Q2 2022 Open Text Corp Earnings Call
We may make statements relating to the future performance of open text that contain forward looking information.
While these forward looking statements represent our current judgment actual results could differ materially from a conclusion forecast or projection in the forward looking statements made today certainly.
Certain material factors and assumptions were applied in drawing any 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 in open text recent forms 10-K, and 10-Q as well as in our press release that was distributed earlier to the earlier this afternoon, which may be found on our website.
Undertake no obligation to update these forward looking statements unless required to do so by law. In addition, our conference call May include discussions of certain non-GAAP financial measures reconciliations of any non-GAAP financial measures to their most directly comparable GAAP measures may be found within our public filings and other.
Cereals, which are available on our website and with that it's a great pleasure to hand, the call over to Mark.
Thank you Harry and good afternoon to everyone and thank you for joining today's call.
Today, we are introducing our new call format.
Earlier today, we published our inaugural quarterly shareholder letter in addition to our press release and Investor presentation, all available on investors that open text dot com.
The three documents are intended to provide more insight into our strategy aspiration growth program and results.
The short medium and long term horizon.
Going forward you can expect our quarterly shareholder letter and shorter prepared remarks from Madhu and myself, leaving more time for Q&A.
Today, we'll spend a bit more time and RMR to ensure a smooth transition to our new format.
We welcome your continued feedback on how to improve our communication.
Onto Q2 accomplishments, we had an amazing quarter financially and strategically.
We provided demonstrable progress towards our longer term fiscal 'twenty four aspiration of up to 4% organic growth.
8% to 40% adjusted EBITDA margin and free cash flows of $1 2 billion plus.
Today, we increased our fiscal 'twenty two targets to include total growth of up to 4% and cloud revenue growth of up to 10%.
This reinforces our aspiration to generate over 6 billion in cumulative cash flows over.
Over the next five years.
Please recall our plan to return 33% of free cash flow to investors in the form of dividends and buybacks, while investing in the majority of our cash in organic growth and corporate purposes, primarily M&A are.
Our capital return strategy has two fundamental pillars, one returning 20% of trailing 12 month free cash flow via dividends and to keeping our share count constant.
Our buyback program.
We believe our cash generation prospects and capital allocation strategy.
And our stellar position to create sustained long term value.
I looked at our quarterly accomplishments in the shareholder letter, but let me call out just a few.
We bettered our best and delivered the strongest Q2 revenue quarter in the history of the company at $876 8 million up two 5% year over year cloud up four 1% year over year with bright line organic growth.
It was a very strong cloud bookings quarter with double digit year over year growth.
Adjusted EBITDA of 39, 2%.
We are expecting strong year over year annual growth in our free cash flows we view our business as annual we make decision many decisions based on that while driving upper quartile adjusted EBITDA and free cash flow on an annual basis.
I'm very proud of the recent talent recognition, our teammates received including Canada. Most admired cultures candidates top employer for young people and being named one of Forbes best employers.
The pandemic strengthened our culture and results.
We announced the open text zero initiative with bold ESG objectives, we plan to lead here.
Two our core we believe the future of growth at open text is both inclusive and sustainable by.
By 2030, we were setting out to achieve zero barriers zero waste and zero net emissions. These are our three pillars to the open text zero initiative, specifically on zero barriers. We are actively striving become a majority diverse company and to expand our leadership to a total of 40% female leadership.
As defined as manager and up.
I'll comment on mid market, and VIX and enterprise growth programs and partners in a moment simply said Zach significantly improves our mix.
It was an exceptional quarter across the board.
We ended Q3 with increased visibility, both near term and over the longer horizon and open text best days are ahead.
I tell you why.
Businesses of all sizes are transforming and they are transforming into the cloud and by digitizing processes, but more importantly, they are transforming through information or as I like to call. It information led transformations.
<unk> the way their employees work and and how we're all mastering modern work. This includes the way they manage their supply chains and digitizing supply chain. It includes the way, we sell and go to market and how we power modern experiences and the way, we secure our digital infrastructures and strengthen.
<unk> cyber resilience.
We are the information management market leader and our cloud edition offerings are optimized to help our customers regardless of their size or where they are in their transformation journey we.
We are going to take market share through organic growth and acquisitions on a path to doubling the company over the next five to seven years, we had amazing wins in the quarter you can read the detail in our investor presentation.
Some of those wins include Volkswagen Kimberly Clark the U S Army Corps of Engineers, Raytheon space, and intelligence and Amazon as new pill pack and many more.
Let me turn to VIX.
Our enterprise growth programs and partners each strategic points of emphasis within my prepared remarks on VIX.
We see an amazing opportunity to expand our information management leadership in the enterprise and the SMB market.
