Core Insights - Pick n Pay Group has partnered with OpenText to enhance its software testing processes, achieving 95% automation in testing and reducing testing times by up to three days, which significantly improves digital services for ecommerce customers [1][5][6] Group 1: Partnership and Technology Integration - The integration of OpenText's cloud-based ValueEdge and DevOps platform with OpenText DevOps Aviator allows Pick n Pay to meet increasing customer demand for innovative digital shopping tools [2] - OpenText DevOps Aviator has transformed Pick n Pay's testing processes, enhancing visibility across projects and methodologies, and improving accuracy, security, and efficiency [3][5] Group 2: Performance Metrics - During testing of 45 features, OpenText DevOps Aviator matched manual tester output 80% of the time and improved testing coverage by 20% on platform-specific scenarios [3] - Quality assurance and system integration testing increased by 95%, surpassing Pick n Pay's standard goals of 75% to 80% [5] Group 3: Competitive Advantage - OpenText DevOps Aviator outperformed a leading public AI platform in testing scenarios due to its ability to learn from private data, ensuring robust data protection [4] - The automation introduced by OpenText DevOps Aviator reduces wait times for manual testing and provides immediate test case suggestions, cutting training time for junior testers by six weeks [6] Group 4: Future Outlook - Pick n Pay plans to further enhance automation over the next 12 to 18 months by integrating assets into one platform with OpenText [8] - The partnership with OpenText is expected to drive interest in adopting this technology beyond the initial phase, contributing to the ongoing AI-driven transformation [7][8]

Core Insights - OpenText has launched OpenText Axcelerate with Aviator, an innovative eDiscovery platform that utilizes Large Language Models (LLMs) to enhance legal professionals' productivity and decision-making capabilities [1][3] - The legal industry is increasingly adopting AI solutions for e-discovery, with 54% of corporate legal teams planning to use AI to focus on high-value tasks, and 52% aiming to improve decision-making [2] - Axcelerate with Aviator aims to automate document review processes, providing faster access to critical information and reducing eDiscovery costs [3][4] Company Developments - OpenText is participating in ILTACON 2024, showcasing its advancements in legal technology, including the Axcelerate with Aviator platform [5][6] - The company emphasizes the integration of generative AI in its solutions to support various legal tasks, including eDiscovery, compliance, and contract intelligence [6] Industry Trends - The demand for efficient e-discovery solutions is at an all-time high, driven by the need for legal teams to manage complex regulatory environments and client expectations [2][4] - Generative AI is transforming the legal landscape by enabling faster fact-finding, enhancing efficiency through automation, and providing cost certainty for legal operations [4]

Financial Data and Key Metrics Changes - OpenText reported total revenues of $5.77 billion for fiscal 2024, representing a 29% year-over-year growth, with cloud revenues at $1.8 billion, reflecting a 7% year-over-year increase [12][36] - Adjusted EBITDA for fiscal 2024 was $2 billion, yielding a margin of 34%, with expectations to maintain this margin in fiscal 2025 [7][37] - Free cash flow for fiscal 2024 was $808 million, a 23% increase year-over-year, with projections for mid-to-high single-digit growth in fiscal 2025 [8][39] Business Line Data and Key Metrics Changes - Cloud revenue for Q4 was $464.9 million, up 2.9%, while total revenue for Q4 was $1.36 billion, down 8.6% primarily due to the AMC divestiture [33][34] - Annual recurring revenue (ARR) for fiscal 2024 was $4.53 billion, up 25.4%, representing approximately 78.6% of total revenue [36][37] - The enterprise cloud business achieved strong annual bookings of $701.4 million, a 32.9% year-over-year increase [36] Market Data and Key Metrics Changes - The cloud renewal rate was reported at 92%, with a gross renewal rate expected to be in the mid-to-high 90s if net renewal rates are applied [28][29] - The company anticipates organic cloud revenue growth of up to 5% for fiscal 2025, with total revenues projected between $5.3 billion to $5.4 billion [12][39] - The content business, business network, and ITOM are expected to be key growth areas, contributing to the anticipated cloud revenue growth [50][55] Company Strategy and Development Direction - OpenText aims to strengthen its competitive advantage through information management, business cloud, AI, and technology, with a focus on cloud revenue growth and margin