Q3 2021 Open Text Corp Earnings Call
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The presentation, there will be and opportunity to ask questions and joined the question simply press Star then one on your Touchtone phone.
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I would like to turn the conference over to Harry Blount Senior Vice President of Investor Relations. Please go ahead Sir.
Uhm June for.
Bank of America Merrill Lynch Global Technology Conference on June 8th.
The bird global consumer Technology and services conference on June 9th.
And nasdaq's virtual investor confidence on June 15th.
Look forward to virtual meeting with investors and the coming days and weeks.
I will now proceed with the reading of our Safe Harbor statements. Please note that during the course of this conference call. We may make statements relating to the future performance of open text that contain forward looking information while.
While these forward looking statements represent our current judgment actual results could differ materially from a conclusion forecast or projection and the forward looking statements made today.
Certain material factors and assumptions were applied and drawing and he's such statements.
Additional information about the material factors that could cause actual results to differ materially from a conclusion forecast or projection in the forward looking information as well as risk factors, including.
In relation to the current global pandemic that May project.
Future performance results of open text are contained and open text recent 10-Q, and 10-K as well as and our press release that was distributed earlier. This afternoon, which may be found on our website. We undertake no obligation to update these forward looking statements and less required to do so by law.
In addition, our conference call May include discussions on certain non-GAAP financial measures reconciliations of any non-GAAP financial measures to this most directly comparable GAAP measures may be found within our public filings and other materials, which are available on our web site and with that it's my pleasure to hand, the call over to Mark.
Thank you Harry.
Good afternoon and to everyone and thank you for joining today's call.
What a difference a year makes.
Today, we are announcing the strongest 12 month period and the history of the company.
The global economic outlook has significantly improved.
GDP projections are strong.
And we are and a new product cycle with open text cloud additions and we just had passed 1 billion COVID-19 vaccination globally.
We have endeavored over the last year to help our customers on and deploy digital capabilities.
We have purposely leveraged from last year to accelerate innovation.
Increase our spending and innovation transition to modern work get more efficient and dramatically strengthen or go to market.
On our last earnings call on February we spoke about green shoots and on and Investor Day and March we laid out our growth roadmap for physical 21, physical 22, and our physical 24 aspirations.
And you can see are strong progress from within and Q3.
With our organic growth of three 6% and cloud services organic growth on four 5%.
Volatility is still present of course, but we are on the offense and and and investing and our growth trajectory. Our business is back to pre COVID-19 levels, except for some portions of automotive and our confidence as high as we look to complete physical 21, with a return organic growth and upward trajectory and to physical.
22.
What a difference a year makes and let me on packed us a little more.
And deeply optimistic the number of vaccines is growing daily and vaccine Rollouts provide reason for optimism and many regions.
World does remain and a pandemic and where you are located will impact how you are experiencing it right now.
And our major markets vaccines are generally becoming more available and improvements and re openings are accelerating.
And International Monetary fund is calling for 6% growth globally, and 2021 and another strong growth here and 2022 and the market too much open text participates could grow even more strongly the net.
And finally, we are watching the U S infrastructure Bill proposals with great interest.
Is open text should benefit from increased investments and many of these sectors transportation telecom water utilities supply chain and hospitals.
While the arrows are pointing upward we recognize that economic recovery may be uneven and will vary by country to the ongoing pandemic and other events like the global chip shortage, but let me leave you with no doubt at the positive now significantly outweigh the negatives are marching are amazing found.
Patient and future is based on a large and growing addressable market with and information management, where we are the market leader.
80% plus recurring revenues, we have and enterprise installed base of $75 and customers and expanding S. M B and C channel through Rmm's Msp's and bars.
A comprehensive go to market that includes direct partners channel and digital to service customers of all sizes supported by our new digital zone.
We have increased investments and sales by the end of calendar 2023, where are from.
And coverage of the global 10000.
Increased investment and R&D over the next five years swollen back 2 billion plus and innovation.
A 90 day product release cycle that continues to rapidly, bringing new capabilities to market.
Our new grow with open text program that defines clear value path for our customers and growth path for open text.
Reduced friction and pre sales sales pulse sales and back office operations via our digital zone.
A disciplined M&A strategy, because this foundation and future is based on again, approximately 1.5 billion and cash and growing and.
And the economy that is projected and have strong GDP growth and the market's that matter to open text.
Let me spend some time on Q3.
