OTEX - Earnings call transcript Q1 2019

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Operator

Thank you for standing by. This is the conference operator. Welcome to the Open Text Corporation's First Quarter Fiscal 2019 Earnings 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 sir.

Greg Secord

Thank you, operator, and good afternoon, everyone.

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

direct by a thereafter. approximately have to have with XX investors.opentext.com, investors call. We followed a prepared moment I'd The section session. replay website, be of today's which remarks, to question-and-answer some shortly referred like posted presentations minutes, take to call and be available Relations during our Investor will a will sets the will three last that of we where

Presentation Strategy our reading financials Presentation quarter; the note information. to this to Safe and that and we future OpenText our I'll QX And specific Liaison our metric; agreement presentation about relating First, to forward-looking OpenText our Harbor Supplement information with performance of includes course of with that acquire the the additional of Please third fiscal the that information statement. conference annual XXXX make during statements contain Technologies. includes second, proceed may now, call, our that

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

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

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

Mark J. Barrenechea

and us we Thank first our for progress Hello, today update you the plan. thank as relative joining quarter provide everyone, you, against our company's annual Greg. to

an and Liaison. that matter. Let encourage in we front release and me announcing off go Last have highlighted you acquire as our presentation into fiscal release corporate press of as well as we IR to also our we new quarter, today the call press to agreement you through as kicked clearly metrics we our entered have presentation year, the

Our business long-term is annual. variances. quarterly towards trends, not We look

include Fiscal included recurring cash organic XXXX to and revenue and Our operating XX% cash objectives key included fiscal objectives annual business growth or XXXX or adjusted of and EBITDA, metrics flow EBITDA $X OCF. billion. operating ARR, adjusted low-single-digit XX% flow of

on to Let the in we business me metrics. saying delivered And call we QX, remain that the start plan. by key

our QX was this fact, ever. In best

up million, of through you metrics. up and recurring key walk Total $XXX year-over-year. year-over-year. was was X% XX% million $XXX me X% Let those revenues, Annual revenue revenue total

note, XXXX, for $XXX fiscal of revenue the me ago Let quarter total in years our million. two was QX

On Cloud and significance revenue Within million. million ARR up support X%; year-over-year, dollar was two slightly $XX million, $XX XX% the million XX% this cloud with was basis, $X were margin. absolute X% is recurring focus business. a transition Our an demonstrating down year-over-year. Non-recurring was up up million, customer $XXX revenues ago, our total margin. of ARR our quarter of by was of ARR, $XXX ARR than revenues years to larger on

see can up cash the I quarter-over-quarter. million, year-over-year. our or revenues, $XXX Ending basis each of And is let far million, consecutive solid was was XX% XX our in these revenues approximately flow issuing up And Operating based year-over-year. XX% of year-over-year. trailing noted $XXX or points pedal up million gas of of EBITDA And After XXX% cloud $X.XX annually $X.XX, a in results quarters World, in XX-month of dividend EPS $XXX on principle Adjusted on share. spring. solid XXX decline up you at at revenues. we to That payments. adjusted me today. million rate $XXX cash Enterprise are that dividend reflected quarterly slight dividend flow cash tap our And re-communicate XX% quarterly increases per was was non-recurring. recurring and going any outweigh $X.XXXX assessed recurring we Our were

Citibank, accomplishments, of of service our cash in marquee customer revenue decisions. for long-term American Fujitsu, and Tobacco, I'm And OpenText business. OpenText. This Motors, long-term projects, British brands relationship very As It's Montreal, high-margin drive to grow Recurring value-based is as recurring, the transformative the that Cargill, And core such experience customers, and grow General recurring very select of AT&T, is engagements. predictable, is dividend. just purchasing and of and for flow, FedEx, we experience-oriented. our Canon. that; as global simple. on Roche, La partnerships, why expect the revenue It's participate strategic we we customers steady, based and business. companies team, It's proud the trajectory the Nestlé, we their customer like Bank

transform, within focus industrial leading investing is this taxes, more are timing, goods services. OpenText track win products constraints. all our fiscal recession investor-run Global revolution, the scenarios, OpenText world's off-cloud inflation, for compete a in is economies the certainly geopolitical about both all these are in we issues We're on-cloud direct for million fourth has ready proven ones. and record down and R&D on year scenarios CEOs up and $XXX and in Our the on these today. in and tariffs, and creating focused performing over businesses. talking wage world's and businesses in largest helping

and win in go to marquee vertical billion world-class the set We total have innovations, $XXX market. a of customers products, addressable industry focus

We and enterprise the our IoT. AI core markets while winning strategy July. and is out that growing connected are focused on security, laid in we business content services, This networks this cloud, in of World Enterprise and intelligent

to are total continue and business our recurring to at best-in-class territory. our expanding margins model our with revenues of revenues strengthen XX% We

Our indirect sales coverage expands global in steady a cost-effective sales cloud implementers, as resellers, sales own way such inside and and value-added our through efforts. system hyperscalers,

