Q4 2023 Open Text Corporation Earnings Call

August 3, 2023

Operator: Thank you for standing by. This is the conference operator. Welcome to the OpenText Corporation Q4 Fiscal 2023 Financial Results Conference Call. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, simply press star, then one on your touchtone phone. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. I would like to turn the conference over to Harry Blanck, Senior Vice President, Investor Relations. Please go ahead.

Okay.

Thank you for standing by this is the conference operator welcome to the open text Corporation fourth quarter fiscal 2023 financial results Conference call.

As a reminder, all participants are in listen only mode and the conference is being recorded.

After the presentation, there will be an opportunity to ask questions.

And the question queue simply press Star then one on your Touchtone phone.

Should anyone need assistance during the conference call, let me see if I'm, an operator by pressing star and zero on your telephone.

I would like to turn the conference over to Harry Blount Senior Vice President Investor Relations. Please go ahead.

Harry Blanck: Good afternoon, everyone, welcome to OpenText Q4 fiscal 2023 Earnings Call. With me on the call today are OpenText Chief Executive Officer and Chief Technology Officer, Mark J. Barrenechea, and our Executive Vice President and Chief Financial Officer, Madhu Ranganathan. Today's call is being webcast live and recorded with a replay available shortly thereafter on the OpenText Investor Relations website. Earlier today, we posted our earnings press release and investor presentation online. These materials will supplement our prepared remarks and can be accessed on the OpenText Investor Relations website, investors.opentext.com. I'm pleased to inform you that OpenText management will be participating at the following upcoming conferences: the Virtual Oppenheimer Technology Internet and Communications Conference on 9 August, Deutsche Bank's Technology Conference on 30 August in Dana Point, California, and Citi's Global Technology Conference on 7 September in New York. Now on to our safe harbor statement.

Good afternoon, everyone and welcome to open text fourth quarter fiscal 2023 earnings call with me on the call. Today are open text, Chief Executive Officer, and Chief Technology Officer, Mark J, <unk>, and our executive Vice President and Chief Financial Officer, Madhu Reagan Nathan <unk>.

Today's call is being webcast live and recorded with a replay available shortly thereafter on the open text Investor Relations website.

Earlier today, we posted our earnings press release and Investor presentation online. These materials will supplement our prepared remarks and can be accessed on the open text Investor Relations website investors Dot open text dot com I'm pleased to inform you that open text management will be participating at the <unk>.

Following upcoming conferences, the virtual Oppenheimer technology, Internet and Communications Conference on August 9th Deutsche Bank's Technology Conference on August 30th in Dana Point, California, and cities Global Technology Conference on September 7th in New York.

And now onto our Safe Harbor statement. 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 these forward looking statements represent our current judgment actual results could differ materially from a conclusion forecast or projection.

Harry Blanck: Please note that during the course of this conference call, we may make statements relating to the future performance of OpenText 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. Certain material factors and assumptions were applied in drawing any such statement. 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 that may project future performance results of OpenText are contained in OpenText recent Forms 10-K and 10-Q, as well as in 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 unless required to do so by law.

In the forward looking statements made today 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 the risk factors that may project future performance.

<unk> of open text are contained in <unk> recent forms 10-K, and 10-Q as well as in 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 unless required to do so by law. In addition, our conference call may include discuss.

Harry Blanck: 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 materials, which are available on our website. With that, I am pleased to hand the call over to Mark.

<unk>, a 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 materials, which are available on our website and with that I am pleased to hand, the call over to Mark.

Mark J. Barrenechea: Thank you, Harry, good afternoon, everyone, from Richmond Hill. As you can see, Q4 was another fantastic quarter and great end of the year, highlighted by record financial results, the successful integration of the Micro Focus acquisition, delivery of Cloud Editions 23.2, Project Titanium, announcement of Cloud Editions 25, Project Titanium X, and today's announcement of opentext.ai. We are a global leader in information management. Information management is essential for the next gen of AI and the next gen of business transformation. Just as the internet changed everything, with AI, everything must change. Before I get to the numbers, I'd like to go over the journey that got us here.

Thank you Harry and good afternoon, everyone from Richmond Hill.

As you can see Q4 was another fantastic quarter and great end of the year highlighted by record financial results. The successful integration of the micro focus acquisition delivery of cloud editions 23, Dart II project titanium announcement of cloud editions 25 project titanium X and today's.

Announcement of open tax Dot AI.

We are a global leader in information management information management is essential for the Nexgen of AI and the Nextgen of business transformation.

And just as the Internet changed everything with AI everything must change.

But before I get to the numbers I would like to go over the journey that got US here three years ago, we were delivering around $3 billion in revenues and I said, we would transform information management by significantly expanding our mission to become a cloud centric company.

Mark J. Barrenechea: Three years ago, we were delivering around $3 billion in revenues, I said we would transform information management by significantly expanding our mission, become a cloud-centric company, grow organically, double the business over the next five years, and that we would return capital in a value accretive manner via dividends at a rate of approximately 20% trailing 12 months FCF per year. Well, as you can see, this has played out. I am so proud of the team on delivering to our aspirations. In constant currency, Q4 revenues were $1.5 billion and F23 revenues were $4.6 billion or 32% total growth, led by cloud organic growth of 3.9%, ARR organic growth of 2.3%, and total organic revenues of 1.2%. Looking ahead in constant currency, fiscal 2024 target revenue ranges are between $5.85 to 5.95 billion, or 30% plus total revenue growth.

Organically double the business over the next five years and that we would return capital in a value accretive manner via dividends at a rate of approximately 20% trailing 12 months free cash flow per year.

Well as you can see this has played out.

So proud of the team on delivering to our aspirations and constant currency Q4 revenues were $1 5 billion in F. 'twenty three revenues were $4 6 billion or 32% total growth led by cloud organic growth.

Three 9%.

Our organic growth of two 3% and total organic revenues of one 2%.

Looking ahead and in constant currency fiscal 'twenty four target revenue ranges are between $5 85 billion to $5 95 billion or 30% plus total revenue growth.

Mark J. Barrenechea: For 2024, we are targeting positive organic growth, including a positive organic contribution from Micro Focus a year earlier than expected. Today, we announced a $1 per share annualized dividend program, or $0.25 a quarter, subject to approvals, up from $0.31 annualized when we started our dividend program. We remain committed to our 2026 aspirations, which include total organic growth of 2% to 4%, cloud organic growth of 7% to 9%, adjusted EBITDA margin expansion up to 40%, and the doubling of our free cash flows to $1.5 billion plus. The confidence in our targets reflect the agility and operational rigor of the OpenText business system. Within five months of closing Micro Focus, we have completed the business, the product, customer, and organization integration. As we kick off fiscal 2024, we are one company focused on customer success and innovation that creates intelligent growth.

<unk> 24, we are targeting positive organic growth, including a positive organic contribution from micro focus a year earlier than expected.

Today, we announced a $1 per share annualized dividend program or <unk> 25, a quarter subject to approvals up from 31 annualized when we started our dividend program.

We remain committed to our F 'twenty two.

26 aspirations, which include total organic growth of 2% to 4% cloud organic growth of 7% to 9% adjusted EBITDA margin expansion up to 40% and the doubling of our free cash flows to one 5 billion plus.

Our confidence and our targets reflect the agility and operational rigor of the open text business system within five months of closing micro focus we have completed the business the product customer and organization integration.

As we kick off fiscal 'twenty four we are one company focused on customer success and innovation that creates intelligent growth.

Mark J. Barrenechea: Our momentum is driven by three fundamental advantages over our competitors. Our ability to deliver comprehensive and differentiated information management technology. Second, giving customers complete choice in how they deploy and consume our software. Third, delivering best-in-class customer experience through our unique love model. This has been our journey, let me speak to our competitive advantages and the relative sizes of our businesses. Content and Business Network are popular among customers, as we are the information management standard to integrate business systems from SAP, Salesforce, Oracle, NetSuite, ServiceNow, Epic, Microsoft, and hundreds more, while also integrating the business transactions between them. Content and BN represents approximately 60% of our business. Our cybersecurity solutions are actively protecting governments, defense organizations, and enterprises of all sizes, from identity through physical and soft assets. It's a fantastic platform, has significant opportunity for growth, and is approximately 20% of our business.

Our momentum is driven by three fundamental advantages over our competitors, our ability to deliver comprehensive and differentiated information management technology.

Second given customers complete choice in how they deploy and consume our software and third delivering best in class customer experience through our unique love model. This has been our journey and let me speak to our competitive advantages in the relative sizes of our businesses on content and business network are popular among customers.

As we are the information management standard to integrate business systems from SAP.

Salesforce Oracle net suite service now epic, Microsoft and hundreds more while also integrating the business transactions between them.

Rent and beyond represents approximately 60% of our business.

Our cyber security solutions are attractively protecting actively protecting governments defense organizations and enterprises of all sizes from identity through physical and soft assets.

Fantastic platform.

A significant opportunity for growth and is approximately 20% of our business our item solutions, all about architects and changing the flow of information across customer critical hybrid assets and service experience is approximately 5% of our business. Our application automation is centered on helping highly trained.

Mark J. Barrenechea: Our ITOM solutions are all about architecting and changing the flow of information across customer critical hybrid assets and service experience. This is approximately 5% of our business. Our application automation is centered on helping highly trained professionals to use their precious time more efficiently by enhancing the developer experience and seamlessly modernizing off-cloud workloads by moving, running, and operating them in the cloud. This is approximately 10% of our business today. This differentiation has placed us in a fantastic position to further innovate with AI and help our customers transform yet again by combining a set of very important factors, such as leveraging large data sets from our content platform, transactions from our business network, test scripts from our applications automation, and IT and service information from ITOM.

Professionals to use their precious time more efficiently by enhancing the developer experience and seamlessly modernizing off cloud workloads by moving running and operating them in the cloud. This is approximately 10% of our business today.

This differentiation has placed us in a fantastic position to further innovate with AI and help our customers transform yet again by combining a set are very important factors such as leveraging large datasets from our content platform transactions from our business network test scripts from our applications automation.

And it and service information for my time from helping customers consolidate competitive platforms into our business cloud and momentum key AI technologies from open text and others and now implementing new models to be successful in AI, you need automation large datasets and new models the better the automation the bed.

Mark J. Barrenechea: From helping customers consolidate competitive platforms into our business cloud and implementing key AI technologies from OpenText and others, and now implementing new models. To be successful in AI, you need automation, large data sets, and new models. The better the automation, the better the data. The better the data, the better the AI. No data, no AI. We have implemented AI machine learning and vector databases for many years prior to the current AI breakthroughs. Our AI platform technology, such as Magellan, capture machine learning, and new capabilities we added with Micro Focus acquisition, including Vertica and IDOL. We have deep and proven experience with many customers running these technologies. Presently, AI and analytics are approximately 5% of our business. Today, we announced opentext.ai, OpenText Aviator, and OpenText Aviator Private Cloud, and an elevation of our AI platform technologies. opentext.ai is our expanded AI strategy and roadmap.

