OTEX.TO - Earnings call 2 2024 | Open Text Corporation

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Operator

Welcome to the OpenText Corporation Second Quarter Fiscal 2024 Financial Results Conference Call. [Operator Instructions] And the conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Harry Blount, Senior Vice President, Investor Relations. Please go ahead.

Harry Blount

Good afternoon, everyone, and welcome to OpenText's second quarter fiscal 2024 earnings call. call Officer OpenText's Mark the and Executive on Technology Chief J. me today Chief are Officer With Barrenechea; and our Officer Madhu Executive Vice President and Ranganathan. Chief Financial a on Today's available website. is being live recorded call webcast shortly OpenText the with thereafter Investor Relations and replay our we and release posted investor Earlier online. press today, presentation Bernstein's be following will investors.opentext.com.I'm Media on XX Media on now JMP materials X March inform pleased San Forum February Tech, These Morgan can March in Stanley's you supplement Francisco.And and upcoming and X to be OpenText New Technology, our the that Francisco; prepared our Securities York; on San on on will Technology management safe participating Conference Telecom to the at harbor Investor conferences: and Conference in OpenText X:X Telecom remarks accessed Relations and website, in statement. note we call, performance information. this during may the the OpenText make that Please course future of to forward-looking contain of relating conference that statements

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

found And that, call GAAP and comparable by on about the Mark. to materially our projection that performance to conference to the non-GAAP which future a could may in Reconciliations found law.In material these their cause differ non-GAAP website. press very of as that or information measures forward-looking actual be statements are in that was conclusion, results forecast as any forward-looking most our release measures include project filings no financial be required available call results may of certain factors unless I'm do this update website. OpenText obligation with pleased from as which directly hand the our are on well so information factors to contained measures. Additional risk to in may public to may other materials, OpenText's discussions within our financial XX-Q well distributed recent Forms We XX-K as and afternoon, of addition, undertake earlier our

Mark Barrenechea

Thank is we you, to joining OpenText than business Harry, the calendar our more ever year. and thank to call. the second today's AI. relevant Welcome half new fiscal era as XXXX everyone enter of of and you

We transform have accelerate as position strong significant management company, to generational and lead is mission the we we a information information in a as a OpenText into expand is in momentum private growth consumption. cloud very cloud and and opportunity, management. we public and general way a intelligence as once in Artificial our

continue with consecutive progress we products, We the currency. growth, growth, year-over-year to seeing and ARR constant and and the revenues our quarter in services enterprise strategy record XXth $X.X following: and growth $XXX we're a accelerate organic cloud results. billion quarter our started. Record of getting our in QX spectacular XX% investments or was year-over-year go-to-market, or XX% showcases growth just and of bookings are performance strong of million

with our winning are cloud. Editions, Cloud business We

information powered growing share reshaped our than the ensure business a proceeds and the Focus clinical ahead company, just selected said complete the the net to million the what and will cargo growth cybersecurity of management we Micro in has Cloud us customer first by winning across information to and of faster the very ] OpenText operational data leverage or world's amazing few flexibility we maintenance and growth. is being online growth, trust on use the high customer for high focus their And owning Aviator BMW #X full that our me standard business had strong work OpenText customary with -- highlight Aviators.We success momentum strong the resume and in truth OpenText a and the decade, colleagues less to We're even to partners. cloud. with fiscal our AMC called Xx excellence.Let and Vertica, and over million the our highest this OpenText into many single providing active We cloud, Micro business partner and and growth. platform, leveraging Carl expands success and regulatory for do.Further, is coming Zeiss customer receive been M&A and now subject OpenText by largest marks to of OpsBridge for QX operations performance. governance. to topology, investments, approvals our of in partnership innovator. of platform imaging and AI OpenText fiscal on mission-critical or systems resiliency flows is XX and and Microsoft go schedule, partners of over availability root of million ARR FedEx EBITDA and SAP, And OpenText leveraging what and medical global flexibility a buybacks Express, innovation in the would Salesforce of integrating management customers, contributed and [ conditions, Content great we the these.Today a is source proud is the enabled our airline to trust Focus Fusion, cloud and patients end its of field track optimal strategic in of in and had for XX% partnerships. cloud with Micro free dynamic XXs. possible a winning end the XX% for of stories just so strategic to adjusted The monitoring leveraging a amazing with to cloud a a requirements. wins, reduce Healthcare well from are which cloud We million mission.We the as ensuring with cash like security year-over-year applications by $XXX divestiture entire Cloud. SaaS exactly the Philips shrinking I'm for customer year-over-year IT year $XXX Focus colleagues allow drive and XX% has in data Micro as to intend to and record organic future responding year should rates with in pursue postnomically new AI doing management. us and value QX, information we're year, into $X we contract impressive support closing Focus. $XXX trust AI, and from revenues our renewal or