50% of U S. GDP is generated by small and medium sized businesses and most need a secure and scalable digital presence.
We just started our third year as a scale provider of information management in SMB and.
And with the acquisition of <unk>, we have market leading platforms for data protection data in E Mail security as well as being a top Microsoft cloud solution provider for our mid market solutions.
By bringing together Carbonite, Webroot, Zika and cloud alloy plus our strategic relationship with the most important endpoint company on the planet, Microsoft We're able to offer the industry's most complete total protection and security platform to arm EMS and the 23000 Msp's direct.
<unk> from open text.
We intend to lead grow and win information management by a dry by addressing the high compliance and cyber resilience needs for small and medium businesses.
And you can expect us to continue to acquire.
The SMB market onto.
Under the enterprise and the enterprise and for larger businesses we.
We have a fantastic direct sales force and high impact strategies to drive profitable growth first one of our most important recent investments is to cover our top 100 customers direct with global account managers. This program is now in place.
Second one of our important recent investments to cover direct the top 20 supply chain companies. This program is now in place.
And as the large get larger and more global we have a clear opportunity to grow the top of the market and we are investing to do just that via our top 100 customer Gan program and our top 50 supply chain program.
On partners third I want to speak about partners here as we are building a remarkable business model with enterprise partners.
We're fully committed to this model and partners are a force multiplier over the long term.
Google We announced today a greatly enhanced partnership to bring our joint content and experience solutions to enterprise customers. Microsoft We have massively expanded our SMB and security relationship Amazon and AWS is the core data platform for our protection cloud SAP.
We are leading.
We are a leading cloud partner with S&P with near 3 million cloud users already and strong product and selling momentum heading into the new calendar year service now as a new opportunity for us to bring extended ECM to their large and expanding installed base.
Curious, even greater macro point.
Our API cloud our developer cloud, we have the opportunity to win the next generation set of cloud App vendors for their information management needs through content services metadata workflow capture it supply chain threat intelligence and more via our developer and API cloud.
I'm delighted with our Q2 results and our strategic progress with cloud editions SMB in Zurich, and our enterprise growth programs and partners. We believe our outlook heading into calendar 'twenty two is vastly more positive than the previous two years.
Pulp and taxes on the offensive as it relates to inflation because the best answer to inflation is to remove labor, where you can reduce your friction cost and create new just in time supply chain to the digitalization of global processes and to do this smartly through information led transformation.
We intend to help our customers beyond the offensive as it relates to inflation.
Me conclude by saying.
I'm humbled by the resilience.
Courage and unstoppable nature of my colleagues through this pandemic.
We use the last two years to transform into a cloud company with 80% annual recurring revenue and today, we are raising our cloud growth target to up to 10%.
The leadership team is excited to present at our March one Investor day, and they plan to detail. Our next generation of cloud capabilities and our business journey to achieve increased market share customer success and financial aspirations let.
Let me leave you with two things.
Getting up to 10% cloud growth in VIX and improves our mix now let me turn the call them or do to provide the financial commentary on the quarter.
And our outlook Madhu.
Thank you Mark and thank you all for joining us today.
Our new call format and will focus on selected financial highlights and I'll go back on line by line to you.
On the Investor Relations section of our website and open text Dotcom piece signed under Q2, the latest quarterly results, you'll see that PBF earnings the PDF of shampoo.
Well, that's the quarterly Investor presentation, all that sensors are in millions of USD and compared to the same period in the prior fiscal year and are on a reported basis unless I state that the buy.
Q2 should contribute to results.
We're pleased with our record Q2 revenue a record annual to cutting revenue and that could childs David.
And then to cutting revenue iron cloud bookings.
Total revenue no single digits organically.
We posted another quarter of double digit enterprise cloud bookings.
Devin you saw its fourth consecutive quarter of low single digit organic growth with positive organic growth in all of our cloud market domain.
Strong renewal date, and cloud and off cloud.
And Q2 annual recurring revenue at 80% of our total revenues on a post tax basis.
With 81% of total revenues on the bookings front end up.
Cloud bookings were strong across many products and geographies and our large deep Chen.
GAAP net income was $88 2 million during the quarter and higher than Q2 of fiscal 'twenty, one loss of $65 5 million, primarily due to the tech sector has been recorded in the prior yet.
Adjusted EBITDA for Q2 was $343 5 million or 39, 2% down slightly from Q2 fiscal 2021.
$60 8 million, primarily due to investments in talent across the board, including destination of compensation sales coverage and growth initiatives.
Turning to operating and free cash flows we generated $216 6 million in operating cash flows in the quarter down, 22% and $756 1 million in the trailing 12 months down 32%.
