OpenText(US:OTEX)2022-06-22 14:24Financial Data and Key Metrics Changes - Revenue for the first half of 2022 was $1.3 billion, reflecting a constant currency decline of 6.8% year-on-year, excluding Digital Safe [9][10] - Adjusted EBITDA was $437 million, with a margin of 35%, supported by a cost reduction program [9][12] - Free cash flow generation increased by 36% to $190 million compared to the first half of 2021 [9][21] - Net debt reduced by over $0.5 billion since October, with leverage decreasing by 0.3 times [10][26] Business Line Data and Key Metrics Changes - License revenue declined by 7.9%, attributed to volatility in large transactions within mature portfolios [15] - Maintenance revenue improved by 2 percentage points from the exit run rate in the previous year, though still below medium-term ambitions [16] - SaaS revenue increased by 8.7%, marking the third consecutive period of improvement, with expectations for future double-digit growth [17] - Consulting revenue declined by 8.5%, consistent with license revenue trends [18] Market Data and Key Metrics Changes - The suspension of operations in Russia impacted revenue by approximately 0.3% in the half [14] - The U.S. dollar's strength against major currencies resulted in a 2% headwind on revenue and a 4% headwind on adjusted EBITDA [11] Company Strategy and Development Direction - The company is focused on enhancing high-quality recurring SaaS and subscription revenue, with progress noted in key areas [5][8] - Strategic priorities include stabilizing revenue, generating strong cash flows, and reducing leverage while adapting to macroeconomic challenges [42][43] - The company aims to improve operational agility and efficiency through cost-saving programs and restructuring [40][41] Management's Comments on Operating Environment and Future Outlook - Management noted increased scrutiny on project approvals and longer decision-making cycles among customers due to a constrained economic environment [56] - There is an expectation of moderation in labor market attrition rates, with recent stabilization observed [58] - The company remains committed to mitigating the impact of macroeconomic headwinds while focusing on strategic objectives for FY 2023 [42][66] Other Important Information - The company completed the sale of Digital Safe, using proceeds to pay down debt [10] - An interim dividend of $0.08 was proposed [10] Q&A Session Summary Question: Interest charge modeling and inflation-related pricing strategies - Management explained that license business is project-driven, focusing on deal negotiations rather than list prices, with pricing opportunities pursued during renewals [47][48] - For the interest charge, the P&L is expected to be higher due to upfront fees on refinancing, with an estimated increase of $20 million to $25 million [49] Question: Customer behavior and staff attrition rates - Management observed increased scrutiny on project sign-offs and longer decision-making cycles, indicating a cautious customer environment [56] - Attrition rates have been stabilizing, with expectations of moderation in the labor market [58] Question: Maintenance retention rates - Management reported improvements in retention rates across the portfolio, with ongoing efforts to address specific issues in sub-portfolios [62]