OpenText(OTEX) - 2026 Q2 - Quarterly Report

Financial Performance - Total revenue for Q2 Fiscal 2026 was $1,326.7 million, a decrease of 0.6% year-over-year, and down 2.6% after adjusting for foreign exchange impacts[218]. - Total annual recurring revenue reached $1,060.0 million, an increase of 0.7% year-over-year, but down 1.2% after adjusting for foreign exchange impacts[218]. - Cloud services and subscriptions revenue was $478.1 million, up 3.4% year-over-year, and up 1.9% after adjusting for foreign exchange impacts[218]. - GAAP-based net income attributable to OpenText was $168.1 million, down from $229.9 million in the same period last year, while Non-GAAP-based net income was $286.3 million compared to $293.3 million[225]. - GAAP-based diluted earnings per share (EPS) decreased to $0.66 from $0.87 year-over-year, while Non-GAAP diluted EPS increased slightly to $1.13 from $1.11[225]. - The company reported total revenues of $1,327,000 for the three months ended December 31, 2025[317]. - For the six months ended December 31, 2025, GAAP-based net income attributable to OpenText was $314,707, with a diluted earnings per share of $1.24[340]. - Non-GAAP-based net income for the same period was $552,553, resulting in a diluted earnings per share of $2.18[340]. Operational Efficiency - GAAP-based gross margin improved to 74.0%, compared to 73.3% in the same period last year[218]. - Non-GAAP-based gross margin increased to 77.6%, compared to 77.2% in the same period last year[218]. - Operating cash flow for the six months ended December 31, 2025, was $466.4 million, a significant increase of 72.6% compared to $270.2 million in the same period last year[225]. - 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 and an additional 35% expected in Fiscal 2026[233][234]. - Total operating expenses for the three months ended December 31, 2025, were $690.4 million, an increase of $8.3 million compared to the same period in 2024[278]. Workforce and Employment - The company employed approximately 21,300 individuals as of December 31, 2025, with 34% in the Americas, 23% in EMEA, and 43% in Asia Pacific[217]. - The company reduced its research and development labor resources by 341 employees, from 7,401 at December 31, 2024, to 7,060 at December 31, 2025[281]. - The company experienced a decrease in general and administrative labour resources by 299 employees, from 3,083 employees at December 31, 2024, to 2,784 employees at December 31, 2025[288]. Strategic Focus - The company focuses on growth in earnings and cash flows for Fiscal 2026 and 2027, with a strategic emphasis on Information Management capabilities[207]. - The company plans to redeploy capital from non-core assets to enhance focus on core Information Management for AI business[207]. - The company is committed to integrating AI and machine learning into its products and services to enhance customer value[216]. - The company is focused on expanding its AI-first Information Management offerings and pursuing tuck-in acquisitions to align capital with high-return opportunities[230]. Cash and Liquidity - Cash and cash equivalents increased to $1,271.4 million as of December 31, 2025, compared to $1,156.5 million as of June 30, 2025[225]. - Free cash flows for the three months ended December 31, 2025, amounted to $279,444, calculated as GAAP-based cash flows from operating activities of $318,659 less capital expenditures of $39,215[324]. - Cash flows used in investing activities increased by $0.4 million during the six months ended December 31, 2025, primarily due to property and equipment additions[359]. - Cash flows used in financing activities decreased by $64.3 million during the six months ended December 31, 2025, mainly due to reduced cash used for share repurchases[361]. Market and Revenue Trends - Enterprise cloud bookings reached $294.9 million, up from $249.9 million in the same period last year, indicating strong demand for cloud services[225]. - The company expects total revenues for Fiscal 2026 to grow by 1% to 2%, with cloud services and subscriptions revenues projected to increase by 3% to 4%[227]. - The Americas region accounted for 53.4% of total revenues, down from 57.4% in the previous year[243]. - There were 53 cloud services contracts greater than $1.0 million closed during the second quarter of Fiscal 2026, compared to 51 contracts in the same quarter of Fiscal 2025[249]. Foreign Currency Risks - The company is exposed to foreign currency transaction risks from intercompany transactions, which may result in realized gains or losses depending on currency exchange rates[397]. - As of December 31, 2025, a one cent change in the Canadian dollar to U.S. dollar exchange rate would have resulted in a change of $0.7 million in the mark-to-market valuation of existing foreign exchange forward contracts[398]. - A one cent change in the Euro to U.S. dollar forward exchange rate for the 5-year EUR/USD cross currency swaps would have caused a change of $5.8 million in the mark-to-market valuation[400]. - Total cash and cash equivalents denominated in foreign currencies as of December 31, 2025, amounted to $557.9 million, compared to $720.5 million as of June 30, 2025[403].