(XX:XX) lean Cloud. the was recently good I tariffs a get was they as their moving them replug structure with due and more make a face constraints. customers for we AI. up to them lower labor and unplug cloud OpenText in intelligent physical who six their months They As with security the to digital, China They help and costs, cost to to production CEO get solutions, from and reduce into plant secure speaking Cloud inflation, connected and can capacity wage chain presently move. just and to OpenText go. transition Southeast and may and digital It the Asia need to supply analytics, take tariffs,

go-to-market solution taking and are America, BXB and We cloud Europe, and North this execute of our core and Australia and refocus services, networks, in Western Japan, theaters core of sales market opportunity New Zealand. services, content to our

productivity in have the Restructuring We curve ahead emerging exposure, enhancements those have us markets. more all agile. but potential growth of in sized, announced we leave downside and upside with efforts August limited market right the along

consolidator a value-oriented strong. is sheet We're balance point Our a proven view. with of

talent at the are on ready And on Liaison power performance disciplined framework announcement with built which foundation. track to capital our cash sector future and our is up of delivering profile; to markets. deploy in our capital, moment. effectively market in allocation few with in reflected I'll but multibillion companies We growth, our of margins our today our leadership, total has and a with as consistent equal expertise flows, speak Technologies, dollars global down technology a and metrics our infrastructure The and revenue, opportunities record

in quadrant We long-term when on a moments compared like our upper-right-hand to to QX. with sector strategic spend deliver value. few peers a the to are I'd shareholder plan firmly

be mid-to-high growth the We sequential seasonally with expect quarter in the single strong revenue digits. to

QX comments QX. – year-over-year we last our our affect to factors ask results, introduced may business. are similar a we of quarterly and and to analysis tougher made factors we factors in Also, due these quarter. last Further, the you I note, revenues have your that of last I Covisint Guidance These acquisition incorporate As into comparison year. these

include QX our strong. Our a factors business and quarters reminder is is QX annual that will seasonally vary.

tougher the on next pound, a year-over-year the the inflation; Canadian its as have cloud timing; and against and dollar and OpenText continued continued recession We euro, dollar earlier; strength more of goods and U.S. discussions tariffs, public yen; investment wage the nature comparison, side. on noted

They a is employees Georgia today, earlier definitive integration bit XXX management enterprise Liaison. and Liaison. based and a approximately Let Liaison global cloud-based leading have acquire me announced a customers. agreement in to are provider Alpharetta, turn data solutions. X,XXX we application to enterprise signed of We and

our focused integrate business our to global solid our will platform. days. partners, operating we million. forward and add case and global hand, look EBITDA are These and and delivered revenue, further The the is will is a customary metrics metrics our on recurring coupled subject digitize is growth. complement conditions, and annual We'll trading powerful As expansion. we transformation The cash margin use with QX. to Liaison In transaction partners, EasyLink, customers to platforms XX welcoming we next of agent the over I that value acquisition and upon our and closing and customers, close and employees our flow, update value mattered chains, cash to business summary, expect Liaison Covisint ANX and and adjusted provide GXS, OpenText their on cloud $XXX closing. to best

that's strong aggregator. a sheet, proven have balance We a and

to capital put We have work. the to

restructuring the outperform created curve QX economic to ahead and all has Our right-sized of in scenarios. organization a

and in OpenText business applications. and momentum OTX our have our with managed new services, We the network, SaaS Cloud

a our XXXX continue XXXX OCF competitors. take fiscal target In share shifting we and landscape, adjusted We our to EBITDA track from goals. model to and fiscal plan to

positioned our all to our for ensure employees, stakeholders and win, partners, all customers, ready and communities are shareholders. We scenarios

the become It's Madhu While to OpenText volatile, our Madhu? Ranganathan. perform. pleasure hand markets to may over CFO, will call my

Madhu Ranganathan

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

our fiscal full fiscal ROIC, fiscal our be growth each of and last to directionally During return organic will those end low-single-digits with XXXX. for year. variability, metrics our XXXX We the earnings will communication of we shared invested provided in you annual key quarterly we growth the subject provide that shared framework. our and indicated that our on We call, organic year at capital, the

into also model period context unnecessary reduce will long-term of financial for nature strategic quarters, quarterly relevant that introduced similar market the in and on quarterly may general quarter-to-quarter to year. and U.S. are visibility the our turning health quarter short-term compared and was but in up you my OpenText communication factors quarterly now fiscal The $XXX affect last along rounded or a be same our how our is a X% up And shareholders. factors factors business. or to such to X%. provide to constant million, We framework currency with to from not for results business million additional trading dollars objective the of some way long-term revenue references prior quarterly results, $XXX to year, Total millions of prior also that the short-term management basis, volatility and all in metrics, aligned see help the our we annual is commentary closely a of to

