OTEX - Earnings call transcript Q3 2019

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Operator

Thank you for standing by. This is the conference operator. Welcome to the OpenText Corporation Third 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. now Vice turn President would to conference I Secord, Greg of Instructions] like the to over [Operator Investor Relations. ahead. go Please

Greg Secord

Thank everyone. afternoon, and operator, you, good

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

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

is first OpenText Investor our Presentation. overview The is which titled strategic

and financials factors few our updated Xth reach at to during CIBC Analysts will management specific place team notably presenting our Please more Nope, Financial World on to months. you is the June, users participating July place forward event are in lunch Toronto. Conference. May Tuesday, which in States. our Centre takes results, and quiet like attend be keynote the to the Investors Business second to The as Institutional coming invite Metro exciting taking feel to about this in May Toronto in QX IR the Enterprise and on United period. Financial or the Convention XX OpenText up tell is quarterly quarterly OpenText some to Canada Technology titled pleased Investor also Page next free Toronto looking OpenText in Mark directly I’d Conference me OpenText now Tuesday, and Events investors and with information. meeting X. on is In for information Results, includes to with that day.

a will OpenText the to offer and innovations an Company's more update about and enterprise one-stop for opportunity an strategy. opportunity partners for performance Company's to or SVP research dialogue open and the It's you on providing not on our and our event. a The we'll the and contact IT learn So and Investors company with Financial or conference Presentation and information Please Analysts the information the more investors.opentext.com site. great offer environment management. access, Investor conference team incredible will directly give full we customers for latest

In addition, from details Annual statement. team. Please proceed and Friday, in date the our in save conference the call, Capital September Investors This Day your in York. be during note we'll of call. OpenText strategic future forward-looking featuring of And New holding we'll our a provide more key we morning with the leadership Update executive for of statements X our event Please Safe presentations calendars will of reading relating our members Markets Harbor course be the of I'll during contain performance information. next that make that earnings to this may to Investor that,

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

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

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

Mark Barrenechea

everyone, hello, you customers total to XXX are million our our cash million, intelligence is a revenues And appreciate Annual currency. X.X% this up the EBITDA a is Cloud well to enterprise. strategy. X.X% all Greg. products Recurring our $XXX Enterprise Total EIM gross to you, Information adjusted $XXX XX% quarter all-in and or is to and of joining accounts, Management to are XX.X% QX but or I X% million into Thank ARR connected continuation up for is Also our our ready vision up cloud million. to solid basis call. fiscal operating QX flow is up $XXX $XXX constant to points XXXX of Revenue and is responding and up enterprise

and World, XXX X,XXX XXX Europe Enterprise this. events quarter over this Our of With partners, underscore Asia XX all and sessions attendees, exhibitors.

and support core growth expansion our of networks of security cloud, within revenue Our driven demand was off and driven AI efficiencies businesses additional and and cloud demand The our and our scale product as well importance as products. in offerings by in our by Content the emerging margin cloud was Services business and mix.

expanded Our points year-over-year. basis XXX cloud margin

with better longer-term, continues to to keep of be expanding. net that This and year-over-year X.Xx. range level and the ended and Year-to-date, EBITDA is to capacity. As and million ample the is approach that the adjusted expand the best aspirational entering adjusted ample M&A $XXX companies opportunities already take run We keep we ratio XX% and improving we to XX.X% to debt XXXX quarter of quarters eight look our XX%. we strongest margin. cash We our in EBITDA have getting fiscal a plan our

by progress today dividend incredible $XX.XX our we quarterly share. XX% are $XX.XX, raising the per started dividend we years Six or ago, outlook, Given from program. execution and this

first Our was year $XX million. dividend

a dividends and have million total quarter four last shareholders Our of totaled million $XXX we to-date. returned to $XXX

forward align results dividend burning note with planned continues strategy XX% operating annual program. target going we our shareholders allocation more our dividend of XX annual that months naturally to call. cash capital returning our review trailing Our to flows a via Please our

call. annual our means that be during XXXX during So XXXX QX our review fiscal will QX next earnings fiscal call, not our dividend

the eight Liaison XX from operating acquired onboarding first to everyone a the get we The world very fully date. think acquisitions since to integrated way closer our team the executed the Has OpenText target to and can Catalyst. within ECD also alignment to as know are remind calendar OpenText’s Documentum class. that review. both operating They be we better dividend will Dell within leadership well We on a And quarter be the to is is do annual on also EMC. been We Division while quarters, months. model