The data the better the data the better the AI no data no AI.

We have implemented AI machine learning and vector databases for many years prior to the current AI breakthroughs and our AI platform technology that shows Magellan capture machine learning and new capabilities, we added with micro focus acquisition, including vertical and idle, we have deep and proven experience with many customers running these technologies.

<unk> AI and analytics are approximately 5% of our business.

Today, we announced open Txdot AI open text aviator and open text aviator private cloud and an elevation of our AI platform technologies.

Open text that AI is our expanded AI strategy and roadmap. Please visit open text on AI to learn more as we continue this journey with our customers.

Mark J. Barrenechea: Please visit opentext.ai to learn more as we continue this journey with our customers. OpenText Aviators are Gen AI capabilities built into each of our business clouds that will allow customers to use large language models and to train their private data from OpenText Information Management, and to do so with trust and security. OpenText Aviator Private Cloud offers customers the ability to leverage Aviator with highly specialized learning models in a secure private cloud environment. OpenText Aviator will initially support Google's Vertex and PaLM 2 and open source language models such as OpenAssistant. We intend to support many specialized learning models, applying the right model for the right job. Here are the six initial aviators. OpenText Content Aviator, supporting conversational search and large-scale document analysis. OpenText Experience Aviator, transforming customer communications. OpenText Business Network Aviator, generating business to business integrations.

Open text aviators or Gen AI capabilities built into each of our business clouds that will allow customers to use large language models and to train their private data from open text information management and to do so with trust and security open text aviator private cloud offers customers the ability.

Leverage aviator with highly specialized learning models and a secure private cloud environment open.

Open text aviator will initially support google's vertex and palm too.

And open source language models, such as open assist.

We intend to support many specialized learning models applying the right model for the right job here are the six initial aviators open text content aviator supporting conversational search and large scale document analysis open text experience aviator transforming customer communications open.

<unk> business network aviator generating business to business integrations open tech cyber security aviator enhancing threat management through behavioral analysis.

Mark J. Barrenechea: OpenText Cybersecurity Aviator, enhancing threat management through behavioral analysis. OpenText DevOps Aviator, generating test platforms and generating trusted software. OpenText ITOM Aviator, redefining level 1 support experiences. Our AI platform technologies, which I mentioned earlier, are available today. Aviator and Aviator Private Cloud capabilities will begin to be available with Cloud Editions 23.4 and be part of our 90-day release cycles. At OpenText, AI will be built in, and we will progress with each release. Our initial AI R&D and capital investments are factored into our F '24 R&D investment range of 14% to 16%. At present, we have not factored any Aviator revenues into our F '24 plan. Now, once we see clear revenue signals, we'll update you. We believe the AI opportunity over the long term is significant. OpenText has a large role to play in AI, and we intend to play it.

Open text Dev ops aviator generating test platforms, and generating trusted software and open text item aviator redefining level one support experiences.

Our AI platform technologies, which I mentioned earlier are available today.

<unk> and aviator private cloud capabilities will begin to be available with cloud editions $23 four and be part of our 90 day release cycles at open text AI will be built in and will progress we will progress with each release, our initial AI R&D and capital investments are.

Factored into our F 'twenty, four R&D investment range of 14% to 16%.

At present, we have not factored any aviator revenues into our F. 'twenty four plan and once we see clear revenue.

We will update you.

We believe the AI opportunity over the long term a significant open text has a large role to play in AI and.

And we intend to play it.

Mark J. Barrenechea: I'll turn to Q4 and fiscal 2023 results. Madhu will provide deeper insights. Let me touch on a few key highlights in constant currency. For Q4, $1.5 billion in total revenues, up 66.5%. $455 million cloud revenues up 10.6%. Strong adjusted EBITDA margins of 31%. Our enterprise and cloud renewal rates in the mid-90s, with Micro Focus renewal rates showing clear improvements into the mid-80s. I want to thank FEMA, DHL, BNP Paribas, CNA, Renesas, Warta, Vertex, and Daikin for selecting OpenText technology during the quarter. For FEMA and DHL, we're providing cybersecurity. For CNA and Renesas, our content platform is essential to their business. BNP, a new DevSecOps platform with ValueEdge, a Micro Focus cloud win, and Warta AI information platform for content tailoring. For the year fiscal 2023 in constant currency, $4.6 billion in total revenues, up 32.2%.

Now I'll turn to Q4 in fiscal 'twenty three results Madhu will provide deeper insights let me touch on a few key highlights in constant currency for Q4 of $1 5 billion of total revenues up 66, 5% $455 million of cloud revenues up 10, 6% strong adjusted EBITDA margins of 31%.

Our enterprise and cloud renewal rates in the mid nineties with micro focus renewal rates showing clear improvements and to the mid eighties.

I want to thank FEMA, DHL BNP pet of us.

Rene sauce.

Vertex and naked for selecting open text technology during the quarter for FEMA and DHL, we're providing cyber security for CNA and Renee source, our content platform is essential to their business.

<unk>, a new Dev ops platform with value add a micro focused cloud wind and water AI information platform for content tailoring.

For the year fiscal 'twenty, three and constant currency $4 6 billion of total revenues up 32, 2% $1 7 billion in cloud revenues up 13, 3% $1 5 billion and adjusted EBITDA dollars or 32, 4% and free cash flows of $655 million.

Mark J. Barrenechea: $1.7 billion in Cloud revenues, up 13.3%. $1.5 billion in adjusted EBITDA or 32.4%, and free cash flows of $655 million. These results reflect the strength of our solutions in addressing the specific needs of customers across content, supply chains, developers, cloud migrations, IT operations, and growing climate and sustainability needs. Now, before I finish, let me provide some initial thoughts for fiscal 2024. On page 18 of our investor presentation, you'll see that we have delivered three consecutive years of accelerating organic Cloud growth in constant currency. You'll note from our fiscal 2024 targets and fiscal 2026 aspirations, we expect to continue this trend. We are targeting enterprise Cloud bookings of 15%+ in 2024, up from 9.5% we delivered in 2023.

These results reflect the strength of our solutions in addressing the specific needs of customers across content supply chain developers cloud migrations, it operations and growing climate and sustainability needs now.

Now before I finish let me.

Some initial thoughts for fiscal 'twenty four.

Page 18 of our Investor presentation, you'll see that we have delivered three consecutive years of accelerating organic cloud growth in constant currency Youll note from our F. 'twenty four targets in F. 'twenty six aspirations. We continue we expect to continue this trend.

We are targeting enterprise cloud bookings are 15% plus and 24 up from nine 5% we delivered in 'twenty three.

Mark J. Barrenechea: Let me note that we grew enterprise cloud bookings by USD 57 million sequentially from Q3 to Q4 or USD 108 million to USD 164 million. Q4 bookings growth was strong at 12% year-over-year. We have solid momentum to the 15%+. The expected acceleration is based on our pipeline, growing demand for the cloudification of Micro Focus products, and our previous investments in Titanium. F 2024 is going to be an unprecedented year as customers consume more information management capabilities, consolidate away from competitive platforms, move more workloads into the OpenText cloud, adopt security, digital operations, and application automation, and as customers begin to look to next gen AI capabilities. Further, the Micro Focus products have expanded our information management vision and provided foundational AI tools. Customer confidence is back, renewal rates expanding, and we expect to return Micro Focus to organic growth this fiscal year.

Let me note that we grew enterprise cloud bookings by $57 million sequentially from Q3 to Q4 or $108 million $164 million Q4 bookings growth was strong at 12% year over year, and we have solid momentum into the 15% plus.

We expect the acceleration is based on our pipeline growing demand for the clarification on micro focused products and our previous investments in titanium.

F. 'twenty four is going to be an unprecedented year of customers consume more information management capabilities consolidated away from competitive platforms move more workloads into the open text cloud adopt security operations and application automation and as customers begin to look to next gen AI capabilities.

Further the micro focused products have expanded our information management vision and provided foundational AI tools customer confidence is back renewal rates, expanding and we expect to return micro focus to organic growth. This fiscal year that is to exceed the $2 $3 billion in revenues I plan to show you our microphones.

Mark J. Barrenechea: That is to exceed the $2.3 billion in revenues. I plan to show you our Micro Focus progress every quarter this fiscal year. Now on to our fiscal 2024 outlook highlights in constant currency. Total revenues between $5.85 billion to $5.95 billion or 30%+ growth. Total organic growth of 1% to 2% or up $90 million of new organic revenues in the year. To note, in fiscal 2023, we added $41 million of new organic revenues. This year, we expect to add up to $90 million of new organic revenues. Total cloud growth of 6% to 8%. Enterprise cloud bookings of 15%+. Adjusted EBITDA margin of 36% to 38%. Growth of our free cash flow to a range of $800 million to $900 million. There remains much news this earnings season on macro issues and demand environment.

<unk>.

Every quarter this fiscal year.

Now onto our F. 'twenty four outlook highlights in constant currency total revenues between $5 85 billion to $5 95 billion or 30% plus growth total organic growth of 1% to 2% or up $90 million of new organic revenues in the year to note in fiscal 'twenty, three we added $41 million.

New organic revenues and this year, we expect that up to $90 million of new organic revenues total cloud growth of 6% to 8% enterprise cloud bookings are 15% plus adjusted EBITDA margin of 36% to 38% and.

Growth of our free cash flow to a range of $800 million to $900 million.

There remains much news this earning season on macro issues in the demand environment open text is well positioned to help our customers capture the nextgen up transformation with with our information management business cloud, our cloud editions and open text on AI.

Mark J. Barrenechea: OpenText is well-positioned to help our customers capture the next gen of transformation with our information management business clouds, our Cloud Editions, and OpenText.ai. Our internal dashboards remain consistent with previous quarters, and we are playing offense right now to advance our unique opportunity. Once again, our fiscal 2024 targets do not yet have any Aviator revenues built in. I want to thank our customers for making fiscal 2023 such an enormous success, and for your partnership and the trust you place in us. I want to thank our employees for advancing our customer's mission through innovation, for their incredible and transformational work on the Micro Focus acquisition and providing an exemplary customer experience. We accomplished so much in fiscal 2023.

Our internal dashboards remained consistent with previous quarters, and we are playing offense right now to advance our unique opportunity. Once again are up 24 targets do not yet have any aviator revenues built in.