XX% and prior XX%, Our EMEA was respectively, was the of percent with APJ XX% in geographical split and revenues that year. Americas, consistent and

$X the quarter, were XX% We delivered revenue relating down in Annual prior in the During year-ago $XX on-premise had MCV, to and prior million the in in revenue up the our currency in exchange. among customer The same prior down $XX compared new first for the year, recurring $XXX Cloud slightly cloud value. revenues, million, Same geographical five on over constant as $XX nine and million now the the license in XX year, reported was to in X% support on last seven of million million annual revenues. versus components year. And versus million $XX revenues recurring seven prior deals to year, year. to split from the foreign we compared down services regions basis. both Professional X% and and consistent the period. quarter, was OpenText

be QX negatively our As you be last expected FX approximately down we XXXX FX. perspective, by $XX call, million. due by FX. impacted our into currencies, mentioned QX expect over To of to our $XX impacted to to in basket we revenues give continue of revenues negatively were QX fiscal And a to revenues looking million

and for clear high a business, gross have as margin to continue EBITDA. results carry-through to aspects of operating we deep adjusted performance, lens margin to Turning adjusted and in all our shown into our

was slightly gross last slightly improvement consistent for the recurring XX% margin support quarter line. adjusted in Our revenue from XX%, up was up with XX% last Customer year. XX% was XX%, from Cloud annual year.

services license last margin And down from professional XX%, XX%, year. margin was to Our was last year. stable slightly compared XX%

adjusted of year. XX% $XXX million approximately up compared EBITDA Our increase in margin the year-over-year. this an EBITDA prior points XX% XX%, to was was quarter, fiscal XXX basis Adjusted

to adjusted driven Our quarter compared share by $XX XXX% per million FX $X.XX or recognized GAAP $XXX for period per diluted losses to million. share compared the a or basis, flows last last year. were earnings on per per quarter The same this the net Operating primarily diluted year. the $X.XX last decrease gains incurred for XX% $X.XX income year. period share share for million was quarter same was cash was a in FX to $X.XX up year-over-year the on $XX to compared basis up

collections million Our seasonality to the of we flow quarter-to-quarter in were underlying business. of could the million now drivers our key $XXX sheet, the our quarter our in diligence at And and the and deferred of although turning and to fluctuate foundation long-term performance, with cash optimizing operational remain cash DSOs given revenue. $XXX the ended balance commitment

X.X within an X.X times XX, from And restructuring. ratio consolidated now on peak September of covenant update ago. leverage As external times, our year down a X ratio debt from net a was of well and of our times

our call, was outlined QX. last successfully during restructuring During a which initiative, executed we

of majority charges be XX will While in the remainder the the towards XXXX. fiscal incurred QX, incurred

Our consistent estimated our with savings during is quarter. updates last

$XX is fiscal restructuring approximately fiscal during expected half realized report realize of during already ongoing with to matter, factored process impact approximately the our IRS. The on $XX to be about The is in to nothing in million benefits of XXXX, of beyond. full XXXX. expected to two-thirds target million IRS and And accrue fiscal the there expect XXXX fiscal respect model. We our to XXXX with the with second new

with some updated in We any will Mark earlier you continue new keep And quarterly developments. shared you on operating call. model. the material perspectives our on to the now factors

As you we heard from more getting productive. Mark, are

During face model, you we confidence operating which the and solid cash income the see FY balance across P&L sheet, statement, and metrics first our our it in the the remains EBITDA, and quarter, in had and target posted unchanged of the Investor adjusted XXXX flows, on Relations website.

and comments In margins well let through margins gross me been have on addition to revenues, to Mark's walk you gross With respect license support optimized. expenses. our margins, customer our and

do incentives, remain year still XX% commissions remaining quarter goals sales improved on during Specific R&D, XX%. a proud committed quota years Mark of on as very mentioned, to to R&D attainments $XXX in for million and investment follow within target certain fiscal for expect are now revenue FY second We the investments. just our technology compared to the expenses margins increase to and they they annually ago, we PS our of We and XX% $XXX cloud and R&D margins Five an million model. based progresses And remain XXXX, levels QX XXXX expect and was between business. model marketing, increase fiscal is XXXX as at our remain annually to typical our to as of the

to range. to mid-to-high range our G&A of of As target XXXX, target at is model expected to in end we our continue model within spending please spending. the invest fiscal be the look for the

is is peak strong history a As a year, year suggest for the would a below that margin to albeit out accordingly. our the build the We QX models year, point levels. QX QX fiscal expense low new to suggest and of of quarter overall QX seasonality, margin the remainder was for

the not advise integrated to We while tax and fiscal with further During for the long-term now expected transaction. Liaison's other our million will between integrated on range fiscal is disclosed year. year, until And to last the financial million quarter, to XX% our to Liaison we Technologies, And it's our you turning at interest close contribution financials $XXX year, following business of be the respect done. expected updated adjusted in be our remains details Liaison's for model $XXX and plan rate expense which and targets.

