OTEX - Earnings call transcript Q4 2019

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Operator

Thank you for standing by. This is the conference operator. Welcome to the Open Text Corporation Fourth Quarter and Year-End Fiscal 2019 Conference Call. [Operator Instructions] I would now like to turn the conference over to Harry Blount, Senior Vice President, Global Investor Relations. Please go ahead, sir.

Harry Blount

good and Operator, you, afternoon, everyone. Thank

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

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

results, strategic which financials our The and & on factors our is first updated Investor FYXXXX Results"; Text Business titled, specific Presentation." to The quarterly titled Financial notably "QX X. overview, XXXX Page is our information "Open quarterly includes second FY and

and August Canada in United In forward looking OpenText is with September, to investors meeting States. and management

We Citi Investor X will at to KeyBanc directly as XX the feel the Please to Colorado well reach more information. Leadership for Conference team August on free out Technology me Technology Forum be New York. attending or as Relations at the Vail, in September

at X. that the event OpenText. the about And coming be in event tell AM The live, to site in the OpenText X:XX market streamed we'll NASDAQ on Square NASDAQ in announce September now, will is Times you an participating Opening on up Bell pleased Investor at I'd Relations to like exciting ceremony live York's website. New be

Friday, at Lotte investors@opentext.com This consist update, to Investor contact analysts presentations confirm annual attendance. OpenText to of I'd featuring Palace. will leadership Please like equity X event key be finally of hosting the of on morning our team. remind members Day our and that York from RSVP will investor institutional your executive and investors strategic New the And September

now well on material we to Investor Relations unable those presentation publicly And available and website. safe attend, with of harbor the the will reading cast teleconference be as our as will listen-only proceed For audio statement.

this of forward-looking call, performance statements of to Please relating note that contain the may make conference we information. course during that, future the OpenText

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

in Additional information about conclusion, factors in press a also cause OpenText, on in recent differ earlier forecast the may our of this from Forms distributed XX-K as performance future OpenText's could the forward-looking afternoon, was that or projection material are release well which that as results well our actual results that contained information, risk and materially may factors website. project as XX-Q, found be as to

update forward-looking undertake statements We law. no these to to unless by so do obligation required

non-GAAP financial of include be within Reconciliations non-GAAP any to In certain financial comparable on of our call their discussions and addition, filings measures conference materials website. available may our which measures most found other public are may directly our measures. GAAP

hand And Mark. call to that, going am to I with the over

Mark J. Barrenechea

on and was I'm If stable lasting, pleased sustainable. to everyone Harry. announce Durability well-made, OpenText from you markets it for results. model, to afternoon down XXXX A and today's call. long stems Thank you durable, one up business thank OpenText, record to is creation times. there good in our fiscal joining describe in or centered word value volatile

in volatile. markets are results record delivered that We increasingly

our continued trust and Brexit years news tariff the from for week U.S. at XX% the today results places a are discussions built and another with England. OpenText company on the position the the look last customers in China in Just hard ahead. great

value cash returns growth, disciplined creation. total on focused company a are We and

before picture, the term. to this get shorter speak into bigger me Let I

XXXX up X% In year-over-year. total in fiscal billion $X.XX constant at revenues finished currency, we

to digits double year-over-year. Our by cloud revenues grew million $XXX.X XX% up

but a positive, organically was year under by for growth ARR X% the X.X%. organic and grew Our

not wars, the Our strong even the term, external growth Asia. effects dollar, U.S. short and of higher temporary tariffs for slow have would trade been down across

revenues $XX for on I to minutes. year. foreign growth full and by in a million QX million have more $XX exchange the due were to few stay affected

As reported flows dollars billion $XXX up or XX% EBITDA our up million adjusted year-over-year. XXX points Operating were basis XX.X% cash $X.X were year-over-year.

Our all was of value had consolidated times, the and million is balance right this net ending cash places. growth in we $XXX X.X ratio in a debt

revenues, total EBITDA into of continues remain built momentum The our priorities disciplined correct flows and and like headline since expertise dollars number This adjusted operating achievements and and the is I'd fiscal last the call. of record creation. with XXXX growth, trust cash for employees. cash record and record our revenues, customers XXXX a total excellence record to cloud consistent, our fiscal our value flow expansion highlight of

We see with and now a deeper relationship broader SAP.

announced the the with business world the We platform have We facto services de a off-cloud with relationship in in deeper largest content Google. cloud. software and now company the

increase build security preferred the Enterprise partner industry.The Management now Cloud. enabled services size automotive trading global their cloud companies for or We relationships. We with partner for technical across efficiencies to collaboration will better chain, for or supply increased relationship of the strategic financial with the help announced trust are the Information location capability into and companies Mastercard to irrespective starting

and half XXXX. services. Cloud OpenText for OTX Cloud-First of leveraging cycle Parks represents thank We for African with product National to Cloud-First Enterprise world us Citi The and respective trust a Intel, OpenText. their Edition, technologies. Coca-Cola, companies OpenText Networks trusted also World approach Fiscal and most the at and enhanced transformative OpenText Business OpenText I Fiscal XXXX South sharing want joining Bank journeys, announced for second

customer major BMW, in including see and the investor wins some you had our can quarter materials, Core-Mark, also in that We others.