We had another exceptional quarter highlighted my revenue growth margin expansion and strong renewal rates.
Many of our quarterly metrics are at historic highs.
And I'll be walk through the results on a year over year basis as reported unless otherwise stated.
Total revenue of $833 million up 2%, the highest Q3 and history with our organic growth of three 6% and cloud services organic growth of four 5%.
Total cloud revenue of $356 million up 5%.
The highest cloud revenue quarter, and our history as cloud remains our largest revenue contributor.
The strength and cloud was led by our enterprise content and services business and continued increase and business network volumes cut.
Customer support revenues of 360 $336 million up 4% the highest customer support revenue of any quarter and our history.
A R R of $692 million up 4% that 83% of total revenue the highest quarter on our history on a dollar basis.
Justin EBITDA of $297 million up 15% year over year.
And and $35, 7% on a margin basis.
[noise] operating cash flow for 63, 6 million and free cash flows were $53 million, which includes CRF payment of 290 million within the quarter.
We have over 2.2 billion and cash and committed liquidity at our immediate disposal.
I also want to highlight two three wins.
We have a new battle with them created during the pandemic, our process and our speed enable us to bring new innovations and capabilities to customers. Every 90 days. This is clear differentiation first of our competitors and as a driver of many of our key customer when let me highlight a few the.
Royal Bank of Canada, The second largest bank and Canada selected the open text business network for commercial lending and a public cloud environment Maersk low.
The largest containership and company and the world's selected open text enterprise content management, but integrations to S. A T and Microsoft 364, better Global Records, and invoice management and a hyperscale our environment, but no further and the Suez Canal for the importance of real time information.
United Nations Refugee agency, the U N H C R and deploying our extended DCM product and and open text cloud me and it services environment, enabling connection as well from Microsoft applications Archer Daniels, Midland where on the world largest food processing and commodities trading company selected on.
New cloud API services.
Connected open text content system towards Salesforce dot com deployment.
Del renewed and expanded their commitment to the open text business network to help manage their growing supply chain Johnson.
Johnson and Johnson upgraded their content and sweet platform and are migrating into and open text cloud managed services environment Juniper based on Germany, one of Europe's largest power producers selected our corp, archived cloud API services to connect to their S. P applications Perigo, a major Ireland base Manny.
Fax or a private label over the counter pharmaceuticals selected the open text calf cloud content and a win over Aviva.
And Deutsche a pension selected open text enterprise cloud for Personalised statement and communications to their stakeholders.
Or 90 day innovation Battle rhythm as clearly, helping us win and win and key accounts let.
Let me turn my remarks to our unique retain grow and acquire total growth strategy.
An entertaining we delivered and other exceptional quarter with customer support renewal rates at 94% and our pod renewal rates, excluding carbonite at 93%.
And I want to highlight the important enhancements, we have been making to drive growth and increased customer value and this portion of our revenue.
It is no longer just a maintenance business and it's turning into a customer value service.
Our customer support customers can now receive warranty services product updates enhancements upgrades new versions enhanced 24 by seven and support full access to a digital knowledge base security update compliance updates privacy updates and.
<unk> enhancement.
Sweet of offerings, and the 90 day release cycle increases the overall value of our product and service offerings. We believe this offering will drive higher customer satisfaction and continued growth and our customer support business.
On to grow.
We announced grow with open text and investigate day grow with open text as a set of programs that brings together everything our customers need to transform their business accelerate their growth and gage with their communities and stay ahead of the competition.
Cloud additions it built on a single technology platform that enables customer choice through for different deployment options off cloud private cloud public cloud and our cloud API services.
Here are the strategic programs for grow with open tech.
Off cloud customers, we are offering enhanced longterm extended support programs and now on premise managed services to brand new revenue opportunities for open text.
Our customers that want to deploy cloud addition, and open text private secure cloud are managed service offering is ideal we added 75, new private cloud customers in the quarter.
We are already 100% available on the public cloud with I start charity and business network clouds content cloud will be available and competition 21, dot four and our experienced cloud and see and cloud additional 20 too dark to some notable areas of strength and the quarter include a core capture or capture for us a P and corp.
Archived for extended ECM.
We have added a new go to market information management as a service via our cloud API services. There are over 25 services available at the day it developer that open text class.
[noise] developer that open text Dot com. This is an important part of our future growth at.