As Mark the fiscal mentioned, remain our same. XXXX targets

margin of in adjusted XXXX fiscal EBITDA Our to XX% XX%.

center the is over And optimize strengthening XXXX Our and but in mode. And plans even place the our and of goals our place CS of to annually billion our cloud and increase our execution Automation and participation margin of within FY would support are quarters customer and and are spend plans in vary, we XX%. worldwide progress margins excellence operating at we To our Canada we and this new billion in annually. People fiscal see to further are our the exit XXXX. as procurement world XX% in executing. for organization can flows in in full cash into to $X you India, $X of quarter reiterate, Philippines cloud at target are onboarding customer focus. now

have this and growth, We scenarios is multiple expansion. And a M&A, paths, to organic of gains, achieve including productivity combination margin objective. it

model, flexibility continue we terms In QX there. choose track on the to currencies, summary, FX. to and quarterly we basket for expect We FY variability, fiscal low-single-digit a how negatively XXXX. to turn dials into looking growth remain have of and our for impacted get organic subject to XXXX be we target And to revenues confidence in by of

mentioned, strength a in single-digit. as Mark we QX, see growth revenue While mid-to-high in the sequential considering FX as seasonal

quarter efficiency. which well-optimized in we to license full support a maintaining focus of dynamic the not meetings Covisint States. our United as this following of trends OpenText part our higher details team the and you and gross investor sequential alignment integrated I closing talented. fiscal margin at our Liaison R&D close customer of deep reminder, I their the shareholders open take during November team to acquisitions, to timeframe initiative a a improved in based provided with our forward you sales group while productivity our of reminder, provide questions. model margins, lastly, thank and communication and look marketing, on The a want directional and advise the you QX on and the further Canada for cloud the had to all to like included whose quarter include Guidance your aspects meeting levels continued transaction. many extremely financials with And and benefit would during opportunity of and commitment rate; As December to gross we our and first greatly XX%; details an for for contributed G&A the framework of QX a until appreciate Operator? last earlier. trust of to of growth and confidence and We we We support now I Technologies' to year, revenues is long-term value. the your our and as call

Operator

Thank you.

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

of The first Phillip Huang comes ahead, question Please go from sir. Barclays.

Phillip Huang

afternoon. Good Thanks. Hi.

question macro The Mark for environment. first on the

others? on their your of and do shift including I perhaps mentioned spending or others? looking have the perhaps your But certain than you be see solutions particular remarks customers any to Obviously, FX And with you sort more seeing in are environment. trade towards or any of vulnerable conversations vertical was you over that also to the solutions hesitation exposed might plans macro deal You customers, wondering spending help from with evolving markets. tensions such some headwinds,

Mark J. Barrenechea

you thank Phillip, the for question.

calls, the of look second through will. kind we're earnings of of you the season you earnings if on the here, half sort If probably

just you and being newspapers it's but the way whether benefit place we But a recession bit differences. today like would will, around discussion narrative read next into would kind the the in up. same or the position all if agile. of narrative is now we the So step read it great puts you Look, and putting third seeing have may and around tariffs seeing the repeat, more, We certain what good the And look And industries translate very tariffs. calendar a to into year. our economies now some regardless up in wage phases well, To it's five-stage of prices, mature headlines. can and translate. And done structuring I've a not optimized in growing phase maybe up process. Certainly, of spending it that not price have next structure, see But when to some lived vendors down. economy see cost as pipeline set And a that of is think we're that inflation increases. they is where and increasing of It's down a narrative same growing scenario, us economies. in have But we're or changes see a of arrive. this the team. the more is the high. place is through pre-buys a economic more

getting Our as portfolio a manufacturing moving in facilities, more quickly. consolidator position view And healthy a market point with we're share if all leaner, customers change scenarios, valuations sheet, of strong to balance navigate helped has a a gain through and digitalization. value solution

We headline, directly and up We question, we're watch all ready it down. translated same change. to the or any pipeline closely. answer the So, all it scenarios, read into hasn't for

Phillip Huang

the sales about bit you wondering, recession when case solutions little changing are bit little pitching prepare order more that a the sort kind help of specific That's for of very with to are sort conversations there bit macro-environment? the to modifying helpful. them in you are a of guys curious, the a to pitch customers team or of the talking go I narrative customer out and just in was such, more the your little

Mark J. Barrenechea

reduce And time can We help Global support I transition a We the the it we help as your for you environment digital. XX,XXX. you into a to move help Cloud. XX,XXX. would your could message support the a message physical value labor. OpenText message We is, growth value can is. help can – Global describe to Certainly a of part for that

from move a to Southeast Asia. to need You plant China

You and go a extensive need – can't you skills. market very get in

our of will I So Cloud. OpenText number-one lead a to migrate be to in that with customers message recurring our downtick revenues would in support the

Phillip Huang

know the quarter quick impact Madhu and well. the I That's ASC helpful, a for but if question missed Mark. from in I as maybe it, also XXX was And what don't FX?

