Financial Data and Key Metrics Changes - The company reported record Q1 revenues of $1.43 billion, representing a year-over-year growth of 67.3% and 65.4% in constant currency [78][88] - Adjusted EBITDA was $495 million, an increase of 62.8% year-over-year, with an adjusted EBITDA margin of 34.7% [109] - Free cash flows for the quarter were $10 million, with expectations to grow year-over-year in each subsequent quarter, targeting $800 million to $900 million for fiscal '24 [7][89] Business Line Data and Key Metrics Changes - Micro Focus contributed $563 million in revenue for the quarter, with expectations to return to organic growth this fiscal year [21][58] - Enterprise cloud bookings were $121 million, up 8% year-over-year, with cloud revenue reaching $451 million, an increase of 11.5% [108] - The company expects to achieve adjusted EBITDA margins of 36% to 38% for Micro Focus by the end of the fiscal year [6][134] Market Data and Key Metrics Changes - The SMB market has been significantly impacted by the current macro environment, with a projected revenue headwind of $10 million to $15 million in Q2 [8][40] - Despite challenges in the SMB sector, the enterprise cloud business remains strong and is expected to grow organically in Q2 and the rest of the fiscal year [8][68] Company Strategy and Development Direction - The company is shifting from growth primarily driven by M&A to growth driven by product innovation and go-to-market execution, focusing on SaaS and AI as key areas for unlocking new value [98][130] - The strategic goal includes expanding competitive differentiation in information management and increasing customer consumption across various business clouds [79][99] - The company aims to achieve fiscal '26 aspirations of 40% higher revenues, 67% higher adjusted EBITDA, and 129% higher free cash flow compared to fiscal '23 [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving fiscal '24 targets, including total revenues of $5.85 billion to $5.95 billion and organic growth of 15% plus in enterprise cloud bookings [97][133] - The management highlighted the importance of customer trust and confidence, evidenced by strong renewal rates in the mid-90s [78][85] - The company is well-positioned to benefit from a rebound in the SMB market as PC shipments increase [41] Other Important Information - The company has completed approximately $560 million of debt repayment since the acquisition of Micro Focus, with a net leverage ratio of 3.6x for the quarter [89][90] - A quarterly cash dividend of $0.25 per common share was approved, with the next payment date set for December 20, 2023 [131] Q&A Session Summary Question: What has been the biggest driver to increasing Micro Focus's renewal rate? - The integration of Micro Focus into OpenText practices for renewals and the alignment of sales and renewal teams have been significant factors in improving renewal rates [112][137] Question: What is the current status of integrating the Micro Focus and OpenText channels? - The integration is progressing well, with a focus on aligning sales forces and defining market segmentation to enhance go-to-market strategies [119] Question: How does customer interest in AI products compare to previous product releases? - There is heightened customer interest in AI, with proactive engagement and a strong sales pipeline for new AI products, contributing to expected bookings growth [30][44]

Financial Performance & Targets - Q1 F'24 total revenue reached $1.43 billion, a 67% year-over-year increase[65] - Q1 F'24 cloud revenue was $451 million, up 59% year-over-year[65] - Annual Recurring Revenue (ARR) accounted for 81% of total revenues in Q1 F'24[65] - The company targets $5.85 billion to $5.95 billion in total revenues for F'24[8] - The company aspires to $6.2 billion to $6.4 billion in total revenues for F'26[8] - The company targets an A-EBITDA margin of 36% to 38% for F'24[8] - The company aspires to an A-EBITDA margin of 38% to 40% for F'26[8] - The company targets free cash flows of $0.8 billion to $0.9 billion for F'24[8] - The company aspires to free cash flows of $1.5 billion+ for F'26[8] Growth & Strategy - The company is shifting from M&A-driven growth to product innovation and go-to-market execution[36] - The company aims for 7% to 9% cloud organic revenue growth in F'26[38] - The company aims for 2% to 4% ARR organic growth in F'26[38]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ______________________ FORM 10-Q ______________________ ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 0-27544 ______________________________________ OPEN TEXT CORPORATION (Exact ...

Open Text Corporation (NASDAQ:OTEX) Q4 2023 Earnings Conference Call August 3, 2023 5:00 PM ET Company Participants Harry Blount - Senior Vice President-Investor Relations Mark J. Barrenechea - Chief Executive Officer and Chief Technology Officer Madhu Ranganathan - Executive Vice President and Chief Financial Officer Conference Call Participants Richard Tse - National Bank Financial George Kurosawa - Citi Kevin Krishnaratne - Scotiabank Paul Treiber - RBC Capital Markets Stephanie Price - CIBC Thanos Mosch ...

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Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Commission file number: 0-27544 ______________________________________ OPEN TEXT CORPORATION Washington, DC 20549 ______________________ FORM 10-K ______________________ ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 2023. OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to (Exact name of Regi ...

