Q2 2025 Open Text Corp Earnings Call
Thank you for standing by this is the conference operator welcome to the open text Corporation second quarter fiscal 2025 financial results Conference call.
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Speaker Change: I would now like to turn the conference over to Greg Secord head of Investor Relations. Please go ahead.
Speaker Change: Thank you and good afternoon, everyone and welcome to Alphatec <unk> second quarter fiscal 2025 earnings call with me on the call. Today are open text, Chief Executive Officer, and Chief Technology Officer, Mark J bearing check open texts, President and Chief Financial Officer, and leader of corporate development, Madhu, recognizing and joining us for today's Q&A session.
Tatyana: Our open texts president of worldwide sales Tatyana.
Speaker Change: Open text, President and Chief customer Officer, Paul do it.
Doug excuse me today's call is being webcast live and recorded with a replay available. Shortly thereafter on the open text Investor Relations website, which is investors don't open text dot com.
Speaker Change: Earlier today, we posted a press release on our website, including our investor presentation of supplemental RP O a disclosure and all of those are available on the open text Investor Relations website open text will be participating in the following upcoming investor conferences and Susquehanna.
Speaker Change: Group on February 28, which is a virtual conference.
Speaker Change: Morgan Stanley Technology Conference on March 3rd in San Francisco, where I'll be joined by the group.
Speaker Change: And the Scotiabank Telecom media and Technology Conference on Wednesday March 5th in Toronto also be joined by Purdue.
Speaker Change: And now onto the reading of our Safe Harbor statement during.
Speaker Change: During this call we will be making forward looking statements relating to the future performance of open text. These statements are based on our current expectations assumptions and other material factors that are subject to risks and uncertainties and actual results could differ materially from the forward looking statements made today additional information.
Speaker Change: Information about the material factors that could cause actual results to differ materially from such forward looking statements as well as risk factors that may impact future performance results of open text are contained in open text recent forms 10-K, and 10-Q as well as in our press releases that our press release that was distributed earlier today and may be found.
Speaker Change: 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 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 again are available.
Mark: On our website and with that I'll hand, the call over to Mark.
Mark: Thank you, Greg and welcome to our Q2 earnings call.
Mark: That's the Microfocus acquisition the M C divestiture I've been focused on getting our business model right and building a solid operating foundation to support our full growth potential.
Mark: Post AMC divestiture, our number one priority was margin.
Mark: And with our first half performance and a strong Q2 operating results we've delivered.
Mark: Now, we're ready to make growth our new number one priority.
Mark: Today, I'm going to provide insight into a large growth opportunity outlined some of our challenges that are in focused areas provide insight into our revised F. 'twenty outlook as well provide expanded and new insights into our P. L. In cloud ERP O and overall, you'll notice the new style and approach the communications today.
Mark: We look forward to your continued feedback as we build the market leading information management company.
In Q2, we delivered $501 million of adjusted EBITDA dollars or 37, 6% adjusted EBITDA margin.
Mark: 307 million of free cash flow.
Mark: <unk> 11 of adjusted EPS each of these metrics up significantly excluding AMC.
Mark: We grow quarter over quarter cash to 1.12 billion.
Mark: Within the quarter, we purchased and retired $2 2 million shares at an average price of $29.82 and over the last three quarters, we deployed approximately $300 million in cash.
Mark: And purchased and retired 10 million shares at an average price of $33.30 USD.
Mark: Expect us to continue to implement our current buyback program and reduce our shares outstanding.
Mark: On revenue, we delivered 1.33 billion down four 9%, excluding AMC cloud revenues grew two 7% and we closed 250 million of new class a cloud contract value. This is a record quarter of customer demand for cloud or new bookings with six 1% year over year growth.
Mark: Further in January we compete we completed the significant transition services agreement with rocket software related to our 2.28 billion dollar acquisition of AMC, which is closed last year in may of 'twenty 'twenty four I'm proud of the team for their amazing work over the last eight months as they performed with excellence and professor.
Mark: <unk>.
Mark: Stitcher with complex and time consuming it is now complete and we have a new corporate muscle.
Mark: These are all important contributors to our long term success, but let me be clear we.
Mark: We are steadfastly focused on our growth performance as our new number one priority.
Mark: Q2, reaffirms that the world's most trusted companies Trust open text as demonstrated by new wins at Bosch for legal Tech S. T micro for the developer B a S. S. Using our business network of global supply chain Novo Nordisk for observer ability and service management and TWC Qatar.
Mark: Our content.
Mark: We went for three core reasons, we are the experts in information management provides exceptional transformative value to our customers.
Mark: We always deliver.
Mark: And a compelling roadmap across our market areas inclusive of cloud security and AI, Let me turn to our growth opportunity.
Mark: We're surrounded with opportunity and we're focused on intelligently growing our business and driving higher profits from these higher revenues.
Mark: Returning to organic growth will happen in three steps first total company growth.
Mark: Second cloud grows faster and three maintenance grows.
Mark: Let me walk through our top growth opportunities in key areas, we are looking to outperform in the.
Mark: The first is in our install base, we have a marquee install base with 120000 enterprise customers will.
Mark: We will complete next quarter the delivery of titanium XO cloud editions twenty-five dot two we view each customer that's an opportunity to upgrade the titanium X. We expect to upgrade customers in place upgrade them to the cloud and expand capabilities wherever they run their workflows, if they choose not to upgrade their support.
Mark: Fees will gradually rise overtime.
Mark: This is a multiyear opportunity for us in our installed base.
Mark: Next we have a hot hand with content and AI that creates intelligent content management secure collaboration and automated workflows Saxony I, our core drivers to the to continue our growth in this key category, where we look to outperform we had large SaaS wins last quarter.
Speaker Change: P S F Oldie Munich re.
Speaker Change: The third is investing in our security business to be a top category for open text.
Speaker Change: Louis Mazuch has taken on a new role to solely focused on security.
Speaker Change: Our new security cloud spans identity application networks forensics and soon xdr.
Speaker Change: This is our ability to ingest detect and respond on a massively scaled vertical the vertical database combined with our new partnership with Microsoft Security Copilot and all hosted on Azure puts us in a key position to win and Xdr, We had amazing SaaS wins in the quarter, Nestle and fortify code level secure.
Speaker Change: Frost Bank and bolted transaction encryption and cap Gemini for identity management, we have turned around the micra focused security business.
Speaker Change: Our growth strategy also means embedding AI everywhere to empower knowledge workers just significantly raised their productivity.
