OpenText(US:OTEX)2025-11-05 21:04Revenue Performance - Total revenue for Q1 Fiscal 2026 was $1,288.1 million, an increase of 1.5% compared to Q1 Fiscal 2025, but down 0.6% after adjusting for foreign exchange impacts[210]. - Total annual recurring revenue reached $1,071.4 million, up 1.8% year-over-year, and down 0.3% after considering foreign exchange effects[210]. - Cloud services and subscriptions revenue was $484.5 million, reflecting a 6.0% increase compared to the same period last year, and a 4.2% increase after adjusting for foreign exchange[210]. - The company reported increases in revenue from Content, Business Network, Cybersecurity (Enterprise), and ADM product categories, while ITOM, Cybersecurity (SMB & Consumer), and Analytics categories saw declines[210]. - Total revenues for the three months ended September 30, 2025, were $1,288,135, an increase of $19,130 or 1.5% compared to $1,269,005 in 2024[233]. - Cloud services and subscriptions revenues increased by $27.5 million or 6.0% to $484,509, driven by growth in Content, Business Network, ADM, and ITOM product categories[238]. Financial Metrics - GAAP-based gross margin increased to 72.8% from 71.7% year-over-year, while non-GAAP-based gross margin rose to 76.5% from 75.8%[216]. - GAAP-based net income attributable to the Company was $146.6 million, up from $84.4 million in the same period last year, representing a 73.5% increase[216]. - Operating cash flow for the three months ended September 30, 2025, was $147.8 million, a significant increase of 289.9% compared to $(77.8) million in the prior year[216]. - The GAAP-based EPS, diluted, increased to $0.58 from $0.32 year-over-year[233]. - Non-GAAP-based net income attributable to OpenText for the three months ended September 30, 2025, was $266,275, representing an increase from GAAP-based net income of $146,616[297]. - Non-GAAP-based earnings per share for the three months ended September 30, 2025, was $1.05, compared to GAAP-based earnings per share of $0.58[297]. - Adjusted EBITDA for the quarter was $467,411, compared to $443,801 in the prior year[233]. - Adjusted EBITDA margin for the three months ended September 30, 2025, is calculated as a percentage of total revenue, reflecting operational performance[286]. - GAAP-based net income attributable to OpenText for the three months ended September 30, 2025, was $146,616, with a net income margin of 11.4%[298]. - Free cash flows for the three months ended September 30, 2025, were $101,229, compared to cash flows used in operating activities of $147,763[299]. Cost Management - Research and development expenses decreased by $21.6 million to $169.1 million, representing 13.1% of total revenues, down from 15%[258]. - Sales and marketing expenses increased by $11.2 million to $257.1 million, accounting for 20% of total revenues, up from 19%[262]. - General and administrative expenses decreased by $1.0 million to $105.8 million, remaining stable at 8% of total revenues[264]. - Special charges decreased by $27.0 million to $20.1 million, primarily due to a reduction in restructuring costs[269]. - Cost of professional service and other revenues decreased by $3.9 million, primarily due to a reduction in labor-related costs of $4.3 million[255]. Strategic Initiatives - The company is focusing on growth in earnings and cash flows for Fiscal 2026 and Fiscal 2027, with a strategic emphasis on Information Management capabilities[199]. - The Business Optimization Plan announced in July 2024 aims to redeploy capital from non-core assets to enhance focus on core Information Management for AI business[199]. - The company anticipates future growth through both organic and inorganic means, including potential acquisitions[199]. - The Business Optimization Plan is expected to generate annualized savings of approximately $490.0 million to $550.0 million, with 35% of these savings realized in Fiscal 2025[223]. Workforce and Management - The company employed approximately 21,200 individuals as of September 30, 2025, with 34% in the Americas, 23% in EMEA, and 43% in Asia Pacific[209]. - The newly appointed Chief Financial Officer, Steve Rai, brings over 30 years of global finance experience, including prior leadership at BlackBerry Limited[213]. - The company reduced its workforce in research and development by 397 employees, from 7,426 to 7,029[259]. Cash Flow and Debt Management - Cash and cash equivalents as of September 30, 2025, totaled $1,087,083, a decrease of $69,413 from the previous quarter[309]. - Cash flows from operating activities increased by $225.6 million compared to the same period in the prior fiscal year, driven by a net change from working capital of $177.3 million[313]. - Cash used in investing activities increased by $36,440 during the three months ended September 30, 2025, primarily due to higher property and equipment additions[315]. - Cash flows used in financing activities decreased by $8.8 million, attributed to a reduction in cash used for repurchases of Common Shares[317]. - As of September 30, 2025, the company had senior debt outstanding with a total carrying value of $4.3 billion, maturing between 2027 and 2031[323]. - The company entered into a $3.585 billion Acquisition Term Loan with a floating interest rate of Term SOFR plus 1.75%, with an outstanding balance of $2.176 billion as of September 30, 2025[324]. - The company amended its $750 million Revolver to extend the maturity date to December 19, 2028, with no outstanding borrowings as of September 30, 2025[325]. - The company has long-term debt obligations totaling $7.787 billion, with minimum payments due across various fiscal periods[336]. Foreign Currency and Hedging - The company hedged certain Canadian dollar foreign currency exposures, with a one cent change in the exchange rate affecting the mark-to-market valuation by $0.7 million[354]. - A one cent change in the Euro to U.S. dollar forward exchange rate would impact the mark-to-market valuation of the 7-year EUR/USD cross currency swaps by $7.6 million as of September 30, 2025[357]. - The mark-to-market valuation change for the 5-year EUR/USD cross currency swaps would be $5.8 million for a one cent change in the Euro to U.S. dollar forward exchange rate[356]. - Fluctuations in foreign currencies significantly impact the reported total assets and liabilities for foreign subsidiaries, affecting cash and cash equivalents reported in U.S. dollars[358].