to court are payment final to make technology I'd readable, to integration Here, on and like process, Vertican standardizing digitize will our business including end-to-end in machine resolution collection they of to be network end-to-end leader They Technologies. highlight to the sourcing everything that market from collections, collections, systems.

stronger. competitive been recognized developer XXXX recently as our it as throughout never of leader has standard a differently, IDC AppWorks. by community enterprises. were fiscal we recognized and software And networks. is organizing, services and in markets changed OpenText We data Forrester the core enterprise critical The the leaders our content Gartner, enter and landscape position between has in moving for with Say and storing and business

secure. Magellan us mine Our puts leadership helping actionable position in insights a customers, our product data puts and position a to strong our for extend us and Encase to to in their

OpenText total growth trifecta and motions, three grow, powerful of a retain, is strategy acquire.

rate five XX%. is our Over CAGR revenues for years last are revenues average growth cumulative, the for

can rates, recognizing some confident strong coming may growth for As years continue our execute be we optimistic and plan we down. the and and be years some years, up I'm that may

Let me retain. expand on

has our XX,XXX We XX% in the XXs margins time XX%. and created day durable customers first durable, OpenText I that mean topped customer a and every have our the over trust OpenText. rates of for revenues are annual By that recurring, are trust renewal support

Our are to among enterprise what is continue improve. software, makes net durability in promoter scores great and great the our and software software, OpenText best rooted great customers. in employees and great

growth. on expand me Let

a of in We just OpenText advantage, platform provider customers our adoption base, world expand OpenText now cost reduction. be a product have is key more It the cloud. global to to within amazing not provides an that cloud strategic Cloud-First position our is to more and and migrate installed opportunity information

our opportunity and have both within We coverage existing the global tremendous our a on grow within and our broadening deepening XX,XXX we customer are product and to base set. planning business

orientation capacity investments sales, Go-to include market our Central East expansion, our important as organization global Asia, go-to in expect America, create sales and investments We further and Latin product elements programs and going Africa, Europe. such stronger market Japan, to geographic in organic a growth. Middle inside

of ahead bit and to now within upper of range intimacy. OpenText This greater productivity to of an and coverage account We a value. growth more to out this arrived is coverage We expect we any and and use to and strength. ideal adjusted this is to lot leader, here create and intend XX% expand and create fund a XX%. deal be set range above with performance customer market EBITDA excess we quartile to plan a

acquire, We strategic patient a playbook buyer coming and to companies. the prudent will and remain be will continue we be of to and a run On years M&A buyers. valued our contributor. growth continue we disciplined In leading

strategic expanded our we Return important On most ROIC, metric be the Capital fiscal is assets, high-teens model. to the our of financial a is XX.X%, XXXX Invested In ROIC ROIC for buyer of place As business any to ideal deal. an

of never for System. balance level total growth, been This Our sheet within proven These and OpenText Business trifecta elements is grow are retain, acquire. has of the M&A. any healthier

factors would revenues this we we Let X%. the together. higher me currency, if fiscal though have earlier. constant bring positive We XXXX organic in not for In external grew grew cloud been mentioned XX%, all growth,

million As flow and times. of reported XX%, adjusted million achieved an X.X operating $XXX at the $XXX margin cash net and cash we EBITDA debt ratio of

last five momentum XXXX Our XXXX. have and and CAGR of coming we Enterprise – strong out into between XX.X% and XXXX of heading is growth fiscal XX%, year fiscal World ROIC

into our bit a looking few fiscal me let growth more profile. XXXX, Now a on provide comments

total planning are year EBITDA of cash We record dollars for record another revenues, record flow. operating and cloud, record

in all expected rates the growth high-single-digits. be the total any to factoring new single digits is this low growth acquisitions. expect Cloud We in in

XX% of our Our PS to the are range single XX% to XX%. to target digits. business new organic And range adjusted in year-over-year, growth low increasing constant is license from we a XX% in EBITDA

Looking as even beyond yields. fiscal and XXXX, confident about well outer optimistic I'm the

acquire OpenText we company. playbook Systems. ago, total we will is into continue Business far Now the trajectory to Future the our Five margin integrated in value XX% long-term remain robust a year be faster company. and using we acquisitions System The OpenText growth, guidance, do. business achieved don't of years We give proven Business than the into high-thirties OpenText XX%, acquisitions margin on are companies a other CAGR we'll five but right. integrating

in digits. are planning low growth for organic We single

large the digits is range we why, rates and this need Some market as high-single should use rates? longer include be. at right grow adjusted term, upper buckets margin to unprofitable indicators XX%, continue of are where we're EBITDA why quartile not performance have bad asked in to XX% they Well, cloud we and here's look market revenue, to me

experts now with what directly business are deeply models I of era. connected really need and thousands more No, information, new to ERP we Enterprise Asia, and believe the advantage this need and above personally advantage? to value range and months. gains creation. all XXXX be customers, over technical World Across the joined Productivity for will and America partners us the in growth earlier for want business and invested of few value in companies become customers partners. these I is unlocked we back information in last gain Europe, a their information process thank events post North as our create who three events, we mentioned fact into Do companies.