I want to thank our customers for making fiscal making fiscal 'twenty three such an enormous success and for your partnership and the trust you place in us I want to thank our employees for advancing our customers' mission through innovation for their incredible and transformational work on the micro focus acquisition and providing an exemplary.

<unk> customer experience.

We accomplished so much in fiscal 'twenty three to our customers to our partners to our new employees to employees have been with us for many years I think you can all see we're in an amazing place.

Mark J. Barrenechea: To our customers, to our partners, to our new employees, to employees who have been with us for many years, I think you can all see we're in an amazing place, and the best days remain ahead of OpenText and opentext.ai. You are the source of our inspiration. I'd like to thank you again, and I'd like to highlight that today we published our fourth annual corporate citizenship report. I'd encourage you to read it. The report reflects our core values and our culture, as well as our commitments as we strive for a more sustainable and inclusive world and as we strive to create an even better company. We see corporate citizenship as both an imperative and a tremendous opportunity. May the one that brings peace, brings peace for all. With that, I'd like to turn the call over to Madhu.

And the best days remain ahead of open text and open text on AI.

You are the source of our inspiration I'd like to think.

To thank you again and I'd like to highlight that today, we published our fourth annual corporate citizenship report I'd encourage you to read it. The report reflects our core values and our culture as well as our commitments as we strive for a more sustainable and inclusive world that as we strive to create an even better company we.

We see corporate citizenship is both an imperative and a tremendous opportunity.

In may the one that brings peace brings piece for all and with that I'd like to turn the call over to Mr.

Madhu Ranganathan: Great. Thank you, Mark. Thank you all for joining us today. Our fiscal year 2023 saw a strong finish with outstanding Q4 results, driven by solid execution from the entire OpenText team. For Micro Focus, we are ahead of plan, as you see in our financial results since the close of the acquisition on 31 January. We are one company. It is our fiscal year-end. Consistent with earlier communication, we are providing you with additional disclosures. Let me outline the complete list of materials in conjunction with our release today, in addition to the AI-related materials Mark talked about. Our earnings release, Form 10-K, our investor presentation, and let me draw your attention to a few key items. On page 17, we are providing a view into the size of our high-value businesses.

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

Fiscal year 2023 saw a strong finish with outstanding Q4 results driven by solid execution from the entire open text team for micro focus. We are ahead of plan as you see in our financial results since the close of the acquisition on January 31st.

We are one company.

It is our fiscal year end and consistent with earlier communication, we are providing you with additional disclosures and let me outline the complete list of materials in conjunction with that.

But at least today in addition to the AI related materials, Mark talked about our earnings release Form 10-K, our.

Investor presentation, and let me draw your attention to a few key items on.

On page 17, we are providing a view into the size of our high value businesses on page 18 is that annual organic growth disclosure highlighted by two consecutive years of accelerating cloud organic growth in constant currency.

Madhu Ranganathan: On page 18 is our annual organic growth disclosure, highlighted by three consecutive years of accelerating cloud organic growth in constant currency. On page 20, our target model. It highlights our expectation of returning Micro Focus to organic growth in fiscal 2024, one year ahead of plan. On page 22, we have updated our financial integration framework to provide deeper insight and a clear path to doubling free cash flow by fiscal 2026. Moving to our Q4 results, please refer to page 13 of the investor presentation. All references I'm making here are in millions of USD and compared to the same period in the prior fiscal year and are on a reported basis, unless stated otherwise. On a year-over-year basis, we had record enterprise cloud bookings of $164 million, up 12% year over year. We had record cloud revenue of $452 million, up 9.7% and 10.6% in constant currency.

On page 20, our target model it highlights our expectation of returning micro focus to organic growth in fiscal 'twenty. Four one year ahead of plan on page 22, we have updated our financial integration framework to provide deeper insight and a clear path to doubling free cash flow by fiscal 'twenty six.

So moving to our Q4 results. Please refer to page 13 of the Investor presentation. All references are making here are in millions of USD and compared to the same period in the prior fiscal year and on a reported basis unless stated otherwise.

On a year over year basis, we have directed enterprise cloud bookings of $164 million up 12% year over year, we had record cloud revenue of 452 million up nine 7%.

At 10, 6% in constant currency, we had record revenue of $1 2 billion up 56, 4% and 57, 7% in constant currency. It represent 78% of total revenue. This was our 10th consecutive quarter of organic growth in constant currency for both cloud and AI.

Madhu Ranganathan: We had record ARR revenue of $1.2 billion, up 56.4% and 57.7% in constant currency. It represents 78% of total revenue. This was our 10th consecutive quarter of organic growth in constant currency for both cloud and ARR. A record total revenue of $1.5 billion, up 65.2% and 66.5% in constant currency, with Micro Focus contributing $602 million in the quarter. Strong renewals at 94% in enterprise cloud and 95% off cloud. Moving to other financial metrics, GAAP net income was a loss of $49 million, down from income of $102 million, with higher operating expenses, amortization, special charges, and interest expenses related to the acquisition of Micro Focus. GAAP gross margin of 71.4% versus 70.2%, reflecting increased revenue contributions from license and customer support. Non-GAAP gross margin of 76.9%, led by higher gross margin for the Micro Focus business and continued strong OpenText customer support performance.

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A record total revenue of $1 5 billion up 65, 2% and 66 five.

5% in constant currency with micro focus contributing $602 million in the quarter strong renewals at 94% in enterprise cloud and 95% of flat.

And moving to other financial metrics GAAP net income was a loss of $49 million down from income of $102 million with higher operating expenses amortization special charges and interest expenses related to the acquisition of microscopy.

GAAP gross margin of 71, 4% versus 72%, reflecting increased revenue contribution from licensed and customer support non.

non-GAAP gross margin of 76, 9% led by higher gross margin for the micro focus business and continued strong.

Open text customer support fulfillment.

Madhu Ranganathan: Adjusted EBITDA of $463 million or 31% of revenue versus $314 million or 34.8% of revenue, an increase of 47.6% year-over-year and 44.3% in constant currency. Breaking this down further, OpenText adjusted EBITDA margin was 32.9%, and Micro Focus had an adjusted EBITDA margin of 28.4% in Q4, a significant improvement from 23.1% in Q3. We continue to make excellent progress bringing Micro Focus into our adjusted EBITDA model. We generated $115 million in operating cash flows and $91 million free cash flows in the quarter. Working capital performance remains strong. Our DSOs were 41 days compared to 43 days in the prior year. For full year fiscal 2023, on a year-over-year basis, enterprise cloud bookings of $528 million, up 9.5% year-over-year. Cloud revenue of $1.7 billion, up 10.8% and 13.3% in constant currency.

Adjusted EBITDA of 463 million or 31% of revenue versus $314 million up 34, 8% of revenue an increase of 47, 6% year over year and 44, 3% in constant currency and breaking this down further open text adjusted EBITDA margin was 30.

Two 9% and micro focus had an adjusted EBITDA margin of 28, 4% in Q4, a significant improvement from 23, 1% in Q3, we continue to make excellent progress in bringing microfocus into our adjusted EBITDA model.

We generated $115 million in operating cash flows and 91 million free cash flows in the quarter working capital performance remained strong.

<unk> is a 41 days compared to 43 days in the prior year.

For full year fiscal 'twenty three on a year over year basis.

<unk> bookings of $528 million up nine 5% year over yet.

Cloud revenue of $1 7 billion up 10, 8% and 13, 3% in constant currency.

Madhu Ranganathan: ARR revenue of $3.6 billion, up 26.2% and 29.7% in constant currency and representing 81% of total revenue. Total revenue of $4.5 billion, up 28.4% and 32.2% in constant currency, with Micro Focus contributing $977 million for the five months ended 30 June. Foreign exchange in fiscal 2023 was a revenue headwind of $132 million, approximately half of this in customer support and 30% in cloud. Moving to other financial metrics for the full year, GAAP net income of $150 million, down from $397 million, with higher operating expenses, amortization, special charges, and interest expenses related to the acquisition of Micro Focus. GAAP gross margin of 70.6% versus 69.6%, again reflecting increasing revenue contributions from license and customer support. Non-GAAP gross margin for the year was 76.1%, supported by higher gross margin for the Micro Focus business, as well as continued OpenText customer support performance.

Our revenue of $3 6 billion up 26, 2% and 29, 7% in constant currency and represented 81% of total revenue.

Total revenue of $4 5 billion up 28, 4% and 32, 2% in constant currency with micro focus contributing $977 million for the five months ended June 30th.

Foreign exchange in fiscal 'twenty, three with a revenue headwind of $132 million approximately half of this and customer support and 30% in <unk>.

And moving to other financial metrics for the full year GAAP net income of $150 million down from $397 million.

With higher operating expenses amortization and special charges and interest expenses related to the acquisition of Microfocus GAAP gross margin of 76% versus 69, 6% again, reflecting increasing revenue contribution from license and customer support non-GAAP gross margin for the year was $76.

1% supported by higher gross margin for the micro focus business as well as continued open text customer support performance.

Madhu Ranganathan: Adjusted EBITDA of $1.5 billion or 32.8% of revenue versus $1.3 billion or 36.2% of revenue, up 16.4% year over year and up 18.2% in constant currency. Breaking this down further, OpenText adjusted EBITDA margin was 34.7%, and Micro Focus had an adjusted EBITDA margin of 26.3%. We generated $779 million in operating cash flows in fiscal 2023, compared to $982 million in the prior year. The decline primarily related to integration of the Micro Focus acquisition. Free cash flows in fiscal 2023 of $655 million compared to $889 million in the prior year. This performance was better than our target range of $580 to $620 million, and reflects strong collections and working capital performance, as well as the rapid operational integration of Micro Focus. Micro Focus contributed positive free cash flow for the year, driven by their strong working capital performance.

Adjusted EBITDA of $1 5 billion or 32, 8% of revenue versus $1 3 billion. A 36, 2% of revenue up 16, 4% year over year and up 18, 2% in constant currency and breaking this down further open it open text adjusted EBITDA margin was 34, 7%.

And micro focus had an adjusted EBITDA margin of 26, 3%.

Generated 779 million in operating cash flows in fiscal 'twenty, three compared to 982 million in the prior year. The decline primarily related to integration of the micro focus acquisition free cash flows in fiscal 'twenty three of $655 million compared to 889 million in the prior year.

This performance was better than our target range of $5 $80 million to $620 million and reflects strong collections and working capital performance as well as the rapid operational integration of micro focus and micro focused contributed positive free cash flow for the year driven by the strong working capital performance fee.