Speaker Change: Titanium X we have we will have in market 15, aviators and over 100 agents.
Speaker Change: Titanium X we are working on agenda across all our product lines and create a new type of corporate worker well the digital worker.
Speaker Change: Aviators worked with titanium ex till the next wave for AI is upgrading customers to titanium X.
Speaker Change: We are also still very much in the license business. This is a meaningful mechanism for customers to own not subscribe to our information management capabilities.
Speaker Change: Speaking a moment to the grants of certain IP rights from last year.
Speaker Change: Excluding these grants from last year, our license business will grow this fiscal year.
Speaker Change: We introduced in January a new mechanism for customers to own our technology via a license we call. It the open path Hello, a perpetual end user license agreement they.
Speaker Change: The open text pillar is an uplift on existing license and maintenance, allowing the customer to remove limits on their usage wallen active support. In addition, these customers gain cloud credits for future consumption, that's providing an additional incentive to purchase the open past.
Speaker Change: License and maintenance growth are intrinsically related it's important to note that while our core maintenance business continues to return impressive results. The Italian ATM areas are not growing this year due to the license performance.
Speaker Change: With this our total maintenance revenue growth rate will be negative this year.
Speaker Change: A return to total maintenance growth is centered on three programs.
Speaker Change: Execution on a P E and premium services to sell more licenses, including Italian ATM and open pass and three new advanced customer services. Our Acs. We're focused on growth. We were we will return to growth and we will update you on our year end call. Paul Duggan is on the call today to answer any.
Speaker Change: <unk> you may have about our growth plans and the next steps in the business.
Speaker Change: Our next top growth opportunity is getting our ADM and <unk> business is performing better get them to their best including their cloud growth.
Berry: These areas have been holding back our growth, but impacting our license and maintenance revenues as noted above our new Chief product Officer, 78, Berry, who we joined open tax from Ericsson advantage will be laser focused here.
Berry: Walk you through our actions and confidence of returning these two group the group's to overall growth on icon with a titanium X we are differentiated and observe ability.
Berry: Which includes discovery assets vulnerabilities and <unk> and it service management, where we're expanding our corporate service management, we plan to relaunch and Reengage, our 5000 customers with our new Absorbability cloud a new service management cloud conjunctive with ramping sales go to market and professional services.
Berry: The next leg of item growth will be driven by expanding outside of traditional it workflows into employee workflows customer and industry workflows in the emerging <unk>.
Berry: And operational workflows on.
Berry: On the ATM side, we have Reoriented, our go to market strategy as a top of market focus.
Berry: M is differentiate it not for single developer before large scale organizations, who are writing software. This is a really good place to be as we are all software companies today.
Berry: Our top industry focus includes software and cloud companies financial services Auto teller.
Berry: Telecommunications biotech and more with this new strategy and with titanium X. We have two key SaaS wins already in Q2 at Pfizer and Lilly.
Berry: I am confident we'll return to growth with titanium SaaS AI and our top of market focus. We're also life internally across 10000 engineers for requirements management productivity insight lease management and quality, we took all our requirements and put them in the product and now thats part of titanium X.
Berry: I find when you can run the software yourself and gained value you build strong momentum from there.
Berry: Next growth opportunity continues to be with our Hyperscale partners, who play an expanded role in our cloud growth real simple, Microsoft we've decided to bring our xdr to market honest, you're an integrated with Microsoft Security co pilot, our new SaaS platform and our new sovereign capabilities run on G. C. P.
Berry: Our private cloud runs across all of the hyperscale or as for customer choice with AWS, <unk> Azure or S. P products run in the cloud and across all Hyperscale.
Berry: And as I said at open text World, we make multi cloud work and these partnerships will contribute markedly and.
Berry: And finally in addition to all these organic programs, we will continue to evaluate strategic opportunities to create value and increase our growth rate through divestitures or combinations let.
Berry: Let me turn to RPM.
Berry: With gross growth as our new number one priority I want to present, our new RP O disclosures in new cloud <unk> metric that will provide insight into our cloud growth overtime. There are two strategic points I'd like to make and then Madhu will go into the detail.
Madhu: We are now providing further insight into our appeal, both for cloud and maintenance both current and non current.
Madhu: As you can see from ending Q2 cloud <unk> was $2 3 billion and larger than our maintenance our appeal at $1 8 billion.
Madhu: Please note. This is now for the entirety of our cloud business and fully includes enterprise and SMB, There's no more asterix on our disclosure, including that's not including this this is our full cloud business.
Madhu: Second we're also introducing a new metric cloud C. R. P L and what flows in and what flows out in it.
Madhu: Common sense formula to calculate the change in cloud ERP all from our beginning period, two and ending period. We also included an example contract waterfall fall, we designed dark disclosure after reviewing market, leading cloud companies, including SAP and Salesforce and <unk>.
Madhu: Course, we welcomed European do we welcome your continued feedback to improve even more.
Madhu: Now we're also including periods ending June 30th 24 September 30th 24 at December 31, 24, and will provide these new disclosures every quarter going forward and when we complete this fiscal year. You can then begin to gain further insight by tracking year over year Cloud C. R. P. L compares and growth. So we thought it was a.
Madhu: Good time to provide a deeper insight into our appeal I mean move onto our financial targets and turn to our updated F. 'twenty five targets, we're revising our revenue downward by $130 million to a range of $5 175.17 billion to $5 two 7 billion.
Madhu: The $130 million is broken out approximately 25% FX.
Madhu: 25% D M D X C impacting license and maintenance and 50% from icon and ADM performance impacting license and maintenance.
Madhu: Turning to slide nine to our Investor presentation provide detailed insight into the $130 million now conjunctive with this our cloud revenue range is unchanged. Our adjusted EBITDA percent target is unchanged, our new cloud bookings growth range is 20% to 25% representing a very strong second half and momentum.
Madhu: [noise] into 26, we're raising our free cash flow range to $600 million to $650 million. We're on track to delivering 570 million plus a record capital return to shareholders. This year through dividends and buybacks and our F. 'twenty six and longer term aspirations remain unchanged in our next update on a longer term view will be.
Madhu: On our year end call.
Madhu: Like all businesses, we are monitoring the impacts of tariffs currency and the transactional nature of U S policy. All of these items are creating some business uncertainty.
Madhu: Let me turn to <unk> for a moment, it's well chronicled that HP <unk> and micro focus had a strategic relationship with <unk> was a major reseller and consumer of HPE and Microfocus software.
