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Thank you for standing by. This is the conference operator. Welcome to the OpenTex Corporation fourth quarter fiscal 2022 earnings conference call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, simply press spar and 1 on your touchtone phone. Should anyone need assistance during the conference call, Thank you, operator.

Good afternoon, everyone, and welcome to Open Tech's fourth quarter and fiscal 22 earnings call. With me on the call today are Open Tech's Chief Executive Officer and Chief Technology Officer, Mark J. Baranchay, and our Executive Vice President and Chief Financial Officer, Manu Raghunathan. Today's call is being webcast live and recorded with a replay available shortly thereafter on the Open Text Investor Relations website. Earlier today, we posted our shareholder letter along with our press release and investor presentation. These materials will supplement our prepared remarks and can be accessed on the Open Text Investor Relations website investors.opentex.com. I'm pleased to inform you that Open Text Management will be participating at the following upcoming conferences. Oppenheimer's Virtual Technology Internet and Communications Conference on August 10th, Deutsche Bank's Technology Conference on August 31st in Las Vegas, and Citi Global Technology Conference on September 9th in New York. And now on to our Safe Harbor Statement. Please note that during the course of this conference call, we may make statements relating to the future performance of OpenText that contain forward-looking information. While these forward-looking statements represent our current judgment, actual results could differ materially from a conclusion, forecast, or projection in the forward-looking statements made today. Certain material factors and assumptions were applied in drawing any such statement. Additional information about the material factors that could cause actual results to differ materially from a conclusion, forecast, or projection in the forward-looking information, as well as risk factors that may project future performance results of OpenText are contained in OpenText's recent Forms 10-K and 10-Q, as well as in our press release that was distributed earlier this afternoon, which may be found on our website. We undertake no obligation to update these forward-looking statements unless required to do so by law. In addition, our conference call may include discussions of certain non-GAAP financial measures. Reconciliations of any non-GAAP financial measures to their most directly comparable GAAP measures may be found within our public filings and other materials which are available on our website. And with that, I'm pleased to hand the call over to Mark. Thank you, Harry.

and welcome everyone. We appreciate you joining us today, and I'm very pleased to be doing the call from Waterloo, Ontario. My remarks are a little longer than usual, given we just closed a great year, and we have a tremendously exciting forward agenda. So let me jump right in. OpenTX Q4 constant currency results once again beat expectations on the top and bottom line. With $935 million in total revenues, and 17% cloud revenue growth. Our renewal rates are best in class at 94% and our adjusted EBITDA margin was 35% and our free cash flows were 214 million in the quarter and 889 million for the year, up 9%. You'll hear the details on the quarter from Madhu. I have never felt better about the future of OpenText, the resiliency of our technology and expertise. the intrepidness of our people and roadmap, the transformative nature of our mission to elevate every person and organizations of all sizes to gain the information advantage, and the value we are creating for the open tech business system of total growth, cash flow expansion, and capital efficiency. Like other premier technology companies, we're managing through many macro issues. The pandemic continues, high inflation, the strength of the U.S. dollar, interest rates, Russia's war on Ukraine, the energy crisis in Europe, and recessionary indicators. Understanding the macro today is more difficult than usual, as there's not a one-size-fits-all plan, nor can you have a single point of planning. You need a multifaceted plan, unique to your business, and you need to act preemptively and boldly. Let's unpack the macro for open text. In everything I speak about today, is already factored into our F23 outlook and our F25 aspirations. The pandemic continues. OpenTex has performed superbly the last two and a half years and will continue to do so. We are a culturally stronger company. Our roadmap with Project Titanium was forged over the last year and is customer prioritized. Our renewals business is ironclad and our corporate and talent brands are stronger than ever. The pandemic tempered us and sharpened us. On to high inflation. We have put in place a program that we call WIN, Project WIN, with inflation now, WIN. We are systematically attacking inflation on all fronts, revenue, expenses, efficiency, and investing for growth. We raised prices by 5% starting July 1. We are not pulling back