Madhu Ranganathan: Free cash flow performance in fiscal 2023 provides a solid platform for our fiscal 2024 target range of $800 to $900 million and our aspirations for fiscal 2026 of $1.5 billion plus. Turning to the balance sheet. Please see page 23 of the investor presentation. We finished Q4 with $1.2 billion in cash and $9.1 billion of total long-term debt. Our net leverage ratio was 3.5x for Q4. Last quarter, we mentioned our net leverage ratio would fluctuate slightly over the next few quarters, reflecting timing of investments and the impact of integration expenses on adjusted EBITDA. After we closed the quarter, we further reduced our debt by $175 million as part of our de-leveraging program. We are committed to delivering a net leverage ratio of less than three times by the end of fiscal 2025 or sooner. Turning to our dividend program.

Cash flow performance in fiscal 'twenty three provides a solid platform for our fiscal 2004 target range of 800 to 900 billion aspiration for fiscal 'twenty six of $1 5 billion plus.

Turning to the balance sheet. Please see page 23 of the Investor presentation. We finished Q4 with $1 2 billion in cash and $9 1 billion of total long term debt.

Our net leverage ratio was three five times for Q4 last quarter, we mentioned, our net leverage ratio would fluctuate slightly over the next few quarters, reflecting timing of investments and the impact of integration expenses and adjusted EBITDA. After we close the quarter, we further reduced our debt by $175 million.

As part of our deleveraging program, we are committed to delivering a net leverage ratio of less than three times by the end of fiscal 'twenty five a sooner.

Turning to our dividend program today, our board of directors approved a quarterly cash dividend of <unk> 25 per common share. The record date for the next quarterly dividend in September 2023, and a payment date of September 22023, the annualized dividend increases to $1 per share subject to quarterly board approval.

Madhu Ranganathan: Today, our board of directors approved a quarterly cash dividend of $0.25 per common share. The record date for the next quarterly dividend is 1 September 2023, and the payment date is 22 September 2023. The annualized dividend increases to $1 per share subject to quarterly board approvals. Turning to our targets and aspirations. We present our business on a constant currency basis for our quarterly factors, targets, and aspirations. Our Q1 fiscal 2024 quarterly factor is on page 21 of the investor presentation. On a year-over-year basis, we expect revenue of $1.36 billion to $1.41 billion, reflecting Q1 seasonality. ARR of $1.09 billion to $1.13 billion. Adjusted EBITDA year-over-year margin percentage down 250 to 350 basis points, again reflecting Micro Focus integration costs. As mentioned earlier, we view and plan our business on an annual basis and quarters will vary.

Turning to our targets and aspirations, we present, our business on a constant currency basis for our quarterly factors targets and aspirations. Our Q1 fiscal 'twenty four quarterly factors on page 21 of the Investor presentation on a year over year basis, we expect revenue of $1 36 billion to one for one.

In reflecting Q1 seasonality.

There are a $1 9 billion to $1 3 billion adjusted EBITDA year over year margin percentage down 250 to 350 basis points again, reflecting micro focus integration costs.

As mentioned earlier, the view and plan our business on an annual basis and quarters will vary.

Madhu Ranganathan: Specifically on free cash flows, we are confident in our annual target of $800 to 900 million. Q1 is expected to be neutral to slightly negative as a result of interest, special charges, and integration costs, as well as seasonally lower working capital at the start of a fiscal year. Starting from Q2, we expect free cash flow growth on a year-over-year basis in each subsequent quarter. Our fiscal 2024 targets and constant currency are provided on page 20 of our investor presentation. We look for Enterprise Cloud bookings growth to grow 15%+ year-over-year. Cloud revenues up 6% to 8%. Customer support revenues up 40% to 42%. ARR up 24% to 26%. Total revenues of $5.85 to 5.95 billion, representing growth of 30%+. Non-GAAP gross margin range, 77% to 79%. Adjusted EBITDA range, 36% to 38%.

Typically on free cash flows we are confident in our annual target of $800 million to $900 million Q1 is expected to be neutral to slightly negative as a result of interest special charges and integration costs as well as seasonally lower working capital at the start of our fiscal year, starting from Q2, we expect free cash flow.

On a year over year basis in each subsequent quarter.

Our fiscal 'twenty four targets in constant currency are provided in page 20 of our investor presentation.

We look put enterprise cloud bookings growth to grow 15% plus year over year.

<unk> revenues up 6% to 8% customer support revenues up 40% to 42%.

<unk> up 24% to 26%.

Total revenues of $5 85 billion to $5 95 billion, representing growth of 30% plus non-GAAP gross margin range, 77% to 79%.

Adjusted EBITDA range of 36% to 38% at current exchange rates FX would be a revenue tailwind of approximately $40 million to $60 million.

Madhu Ranganathan: At current exchange rates, FX would be a revenue tailwind of approximately $40 to $60 million. Our fiscal 2026 aspirations remain unchanged, and these are included on page 24 of our investor presentation. Let me turn to the financial integration framework update on page 22 of the investor presentation. We have actioned $260 million of our $400 million cost savings, with the balance expected to be completed in fiscal 2024. We have incurred $6 million of the $70 million integration expense, with the balance expected to be completed in fiscal 2024. Finally, we have incurred $146 million of the special charges. We expect $180 to $200 million of the remaining Micro Focus charges and expenses to be incurred in fiscal 2024, and the remaining $150 to $190 million in fiscal 2025. All of these are outlined on page 22 of the investor presentation.

Fiscal 'twenty six aspirations remain unchanged and these are included in page 24 of our Investor presentation.

And let me turn to the financial integration framework update on page 22 of the Investor presentation.

We have action $260 million of our 400 million cost savings with the balance expected to be completed in fiscal 'twenty. Four we have incurred $6 million of the 70 million integration expense with the balance expected to be completed in fiscal 'twenty. Four finally, we have incurred $146 million of special charges, we expect 180 to two.

$200 million remaining microfocus charges and expenses to be incurred in fiscal 'twenty four and the remaining 150 to 190 million in fiscal 'twenty. Five all of these are outlined on page 22 of the investor presentation. The related initiatives driving these spend include global entity simplification tax structures and technology.

Madhu Ranganathan: The related initiatives driving these spends include global entity simplification, tax structures, and technology footprint optimization. These are fully reflected in our targets and aspirations. Turning to our free cash flow, we are reaffirming our fiscal 2024 free cash flow target range of $800 million to $900 million, and our fiscal 2026 aspirations of $1.5 billion plus. Our fiscal 2026 FCF aspirations are more than double our fiscal 2023 free cash flow for the year. In summary, we are very pleased with our outstanding Q4 and full-year performance. Our enhanced global size and scale enables us to deliver stellar metrics for gross margin, adjusted EBITDA, and free cash flows driven by innovation and growth. On behalf of OpenText, I would like to thank our shareholders, loyal customers, and partners.

Footprint optimization. These are fully reflected in our targets and aspirations.

Turning to our free cash flow, we are reaffirming our fiscal 'twenty free cash flow target range of $800 million to $900 million and our fiscal 'twenty six aspirations of $1 5 billion plus.

Fiscal 'twenty six Fcs aspiration to more than double our fiscal 'twenty free cash flow for the year.

In summary, we are very pleased with the outstanding Q4 and full year performance.

Enhanced global size and scale enables us to deliver stellar metrics for gross margin adjusted EBITDA and free cash flows driven by innovation and growth.

On behalf of open text I would like to thank our shareholders loyal customers and partners to.

Madhu Ranganathan: To the OpenText team members, you have proudly delivered great milestones for fiscal 2023 and put us in a position for an outstanding fiscal 2024. I'm looking forward to that exciting journey ahead. I will now request the operator to open the call for questions.

To the open text team members you have proudly deliver great milestones for fiscal 'twenty, three and put us in a position for outstanding fiscal 'twenty four I am looking forward to that exciting journey ahead, I will now request the operator to open the call for questions.

Operator: Thank you. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on your touch-tone telephone to join the question queue. You will hear a tone acknowledging your request. If you're using a speakerphone, please ensure you lift the handset before pressing any keys. If you wish to remove yourself from the question queue, you may press star and two. Anyone who has a question may press star and one at this time. The first question comes from Richard G. from National Bank Financial. Please go ahead.

Thank you.

We'll now begin the question and answer session.

And who wishes to ask a question you May press star and one on your Touchtone telephone to trying to question queue.

We'll hear a tone acknowledging your request if you.

We're using a speaker phone. Please ensure you lift the handset before pressing any Keith if you wish to remove yourself from the question queue. You May press star two.

Anyone who has a question you May press star one at this time.

The first question comes from Richard Chin.

National Bank financial.

Richard Tse: Oh, yes. Thanks for taking my question here. Madhu, on slide 22, when you talk about sort of the special charges, if I kind of look at the prior deck from the prior quarter, it looks like it's sort of gone up here a little bit. Just wondering if you maybe unpack that for us a little bit just to explain sort of why that increased here.

Please go ahead.

Yes, Thanks for taking my question here.

My view on slide 22, when you talk about sort of the special charges, if I kind of look at the prior deck from the prior quarter. It looks like it's sort of gone up here a little bit and just wondering if you can maybe unpack that for us a little bit.

So why not increase here.

Madhu Ranganathan: Absolutely. In fact, if you look at a couple line items, we have actually gone down on the integration expense by about $10 million, and we've expanded the range to about $40 million of the special charges. Again, these are the current estimates for the global entity simplification, tax structures, et cetera. Yes, through fiscal 2025, it's a net increase of about $30 million.

Yeah, Yeah, absolutely in fact, if you look at a couple of line items, we have actually gone down on the integration expense by about 10 minutes and we've expanded the range to about $40 million of special charges and again. These are current estimates for the global entities simplification tax structure.

Jos et cetera, So yes, two fiscal 'twenty five it's a net increase of about of about $30 million.

Richard Tse: Okay. Thank you.

Okay. Thank you.

Madhu Ranganathan: Yep.

Richard Tse: It's probably a little bit too early for this, but obviously it seems like you're doing quite a good job in terms of this integration with Micro Focus. As I look at your aspirational guidance going forward to, let's say, fiscal 2026, I'm assuming here it does not include any acquisitions. Just kind of wondering if you could maybe help us understand your thoughts and process around annual capital deployment targets when it comes to acquisitions. Do you look at it that way? How should we think about that?

It's probably the hope it too early for this but obviously it seems like Youre doing a quite a good job in terms of the Senate ratio with micro focus so as I look at your aspirational guidance going forward to let's say fiscal 'twenty six I'm assuming here. It does not include any acquisition. So just kind of wondering if you could maybe help us understand your thoughts and processes.

Annual capital deployment targets when it comes to acquisitions do you look at it that way or.

How should we think about that.