the generating and adjusted our number addressable EBITDA in $XX $XXX stellar one strategy our continued from an results policy, today's levels. market, our rapidly in governance adjusted to culturally OCF We're $XXX tech Fulbright legal and platform machine company. Services, is now year-to-date, a business XXXX. putting and Data the I'd core leveraged delivered economies XX,XXX X,XXX languages, the X.Xx to in We've NTT progress. our the Parliament sellers. and key our Tata buyers approximately and XX the policy, employees delivered is Annual and returned capacity. wins with network highlight as have our action, approximately quarter members noted these of are $XXX $XX professionals billion focus and double-digit of global Parliament market Services but over large with among currently system is Employees, will will law a $XXX engineers, evidence. year-to-date, manufacturers, Rose reflect supply and multinational software a top to far be reflect our time both country European debt $X.X supply in We discovery more extremely net to binding dividends now software advanced will incredible provide M&A EU have billion for trillion at Steel is Content physically than parliamentary in five approximately party OpenText EBITDA Canada The delivered Content for Commerce, in in global Rose and standardizing their be growing be million revenues, for sourcing, revenues. OpenText the as EIM complex chain and We're billion margins, law, of They offering chains. our an European company provider and critical GX is a hundreds its The XX NTT growth, worldwide. is Tata they over important employees. cash firm December a reflecting There Norton clients a equity platform. digitize of million to the and business like revenues. leveraging the TAM, our on of Services OpenText. subcontractors, XXX,XXX leveraging in returned to cloud earlier. information world world. we Let's an to Norton system. Data billion pre ample $X million as analytics buying leveraging through total Content acquisition and of steel integration XX.X% review XXX,XXX Government It by in home learning OpenText and legal iron

wins government We in governments platform in organic largest coming than $X penetrated in Canada. QX world's To-date, G-XXK OpenText is and the won and This the G-XXK those in as Global billion short. XX,XXX G-XXK EIM for growth. by information companies highlight These typically have our the to our double well The we're only execution are greater we the market the platform. proud focusing digital on the largest the strategy connecting third or or G-XXK world's key and as can to announce the of more for one around organizations. years the we next-generation that than revenues

effective also operate the comment businesses. one me We services. PS and of and on profitable professional industry's our run most Let

Over more with System the Integrators. partnered Global last we've year,

inherited at Within the we million becoming $XX low into have moving margin. and from OpenText delivered more discontinued We cloud. XX% standardized of revenues work margin We contracts. and acquisitions is QX,

QX. the should expect in levels same revenue here You of

following IRS provide phase. let matter. is Finally, me entering process standard our a appeals are IRS now brief the IRS The we and matter update a on

enter As we wrong steadfast phase, we our defending in We position time the resolve. remained our position. strengthened begin matter IRS has and and has vigorously is to that next progressed our the the are

annually. XXXX my in the our remarks to nature We basis. an business. annual transition me on fiscal ourselves of annual plan We measure Let

$XXX large and to deliver business budget or customer's our long-term cycle, Our typically a product an on decisions low annual centered recurring annual XXXX, million. In revenues. Quarters quarterly fiscal while allows We the on is was releases recurring of will ARR. meaningful in growing strategic fiscal revenue ago, us excited operational just annually, vary. our an our XX our and I'm the or XXXX, better annual multiyear variance annually value annual annual annual context about single-digit business. Any period thinking make of is running creation. not recurring basis over our revenue that business years and

this have every the grown year ARR We years, over year. XX including last

is track XXX% Our the years. representing ARR fiscal than $X billion, to year be last greater this growth XX on over

then XXXX will fiscal fiscal our will well for target that ARR a ranges we strong targets target are for XXXX cash as on annual call, business XXXX highlight We fiscal trend, earnings and current our our will EBITDA On EBITDA, aspirations. dollars flow. also plans as and XXXX adjusted fiscal be for On aspirations are revenues, and recap next target XXXX. on our adjusted fiscal three-year year provide updated we XXXX fiscal and our and XXXX include fiscal

quarterly factors. our let Next, through QX us go

key your important, but our a our nature these modeling. factors for into affect items do items are The you not and As of business. those are long-term financial tactical reminder, to quarterly short-term the items factor

recession same uncertainty, same the the see regulation data factors and newspapers wars, goods following; global include wage trade and QX tariffs, concern concerns. the prolonged concerns Brexit all and continued. read Our inflation, around GDPR We

expect Canadian yen to when dollar of prior million Secondly, strong pound, the compared impact revenue the due to continues U.S. a QX euro, to year. FX the against approximately negative US$XX be dollars and

Third, our business is quarters annual, as and will vary. I said earlier

sequential execution QX revenue do to historical expect uplift QX. strong not in Given compared QX the in the

$XX negatively were operating be expenses the We in up of for year, to quarter QX. expenses is higher we adjusted Liaison lower by historically sequentially revenues given expect quarter-over-quarter revenues to of last to quarter, to consistent PS impact last expect EBITDA, bps is the end with X% in XXX approximately fiscal and your also and EBITDA QX a it be QX QX. expect or is million, seasonally X% consistent And QX quarter adjusted

value. topic to short-term longer-term months beyond competing, Looking about the XX talk how months the and we the creating now, in my is growing, to next plan fourth on and XX

step big picture. at me and back the Let look

strong. incredibly Our business is

retention leading market rates product have and releases customer incredible and our We support powerful business, loyalty.