on hiring. We have a 2% headcount expansion plan for the year. We're also accelerating some key automation projects for efficiency and cost out. Then parallel, we're doing some good old-fashioned belt tightening. As well, we'll help our customers win with inflation now by accelerating their digitalization projects, removing variable costs, and enabling them to do more with less. Let's be frank, digitalization is the only answer here. The strength of the US dollar. Where possible, we minimize our FX exposure through natural hedging, where we match revenues and costs in our major theaters of operations, and we'll continue to optimize this balance. Our high ARR provides for consistency and predictability. And we will provide our F23 outlook and our F23 aspirations now in constant currency to reinforce that consistency and predictability. Interest rates. We've already moved approximately 75% of our debt to fixed rates. And interest rate increases have a minimal effect on our business. Russia's war on Ukraine. On the human aspect, we're helping our employees in Europe with stipends for those employees hosting refugees. We've announced a series of funding of schools in Poland for refugees, and we are a technology and funding partner with the United Nations Refugee Agency. On business aspects, we shut down our Russia offices and removed all employees two years ago and exited Russia at minimal financial cost. More than offsetting this, we see an upward pipeline in Europe and the Middle East given our strength in heavy industries, construction, and the energy sectors. Recessionary indicators. Companies are going to fall into a variety of categories here. Those poised to thrive, those who will be constrained, those who will just survive, and those who get lost. Our clear and preemptive actions on the macro issues with our WIN program are placing Open Tech squarely in the thrive category. We plan to out-compete our rivals by investing in our people, our products, and in our customers' success. We see a real opportunity to help organizations of all sizes to use digital technology to overcome today's challenges, emerge stronger, and out-compete their rivals. OpenTex is fantastically positioned to help organizations deliver on the digital imperatives, to innovate, to grow, to connect people and organizations and systems. to be well run and to do more with less. We are investing to win and we are putting our investments behind that. In fiscal 23, approximately 40% of our total expense is direct investment in R&D and cloud operations. And our investments this year are going to increase 75 million. Six years ago, our annual investment was just half that and 10 years ago, our cloud revenues were zero. and today they're 1.54 billion. We are fully committed to being the global leader in information management in the cloud at scale. In costing currency, just to recall, in fiscal 21, our cloud organic growth rate was 1.8%. In fiscal 22 last year, our cloud organic growth rate was 3.6%. This year, our cloud bookings rate, and we're gonna, we do, we'll talk about, we're gonna introduce bookings this year, Our cloud bookings rate is expected to grow 15% plus. And these proof points and increased investments give us the confidence that you'll see here in our F25 aspirations of up to 8% cloud organic growth. We are accelerating all things cloud. And OpenText is an all-weather company with foundation built on bedrock. In this dynamic environment, we saw strong demand, took share, and fortified our cloud with increased customer commitment. It's a time to standardize on companies built for the long term like OpenText. So for the full year fiscal 22 in constant currency, we delivered record total revenues of 3.53 billion and grew 4.3 year over year or 1.7% organically. The Open Text Cloud delivered a record $1.54 billion in revenues and grew 9.8%. Make no mistake, the Open Text Cloud is the flywheel of our business today. $1.35 billion in maintenance and update services, growing in a gross margin of 91%. I'm really proud to highlight we've created an SMB&C business from zero to approaching $700 million in just two years. growing and with gross margins in the high 80s. We have a unique distribution strategy with RMMs, MSPs, and our great partnership with Microsoft, and we're just getting started. ARR was 2.89 billion, up 5.5%, and 82% of our revenues. Customers fortified their long-term commitment to the OpenText Cloud with $466 million of new value in enterprise bookings, and we expect this to grow 15% plus in fiscal 23. In Q4 alone, we had 34 new cloud wins, over $1 million in bookings value, with an average commitment of over four years. World-class brands joined the OpenTex cloud in Q4. Carl Zeiss, Citgo, Close Brothers, Hydro-Quebec, Evermark, MUFG Bank, and the Salt River Project. We had adjusted dividend dollars of $1.3 billion for upper quartile margin of 36.5%. Our free cash flow for the year was $889 million, up 9.4% year over year. And during fiscal 22, we returned $415 million to shareholders, $238 million via our dividend program. We also purchased 3.8 million shares for cancellation during