Mark J. Barrenechea: Yeah. Richard, Mark here, and thank you for the question. At present, we're very focused on returning Micro Focus to organic growth this year, a year ahead of schedule, and that's certainly where our energy is. Second, as I noted, we have a large role to play in AI, and we intend to play it. Our focus, and we had in parallel a large set of announcements today about opentext.ai, our strategy and roadmap for AI, announced a new product line called Aviators, and discussion of our initial six Aviators that we expect to be available for sale next quarter. Within that framework, our R&D investments are between 14% to 16% of revenues this year. We're very focused on delivering to our 2024 aspirations, 2026. As you note, those are all organic.

Richard Mark here and thank you for the question.

At present were very focused on returning micro focus to organic growth. This year a year ahead of schedule and that's certainly where our energy is second.

As I noted.

We have a large role to play in AI and we intend to play it.

So our.

Our focus and we are in parallel large set of announcements today.

About open Txdot AI, our strategy and roadmap for AI.

<unk> announced a new product line called aviators.

And and discussion of our initial six aviators that we expect to be available for sale.

Next quarter.

Within that framework, our R&D investments are between 2014% to 16%.

Of revenues this year, so we're very focused on.

On delivering to our F. 'twenty four aspiration F 'twenty six and as you know those were all organic.

Mark J. Barrenechea: Certainly as we approach our under 3x leverage, we'll certainly consider if we want to do acquisitions. Right now we're focused on capturing the organic opportunity for us. I'd also note on capital return, we brought our dividend up as well, to $1 annualized per share.

And certainly as we.

<unk> approach are under under three <unk> leverage.

We will certainly consider if we want to do acquisitions, but right now we're while we're focused on capturing the organic opportunity for us.

And I'd also note on capital return, we brought a dividend up as well to $1 annualized <unk> per share.

Richard Tse: Okay, great. Just my last question, do you use Aviator within OpenText's current operations? I'm just really trying to understand maybe the use cases there and I guess related, do you kind of see that having an impact in terms of the operating model, if that's the case, you using Aviator within the company?

Okay great.

And just my last question.

<unk> within the open text current operations I'm, just really trying to understand and maybe the use cases are there and I guess related.

See that having an impact in terms of the operating model if that's the case.

Using either within the company.

Mark J. Barrenechea: Oh, how much time do we have, Richard? Our announcements today are around our initial product offering and our strategy and direction. There's a lot in there. How we're going to use IDOL as a way to translate information into useful vectors and metadata. How we're going to use Vertica as the vector database. Not other people's technology, our technology. How we're going to bring embedding technologies in from open source. We're going to be polymodel. We're going to support highly specialized language models for highly specialized jobs. We're talking about enterprise AI here, not consumer AI. Language models will be highly specialized. Our focus is getting that initial product to market, doing that in a private trusted way as well in our private cloud, and elevating IDOL and Vertica and Magellan.

Oh, how much time do we have Richard so.

Yes.

Our announcements today.

Our around.

Around our initial product offering.

And our strategy and direction and Theres a lot in there.

How we're going to use idle.

As a way to translate information into useful vectors and metadata. However news vertical as the vector database not other People's technology, our technology, how we're going to bring embedding technologies and from open source and we're gonna be poly model, we're going to support highly specialized language models.

For highly specialized jobs.

We're talking about enterprise AI here not consumer AI.

And.

Our language models will be highly specialized.

No.

Yes.

Our focus is getting that initial product to market.

Doing that in a private trusted way as well and our private cloud.

And elevating idle and verdict and Magellan.

Mark J. Barrenechea: If you just allow me for a moment, if we think of the role automation has played in the enterprise over the last 20 years, before ERP suites got integrated, G&A expense was up to 20% of P&Ls, right? Automation knocked G&A into the mid-single digits. AI is different than automation, but AI is the next transformative aspect for enterprises. We will use Aviator to transform our own business over time. Initial areas that we'll consider. Support, just as I talked about our ITOM Aviator, our ability to transform level 1 support. We have opportunities in our professional services of how we will generate code. We have opportunities how our engineers can transform how they test.

But if you just allow me for a moment if we think of the role automation has played in the enterprise over the last 20 years before ERP suites got integrated G&A expense was up to 20% of P&L.

By automation knocked G&A right into the into the mid single digits.

AI is different than automation, but AI is the next transformative aspects.

For enterprises, we will use aviator to transform our own business over time.

Initial areas that were we will consider.

Support just as I talked about our item aviator our ability to.

Transform level, one support we have opportunities in our professional services of how we will generate code.

We have opportunities how our engineers can transform how they test.

Mark J. Barrenechea: Richard, we'll speak more and more about how we'll apply Aviators to our business and how we'll transform our cost structure and how we'll transform the revenue side, RFPs, and sales. We have 20 years of RFP history, 200,000 RFPs. We'll put them in our vector database, we'll apply a language model and generate the best information out of it. That will come in time. Right now we're announcing our strategy, our vision, our direction, our initial products, our initial R&D investment, we will apply it to ourselves as well, through time.

So we will have a whole.

Richard will speak more and more about how we will apply aviators to our business and how we will transform our cost structure and how we will transform the revenue side rfps in sales.

We have.

20 years of RFP history, 200000, rfps or put them in our vector database will apply a language model and generate the best information out of it so that will come in time.

But right now we're announcing our strategy our vision our direction. Our initial products. Our initial R&D investment and then we will apply it to ourselves as well through time.

Richard Tse: Okay. Thanks for taking my questions.

Okay. Thanks for taking my questions. Thank you.

Mark J. Barrenechea: Thank you.

Harry Blanck: Thank you.

Yes.

Operator: The next question comes from Steve Enders of Citi. Please go ahead.

The next question comes from Steve Enders of Citi. Please go ahead.

George Gerosau: Hi, this is George Gerosau on for Steve. Thanks for taking the question and congrats on a great quarter. Did want to double-click on the enterprise cloud bookings, and just get some help on getting confident in the acceleration into next year. Was there any element of deal push-outs from this year into next year that you expect to close? Just any more color on how you guys are thinking about that.

Operator: Hi, this is George Gerosau on for Steve. Thanks for taking the question and congrats on a great quarter. Did want to double-click on the enterprise cloud bookings, and just get some help on getting confident in the acceleration into next year. Was there any element of deal push-outs from this year into next year that you expect to close? Just any more color on how you guys are thinking about that.

Hi, This is George Chris on for Steve. Thanks for taking the question and congrats on a great quarter did want to double click on the enterprise cloud bookings.

Just get some help on getting confident in the acceleration into next year was there any ellen.

Element of deal push outs from this year into next year that you expect to close or I guess, just any more color on how you're just thinking about that.

Mark J. Barrenechea: George, happy to and, thanks for being on the call today. Just to recap the numbers, our cloud bookings in F23 were 9.5%, which we've already talked about Q1, Q2, Q3. In Q3, our bookings were constant at $108 million. In Q4, we had a strong bookings quarter, $164 million up 12% year over year. Q4 bookings was $164 million, and we got solid momentum to get to the 15% plus. That's based on pipeline, based on deals. The difference between 12% and 15%, I wouldn't point to push deals, at all. Our momentum is up. We delivered $164 million in Q4, up 12%, and we got solid momentum to get to the 15% plus.

George Happy too and.

For being on the call today, so just to recap the numbers.

Our cloud bookings in F 'twenty, three or nine 5%.

And which we've already talked about Q1, Q2, Q3, and Q3, our bookings were caught $108 million in Q4.

We had a strong bookings quarter of $164 million up 12% year over year.

And.

So Q4 bookings was $164 million and we've got solid momentum to get to the 15% plus.

And so thats based on pipeline pace based on deals. So I mean, the difference between 12% and 15% I wouldn't point to push deal.

At all our momentum is up so we delivered $164 million in Q4 up 12% and we've got solid momentum to get to the 15% plus.

George Gerosau: Got it. Super helpful. Just on the Aviator announcement, really exciting set of products. Maybe just any color on the go-to-market and monetization strategy here. Is there anything kind of unique or, what would you highlight there?

Mark J. Barrenechea: Got it. Super helpful. Just on the Aviator announcement, really exciting set of products. Maybe just any color on the go-to-market and monetization strategy here. Is there anything kind of unique or, what would you highlight there?

Got it Super helpful.

And then just on the aviator announcements really exciting set of products, maybe just any color on the kind of go to market and monetization strategy here is there anything kind of unique or I guess.

What would you kind of highlight there.

Mark J. Barrenechea: Yeah, I would say two things. There's two pricing models sort of emerging in the market. You certainly have Microsoft, I think O365, you have Copilot, ChatGPT, GitHub, GitLab. They're ranging from $10 to 30 per user per month. That sort of makes sense to me. You have kind of the other spectrum where you see Google pricing and others in the enterprise sort of based on processed tokens. When we turn GA in the next quarter, we'll introduce the pricing then. Some Aviators will be more oriented towards user pricing per month, and the market sort of setting the rate right now, between $10 to 30. There'll be other parts of what we do, based more on sort of consumption. Our Business Network, by the way, is priced on what we call kilo-characters, which is the same thing as tokens.

Yes, I would say two things theres, two pricing models sort of emerging in the market.

You certainly have.

Microsoft.

I think <unk> hundred 65, you have Copa co pilot.

<unk> GBT get hub.

Get lab.

The range from $10 to $30 per user per month.

And that's what it makes sense to me.

You have kind of the other spectrum.

You see Google pricing and others in the enterprise sort of based on process tokens.

So.

When we.

Turn gea and next quarter, we will introduce the pricing then.

But some aviators will be more oriented towards user pricing per month.

And the market sort of setting the rate right now between 10% to $30 and there'll be other parts of what we do based more on.

Sort of consumption and our business network by the way is priced on what we call kilo characters, which is the same thing as tokens.

Mark J. Barrenechea: When we deliver in 23.4, we'll announce the pricing, and we'll probably have two models built for each Aviator. One user based, and again, the market is between $10 to $30 per user per month, and we'll have some Aviators more oriented towards consumption, either based on tokens or kilo-characters. We've thought through it, and we'll get the right pricing for the right Aviator.

So when we.

When we deliver and $23 four we will announce the pricing and we'll probably have two models are built for the built for each aviator one user based but again the market is between 10 to $30 per user per month, and we will have some aviators more oriented towards consumption either based on kind of tokens or kilo character.

But we've thought through it and we will get the right pricing for the REIT aviator.

George Gerosau: Great. Thanks for taking the questions.

Mark J. Barrenechea: Great. Thanks for taking the questions.

Great. Thanks for taking the questions.

Operator: The next question comes from Kevin Krishnaratne of Scotiabank. Please go ahead.

And the next question comes from Kevin Krishnan, Rodney <unk> of Scotiabank. Please go ahead.