discussed As on customers insurance example, an insights. models and keynote, a OpenText I you're in company can help for manufacturer our an information company business based Enterprise or move X.X or auto just your Industry information you car advantage create new if and my World to and advantage or process beyond car company

companies all the information our We is and are this of future business.

at high product is that scale. Cloud-First, quarterly off-cloud operate impact for a to strategic cloud-only, releases We're We not platform moving are OpenText.

services, from and their gain grow end with of Cloud staff-based OpenText new as of off-cloud We with value Services, value my to and investments keynote cloud workloads, next usage new we OpenText and Managed and discussed By as platforms are OTX, such the in providing maximum by XXXX customers OpenText the into Cloud generation plan expand and I OTX. helping OpenText investments, EIM their the selling enable Editions enterprise. fiscal

management, our and to year, very release Services OpenText next is and milestone when OpenText to the As at the for managed important company the begin network in scale, management offer Cloud. archive, is capture, cloud, identity. content signature, in XXX% reminder, business cloud-based services EIM a XX.X include we'll already the hosted output

find growing EIM to gain create of unlock and against value customers sprawl, intelligent their of enterprise help secure customers and We're and that hacking, protect and breaching information behaviors. is menace their bad connected the the advantage. and endpoints helping manage information designed information,

we the supply and circular everything chains. to can economy identity through believe attaching we ethical digital and enable are We

wrap ready well-made, is sustainable. And a the my Let in hungry all closing, up long me and comments. durable scenarios company, strong even are the leadership OpenText market. continue that the QX, margins and grow we solid. flows. fundamentals poised in corporate rock will of to The upper a seasonably year-over-year. We're growth quartile company cloud lighter cash team a is for lasting, and In humble

are need has market the and products, best never need the Our they image post brand and companies advantage provide we process information recognition or – to ERP they been it's stronger, and are that. do error EIM process a advantage, more not partner

look factors with rather quarterly my reports other quarterly modeling. not well. this end news items your GDP for me QX strategic U.S. recession wars, Brexit, tariff Global U.S. consider Let remarks continue. long-term the in Bureau the reports, trade geopolitical Asia the Again, concerns and of to short-term factors, recent at Analyst slowing are came events, out Economic is and with of headline this afternoon out week as BEA U.S. factors.

seasonality, QX summer vacation due so few selling Our are lighter those quarter to days.

XXX be If want you million be as X% and operating QX between EBITDA could basis points last sequentially, to QX to $XX quarter basis down to headwinds down FX be FXXXX million. points. adjusted X%, be XXX FX as million expenses could high and from $XX sequentially about $XX headwinds down to

team hope New Investor join September completes after I X. attention leadership her and today at your I on in me to to York you. over questions thank our taking Madhu your time you look in remarks. Madhu, the and Day for you'll forward

Madhu Ranganathan

and capital Thank optimization. today. fiscal all joining investment and QX growth, and an unparalleled operational XXXX reflect Mark, performance, management you, and hello for and you thank year of expense strong results us

and the quarters fiscal my turning to periods in and USD annual will references be and compared same details of prior the to millions now quarterly results our in the prior to So year similar of

FX quarter meaningful. impact negative fiscal the XXXX, During and fourth was

let of You was revenues, measured revenue start our impact million basis. will pointing Total $XXX X% the when earnings. and a or $XX fiscal across to segments a on a revenue see FX performance entire revenues On year. negative currency the for a quarter negative with constant impact the million, the impact upward P&L, to constant effects and quarter all million currency there $XXX was for earnings And during full up basis. on down and $XX FX the revenue X.X%, million, me

year $X.XX up from basis. were For constant X.X% the revenues fiscal $X.XX a year, currency billion, up in total billion, last or X.X%

GAAP quarter year. the earnings last Our for from earnings per share, $X.XX for up share, per was period share the per $X.XX per share same

fiscal year up per a $X.XX on prior per in earnings were the the the per a $X.XX constant same share diluted per the no share period basis from earnings currency for year. from share $X.XX For up $X.XX a basis, GAAP last for share a on $X.XX Adjusted change quarter share $X.XX, on per diluted was year basis.

per $X.XX $X. basis. or earnings from year in $X.XX, on adjusted share the year, fiscal per up up the share prior constant For was $X.XX $X.XX XX a currency

our So now and XX%, up $XXX let The in revenues up $XXX a of the revenues X.X% were or me was million, share currency basis. with XX%, for Americas year you X%. constant all recurring the geographical quarter, other EMEA the Annual on million details results. of total X% split APJ

were a respectively recurring as last and $X.XX $X.XX of X.X% solid XX.X% and fiscal fiscal from the Annual billion, X.X% total For the XX.X% revenues for for annual year, year. a revenues revenues the on billion, remain up recurring currency year basis. percentage quarter up at of constant