Madhu Ranganathan

it's Sure cost it's to it about in as $X million – the thing. was No. when saw positive On from to And a XXX, as margin side actually There standpoint. million shared, you the negative million $X.X QX. about of compared impact $X impact about I of you of And our in $XX.X in as exchange million positive consider revenue. on revenue we XX-Q. then QX FX, to about rates well,

Operator

The next Please Tse comes from ahead. Financial. Richard of go Bank National question

Richard Tse

months I to of the ask year? the six here funnel. call way line from Has of context Yes. the sort here. the the along over it, from Congratulations on let's last acquisition changed wanted on M&A past, in sort that environment any

Mark J. Barrenechea

planning for Mark And business we're by of good customers scenarios. thanks question. Certainly, navigate scenarios, up large and through scenarios all and and in to here. any both. we're Richard, value-oriented to approach. our sort as going the as shift consolidator. we market We're a say think in engaged that's conversations, thing more that that position down a reemphasize in I'll pipeline good our it's for activity a our great would help is M&A a ready given up. valuations I bit, be

months. yeah, last So, difference over the six been a there's

Richard Tse

you growth, perspective of guys But know target of are probably – say you from with opportunities not here? kind I this have are all Okay. quarter. that providing here, the you look organic could organic greatest to And would lines respect an product your that what the top of sort single-digit like I back at that if then

Mark J. Barrenechea

the support three. ability the as support customer top have of It's, revenue, maintain them OpenText hit for opportunity of highlight license, migrate existing up the XX% and I'd our to million X%. revenue. shout out I'll customers one, their do an this Cloud, grow to a ownership continued just take to $XXX We transition margin. and our

really First from that time, customer of gaining shows upper-right-hand satisfaction value the and that they're the our quadrant and margin. of XX% performance platform. which This and is support, engagement experience value the

number nature Cloud So it additive transition the one OpenText in the recurring that growth revenues. to on path in is continued organic

ones. driving base. security largest And security just me into entire are is say Second the let pause those probably – I'd our installed there. two

Richard Tse

one And last one from me. Okay.

remarks to You business noticed from a across about you specific wage of Like, across sort names. that cost inflation. degree it in all areas in of And or that what we comment sort in Is the seeing operating localized earlier made the some are your across one to other is sort base? certainly sales, of coming board some R&D it of line?

Mark J. Barrenechea

interesting growth It's I'd scenario Yeah. And oriented in now. of say have phenomenon. I sort an would the United than unemployment. right – primarily GDP U.S. that's a higher it's unique in the States you where

higher to we years pretty I'll where double is down in of unemployment growth U.S. than India that rates. So terms in inflation, the a Canada, we've Philippines. And that's wage for and candidly ago, the well us. GDP But out going were indicators in decided macro point few to worked just

we India Canada, expand is and everyone to Philippines. more – bases the for in continue And for employee those fighting jobs. So our

Richard Tse

Okay.

going And this sorry, level I comes of forward? just inflation one your here in when sort it margins your that slip want as to to targets in Do incorporate well.

Mark J. Barrenechea

do. they It's an scenario. all-in Yes,

Richard Tse

Thank you. Okay.

Operator

The Please Markets. Moschopoulos next BMO of question comes go ahead, sir. from Capital Thanos

Thanos Moschopoulos

half XXXX. be afternoon. will in Hi, relatively growth seems first correctly, of I'm math the organic flat like if doing good it the Mark,

guidance year would that that for full your growth so low-single-digit imply is for organic And the back-end loaded.

expect would comment half? math is growth whether there correct. So on whether But on if be you I second my organic firstly, you in guess, know the secondly, in acceleration comment don't an can I reasons could to

Mark J. Barrenechea

go this Yeah. to organically prepared Thanks the back remarks. on year. question, low-single-digit Thanos. target for to my grow I'll We're

is In quarterly tougher terms of a factors, our QX it compare. QX

We annually had As we model to we last that Guidance going anything positive the to and have use. we update positive add confirm to QX. how And to to had what QX the and actual of growth to And to that? number low-single-digit you to and organic go quantum of year, organically you Covisint had in your grow year. run target QX you'll in QX, in lot for spread growth. of on of from year. last tougher you'd growth we're I'll we're back organic a QX, in acquisition out compare organic fiscal like want want Madhu, revenue But on

Madhu Ranganathan

No, Mark. And that. you, thank I agree with Yeah.