achieve cloud organic revenue need increases.And fantastic X% and And of a X% XX% our bookings the all have to a our with your for growth we're as of to we aspiration as ingredients quarter, We we visibility F'XX say, an business. cloud strong growth. this into reminder, like cloud and our annual XXXX to growth

fiscal our of me total outlook cloud 'XX $X.XX turn billion our outlook. revenue let to We're billion. to $X.XX maintaining So

We adjusted growth in given from range, are target up within the EBITDA but XX% to and XX% We're raising range XX% tightening cloud our AI. and bookings investments our our security to XX% plus. cloud to XX% growth, to

very free AI, OpenText $XXX the But advantage. expect Micro an focused on to innovation will million of on transformation, our competitive growth. flow cash restructuring also our part opportunities positive of our both driving and and have completely plus and our AI now bookings and be our full cash Aviators. management now complete, growth. long-term AI $XXX year complete feedback raising cloud, Edition free workforce are focus range million end and Information business our We're majority all of Focus our is attention the We information to flow.And aka revenue right business customer Cloud essential optimization increase customer and embed of margin. in our received now, between with of stronger aka energy I've automation and products. will lower cloud the medium- results

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and are from discussion progressing are clearly delivered XX.X delivery soon We XX.X and to XX.X. Aviator's and vision to value. from

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for fuel the are investments momentum. Our that

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that all.Let one the brings call over to peace, are for bring turn We Madhu. peace the me

Madhu Ranganathan

you, us for and thank all Mark, Thank you joining today.

So and let points. record strategically we few buy, With extremely business. of revenues a growing supports an practice at OpenText me In solid bookings cloud cloud start QX, all-time key that foundation a built with have operations this an executed enterprise well. QX

our Micro we today. During integration, X-year X drive anniversary is Focus also to delivery QX, and Micro accretive completed Focus successfully on of commitments year

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than For we $X cloud, greater versus deals the earlier closed XX million the in XX period. in quarter

importance of earlier. was moving versus the For our OpenText other The of increasing reflecting for charges $XX financial million, deal year Non-GAAP EBITDA the gross primarily in strength License, up in GAAP to contracts as year-over-year of customers from metrics. margin XX.X%, greater amortization up $X to acquisition in sizes we reflect net of driving and gross Micro reflecting XX.X% AI.And Focus reflecting from contribution expense, closed related income the prepare from than revenue XX.X%, License contribution of strategic million business. $XXX the special relative $X.XX. booking relative increase increased the of and margin XX License.Adjusted interest GAAP also quarter increased XX EPS cloud and an XX%, XX.X% from of XX.X%, million, currency. our revenue constant GAAP

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capital strong million $XXX.X presentation. Focus capital generated a flows the and working Micro finished free We million $X We see higher balance sheet. to in to in investor on remains billion and operating working cash the Please Our stellar with Page $XXX.X cash. quarter.Turning continues QX of the overall XX all cash perform metrics. performance flows systematically in during

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range up to to Our expected compared year-over-year cloud Customer up to XX%. XX% XX%. our is revenues our XX% to revenue range XX% of XX% XX% to prior X% XX% to X%. be Support up ARR, to prior of compared to up up

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and cloud XX% extremely visibility. is As year-over-year noted in the with increasing revenue well our enterprise earlier, business bookings doing solid growth our quarter, growth