the year, reducing our share count by 1.4%. to 269.5 million shares. We did what we said we were going to do. Total growth, 3.53 billion of 4.3% or 1.7% organic growth. Cloud growth, 1.54 billion of 9.8% or 3.6% organic growth. Free cash flow expansion, 889 million of 9.4% And for our capital efficiency, we returned $415 million to shareholders. As we begin our new fiscal year 23, we remain committed to balancing our operational discipline, which is a hallmark of OpenTax, with continued investments and key strategic areas to drive future revenue growth, free cash flow expansion, and a continued capital efficiency. We're hiring smartly. We're investing in Project Titanium. We're going to help our customers of all sizes with their transition to the open-text cloud and win. Pressure is a privilege, and pressure creates diamonds. At the core of our fiscal 23 operating plan are the open-text four Cs. Customers, cloud, cash flow, and capital efficiency. And we intend to produce diamonds this year. On customers and cloud, again, let's be frank. Digital technology is the only answer, and our demand drivers are very clear. Converting our off-cloud install base to the open-text cloud. The continued value realization of digitizing all manual transactions and repeatable work. The overhaul of supply chain for regionalization, insight, and mitigating ongoing disruptions. The explosive growth in security, data trust, data zone, and compliance needs and regulations. The need for information and process insights to help customers manage staff turnover. to create cultures of knowing, to remove costs and do more with less. The transition to a green agenda and new ESG audits, new trading partners, new manufacturing decarbonization and 2030 pledges to be climate innovators. Open Tech has a key role to play here to help our customers be climate innovators. And even deeper relationships with top tier tech partners like Microsoft to capture new RMMs and MSPs driven by the Microsoft ecosystem and disruptions that companies like Datto and what security and data protection needs. We're also gonna look for deeper relationships with GCP and AWS for new enterprise workloads, all together helping our customers win with inflation now and get more done with less. On the cash flow and capital side, our outlook for the new fiscal year is continued growth and expansion. Let me start with the assumptions that we're using for the next 12 months. I think it's important to get an insight into the assumptions that we're using. One is continued high inflation, continued strength of the U.S. dollar, global GDP at 2% to 3% growth, high energy and wage costs. For some of the open text operating assumptions, we're expecting every business line to show revenue growth. Please recall, we have a half year of fixed benefits. You'll see in our target models that we're anticipating growth margin to be constant, R&D and cloud operations investments up $75 million, a constant adjusted tax rate at 14%, and we're anticipating CapEx down 5% to 10% as we leverage greater benefit from our partners with our cloud partners at Microsoft, Google, and Amazon. We have a strong constant currency outlook for fiscal 23. Enterprise cloud bookings growth of 15% plus. Cloud revenue growth between 6% to 8%. That's total cloud revenue growth between 6% and 8%. ARR growth between 3% to 4%. Total revenue growth between 3% to 4%. Positive organic growth. Constant adjusted EBITDA as we invest significantly. Continued free cash flow growth. And continued capital returns. Our board of directors approved a 10% dividend increase to 24.3 cents per share for shareholders of record on September 2nd, payable on September 23. On M&A, there's no change to our previous statements. Our pipeline remains active. We continue to seek those opportunities that meet our criteria on valuation, future growth contribution, cash returns, and return on invested capital. Our ability to execute is another key point of confidence. This is a proven team. I'm very excited about Project Titanium, or Cloud Editions 23.2. We chose the name Titanium because it reflects our cloud fundamentals. Strong, lightweight, industrial strength, corrosion resistant. Titanium is both new product and new routes to market. Let's get into it a little bit. The acceleration... of our large off-cloud customer base to the open text cloud. Look, our licensed customers benefit by consuming by license, and our off-cloud customers remain a massive cloud conversion opportunity. We believe this acceleration will happen because our customers can drop plans for large-scale customizations and can increasingly move to a consumption and expansion model. So we think titanium is going to help us accelerate our large off-cloud install base. Titanium is also going to further scale our private cloud business with significantly expanded geographic capabilities, data zones, and compliance capabilities. We see the opportunity to be the most trusted, secure, and compliant private cloud around the world. Our public cloud products will be at equal functionality to our off-cloud and private cloud products. And we're going