We generated $206 million in free cash flow in the quarter down, 25% and 688 million in the trailing 12 months down 35, 6% during the quarter and compared to prior year that all three items I wanted to share with you, but the fact the ocs in Fcs.
Integration costs relating to the six acquisitions in the current quarter.
And the timing of tax refunds in the prior year, including cares act benefits, but I'm not putting in this quarter and two months of saturday's comparisons to the prior year now this tour and augmented with competitive salary increases as well.
And.
[laughter] two minutes and I wasn't seamless.
Working capital metrics are strong looking capitalization from one four times to one six times on a year over year.
So into 247 to 44 days when our cash conversion cycle in two bytes eating.
Our operating tax shields and C pass throughs in a trailing 12 month basis. The reason to spend the night in terms of cans Act benefits last year sagittal balance plus the one time I had a second you mentioned the patterns yet.
Our next quarter Q3 is expected to remain our strongest cash flow quarter also free cash flow comparisons will continue to improve on a year over year basis.
Adversity, the IDE supplement payment last year and Cobra debated comparisons also become easier.
Turning to balance sheet and liquidity, we ended the quarter with $2 3 billion of cash and available liquidity and a very strong net leverage ratio of two times.
And before I speak to our outlook and aspirations that we shared details to binding on six acquisitions.
We closed this acquisition on December 22021.
And then it's just a VIX reporting prior to our acquisition. Please note. The following open text will record Devon using a net revenue basis, it will be 100% part of cloud gross margins in the low eighties.
During integration, we are factoring year, one customer apartment exception that overall models, we expect to share with you at the end of this fiscal year as we complete the June quarter, the combined growth prospects for SMB powerhouse offering that Mark mentioned in his commentary.
And now let me turn to our updated targets and expertise.
The third quarter of fiscal 'twenty, two and on a year over year basis, We look for told US Avenue to grow mid to high single digits.
Our annual depending that we need to grow mid single digits year over year.
And FX headwind of 20 to 25 million.
We expect adjusted EBITDA margin percentage to be down 450 to 500 basis points due to higher investments in talent and continued support of our growth ambitions six acquisition and typical calendar year reset of higher benefits expense.
So full year fiscal 2022 that increasing our planned revenue growth outlook from 1% to 2% to a range of 3% to 4% and our cloud revenue growth from 3% to 4% to a range of 8% to 10% our higher revenue outlook is predicated on our cloud bookings contributions from fixed and confidence.
Some strong Q2 and subtract results and.
Let me expand on the on the cloud revenue line.
Our fiscal 2022 cloud growth at 8% to 10% includes the fixed acquisition.
We expect to built out organically both in supported and constant currency in fiscal 'twenty two despite the Q3, FX headwind and where we sit today, we expect FX headwind in Q1 as well.
Extending FX aside and I should say.
We saw the strongest booking growth in our enterprise cloud bookings during the first half and along with an expanding hyperscale relationships Carbonite and Vicks acquisition, we expect cloud to continue to drive our future organic growth destination.
Moving to adjusted EBITDA margin, we now expect our fiscal 'twenty two adjusted EBITDA margin to be in the range of $35 five to 36, 5%, reflecting the integration of <unk> and internal investments to support growth initiatives. We have made demonstrable progress towards a solid fiscal 'twenty to finish and continued momentum.
Into fiscal 'twenty three.
Fiscal 'twenty sort of aspirations I mean unchanged at up to 4% organic note, 85% Daniel the cuttings Avenue.
30% to 40% adjusted EBITDA margin and $1 2 billion plus of pretax grows we plan to continue to invest anything higher than 40% factor to sales marketing and product initiatives driving organic growth.
We're seeing growth in all the right places our investment in talent since companies in innovation are paying off in organic growth a strong bookings also give us long term disability, while the predictability of our business remains high.
All of this is made possible by the amazing open text team and your contributions that intangible.
On behalf of Goldman text, I would like to thank our shareholders customers partners and employees across the globe I would now like to turn the call over to your questions and over to you operator.
Thank you.
We will now begin the question and answer session anyone who wishes to ask a question May Press Star then one on their touch tone telephone to join the question queue, you'll hear a tone acknowledging your request. If you are using a speaker phone. Please ensure you lift the handset before pressing any Keith if you wish to remove yourself from the <unk>.
Q you May press star and to anyone who has a question May press star and one at this time.
Our first question comes from Raimo <unk> of Barclays. Please go ahead.
Hey, Thank you congrats from me on the solid numbers.
Mark.
More of a bigger picture picture question. The one thing that gets discussed a lot with software investors here at the moment is.
The demand situation in terms of spending.
With customers.
Digital transformation was a big theme the last couple of years, Jamie kind of really sharpened People's minds here and if there's kind of notion that we kind of overspend a little bit over the last year and now we're coming back to kind of more normal levels. What are you seeing in terms of how this is playing out for you and I had one follow up for me.