Thanos Moschopoulos

one any on comment there in very quite a been is Okay. doing seems just a Or there? sciences. life specific question helpful. It Liaison, whether perspective? On you. you it was there've have like industry lot concentration comment diversified vertical can is That Thank from I is,

Mark J. Barrenechea

you come Thank for the we'll and with I'm understand We're fulsomely. go that. them. sure Liaison. look – sources very They the more we public close at business about you'll out case Yeah. once better are excited business

into markets industries, investor are upper We've the integration, of plays, on terms site as quadrant puts and strong integration. plays, quadrant. MuleSoft Informatica. they The well posted into they process hand is industries, you application new markets. heavy are business-to-business some as pharmaceuticals, us ourselves, processing, right as verticals markets That such if IBM, traditional our well are our to magic GXS where In puts Informatica and These us industrial as and will. application where MuleSoft the as of

process GXS Liaison CPG so, more to and was it's nice So industry. in retail auto where Covisint more industry add heavy in and and in was a and transportation,

Thanos Moschopoulos

you've you. me. in has while Documentum a Great. that know maintenance one change renewal any or And longer, that for rates steady? for Thank been holding had one just last I

Mark J. Barrenechea

X%; to million, if is of in revenue point, than And this years kind company for and $XXX years recurring XXXX revenue go our revenue support This see we total QX. ago think is bigger $XXX from XX% quarter. power company here our allow the pre-Documentum, margin. Today, scale. I'll acquisition I total of all million, was the two revenue you of me total – is $XXX of this for revenue. annual make power revenue right of fiscal Again, the the QX, total ago, as – the the up two the to integration you'll – million,

purchase. asset an was it So

little all as know a take We quarters ago, purchases talked integrated. we fully longer. it's, Asset many

renewal seeing of million, that business, better you're the X% year-over-year, XX% into think the power integration, $XXX flowing up margin. scale, the rates I

Thanos Moschopoulos

pass line. I'll the Thanks. Great.

Operator

comes CIBC. The who's next from with go ahead. question Price Please Stephanie

Stephanie Price

Good afternoon.

Mark J. Barrenechea

Steph. Hey,

Stephanie Price

Can You've general of the us the is looking just OTX bit update interest uptake talked in you an in for on about what in the the here? quite give on the a cloud early a cloud bit call. and solutions like the pipeline

Mark J. Barrenechea

and PS. Steph, new cloud for some We're being changing script. the introduced language emphasis. revenue question. off-cloud my of talking thanks off-cloud, We're and non-recurring our in license the I about

off-cloud And and our our so have cloud solution. we solutions

emphasis going we're Three new clearly on our some introduce for language here the cloud. So swimlanes to with major cloud.

value. our is a of demand enormous And value-added lot added business business is Liaison This in messaging. cloud. ANX is network that network, that First on is Covisint our our there provide the where will and network value cloud.

could we content moving platform. into We into be a to fully. global our in our cloud. customers' wins The the platform, new And and services run supply services services our releases. great L'Oreal quarter. And had environment, We into we're a where them cloud, environments be on SaaS our managed cloud. our come second multi-tenant managed OTX won a third public It swimlane OpenText on could the Opel now quarterly services two is managed basis. is is chain bring Cloud we which our

release our quarter We weeks in two out next have actually. going

So OTX XX.X.

year, Our will next the quarter. the naming XXXX, first convention the will XXXX, see XXXX, and be stop

up. subscribers are goes So our OTX XX.X And into production. full

to when And ago, expect And growth. probably up fiscal that'll XXXX, opening new of if to third we questions Our couple a swimlane. revenue is business OTX. start the going third a for kind get back I It's can be contribution into it's driver through up. organic of of that go have in I coming revenues the to to sort

Stephanie Price

with terms partners? Great. quarter. announced would in then in Thank in you talk partners, Israel bit enter And partnerships partnership NessPRO that Can like with you the a regions new this to about you. you of other

Mark J. Barrenechea

our continuous force, Thank my put a for that. place. talking It's organization. we've thank culture about about sales that sales have we long-term yeah, investment. a just team say a sales. coverage. in I force progress and and It's And and the indirect you. And you little engage alliances. within simpler sales partners kind our indirect had remarks comment bit around prepared a all in extending Steph, alliances. direct got of go and to is A our we partners We've way it's Right? And out and is directly.

platform, So we're World at our Amazon. Google services that the the a biggest And to as then system on – now run we getting And closer where Accenture, And there. the solutions. thrust to resellers. own go inside that global of market in there well announced we're Enterprise managed variety on our value-added will great progress Azure, Cloud We've as refined implementers. we have sales ilk. with hyperscalers we of we'll is the Deloitte and our that making companies

So it. coverage low that be a in or doing of a we cost-effective we're countries and may efficiency high get not continue a to and to that in way account It's at going coverage highlight cost. to variety

Stephanie Price

much. very you Thank Great.