XX% revenue transformation Industry highly security Our but learning more as coming and This to about from tremendous the OpenText automation, and to workloads grow market cloud, and predictable grow well. core move is rely happens, transitions stronger customers on the sources. AI customers as as will as digital business X.X not and it's recurring more machine and just and requirements

offering month. to continuous a have Release or intelligent XX Pack ERP endpoint this EPX monitoring, major all flagship customers Release wider has enhancement delivered providers. CRM capture, to Our we'll integrations XX EpX and X

and leading OpenText market cloud. Our Identity trading capabilities. information XX services, for a million built XX.X industry million and track applications XX and cloud over digital identities new and and platform, application comprehensive the all legal suite transformation. application million platform a trace for and endpoints financial retail. already horizontal new in We OTX We're includes integration partners, a managing Management X.X large Access pharma has to update

last $X.X capital we $X.X creating intelligent in the OpenText billion via information have in five our R&D years billion Over system, business the platform. and deployed

We platform innovate deepen and our will continue information and intelligent customers. to strengthen to for business continue OpenText to strategically acquire playbook. then then We'll and integrate system to our run

and and we on other zone our companies, Industry has new self low side The most into High can and where important to CapEx rate, an put M&A. powerful us now text tax core an strong effective X.X. are trusted of of the transform inflection to flows point cash We trust open funding margin M&A. sell world's one this milestone core fund

me up continuation QX solid growth prepared cloud was fiscal organic XXXX. growth growth from wrap of for organic we're total plan The strategy, execution We our It on from Let remarks. greatest a is OpenText our and my execution. opportunity. remains a and

our a be This recurring EBITDA aspirational cloud date $X year businesses XX%. scaling fiscal adjusted enterprise range billion. business XX% will of fiscal into XXXX and billion is already of or Our $X strategy, north our to to annual year in

capital. We on flow are fiscal year of annual cash and track a to operating record well return for a

program, are XX%. $XXX mentioned annual as inception by confident outlook, Now and earlier, of shareholders the we raising our dividend given we our returned have dividend our million to we

in services both leader market core the content our networks. You're business of of and market

Our roadmap been has IAM liaison additions capture, and never like application OTX new with intelligent stronger to integration. application

balance before the to our the of of my the billion. started $XXX our you capacity, Do but stronger joining you Lee, CFO, call over Tim pipeline bright support or getting at thank Madhu? is sheet Berners see with OpenText. We over MNA be future pipeline the be a the I'll It’s Worldwide market Tim will of what many snapped global make relay hand adjustable will is Madhu. have the enterprise and a and world strong for me MNA pleasure Toronto at you can Web active, right to Xth. Inventor our and forward total event. enterprise is sure compelling target vision I event Our of world on worldwide right our ample you the outlining R&D ploy strong. I'm look web. July hope the very to

Madhu Ranganathan

across hello, show QX work you, significant all our and over results performance, upper acquisitions. you for improvements us today. thank on Thank results last metrics. strongly year efforts to all quartile collective consistent integration The Mark, reflect operational joining including and and two maintain key

results, the the my and will fiscal direction turning similar quarterly the period millions to of USD details prior Now to of same compare be and is quarters, to a and year. year-to-date prior in

year-to-date at for X.X% fiscal given broad our from and up start strength the quarter $XX see the all up $XX since was the exchange million, basis. quarter foreign revenues of during and the will million Total constant of impact you million the of USD XXXX. $XXX of X.X% revenue our a on results, across As lines were significant the currency or

up $XXX avenues X.X% EMEA at we the X.X% to or revenues XX%, basis, geographical revenues Annual X.X% look remain was of $X.X billion, in X%. As billion, XX% up Year-to-date, $X.X the America up were X.X% constant million recurring and revenues a or and split at the continue quarter revenues recurring business constant year-to-date. on up or basis. year-to-date from X% a our currency APJ basis. annual X.X% a of and quarter, for Annual currency were recurring were and an up year solid on The a constant percentage XX.X% on total as annual basis. last currency up for XX.X% respectively revenues total quarter

the basis. in $XXX strong particularly were revenues or currency XX.X% constant at million, cloud up a up on quarter Our XX.X%

last MCV, revenues $XX.X year QX renewals a in cloud mid We up Year-to-date currency XX% in from new on also the up constant in million generated or were million, up XXs year. last Cloud remain compared $XX.X range. million to $XXX X% basis.

a down revenues revenues up support Year-to-date basis. on year X.X% were customer up or to a were X.X% or constant X.X% million, basis. support $XXX constant million, currency X.X% Our up currency on customer from last $XXX

rate year prior Our XX%. prior at renewal support and was with approximately consistent quarters customer

Our license currency were revenues a or up on constant up revenues up X.X% X.X% basis. up XX.X% were million, $XX a license from last million, currency on year constant Year-to-date $XXX $XX.X% basis. or

a on revenues or million, down service were $XX from revenues down basis. last down X.X% XX.X% professional service currency $XXX professional Our or constant X.X% a million, Year-to-date currency down constant X.X% were basis. on year

the the to XX%, GAAP same the was QX. gross to over details last basis quarter period our up year. Turning XXX in margin of margin for points performance

was support same XXX mix. by year. last XX%, last primarily quarter product for up was margin XX% basis the last up from Our up from year adjusted year. and XX% XX%, driven Customer was Cloud and XX%, the scale gross points quarter over

was a services FX last negative in approximately was by quarter adjusted gross up $XX margin XX% professional margin from Our impact license year. up and XX%, had XX%, and last from million. year XX% the margin