Two please.
Yeah. Thanks, Thanks, Raimo good to hear from you.
Like I said in my prepared remarks, I mean coming into 'twenty two it's a vastly calendar 'twenty two it's a vastly more positive year for us.
I mean look at our look at our customer wins, Novartis and new machine learning and capture Volkswagen building a new.
A new platform for electric cars, and rough math 10 million cars times 1000 documents.
10 billion documents, a year across purchasing delivery Assembly service warranty and more U S.
Army Corps of engineer, a big new projects going on in the U S.
600 down to the 2000 Levy levies.
And Theyre all on cloud edition so we.
We see it.
Increased demand not not not shortening demand as we come into 'twenty two calendar 'twenty two.
And we're very focused on also up upgrading and migrating our install base into our into our cloud edition. So at least open tax position is.
More positivity coming into 'twenty two than we had over the last two years.
Okay perfect. Thank you that's good to hear and then do it.
If you if I think about.
EBITA Guy.
Guidance.
If I do the math it came down a little bit can you talk a little bit about the drivers in terms of.
If I look at the absolute level.
If I look at the drivers here in terms of between FX kind of investment to business.
Employee cost et cetera, and just could you break down a little bit. Thank you and congrats from me.
Yeah. Thank you Raimo or the Commons, so I'll take FX first and certainly on the topline on <unk> FX definitely I think though they are calling it out in our quarterly factors and the two lines that FX impacts. The most is the cloud services line as well as customer support.
We're definitely seeing that in Q3, and maybe sit today I would say expect assuming that FX impact in Q4 again, maybe sit today, but the underlying business as I said is absolutely growing and growing from an organic basis as far as the adjusted EBITDA goes I put the number one.
Acquisition and this is not uncommon for us if you go back to the Carbonite acquisition, we did the quarter immediately following yes, we did take a downward tick on adjusted EBITDA and then you saw how we came back up so the number one reason is going to be <unk> and are targeting to get six to our operating model in our usual time.
Graeme I'll forget plus and number two as you outlined yes, we did have some sadly for band into compensation, but more importantly, they did pass due to increases in the investing in talent. Overall in addition to investing in talent from an expansion perspective, as we've shared since coverage marketing R&D product and innovation.
So in terms of the order of the reasons that go anytime you do a large acquisition vaccine in number one and number two people investment and more go to market and product as well.
Perfect. Okay. Thank you.
Thank you.
Okay.
Our next question comes from Paul steep Scotia capital. Please go ahead.
Hey, good evening, just two quick ones, Marc maybe you could just update us on the roadmap for 'twenty two dot two and maybe other key releases that should be on our radar screen and then Madhu just can you when we get to it can you go back because it doesn't look like the transcript cut your third comment after.
Gross margins low eighty's in terms of maybe the impact on customer that broke up on my side as well and then just one last one on gross versus net six thanks.
Yeah, Paul Thank you for the question and good to hear from you and we're going to have a large and important product update.
At Investor Day.
So.
I'm going to save some of the gunpowder for March one but in advance of that.
For a 22, 2% and $22 three.
First we remain on our on our 90 day cadence, which is our battle cry.
And the reason I highlight that have highlighted that is it so important.
How do you how do we.
How do we help develop our go faster.
And how can we go faster and how can we go from thought to code to quality to pre prod production capabilities in customers' hands faster and faster.
Were now releasing to 20000 in fact, its features and tools a quarter across our clouds and I go back to the days when when Silicon Valley and that was part of this model.
We moved talent to India now wasn't just labor arbitrage, we're able to work 24 hours a day and that differentiate at very large companies from their process.
So this is the next big process improvement.
As to go faster every 90 days.
With that.
Or what we can look forward to over the next 90 days is our content cloud all support for partners and embedding extended ECM on the content side, which is really enabling.
Salesforce service now.
Google.
Microsoft.
So this notion of extended ECM on the business network cloud and we actually have a supply chain summit coming up in a couple of weeks, we have a new global invoicing capabilities supporting about 60 countries that are gonna enable what we called just in case supply chains, not just in time, but Justin.
Case, and we're bringing to market, our new mid market offering directly targeted at Sps commerce and the mid market with our with a product line called the freeway.
Experience cloud.
We have a new CPAP platform.
The in the marketplace and enhanced over the next 90 days.
We're gonna be integrating very rapidly for email protection and encryption.
Within the security protection cloud.
And more.
More advanced API.
Magellan risk guard Sandisk content, we'll send you back our content score does it have a certain number and it does have a social security number is it a violation of GDP are we just want a real nice win at Paladin cyber threat API and over a dozen customers for machine learning and capture so it'll be more.