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

constant $XXX on the million, when For up revenues basis, cloud up year, or currency $XXX million X.X% XX.X%. a

customer $XXX $XXX down million X.X% revenues on Our a were million, basis. or support constant up currency X.X%

the basis. a last billion support $X.XX $X.XX on revenues constant currency up year X.X% billion, For or were up from year X.X% customer

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

were million, XX.X% or constant basis. on the for Our down license quarter currency revenues XX.X% $XXX a down $XXX million,

from $XXX revenues last year constant X.X% Our $XXX a on for the basis. or down were million, X.X% fiscal license million, currency up year

X.X% as the million revenues mentioned recall remain constant basis revenues the and general have quarterly license in down volatility an $XX strong at a $XX services our revenues quarter or were annual very license down basis. constant. XX.X% currency our license revenues third Due that Professional and had quarter, for on million,

currency on basis. professional $XXX a last For down down year X.X% constant $XXX were X.X% revenues the year, services million, million, from or

to leverage partner and Our goal our target as business earlier network. margin we stated is higher PS

to QX ASC And XXX minimis. was in de ASC with respect impact XXX,

companies Our quarter only. ASC comparisons accounting adoption. we ASC our QX to during Form details provide XX filed the XXX last be year XXXX, months the first of XX-K beginning to fiscal and report the Accordingly, have XXX require are to report available rules the comparison to will The on today. in only will the

we basis XX margins, year the up last for XX%, points was the very margin year. in last for to year gross points the up same XX%, our are Turning fiscal was pleased margins XX margin quarter over up GAAP the with points performance last and the fiscal gross the in year. gross XX.X%, same basis was basis and the quarter GAAP quarter for also XXX Adjusted from quarter period year. margin over

year, quarter, from fiscal adjusted the adjusted Also XX.X% cloud points. margin For basis, an for fiscal cloud in of up margin on XXXX, XX.X% XX.X% margin an XXXX. XXX basis improvement was gross XX.X%, was was the during fiscal

Our XX.X%, for customer margin fiscal customer XX.X% up XX.X% support XXXX fiscal XXXX. margin was the from support quarter, during was in

margin with also XXXX, fiscal margin license down XX.X% from quarter, XXXX. the Our slightly was our for XX.X% license in XX.X% fiscal during

of Our quarter, from year-over-year QX XXXX. was up XXXX the $XXX this margin for XX.X% XX million compared in during XX% last to professional X.X% EBITDA professional in and margin margins Adjusted services fiscal EBITDA XX.X%, quarter, was fiscal basis adjusted up year. was XX.X% was an points, services increase XX.X%

$XX.X period and adjusted compared net improvement points to was for million year. the up EBITDA year to $XX XXX quarter for same was XXXX, for an compared basis in XX.X% from adjusted X.X% XX.X% the GAAP billion, last fiscal income the $X.X For million, prior year EBITDA XXXX. the fiscal margin up over the of was

the up million GAAP income net million for period last $XXX.X from $XXX.X same fiscal year. XXXX Our was

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

aspects Now large, you EBITDA very adjusted XX% range fiscal of our a deflecting of above Overall, elements. all, and lens all the We XX.X% target our all target start turning placed to the year you of see business, models. was XXXX model solidly we of the model shared our model on target expectations margin to that small. our with at fiscal and on XX%, the that operating meeting XXXX the year ended deep medium will or target we for

operating We quarter. for to Turning year-over-year. cash the flows XX.X% $XXX generated up million,

the year, XX.X% operating fiscal flows year-over-year. During $XXX cash annual a million, our was record up

to growth performance well the acquired initiatives. cash total optimized investments Our reflects Text continually built for Open engine and our in support the be flow operating

And let's the sheet. cash, a balance turn increase to in with ended year $XXX million We year-over-year. XX.X% the

within Our consolidated level of in covenants X.X net external the our leverage ratio is strongest two debt years well at and ratio X times. times

our continues position. into we Out I IRS vigorously you the we The the as defend In appeals head as remains terms of our results standard call. ongoing Mark’s to IRS refer back phase. strong matter, last process comments in

turning of today dividend, our we to be and dividend $XX.XX quarterly a And component dividend per program share. allocation very important strategy to of a capital our announced continues

XX operating approximately dividend cash XX% in rate flows. reminder, is a As distributing our months our of based trailing

with Going fiscal will dividend next year performance. forward, assessed update align with year continue occurring time the our to our next be this to annually, rate

provided metrics IR been return investor growth materials agreed revenue update each posted capitals, we we two have organic year organic basis, These at ROIC. and the to end year in on growth the ROIC. on on that of historical annual At the today. to invested the of our included website Turning we total fiscal of in a start