announced Our basis into XX.X% increase same compared activities driven per Adjusted margin $XX the basis, adjusted for Year-to-date EBITDA Year-to-date period an XXX basis XXX the adjusted we or last XX% billion, year. of period as EBITDA to income quarter, or in for margin last the $XXX first operating same share restructuring by net as an to was the XX.X% EBITDA last points million up lens a up QX was year basis, XX.X%, $XX year-to-date Adjusted EBITDA from in $XXX on was from share our fiscal call. XX.X%, increase income million to diluted per year-over-year. and well GAAP this of $X.XX $X.XX was the period XX.X% a for period year. same $XXX business points in up same our was last up deep prior $XXX compared diluted million the quarter net on or year. $X.XX per GAAP the year. per share was $X.XX up share million compared million,

income was a currency up up Our adjusted was in XX% the net or million, constant $XXX period on a adjusted currency income or XX.X% the up year up basis. XX.X% $XXX last year-over-year XX.X% on million, compared quarter Year-to-date same net to constant basis.

share Our same diluted last share XX.X% were a the for Year-to-date, year. earnings per up period adjusted adjusted same per was for quarter our from period the a XX.X% on from share basis, for year. last the per $X.XX, $X.XX up earnings $X.XX $X.XX

to year. $XXX And turning for up sheet. cash operating payments million, from net same million flows up $XX We balance had was period the cash million, the million Catalyst. last Year-to-date the were cash operating flows $XXX XX.X% Our year-over-year. X.X% $XXX for quarter of in the

strategy. achieved the same And results to in is days last record XX quarter. leverage two quarter, We was flexibility integrating a quarterly achieving OpenText debt such well quarter. quarter total collections teams to Xx a XX huge of net ratio for at and DSO within overall us consolidated flow days to X.Xx Our on our in acquisitions year. covenant the the in cash the outstanding while applause compared In ratio execute our and third growth provides meaningful with external

dividend are to learn On his in $XX.XX to and dividend, share. to management XX% optimize today, indicated framework. We continue remarks, from be by cash we raising per very up our $XX.XX Mark our pleased quarterly from as

Our to dividend component program of capital continues important strategy. a very be our allocation

on Now operating for our model. prospectives

remain target presentation our is on to Mark is model, As reminder we XXXX on in a fiscal track investor website. our included outlined, our IR which

and by fiscal of for summarize our me QX. negatively let that the impacted QX anticipate So reiterate $XX factors was million. quarterly FX we

headwind rates we million. are approximately business, As as level in of of the FX where look well geographical components today at our as we QX expect $XX

QX target is QX It historically negatively is these XXX and be basis constant in $XX remain in higher a expected sequential expect impact integrated adjusted to to model seasonally to operating revenues our incorporate to QX QX execution although million. PS to revenues PS to sequentially and respect quarterly was lower Note uplift is in QX. QX, on of and of factors not end we With quarter in strong on QX important QX, Given that be than XX do expect EBITDA, remain historical operating the points At last the our and Catalyst in to adjusted quarter-over-quarter first it in expenses. the expenses fully up range quarter, QX. Liaison months. to in given as to approximately year be X% by of and QX. fiscal X% compared you for your model EBITDA Liaison

XXXX expenses, tax of On our our remain $XXX million million they target fiscal adjusted remains as in rate interest model to $XXX and the noted XX%. at

EBITDA target, year-to-date Mark turning margin adjusted flows million. mentioned So at XX.X% at our long-term to cash with year-to-date $XXX operating as and

we will $X in on forward We include a end XXXX organic fiscal highlights fiscal ROIC. sharing on are to of within two and At next at in framework operating are our of three-year we fiscal business. aspirations communication we target flows XXXX. look and our annually that XXXX. introduced each as way way updated the XX% cash exist provide that we of quarterly you aligned start framework, see to of of we basis, And earnings margin there to how model expectations invested fiscal and recapping to On call, that growth metrics you fiscal closely capital, of EBITDA year, XXXX, XX% billion factors year to our our a XXXX the the strongly our and historical on annual provide to to OpenText is help return adjusted

our these We of metrics call. during annual will update you next on both

excited I the joined Harry conclude, team am team our the extremely and and the of with I of before of global the Secord. Investor Harry Head strategy oversee several served us. President week Harry’s leadership Investor broad has really and are Senior on leadership, of aspects decades all Relations Relations. confident support Vice this of for enhanced continued drive to and initiatives to behalf important So with Greg Greg Mark management Relations [indiscernible] well of our team OpenText has will Investor brings OpenText. as that we welcome and experiences help and will addition excited

part Management excited built coming ahead. of Madhu, leadership and very weeks an in future growth forward will next a driven Thank can the the you very to financial by in discipline Information the join to execution, you I phase Greg. position has Mark, strategy. the growth. meeting our in words. a Madhu. many and Harry strong you, be Company's total strong look be you, the So Enterprise great bright OpenText few Thank I'm share thank and if of to team you of in

Madhu Ranganathan

Harry, you, welcome Thank and again.

operational you continued valued. with A look high of We OpenText thank long-term the we as the performance trust So the and results will you, over our progress to everyone. drive reflection big to great to team shareholders forward in whose summary, sharing a excellence. QX our of confidence our greatly continue be are

and engage and June, investors connect to and with through United meetings and information. conferences Greg Please do States. more one-on-one in with Secord Canada analysts plan May for our we During the

this questions. for So at time, the your like Operator? I open to would call

Operator

you. Thank

We Our from begin will Phillip Instructions] Barclays. of question-and-answer question the first Huang session. [Operator now comes