Madhu: In Q2, the long life Microfocus Alliance agreement with <unk> has now run its course and.
Madhu: And that reflects the end of an unlimited deployment model with Dx seat in Q2.
Madhu: And we did not come to a mutually beneficial new agreement.
Madhu: This ending as it is the best outcome in the long run for open text as we're able to establish now full value for software engage customers directly however, the near term it creates some headwinds for renewals and maintenance revenue in the second half of the year second half of fiscal 'twenty five more importantly, it positions us for success in 26, which is <unk>.
Madhu: Both DSD remains partner and we hope to build a forward looking partnership from here.
Madhu: As we discussed during our last earnings call Q2, and F. 'twenty five are difficult year over year comparisons.
Madhu: Please recall in fiscal 'twenty four we disclosed license revenue primarily from inclusion of Microfocus and grants.
Madhu: Certain IP rights this was particularly called out within Q2 and Q3 of last year.
Madhu: Can you give a really important perspective, you really important when you're looking at the core health of our business and the foundation. We are building on our four growth as our new number one priority excluding AMC.
Madhu: Excluding license revenue from grants of certain IP rights, excluding the FX impacts our F. 'twenty five year over year revenue growth would be constant not declining.
Madhu: Excluding the second half the impact would be growing.
Madhu: And further and very important we expect the company to return to bright line organic growth in Q4 Hope you find this insight helpful.
Madhu: Let me wrap up with some qualitative comments as we look over the remainder of fiscal 'twenty five.
Madhu: The AMC divestiture margin was clearly our number one priority with our first half results.
Madhu: And our Q2 delivery we have delivered now.
Madhu: Now that we've delivered we're setting a new number one priority which is growth.
Madhu: We have our business model right and our operating foundation strong and with a Q2 adjusted EBITDA of 37, 6% 307 million free cash flow and raising our free cash flow outlook for the year.
Madhu: Our growth challenges are in focused areas and we have a clear plan to resolve them in the short term with a more focused leadership team. We expect Q4 to have bright line total revenue growth and this sets us up for a successful F. 'twenty six we're excited about the opportunity of growth in titanium content security AI SaaS.
Madhu: Getting item at ADM towards that improved sales.
Madhu: Sales execution open path for license advanced customer services for maintenance, all expanding our competitive advantage.
Madhu: I'd also like to note that near 60% of our businesses in the U S and the New administration is focused on pro growth initiatives and investments like SMB and expanding manufacturing. We're excited about these pro growth opportunities ahead of us in the United States.
Madhu: <unk> plus competitive vantage plus margin and free cash flow expansion plus capital return as he open texts formula for creating exceptional shareholder value.
Madhu: You asked for more transparency and to the exceptional items and our cloud. So I hope you find the deeper insights helpful. Today, you have my full commitment to continue this style of communication.
Madhu: So let me end with we're making progress. So you should team is focused and we will not rest nor will be satisfied until we deliver total growth.
Speaker Change: Cloud growing faster come back to maintenance growth, so with that let me turn the call over to Mr.
Speaker Change: Thank you Mark and thank you all for joining US today, please refer to the IR materials posted on our website in.
Speaker Change: In Q2, we demonstrated the strength of our operating model delivering 37, 6% adjusted EBITDA, a significant achievement and that reflects that operational efficiency as a larger company. Today I will also present expanded disclosures and new metrics relating to our P. O N C. I P O.
Speaker Change: Specific instances I will provide year over year comparison, excluding the impact of AMC divestiture.
Speaker Change: And moving to financials metrics GAAP net income was $229 9 million or <unk> 87 cents diluted EPS non.
Speaker Change: non-GAAP diluted EPS was $1.11 down 10, 5% due to the impact of AMC divestiture.
Speaker Change: GAAP gross margin of 73, 3% was down from 73, 6% year over year.
Speaker Change: non-GAAP gross margin of 77, 2% compared to 78, 6% due to higher margin license revenue in the prior year from AMC and IP rights now.
Speaker Change: non-GAAP cloud gross margin was strong at 63, 2%.
Speaker Change: Justice EBITDA of $501 5 million or 37, 6% and continues to reflect our extreme operational focus to capture a large margin opportunity operating cash flows of $348 million and free cash flows of $306 7 million Dsos at 43 days, one day higher than 42.
Speaker Change: Two days from last quarter and down four days from Q2 last year at 47 days and that reflects the strength of our working capital and what is seasonally the highest billing quarter for us.
Speaker Change: Now moving to outlook first let me draw your attention to our Q3 quarterly factors included in slide 12 of our Investor presentation. We expect 126 billion to $1 3 billion of total revenue and <unk> at a 1.025 billion to 1.045 billion with targeting Q3 of <unk>.
Speaker Change: And EBITDA margin of 29% to 30% and let me recall that while our fiscal year ending June 30th January of each year starts the clock for employee Saturday uplift the higher benefits and vacation accruals to note. Our total spend in Q3 would be approximately 8% higher on a quarter over quarter basis.
Speaker Change: Due to the factors I, just noted yet 3% lower on a year over year as we continue to optimize that expense model.
Speaker Change: Mark just provided you with insight into our updated fiscal 'twenty five outlook and that that is a clear path ahead to address our near term challenges we remain on target for our fiscal 2025, adjusted EBITDA target of 33% to 34% and have increased our free cash flow range to 600 to 650 million fully yet.
Speaker Change: Now, let me offer more details on our expanded disclosures relating to RPM.
Speaker Change: Please refer to supplemental materials on our IR website, which includes an expanded disclosures to be that alongside our Form 10-Q page 13 of the filing today.
Speaker Change: You will see total RPM, a full point 1 billion, including cloud, our appeals $2 3 billion and customer support and maintenance and other IPO 1.8 million for cloud current C. R. P. L is a new metric the percentage to be recognized for the next 12 months is approximately 50%.
Speaker Change: The remainder is the balance beyond 12 months.
Speaker Change: We want to provide additional insights and sharing two numbers relating to cloud revenue in any given 12 months.
Speaker Change: Approximately 60% of the cloud revenue arises from CRT or current thought to your balance and remainder of the 40% is contributed in year by revenue from India in your business.
Speaker Change: When you from India, the noodles and do referred to our strong cloud renewal rates there.
Speaker Change: Revenues from India, Uncommitted business, which include business not in committed contracts.
Speaker Change: And contracts more aligned to consumption models like our business network.