X%, in organic was in total currency external XXXX. but earlier. growth that and below year, at was factors fiscal constant the constant organically impacted currency, X.X% the by revenue Mark highlighted recurring Annual For which positive, grew during

given ROIC capital, to profitability. last compared year invested of on return Our was XX.X% higher XX.X%,

ranges and model fiscal operating long-term to to talked aspirations. model target on included our our to That commentaries refer practice, today XXXX website our target XXXX as Mark’s reminder, and the presentation which our in Please growth, model. So acquire. fiscal our our and provides of grow retain, operating our the with target is components fiscal consistent model is XXXX he do let’s we turn investor about is published earlier, annual total

to fiscal for change look the total you to XX% As XX% of to increase expected to and at to XX% to on range offset full support services segments the revenue revenue Liaison customer with revenue XX%, the the year in to XXXX, cloud and acquisition to XX% of XX% our share XX% in impact XX%. the Catalyst subscriptions for is target from

and end built to by margin we EBITDA points all target our XX% across maintain model, our while As by our range ranges and to up upward XX%, models low for from XXXX, we point. up our XXX moving expense XXXX XX% the fiscal elements of a the end we XX% basis to basis high fiscal shifted adjusted XXX

We growth. focused and to on have been profitable continue remain

at in tax and cloud. on focus to target interest $XXX our growth at expenses million rate remains models on at the remains also will adjusted also XX%. $XXX such right for fiscal XXXX tax million interest An our our Our update be rate, adjusted places as

XXXX to year range aspirations, fiscal see, three our shifting fiscal can we’re as XXXX. Our you target

XX% billion XX% during for this margins value fiscal to above flows now the to fiscal operating will $X.X cash EBITDA, be into $X creation, at aspirations business range XXXX. with long-term billion adjusted XXXX growth looking Our and back reinvested

upcoming fiscal let QX is QX. that me the anticipate factors And mindful recession summarize our Mark we should in quarter concerns that seasonally commentary? for also We that global his the for and factors be remain. reiterate lighter all outlined a quarterly

we expect $XX basis expenses expected is sequentially points QX As as XXXX. we could fiscal looked rates expecting margin basis X% down during our points. to high adjusted to XXX to headwinds EBITDA operating components FX by headwind be be is million are well as by FX to down the XXX QX expected X%, $XX as and million at as QX FX we're where in business, of today, geographical approximately be

on XXXX long-term we with So fiscal look fiscal we in our are results and XXXX to pleased forward our targets. very summary,

bandwidth with investor As you have may expanded connect internal community. significantly we our observed, have to

leadership the Xth team, and models with is With at opportunities our of Secord the Day in lie we the us. the the share stakeholders, forward Open strength of our business along to New Harry look see all engaging ahead to that Investor forward September of York; we Greg Text there. look with And Blount you

finally, committed thank And shareholders team trust greatly the call confidence Open efforts. your like deeply value would now for questions. to whose and I their I'd for our Text we and like to open the Operator?

Operator

Thank you.

will the go Instructions] The session. Please first [Operator We who Price, is question CIBC. Stephanie comes begin question-and-answer now with from ahead.

Stephanie Price

Good afternoon.

Mark J. Barrenechea

Stephanie. Hi,

Stephanie Price

I you more was environment. talk about bit hoping macro could the a little

and around You've quarters mentioned bit in the on talk well. customer you this And as prior and could Have the given you the any little uncertainty? trade changes tensions a patterns about quarter seen the buying impact headwinds FX, pipeline?

Mark J. Barrenechea

kind out Yes. only U.S. the growth of look no do for XX%. I another top today's out lead of headlines money of mean, are there doubt corporate or line, do And psyche right, the effecting strategy. want at I that just more into – I to is do spend of tariffs cost that does and

cash recurring we line, expansion revenues, variance grow And our and our a think flows. XX was able days And this were recurring bit a incredible of in flow in transitioned today to kind up certainly X% cash cautious or more that margin out So is to said, than there. very our we but are are we've we don't had business a business. the able whether market a is With see business, to we of business slowdown the X% the XX% margins, in we seeing tones grow have of durable I we it do top on why pipeline, caution ago. the year.

cautious. I into year-over-year. more I grow the So as XXXX, look we're is grow to look do I we're going fiscal environment into a think to going QX, year-over-year, bit

Stephanie Price

the at you Okay. Are environment, And more that you pipeline Has down. environment? talk about bit acquisition seeing think all, volatile you about at our when valuations environment all? impacting a the little the potentially acquisition can that changed coming

Mark J. Barrenechea

be M&A remarks. said – driver to growth as I in to going our We’re will continue my prepared leading

XXXX. we expect here growing pipeline fiscal is Our in and deals done get to

So public kind private on of some are in the getting I’m that of valuations to turn, lives funds, the a end high, ready equity bit do seeing their and markets assets. we remain our that our but get fiscal M&A to year pipeline value we is going deals is expect growth M&A confirm at let me to done up, driver, and remain leading this playbook. our

Stephanie Price

And this one is great. Madhu. Okay, just one for maybe more,

little fiscal at all. In so R&D, changed you Can a of quarterly show terms it you product model, R&D forward? at think costs look when releases terms we of the revenue, your see hasn't when you target the cloud the doesn’t in associated to XXXX moving talk of and And bit in about how cloud. with should R&D going