expansion [6][7] - The company plans to return 50% of trailing twelve-month free cash flows to shareholders through dividends and buybacks, with an increased NCIB program of $300 million [8][9] - The launch of OpenText 3.0 is positioned as a pivotal strategy to enhance market presence and drive future growth [5][6] Management's Comments on Operating Environment and Future Outlook - Management emphasized that the challenges faced in Q4 were not macro-related but rather due to internal transitions, including the license to cloud migration and the AMC divestiture [44][46] - The outlook for fiscal 2025 includes expectations for revenue growth between $1.25 billion to $1.3 billion and adjusted EBITDA margins of 32% to 33% [16][38] - The leadership team is focused on delivering higher performance and shareholder value through cloud growth and operational efficiencies [17][41] Other Important Information - The company reported a GAAP net income of $465.1 million for fiscal 2024, including a gain from the AMC divestiture [37] - OpenText's employee retention rate is at a record high of over 92%, indicating strong talent management [10] - The company is committed to corporate citizenship and sustainability, as reflected in its Annual Corporate Citizenship Report [11] Q&A Session Summary Question: Can you help us understand how much of Q4's performance was macro-related versus internal factors? - Management clarified that the performance issues were primarily due to the internal license to cloud transition and the AMC divestiture, not macroeconomic factors [43][44] Question: What is the expected margin progression for the coming years? - Management indicated that margin improvements will come from higher revenues, operational efficiencies, and increased SaaS workloads, targeting adjusted EBITDA margins of up to 34% in fiscal 2025 [45][46][47] Question: Are there any specific areas within the portfolio showing stronger or weaker performance? - Management noted strong performance in the content business, business network, and ITOM, which are expected to drive cloud organic growth [50] Question: How does the company view its capital return strategy in relation to M&A? - Management stated that while M&A remains part of the strategy, the focus for fiscal 2025 is on organic growth and delivering the largest capital return in the company's history [52] Question: What is the current customer interest in AI and content management? - Management reported steady progress in AI discussions with customers, indicating growing interest and engagement in content management solutions [54][55]

Core Viewpoint - Open Text (OTEX) reported quarterly earnings of $0.98 per share, missing the Zacks Consensus Estimate of $1.05 per share, representing an earnings surprise of -6.67% [1][2] Financial Performance - The company posted revenues of $1.36 billion for the quarter ended June 2024, missing the Zacks Consensus Estimate by 3.23%, and down from $1.49 billion year-over-year [2] - Over the last four quarters, Open Text has surpassed consensus EPS estimates two times and topped consensus revenue estimates three times [2] Stock Performance - Open Text shares have lost about 25% since the beginning of the year, while the S&P 500 has gained 15.8% [3] - The current consensus EPS estimate for the coming quarter is $0.86 on revenues of $1.29 billion, and for the current fiscal year, it is $3.65 on revenues of $5.4 billion [7] Industry Outlook - The Computer - Software industry is currently in the bottom 39% of over 250 Zacks industries, indicating potential challenges for stock performance [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Open Text's stock performance [5][6]

Fiscal Year and Financial Overview - OpenText's fiscal year runs from July 1 to June 30, with fiscal 2024 ending on June 30, 2024[6]. - For the fiscal year ended June 30, 2024, total revenues were distributed as follows: 40% from Content Cloud, 20% from Cybersecurity Cloud, 15% from Application Automation Cloud, 10% from Business Network Cloud, 10% from IT Operations Management Cloud, and 5% from Analytics Cloud[18]. - As of June 30, 2024, total cash and cash equivalents amounted to $1,280.662 million, an increase from $1,231.625 million as of June 30, 2023[274]. - Cash and cash equivalents denominated in foreign currencies totaled $521.702 million as of June 30, 2024, down from $598.374 million as of June 30, 2023[274]. - The company reported an outstanding balance of $2.2 billion under the Acquisition Term Loan, with an interest rate margin of 2.25%[271]. Acquisitions and Investments - OpenText completed the acquisition of Micro Focus International Limited for a total purchase price of $6.2 billion, enhancing its software technology and services portfolio[15]. - The