At the forefront of our grow with open text program is our cloud based engagement platform. The open text digital zone available today, the digital zone. It allows us to connect with customers and prospects for events seminars pre sales design proof of concept support and renewals. We do this digitally today the open texted or.
Zone alternately automate the vast majority of our customer engagement and allow us to help scale revenues non linear two expense.
And lastly, and our grow with open tech setup programs as our Voyager learning services program that brings more professionals and to the open text ecosystem with skills training and certification.
With the release of open text cloud edition of 21 Dot two we have never been better positioned to capitalize on some of the most.
On some of the most.
Powerful post pandemic trends and then.
And it's been a moment and just highlight our our five clouds.
And cloud from.
Modern workforce wants control of their time and space the workforce is forever changed and.
And more centric.
Seamless personalized and exceptional service and they are less forgiving of sub par interactions I've always called it the internet of me.
Digital technologies enable businesses to engage with their customers every touch point to allow our customers. The open text experience cloud is an exciting part of our future growth and fully complements our thinking on.
On information management.
<unk> and protection cloud during the pandemic, the number of off cloud and points and remote worker skyrocketed and cyber attacks increased by five times. The open text security and protection Cloud provides the foundation for best in class Cyber security and data protection digital forensics and endpoint security solutions for business.
<unk> of all size we.
We are committed to expanding our security business over the long term and providing the necessary protections for the for the edge for the core and for the cloud for secure information management.
And I'll add cloud the open text developer cloud the modern developer needs to deliver fast reliably and at scale.
A critical to select the right partners early in their innovation cycle.
Open text developer cloud provides information management as a service.
And making it faster and easier to bill extending customized applications using the collection of cloud services Kpis and SD case the.
The open text cloud API services, our imap is already showing big wins and is opening a new route to market for open text.
Overall cloud growth remains our largest opportunity and we are still on the early days of cloud edition adoption with approximately 20% of our customer base on the new platform.
Cloud editions accelerates, our ability to cross sell upsell and enable self service access to more of our portfolio.
On acquire we are committed to our M&A playbook patient disciplined value based buyers with return based metrics and cash flows as key criteria. We always take the long view and I encourage you to look at our annual rate of revenues, we have on boarded via M&A over the last day.
Cade on.
Liquidity cash flow and balance sheet remained strong our M&A pipeline is healthy and we will deploy capital on the right opportunity arises our continued cash flow and cash flow generation only enhances our financial position.
We're very confident and our unique total growth strategy of retain grow and acquire let me turn to our financial outlook at Investor Day, we laid out our growth strategy for fiscal 'twenty, one fiscal 'twenty, two and our aspirations for fiscal 'twenty four based on as I said above our grow with open text programs the strength of our new cloud <unk>.
<unk> continuous improvements and our own execution and optimism and the global economy today based on our organic growth within Q3 and other factors. We are updating our financial outlook with an increase to our cloud revenue outlook. Let me summarize for fiscal 'twenty, one total revenue growth of mid single digit.
Today, we are increasing our full fiscal 'twenty, one cloud revenue growth outlook to a range of 18% to 20%.
From the previous high teens, and we remain confident that we will deliver on.
Organic growth here in fiscal 'twenty one.
For fiscal 'twenty to total organic revenue growth of 1% to 2%.
Organic cloud revenue growth of 3% to 4%.
And we will comment on our fiscal 'twenty two outlook on our next earnings call, but today, we can see even more green shoots happening in fiscal 'twenty two.
Our fiscal 'twenty four long term aspirations sustained total organic revenue growth of 2% to 4%.
Our of 85% adjusted EBITDA between 38% to 40% and free cash flow of $1 1 billion to $1 2 billion and of course, any new M&A revenues or new margin dollars and new cash flows from M&A would be additive to the above outlook.
Above F 'twenty, two outlook and F. 'twenty four aspirations are organic and they do not include any benefit from future M&A at this point and time Madhu will comment as well here and a few moments.
And on our value creation strategy is predicated on growth.
Stability and capital efficiency.
Growth profitability and capital efficiency, we have built a company that continues to deliver growth upper quartile profitability and cash flow regardless of the economic environment. This strategy enables us to drive shareholder return through stock price appreciation and dividends and periodic share buybacks.
With this financial outlook, we could generate 5 billion plus and free cash flows over the next five years.
That capital will enable greater flexibility within our total growth and value creation strategies today I'm pleased to announce that the board of directors has approved our quarterly dividend of 20.08 per share for holders of record on June four 2021 with a payment date of June 'twenty five 2021.