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grow between million year-over-year range FCF to and raising to quarter. lower now end both We're in full year $XXX million. expect and flow the fourth $XXX our stronger cash results expect We quarter of free third

included are investor unchanged from you remain Page aspirations XX with materials we we the on divestiture. announced AMC our of XX on 'XX fiscal presentation the November shared Our and when

predictable allocated to we a Focus members first business Our shows important Micro and 'XX growing cloud fiscal half in expect a to 'XX fiscal be 'XX, Micro adjusted remain and high time, organic on receive proudly solid and for drive led ahead aspiration and fiscal on allow model free our and will fiscal I partners. The in our to a Focus of call and Focus is the our customers and and request QX operating ARR.So to a meet delivered OpenText behalf by The to of will we our to more cash highly flows. OpenText milestones strong and and XXs 'XX sharpens have divestiture open Micro team fiscal to operator business now thank OpenText, renewal and at integration the like in sharpens year, focus, our of growth commitments, summary, shareholders, to aspirations. targets scale for over our to and the capital return track allocation the more EBITDA loyal be growth.On rates your reinforces resources our would questions. AMC I

Operator

with question Tse first Bank from Financial. Our Instructions] is National [Operator Richard

Richard Tse

of broadly spend Madhu, or normal is wondering I think if you more not? market. but of to been that whether a sort there there's it's could did this talk and about seems talk or gone It back not out sure about some Madhu, the the expand to messages kind mixed enterprise I'm environment. Mark pace as for you SMB

Mark Barrenechea

Yes, for thanks Richard, the question.

Microsoft management SMB spend believe is SMB on relevant take a part economy. employees with Microsoft in key as in drivers short-term we growth are space. of there the SMB some We as this less. confirmed $XXX discussed a or but strategic for is for in of billion also massive companies X,XXX information that. deeply Look, their has market. recently they've well. challenges is long-term part SMB part, in And a the this know, for me U.S. of Let partner

organic term, the going I'm will in hand macro a strong it benefit contributor combine and from X% And a will more the to SMB, bit think macro over aspirations. to the cloud be to both side, I as we're combine maybe I and look, I'll and X% -- long relates So any it Madhu. a great position to medium to and of to a of little growth on our competitors. comments, little in

platform we are got We X% deliver. a are to We've off the apparel energy, today. weak or We're North fantastic are stuck CPG public and Salesforce. AI in capabilities manufacturing, demand customers benefiting our a competitors look from ecosystem of place and business America, right to have in have cloud. partners, away from that consolidate vision sector, data customer don't They Google is low financial and as security SAP, Microsoft, some supporting services, trust retail.

delivering places now, So we're value it's and in right customers. our for about the right

see And execute. out -- a to so we we're there economy reasonable go

Madhu Ranganathan

to you, bookings at saw the revenue, we for content I highlight very as year the Thank the also to rate look to revenue, XX% revenue 'XX. Yes. se. the fiscal specific fiscal Mark. and the cloud the and but for and of analytics Again, And wanted all business for you well, cloud growth increasing revenue you fiscal enterprise targets just we're out doing in QX 'XX, did 'XX outlook cloud per call network experience SMB want revenues

Richard Tse

in of And it terms note, -- on like the opportunity? annual you I on a trial. was know products time, and user be still, if this uptake I'm sort I I conference, that if have what sort And guess would the of was probably sort but of doubt revenue now. of early attach your sense, within on called, you it rate base existing at a do don't in of you it's more potential had wondering can think your one exciting no incremental your that Aviator, I share any reasonable too what a I point that's some right trial have sort of any customer same stats just at question forgot

Mark Barrenechea

business. differentiated and we Yes. with in market, Richard. making strong steady the Sure again, thing. We're Thank progress. we're start one And have and you just I'll

on the automation And that our data embedding term. my are integrated. believe and differentiated, cloud, business AI in we remarks next to It are prepared manage. on be we're we create sets I AI noted, as will a said right Now capability, prepared our everywhere. automation live long my will also the I automation We remarks, that in AI

automation to is have my best you'll moving -- asset it vision You'll way delivery. it. showing to but AI describe the have your value screen, discussion we're next we're right from your to to And and

customers We today our Your discussed XX% program. in to a to have Earn in if that. Wings at manufacturing. our in And we XX%. my numerous food, XX% that And apparel, our you in look from I wins in of year-over-year AI remarks outlook few also growth, our we not have bookings bookings XX% raised growth growth on