Application Modernization and Connectivity (AMC) business was divested for $2.275 billion in cash, with net proceeds used for a $2.0 billion debt reduction[15]. - The company has deployed $12.1 billion on acquisitions over the last 10 fiscal years, focusing on companies within its total addressable markets[34]. - The company plans to pursue strategic acquisitions to strengthen its product offerings in the Information Management market[49]. Research and Development - OpenText's investment in research and development may not yield timely returns, impacting future growth[10]. - OpenText has invested a cumulative total of $2.0 billion in R&D over the last three fiscal years, representing 14.7% of cumulative revenue for that period[32]. - R&D expenses for Fiscal 2024 were $893.9 million, up from $680.6 million in Fiscal 2023 and $440.4 million in Fiscal 2022[45]. - OpenText's R&D investments focus on enhancing cloud and AI capabilities, with a significant portion allocated to integrating Micro Focus products and meeting new compliance standards[17]. Product Offerings and Technology - The company emphasizes the importance of developing technologically advanced products to maintain future revenues and operating results[10]. - OpenText's software products are integrating AI and machine learning technologies, presenting potential risks and challenges[12]. - The Content Cloud provides secure and compliant access to both structured and unstructured data, improving productivity and reducing risk for customers[19]. - OpenText Cybersecurity solutions utilize AI-led threat intelligence to protect critical information across endpoints, networks, and applications[21]. - The Business Network Cloud facilitates digital supply chains and secure e-commerce ecosystems, enabling organizations to streamline connectivity and improve operational efficiencies[23]. - The IT Operations Management Cloud enhances service levels and customer experiences through holistic management of IT assets and applications[25]. - OpenText's Analytics Cloud integrates AI capabilities to provide actionable insights and improve decision-making processes for organizations[26]. - The Developer Cloud offers APIs and SDKs to accelerate product development and customization of Information Management applications[30]. Market and Customer Strategy - OpenText expects cloud services and subscriptions to be the largest driver of growth, supported by a global, scalable, and secure infrastructure[36]. - The company has a diverse customer base, including G10K organizations, enterprise companies, public sector agencies, mid-market companies, SMBs, and direct consumers[40]. - OpenText's partnerships with major companies like SAP, Google Cloud, AWS, and Microsoft enhance its product offerings and market reach[41]. - The company aims to broaden its global presence by targeting G10K customers and expanding into new geographies and SMB markets[49]. Risks and Challenges - The company faces risks related to geopolitical instability, including the ongoing Russia-Ukraine and Israel-Hamas conflicts, which may affect business operations[10]. - OpenText's financial condition may be impacted by fluctuations in foreign currency exchange rates and its indebtedness[13]. - OpenText's ability to generate future revenues may be affected by the length of its sales cycle and customer contract renewals[10]. Sustainability and Inclusion - The company is committed to achieving net-zero greenhouse gas emissions by 2040 and zero waste from operations by 2030[53]. - The company has established a global Equity, Diversity and Inclusion steering committee to guide its ED&I strategy and initiatives[54]. Employee and Financial Management - The company offers a global Employee Stock Purchase Plan (ESPP) allowing eligible employees to purchase shares at a 15% discount[55]. - An adverse change of 100 basis points on the interest rate would increase the annual interest payment on the Acquisition Term Loan by approximately $22.2 million[271]. - A 10% uniform weakening of foreign currency exchange rates against the U.S. dollar would decrease reported cash and cash equivalents by $52.2 million as of June 30, 2024, compared to a decrease of $59.8 million as of June 30, 2023[274].

| --- | --- | --- | |---------------------------------------------------|-------|-------| | | | | | | | | | | | | | OpenText F'24 Financial Results and F'25 Targets | | | | August 1, 2024 | | | | NASDAQ: OTEX \| TSX: OTEX | | | Safe Harbor and IP Statement This presentation contains forward-looking statements or information (forward-looking statements) within the meaning of the Private Securities Litigation Reform Act of 1995, Section 21E of the U.S. Securities Exchange Act of 1934, as amended (the Exchange ...