Machine learning capabilities, so that's a bit of a flavor across our five clouds in 'twenty two dot two but please expect a very important significant product roadmap update at Investor day in March.
Okay. Thank.
Thank you Martin.
In Portland.
Adjusted <unk> as well again, keeping in mind mix was a public company, but it will be a client and then suddenly data and information out there about six we wanted to take the opportunity to clarify how we are approaching six.
As I mentioned, we closed the acquisition in December 2010.
We'll record revenues and a net revenue basis, we've done our computes entitled <unk>. He said, that's the perfect way in our view and by the way keep in mind that our sales channels.
China would get all bringing in business from a close perspective, and that's what they're supposed to do as I said this isn't a sort of discounts the totality of the effort that goes into the business did want emphasize that financial reporting doing bit accordingly, and that 70 basis. All in fixed 70 goes in as part of cloud and good margin NUCYNTA No 80 during.
During integration, we generally do this for every acquisition, we do factor a yield one customer Hoffman disruption in our overall revenue models, we certainly strive to meet the higher end of it.
But it is prudent to not view to factor some discount to the normal run rate just keeping one customer disruption and that was my point number two and the third point, which we'll share with you at the end of this fiscal year.
And behind those prospects and F&B powerhouse that mark talked about in his commentary.
Great.
In line with what we'd Miss on the integration should we think to the traditional I believe we were used to be 18% to 20% sort of step down is that split sort of embedded into the thought process at this point.
Well, yes, I would agree yes. Thank you.
Sorry last clarification I'll wish you bid I promise.
Can you give us a sense what do how what that sort of translation obviously from gross to net is on their revenues. It's certain folks are going to be looking at <unk> numbers and trying to read across understandable and you stated already deal that you were going to.
Recast it in your <unk> standard.
Right.
A totality of gross to the totality of Mac.
Again, I would think somewhere in the range of let's say they have two different types of business insight and the resell business is where we're taking the position that he would go from a go to a net 70 basis and without getting into the heavy components here on the resale side, it really translates into somebody but 30% to 30.
5% of a dollar there will be some cabinets.
Perfect. Thank you very much folks.
Thank you.
Our next question comes from Thanos, Ms Tripling of BMO capital markets. Please go ahead.
Hi, Good afternoon, maybe just to follow up on <unk> and accounting.
When we look at their deferred revenue balance with that has been.
Some resale revenue in there that needs to be marked down too in that basis or with the stuff they had and deferred as a public company when it all pertain to the stuff that you're recognizing that anyway.
Yeah again, it's a great question VIX had had.
Had adopted a gross revenue accounting for that entire business sites, so that aside from the deferred revenue as well.
Okay. So even the resell revenue had some different elements in it that would be deferred revenue <unk> quite element, yes, yes, yes, okay.
Also given that it's going to be a higher gross margin profile is that means that once.
Once integrated.
It should be above your target operating model.
Yes in fact, the convergence to a target operating model is absolutely. The goal as we come off of integration that mentioned in the gross margin is important because you would expect that some sort of a SaaS cloud based business in the low eighties and that's why we wanted to make it a point very akin to carbonite.
Okay.
Finally, mark just touching on M&A.
You, obviously announced a new head of corporate development.
And we're seeing valuations come down in the public markets I'm not sure if youre seeing that yet at this point in terms of assets you might be exploring bus.
Any color update on on that front because thanks.
Yeah, very happy too and thank you Sir.
And good good to hear from you. So first is I'm.
I am pleased to.
Give my first live voice to the promotion.
Of.
Doug leading Corp, Dev and reporting to me and.
Expansion of the team we have a fantastic.
Corporate development organization, and Doug just a fantastic leader.
And I'm delighted to have him.
Reporting to me and let me just use this also opportunity to add my voice to Gordon's retirement. He has been a great partner over the last decade, and we wish him.
All the best in his continued journey and his retirement.
Doug.
Promoted working for me expanded team in Corp Dev.
And then also we are seeing more assets today than.
And then we were a year ago.
We're seeing.
A better valuations as well so there's more optionality that we see.
You should expect us to complete more deals here in calendar 'twenty two.
And I'd also note that if you look at our cash flows and the strength of our cash flows.
We can.
B ball Terra, but we can fund double digit acquired growth straight from our cash flow.
And we may choose to use other instruments, but.
Our cash flows are strong enough that we.
We can now fund double digit growth acquired growth straight from our cash flows.
So a lot of the things I would note for M&A.
Doug reporting to me expanded team.
Seeing more assets prudent and valuation we're expecting to.
To get more deals done in calendar 'twenty, two and the strength of our cash flows.
As a directly implies.