Operator

comes ahead. next Please Capital question The from Paul of go Markets. RBC Treiber

Paul Treiber

afternoon. Thanks very good much, and

deals that in to regards a-million-dollar-plus could to disclosed it? commentary cloud momentum I license quarters way are just it's in but have the relative is up off-cloud, you since – of any couple a MCV, or you're Just seeing been year-over-year. there cloud quantify you know to

in of cloud sort any seeing you're just the regards on additional in side? So to and momentum what commentary bookings the

Mark J. Barrenechea

because I'd percentages denominator. may need and a moment Well, an you kind story I the put both up recurring because mean, absolute tell revenue percentages to aside full of the the on not numerator for point –

at basis, revenue our million. $XX So non-recurring look an up if on recurring down our is and we million, revenue $X absolute quarter, annual the within it's

the absolute right and is ARR percent percent X%, an on think non-recurring, is just $XX the up non-recurring there. story tells I and million. up million, basis, X%. the number down absolute the But $X a on So down

Paul Treiber

just is within to is I with one Liaison, mean, disclosing line deviate commenting acquisitions any And financials bring target typically that then Liaison speaking at your And why still not reason in this just from is Okay. or model? there point. you're M&A – your the shifting generally, on or year? would to But and margin target

Mark J. Barrenechea

Correct.

what a wouldn't we from on I the to that. Liaison see model first Our expect based here, is onboard And vary year. within to business

Paul Treiber

you. line. the pass Thank right. I'll All

Operator

question Walter. ahead, Please comes next from go The Pritchard Citigroup. Walter with

Walter H. Pritchard

Hi. Question first for Mark.

given has enabling – it On been the in umbrella including macro, becomes that's through like good macro, price growth wondering feels you a little probably yourself this lever pull. which good everybody side, has growth for getting and tougher we're historically in bit while, I'm help And had pricing a to pretty a optimization. maybe a that understand if a I help Can of how looking much assume been? tougher us price

Mark J. Barrenechea

Walter, a the for lot not than scenarios. sort companies at thanks the where business, XX% variables. traditional look still U.S., a We for Right? is question. set It's of set higher of economic interesting you is of their which It's of an have unemployment. of GDP

So as inflation the speaking. biggest slow concern things is down, and really inflation generally

bringing hundred World an in You Oracle support. raising prices. our Protect, from basis raising up couple customer which around our prices at see I Prime is raising e-mail Enterprise too, the prices. We our Microsoft today got And we're market announced points. of a

bringing our Our thus PS up well. rate we're and our cards, program, as look at adjusting PS for RCS and FX cards rate we

cloud living But of or a both to mechanics think new selling side, value. have sell cloud sell. off-cloud. an it's compete focused it thus the a on when in new in And of very cost contract on the license to a agreement, base, ROI-based value-based we the and are a comes I renewal and on annuity still adjustment long-term you large selling

that it's But So we're term competing on adjust I in and our kind a still new FX helpful? you're of of where mixture have to you share for you mechanics which some doing of. inflation, contract, think longer got Is value.

Walter H. Pritchard

any about drive it also, then know we've margin things can which bit on And the cloud quarters. different that margins that be Madhu, are do there those we enable mix of the on side, sort understand how would we us Thank a in one over in go to now. few makeup, help you a play pretty the for helping to view of you, yeah, Madhu Mark. right then should is several cloud the – pieces last does. margins, think higher margins are out? help than I to rather quite And – cloud cloud small as a for scale. bit But then understanding given and the of on that you've And talked quarters And watching that about little next us the

Madhu Ranganathan

great question. No, a it's

to as look we've continue we the we we But certainly And it that XX%, but about. invest encourage And we I those those. that about probably at would So But longer-term productivity at aspects QX of our need the to at on to improved levels three that the talked term, one productivity we've I said into mix off cloud the balance much it's I efficiency, levels, to is make. we this that it, there is three a the balances as year, goal. it getting continue margin, QX this need in drive also to to think to as in the investment longer hence although low-XX%s direction it, the the XX%s, talked we keep and before, think looking mind, are in cloud. aspects also keep as efficiency to off well you, and

Walter H. Pritchard

you. Great. Okay. Thank

Madhu Ranganathan

You're welcome.

Mark J. Barrenechea

Ben, next question, Okay. to please. the

Operator

Please question next ahead. The Abernethy from go comes of Blair Securities. Industrial Alliance

Blair H. Abernethy

of managing is, the revenue say, I be OTX? could Mark, managed side or OTX, opting wonder of going go at progress And progress of managed I services going existing what's moving to, much. little that a with taking just very how on-premise you to the services, if on-premise customers versus shift. just other how how shed of making lift traditional color – would sort is on to sort Thanks question whether look opportunity the they're guess and license you're license an or or what on license, side and you're not more to this

Mark J. Barrenechea

I'm took with thanks excuse companies. And Blair, important a than Yeah. different from repeating an me And the years other stance a Fair answer. enough. start I'll question. ago, sort principle-based myself for of but if a it's couple principle. of We

if base, substituting install and that a very a cloud important have install revenue a large very substituting will. we weren't it maintenance base, we – and for interested you that dollar, was revenue view Our in

– up principle give to things and were that. willing we Our for

if go dollar principle has the will. that's Where economic not dollar Our And owning off. value. you enjoy substitute, the license, paid customers after the it was to add, our