OpenText Corporation (NASDAQ:OTEX) Q3 2023 Earnings Conference Call May 4, 2023 5:00 PM ET Company Participants Harry Blount – Senior Vice President-Investor Relations Mark J. Barrenechea – Chief Executive Officer and Chief Technology Officer Madhu Ranganathan – Executive Vice President and Chief Financial Officer Conference Call Participants Raimo Lenschow – Barclays Daniel Chan – TD Cowen Thanos Moschopoulos – BMO Capital Markets Paul Treiber – RBC Capital Markets Stephanie Price – CIBC Adhir Kadve – Eigh ...

Financial Performance - Total revenue for Q3 Fiscal 2023 was $1,244.7 million, an increase of 41.1% compared to the same period last year, and up 44.9% after adjusting for foreign exchange impacts [232]. - Total annual recurring revenue reached $1,011.3 million, up 37.7% year-over-year, and up 41.1% after adjusting for foreign exchange impacts [232]. - Cloud services and subscriptions revenue was $435.4 million, reflecting an 8.3% increase compared to the same period last year, and up 10.4% after adjusting for foreign exchange impacts [232]. - GAAP-based net income attributable to OpenText was $57.6 million, down from $74.7 million in the same period last fiscal year; Non-GAAP-based net income was $197.8 million, up from $190.8 million [238]. - Adjusted EBITDA was $365.1 million, compared to $284.5 million in the same period last fiscal year [238]. - The company reported a GAAP-based EPS of $0.21 for the three months ended March 31, 2023, down from $0.28 in the same period of 2022 [257]. - Non-GAAP-based earnings per share for the three months ended March 31, 2023, was $0.73, compared to a GAAP-based earnings per share of $0.21 [345]. - For the nine months ended March 31, 2023, GAAP-based net income attributable to OpenText was $199.1 million, with an Adjusted EBITDA of $1,010.1 million [364]. Acquisition and Integration - The integration of Micro Focus is expected to enhance the company's operational capabilities and market presence [221]. - Total revenues increased by $362.4 million in Q3 Fiscal 2023, primarily due to Micro Focus Acquisition, contributing $374.4 million to total revenues [253]. - The Micro Focus Acquisition was completed for a total consideration of $6.2 billion, including cash and repayment of outstanding indebtedness [236]. - Customer support revenues increased by $243.4 million or 73.2% for the three months ended March 31, 2023, primarily driven by the Micro Focus Acquisition [272]. - Professional service and other revenues increased by $26.4 million or 39.4% for the three months ended March 31, 2023, compared to the same period in the prior fiscal year, driven by the Micro Focus Acquisition [288]. - Research and development expenses increased by $93.0 million during the three months ended March 31, 2023, primarily due to the Micro Focus Acquisition, with payroll-related benefits rising by $63.6 million [296]. - General and administrative expenses increased by $38.9 million for the three months ended March 31, 2023, primarily due to the Micro Focus Acquisition, with payroll and payroll-related benefits increasing by $22.8 million [303]. Workforce and Restructuring - Approximately 25,550 employees were reported as of March 31, 2023, with 10,600 joining through the Micro Focus acquisition [231]. - A restructuring plan post-Micro Focus Acquisition is expected to reduce the combined workforce by approximately 8%, or 2,000 employees, with an estimated cost of $135 million to $150 million [247]. - The company’s research and development labor resources increased by 4,153 employees, from 4,391 at March 31, 2022, to 8,544 at March 31, 2023 [298]. - Sales and marketing labor resources increased by 2,316 employees, from 2,770 at March 31, 2022 to 5,086 at March 31, 2023 [302]. Revenue Streams and Growth - Annual recurring revenues are a key focus, with significant contributions from cloud services and subscriptions [232]. - Cloud services renewal rate increased to 95% from 93% year-over-year, excluding the impact of acquisitions [260]. - License revenues increased by $59.1 million or 73.3% for the three months ended March 31, 2023, with a gross margin percentage increase to 97% [279][281]. - Customer support renewal rate improved to 95% for the quarter ended March 31, 2023, compared to 94% in the prior year [269]. - Total cost of revenues for the three months ended March 31, 2023, was $369.7 million, an increase of $95.5 million or 34.9% compared to $274.2 million in the same period of 2022 [257]. Expenses and Margins - GAAP-based gross margin was 70.3%, up from 68.9% in the same period last fiscal year; Non-GAAP-based gross margin was 75.8%, up from 74.5% [238]. - Total operating expenses for the three months ended March 31, 2023, were $810.96 million, an increase of $334.52 million compared to the same period in the prior fiscal year [294]. - Overall gross margin percentage on Customer support revenues decreased to 88% from 90% [274]. - Cost of professional service and other revenues rose by $21.8 million during the same period, primarily due to a $22.1 million increase in labor-related costs [289]. Cash Flow and Financing - Operating cash flow for the nine months ended March 31, 2023, was $663.9 million, down 9.0% from $729.9 million in the same period last fiscal year [238]. - Cash used in investing activities surged to $5.6 billion for the nine months ended March 31, 2023, primarily due to the Micro Focus acquisition, compared to $933.0 million in the same period of the previous year [380]. - Cash flows provided by financing activities increased by $4.4 billion during the nine months ended March 31, 2023, compared to the prior year, reflecting significant financing activities [382]. - As of March 31, 2023, total cash, cash equivalents, and restricted cash amounted to $1.4 billion, a decrease of $296.2 million from $1.7 billion as of June 30, 2022 [372]. Tax and Regulatory Changes - The effective tax rate for the three months ended March 31, 2023 was (27.5)%, compared to 35.5% for the same period in 2022 [324]. - The effective tax rate for the nine months ended March 31, 2023, was 26.5%, a decrease from 29.6% for the same period in 2022 [327]. - The provision from the Tax Cuts and Jobs Act of 2017 requiring capitalization and amortization of research and development costs will be effective starting Fiscal 2023 [328]. - The Inflation Reduction Act introduced a 15% corporate alternative minimum tax for large corporations, effective for Fiscal 2024, which the Company is currently evaluating [329].