Speaker Change: Page four of our supplemental materials for details on cloud CRT Your model and a cloud contract example on pages five and eight.
Speaker Change: Our enterprise cloud bookings 250 million for Q2 flow completely into the cloud IPO balances and only the current portion of those bookings flow into see IPO.
Speaker Change: For customer support the percentage to be recognized for the next 12 months is 17, 9% given the predominantly annual nature of the support contracts and ratable revenue recognition.
Speaker Change: Feel balances can fluctuate from quarter to quarter, we are a global company operating in multiple industries and verticals and seasonality is inherent in our business calendar year end and our fiscal fourth quarter June was generally see stronger bookings.
Speaker Change: In summary, I would like to close with our previously communicated full point strategy to create shareholder value as we continue to accelerate cloud growth capturing the large margin opportunity and casually expansions remain front and center alongside disciplined capital allocation all enabled by the open text business system.
Speaker Change: Our strong operational improvements during the last two fiscal years are paying off. These efforts continued in Q2, posting 37, 6% adjusted EBITDA margin in Q2, our free cash flow and working capital performance in Q2 was driven by strong cost controls and and and leveraging timely in advanced billing supported by steadfast collections.
Speaker Change: Turning to the dividend program. The board of directors declared a quarterly cash dividend to <unk> 26 to five cents per common share. The record date for this dividend is March seven 2025, and the payment date is March 21st 2025, we continue to be on track to deliver approximately $570 million of capital.
Speaker Change: Our dividend and share buyback programs this fiscal year.
Speaker Change: I'll close with a few areas relating to operational initiatives, but the deep lengths again into margin and cash flow expansion expanding cloud profitability by addressing our fixed data center space, optimizing cloud infrastructure vendor contracts and customer level cost structures, and hyperscale or cost containment all will continue to benefit.
Speaker Change: Our cloud gross margin.
Speaker Change: Our next wave of high value use of AI internally are in full motion in Samsung R&D.
Speaker Change: Type C on who is with US today and can certainly take your questions. Todd has rolled out programs towards consistency and elevating sales accidents. This would improve sales productivity, while giving us operating leverage we continue to expand our centers of excellence given the incredible talent and capabilities.
Speaker Change: Classical shifts to the centers of excellence has a strategic focus to ensure those and regions are optimized.
Speaker Change: In terms of investments our plan includes investments in marketing for demand generation sales University for enablement and training new sales leadership in content cyber in legal tech all to drive our go to market initiatives.
Speaker Change: We remain well positioned for return to growth in Q4 fiscal 'twenty five to expand margins and cash flows to deliver a strong fiscal 2025 and setting us up for even greater success in future years.
Speaker Change: On behalf of open tax I would like to thank our shareholders our loyal customers and partners. We have continued to support a big Thank you to the fellow team members at open text.
Speaker Change: Unwavering commitment to drive greater themselves I will now request the operator to open the call for your questions.
Thank you well now begin the analyst question and answer session analysts who wish to ask a question Press Star then one on their touchtone telephone to join the question queue.
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Speaker Change: That's one.
Speaker Change: Anyone who has a question that May press Star then one at this time.
Speaker Change: Our first question is from Raimo <unk> with Barclays. Please go ahead.
Speaker Change: Perfect. Thank you.
Speaker Change: Brad on the extra cost.
Speaker Change: Cause closer I'm really looking forward to kind of digging into that.
Speaker Change: One one area that is obviously, helping you or not helping you is kind of for the economy.
Speaker Change: Can you kind of talk a little bit about what you saw in the quarter.
Speaker Change: What's your sort of the different regions that would be great start plus thank you.
Speaker Change: Yeah, Thanks, Raimo and thanks, and thanks for the comments were were excited to provide that increased.
Speaker Change: Visibility and you have my commitment to continue that style of communications look I think our around around the globe are the only area at shot out as Europe and and growth is is it's hard in Europe right now.
Speaker Change: But we are in very good industries were and a strategic manufacturing were in communications, where deep with governments and that's really only macro area that I I would shout out we're quite excited about the pro pro a growth American investment.
Initiatives happening in SMB and U S based manufacturing and there's no doubt that currency are the new New U S administration is focused on the U S currency, which is creating FX challenges for everyone Who's a global business, we are not subject to tariffs.
Speaker Change: As a digital company, we will see where that progresses over time, but it's really on physical goods.
Speaker Change: Not not digital services.
Speaker Change: And that just creates some uncertainty for others actually we're here to help customers to <unk>.
Speaker Change: About moving manufacturing or supply chains to kind of you know right balanced their portfolios. So we're not subject to the tariffs we're helping customers.
Speaker Change: We're excited about the pro growth investments in the U S. But I'd say growth in Europe is a is as elusive right now, but I like the industries we're in.
Speaker Change: Perfect. Thank you and I have one follow up.
Speaker Change: Talk a lot about them.
Speaker Change: I had one follow up Mike you talked a lot about like item and you made mention of suitability I T. S M et cetera, but the one question I get a lot from U S. Investors is around like how should we think about you were in the market because obviously that was like it was a service now on the idea of semi Tom side, there's like the gods.
Speaker Change: Guys out there like how where do you think you kind of play and where do you win thank you and congrats from me.
Speaker Change: Yeah. Thank you well I like very much the Oh, that's why I highlight it we want to outperform in key categories.
Speaker Change: And the three key categories, our content security and what we'd call I'd. Tom today. So if you think of our ability to discover a company.
Through observer ability and monitor it be able to manage all its unstructured content intelligent content collaboration and workflows that on top of that have our own packaged staff not just for it service.
Speaker Change: Service management, but for HR help desk for supply chain help desk.
Speaker Change: Corporate employee experiences.
Speaker Change: I think we're very well positioned.
Speaker Change: And that core stack to.
Speaker Change: Out compete and outperform so expect us to focus on observer ability and service management being real focused in those two areas.
Speaker Change: But combined with security and combined with our strength in content.
Speaker Change: Okay. Thank you.
Speaker Change: The next question is from <unk>.
Speaker Change: So manav with Jefferies. Please go ahead.
Bill Simmons: I. Appreciate the question. This is bill Simmons dot for odd for <unk> from Jefferies.
Bill Simmons: You highlighted multiple growth opportunities.
Bill Simmons: Mark maybe expanding on the previous answer what are those growth opportunities you've talked about with security maybe you could double click there can you talk about where you do particularly well in security today.