Strong acquired growth straight from cash flows.
Great. Thanks.
Yeah. Thank you.
Our next question comes from Richard Tse of National Bank Financial. Please go ahead.
Yes. Thank you.
Okay.
Following your website here and you've got a lot of material there on IBM and it seems like you guys are still making some pretty big gains against them.
Is that sort of changed in any way in terms of those share gains that you've had over the past few quarters.
Hey, Richard Thanks for the thanks for the question and good to hear from you.
We launched.
At the beginning of January campaign.
Bye Bye blue.
And the campaign.
Which is very asset rich very program rich.
Is communicating to filenet.
And.
Sterling Commerce customers.
The challenge they have when Kindle got carved out of IBM.
That you now have two different companies two different roadmaps to different contracts to different SLA.
And the increased complexity of running your supply change our information management platform.
We think it's a great time.
To call every filenet.
Sterling commerce customer and provide an alternative because theyre not investing more in the upper right for Gartner Theyre not.
We have a private cloud they don't we have a SaaS alternative they dumped.
So.
This is going to yield wins is.
It's going to yield wins, probably over the next one to three years and so we just love. The campaign, we have one customers. We're building tools to make the automation off the IBM platform even.
More rapid.
Let me just also note on the competitor front.
That and the mid market, we're very focused on bringing our business that work into the mid market that spent a lot of time on a product line, which we call freeway.
And it's now an alternative to Sps commerce in the marketplace.
Hum and we're very focused on winning Microsoft transition, helping customers support the Microsoft transition so as Microsoft moves to their LTE program, we want to be right there to help Microsoft and any competitor in a way.
It's also going to be an important.
Ah watchdog for us because we're here to help Microsoft.
Establish their N C E program.
That would be my comments on our competitors.
Okay, and then I guess kind of a related question on the acquisitions is there.
Not investing and they view that sort of information management business as noncore. The they were to sort of think about spinning that off that.
Of that amount that you would consider looking at.
Well they should.
Of course is yes, we'd look at it.
And it has to be at the right value but.
But of course of course would look at it.
And I'm very happy with our competitive position.
But of course, when I look at it it's been in the market way to establish for way too long and and.
Of course would look at it having said that I really like how we're competing against them and.
And.
And we're going to keep competing and we've got a great campaign in the market.
Okay, great. Thank you.
Okay.
Once again, if you have a question. Please press Star then one our next question comes from Paul Treiber of RBC capital markets. Please go ahead.
Thanks, very much and good afternoon.
In the prepared remarks that you called out double digit cloud bookings growth and I was wondering you know how important Wisconsin cloud 20 went up for the release this quarter to grow.
Our bookings and then more generally speaking you know how do we think about product cycles in the future and do you expect the ebbs and flows in cloud bookings around more significant product releases or is that less of a factor.
Yeah, Paul Thank you for the question and good to hear from you.
<unk>.
There is no doubt that our content cloud as a as a call out right now.
And if we look at some of our customer wins novartis, great content cloud customer.
Bringing machine learning capture and machine learning capabilities.
Into many of their information rich processes from regulated documents to clinical trials.
Volkswagen.
I had mentioned a little earlier 10 million cars times.
100, K documents equals 10 million documents a year whenever you from purchasing to warranty that's the single platform of content.
U S Army Corps of Engineers I am very proud of this win and very very proud to partner with one of the most prestigious engineering firms in the world from everything from civilian to military construction.
And everything from dams locks hydroelectric facilities levies.
Water supply to over 100 cities in the U S. One information platform content services all on cloud editions.
So yeah, our 90 day cycle is really important.
22 that one.
Really brought up big capabilities twenty-two dot too as I highlighted earlier.
And Investor Day, I'm real eager to get the March one two.
Significant announcements for the roadmap ahead. So if you allow me Paul I'm going to hold onto some of our gunpowder for our Investor day, and the big pieces of the roadmap ahead, but there are significant but.
Yeah.
$21 for 2022 Dot one really contributed to some of these very impressive cloud edition win.
Innovation matters.
Yeah.
My second question and maybe it relates to the roadmap, but I'll try to speak about it more generally just on SMB and the opportunity there the products that you mentioned.
I've been acquired to build out a further build out the product portfolio should we expect.
The more sort of traditional enterprise grade software the open pits have you.
Repositioning down into SMB or do you think that that is a disc.
A distinct market.
Acquired distinct products.
It's it's a bit of both but it is a distinct product.
And going back to kind of our vision.
And our strategy for information management, it's both in the cloud.
And at the edge and we think both are really important.
Right No no edge no cloud no cloud node. So they are both really important in that.
At the edge, it's data protection, that's information security E Mail security Edr MTR and forensics.