to be adding all these, and this will open up a whole new set of opportunities with our public cloud at equal capabilities to our private cloud. We're going to look to win the next generation platform and future workloads from customers, partners, and embedded IP partners to our developer cloud. We see where ecosystems can be built around our API-based developer cloud. The Open Tech Cloud platform, the fundamentals underneath all our business clouds and developer clouds, will allow customers to leverage all of our cloud suites with less friction and less professional services and seamlessly go from one module to all modules because the technology, the data, the workflows, the setup, the user administration is all common across those business clouds. We also see the new opportunity for a new digital engagement center that we call the Open Tech Zone. where customers can try, purchase, renew, and get all the support they need, all automated, all self-service, without human intervention. With all of this together with titanium, we have an opportunity to reimagine the enablement of customers at scale in the cloud. This is really important. The old model that almost all of the large tech partners, the tech ecosystem work under today, it's the old model of layer. Land, adopt, expand, renew. There have been books written about it. Well, let me be clear. It's an artifact of the past, and it's not built for clouds at scale. We've created a new model with Titanium, a new customer success model centered on four principles, and we've actually already trademarked it. It's land, operate, value, expand. Win the customer, land. Operate their business at scale. See the customer and deliver the value. And when we've delivered the value together, then they expand. Land, operate, value, expand. We're going to organize it. We're going to evangelize it. We're creating programs behind it. Land, operate, value, expand. L-O-V-E. That's right. It spells love. The new open text love model for customer success with titanium. Land, operate, value, expand. we are investing in accelerating all things cloud and this puts us on a vigorous and guided growth trajectory that informs our medium-term fiscal 2025 aspirations we are raising the bar on our medium-term aspirations and in constant currency our aspirations include continued enterprise cloud bookings of 15 plus total revenue organic growth between two percent and four percent increased bookings to drive increased cloud organic revenue growth of 6% to 8%. This is really important, I want to repeat this. Our three-year aspirations, our fiscal 25 medium-term aspirations includes cloud organic growth revenues of 6% to 8%. ARR, up to 85% of total revenue, adjusted EBITDA margin between 37% to 39% given our increased R&D investments to drive more cloud growth. And annual cash flows of approximately $1.1 billion. And the slight change is due to the US dollar strength and our updated non-GAAP tax rates in the low 20s. Continued capital allocation of 33% of free cash flows to dividends and buybacks. Let me wrap up my prepared remarks before I hand the call to Madhu and then your questions. We're prepared for this dynamic environment. And we've prepared uniquely in the OpenText way for the opportunity that we see for OpenText. We're investing to outcompete our rivals, and our R&D and cloud investment for F23 is up $75 million to a total of $1 billion in annual investment, driving titanium, the open text zone, increased distribution, and the open text love model. We're also preparing for a better company and a better tomorrow. Today, we published our third corporate citizenship report. Please read it. It reflects our culture, our commitments to our employees, our commitments to our customers, to our partners, and our commitment to you and to the world around us and the communities in which we live and work. We welcome and value your feedback. I'm an optimist. I deeply believe the future is brighter than today because the future is made of the best parts of today. OpenText is committed to ensuring that growth, that our growth, is based on inclusivity and sustainability. I'm recently back from just a fantastic customer employee tour in Europe. Let me quote a customer. Time and people are the greatest assets of our company, and it's time for radical prioritization. At our strategic technology table is Microsoft, Oracle, SAP, Salesforce, Google, and OpenText. OpenText has demonstrated amazing flexibility, time to value, an unwavering commitment to us during the pandemic, and you earned your seat, end quote. It's time to standardize on companies built for the long term like OpenText. I'd like to thank our employees, our customers, our partners, and our shareholders for your continued trust and confidence in OpenText. It was just a fantastic fiscal year. We're off to a great start in fiscal 23. We're humbled and proud to help advance your mission and goals and work and to make open text in the world better for everyone. May the one that brings peace bring peace for all. With that, let me turn the call over to our amazing CFO, Madhu Raghunathan. Madhu, over to you.