Before I turn my summary, before I turn to my summary comments, let me touch on the back to workplace and corporate citizen initiatives here at open text.
The past 12 months have been truly extraordinary a shared journey.
And when our employees began to work from home last March we didn't know how long this would last or exactly how we would adapt.
We have shown that our productivity is up our innovation is accelerating and we are growing.
We have heard from employees that they value and appreciate the flexibility that working from home is providing.
The pandemic has forever changed the nature of work employees want more control of their time more control of their space and more personal advancement.
Open text remains on a voluntary work from anywhere through the end of this calendar year and this approach is clearly working for our customers and for our employees.
We have also began a phase returned to their workplace safely of course as per governmental rules and guidelines we.
We are also dedicate it and decided that on that a return to the workplace will include a new flex work approach that means providing our employees the option of weekly flex days and the office on.
Corporate citizenship last August we published our foundational report, which reflects our corporate beliefs and culture of doing well by doing good and utilizing technology for the good.
We continue to learn and improve and the next corporate citizenship report, which we expect to publish this August you will see the open text employee relief fund expanded to 3 million USD. They continue to support our employees and the bench of hardship and third because of the pandemic.
The expansion of our equity diversity and inclusion programs and we are adopting that.
Reporting framework silicon and more clearly articulate and measure our amazing investments and progress and.
And the past 12 months, we have experienced great disparities and fishers not just at home, but also around the world. This is deeply impacted me and the open text leadership team and we are redoubling our efforts to do good to create sustained positive change, while doing well as an organization and corporate citizenship rip.
Port.
And our initiatives are so important to us.
Last 12 months have been the best financial performance and the history of open text and our forward momentum is even stronger and closing let me summarize we delivered another exceptional quarter led by organic growth and cloud and they are our cash cash flow and liquidity keeps getting stronger we have increased.
<unk> ability and to the impact of the global economic recovery of our business and this is creating upward momentum and our future outlook, we will benefit from many secular trends, including modern work monitor experiences and a transformation of global supply chain.
We are a cloud first company with the best product portfolio and our history, we continue to invest and the drivers of future growth and we have a great workforce that is increasing innovation cycles during the pandemic and leading the way to modern work on.
On behalf of open text I'd like to thank our shareholders loyal customers partners and 14000, plus dedicated employees across the globe for their contributions to the success and I am so proud of our culture and our resilience and our employees.
And that we can feed them demonstrating every single day.
What a difference a year makes and it's my pleasure to turn the call over to Madhu, rather and often open text Chief Financial Officer Madhu.
And thank you Mark.
And thank you all for joining us today.
And welcome kits and delivered another strong quarter that goes on Jim and bad investments and organic on.
On a strengthening base of operations.
And we expect momentum to continue in fiscal 'twenty two.
Q3 Q4.
And he taxes on fiscal 'twenty, one total goods sandy on fiscal.
And 21 on your topic modeling and just on <unk>.
Two outlook and I won't go on citizens.
On outlined and I'll keep the investor presentation that is posted on our IR website today.
Is that something will be and millions of USD and contained and St. Peter yet the price.
It's going to be and unless otherwise stated and then lets talk with Xiaomi and total revenues for the quarter net $832 nine up two 2% on <unk>.
Down 8% on a constant currency basis. It was a favorable FX impact identity of 25 million.
Fantastic and split of revenues in the quarter, and Madison, and 61% EMEA, 31% and Asia Pacific 8% net.
And yet to date total revenues when it went to $419 6 billion up nine 2% on <unk>.
And 1% on a constant currency basis, Kiki annual recurring revenues of 691 eight up four 4%.
Or up one seven percentage on a constant currency basis on that.
A percentage of total Germany and on.
And then the cutting revenue with ADT percentage for the quarter up from 81% and the third quarter of fiscal 'twenty.
To date, and then they're cutting back on you.
And two point data flow.
And <unk>.
And up 15, 2% or up 13, 5% on a constant currency basis and we'll pursue.
And then just total revenues year to date.
82% up from 78% and the first nine months of fiscal 'twenty.
Q2, cloud revenue, but $255 eight up four 8% or up two 1% on a constant currency basis.
The new one day and excluding Carbonite was approximately 92%.
Year to date cloud revenue was 1.7.
<unk> 7 billion up 26, 9% on a $25 seven.