OpenText is moving We're way. So the vision backed by up that we're from every to discussion doing moving product. days. showing delivery. from to XX this vision We're a We're delivering value. strong It

now bookings for have outlook progressed the We to on just quarter year a raising fantastic bookings. our and

how going the to next a which is and transform, idea on using Athena own write how we're moved our really creating software our on platform. own breakthrough -- we've to step, platform I'm So we

And our with keep organic strong to every progress that revenue to X% I'm our the growth visibility making believe going So significantly We're your strongly X% bookings cloud increases outlook. into pleased XX with progress. I days.

Operator

[ ]. Chan next with The Collins Daniel from question TD is

Daniel Chan

we integration, seemed And there this -- took to performance? out quarter. good. on a really Is But seasonally pretty the conversion Cash should ongoing flow to anyway. expect be that stronger QX step-up for call that seems in the considering to continue? anything conversion took

Madhu Ranganathan

Yes. Thank you, Dan.

and that conversion cash is say as would I've I steady before, what the shared strong. very has remained So OpenText

set What Yes, would QX, Focus saw about to you it sort and right cash actually had that do conversion we able also in the see Do how If Keep very Micro mind, respond and Micro think continue? to different expect of with is and the you in year-ends we're converge their Focus. say that that we quarters, elevation actually there. it to to we expect different I with positively we we out delighted made continue. quarters, OpenText, is et to very operating performance they were our we cetera. in that

Daniel Chan

year, it but to then for XX%. think looks margin like it guidance going the And on tightened it's step quarter, XX% down the up, EBITDA to a I take full to next

that? Just wondering what's driving

Madhu Ranganathan

Yes.

bookings is remainder if for I usually investment seasonally just you factors, I'd given big that of So includes called QX There cloud us and Mark in the out are the AI both EBITDA recall, year, say, a lower and quarter. new I strong January we from for as Focus X, and QX, in experience some also a and perspective, Micro if highlight, some the integration we have an see, it's in just But do employee divestiture could year. expenses AMC expense. a

We higher have benefits expense.

We have cetera. expense, higher et certification

the So XX% that QX, also weighs the to bit and margin. QX is seasonal for year, But that more to will down seasonally XX%, the a EBITDA remain a strong quarter.

Mark Barrenechea

quarter. as And Dan, Madhu is QX seasonally low to I that a say, it's fair think noted

Madhu Ranganathan

Yes.

Mark Barrenechea

a is stronger seasonally quarter. QX And

Daniel Chan

you're areas focus for AI, added the where investment? investments that like into this cloud making of The are

Mark Barrenechea

as value. compliance, you, our investment particularly Well, unlock Thank our to talk you -- Dan. them. about infrastructure, of private around we cloud Yes. of out we an future our offerings privacy. how SaaS The data noticed trough continue It's to in security, build some industry

next We The or AI. private consumption across Aviator a established our have cloud step our standard; more as is and cloud SaaS globally. our of platform public products course,

the So at we're the though we're within applying the doing of And we've still presented. where year, range tightened bit, little investment. it the those we we a areas talked range that beginning that even within

Operator

Steve from question Citi. Enders with is The next

Steven Enders

Was in booking issue what cloud converting upside on start results if up just guess the that growth AI secondarily, there. that? you then outlook the embedding cloud the I for year. drove an guess, customers impressive over in it pretty the mean kind to I [indiscernible] contribution in the of What's And I AI? quarter. how Maybe of strength there? particular in with big the or about step kind of growth on bookings think you're the kind

Mark Barrenechea

for thanks Steve, the question.

raised As for driving can't see our have visibility, AI What's I quarter, to away first outlook lot bookings move year. our to And competitors bookings growth. on cloud see And side, alone in vision from is, products XX% to XX% our said and get cloud continuing the a a with we don't very prepared to First growth strong a that? in year-over-year continued who we trust, clearly, security the cloud. to we And cloud forward the provide of XX% growth remarks a market. data credible from let can't XX% the my the consolidating customers strength. cloud,

remain compliance, we're and AI, XX,XXX. the BN So won We for cloud, our content a and XX% book, consolidating, raising bookings AI the factor And point. on and privacy AI out top showing of breaking cloud clear not growth for driver us. That's just the for strength growth the customers data we've security Global security, a contributor AI trust, continued a this ] our But our up level. business. down was or private of connect is it's that [ to bookings list trust or at in outlook year. or that get in don't us And

Steven Enders

last Cloud a License Maybe guess, can stepping pace good down little Customer Support outlook, more, the just step maybe you growth on from from color give And little the down the bit of expectations it's [indiscernible] the puts see little and some bit in I Services to stepping the a up. a quarter.