Revenue Growth and Performance - Total annual revenues reached $5.8 billion, representing a 29% year-over-year growth[1][2] - Annual Recurring Revenues (ARR) grew to $4.5 billion, up 25.4% year-over-year[1][3] - Cloud revenues increased to $1.8 billion, up 7.1% year-over-year[1][3] - OpenText's FY'24 revenue increased by 28.6% to $5,769.6 million compared to FY'23[16] - Total revenues for the year ended June 30, 2024, increased to $5,769,577 thousand, up from $4,484,980 thousand in 2023[26] - Cloud services and subscriptions revenue grew to $1,820,524 thousand in 2024, up from $1,700,433 thousand in 2023[26] - Revenue composition by currency for the year ended June 30, 2024: USD 59%, EURO 22%, GBP 5%, CAD 3%, Other 11%[83] Profitability and Margins - Adjusted EBITDA for the fiscal year was $2.0 billion, with a margin of 34.1%[3][6] - GAAP-based gross margin for FY'24 improved to 72.6%, up 200 basis points from FY'23[16] - Non-GAAP-based diluted EPS for FY'24 was $4.17, a 26.7% increase from FY'23[16] - Gross profit for the year ended June 30, 2024, was $4,191,028 thousand, compared to $3,168,393 thousand in 2023[26] - Non-GAAP-based gross margin for the year ended June 30, 2024 was 77.3%, compared to GAAP-based gross margin of 72.6%[55] - Adjusted EBITDA for the year ended June 30, 2024 was $1,970.20 million, representing an Adjusted EBITDA margin of 34.1%[60] - GAAP-based gross profit margin for Q2 2023 was 71.4%, while Non-GAAP-based gross profit margin was 76.9%[69] - GAAP-based gross profit for the year ended June 30, 2023 was $3,168,393 with a gross margin of 70.6%, while Non-GAAP-based gross profit was $3,412,866 with a gross margin of 76.1%[75] Cash Flow and Financial Health - Free cash flows for the fiscal year were $808 million, up 23.3% year-over-year[3][6] - The consolidated Net Leverage Ratio improved to 2.3x as of June 30, 2024[4] - OpenText reduced its debt by $2.0 billion in the quarter[8] - Long-term debt reduced to $6,356,943 thousand in 2024, down from $8,562,096 thousand in 2023[23] - Free cash flows for the year ended June 30, 2024 were $808.40 million, calculated from GAAP-based cash flows from operating activities of $967.69 million minus capital expenditures of $159.30 million[61] - Free cash flow for Q1 2024 was $348.160 million, derived from operating cash flows of $384.697 million minus capital expenditures of $36.537 million[68] - Free cash flow for Q2 2023 was $91.241 million, derived from operating cash flows of $115.301 million minus capital expenditures of $24.060 million[74] - Free cash flows for the year ended June 30, 2023 were $655,373, calculated by subtracting capital expenditures of $123,832 from GAAP-based cash flows provided by operating activities of $779,205[81] Share Repurchase and Dividends - The company announced a new $300 million share repurchase program[1][2] - The annualized dividend was increased by 5% to $1.05 per share[1][2] - OpenText's Fiscal 2025 Repurchase Plan allows for the purchase of up to $300 million of common shares, with a maximum of 21,179,064 shares, representing 10% of the company's public float[11] - Under the Fiscal 2024 Repurchase Plan, OpenText purchased and cancelled 5,073,913 common shares for approximately $150 million at an average price of $29.57 per share[10] - Dividends declared in 2024 amounted to $271,486K, compared to $261,464K in 2023 and $237,655K in 2022[30] - Common shares repurchased in 2024 amounted to $152,333K, compared to $176,987K in 2023[30] Divestitures and Debt Reduction - The company completed the divestiture of its AMC business for $2.275 billion[3] - OpenText completed the divestiture of its Application Modernization and Connectivity (AMC) business to Rocket Software for $2.275 billion[8] - Proceeds from AMC Divestiture were $2.23 billion in Q2 2024[32] - Repayment of long-term debt and Revolver was $2.01 billion in Q2 2024[32] Non-GAAP Financial Measures - The company excludes amortization of acquired intangible assets, share-based compensation, and special charges (recoveries) from Non-GAAP measures to provide a more consistent basis for comparison across accounting periods[44] - The company's Non-GAAP-based tax rate for the three months ended June 30, 2024, was approximately 14%, compared to a GAAP-based tax provision rate of approximately 49%[50] - The company's Non-GAAP measures exclude items such as amortization, share-based compensation, special charges (recoveries), and