Kevin Krishnaratne: Hey there. Sorry. Good evening. Just maybe one from me. Just on the Micro Focus, returning to organic growth a little bit faster, how do we think about that in conjunction with the F2024 guidance, which, correct me if I'm wrong, but I think on the top end, it came down a little bit from the preliminary guide that you gave in the last quarter. Can you just talk about maybe perhaps what you're seeing in OTEX core to lead to that result? Thanks.

Hey, guys.

Good evening, and just maybe one for me.

On the micro focus recurring organic growth a little bit faster, how do we think about that in conjunction with <unk>.

24 guidance, which correct me, if I'm wrong, but I think it.

On the top end it came down a little bit from the preliminary guidance that you gave in the last quarters can you just talk about maybe perhaps what you're seeing in <unk> core.

To lead to that result.

Mark J. Barrenechea: Thanks, Kevin. Thanks for the question, and thanks for being on the call today. Just to recap the numbers. In fiscal 2023, our total company organic growth was 1.2%, or $40 million of new organic revenues we added in the year. Percents on top of percents can be tricky. Just real simple, organically, we grew 1.2%. We're committed to showing you that annually. Said differently, we added $40 million of new revenues. Our target for 2024 is 1% to 2% on a much larger base. That's $45 million to $90 million of new organic revenues in fiscal 2024, because it's on a much higher base, if you will. That's up to $90 million, almost $100 million, of new revenues here in fiscal 2024.

Yes, thanks, Kevin Thanks for the question and thanks for being on the call today.

To recap the numbers.

In fiscal 'twenty three our total company organic growth was one 2%.

Or 40 or $40 million of new organic revenues, we added in the year. So percents on top of a percent it can be tricky, but just real simple organically. We grew one 2% we're committed to showing you that annually and or said differently, we added $40 million of new revenues.

Our target for 'twenty, four is 1% to 2%, but a much larger base. So thats 45 million to $90 million of new organic revenues in fiscal 'twenty four it because it's not.

Because it's on a much higher base. If you will so that's up to $90 million almost $100 million.

Of new revenues here in fiscal 'twenty, four and as I said in my.

Mark J. Barrenechea: As I said in my script, we have no Aviator revenues built in our model yet, and until we have the revenue signals, we're not going to add it. Look, we expect all our product lines to grow. I don't like speaking this way, but I'll say it this way. We're clearly expecting Micro Focus to return to organic growth and base OpenText to have organic growth as well, both having organic growth. Again, the 1% to 2% for fiscal 2024, is up to $90 million of new revenues, and we added $40 million of new revenues last year.

Script.

We have no aviator revenues, both in our model yet and until we have the revenue signals, we're not going to add it look we expect.

All our product lines to grow and we expect.

I don't like speaking this way, but I'll say it this way, we're clearly expecting micro focus to return to organic growth and base open text to have organic growth as well, both having organic growth at <unk>.

The 1% to 2% for fiscal 'twenty four.

It's up to $90 million of new revenues, and we added $40 million of new revenues last year.

Madhu Ranganathan: Yeah. Kevin, if I could just share just one last point in addition to what Mark said, the last print versus this print to your point, please make note of the FX tailwind we have, slide number 20, and the midpoint there is about $50 million.

Yes, and Kevin if I could just share with just one last point in addition to what Mark said.

<unk> print with a disciplined to your point.

Please make note of the FX tailwind, we have on slide number 20, and the midpoint there is about $50 million.

Kevin Krishnaratne: Got it. Okay. Look, thanks a lot. I'll pass the line. Thank you.

Got it okay. Thanks, a lot I'll pass the line. Thank you. Thank you.

Madhu Ranganathan: Yeah, thank you.

Mark J. Barrenechea: Yeah, thank you.

Yes.

Operator: The next question comes from Paul Treiber of RBC Capital Markets. Please go ahead.

The next question comes from Paul Treiber of RBC capital markets. Please go ahead.

Paul Treiber: Thanks for taking the question. Given that your comments in the prepared remarks, Micro Focus is doing much better than you expected. Fundamentally, why is that? What has changed with the business? I might have missed in the prepared remarks, but did you comment on renewal rates for Micro Focus this quarter and how that's been trending?

Thanks for taking the question just given the comments in the prepared remarks micro focus is doing much better than you expected.

Fundamentally why is that what has changed with the business and then I might have missed in the prepared remarks, but did you comment on renewal rates for micro focus this quarter on how that's been trending.

Mark J. Barrenechea: Paul, happily, thanks for being with us today. Two things. We're executing. I'll wind the tape back. We're experienced acquirers, experienced integrators. We had a vision around how to integrate the company and return it to organic growth, we're executing to it. It's fundamentals, right? We've released a product roadmap that's giving customers confidence. The confidence is back. We've integrated the renewals teams to the OpenText practices, the renewals practices. We've done our work with the field, where the field sells new. They don't sell renew. We've gotten our systems aligned. We ended fiscal 2023 with Micro Focus renewals in the mid-80s, up from the low 80s, we're on a trajectory to get the renewals to the high 80s this year. We've also announced our roadmap for the cloudification of Micro Focus.

Paul happily and thanks for being with US today, So two things.

Where executed.

We all wind the tape back.

We're experienced acquirers experienced integrators.

We had a vision around how to integrate the company and return it to organic growth and we're executing to it.

And its fundamentals right, we've released a product roadmap.

That's giving customers confidence and the confidence is back.

Great at the renewals teams to the open text practices.

Renewals practices.

We've done our work with the field, where the field says sells new they don't sell renew.

We've gotten our systems aligned.

And so we ended the.

We ended fiscal 'twenty three with micro focus renewals in the mid Eighty's up from the low Eighty's and we're on a trajectory to get the renewals to the high Eighty's This year.

And we've also announced our roadmap for the classification of micro focus we've delivered our first products and actually we announced the first linear right.

Mark J. Barrenechea: We've delivered our first products, actually, we announced our first win here, of BNP for ValueEdge in the cloud. You can see in the investor deck, 23.3, 23.4, 24.1, just a continued pace of more cloudification. Right? We transformed Documentum into the cloud. Right? We will transform Micro Focus into the cloud. It's those fundamentals that are giving us the confidence, plus the pipeline, plus our execution, that will return Micro Focus to organic growth this year. I'm gonna show you every quarter along the way in showing you the numbers.

BNP for value edge in.

The cloud and you can see in the investor deck.

$23 $323 424 that one just a continued pace of more clarification.

We transformed document them into the cloud we will transform micro focus into the cloud. So it's those fundamentals that are giving us the confidence plus the pipeline plus or execution.

That will return micro focus to organic growth this year and I'm going to show you every quarter along the way.

And showing you the numbers.

Paul Treiber: In regards to Aviator, you sound very excited about the opportunity there and the product. How do we think about sizing it? I know you're not giving it an outlook, but how do we compare it to some of the products you've had in the past? You've had Magellan in the past, you've had other large product launches in the past. How do we think about the magnitude in terms of the opportunity for Aviator?

And in regards to aviator.

Im very excited about the opportunity there in the product.

Do we think about size and I know you.

We're not giving it.

Outlook, but how do we compare it to some of the products you've had in the past that Magellan in the past.

Large part of launches in the past you know how do we think about the magnitude.

In terms of the opportunity for either.

Mark J. Barrenechea: Yeah, I'm not ready to put a TAM on it. All right? It's a fair question, but we're not ready to put a TAM on it. As I said in my remarks, I believe it to be a significant long-term opportunity. We're gonna go after it the OpenText way. Fundamental innovation. We're gonna deliver. We're gonna show you the signals along the way for sort of predicting those. We don't have any Aviator revenues built into our F24 model yet. I think it's gonna be relevant for every customer. It's gonna be an independent set of products. It's clear that what automation did for the enterprise, I'm gonna make the distinction, AI can do for the enterprise. You need automation, and the better the automation, the better the data. The better the data, the better the AI.

Yes, I'm not ready to put a Tam honor alright. So its fair question, we're not ready to put a tam on it.

But as I said in my remarks, I believe it to be.

A significant.

Inefficient long term opportunity and we're going to go after at the open text way.

Fundamental innovation when deliver we're going to we're going to show you. This.

Joe you the signals.

Along the way for sort of predicting those we don't have any aviator revenues built into our.

Any revenue built into our F 'twenty four model yet.

So.

I think it's going to be relevant for every customer is going to be a independent set of products.

It's clear that what automation did for the enterprise I'm going to make the distinction AI can do for the enterprise.

And you need automation.

And the better the automation the better the data the better the data the better the AI, we're extremely well positioned where we've been managing large datasets.

Mark J. Barrenechea: We're extremely well-positioned, where we've been managing large data sets for thousands of customers in content. We are well-positioned, where we've been managing billions of business network transactions. We're well-positioned, where we have the software and testing scripts in ADM. We're well-positioned in ITOM with IT assets. We're in the places where you can create value in the enterprise. The McKinsey report, I think, is great because Their AI report, they have a nice grid of the places of the enterprise that are gonna be impacted. You look up and to the right, it's the developer, it's content, and it's contracting. It's the things I've just mentioned. I'm not ready to put a TAM on it. Our products, our initial Aviators, will be available next quarter, be a showcase, obviously, in Vegas.

Thousands of customers and content, we are well positioned where we've been managing.

Billions of Av.

Business network transactions, we're well positioned where we have the <unk>.

Software and testing scripts in ADM, we're well positioned in <unk> with <unk>.

Asset so we're in the places where you can create value in the enterprise and there is a real even the Mckinsey report I think is great because it kind of there.

Their AI or where they have a nice grid of the places of the enterprise are going to be impacted you look up into the right. It's the developer is content contracting.

It's the things I've just mentioned, so I'm not ready to put a time on it.

Our products our initial aviators will.

Be available next quarter be a showcase obviously in Vegas.

Mark J. Barrenechea: We'll announce our pricing and spend a little more time talking about the TAM when the product comes to market next quarter.

And we will announce our pricing and spend more time talking about the Tam when the product comes to market next quarter.

Paul Treiber: Jim, just one last question from me. Just Madhu, in regards to tax, can you speak to the slope in the tax rate to 2026? Obviously, it's a big jump to mid-20% from 14%. Does that reflect what's driving that increase? Does it reflect the global minimum tax?

Paul Treiber: Just one last question from me. Just Madhu, in regards to tax, can you speak to the slope in the tax rate to 2026? Obviously, it's a big jump to mid-20% from 14%. Does that reflect what's driving that increase? Does it reflect the global minimum tax?

Just one last question for me.

I do.

Okay.

Can you speak to the slope and the tax rate to 26.

It's a big jump to mid 20%, 14%.

And then does that reflect what's driving that increase and is reflected the global minimum tax.