Phillip Huang

quick thanks. for me. couple Hi, Good of ones A afternoon.

just on First, I if I think little elaborate Madhu that strong it's a a quarter. wondering for a light you could the licensed bit was given on seasonally that maybe question revenue.

based understood mainly was if comments around was perhaps sizes I all that it make or so timing factors I driven factors, wondering deals. I forward just pull it Just if to on it the point by that that you'd wanted by your driven – deal correctly or was larger quarterly was there of other out. any sure

Mark Barrenechea

It’s and… Mark here. take first Phillip, the I'll probably hi. one

Phillip Huang

Hi, Mark.

Mark Barrenechea

– yes, IBM. more Madhu We hello. had forming. enterprise a factors, quarter quarterly was competing the off-cloud certainly effectively in a software Madhu speak to a can it both landscape deeply driven quarterly little against the on by new and And There's factors. strong and cloud very

transitioned transitioned So recurring been focused. the we to as to we've agnostic always our cloud and revenue

QX We has are license in agnostic deal. options any a to IBM it. I new enterprise software our subscription, our total out other a that called was it how we shrinking we're customers calling growth service, purchase, strategy, to both when and continuation larger of in managed whether be But presence organically and a cloud. not acquisition. I will landscape note are effectively competing very the

Madhu Ranganathan

Mark. factors, Thank that And the so quality question to expand do want on on you you, your I…

Phillip Huang

Yes, no.

was around piece there strong out? that strength just a you to whether comments guess, of trying pull I QX of it that's by fiscal together – was seeing I the Just based on not fiscal the the not execution, forward the puzzle, why there larger driven point to we're of any QX sizes, deals into other because into just but bump factors think would was deal the wondering or were QX answered driven license the question if sequential strong on QX calling this also on Mark that historical drove the not quarter. by other revenue I factors I was part the and

Madhu Ranganathan

Right.

and look license there are it, And back at is to for think to the you QX. execution reiterate professional QX. million sequential and revenue. I of and outlined, Mark addressed all reasons the the we the FX expect when and $XX And are would QX the constant about So the today in overall PS One services we at looking cloud, revenue, three not a impact where to QX expect revenues license just factors. it's I do course, historical important sit QX. right, strong QX between in same uplift we

Mark Barrenechea

add here I very remarks to or annual but only would I quarter annual We're vary think the up deals. we're And the prepared to little of if all again, is competed. I thing the remarks the statement to big question. business. can an on it's out might to calling back Madhu the a in not right, We there, focused any given the or business, any nature

very effectively we very when called software competing Second, landscape. effective competed or I enterprise new the

and a like effectively incumbents strong IBM, we've outlook. and against competing others those We’re got

Phillip Huang

just Got very concern, on you've helpful. give the wondering it's global a your to wording Was quickly I last potential on well. visibility I it. quarter. you that That's any in on an mentioned wasn't on you there pipeline, the factors any update put noted the very impact just that then know And us if the you quarterly could last that similar know in recessions as

was So wondering thoughts are what update your for that on an comment?

Mark Barrenechea

are dates around factors. category. slightly, of in Europe. continue I've to going pipeline. our some – or healthy I'll still – in seeing bullet moving call any you the directory see see of I change it coming to don't keeping know close kind business. is a shrinking land. those to the know of to not But typically into in this just There out would We're yet deal continue you think quarterly are growth We size, Brexit shrinking, approvals our either We're is in kind headline news don't towing But factors Yes. what a of statistical it's headline place. more there to out, where

Phillip Huang

helpful. really That's very Thanks much.

Mark Barrenechea

you. Thank

Madhu Ranganathan

Thank you.

Operator

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

Richard Tse

you. Yes, thank

just week a of biggest explosion role, the I’m a today still when and of customers think pay technology had data of the see enterprises. event wondering to in your seems attending a you the fairly large I'm as it comes as this be large conference So sort is for well challenges data? what your I to been from side point on of this big this theme your

Mark Barrenechea

for question. thanks. Richard the Thanks

ago, years think question. the on I CTO my put I'll remember for mobile XX little a I think eats CTO moment, more I a world. hat of the And headline, a back

in the a maybe years we're all the into last And to data I years all And a or exhaust goes – unlock company their XX and to and for really back out provided and companies, data can this next I And or more data market to few year the affective process think companies. data has ERP smarter, advantage. back their headline over go think leverage each is right? software use year or competitor them make how market that data monetize in the a ago out.

next the EIM, to look I advantage. over think years at the provide information here XX we're I

the great consolidation, master see I challenge of right right it I we sit the trends the question the help right of like I secured? right in think take way tools format? data Richard place think get into is to the think make advantage. I understand a step I now But you those and is information Does – think to and think great I that it when now right then is Is the a kind in challenge to it – usable of and meet So the can the picking And yourself exhaust? is the management, for your biggest privacy? right The format, data think I advantage to an actual unlock that is data, gets it. see data taken from or shifting data algorithms, greatest right the of process inventory platform immediate data course a things right we that everyone some of They so leveraging are I the it. getting look better landscape sell the I and a automation it. to in into next enterprise landscape it then have do governed? of that

Richard Tse

enterprise increase traction it I products? that a currently evaluating like and Magellan like position in are when your sounds this guess you my It lately? get that could real in at Magellan customers and see Yes. that context like question what you of you a think material And guess is look we you is products also instance. have Do that kind from been of the I those potential you that we're are for the

Mark Barrenechea

Yes.

two things. there think I are

is, Microsoft a first The horizontal wide is company.