other income (expense) to better reflect ongoing business and operating results[48] - The company's management believes that Non-GAAP financial measures provide useful information to investors by portraying financial results before the impact of certain non-operational charges[44] - GAAP-based net income for the year ended June 30, 2024 was $465.09 million, while Non-GAAP-based net income was $1,137.25 million[55][58] - Non-GAAP-based net income for the three months ended June 30, 2024, was $267,427, with diluted earnings per share of $0.98[48] - Non-GAAP-based income from operations for the three months ended June 30, 2024, was $413,475[48] - Non-GAAP-based net income for Q1 2024 was $257.049 million, with a diluted EPS of $0.94[65] - Non-GAAP-based net income for Q2 2023 was $245.837 million, with a diluted EPS of $0.91[71] - Non-GAAP-based net income attributable to OpenText for the year ended June 30, 2023 was $890,700, compared to GAAP-based net income of $150,379[77] Quarterly Performance - Q4 FY'24 revenue was $1,362.1 million, a 5.9% decrease from Q3 FY'24 and an 8.6% decrease from Q4 FY'23[17] - GAAP-based diluted EPS for Q4 FY'24 was $0.91, a 152.8% increase from Q3 FY'24 and a 605.6% increase from Q4 FY'23[17] - Net income for the three months ended June 30, 2024, was $248,274 thousand, compared to a net loss of $48,685 thousand in 2023[24] - GAAP-based net income for the three months ended June 30, 2024, was $248,229, with a net income margin of 18.2%[53] - GAAP-based net income for Q1 2024 was $98.285 million, while Non-GAAP-based net income was $257.049 million[65] - GAAP-based net loss for Q2 2023 was $48.734 million, while Non-GAAP-based net income was $245.837 million[71] Operational Expenses and Adjustments - Research and development expenses increased to $893,932 thousand in 2024, up from $680,587 thousand in 2023[26] - Share-based compensation adjustments totaled $140.08 million for the year ended June 30, 2024[55][58] - Amortization adjustments totaled $676.33 million for the year ended June 30, 2024[58] - Special charges (recoveries) adjustments totaled $135.31 million for the year ended June 30, 2024[55][58] - Other income (expense) adjustments totaled $(358.39) million for the year ended June 30, 2024[55][58] - Research and development expenses for the year ended June 30, 2023 were $680,587 on a GAAP basis and $641,522 on a Non-GAAP basis[75] - Sales and marketing expenses for the year ended June 30, 2023 were $948,598 on a GAAP basis and $906,888 on a Non-GAAP basis[75] - General and administrative expenses for the year ended June 30, 2023 were $419,590 on a GAAP basis and $391,352 on a Non-GAAP basis[75] - Amortization of acquired technology-based intangible assets for the year ended June 30, 2023 was $223,184, which was excluded from Non-GAAP-based operating expenses[75] Balance Sheet and Equity - Total assets decreased to $14,205,707 thousand as of June 30, 2024, from $17,089,200 thousand in 2023[23] - Total current liabilities decreased to $2,800,494 thousand in 2024, down from $3,219,614 thousand in 2023[23] - Shareholders' equity as of June 30, 2024, stood at $4,199,681K, up from $4,022,104K in 2023 and $4,032,260K in 2022[30] - Accumulated other comprehensive loss as of June 30, 2024, was $69,619K, compared to $53,559K in 2023 and $7,659K in 2022[30] - Non-controlling interests as of June 30, 2024, were $1,523K, up from $1,329K in 2023 and $1,142K in 2022[30] Foreign Currency and Comprehensive Income - Net foreign currency translation adjustments resulted in a loss of $15,646K in 2024, compared to losses of $40,798K in 2023 and $78,724K in 2022[28] - Total comprehensive income for 2024 was $449,224K, a significant increase from $104,666K in 2023 and $323,362K in 2022[28] Expense Composition - Expense composition by currency for the year ended June 30, 2024: USD 50%, EURO 12%, GBP 7%, CAD 10%, Other 21%[84] Cloud and Government Solutions - Enterprise cloud bookings for the fiscal year were $701 million, up 32.9% year-over-year[3] - OpenText's cloud for government solution achieved FedRAMP authorization, enhancing its offerings for government clients[8]