Bill Simmons: Hello.
Bill Simmons: That's it.
Bill Simmons: Right now to develop that market.
Bill Simmons: Great.
Bill Simmons: Very happily and thank you just a little echo on the phone there.
Bill Simmons: So where we're focusing where we are today.
Bill Simmons: Is core identity applications network and forensics, that's where we excel today and I highlighted some of our new SaaS wins in that area. Nestle for example for a total level security Frost bank and voltage for transaction Crimson and cap Gemini and identity management.
Bill Simmons: Our next deliverable or the next market segment for US is xdr right the ability to adjust detect and respond and we think we're very uniquely positioned with some of the core assets from micro focus as well as the vertical database some of our own technology.
Bill Simmons: And we partner with Microsoft We've built this integrated to Azure. We've built this integrated with security co pilot, we're going to go to market with Microsoft and we believe we're gonna be composed of both solution. Now we don't think we have to go in and displace any one actually we want to be we want are we.
Bill Simmons: Want to incorporate them all and to what we do and we think we can provide value on top of them all to be able to literally ingest.
Bill Simmons: Billions of events.
Bill Simmons: Day and process them down to a multiple a needle in multiple haystacks.
Bill Simmons: Next area is we wanted to bring all of that to our installed base. So when we launched titanium Max next quarter or the.
Bill Simmons: The xdr capabilities will be pre integrated to our content platform and pre integrated to our business network platform. So we can go into our install base and not just try to win xdr standalone extra on top of other vendors, but pre integrated into our own software. So that that's why I highlighted it as my second point of.
Bill Simmons: Growth and category, we're going to out compete in and we put into it to lead the engineering side of the business, we repositioned movie Mazuch to.
Bill Simmons: To do nothing but security so that's why we feel pretty confident here.
Speaker Change: Thanks, Mark and then if I could sneak in a SEC.
Speaker Change: A big focus during the presentations at opened next world was on some of the go to market changes across the business can you just remind us of some of those announcements obviously, it's only been a few months and things take time, but maybe updates on our progress, thus far and maybe where theres still more work to be done.
Speaker Change: Yeah, we have tops young with us So Todd you want Jonathan Yeah, absolutely. Thanks for the question look we've been heavily investing in our sales force capability across a comprehensive and global sales excellence program.
Speaker Change: That commenced a couple of quarters ago, and we're beginning to see outcomes from that investment now in Q2, we actually saw improvement of AE productivity, both tenured and new <unk> and in the second half the sales excellence program investments continuing.
Speaker Change: Myself Sandy <unk>, our marketing leader are going to be on the road in Asia, ANZ said, Europe and U S markets driving this with our Salesforce. So we're excited about the productivity gains that it's driving and then in addition look we're in the people business. So there's been a lot of improvement in boosting our leadership with.
Speaker Change: Our sales organization as well.
Speaker Change: Perfect. Thank you very much out of the market.
Last Coppola: And next question is from panel last Coppola with BMO capital markets. Please go ahead.
Paul Coppola: Hi, good afternoon.
Speaker Change: Mark can you explain to me.
Last Coppola: The challenges.
Speaker Change: Challenges in ADM and Tom was that more on the.
Speaker Change: Our go to market side or a bit of both.
Speaker Change: But maybe just those products that haven't been.
Speaker Change: Classified and how you're addressing that with any next just any color would be helpful.
Speaker Change: Yeah.
Speaker Change: Very good thanks for the question Yeah, we as I.
Speaker Change: As I committed to we're going to have a new style of communication and so when we have exceptional items or things to communicate we're going to provide the detail.
Speaker Change: And that's what we're doing today inclusive of materials in our IR deck. So within the 130 million, 25% is FX, 25% is D. C. It really focuses on focus is down to just ADM an item of about $65 million to $70 million, where is the core challenge and it's relate.
Speaker Change: It to license and maintenance.
Speaker Change: The cloud side. So we got the security business back on track, so and item its about titanium ex its the argue absorbability cloud also.
Speaker Change: Service management cloud.
Speaker Change: We believe we are ready now and including some of the investments Todd was talking about and we're simply going to relaunch with titanium acts and Reengage, our 5000 customers on ADM we.
Speaker Change: We have now refocused the portfolio.
Speaker Change: Top of market and this idea of to be everything to all things, which was the previous strategy do you think the new strategy going forward, where we're not here for a single developer. We're here for a large scale developer organizations were now live on the product I've got 10000 engineers and the product every single day, we've taken.
Speaker Change: All those advancements and put them back in the product and the released with titanium Max thus wins like at Pfizer.
Speaker Change: And Eli Lilly that we've talked about so we're confident that here in the short term, we're going to return those two pieces.
Speaker Change: A back back to growth I'd also like to take the opportunity if I can again less the IP licensing license will grow this year.
Speaker Change: The IP and FX, our businesses constant this year unless dfc, we'd be growing so.
Speaker Change: We're very focused on that that fit that that area of item and ADM license maintenance $65 million to $70 million and I believe we've got the right plan here in the short term to return them to growth.
Speaker Change: Okay, Great and then you touched on the new licensing model in your prepared remarks, which should be a bit of a tailwind just any further color on that in any one specifically was that launched.
Speaker Change: Yeah, we launched it in January this is the open text Palo.
Speaker Change: And look we have a large license install base and we're in the license business.
Speaker Change: And there are a couple of models in the industry that when you get pretty mature in this space.
Customers.
Speaker Change: Want to keep for those customers, who want to keep running on premise or off cloud we wanted to help support them.
Speaker Change: And you know they've grown they've acquired Oh, they may want to expand to new divisions add more users. So we're gonna make it easy for them.
Speaker Change: Work and allow them to go enterprise wide.
Speaker Change: Not have to count anymore.
Speaker Change: And that will require a license uplift in our maintenance uplift.
Speaker Change: And we will give them some cloud credits along the way so when they're ready to move to the cloud, they're even more invested in the open text solution. So.
Speaker Change: Again less the IP licensing license is growing this year and we wanted to kind of continue that momentum with this new open past mechanism.
Speaker Change: Yeah.
Speaker Change: But the premise is that the clients pay more but in exchange get unlimited licenses at Susquehanna.
Speaker Change: That's correct that they will get they'll pay more for and licensed they'll pay a little more in maintenance.
Speaker Change: But in exchange for that there'll be able to go unlimited.
Speaker Change: And they'll no longer have to count.
Speaker Change: Alright. Thanks.