Canadian global excel, word, standard core standards Well, be thus or platform. that of of we wide into horizontal get want the long-term and that and that tech the of that is keep and paper legal horizontal filler platform content don't the opportunity then on OTX intelligent AI market XX,XXX off They're have their to the OpenText platform. for analytics of to of supply another right? information of all services, we the is of financial we're chain, wide want driving is to And information the that want largest a We of or as and platform. applications. us vertical healthcare, type of top and cash horizontal strategy farm course You services, be right? management wide pulp in is with version going version horizontal fine a and the platform On or to Magellan well. securing front with penetration. that And to that applications. coming deliver the top

still to it's Magellan it's a is and future. it for days early strategic contributing us piece P&L So the in the very with

Richard Tse

think great. in of us for acquisitions. one last with it comfort Have is? one terms me ratio quarter, just you. remind just your the Thank if was the but to be forgot you leverage level changed what I that'd Okay, last I what respect And great? you

Mark Barrenechea

zone. that the still Xx same is ratios leverage Thanks We up believe comfortable in think a Yes. Richard. we to

over believe in say going of then and we to. back in data think points years. all the last over deliver There's that thing we I some for what would team they looking performance. management can rapidly it and then slightly need you'll and short-term take the we delivering. be one We If to said comfortable confidence two

So we eight are later EBITDA went and quarters adjusted at up to document debt about to we X.Xx of X.Xx sitting net a acquisition ratio. EMC completed when we here the

to do that we confidence we deliver consistent if think going can take is rapidly just philosophy would it, shown. up we as And we of I Xx. our hasn't So changed need to above go

Richard Tse

great. That's Thank you.

Madhu Ranganathan

well. you Thank as

Operator

from next Walter Our of comes Pritchard Research. Citi question

Walter Pritchard

IBM could Hi, areas call new mean, you thanks. on took you asset in the here. seeing particular some the you the quarter. curious couple Mark in questions that, side, that I positively which obviously of areas are of trend, which wondering the sales best resonate a just they but A out, seeing not if business I'm business pipeline this are I'm and activity? the

Mark Barrenechea

would Thanks Yes. three Walter. areas. I say

innovating I'm is The a and rapidly slack out enterprise well. of service there changing. companies they Excuse we've as where in ourselves times not filing now this that as putting really landscape me, from correct the been called just category me changed. have is let new have few set first software that is And myself enterprise

advantage SaaS we've and As ready versus process have – platform cloud OTX, companies SAP into version competing very to integration, just And look integration, bionet. can to get platform, Oracle, information SaaS our effectively application to really a have containerize we we advantage, a but that deep integration we're come turned we deep salesforce. a to against

and able and think version connected into been IoT commerce commerce IBM acquired sterling in has bring almost platform the platform. It's and platform, a their to has is X Management we for I area well into which and an platform. commerce, version Identity to Access million their their up And And Technologies and X, evolved. Covisint network. our devices second evolved we're The over Access to XX Identity bring

of examples cloud Mulesoft, network. to business I our to Liaison XX,XXX cloud right? ERP to us has tie connectors out example integration. use canonical of have like the library a put the an Where but of hate acquisition process we'd to any process Our can this, market I'll any into throw we ERP, where of within

the to Commerce. are a And sort get a is very needs to just cloud be go of a platform to effectively competing we're So advantage. of a place cost innovation. not against clouds IBM – lastly, IBM Sterling and It

look next-generational being but today and this able it can we our a back to And cost as for so the and advantage provide now workloads. cloud full a I platform we provide also provide innovation at yes, and can for us security, EIM

these are platform services, content areas three the effectively; So and competing we’re cloud. commerce

Walter Pritchard

up you this you around maybe what we as for side you sort get call new and saying take Got you you less as larger away expect, should you Xx mistake of can it. a Mark And you're other brought about the funding, you looking take here you’re you then self leverage Help us M&A, leverage but era interpret or forward. deals to I if fund mentioning maybe still on reflection where can said then to talking there. – is just of the in don’t on do and bigger going self

Mark Barrenechea

simple at look all right right and to active right Yes, for right us. right right company in the be the or I it's at medium, deal it's the price the That'd mantra like of ROIC. price above say and the don't And is a And know if the it's as with the I’d categories. always really large our very ROIC. pipeline small,

general, debt we in like out go mean if And pay ratio. years, flows perpetuate take M&A. the in cash able place that my management innovate. as and have say Our of companies. it puts to leverage sideways. To horizontal We've philosophy take acquire, model three dividends, In to we a delivering integrate ample our so I’d self core self pipeline capacity. the take I simply a fund, right. off world and interest, platform, very is Xx other to – we're We up out that's we to of than good is simply, CapEx, active, a ratio. out be very think a our philosophy look different us our delivered we're – a will able to take just