Madhu Ranganathan

Stephanie. Thanks, sure thing. Yes,

excellence to spend the how the to added R&D not look presence, across maintenance we bucket you of that the expanded keep it's have much centers we spend globe. dollar we around. we've look and And when right, workforce based is U.S. continue of of mind, at in R&D, the So innovation have bucket. only And in at

I R&D dollars So use to that much say, we’re more effectively. able would

to relatively talked flat, and high our specifically get both gross tell is maintained flat I growth or into why with is cloud and line. is margin you spent high you at Mark… support And some of also investments maintenance. where we productivity people odd dollar very about also we And XX% investment the going the that that's where that to cloud XX%, and innovation people the may from but the growth be can that the

Stephanie Price

great. Thank very much. Okay, you

Mark J. Barrenechea

Steph. you, Thank Yes.

Madhu Ranganathan

Thanks, Stephanie.

Operator

Tse, sir. from ahead, question is who National with next comes [Operator Instructions] Bank Please Richard The go Financial.

Richard Tse

you. thank Yes,

on comments pace that clear kind to of there of soft accelerate your would perspective curious Just hurdles see, growth an any notwithstanding sort you wondering, to been that of for Text it I'm some organic need from growth, here? to time. Open are has

Mark J. Barrenechea

right. thanks the X.X%, we targeting XXXX, X%, organic we're growth was in, question. that, all XXXX. positive low Fiscal single-digits. high faster and for M&A growth, in currency, Richard, than XXXX, And cloud And we're under were we targeting getting but ARR Fiscal constant grew X.X%. single-digit

in far kind the some a from And see also long-term tables, of strategicness not If not FX, on us next public we're the higher. that Asia, confuse way pause have goal growth station affected for were that tariffs of the QX, it not the right, our can Asia. paused in on factors growth. some temporary our would sector out that in external organic which of for spending, you let's with So organic been of of control

be positive, to So lower in fiscal to QX the but ARR XXXX, factors year want this X.X%, we a in due at X.X%. we're right little in where

not in we we’re the total We're be $X.X single-digit years, low though billion on year-over-year five XX% where growth. dollars, expansion So almost organic there like flows. it XX% about organic CAGR single-digit our cash generate over EBITDA of in want and I growth. is ultimately and from to we low far last

Richard Tse

fair. perspective about company? away Is respect how margin your we’re just a that we sort baseline your moving like zone, from forward? on should That's more, guess into business the going of to or I think bit this this With of professional this from their the kind modeling partners of services this sort comments coming lower using at

Mark J. Barrenechea

our of year-over-year, so we Again, closed QX approach XX%. constant PS, and Yes. constant model I XXXX I'd at Look at in year over in XXXX. the margins like the XX.X%

need and I'll out what year-over-year. we best put generate margin We a us, business the the global We're do to be, after SAP to run to organizations. to our business we so than go higher it. room to that’s year-over-year modeling constant lot firms, XXXX. do. to largest is partners place a model our margin to run want next continue right captured we where be organization, and the a world's of able SI world-class like work that's margin the Google value and better PS we're good we the at capture high to the and PS that ideal set they gives in and And constant to So

Richard Tse

Thank Okay, great. you.

Operator

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

Thanos Moschopoulos

Question afternoon. good Hi, for Madhu.

XXX ASC that the organic no? of terms for year-over-year fiscal for includes adjustment impact or In did your calculations million growth $XX XXXX,

Madhu Ranganathan

mean Do organic growth you right? our fiscal in XXXX,

Thanos Moschopoulos

yes. Sorry XXXX, for XXXX over

Madhu Ranganathan

And growth to I term Yes. is look a as of We’ve organic licenses growth. term part our when you license we've XXX consistently specifically say at would before. done calculated XXX,

So customers. are from new out team gone and secured has businesses again incremental these the

growth So question, the organic past. we've calculated to we've in consistently done your as answer

Thanos Moschopoulos

XXX be But Okay. correct? an ASC is that clear, sure you're understand, to just using XXX ASC to make an number I over denominator,

Madhu Ranganathan

Yes. do And as that's forward we what going well. will

Thanos Moschopoulos

as to opposed speak question, customers attach deal, when public it with seeing there back can Okay. partnership? cloud or been a rate any you Fair a hosting has cloud change Open of you're Different Text you provider? And enough. the Google on the to trend would sell the for expect in metric tip cloud of you to Mark, that the discernible

Mark J. Barrenechea

contribute to had think cloud to going – I high talked year going talked to contribute, cloud double-digit Look, the I partners we Google our growth about SAP are the growth as XXXX, help do for movement Yes. in a question, metric says XXXX. think help to that. help the don't you single-digit I think seeing will. is will, in that. –we a And you that. cloud about. in and I And look as I produce that going is we x is But which fiscal of percent kind to about meaningful We're interesting me haven’t seen provider percent, a contribute not if let if into

business. me no will Let the as metric. deeper But relationship grow about there's Google going is think that doubt that Google a – the to

in fact to partner forward well. going as the content SAP, growth will SAP for it’ll Now the contribute being the services cloud

Thanos Moschopoulos

I implication cloud correct? shouldered help maybe should the margins being burden is somebody by that be guess else, infrastructure is if over And time the

Mark J. Barrenechea

should should no help it no, have – If margin. margin, lower I have the it cost, lower I help cost If yes.