Madhu Ranganathan

Yes.

your was the you year-over-year fray momentum mean Steve, strong, recall, is right, I cloud perspective also they're quarter Focus' basis. of grow both revenue I sure in is take Micro to still Micro into comparatively. the course, relative bringing actually quarter. want did as License but from I grew make And Focus the heard PS of cloud mean, a that. the OpenText revenues terms PS in and there really you to, I'll So as quarter License the into bookings -- contribution and question in the I from smaller a in -- higher significantly and

Steven Enders

the I want because think to down that guess I I from just those clarify said expectations outlook you on prior just the quarter. last from were both

the down annual why bit. understand trying little outlook, for came just So to a X those

Madhu Ranganathan

Sure. earlier in comment. I your part missed that

in And range. that consider really License contributor that And I for Micro would overall reflects adjusted have a is we support. strength License again, well. Micro a better So customer as say, the applies the to really 'XX the renewals Support there, our from the it's adjustment keeping perspective, Micro the But that target the Focus of Focus Focus and perspective, right? seasonality QX of, just same the Customer ranges the fiscal we've from in

So of we obviously the and License business. volatility to the some for range wanted support inherent increase the in customer account

Operator

is question Scotiabank. next with from The Kevin Krishnaratne

Kevin Krishnaratne

Just of a clarifications for me. couple

the cloud So X%, growth, just was maintained. that to on X%

offset from maintained? Is to but you've that So sort the just read range had that are I the bookings, fact strong want just why SMB. still is the was reason of enterprise they that

Madhu Ranganathan

I'll it to and Yes. question. first take turn Thanks over the Mark. it for

visibility the Mark about increasing our 'XX. which future, think and would cloud really as fiscal So the to fiscal mentioned, bookings, be 'XX

the talked we've visibility. long. contracts the that are delighted in Our cloud very are future long. that the at forward before and time we're quarter, about giving performance to revenue us And and deployment to But just also

keeping it it's And a SMB, that, down we're here as weighing out bit. in enterprise BN, fiscal called for we well. doing within analytics, 'XX, revenue, at to take X% all So And cloud's experience, X%.

to X%. bookings kind from and revenue want prior benefiting X% rates, our of renewal is the right, quarters, we our cetera. that from that balance and cloud et to cloud revenues really at So the keep And

which to 'XX impacting to strength So in be going bookings is just really fiscal and I positively of outlining just cloud want factors 'XX here, the the separate and the 'XX.

Kevin Krishnaratne

here. question other final just And

think be bit little delay, do any bookings, revenue. I you've to a Just those and AI-related I the know guess, be on translated pace, strong the seeing AI are a just your for look the demand sort that the given bookings. are to the to faster at announced can the different? of in a bookings going customers revenue those products? of translation from bookings Do that you sometimes there Is

Mark Barrenechea

Yes, Kevin, enterprise to bookings the No, characteristics AI as the following same question. booking. the thanks an for are related

And contracts. tend to see the so the tend SMB we in see X- X-year contracts. space, space, X-year we In to to enterprise

in enterprise if pattern, as you number impact, enterprise looks now, will positive 'XX. our follow And do AI note a wins have that following But will. it pattern. right like a traditional will we 'XX bookings that is AI so impact our and And clear

Operator

is The Capital. Kadve with Adhir Eight from next question

Adhir Kadve

-- some you talk initial to I in bookings about last bit little a saw AI. quarter, wanted

wet early they some But are of more Get in just lot well. program, that of really are the This customers maybe there their program. customers, larger-scale dipping I deployments? those with quarter, Wings a still phase? deployment kind still customers get of Get Wings AI? you are progressing faster out Your to you've as some type their of they Or ask, strength of Mark, feet mentioned called Your are feet have kind how the in progressed