Walter Pritchard

great. Okay, you. Thank

Operator

from comes Leung Our Investment next Research. question of Howard Veritas

Howard Leung

question. a few thanks of Thank my And you. them. had taking I

years. the it's First potentially what of XX level it around drive and cloud one I’ll of comments could you They're see color is few margins. for or some Can give the XX, kind result? that higher at maybe start level? is the with you what Why stayed at for a kind some now gross

Mark Barrenechea

welcome Howard, Mark here. thanks for and question. the

making margin. in quarter, last just low-XXs the up currency Look, points cloud be our for medium we and that and new to delivered we've XX% in was in $XXX basis in as margin. constant cloud cloud, margin And acquisitions in the quarter term cloud was Liaison XX%. we're like investments we million So under were targeting onboarded And XX.X% grow cloud up the to Catalyst year-over-year. XXX in

all XX% basis points. below reason, a the note is dipped the our And is target to onboard XX%, between cloud, have to XXX and and in range right, range. little margins Our for smack the the margin And that but up acquisitions. I'll XX% for grow couple year year-over-year great bit right we're a

right where want it's be. it to we So

Howard Leung

the upfront. $XX helpful. very wanted It the revenues. was of kind the million on on based one was quarter just like conversion. the that's the I licensed for Okay, XX,XXX there licenses of a And of was that impact think on to MD&A touch And acceleration looks other then from some I

find want contributed to the $XX that how Just to out million, that – $XX licenses many term were for licenses million? sold

Mark Barrenechea

Howard, a detailed very question.

at conceptual all piece, the right. of Let me sort start

wants And to procure one deploy. about around all a how all So customer to first don't how buy say, It's this buy. Global wants for way. and and it's and we go you must XX,XXX foremost us, the a customer into

to in We're all off-cloud cash right? license do flow. in For adjusted somebody about that want they else's if cloud. or all us our and it's the in, annual So revenue, cloud, recurring EBITDA

the principal a how to about wants at start just I'll it's procure. customer level, So all

business all These business contracts. there gap business, is has for us. is new These it for are It new and the for wins. alternative. There Second, us. is are It's it's new third, all XXX there. alternative standard new brand no right. no us, the And

that if know there's that to question question level have. or the other another don't I your So you if answers

Howard Leung

I pulling these of quarters. guess choice the not an for the accounting in from It's future signed wondering that. all just licenses, which policy. just kind I I I guess quarter, up forward It's business…? understand new for you was not in that anyway, the just new change I and it's it's mean

Mark Barrenechea

No, new new wins. business,

Howard Leung

Okay

Mark Barrenechea

wins. good Very

Madhu Ranganathan

Yes.

Howard Leung

Yes.

looks this guys. it but strong, That Thanks Now really very helpful. so, that's was good. quarter

Mark Barrenechea

Howard. Thank Appreciated. you,

Madhu Ranganathan

well. Howard, you as thank And

Howard Leung

problem. No

Operator

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

Stephanie Price

go give a on minute. I to on into remarks? your revenue a can touch mentioned thoughts your you Mark, I in detailed a to you maybe for and services prepared more hoping that afternoon. and in bit services update puts was just us Good takes that wanted bit an business of

Mark Barrenechea

– run is very Pillar one PS I a business we the great. Thanks. company. sort the of time for the Stephanie, and always one We for Thanks, our customer. of think sounds pillars. three, to run And inside a Yes, in software of question. accelerated PS three thanks value best organizations

accelerated getting does amazing organization day. Deploying to software, any our an time PS up against I'd Our our job. value. organization put anyone's

back And there delivering center a value businesses that in customers. enterprise can is, because their profitably? we're do PS negative to no leader. It's that companies our loss you margin. not And companies profit I CA would run like that look Second BMC, for other is large philosophy. not that's just to It's a

margins around our deliver world’s we've of to run able zone PS those the best businesses. which been is revenue of in XX%, So levels, the

us and PS give grow that's some that think do framework more put the into strategic revenues cloud and to and out of were we we go having to up perfectly their can We to going global like sort third we're the a others, will implementers quantum And Accenture, revenue. that is strategy revenues partnership. by Deloitte, the TCS, you going on if of going they're to as we've like system pillar, of more an and taken NTT, bring that The okay.

the configured. work our of It to then and that to and Second of we is, wean need it's complete that's in the business as as that well. service, cloud, PS run becomes businesses acquired then how philosophy quite organization and need And move thirdly, have on. less right. a PS And and off don't deployments ourselves we fine more you self standard

and So revenues if three other slightly, the a PS reasons is reasons. I mean why right strategic those the up are down are for all

Stephanie Price

sell a whether deck, you base in the opportunities a growing extension talk little And thanks. and and terms slide bit seems in factor be in were Hoping quarter? a here. the then cross they on Great, in slide selected your can to product customer install of the performance