And it is helping customers constantly move information off the edge.
Into more cloud based solutions, but we do we spend our lives on the edge and we innovate it yet so there are unique technologies for the edge.
And the edges, both SMB and enterprise.
I'll take some <unk> technology, we think the email encryption.
<unk> really well into our experience cloud.
For security information and health care.
We think the secure edge email security is going to be really helpful. In the business network.
Our culberson platform.
And those technology scale up but they didn't have a sales force.
Bring there.
We think our guidance software it goes into SMB very well for law enforcement horsemen, but we didn't have a big channel to do that.
No.
Multilayered right its edge and cloud.
SMB and enterprise there are unique technologies for both but that intersecting circle is large enough that.
And that we can bring technologies both ways.
Last one for me I was on your your developer website today and and I went through all the Apis that are available and there's quite a number of them.
What I was thinking through though as you know what's the marketing strategy for developer cloud I mean, it seems quite different of a channel than than enterprise sales. So how do you. What's the plan to raise awareness for open text with API to developers.
Well, it's a great.
I'm delighted you're on developer that opened Texas Dot Gov that things are being there so.
Look I think it's one of the gems, we have inside the company and we haven't cracked the scale code yet.
Is roughly $100 million business today inside of open text.
And it's a twilio locked inside our company.
So part of the strategy to unlock it.
Always bringing us Andy Oh, no onboard our new Chief marketing Officer, we've set up a new internal group.
To.
To go to market, we think being able to come in.
And attach and API sale.
Two a platform sale is a good strategy for example at our back and Dickinson, we brought some API into that into.
And to that sale on our business network.
We went over a dozen customers for machine learning and capture.
We've introduced some new <unk> API is the Magellan risk guard and enhanced our threat intelligence, but it's it's it's going to be a combination of things, we got a new chief marketing officer.
Who understands the market, we've set up a new selling team reporting to Ted Harrison.
We are going to attach it to platform sales.
Kristina and our customer success group is going to set up the organization.
To build.
Applications on top of it and it's going to be that comprehensive learning from Twilio.
And I'm, making this a future growth driver for us, but we have the technology, we have the knowhow.
Now, we're going to crack the scale coke.
Okay. Thanks, Dan if you can hear the passion and my voice on this one because it is something very unique we have.
Thank you.
Our next question comes from Stephanie price of CIBC. Please go ahead.
Good afternoon.
Hi, Stephanie.
Can you talk a bit about the potential from the get go partnerships that you announced this afternoon. How are you thinking about that partnership evolving.
Yeah, very good and thanks for joining us Stephanie and good to have good to hear good to hear from you.
I purposely focused.
My prepared remarks.
On our enterprise partners.
We've just come a long way.
And developing out our technology and our strategy with partners.
So in relation to Google, which we also announced today, we we announced we put new Mou in place and a greatly enhanced partnership and the enterprise.
One is we're going to jointly innovate together.
We are and open tax going to consume more of their platform for our customers and our youth.
And we're going to bring our content and experience platforms to their customers.
Their workspace platform.
And we will build out a joint selling teams.
Like what we've done at FTP and other places to engage with enterprise customers.
So it's a.
It's a very evolved.
And complete strategy to move kind of into the next level of engagement around joint innovation.
More mutual consumption.
And bringing our content cloud and experience cloud to the enterprise via their Google workspace.
And then layering are around that.
Joint selling organization.
Create demand closed deals that make customers very successful unhappy.
So that's a bit more on the Google announcement today.
Great. Thank you and then switching to the SMB market I'm curious about the ability to cross sell other solutions to remix that.
Partner channel and what the timeline looks like after starting now.
Sure thing.
I would.
Highlight a couple of things today.
The.
First opportunity.
Is to bring VIX product.
<unk>.
To Carbonite webroot customers opportunity number one.
Two is to bring <unk> email security, which is a cloud service.
The processing of 100 million emails a day.
Proof point.
And bring that scaled service into our C. C pass platform and experience to strengthen healthcare auto.
And.
Some other of our our big Edr traffic. If you will we think theres a good relation a good opportunities and immediate opportunity there.
I also think on the Microsoft reseller side.
As we've identified close to 5000 MSP.
And the Carbonite Webroot World.
That doesn't have a relationship with them.
Microsoft N E and we're gonna, we're out actively reaching out to them too.
To bring the cloud.
Cloud service platform from Microsoft to those new 5000, MSP and Thats immediate active real time that we're doing that.
Stephanie those are some of the immediate programs.
That.
We're going to cross sell and cross pollinate.
That's helpful.
Finally, Q customer support came down as a percentage of total overall revenue in the target model just curious about the puts and takes here.
Yeah, So Stephanie I would say two things one it.