Thank you, Mark, and thank you all for joining us today. All references are in millions of USD and compared to the same period in the prior fiscal year and are on a reported basis understated otherwise. As I share our strong results in the quarter, and full year ending in June 2022. And let me start with the entire OpenText team's execution during the quarter and the fiscal year, which was remarkable. And now let me expand on Q4 fiscal 2022 results. Q4 revenue. We are very pleased with our record Q4 revenue, our record annual recurring revenue, and record cloud revenue. On revenues and adjusted EBITDA, we are well within the expectations shared with you as part of our quarterly factors in May 2022. First on foreign exchange, the US dollar strengthened throughout the quarter, creating an additional headwind beyond what we shared back on May 4th. Foreign exchange in Q4 was a revenue headwind of 33 million, impacting customer support and cloud revenues the highest. We grew total revenues 4.7% on a constant currency basis and 1% on a reported basis. Cloud revenues grew 16.6% in constant currency, and 14.3% in reported currency in our sixth consecutive quarter of organic growth. Strong renewal rates of 94% in cloud and 94% in off cloud, and we see this continuing given strong performance of our renewals organization and customer validation. And now moving to other financial metrics. GAAP-based net income was 102.2 million during the quarter, Down from Q4 of fiscal 2021, income of $181.3 million due to fixed integration, higher special charges including our facility optimization, and lower year-over-year equity gains on limited partnership investments. Adjusted EBITDA for Q4 was $313.6 million, or 34.8% of revenue, versus $314.8 million, or 36.2%. As you see in our Q4 results, on a non-GAAP basis, cost of sales and operating expenses were higher by $12 million year-over-year as we proactively balanced the integration of VIX, our foreign exchange expense, plus the continued investment in growth-focused R&D, health, marketing, and automation-related internal technology projects. Operating and free cash flows. We generated $251.9 million in operating cash flows, free cash flows in the quarter, with $213.8 million of 23.7% of revenue. During the quarter, consolidated DSOs, day sales outstanding, were 43 days, consistent with the same quarter a year ago. Our team continues to deliver strong working capital efficiency and conversion from adjusted EBITDA to free cash flows. Our conversion rate from adjusted EBITDA to operating cash flows was 80%, and a high conversion of 85% from operating to free cash flows. Now let us move to our full fiscal year 2022. We generated record revenue, ARR, and code revenue for the full fiscal year. As we accelerate our business into the cloud, we believe the better way to measure our business tempo is enterprise cloud booking plus reported revenue. For fiscal 2022, our enterprise cloud bookings are $466 million, representing strong double-digit growth over the prior year. The growth is broad-based. across our enterprise product offerings, and we're seeing a growing number of large multi-year cloud deals with an average commitment of over four years deflecting the strategic importance of OpenText to our customers. A few trends relating to our enterprise cloud booking. The trend of larger deals defined as $1 million contract value continued during the fourth quarter. Content cloud was strong in telecommunications, utilities, and retail. Our experienced cloud growth was strong in insurance, healthcare, and chemical manufacturing, while business networks saw strong cloud growth in sectors that rely on supply chains, such as food and beverage, manufacturing, automotive, and retail. We will begin to disclose enterprise cloud bookings every quarter on a trailing 12-month basis. On revenues for the year, we grew total revenues 4.3% on a constant currency basis, 3.2% on a reported basis, and 1.7% on an organic constant currency basis. Cloud revenues grew 9.8% in constant currency and 9.1% in reported currency and 3.6% on an organic constant currency basis. ARR revenues grew 5.5% in constant currency, 4.5% on a reported basis, and 2.3% in organic constant currency. The impact of foreign exchange revenue for the full year was $39 million, most affecting customer support and cloud revenue. And now moving to other financial metrics, GAAP pays net income was $397.1 million, up 27.8% from $310 million in fiscal 2021 due to lower tax provisions relating to the prior year IATA settlement, offset by higher costs from VIX acquisition, our facility optimization charges, and debt extinguishment related to our successful refinancing during the year. Adjusted EBITDA for fiscal 22 was $1.26 billion, or 36.2% of revenue, versus $1.32 billion, or 38.8% of revenue in fiscal 21, once again deflecting our continued investments in cloud, edge, security, and VIX integration. We remain on track to have VIX in our operating model by December 2022. Operating and free cash flows. For fiscal 2022, we generated $981.8 million in operating cash flows and $888.7 million in free cash flows of 25% of revenue. The conversion rates from adjusted EBITDA to operating cash flows on an annual basis of 78% and a high conversion to free cash flows of 91% given our continued capex efficiency. Now moving to balance sheet and liquidity. We ended the quarter with $1.7 billion of cash another $750 million available on our undrawn revolver and a very strong net leverage ratio of two times and approximately 75% of our debt on fixed rates. Let's turn to Outlook, our updated targets and aspirations. The U.S. dollar remains strong. We plan our business in