Thanos Moschopoulos

Okay. will the pass I you. line. Thank

Madhu Ranganathan

you. Thank

Operator

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

Walter Pritchard

the Question market as in base? as thanks. kind products adoption, assumptions so in generally around just the you about three three year in to plan, you're Multi-Tenant forth continues embedded and well thinking moves adoption they're with as out you Hi, the year that come cloud wondering of Mark both that for have make SAAS, your I'm how product

Mark J. Barrenechea

to our scale, on two customers where services, the this year, applications do that call what EIM a at allow the multi-tenant Yes, in XX.X production is going Walter. XX cycle the capabilities. what quarter, being core for think of sound conservative core providing we're this Look, our of XX.X, for second the in OTX customers AKA consumable year factoring SAAS, market big services being being enter call in I we're their we that. have fairly our Thanks the to enterprise public half product I in, us, We the already own. about –

with collab, electronic also introduced core We're progress incredible signatures. our making we

single growth So cloud of margin our target. we digit high it factored expansion have our into on statements

I being So factored into in models. contributing say multi-tenant in that, SAAS it's but the a how is also little can conservative we're

Walter Pritchard

months, I things dynamics you they're I new morning, over temporary, highlighted think as Or the what bit of may Mark, And maybe be this control, temporary? your Is just temporary? curious three I'm I'm trade Asia little six especially into I just do, just out about that at three thinking months, you're thing, tariffs then how being months calling what you obviously forecast XXXX was feel to are makes worsening or six really. guess for a are just over it, those little surprised a the going think them you dynamic? factoring you like a looked you bit months,

Mark J. Barrenechea

Yes.

in so temporary. I ultimately longer resolution. when opinion going But that have a to than – not in were they're they be governments of it's – So come say I'm of probably mean, words be to the being the the question. could temporary, temporary. Asia have be – to Sure. I I'm that? optimistic my my And we come take Madhu, the to optimistic, a global we to need I'll importance quarters, Again, mean I confused, economy. couple they let's I

by So by to mean they're quarters. factored temporary two for into already, XXXX I yes, more and temporary, one views our

Walter Pritchard

Okay. Thank you.

Madhu Ranganathan

you. Walter. Thank

Operator

ahead, from The Veritas Howard Leung who's with Please sir. next Investment go comes Research. question

Howard Leung

Mark, into currency kind for was look a growth. guys you. on of discussion the to growth be? organic rate May constant Asia-Pacific what to Thank a just turn is weaker. wanted organic region? that just I you Did had you mentioned little that

Mark J. Barrenechea

break – in we granular you're that's don't a down line metric we don't don't get for get to that no, sub-geographies, to asking a by level down publication. it of sub-location, and No, a pretty but down we and revenue

Howard Leung

just Is licenses, license what material that drove of That's if down in was slow one QX quarters. Okay. so, And the that just fair. kind on just XXX then in less that that in talking factors were term QX as than of and a in demand impact, sales Madhu you it result you mentioned prior the about?

Madhu Ranganathan

you. Thank you for Thank Yes. that.

Mark J. Barrenechea

Madhu, if take to want license you XXX, take question. the I'll

Madhu Ranganathan

thanks. Sure,

Mark J. Barrenechea

Yes.

Madhu Ranganathan

it. Mark and quarter year the it minimis business de let and throughout in fourth also kind on the the was So closed of expand license I'll

Mark J. Barrenechea

So XXX, was X.X?

Madhu Ranganathan

X.X million

Mark J. Barrenechea

X.X million Madhu.

also de that, don't minimis FX. model. we which had think down revenues. license and can company. up was cash Look ARR over pick for with of as temporary be and cash two operating it's business is continued and in variances revenue we quarter Asia note world license I'd And investment recurring the confuse license QX. there the was to third XX% the flow and and which Asia in but importance basically is is total that the metrics, was constant quite In X.X% down the at talked importance And we about, and So I why our want strong this flows was year. quarter, per year-over-year. our up currency for record And we

Howard Leung

makes Right. That sense.

regional guess really that I why and lot of that's get to were you QX. slower liken in would sales So attribute factors a

Mark J. Barrenechea

External elements, absolutely.