It's more of an adjustment at the cloud revenue, you'll see it going up kind of mid model slightly.
That's the main driver of customer support continues to have very strong renewal rates.
As you see in our commentary and maybe the last comment I'm sure that I spoke about FX and FX impacts that had been to impact customer support and cloud length as well.
Alright, Thank you very much.
Thank you.
Our next question comes from Howard Leung of Veritas investment Research. Please go ahead.
Thanks.
Thanks for taking my questions.
It doesn't sound like I guess, the six acquisition a lot of the focus on the call.
The marks are the cross sell which makes sense.
It sounds like I guess for the resale part of their business, even with the larger size that Oh protections combined are it doesn't look like you will try to renegotiate those those margins or trying to get a little bit of a lift there.
Howard Welcome and thanks for your question and good to hear from you.
No there's multiple.
Vectors here of opportunity first obviously is there.
Are the Zika <unk> secure cloud products.
And.
And I noted.
The better integration with data protection.
Information security and E Mail security.
And ultimately our strategy is to have an integrated <unk>.
Endpoint edge platform.
And this is another strong component for us to do that across data protection information and an E Mail security plus our forensic offerings and then eventually Edr and MTR. That's the that's the that's the arc of our strategy to an integrated platform.
Second is our ability to cross sell across those companies.
As noted, bringing music into Webroot, and Carbonite customers, bringing carbonite webroot and <unk> customers.
And then the resell opportunity.
Theres just enormous opportunity.
Yeah.
<unk> relation of the relationship is the power ultimately in the force multiplier for us.
So the ability to go.
Go further with our great Microsoft relationship, bringing that relationship into the Carbonite Webroot M. S. P's.
Is it is a very important and then expanding larger than 23000.
S P's.
Well and then on top of that there's no reason, we can't bring even other third party resells into that singular platform and I won't go into others, where we're working with on top of Microsoft Microsoft complementary to bring in there for even a little more resell.
So Howard it's a very comprehensive approach to create madhu called the SMB powerhouse for us from everything from an integrated.
Platform at the edge through the power of the relationship with Microsoft and Microsoft complementary vendors.
No. Thanks.
Yes.
Sure.
Well I was just going to say thank you for the question as well.
No problem no problem and then actually just just to follow up on the MSP can you talk about your process of how how we how to onboard that.
How are you guys I guess introduce the new MSP to your products and maybe talk through that a bit.
Absolutely and.
This is.
A very important question because its all driven by software.
And Oh, we're going to speak a bit about it at Investor day, but effectively our digital zone is a software running in the cloud as a platform.
The goal is to have a single pane of glass or one application.
That msp's come to self service.
And after.
After our selling and after our engagement and their tries and buys but a single platform in the cloud where they can transact.
And they can provision.
And they can support and they can renew.
And so part of our.
Strategic approach.
As to invest in that platform writing software.
Move the friction from a try.
Try and buy remove the friction from selling.
Buying renewing monitoring.
And we today call that or.
<unk> digital zone.
That's a that's really helpful. Thanks for explaining the process and then just maybe one final one for me on.
On the on the renewal rates I know on the on the cloud side I think it's.
It's slipped a bit from 90 693 is there anything you wanted to call out there should we expect it to to go back up or.
I guess the.
The growth trajectory is more about new new deals and maybe less about the mid nineties.
Retention.
I mean do you may be on mute.
Oh my apologies.
So we know how long it was saying we announced I believe a quarter ago Paul Duncan.
He is an oracle back in running a $5 billion of new business. He has been heading up our R.
Or are you thinking there wasn't a lot of new and implementation.
Simplification ideas are coming alongside with safety teams and the second piece is bump would also lead to a continuous improvement in the cloud and the web site.
Your questions about products and innovation and value and expect this organization to keep introducing that to our customers.
Dan.
There is churn, but I would say the value that's going to be higher than the chance as we look ahead.
Okay.
Thanks for the comments and I'll turn it back.
Yes, Thanks Howard.
Good morning, Yeah in any given quarter any given quarter will vary on a cloud renewal rate.
But the trajectory is definitely into the mid to high <unk>.
This concludes the question and answer session I will now hand, the call back over to Mr. Burns for any closing remarks.
Alright, very very very good and thank you for joining today and we welcome your feedback on our new format, where our quarterly shareholder letter, but you and I I'm going to be very disciplined.
Keep our remarks are majoring in the majors and and narrowing our prepared remarks to provide more time in Q&A, which we think is the most important point of this call I hope Youll join us on March 1st for our Investor Day, the executive team will be altogether out here in Silicon Valley live and you are most welcome to join us.
In person.
Or virtually.
For our Investor day on March 1st and look forward to seeing you that thank you.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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Yeah.