Speaker Change: Thanks, Mark I'll pass along.
Speaker Change: Thank you.
Speaker Change: Operator next our next question.
James: I'll, let James the next question is from Stephanie price with CIBC. Please go ahead.
Stephanie Price: Good afternoon.
Stephanie Price: Just in light of some of the recent news around large language models, such as deep Sea just curious how youre thinking about planned investments in AI and whether you think you can benefit from some of the cost reductions in the space.
Stephanie Price: Yes, we're up.
Stephanie Price:
Speaker Change: I said earlier, Stephanie welcome to call. Our criteria question I said very early on there'll be a thousand language models.
Stephanie Price: A thousand models Bloom.
Stephanie Price: Quota pull them those tool ups not language models below 1000, tulips Bloom, So let 1000 models bloom.
Stephanie Price: We like the spirit of deep seek to lower the cost.
Stephanie Price: Of language models.
Stephanie Price: And we're already embedding some open source bottles into parts of our solution to for ease of deployment predictability of expense and lower expense. So we applaud.
Stephanie Price: The spirit behind deep seek and we think this trend will continue now.
Stephanie Price: Now for technical point.
Stephanie Price: We have deep seek.
Stephanie Price: In a quarantined area fully installed we've tried the <unk> one model.
Stephanie Price: And it doesn't really work.
Stephanie Price: So it's actually more expensive than running Lama, so I don't want to get into the technical aspects of the the.
Stephanie Price: The version in China of how it may be running the technical backend.
Stephanie Price: But we have done just a pure test and a quarantine Faraday cage.
Stephanie Price: And it simply doesn't outperform Lama and is not more cost effective but we applaud.
Stephanie Price: This idea of innovation open source models and lowering the cost and we will benefit from that.
Stephanie Price: Yeah.
Speaker Change: Thanks for the color and then in your prepared remarks, he mentioned evaluating strategic alternatives to increase value either through divestitures or combinations.
Speaker Change: Even span on how to think about capital allocation at this point.
Speaker Change: Well great question and.
Speaker Change: Look I think it goes like this.
Speaker Change: With.
Speaker Change: Margin was our number one priority post EMC divestiture and I couldnt be more proud of the team and how they delivered in the first half, including Q2, I mean half a billion dollars of adjusted EBITDA $1. So we now have a new number one priority.
We have multiple priorities, but this is the this is the number one overriding priority at the company, which is now growth and it's across all be use and maintenance.
Speaker Change: We're going to return to bright line growth in Q4.
Speaker Change: And yes, we all want more growth and we expect more growth and will return to growth in Q4, that's our current focus now.
Speaker Change: Now in parallel we're going to continue to evaluate strategic opportunities and what does that mean in some cases I think it will mean for Bu and acquisition.
I think some other cases it could mean a combination of divestiture.
Speaker Change: But my macro point is this and my attention for purposely saying it on the call in my script as I wanted to deliver more paths and more reasons to buy our stock.
Speaker Change: And I think those answers are total growth higher cloud growth.
Speaker Change: Their margins are higher free cash flows upper quartile capital return and unlocking the value of each of our business units beyond organic growth through this strategic thinking.
So.
Speaker Change: Clearly, we're focused right now on record capital return in 'twenty five.
Speaker Change: Completing the divestiture and getting the margin operation engine boy, it's just a whole different level of oxygen what growth is our number one priority and as we focus on each be you to do that I wanted to kind of walk through just how I was thinking.
Speaker Change: Parallel to just focusing on organic growth I hope that's helpful.
Speaker Change: That is thank you very much.
Speaker Change: Our next question is from Paul Treiber with ardent.
Speaker Change: We see capital markets. Please go ahead.
Speaker Change: Oh, thanks, so much and good afternoon, just wanted to.
Speaker Change: To ask a question on bookings.
Speaker Change: And your expectations for bookings going forward the outlook calls for a pickup in growth in the second half of the year.
Speaker Change: What do you see as the primary.
Speaker Change: Driver of that is do you expect titanium Max to drive a search or do you just see less seasonality than in the past.
Speaker Change: And $200 million or so on bookings per quarter is sort of a new normal going.
Speaker Change: Forward, Yeah, Yeah, Paul let me just jump in the hand, and I'll hand, it to Todd.
Speaker Change: Look I on a percent basis it was.
Speaker Change: A little over 6% in Q2, but it was a record high watermark of $250 million of guaranteed new bookings that flowed right into <unk>. So that is the high watermark and clearly we're expecting.
Speaker Change: Very strong second half and Todd I'll, let you talk to the strong second half yeah. Thanks, Mark and thanks for the question. So I mean, just as Mark mentioned, we're super proud and excited about that record quarter of customer demand for cloud or new bookings and we see this continuing into the second half because we've got a solid pipeline in Q3 and in Q4, we've heard large.
Speaker Change: Just cloud pipeline ever that means we've got really strong coverage and in addition to that we've launched already a focus list of programs and incentives to convert that pipeline and we also fully expect that titanium Max being completed next quarter, it's going to provide a tailwind for that.
Speaker Change: Pipeline conversion as well so we're super bullish.
Speaker Change: That's great to hear thanks for the explanation fee shifting.
Speaker Change: Shifting shifting gears and.
Speaker Change: Speaking on AI could you walk through you touched in the past like Theres internal initiatives around AI do you have any.
Speaker Change: Metrics you can share in terms of the productivity gains that you've seen or ways you can be more efficient youre spending internally. So perhaps you can ship that those dollars to focus on growth initiatives.
Speaker Change: Yeah. Great question. Thank you, Paul we're not ready to put a quantum on it.
But we have two large initiatives.
Speaker Change: And there'll be a third and a fourth that's right on the event horizon for us.
First is our platform.
Speaker Change: Thenar.
Speaker Change: Where.
Speaker Change: You can imagine the.
Speaker Change: The breadth of software rebuild and development environments.
Speaker Change: You know it.
Speaker Change: As you know, we're close to 10 billion lines of code.
Speaker Change: Across multiple environments, and <unk> and all of that.
Speaker Change: We've built a proprietary.
Speaker Change: AI platform internally for our developers.
Speaker Change: To use Athena, we don't use co pilot.
Speaker Change: To use Athena for things such as the following explain a piece of code to me.
Speaker Change: A new developer and I got to learn a piece of code explain it to me.
Speaker Change: Fixed a bug helped me.
Speaker Change: I need to write an interface to an API generate the code.