Madhu Ranganathan: Yeah. A few things. First of all, as we end up using up the Canadian attributes, and we've talked about this before towards the end of fiscal 2024, that plays a role in the creep up of the rates. You slap in Micro Focus in here. We're not talking about strategic tax initiatives. There's no immediate relief from the statutory tax rate. We're absolutely using the UK attributes of Micro Focus. Micro Focus is a taxpayer on the US front, and so is OpenText. Really the slope you're seeing is the utilization expiry of the Canadian attributes for OpenText and adding on the US tax attributes for Micro Focus. As I said, we will spend the next 12 to 18 months strategizing the next wave of tax optimization. That is not factored in the slope you're referring to.

Yeah. So a.

A few things.

First of all as we end up using up the Canadian attributes and we've talked about this before.

Towards the end of fiscal 2024 that plays a role in the creep up of that right now you slap in micro focus and here again, we're not talking about strategic tax initiatives.

Immediate.

Set of lead from the statutory tax rate with absolutely using the UK attributes of micro focus, but micro focus is a taxpayer on the U S front and so so as open text.

Really the slope, you're seeing is sort of the.

Utilization expiry of the Canadian attributes that open text and adding on the U S tax attributes for micro focus.

Again as I said, we will spend the next 12 to 18 months strategizing. The next wave of tax optimization.

But that is not factored into slow period setting too.

Paul Treiber: Okay. Thank you.

Okay. Thank you.

Madhu Ranganathan: Yeah. Thank you.

Okay. Thank you.

Operator: The next question comes from Stephanie Price of CIBC. Please go ahead.

The next question comes from Stephanie price of CIBC. Please go ahead.

Stephanie Price: Hi. Good afternoon. Thanks for.

Hi, good afternoon.

Mark J. Barrenechea: Hi, Stephanie. Welcome to the call.

Thanks, Stephanie and welcome to the call.

Stephanie Price: Thank you. Thanks for the additional details on the revenue from each of the divisions and the breakout between the different content management, security, et cetera. Just wanted to dig a little bit deeper into that. As you think about the mix of the different high-value businesses, as you look out into fiscal 2026 and beyond, which of the businesses do you see as growing above the company's typical growth rate, and where do you really see the most opportunity here out of the high-value businesses you've pointed out?

Thank you thanks for that.

Details on the revenue from each of the divisions and the breakout between the different content management security et cetera, just wanted to dig a little bit deeper into that if you think about the mix of the different high value businesses. If you look out into fiscal 'twenty, six and beyond which of the businesses do you see us growing above the company growth rate and where do you really see the most opportunity.

I'll be here right at the very high value businesses.

You pointed out.

Mark J. Barrenechea: Thanks, Stephanie. Thanks for the question. They each have their dynamics. Let me just start with, we promised to provide more visibility into each of the high-value businesses. On slide 17 of the investor presentation, you can see content at 45%, cybersecurity at 20%, application automation 10%, business network 15%, IT ops 5%, AI and analytics 5%. I'll not get down into growth rates for each one of them. I'm not going to do that today. We have clear opportunity in AI and analytics, as we've talked about today, just clear opportunity. IT operations management, I'm very pleased with private cloud and SaaS products that we're bringing to market. I think we have a significant opportunity there. Everyone needs cybersecurity. We've been talking about kind of winning each of these value stacks, right? Having select programs across all the value businesses.

Thanks, Stephanie Thanks for thanks for the question.

They each have their dynamics, let me just start with we promised to provide more visibility by into each of the two.

Each of the high value businesses on slide 17.

Of the Investor presentation, you can see content to 45% cyber security at 20% application automation, 10% business that were 15%.

<unk>, 5% AI and analytics, 5%.

I am not get down into growth rates for each one of them.

I'm not going to do that today.

But we have.

Clear opportunity in AI and analytics as we've talked about today just clear opportunity.

It operations management.

I am very pleased the private cloud and SaaS products that we're bringing to market I think we have.

Significant.

Opportunity there and everyone.

Need cyber security so are we.

<unk> been talking about kind of winning each of these value stack right and having select programs across all the value businesses cyber securities is an effort underway across all the value value businesses. So.

Mark J. Barrenechea: Cybersecurity is an effort underway across all the value businesses. As they say, I love all my children. They're each unique. AI and analytics, obviously significant opportunity. Very optimistic on IT ops. Cybersecurity, a deep opportunity. An interesting thing about AI. Again, you have automation, different than AI. For customers to take advantage of AI, they need to be on some cloud platform, private or public. They need to consolidate their automation, and then take advantage of that enriched data through AI. Therefore, I believe that content management has opportunity to continue to grow, because there's more automation and more consolidation into that.

As they say I love all my children.

Yeah.

They are each unique.

But AI and analytics, obviously significant opportunity.

Very optimistic on on ops cyber security deep opportunity.

An interesting thing about AI again, you have automation.

Different than AI.

And for customers to take advantage of AI.

They need to be.

On some cloud platform private or public.

Yes.

They need to consolidate their automation.

And then take advantage of that enrich data through AI.

And therefore, I believe that content management.

<unk> has a.

Has opportunity to continue to grow.

Because there's more automation and more consolidation into that.

Stephanie Price: Great. Thank you very much.

Yes.

Great. Thank you very much yeah. Thank you.

Mark J. Barrenechea: Yeah. Thank you.

Operator: The next question comes from Thanos Moschopoulos of BMO Capital Markets. Please go ahead.

Okay.

The next question comes from Santos with Scrubbers of BMO capital markets. Please go ahead.

Thanos Moschopoulos: Hi, good afternoon. Mark, can you update us on where you stand as far as sales integration? Have you started to see any early cross-selling or just early days on that front?

Hi, good afternoon.

Mark can you update us on where you stand as far as our sales integration and have you started to see any.

Early cross selling or its still early.

Early days on that front.

Mark J. Barrenechea: Yeah, we're complete, Thanos. Thanos, thank you for joining us today. Glad to have you on the call. We're kicked off 1 July. Salesforce fully integrated. Single global accounts team. We go to market by buyer. We've completed all our account assignments, singular comp plan. We're integrated. All that work was completed and implemented 1 July. We have a single Salesforce compensation system as well, as an example. We're complete. The second piece is on the select cross-selling. Again, security top of the list, IDOL top of the list as well. As part of our kickoff, which was just a couple of weeks ago, we laid out training for everybody. It is early days on the cross-selling, but we're really focused on two areas. It's security, and it's metadata and AI tools.

Yeah, We're we're complete Santos Santos. Thank you for joining us today I'd like to have you on the call.

Were kicked off July one salesforce.

Salesforce fully integrated.

Single global accounts team.

<unk>.

We go to market by.

Buyer.

We've completed all of our account assignments singular comp plan, where integrated and all that work.

Was completed and implemented.

July one we have a single.

Salesforce.

Compensation system as well.

As an example.

The areas. So we're complete.

The second piece.

Is.

The select.

Cross selling.

And again security top of the list.

It'll top of the list as well and so as part of our kick off which was just a couple of weeks ago.

We laid out training for everybody.

So it is early days on the cross selling but were really focused on two areas is security.

And it's a meta data and.

AI tools.

Thanos Moschopoulos: Great. As far as leveraging your OpenText channel partnerships with respect to the Micro Focus products, how's that progressing?

Great and then as far as leveraging your open text channel partnerships.

With respect to the micro products.

How's that progressing.

Yeah.

Okay.

Mark J. Barrenechea: Well, we're very focused on sort of the top of the pyramid, which we announced earlier this year, the next generation of our partner program, we now call it the OpenText Partner Network or OPN. Top of that pyramid are our top 10, Microsoft, Google, Amazon, SAP, Salesforce, DXC, Accenture, TCS, and a few others. That work is beginning to kind of speak holistically to Google, holistically to DXC, holistically to Accenture. Still early days, but we've done the work to say these are the top 10, and we're going to pick key opportunities in each of them. Let me take an example. We had a great partnership with Google at OpenText. We're going to work together on mainframe modernization, and moving more workloads into the Google Cloud. We had a great relationship with AWS hosting a lot of our SaaS products.

While we're very we're very focused on sort of the top of the pyramid, which we.

We announced.

Earlier this year.

The next generation of our partner program, we now call. It the open text partner network our Opn.

And on top of that pyramid, our top 10.

Microsoft.

Google.

Amazon.

S P.

Sales force.

<unk>.

Accenture, Tcs and and a few others.

So.

That work is beginning to kind of speak Holistically to Google.

I'll, just holistically to DXP holistically to.

To Accenture, so still early days.

But we've done the work to say these are the top 10.

And we're going to kind of pick key opportunities in and each of them I'll. Let me take an example, we had a great partnership with Google.

I'd open tax we're going to brand, we're going to work together on mainframe modernization.

And moving more workloads into into the into the Google Cloud, we had a great relationship with AWS hosting a lot of our SaaS products.

Mark J. Barrenechea: Again, bringing application automation into the AWS relationship. There's high synergies. We're focused on the top 10. The work's begun.

Again, bringing application automation.

Into the AWS relationship. So there's this high synergies we're focused on the top 10.

The work has begun.

Thanos Moschopoulos: Great. That's the line.

Operator: The next question comes from Adhir Kadwe of Eight Capital. Please go ahead.

Right Epsilon client.

Sure.

The next question comes from adherent Cosby of eight.

Capital. Please go ahead.

Adhir Kadwe: Hey, good evening, guys. Thanks for taking my question. I wanted to ask on the Aviator product as well. Can you just give us a sense of your conversations with customers, Mark? Are they excited for what this product could do for their business? Of course, we hear that these products are just going to increase productivity, but are customers ready to deploy these products? Just based on those conversations, how do you see adoption going for these customers as we move past the initial deployment in October?

Okay.

Hey, good evening guys. Thanks for taking my question I wanted to ask on the aviator product as well can you just give us a sense of your.

Issues with customers Mark are they excited for what this product can do for their business. I mean, we of course, we hear that these products are you just going to increase productivity, but are customers ready to deploy. These these these product and just based on those conversations how do you see adoption going for these customers as we move past the initial deployment in October .

Mark J. Barrenechea: Look, our early conversations informed us deeply. Just 90 days ago, we're talking about early conversations. 90 days later, we've announced Aviator, and we've announced Aviator Private Cloud. 90 days from now, we'll have our first Aviators in production, if you will, and with good deployments to a few customers as well. These are our initial strategies, if you will. We're also going to build a practice area. When I speak about Aviator Private Cloud, we have a couple of very unique things that we can bring to market here. We obviously have our tools, IDOL, Vertica, Magellan, unique. We don't have to go out and kind of rent those tools for others. We own them. The second unique thing is our managed services, our private cloud. Customers want to be able to use their data privately, securely.

Yes, so I'll look our early conversations informed us deeply and just 90 days ago right. We're talking about early conversations 90 days later, we've announced aviator.