Financial Data and Key Metrics Changes - OpenText achieved overall constant currency revenue growth of 7.8% in Q2, with cloud revenue growth of 16% and an adjusted EBITDA margin of 37.7% [8][15][24] - The company reported adjusted EBITDA of $341 million, representing 38% of revenue, compared to $344 million or 39.2% in the previous year [24][50] - Free cash flow for the quarter was $163 million, with adjusted EPS of $0.89 or $0.94 in constant currency [15][50] Business Line Data and Key Metrics Changes - The enterprise cloud bookings grew by 12%, with trailing 12-month cloud bookings reaching $511 million, up 25% year-over-year [15][51] - The company reported a 95% renewal rate for off-cloud services in Q2, with expectations to improve Micro Focus's renewal rates to match this by the end of fiscal 2025 [12][21] - In the content services space, OpenText plans to leverage new capabilities to incorporate voice, video, and imaging workloads [39] Market Data and Key Metrics Changes - International markets, particularly APAC, saw key cloud wins, with strong growth in sectors such as government, healthcare, and banking [25] - The total addressable market (TAM) for OpenText is projected to exceed $200 billion, driven by six key markets including content services, business networks, and cybersecurity [1][61] Company Strategy and Development Direction - OpenText is focused on digital transformation through four key areas: total enterprise reinvention, a new workforce, new digital paradigms, and new digital requirements [10][36] - The company aims to deliver $6 billion in annual revenues, with a $2 billion cloud revenue business and over $2 billion in adjusted EBITDA dollars [9][17] - OpenText is committed to integrating Micro Focus to enhance customer engagement and improve renewal rates, with a focus on operational efficiencies and cost reductions [21][27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate current economic challenges, including inflation and supply chain constraints, emphasizing the increasing demand for digitalization [16][42] - The outlook for fiscal 2023 includes total revenues projected to increase by 28% to 30%, with Micro Focus contributing between $870 million to $920 million [17][44] - Management highlighted the importance of innovation and customer engagement in driving future growth, particularly in the cloud segment [12][40] Other Important Information - The company plans to execute a $400 million cost reduction plan, which includes a workforce reduction of approximately 8% or 2,000 employees [53][104] - OpenText's capital allocation strategy includes a commitment to pay down debt by a minimum of $150 million per quarter [45][55] - The company expects to maintain a dividend program, with plans to grow dividends as free cash flows increase [45] Q&A Session Summary Question: How does the product fit and revenue synergy opportunity compare to previous acquisitions? - Management stated that this acquisition represents the largest expansion of information management, enhancing capabilities across various industries [76] Question: What are the key factors for the acquisition's success? - Management emphasized the importance of customer engagement, renewal rates, and accelerated product innovation as critical success factors [77][78] Question: How does the fiscal 2023 guidance reflect macroeconomic conditions? - Management clarified that the organic growth trajectory remains strong, with Micro Focus's integration being a significant factor in the guidance [80][81] Question: What is the timeline for improving Micro Focus's renewal rates? - Management indicated that renewal rates are currently in the low 80s, with a goal to improve them to match OpenText's mid-90s rates over time [132] Question: How will R&D be prioritized post-acquisition? - Management highlighted a focus on accelerating cloud capabilities and integrating new technologies to enhance product offerings [138]

| --- | --- | |---------------------------|-------| | | | | | | | | | | | | | | | | Investor Presentation | | | February 2, 2023 | | | NASDAQ: OTEX \| TSX: OTEX | | Safe Harbor and IP Statement These forward-looking statements involve known and unknown risks and uncertainties, such as those relating to: all statements regarding the expected future financial position, results of operations, cash flows, dividends, financing plans, business strategy, budgets, capital expenditures, competitive positions, growth ...