Operator

ahead. next The Bank. Scotia Please from Steep comes go question Paul with

Paul Steep

Good evening.

bit the about of the the of do. resources? quick magnitude of And, a that about the you looking that of then boost You Maybe So talk Mark, see then market when sort can size you one to talked there. a ads you're talk go-to about little timing contributing follow-up. and

Mark J. Barrenechea

for the question. important year, was year to this we're raising A to XX, thanks in One there. of the last Well, this was couple target XX. points XX year is Yes. EBITDA XX

EBITDA. bps of And XXX bottom software the XX% So top-end is and This upper the over companies. all adjusted is we fiscal up XXXX closed quartile just ends in performance bps. XXX up to

is XX XX for I zone that point And want make the to ideal just the to OpenText.

zone be of the leader operate got productivity and we I'm largest to happy in than very we Some software here faster range. world's others chose and be in this companies don't this and to

be you're XX to I'm row, ranges XX above will happy in XX.X that with EBITDA. our I'm happy with. Some range happy at

invest and growth above creation. value will We use to excess any in that invest to in

XXXX. with just range we're and raised want happy range So the I'm we that very into very be coming I the to clear in target

U.S., We're Europe if expansion looking stronger investment, but to Africa, of into in into range. increase geographic specific and The at on EBITDA not investment focus have otherwise in America, quantum markets a Middle South Latin capacity kind an and Canada, East, expansion, America, going would a APAC coming not core North expanding I'm the give we we Japan. the are capacity Western our XXX.

taking We're it. inside with sales going and also our global

more you intimacy would so New then Zealand, will capacity, to That And in us coverage. coverage more RP in third into will account is I stronger note really get create intimacy things, More Global means Paul. stack-in deeper geographic global. in coverage, coverage. is XXXXX So if sales expansion. inside more is, Korea, taking the One allow more three more Japan, account have and intimacy

Paul Steep

The XXXX quick Great. think there for In it won't reversal fiscal consider simply to benefit follow-up Sure. on saw FY Thanks. we ASC to should impact there. fiscal Madhu, was we XXXX XXX FYXX. a about ASC thinking benefit XXX, onetime that XXXX, that a or materially

Madhu Ranganathan

with again the team emphasize that a question. And Thank that the months. requirement these the customers. you for XX say sales it again accounting I was new won one-time are for I would businesses

show to differences We did. are required and the we

going showing under forward we one So sense. with XXXX, in are accounting if be going makes that XXX to

Paul Steep

you. Thank

Madhu Ranganathan

Thank well. you as

Operator

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

Paul Treiber

good and afternoon. Thanks very much

that the and on to but revenue? the clarify the I like licenses and it's don't or you're Could term follow-up term more the what deployments products just want accounting, licensed business selling much the you term I leads to license. recognize to nature about want of on Just think so

Madhu Ranganathan

well. and expenses The shipping marketing as

commitment, time. year, of It a committing or And a the here, by that again, period as the standpoint that in three business of of customer is any exactly could services, is term includes and advantage purchase be license, a terms could support the year year well. right. a longer the what a the from time, think five So want about could the the include it here a obviously we for which it benefit period licenses, include two

us. of budget, the So commitment to of but sort of the the period just terms customer in in not extending to really of terms it's time, the

Mark J. Barrenechea

The business me business for has us small It let a this not large a has or Historically, for very large been vehicle fiscal XXXX. business. in a large term Paul, emphasize. And wasn't always been us.

We are subscriptions. focused on cloud more

choose see our do that's they'd growth can As a purchase you cloud numbers, to some to license, customers in term that like way.

know to of of procure $X.X will for that IP term, Minimis, they enable may think value end not term actually in not it are de the to in million the licenses something. end a even was QX term it. the at And million. At was I as the We long-term how you the customer best $X.X own

do majority subscriptions. what cloud we the prefer we are vast and of So, much

Paul Treiber

recognize that, with licensed can you revenue to on ratable or deals on term basis? hyperscalers, that basis a that And clarify further to in regards

Madhu Ranganathan

be cloud be subscription that as a would an that would it as basis. earlier, a ratable basis but term we on From says upfront purchase licenses described

Paul Treiber

facilities if So that hyperscaler would be at the recognized a of it's your manner. customer in deployed or regardless

Madhu Ranganathan

the the itself. deal right. Yes. that's of Yes, nature It's

Mark J. Barrenechea

Yes.

our Paul, technology make to There's then distinctions. let's want So and two it. you where run

you then right. Okay. may wrap want what to it, And around services

as customer going choose visibility QX, to it business a run that in could run I know won't management have the part forward, procure as very our a well. that a anywhere. So, license to license here you XXXX anywhere focus They can could in fiscal that term, of buy but small and

whole for that on managed one provide the We do back us provide cloud, in service in all around coupled it and services application the software. you run with one and provide we performance management. our dial-tone just thing, along we upgrade provide a service the services, What is subscription the

managed anywhere like all buy can license anywhere service. hyperscalers, it run services our run a term, around could a you including it, you becomes or and wrap buy buy you'd So it the could it we

Operator

to call question the closing for concludes like over any to answer I remarks. session. hand This Barrenechea and now back Mr. the

Mark J. Barrenechea

All forward X. to on at very our everyone look Investor seeing today's to thank That September like for I'd you today us and City New call. we much in Day right. concludes York joining

Operator

This concludes today's conference call.

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

Open Text (OTEX) 1 Aug 192019 Q4 Earnings call transcript