XX economical XX In a own solves months to of for than it it fact, want more But shows I use customer our own our to more own months, they a license like If the it's to license. months to is experience that number more after – in it's than as subscription. a always lot be XX things. economic for

that went repeat quarter. And decision. Other substitution think So for won't us. the the ARR companies off I the that's Again, paid I from for approach. principal we made numbers

I think principal you through see that decision today. P&L our flowing

solutions It's it's add the opportunity. into labor, opportunity an add management of top as the increase they add. It's us. an add it's of their of application their infrastructure of And opportunity. dependence migrate that future on customers And the So now that. reduce the an cloud, on

its areas its going solution three and top on new quantum management open of I'm to dollars hard its up I So on infrastructure a put application not put – dollars it's those dollars, that. would of a but it, to

In again, add. We very being on the don't want because, workloads a selective OTX, we terms want dollar to we're substitute of dollar. a

adding be new into features new to tend OTX. and we workloads So

doing, additive we existing see dollars dollar. again, to what can that as, not – we will So substituting we're

Blair H. Abernethy

– And the replacement. update fact time – you've well. some very one particular, you then shifting the an with there? drivers yeah, give you to business Can That's And helpful. as of had you're Thanks, proceeding just for you've how growth competitive with just Okay. Mark. organic got that gears your us Documentum on in is

market are in you the competitively? doing how So

Mark J. Barrenechea

this for IBM's that's in Watson the thought at Sterling marketplace, focused opportunity answer. expensive want don't focused to But And Commerce. billion what the to lead decision we're an they're FileNet, I on was stay very I they're be hubris-type marketplace, come going to point going to to and And in Blair, with $XX I to a with. Well, on look recent They're will going question. it's OpenText. doing, and going be I new, thing a off IBM.

like going lead source. Sounds they're with to open

analytics on we're well. have So opportunity going as an

competitive talked few we even more front, that's laser-focused acute quarters IBM, that today. and the a on we're So, going ago to be on about replacement

Blair H. Abernethy

Okay. much, Great. Thanks very Mark.

Operator

TD from question go Securities. of next comes Chan Please ahead. Daniel The

Daniel Chan

Hi, guys.

you a can if on pronounced more It was seems seasonality seasonality. wondering bit comment the Just this quarter. like

about? the sequentially, I that there And the quarter about fiscal quarter to we the five think in this last rest as years, this more X% saw should we thinking to and through about move should be down specific X% been seasonality it's of XX%. we year. Is anything we see

Mark J. Barrenechea

very tougher Dan, compare QX, We has given QX rolling from year thanks for and the a QX, year-over-year, our off question. believe No, came a into strong so. and I acquisition a slightly revenue Guidance Covisint don't all ago. just the

just just views we a ago. Covisint have slightly and our to a I Guidance very tougher and over note seasonality. came a compare of QX, strong would change off year given we no So

Daniel Chan

the kind the lower the and that the and And on question quarter about the level This the your as high follow-up fiscal are what to of second had you got range? takes here EBITDA a and kind XX% margins. goals? will either you've get towards puts of of that move end Is just higher XXXX end range new you is the And Okay. to of I we move this margins. that

Madhu Ranganathan

going You're to take that?

Mark J. Barrenechea

Madhu. Over to

Madhu Ranganathan

the for question Thanks sure. Sure, there.

in again in shared Right? QX, range. is to there point would a -- to going the but and QX margins QX QX still do as I we as be QX have out a the there's your we and downs well. well. and our comparison So As bit the higher target model lower, ups commentary,

in baked one. number have the We

The our in into the talked about the restructuring of we've essence You drivers. baked doing year, the early model. that whole fiscal on target

at investments, really we answered efficiencies look investment" "fund QX how we'll look to you levels questions in the our And between FY continue XXXX. cloud the that. That's cloud. the to the balance would to of would think the I keep when earlier We we'll at the about to at So do balance I do well. for have models target as

Daniel Chan

you. Thank Great.

Operator

back for Mark remarks. to now hand for allocated time concludes any over This call. call the today's Barrenechea questions closing I'll on

Mark J. Barrenechea

up you, remarks. Ben, metrics just Madhu, very adjusted today that you of for quarter; the on the $XXX we'll $XXX the XXX thank continue million. everyone, focused million, basis you And for $XXX XX% up I'd you. you Thank million of we're we of then up And EBITDA excited thank a OCF thank to announced for your XXX%; Thank joining cloud, margin you. and today. recap record a And $XXX joining. $XXX matter: to Liaison Technologies. we margin; of of and on ARR, or to million, had million; about points; within X% very cash soon. all support that up the X%, we speak acquisition XX%, up focus like X%, XX% to

Madhu Ranganathan

you. Thank

Operator

This concludes today's conference call.

for You Thank Have your pleasant you lines. participating. may disconnect day. a

Open Text (OTEX) 31 Oct 182019 Q1 Earnings call transcript