And 7% on a constant currency basis.
Customer support and the needs of $235 nine up 4% or on key percentage on a constant currency basis, our customer support and moving from Q3 with 94%.
Our women's.
Performance remains strong.
And yet to date customer support revenues of 990 985.
And five 2% or up two 9% on a constant currency basis Q3 license revenue was 76 <unk>.
<unk> pipeline and 9% on down 10, 9% on a constant currency basis.
Year to date license revenue with 250 to two down 15, 1% flow down 18% on a constant currency basis Q2 professional services revenue was $64 nine down 9% flow down 13, 2% on a constant currency basis.
To date and professional services revenues of 192, eight down eight 1% on DAU.
And even 1% on a constant currency basis Q2, GAAP net income was 91 five.
And to net income of 26 in the prior year and primarily driven by high adjusted used lower operating expenses, and then a debt extinguishment costs incurred and QTL fiscal 'twenty.
You have to date GAAP net income of $129 four compared to net income of 207, eight and the prior year, primarily driven by the tax expenses relating to the IRS settlement, partially offset by higher than.
Q3, non-GAAP net income was $204 five up 22% or up 16, 9% on a constant currency basis net to date non-GAAP net income was $706 nine up 24, 7% or up 25% on a constant currency basis.
Q2, GAAP earnings per share diluted with certainty.
And some earnings per share diluted of <unk> net.
To date GAAP earnings per se and debated with 47% down.
Down from 77.
And also driven by the taxes and the tactics and Canadians by on a settlement.
Q2, non-GAAP earnings per share diluted was <unk> 75 up 14 from 61.
And up 10% on a constant currency basis year to date non-GAAP earnings per share diluted was $2 69.
From $2 nine.
And up 41 on a constant currency basis.
Turning to margins GAAP.
Gross margin for the quarter was 68, 6% up 220 basis points net to date GAAP gross margin was 69, 4% up 190 basis point non.
Non-GAAP gross margin for the quarter was 75, 2% up 190 basis point multi day non-GAAP gross margin was 76, 2% up 230 basis points from.
GAAP gross margin and revenue stream pizza to our key pieces from 'twenty, one and 10-Q reports.
Also on an adjusted basis for the quarter cloud margin was 65, 4% up from 62, 5% driven by continued improvement and that cloud <unk> and strong contributions from Carbonite.
On todays cloud margin was 66, 4% up from 59, 7% from.
On a quarter customer support margin was 99% up from 91% and detecting continued strong renewal performance year to date customer support margin was 91, 2% up from 95% for the quarter and license margin was 96, 2% down from $96.
9%, primarily due to higher third party technology costs similar trends on a year to date basis as well for.
And for the quarter professional services margin was 22, 5% up from 21, 2% and reflecting the ongoing benefits from your moat and cloud based deployment yet.
And yet to date and professional services margin was 26, 7% up from 22, 2%.
Adjusted EBITDA was 297, one good quarter up 14, 5% or up nine 9% on a constant currency basis. This represents 35, 7% margin up from 31, 8% and the same quarter last year net.
And yet to date and adjusted EBITDA was $1 billion up 24% or up 17% on a constant currency basis. This represents 41% margin up from 36, 4% during the first nine months of fiscal 'twenty.
Turning to operating and free cash flow operating cash flow was $60 6 million and free cash flow net $52 million, which include and I had a settlement payment to 219 million operating cash flows remain strong and to take on.
DSO was 44 days for Q2 fiscal 'twenty, one compared to 51 days in Q2 fiscal 'twenty yet on the.
And the deduction of 70 to significant and and reflects the consistent efforts to improve collection efficiency and other aspect of and working capital net of cash conversion cycle on next milestone and fiscal 'twenty two will be automation within the working capital same book to maintain and well optimized levels of performance.
And I and efficiencies and capital spend free cash flow generation also remained strong and the quarter.
So on balance sheet perspective, we ended the quarter with approximately $1 5 billion and cash and supported by strong cash flow performance. We have 750 millions of Barbara Undrawn and fully available, bringing our total liquidity to two 2 billion.
Consolidated net leverage ratio and 1.5 dollars seven clients decided chairman from one six times last quarter. This is a strong place to be a balance sheet that positions us well to execute on our total growth strategy.