And we've announced aviator private cloud.

90 days from now we will have our our first.

Aviators in production, if you will and with.

Good deployments are a few customers as well.

So.

These are our initial strategies.

If you will we're also going to build a practice area. So.

So when I speak about aviator private cloud <unk>.

So we've done.

We have a couple of very unique things that we can bring to market here.

We obviously have our tools.

Idle vertical Magellan unique we don't have to go out and.

Kind of rent those tools.

For others.

We own the second unique thing.

As our managed services, our private cloud our customers want to be able to use their data privately securely.

Mark J. Barrenechea: Aviator Private Cloud is a strong avenue for our customers already in our private cloud or want to move to our private cloud to use their data privately and train their data privately and not bring it into some public domain. We're going to build a practice area around this. Just like we have practice areas in business network, practice areas in content, we're going to have practice areas in AI and in language models. It's early days. We've announced the initial vision and direction. Next set of products coming next quarter, and we'll keep you updated along the way.

So aviator private cloud.

<unk> is a strong avenue for our for our customers already in a private cloud or want to move to a private cloud to use their data privately and train their data privately and not bring it into some some some public domain. So we're going to build a practice area around this just like we have practice areas in business that.

Work practice areas in content, we're going to practice areas in AI and in language models.

So it's early days.

We've announced the initial vision and direction.

Next set of products coming next quarter.

We will keep you updated along the way.

Adhir Kadwe: Thanks, Mark. Just for my second question, to piggyback on Thanos' question, some of those early Micro Focus customers that you onboarded early post the acquisition. Now that they've had a chance to really experience the combined company, the combined offerings that we've spoken about over the past two quarters, what's their initial feedback? Do you find that those initial synergies that you had envisioned are kind of playing out? Of course, I understand early days for that, but just some initial thoughts on that would be great. Thank you.

Thanks, Marc just for my second question to piggyback on <unk> question. Some of the early some of the early microfocus customers that you onboard it early.

Post the acquisition.

Now that they've had a chance to really experience the combined company. The combined offerings that we've spoken about over the past two quarters whats. The initial feedback and do you find that those initial synergies that you had envisioned are kind of playing out of course I understand early days for that but just some initial thoughts on that would be great. Thank you.

Mark J. Barrenechea: Returning them to organic growth this year. Maybe just to reiterate, confidence is back. Roadmap published. All the key aspects of the integration complete. Cloudification's begun. Renewal rates up to mid-80s. Pathway to high 80s. Initial wins in the cloud. The pace of innovations. You can see some of the Aviators being square in the middle of Micro Focus product lines and accelerating a Micro Focus to organic growth this year. Those are the indicators. Don't know much more to add to that, but those are the indicators.

We're turning them to our organic growth this year.

So.

We.

Maybe just to reiterate.

Confidence is back.

Roadmap published all of the key aspects of the integration complete.

Classifications begun renewal rates up to mid Eighty's.

Pathway to high Eighty's.

Initial wins in the cloud.

And <unk>.

And the pace of innovation.

You can see some of the aviators being square in the middle.

Of micro focused product lines and accelerating a micro focus to organic growth this year.

So those are the indicators right.

And.

Hum.

Not much more to add to that but those are the indicators.

Yes.

Adhir Kadwe: Thanks, guys. I'll pass along.

Thanks, guys I'll pass along.

Thanos Moschopoulos: Thank you.

Mark J. Barrenechea: Thank you.

Thanos Moschopoulos: Thank you.

Thank you. Thank you.

Operator: The next question comes from Raimo Lenschow of Barclays. Please go ahead.

The next question comes from Raimo <unk> of Barclays. Please go ahead.

Jeremy: Great. Thank you. This is Jeremy on for Raimo. I was just wondering if you could share anything on how the Micro Focus free cash flow conversion is trending. I know that that was a point of opportunity when the acquisition closed, and was just curious if you can maybe talk about any improvement there. Thank you.

Operator: Great. Thank you. This is Jeremy on for Raimo. I was just wondering if you could share anything on how the Micro Focus free cash flow conversion is trending. I know that that was a point of opportunity when the acquisition closed, and was just curious if you can maybe talk about any improvement there. Thank you.

Great. Thank you this is Jeremy on for Raimo.

Just wondering if you could share anything on how the micro focus free cash flow conversion is trending.

That was the point of opportunity when the acquisition closed.

And was just curious if you can maybe talk about any improvement there. Thank you.

Madhu Ranganathan: Yeah, absolutely. It's Madhu here. Thanks for the question. A couple things. One, as we've shared, I'll start with adjusted EBITDA. The adjusted EBITDA in Q4 was 28%, up 5 percentage points, although Q3 was only 2 months. Fundamentally, the question was asked in terms of integration and even what are the reasons therefore. I will take all that Mark said in terms of product market customers to the working capital and the operational side, right? They have a strong customer base, and as we applied our own operational rigor, the team were very receptive, and you saw that. I would say starting with adjusted EBITDA, we improved the working capital, and that is really where you see from a free cash flow perspective, they positively contributed.

Yeah, absolutely. Thanks for the question. So a couple of things one is we've shed I'll start with adjusted EBITDA and adjusted EBITDA in Q4 was 28% up five percentage points from although Q3 was only three two months and also fundamentally the question was asked in terms of integration and.

Wed now like what are the reasons. Therefore, I will take all of that Mark set in terms of product market customers to the working capital in the operational side. They have a strong customer base and as we applied our own operational rigor. The team were very receptive and you saw that.

So I would say starting with adjusted EBITDA improved working capital and that is really where you see from a free cash flow perspective, they positively contributed.

Madhu Ranganathan: Again, I'll answer the question, the second part as well, as we look into fiscal 2024, what we saw the adjusted EBITDA in Q4 will continue, and I see continued improvement in the working capital performance. All of that adds to our confidence in the $800 to 900 million for 2024.

So again I'll answer the question the second part as well as you look into fiscal 'twenty four what we saw the adjusted EBITDA in Q4 will continue.

I see continued improvement in the working capital performance and all of that adds to our confidence in the 800 to 900 million for 'twenty four.

Mark J. Barrenechea: Perfect. Thank you.

Perfect. Thank you.

Operator: The next question comes from Steven Li of Raymond James. Please go ahead.

The next question comes from Steven Li of Raymond James. Please go ahead.

Steven Li: Thank you. Hey, Mark, Madhu. I got a quick one on organic growth in Q4. If I take the $602 from Micro Focus out of Q4, I get a slight negative organic growth for Q4 for OpenText at constant currency. Given this is Q4, which seasonally probably a stronger quarter for you guys, should we not have seen a stronger organic performance? Maybe any soft areas you want to call out, Mark?

Thank you Hey, Mark Madhu.

I've got a quick one on organic growth in Q4.

If I take the $6 two from micro focus out of Q4, I get the slight negative organic growth for Q4 for open text at constant currency.

Given this is Q4, which seasonally appropriate a stronger quarter for you guys.

We don't have seen a stronger organic performance.

Any sort of areas you want to call out.

Madhu Ranganathan: Yeah. Steven, I'll take that. When you look at Q4 and you take out Micro Focus, we are not seeing the negative organic growth. We are seeing positive organic growth as I shared. Happy to walk through the numbers if it'll be helpful, but the numbers are all there. I'll just say for Q4, when you factor in Micro Focus, we are positively growing organic growth, cloud, as well as ARR in constant currency. Again, I want to emphasize that.

Yes, so Stephen I'll take that so when you look at Q4 and you take out.

Microphone, because we are not seeing negative organic growth, we are seeing positive organic growth as I shared and happy to walk through the numbers I mean, if it would be helpful. But the numbers at all there. So I'll just say for Q4 than.

When you factor in micro focus we are positively growing.

Organic growth cloud as well as they are in constant currency again, I want to emphasize that.

Steven Li: Okay. Yeah, I'm just taking the reported numbers and $ -602, and it's lower than last year.

Okay.

Yes, I mean, I'm, just taking the reported numbers and minus six or two and it's lower than last year.

Madhu Ranganathan: Yeah. When you take out the 602, again, as you see license from a constant currency perspective, is down from a year over year in the quarter. Cloud is positive organic growth, customer support is positive organic growth, ARR is positive organic growth as well.

Yes, so when you take out the 600 to again as you see license from a constant currency perspective is down from a from a from a year over year in the quarter and cloud is positive organic growth customer support is positive organic growth.

<unk> is positive organic growth as well.

Steven Li: Okay. Just maybe housekeeping, Madhu. I couldn't try reading the MD&A, did you actually disclose Micro Focus different revenue lines like license maintenance and PS? I think you did that last quarter. Thanks.

Okay. Okay, and then just maybe a housekeeping do I couldnt try need in the MD&A, but did you actually disclosed micro focus.

Different revenue lines like license maintenance NPS I think it did that last quarter.

Madhu Ranganathan: Yes, we did. I can share with you offline the page number of the 10-K. We did call out the license. We also called out the customer support in a number for Micro Focus as well.

Yes, we did.

I can I can share with you offline the patient out of the 10-K, we did call out.

<unk> services.

I am sorry, we call that the license we also called out the customer support in a number for micro focus as well.

Steven Li: Okay. I'll get it offline from you. Thanks.

Okay, I will get into that timeframe you. Thanks, yes, absolutely. Thank you.

Madhu Ranganathan: Okay. Absolutely. Thank you.

Operator: The next question comes from Daniel Chan of TD Cowen. Please go ahead.

The next question comes from Daniel Chan of TD Cowen. Please go ahead.

Yeah.

Mark J. Barrenechea: Hello, Dan?

Hello, Dan.

Okay.

Operator: Daniel, your line is open. Please go ahead. Daniel Chan, your line is open. Please go ahead.

Daniel Your line is open. Please go ahead.

Okay.

Daniel Chen Your line is open. Please go ahead.

Yes.

Mark J. Barrenechea: Okay, operator. There must be something not working there. I think let me go to wrap up. I'd like to thank everyone for joining today's call, and we look forward to seeing you at the Virtual Oppenheimer Technology Internet and Communications Conference on 9 August, Deutsche Bank, 30 August, Citibank Global Technology, 7 September. We'll be reaching out and hope you can join us in Vegas at OpenText World in early October. Thanks for joining today's call.

Okay, operator, there must be something.

Not working there so I think we can go to.

Let me go to let me go to wrap up.

So I'd like to thank everyone for joining today's call and we look forward to seeing you at the virtual Oppenheimer technology Internet and Communications Conference on August nine Deutsche Bank August 30th Citibank, a global technology September seven and well.

We'll be reaching out and hope you can join us in Vegas at open text World in early October .

Thanks for joining today's call.

Operator: This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.

This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.

Yeah.

Okay.

[music].

Okay.

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