Core Insights - OpenText Corporation reported total annual revenues of $5.8 billion, reflecting a 29% year-over-year growth, with significant contributions from Annual Recurring Revenues (ARR) and cloud services [1][2][5] - The company announced a new $300 million share repurchase program and increased its annualized dividend by 5% from $1.00 to $1.05 per share [1][2][8] - OpenText achieved a GAAP-based net income of $465 million, a 209.3% increase year-over-year, primarily due to the gain from the divestiture of its Application Modernization and Connectivity (AMC) business [2][5][6] Fiscal 2024 Annual Highlights - Total revenues reached $5,769.6 million, up 28.6% year-over-year, with constant currency growth of 27.7% [2][5] - Annual Recurring Revenues (ARR) were $4,533.8 million, representing a 25.4% increase year-over-year [2][5] - Cloud revenues totaled $1,820.5 million, marking a 7.1% increase year-over-year [2][5] - Operating cash flows were $967.7 million, and free cash flows were $808.4 million, indicating strong cash generation [2][5] Fourth Quarter Highlights - In Q4 FY'24, total revenues were $1,362.1 million, down 8.6% year-over-year, primarily due to the AMC divestiture [3][4] - Annual Recurring Revenues for Q4 were $1,093.3 million, down 5.5% year-over-year [4][5] - Cloud revenues in Q4 were $464.9 million, reflecting a 2.9% increase year-over-year [4][5] Share Repurchase and Dividend Program - OpenText initiated a new share repurchase plan for up to $300 million, following the termination of the previous plan [8][10] - The company declared a quarterly cash dividend of $0.2625 per share, with a record date of August 30, 2024, and a payment date of September 20, 2024 [7][8] Strategic Moves and Market Position - OpenText completed the divestiture of its AMC business for $2.275 billion, which contributed to its improved financial metrics [6][12] - The company has made significant investments in cloud, security, and AI, positioning itself as a leader in Information Management software [2][6][19]

Core Insights - OpenText has enabled Export Development Bank of Egypt (EBank Egypt) to enhance operational efficiencies and innovation through its IT Operations Cloud solutions, facilitating a digital transformation aligned with a customer-centric service management strategy [1][9] Group 1: Implementation of OpenText Solutions - EBank Egypt replaced its outdated ticketing support system with OpenText Service Management Automation X (SMAX), which optimizes costs and enhances support through private generative AI [2] - The implementation of SMAX has led to a largely paperless organization, supporting EBank's ESG goals by digitizing IT financial management processes [2] - Key personnel at EBank, including Ibrahim and Amr, played significant roles in automating processes and extending SMAX to non-IT departments, resulting in improved accuracy and real-time tracking capabilities [3][10] Group 2: Industry Context and Challenges - Financial institutions face increasing pressure to address evolving regulations and security threats while remaining competitive and innovative [4] - OpenText supports operations for seventeen of the top twenty largest financial institutions, emphasizing the importance of investing in solutions that enhance customer service operations [4][5] Group 3: OpenText's Market Position - OpenText is recognized as a leading Information Management software and services company, providing a comprehensive suite of Business Clouds, Business AI, and Business Technology [6] - The company manages over 30 million digital identities and processes more than $9 trillion in network commerce across 26 billion transactions [11]

Core Insights - Investors in Open Text Corporation (OTEX) should monitor the stock closely due to significant movements in the options market, particularly the Aug 16, 2024 $22.50 Call which has shown high implied volatility [1] Company Analysis - Open Text currently holds a Zacks Rank 3 (Hold) in the Computer - Software industry, which is positioned in the Bottom 32% of the Zacks Industry Rank [3] - Over the past 30 days, no analysts have raised their earnings estimates for the current quarter, while one analyst has lowered the estimate, resulting in a decrease of the Zacks Consensus Estimate from $1.08 per share to $1.05 [3] Options Market Insights - The high implied volatility surrounding Open Text shares suggests that options traders are anticipating a significant price movement, which could indicate an upcoming event that may lead to a substantial rally or sell-off [2][4] - Seasoned options traders often seek out options with high implied volatility to sell premium, aiming to benefit from the decay of options value as expiration approaches [4]