Now turning to quantity factors total growth strategy and anatomic model all available in the Q3 fiscal 'twenty, one investor presentation on our website and to the mine there'll be view on business, and Daniel and quarters, and Ben and long term value and sustained annual performance and 90 day cycle on to shop to measure.
Quarterly factors for the fourth quarter fiscal 'twenty, one and compared to the same periods and the prior year, we expect the following.
Expect Q4, FX tailwind similar to kitchen.
Total revenue growth up to 2% and.
And in the cutting that and the Anr up low single digits and adjusted EBITDA margin percentage down 200 to 400 basis points.
Our full year fiscal 'twenty, one total growth strategy.
And on fiscal year to date performance has been strong and our leading indicators are pointing upwards. We are pleased to increase our cloud revenue outlook for the current fiscal year to grow 18% to 20% year over year versus our previous range of high teens, all our living and does remain unchanged for.
And for our full year fiscal 'twenty, one target model with inducing our capital expenditure spend target change.
And 5% to $65 million from our prior range of 85 to 95, and lower Capex changes driven by broader partnerships and the hyper scanner from many parts of our business, while we continue to invest and our cloud infrastructure all other aspects of fiscal 'twenty, one target models remain unchanged and we do.
We expect to increase and investment and a variety of income initiatives such as the digital zone non linear scaling of our processes and higher self service on.
All towards the fixed and with environment, the tools and automation IMTT excited that many of these initiatives are under my objective possibility and cooling CIO organization.
Our fiscal 'twenty two outlook consistent 24 aspirations remain unchanged from our Investor day presentation in March of this year as it continued to strongly execute against that roadmap on fiscal.
22 outlook provides for 1% to 2% total organic growth and key to 4% cloud organic growth.
Fiscal 'twenty, four with targeting 2% to 4% total organic revenue growth 85%.
And just to EBITDA margin.
Excuse me adjusted EBITDA margin of 38% to 40% with a plan to reinvest any margin gains above 40% into additional growth initiatives and free cash flow of $1 1 billion to $1 2 billion.
M&A remains additive to our outlook and expectations.
Update we know could each and development that needed to the meeting and medical tax plan proposed deposits and fighting and the ongoing consolidation by the OECD.
And do not anticipate any changes to our fiscal 'twenty, one tax rate, nor any significant changes to our fiscal 'twenty two tax rates and it will continue to monitor these developments.
During April and Canada revenue agency or CRA issued a proposal to open text and connection with its audience.
2017 tax yes.
Asserting.
That's a technical and valuation arguments, which seek to the dealers to fair market value of certain tax assets I want to be clear that this is not similar to the prior IRS matter. We have previously discussed. This CRA proposal has no initial cash impact, but rather could affect that tax rate and future yet.
And with the support of leading tax advisor and we strongly disagree with the CRA and we intend to vigorously defend our position. All details are included on our form 10-Q filed today.
In summary day, well done to the open text team for delivering a solid Q P and leading the way and excited about our future and the momentum that continues to build into fiscal 'twenty, two and I wish you. All continued safety and governments I would now like to open the call to questions operator.
Thank you Pedro.
And now begin the question and answer session anyone who wishes to ask a question you May press star and one on the Touchstone telephone to join the question queue yogurt.
And acknowledging your request.
If you're using a speaker phone. Please ensure you lift the handset before pressing any key if you wish to remove yourself from the question queue, you May press star and to anyone.
Anyone who has a question you May press star and one at this time.
We'll pause for a moment is clearly starting to queue.
The first question comes from Stephanie price from CIBC. Please go ahead.
Hi, good evening.
And that gave US Mark Hi. This is what have you noticed from our current uptake and CE, where do you think the most demand and how how does the pipeline Doug on that.
Good day. Thank you for the question as I said on the prepared materials, we have about 20% of our install base now on.
And on cloud editions.
And that's about.
And Thats very positive I think ultimately.
On the ideal sort of landing zone for us is about.
50% and else install base that will migrate to cloud and all new customers come on and on the cloud editions I think the ultimate landing zone is about half of our installed base.
About 20% today, so still significant opportunity in front of us.
And we are also announcing what our grow with open text program.
That for those who decide to stay on.
And on release 16.
That we introduced a new extended support program.
And at additional fees and we're going to take our private cloud to on premise.
And we'll be able to do managed services on premise for customers who want to maintain.
Themselves on release 16 longer which is another revenue opportunity. So we're progressed to about 20% I think the ultimate landing zone is about half the installed base and we introduced new programs to support those who are either going to take a little longer to get there or will just run the life of their investment on release 16.