Speaker Change: I need to localize it in to Ghana.
Speaker Change: Or in left left to right languages, so generate the screens and goes for me.
Speaker Change: So that's.
Speaker Change: That's kind of uplift productivity.
Speaker Change: Is that 5%, 10%, we'll see it could be mid single digit could be low double digit and if we can do that I just added 1000 developers at no extra cost.
Speaker Change: On the sales side, we are live on our platform we call. It internally Ali Dot AI Ali was your original name for our pre demo environment are back in the lives linked days and we've advanced it to Ali Dot AI, where we're helping we downloaded at open text world to generate rfps.
Speaker Change: Can that uplift sales productivity, 5% to 10%, 15% increase our win rate.
Speaker Change: Todd any comments you want to provide on an aldi dot AI, yeah. So if you're a pre sales leader at open text that is your first.
Speaker Change: Stop when you have an RFP right now it's live and it's active and we are at the precipice in Q3 of expanding that and the capabilities for the entire Salesforce account executives will have new information at their fingertips via mobile as well. So we're really excited about AI.
Speaker Change: Boosting our efficiency in worldwide sales.
Speaker Change: So next stop is tech support and and one of the next stops post that is helping increase our win rate.
Oh, and competing and more opportunity. So look I from what we've seen from theory to test beds to version one even version twos internally I'm, absolutely convinced will raise productivity.
Speaker Change: And engineering.
Speaker Change: <unk> support and helping us compete more and win more win more but not ready to put a hard dollar number on it yet Paul but we'll keep you updated.
Speaker Change: Thanks for taking the questions.
Speaker Change: Yeah.
Speaker Change: Our next question is from Seth Gilbert with <unk>.
Speaker Change: Please go ahead.
Thanks for the questions maybe two if I may start you made a comment in the beginning of your prepared remarks about the upgrade to titanium axis re engaging with 5000 customers and upgrade fees kind of rising over time I was wondering if you could talk about the upgrade journey titanium ask how's it going is there.
Speaker Change: Maybe plan to migrate certain percent of customers in FY 'twenty five.
Speaker Change: Yeah fair enough. So titanium X is fully delivered next quarter right. So we're almost there and we have 5000 customers were just an item not the overall install base of 120000.
Speaker Change: But the opportunity.
Speaker Change: Is large for us we want to get the entire install I mean, I'm just going to start a big generale I want the entire install base to be engaged and move to titanium Max overtime. All we got to bring our install base with us and it's compelling Gen AI and aviators 15, aviators 100 agents SaaS esque.
Speaker Change: <unk> I've already started to highlight some of the wins that <unk>, all deep Frost cap Gemini.
Speaker Change: Content Pleasant cotton the content world intelligent content, plus AI workflow plus as I, Tom the one you highlighted <unk> ability service cloud ADM. The features that run open tax can now run you BN control tower and AI unsecured xdr sell titanium X is compelling.
Speaker Change: We're going to start with those on older versions.
Speaker Change: When are we going to kind of look at three three major buckets. One of those buckets is the customers on three releases in back Oh, we have a world class PS organization, they'll engage they'll have upgrade programs.
Speaker Change: And that's the first place that we're going to go to with titanium X and we respect customers, who don't want to move and we're perfectly understand that but will begin to raise your prices and because of our cost will go up or supporting you off cloud so while that's a bit of the opportunity.
That's a bit of where we're going to start and we begin next quarter.
Speaker Change: Got it very helpful. Maybe just as a follow up unless I missed it I didn't see.
Speaker Change: Any of the disclosure around the business unit revenue split I guess, we were we were hopeful that we would see maybe a little bit of it this quarter. So even if and correct me if I maybe missed it in the filings, but even if not a quantitative I was wondering if you could provide maybe some qualitative color on some of the faster growing be used.
MS units and maybe some that are not growing as quickly. Thank you.
Speaker Change: Yeah, No you didn't miss it.
Speaker Change: And what we did this quarter.
Speaker Change: His focus on cloud.
Speaker Change: Cloud.
Speaker Change: And so the new <unk> disclosure is very important and very strategic and ties to our number one priority. So we put our energy there.
Speaker Change: Because this is a long life disclosure for us to give you the insight into the strength of our cloud growth overtime.
Speaker Change: So that's where we put our energy to get our RPI.
Speaker Change: <unk> maintenance and cloud <unk> and cloud <unk> cloud CRP Oh, so that's fully fully available. We also focused our attention in the communication around I want I just want to say it again that again less the IP licensing.
License is growing this year, new new insight for you all.
Speaker Change: Less IP and FX the business is constant new insight for you unless dfc, we'd be growing so we focused on those insights.
Speaker Change: Versus breaking down each each bu.
Speaker Change: We will or we will at the end of the year provide our usual be you update if you will content are hot hand with AI.
Speaker Change: Security growing.
Speaker Change: <unk> B.
Speaker Change: It was a negative year last year.
Speaker Change: Or or performing constant this year with paths to the second half growth. For example, we just delivered the new secure cloud secure VPN or.
Speaker Change: PC Optimizer, Oh, we have edr unsecured cloud and we have a whole new online presence at cyber security open text Dot com. So <unk> went from negative to constant path to growth in the second half should be a positive contributor in the year out. We also provided some insight into ADM an item on the call specifically around.
Speaker Change: Maintenance and license. So we thought that was we thought that was a better usage of our time to give you that insight and so that's a little bit of the Bu insight, but we'll have a full view update at the end of the year.
Speaker Change: Got it Super helpful. Thank you Mark.
Speaker Change: And Seth welcome to our call and thank you for your questions.
Speaker Change: The next question is from Kevin Krishna asked me with Scotia Bank. Please go ahead.
Speaker Change: Hey, there good afternoon question on on the cloud business that had a nice uptick in growth this quarter, but you've maintained them you know the guide 2% to 5% for the year you sound really bullish on on on that business you talked about a lot of different initiatives big SaaS wins and it just.
Speaker Change: Curious are you know.
Speaker Change: What would you is there anything to think about that would make you know the revenue growth in cloud the closer to the 2% range rather than the 5% range just wondering about the guidance and your thoughts there.
Madhu: I'll highlight a couple of things and even tighter Madhu jump in one is record new commitments in Q4 $250 million.
Madhu: Cash flows right into the top of the <unk> and you can now see the RVO and Youll see it next quarter.
Madhu: Second is I highlighted.