Mark Barrenechea

specialist. you there's question. Adhir, you embed Yes, to AI a to If a automation, going be these. that a approach learning We a health assist our automate from We have to is should be loan -- contract automate AI tech progressing. there next should an It's here. to wide right There your products. we And right professional, it. specialist, It's for We're path AI and the an all be And care clear it. sonar our assist a should assist thanks in an have AI provide support the or automate data. next statements AI that. to next couple for there a where specialist

to in It's discussion every a going we're everywhere. every RFP; So in AI RFP. embed

stages but discussion. early in of some are medium, single advanced, exploring, customers are are in handful some it's a And more every

to the market, certainly or is resources necessarily of to cloud platform. have a it AI robust So who in separating have out moved alone let sort not the those even competitors the deliver

and vision. very our we're from seeing of our So strong wave first benefit products

small in be market in or investing vectorize I differentiated to be Wings language been get our And able and to customers skills organization. model, out at to that in able to we've now the be deploy organization. able building scale; service able be a to called a Our your, very install services the in either why a experiment to to platform in decade to for actually Earn management Your data and

organization to on steady we we now first bookings higher products, seeing co-platform our internally and beta what set and our a to first it vision of -- making using outlook getting apply can very we're strong customers delivery, platform, a raising gone a Athena. our bringing value, to first think progress. a we've So -- is from We're version growth, services to capability, breakthrough how booking through first our

So really like making. that the I we're progress

Adhir Kadve

wanted value I How their from touch is on getting? one customers made these getting AI to the products? organization then helping are just that that some customers you early that comment And using value. it learnings What are are

Mark Barrenechea

learnings invoicing -- One using particularly need business few did to of the systems, may some liabilities. and deep script. in may opportunities I some into and the you understand consolidate little going need And of the a wider bit. next network our contracts is Yes, food -- of and shout-outs early prepare sustainability, transactions metadata are, a have to the network to you your data prepare. But you understanding one, revenue and to to generation

So Customers to want out preparation not vagueness of but is prepare. a on to know want they to do they lot do, important. There's what got right? what there customers

your AI. Second and is, do automation not separate your

a automation it out of get immediately because dated. rots like your cabbage You data take you

that's skills, you is it learning. going it want to still processors, open OpenText. staying more more itself think do big economically. the source on And traditional want customers building to models, And language for keep we're with manage another So cost, I this just on customers if will, do to to reasonably. And

So those are some of our learnings.

Operator

Thanos Markets. from Capital is question with BMO next Moschopoulos The

Thanos Moschopoulos

you Or to from regard? impact AMC fact you've in that seeing [indiscernible] any dispose the of business, it? that are plans out in the nothing announced business kind publicly stemming Regarding your that

Mark Barrenechea

from we thanks investment No, the who Thanos, and go. for as as of and nature of the you and steady products it's steady customers Yes, understand go. are question. platform, have long-term been benefiting decades These the

Thanos Moschopoulos

of License to? But anything street were License preferring model a slightly Obviously, that more a you Is deployment anything out else Next is for would going in back than you greater to maybe to more it else extent market forecast. Or point to is clients the there question outlook. would a expecting? volatile you regard? conservative regarding a cloud function initially call the

Madhu Ranganathan

I'll mean Thanos. part, the I take first And

and In the that a Again, I business, applies License is standpoint, returning year. as well, turn over mind, this QX the pattern organic also them Micro we said, growth a keep License, been customer to Mark. also from Micro on terms are seasonally while lower doing very trends, of we'll Focus it to Focus licensed to has in in

do that we're actually the out. calling really very Focus the rates, cetera. QX Micro seeing well renewal And that's et So seasonality with also, we're

you more range the there deals, both and Support the the share of side cloud dollar those Customer to in also ranges So you that on share? number the any really, million the ranges. you're seeing X and commentaries, want the in both as our QX seasonality we other over in the and right? really remain as Mark, that well And volatility see License into my for annual keeping very side, there annual license wanted I'll the shared ranges. within strong, It's more the accounting what of to line is expand revenue we comments,