And.
That's good color. Thanks, and then on the supply chain transformation, you mentioned and that is a growth driver for several times. Just wondering if you could talk a bit about the demand you're seeing and the business network and and it isn't it and supply chain offerings.
Sure thing.
I'll start at the.
At the headline which is all our services are back to pre COVID-19 ladder levels ex.
<unk>, some portions of auto and and Thats driven.
Mainly by.
Chip shortages and dust wherever there is a temporary pause on some production, but I'm really excited to see our levels back to pre.
Pre COVID-19 levels things driving demand.
And the return right too.
GDP growth.
New activity for us and CPG and retail health care.
<unk>.
More micro payments.
Our volume over our network.
And as we've stated we think the longest.
One of the strongest drivers <unk>.
Sustainability and we have new.
New eco friendly and sustainability features of being able to look up suppliers and get scores and look at many layers and we're also seeing regionalization.
Canada has moved.
Certain pharmaceutical supply chain back to Canada, while participating in the re.
Regionalization of auto supply chains, and Germany, we're seeing certain manufacturing supply chain has come back to the U S, which we're going to be participating and some of those as well. So I think it's a return to volume sort of industries that have just gained more tam.
It is regionalization and our long term sustainability features.
That is driving the growth.
Great. Thanks, so much.
The next question comes from Raimo <unk> from Barclays.
Please go ahead.
Hey, this is Frank on for Raimo I wanted to dig a bit deeper into that raised guidance for cloud.
So specifically what are you seeing the most strength and confidence and the cloud business, both from a product and a customer vertical perspective.
Yes. Thank you. Thank you Frank so it's.
It's sort of broad based confidence right now on our private cloud as I said, we added.
Approximately 75, new customers into a private cloud and these are global 10000 customers.
So there is a continuing need to provide.
These specialized environment these private clouds.
And that have very unique value proposition for them and.
And that includes <unk>.
Content services.
Experience.
And some other things second our new cloud API services I highlight some of the wins.
And previously and then both network volumes.
Coming back.
Back to pre COVID-19 levels and certain industries as I noted.
CPG.
Retail.
Health care.
Pharmaceutical.
Leading the way for us so putting that altogether has led us to our confidence and.
And raising our total growth strategy for fiscal 'twenty, one where we now expect to see the cloud at 18% to 20% year over year percent growth.
Great. That's really good color and then just on the grille with Opus ex program I was wondering if you could provide some more detail into the customer conversations and feedback there so far.
Yes, it has been.
Early engagement is quite positive we announced that we kind of gave an early preview and March at Investor Day.
We had intended to launch it with open text World Europe, and then open text World Asia.
And then.
And that sort of rolling Thunder approach and to July what our sales kick off and start a new fiscal year, but we kind of accelerated and PV.
Previewed it at Investor Day.
So early conversations are really positive.
The first is that engagement with off cloud customers and ensuring that they can get the full value.
And for their investment and release 16, so the two new services extended support programs.
Which is a 20% fee that we're going to charge.
And then we have bringing on Prem managed services to off cloud customers. So those are the two new to brand new revenue opportunities for off cloud for private cloud, we're going to keep or we believed and private cloud some companies were in and out and back and again. This is just a great opportunity.
Or is it customers gain unique value and unique processes and don't want to move to kind of on.
More generic public cloud, we added 75, new private cloud customers.
And from that point, you can integrate into our public cloud or go to the public cloud directly our security and business network products are 100%.
Public cloud today.
Good additions 21 dot for our contact cloud will be 100% public cloud, you'll never have to upgrade again and at $21 four which will be available by the end of this year, then experienced card would be 100% public cloud and cloud editions 22 doctors and so we got great momentum there and then we got this brand new market, which is.
We've turned our information management and to API.
And whether it be twilio or other companies.
Stripe and alike.
For just pure API companies that will be our product and platform company plots and API service company as well and this is our developer cloud.
And Thats part of the grow with open text program. So.
Frank on.
And you probably hear my voice excitement around these strategic programs.
But the initial take from April and May we're just two months and have been pretty positive.
Great to hear thank you.
And the next question comes from Paul hybrid from RBC capital markets. Please go ahead.
Thanks, very much and good afternoon.
Just on the the transition or migration to CE could you speak about the unit economics, and then typically when you see a customer.