Mark Barrenechea

calling have thanks for we Yes, out. it –

just for earlier the for like is us and selective of services some the not we're have where reaching the solutions and/or We I've to go got for XX I'd multiple in back Fujitsu, deck, keep key have our say to markets, our go GM, XX, to of capabilities product back around we of where a provide. and portfolio I'm showing core a deploying. Nestle, widening quarter and Slide to just Coca here, Look, and to Cola, pillars strategy we've companies has services business and how offering content businesses our customer network. is XX, IBM and us. comments my expansions it have network strong the business in running again, kind strength investor content I like it two was expanded we're

Stephanie Price

Thank much. Great. you very

Mark Barrenechea

I’ll joining look Stephanie. forward CIBC to a Thanks, XX. May

Madhu Ranganathan

Yep. well. as Thank you

Operator

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

Thanos Moschopoulos

outlook, little Hi, good QX afternoon. still With your respect unclear I'm commentary. a to in your

clear, there QX? that just will modest So but that be more are revenue quarterly are uptick may seen in it to suggesting you suggesting historically be or uptick, quarter-on-quarter be for a very be you revenue we've will than uptick no there

Mark Barrenechea

we not be a just expect as will strong. an – seasonally There uptick

Thanos Moschopoulos

that point. Okay, to thought. That's confirm just I great. Yes. I wanted what

of capital for than just recent of flows, EBITDA year. cash working a your up highlighted, QX cash a flow from as you of drag tuck-in acquisitions? last terms two your the that was conversion In was cash obviously because year-over-year Was although lower

Madhu Ranganathan

yes. Yes. Thanos, I would this is Madhu. say

this And much higher. Right. quarter, but of also so the billings the revenue deferred

So that still very conversion, in Keep but high. to was conversion a the mind. contributor a is

Thanos Moschopoulos

Liaison one line as one well? the services cloud in me, fair Catalyst last just some enough. revenue a it in And lines sprinkled was for Okay, other all was the or

Madhu Ranganathan

the services side. in It's cloud predominant

Thanos Moschopoulos

I'll Okay, line. thanks. pass the

Madhu Ranganathan

well. Thank you as

Mark Barrenechea

Yes. Thanks.

Operator

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

Paul Treiber

and Thanks much good afternoon. so

Madhu Ranganathan

Paul. Hi,

Paul Treiber

on want the mentioned but public remember to Hi, following in they I deals a you horse very beat were significant when mid-year I this, they some had that there. dead don't before range.

around you large that potential size can in weren't can put as some deals Just bounds confirm hope the of figures. the he any deals, if as there

Mark Barrenechea

a private, quarter. calling had private been We're out that Yes. having File the long long any not it a deals they've larger net time. been in time a

effectively we're the I very and market appreciate we're call transaction. not commentary. again here our core competing It's and So two larger any to out

Paul Treiber

Okay. That's fair.

and ECD rate them similar at core migrate OpenText your mentioned or consider the cloud your customers that also you and products as – rate your How seeing latest are document to the documents EMC, core versions of earlier. does turning to a business. a at you the Just when similar customers

Mark Barrenechea

and Paul, Hey head, thanks kind any top I'm a data. have my the data the I out jumping of of real for rate to pretty or back a say in but me just go nothing But I off as sensitive, at of rate. sort migration. could different the I'm don't, question. not a seeing I'll difference check upgrade

phrase, our us. In to terms and early are strong this a latest is I the opportunity innovation. platform of use embracing upsell customers And for the a for software. cloud. This cloud And looking, get will customers or greatest our allows

and compliance burdens the uptime remove software um, You to of get management, innovate. security brains their a free of and and up fuller stack really to

workloads, ability the yes, upsell strong to SaaS us a So opportunity and upsell services, base. managed the is for document

Paul Treiber

for Thanks question. taking my Okay.

Mark Barrenechea

Paul. you, Thank

Operator

comes next of question Our Steven James. from Raymond Li

Steven Li

in organic on given positive have a be XXXX question for positive your adjusting would out would Madhu. recognition. has growth you revenue XXX I When Yes. Hey on do be impact XXX? guys, XXX next calculation Madhu base you your the impact? Given quarter,

Madhu Ranganathan

growth. XXX, looking at of encourage, question. of QX businesses shared you I'd about And constant XXX XXX adjustment million was as of what sort to we when we XXX. XXX from at if new are new for Mark adjusted, would I $XX you you is XXX know, businesses apples, business took look said currency. the that point last the XXX. is apples you earlier. we and but is of new XXX probably how out new in million that's XXX business, think back revenue do or even still you all what Thank So to I'd for growth And to year, it's grew go this we if and in and And Growth look the it right? is at the QX and

Steven Li

Thank Okay. you.

Madhu Ranganathan

as And well. welcome. you very You're thank

Operator

would to for conference question-and-answer session. closing I over Barrenechea any the This remarks. concludes back the like to Mr. turn

Mark Barrenechea

call. direction in quarter, And of you, Greg. All today. I'm Thank for right. and the everyone Thank July hear the Madhu. see in you week. joining OpenText cloud. I'm excited our future. excited network, obviously Enterprise and can in great business, you you have joining you World the you, leadership And call Hope CIBC Thank the about see the Thank the you, and in the my rest voice, Harry. the services Conference content our of May thank a for to business about to

Operator

This concludes today's call. conference

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

Open Text (OTEX) 1 May 192019 Q3 Earnings call transcript