Madhu: Large strategic SaaS wins before the full delivery.
Madhu: <unk> by the way when we deliver titanium customers don't have to upgrade those pieces, we upgrade them for them on the content side, a large win at SAP.
Speaker Change: All of these immune agree on the security side Frost cap Gemini necessarily on ADM Lilly Pfizer Theyre, all SaaS wins faster time to revenue.
Speaker Change: And <unk> and then the momentum around the delivery of titanium X. So so yeah, we're focused on a $65 $70 million in an ATM and I, Tom but no. We're not moving are our cloud view of fiscal 'twenty five.
Speaker Change: You went out or reduce.
Speaker Change: Yeah, I'll take a pass and then Todd can chime in.
Speaker Change: Kevin just specific question on why we left the range is unchanged right I think the good news is that we did lead the ranges unchanged notwithstanding a kind of a downward trend in the other buckets license and maintenance right now two things I will I will remind us our enterprise cloud bookings are strong cloud bookings still have a ramp to revenue right there's about Ah.
Speaker Change: Six months to nine months after the first dollar of revenue. So think of this as providing us more visibility into beyond 'twenty five.
Speaker Change: The second part as Mark outlined SMB and see a very strong components of cloud revenue for this year for 25, we are planning them at more neutral to constant. So those are the reasons why we left the range unchanged and SaaS is picking up as you heard from Marc and overtime beyond 25 suddenly we think the SaaS mix.
Speaker Change: Mix in the overall cloud revenue will.
Speaker Change: We'll provide higher velocity from bookings to revenue.
Speaker Change: Yes.
Speaker Change: Adding onto my comments I made about the direct sales force and the pipeline activation and conversion activity. We have underway partnerships are playing an increasingly important role in our cloud business and that's going to only continue mark referenced a couple of those just to reinforce our industry, leading SAP partnership is driving.
Speaker Change: Accelerated cloud growth our relationships with the cloud service providers, Microsoft and Google are contributing and then in our emerging markets in specific industries resellers are playing an increasingly important role for us as well and we're excited about that.
Speaker Change: I really appreciate that extra color I just wanted to slip one last one in here can you remind us how big your government opportunity is how much how much government exposure you have in the U S and maybe any thoughts on Doge, you know potential benefits or things to consider there. Thanks.
Speaker Change: No we don't break out just our U S government business.
Speaker Change: But I would say globally.
Speaker Change: Public sector.
Speaker Change: Is.
Speaker Change: Roughly 15% of our revenues on a global on a global basis.
Speaker Change: Look we're.
Speaker Change: On the business front, we are excited about the opportunities in the U S.
The mid.
Speaker Change: Mid market.
Speaker Change: And manufacturing investments.
Speaker Change: 60% of our business in the U S and.
Speaker Change: We're gonna be very present to help bar.
Speaker Change: To help our customers take advantage of that and do that digitally enabled I'm part of the U S government efficiency programs dose is about becoming more digital.
Speaker Change: So we got a great presence in D C.
Speaker Change: We're fully represented both on the.
Speaker Change: Government intelligence side, as well as standard agencies, and Ngos as well as the large states in the U S. So I think we're well positioned that as opportunities come along we will be right there.
Speaker Change: The next question is from Richard Tse with National Bank Financial. Please go ahead.
Richard Tse: Oh, yes, thanks for fitting me here through the hours just quickly.
Richard Tse: Can you provide some metrics on how aviator is performing.
Richard Tse:
Richard Tse: Look I think the.
Richard Tse: We're not.
Richard Tse: Disclosing specific.
Richard Tse: Bookings or revenue numbers, there is no doubt that.
Richard Tse: Our.
Richard Tse: Our work fully delivered in titanium X is helping us win.
Richard Tse: The SaaS wins, all have a part of AI.
Richard Tse: Again, I can't emphasize the strategic enterprise global nature of the SaaS wins open take.
Richard Tse: Imagine these two words in the same sentence open text and SaaS.
Richard Tse: Tom.
Richard Tse: And what titanium X, we sat out on tied to him extra to have as part of it a SaaS platform.
Richard Tse: <unk> in Q2 S b.
Richard Tse: So all the Munich re frost Capgemini Nestle Lilly Pfizer I, just couldn't be more proud of those wins.
Richard Tse: Most of that.
Richard Tse: Have aviator as part of it.
Richard Tse: So so we're not here yet to kind of break out this much of revenue or this much of booking but unequivocally a part of our platform part of our win strategy and part of the actual wins at this point so stay tuned there there'll be more to follow here as we upgraded titanium X.
Richard Tse: There'll be more to talk about on the AI platform.
Richard Tse: Okay, and just a last quick one here for me I. Appreciate you sharing those <unk> metrics I think in the past you've talked about sort of expanding your disclosures and so as you go forward are you going to be looking at disclosing things like net expansion rate and I only ask that because.
Richard Tse: Big part of your strategy here is selling into the base and I think having that metric in terms of understanding how that basis growing would be very helpful. So is that something on the radar here.
Richard Tse: Thank you for the feedback.
Richard Tse: There's we're going to assess the feedback.
Richard Tse: Nearly it's not about renewal it's about expansion over time right. So thank you for the feedback we'll take it offline and process all the feedback.
Speaker Change: A big disclosure for us as you know.
It's both cloud and maintenance, it's current and long term with a big emphasis on cloud <unk> and that increased visibility and so what are the commitments flowing in.
Speaker Change: What are the uncommitted portion and they're all the things we do talked about we disclosed a very simple formula we.
Speaker Change: We looked at SAP and Salesforce of how they disclose we have a net renewal rate as well. So a good comment on we start to talk expansion will take it as a feedback and who.
We will collect all the feedback and then understand what the next set is so thank you for the questions.
Speaker Change: Thank you.
Barry: I'll now hand, the call back over to Mr. Barry for closing remarks.
Barry: Very good thank you for.
Speaker Change: Being part of our Q2 call.
Speaker Change: Margin was our number one priority post AMC divestiture and with our Q2 and first half performance, we delivered in our new number one priority is growth.
Speaker Change: Second.
Speaker Change: We're very excited about the opportunity that titanium exit upgrades will bring us and three we look forward to your continued feedback.
Speaker Change: On our new style of communications and the insights into our business and did you find them helpful and how we can continue to do that.
Speaker Change: Thank you very much and we look forward to seeing you at Morgan Stanley.
Speaker Change: And elsewhere. Thank you very much.
Speaker Change: This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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