Mark Barrenechea

in cloud have business. SaaS and have that strategy. a environments utmost sort it's in very also can also natural a We role private strategy a secure And platform requires of won very we compliance. security, high place license has Yes, has the cloud means deeply And certain a won environments of cloud. a found right, our level, as that environments, regulatory role. other and we a types well. well. the cloud a also going a role. compliant sure. require has in in fantastic time as work a that on And community it that role deeply we and And a And We in private security is where trust License then and our hybrid integrate to require our License hybrid through environments, environments we've work bar regulated License in it's role, a clear nuclear platforms what's to cloud. has and customer licenses and private DoD that -- But many

it we're got was the but License business. role It's ago. clearer a today is years So in the role, X than

Operator

The with next question from is Barclays. Lenschow Raimo

Jeremy Horowitz

This on Raimo. is Jeremy for

moment, at Vertica bit just seeing whether So a the areas which interest of business are maybe you Micro maybe IDOL, the focusing it'd of on most be security some Can Focus, or product on products? the the side. to speak

Mark Barrenechea

Yes, to. you, Thank be happy Jeremy.

a and it it's a just shrinking business allow marks And first fantastic the for I we're was X. into a Today anniversary. first support. their if an and thank reshaped X, been growing you'll it on want look, formed year, and everyone to -- was So first year we And me, innovative it a great year year one. to

shout-outs, priority. around of and about operations environment corporate-wide outside management. terms our It's In generation and the service innovation me ITOM, observability products IT few our the to management. That's of extending provide next a let growth, management IT all service of

And having SaaS, In management It's many terms it computing. and ADM life to bringing and identity components security, edge our end-to-end cycle. about into that platform about it's -- has of to from ADM. Athena

And then well scale machine Microsoft, comments data our on things to cloud transaction our course, And into XX% we're ITOM AI very to XX% the cloud, Focus. I security, on XX% AI in of XX% So not I time. buy year Microsoft. acquisition information our to Aviators in new didn't Vertica bookings of higher the getting SaaS, that bookings developer announce contributed contribute called on did based also experience. will the raised that something to outlook Micro you bought Focus growth, keep IoT. so I Microsoft and a across excited private note modules, over all platform calling -- Microsoft, bring bookings as GPAS I'll for business website. cloud cloud cloud, ADM, to We more we growth noted my into growth, Micro bringing it our we core IoT cloud. begin today. AI and a -- embedded our it of can find introduced and

to clear. be just So

Operator

with question Stephanie is Price CIBC. from next The

Stephanie Price

M&A. mentioned you Mark,

mention remarks. maybe we strategic did go in M&A but will you your prepared So Microsoft, Not there.

here we about should investments the divestiture? capital between AMC the and think post M&A how organic and return So balance shareholder

Mark Barrenechea

return we our Well, track, to you, excited is when we're noted, we approvals, Thank to close to delever a and end Stephanie. and our And and to look, allocator. full of leverage divestiture. by our okay. And to Xx we're do the on to expect complete intent additions year. Yes, bring I fiscal so, and under regulatory subject stack as the closing capital

in drive capital return available we're materials, investor our you for XX% and will our available And And buyback. our expect allows flow free strategic. see growth. to via should cloud M&A -- dividends focused You'll cash future purposes, that of organic M&A. to return It to approximately of XX% including be That other will on be assets of looking XX% us M&A. the and that ARR

Stephanie Price

and back post on the And then we should as of investments going to these we I think, circle AI, from fiscal investments how continue want Should percentage think here? 'XX also revenue R&D in a forward and assuming cloud security. about

Madhu Ranganathan

Yes, Stephanie. take that absolutely. I'll

we today, called a So actually looking we're XX%. actually out -- at R&D XX% to of as at percentage revenue

that the larger expect I to So scale, continue. at

marketing. both, it's XX%. it and of AI is And sales fiscal and to XX% R&D it's 'XX, In for terms investments,

expect be keep engineers well. the also obviously, in us scale, of Mark higher say AI and deployed And will deployment the would mentioned, I towards XXX R&D, as dollars that activities. as the So to range, related at

not of spending are the but So a the lot on where are teams investments time investments the going. just

Mark Barrenechea

X point from amplify leading our better incredible looked through to productivity open have called wave, and over evolved a like to Madhu. output. source AI. significantly Yes. wave how Athena, through I and Platform and they've look through OpenText globally season coming, ] through There's how X and talent it's tools. going -- systems, another our raise time organizations [ automation which just an decades decades Thank is of organizations you, so And to and Stephanie. this through And engineering balance

well, will use along stumble And may some some way. the companies it

have to generate we to building learning. a of very and and APIs, proprietary to us, internally interfaces X billion going auto lines how auto For our how be clear to platform to roughly how software we're to manage generate vision, cases, accelerate

generate able hire Athena and to be to future the is we descriptions be talent elevated. radically the in think engineering take and code. different radically will I going in

companies F'XX how the about R&D our we we're So software. of because of we'll percent, of wave to large-scale there's to that be when going and a are change interesting get coming talk expense more next that nature tech this wave to efficiency, building plan very the and and going AI in

Madhu Ranganathan

Yes. if our given one category, and Stephanie, add just R&D a And and growth, 'XX talked very about cloud is broad we bookings to I 'XX. could just spectacular visibility more.

also in and what of organization. are we sort We're We information [ call The costs. CSO and operations cloud cloud investing investing also ] infrastructure security, in right? hyperscaler

well. below mention going in want did line sort as of line investments, the I terms of and to So above it's the

Operator

is with next Paul Treiber The RBC Capital from Markets. question

Paul Treiber

it Athena AI you your years? you -- the that on The that understanding the -- using the expect improving forward? to Your over see improve do helpful to Can through and of recent or productivity expect were something comments very going R&D is. do AI next several entire organization we what Is teams. could across productivity --

Mark Barrenechea

on And very our productivity working IP will only increase And when In But Paul, being that the area fruition we the call. right entire I and the us, for bookings core large revenue firm, Yes. the decided company. to come of voice, in transformative years on on organization. an we're we the to We're coming for on the And area good the and call that presales which to to products. hear organization. the a area, and projects have your renewals one as across and the margin look we is and thanks support create company, we and Absolutely. in right? organization room for engineering us, now. We're focused today growth. I other improve noted, have going

more get talk kind our sort transformative of very is area deploy we about a be to first the look and can are, that plans but them, where we have in grounded to it we So concrete force I will wanted of more engineering market. term of multiplier multiple productive that product generation area be team to that's and to to the accelerating impact. have it's our And think highest nearest we next -- able a talent, the

Paul Treiber

there? EBITDA you second for QX. the EBITDA lot just what an is midpoint about is how for it's is about it high outlook close driving high, implies company. do then can we And when for upside? and at QX, quite which all-time XX.X% seasonality that a about question, drivers you QX margins, the think look And on into to talked to What back we just I at QX, But margins, think specifically more if the the 'XX. the And

Madhu Ranganathan

Yes, It's question. a Paul, thank you. Madhu here. very It's important

QX things. of spoke is typical. couple about very a One, seasonality, which So the actually I

again, So seasonality at people has own QX uber its spend, the et investments spend, making we but cetera. are in level, terms benefit, of payroll

benefit So QX will And from is EBITDA our see that the perspective. well. revenue seasonally as strong quarter you margin a

the expenses fiscal to this those Micro of for we We for in in is And of year, some some look QX. some optimize focused of Focus integration spend the have QX.

be than margin seasonally for say revenue much going to half range. big second So the get the contributor and of annual our of of to margin EBITDA right will to stronger absolutely would QX the strong off year, QX EBITDA some is be And QX quarter I to tapering the expenses. you're our

Operator

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

Mark Barrenechea

Thanks you, today. momentum. call with Thank good. our everyone. joining our delighted just Very and for our progress We're

we for to birthday. Yes. engaging coming days in In ends today's a Greg strong Greg, us, look to forward You for focused the happy competitive capital And financial and Thanks, Harry We're room on him and we return. and well and update, we're would today weeks. our like we're the investing That expanding advantage, heard is joining. and wish growth. as myself, Secord everyone, Madhu call.

Operator

today's call. concludes conference This

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

Open Text (OTEX) 1 Feb 242024 Q2 Earnings call transcript