constant currency, and we will present our business this year on a constant currency basis for our quarterly factors, total growth strategy, and medium-term aspirations. For the first quarter of fiscal 23, you will see our quarterly factors outlined in page 7 of the investor presentation. For Q1, on a year-over-year basis in constant currency, we expect cloud revenues up 13% to 15%, ARR up 6% to 8%, total revenues up 4% to 6%, and FX revenue headwind of 40% to 45%. Adjusted EBITDA dollars slaps year over year in constant currency while continuing to make investments in cloud, in security and edge, and continued integration of the fixed acquisition. We expect FX to be an adjusted EBITDA headwind of approximately $20 million. Our fiscal 23 total growth strategy in constant currency we have provided on page 8 of our investor deck. Enterprise cloud bookings of 15% plus. Total cloud revenues up 6% to 8%. ARR up to 4%. Total revenue growth up 3% to 4%. At current exchange rates, FX would be a headwind of approximately $100 million for the full year. As noted on page 9, our fiscal 2023 target model remains largely unchanged from fiscal 22 levels, except for an increase in net interest expense of $12 to $22 million and a decrease in capits of $3 to $13 million. Our fiscal 25 aspirations are provided in page 10 of our investor deck, and specifically enterprise cloud bookings of 15% plus growth, organic revenue growth of 2% to 4% led by cloud organic growth of 68%, ARR at 85% of total revenues. As you can see from our results, outlook, and medium-term aspirations with respect to cloud revenue, we have grown cloud revenues from zero in fiscal 12 to 1.5 billion in fiscal 22. We delivered 9.8% constant currency total growth in the cloud in fiscal 22. We are communicating today fiscal 23 outlook to deliver 6 to 8% constant currency total growth in fiscal 23 for cloud revenue. Most important, constant currency organic growth in the cloud improved from 1.8% in fiscal 21 to 3.6% in fiscal 22, and today we are communicating our medium-term aspirations outlook of 6% to 8% organic growth in fiscal 25. This truly reflects OpenText's acceleration to the cloud with emphasis on cloud organic growth leading. Acquisitions remain a strong optionality and consistent with our total growth strategy of grow, retain, and acquire. This is a fantastic accomplishment. So moving to adjusted EBITDA margin for our medium-term aspirations, 37% to 39%. Three cash flows of $1.1 billion plus with an opportunity to do better through stronger revenue, improving currency exchange, and higher benefits from tax structure optimization. We expect our effective tax rate to stay at approximately 14% in fiscal 2023 before moving to the low 20s in fiscal 2025. And finally, let me echo Mark's comments. The relevancy of our technology and expertise to our customers has never been higher. Open Tech is not just prepared for the future. We are well poised to thrive. With our strong financial model, we expect continued investments of growth and innovation, remaining focused on both preemptive and ongoing action, operational excellence, and disciplined execution. In summary, for all of us at Open Tech, it was a remarkable finish to our fiscal year. On behalf of OpenText, I would like to thank our shareholders, our loyal customers, and partners. A special thank you goes out to my OpenText colleagues around the globe. Thank you. You are the best in the industry. I will now open the call to your questions.

Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone to join the question queue. You will hear a tone acknowledging your request. If you're using a speakerphone, please ensure you lift the handset before pressing any keys. If you wish to remove yourself from the question queue, you may press star and two. The first question comes from Stephanie Price of CIBC World Markets. Please go ahead.

Hi, good evening.

On the other 15% cloud bookings expected in fiscal 23, I was hoping you could walk through the cloud offerings that you see driving the growth there.

Yeah, sounds great. Very, very, very happy to. So first, Stephanie, we're going to introduce new bookings for the year and going forward. And we're going to keep you up to date quarterly. We do that on a trailing 12-month basis, as Madhu said, so we can keep a lot of visibility right on here. And this is enterprise bookings for us. It does not include SMB. It's enterprise bookings. There are a variety of... The two top of the list are continued strength in customers migrating from off-cloud to our cloud for... for the content cloud. This is the continued digitalization, finding, being a bit short on resources, skills, security, compliance, the need to go global on workflows. So just that continued drumbeat of digitalization for the content cloud. Second, or code number one, I would rather, is we're seeing a lot of activity in the supply chain. as companies are in full throttle for regionalization and de-risking from around the world, getting more control of just-in-case inventory, more control towers, and a new set of requirements around their 2030 pledges. Even with all the macro, we see just a sustained commitment to 2030 pledges. We're Toyota's partner in the supply chain. as they drive towards their 2030 electrification goals, for example. So, Stephanie, I'd put the continued drumbeat of digitalization in the content cloud and supply chain code number ones driving towards what we think is going to be strong double-digit growth in our cloud bookings. And just to recall, that's on a base of 466 million of new bookings in 22, and that's 15% plus in fiscal 23.

That's helpful. And then maybe the other side of the equation, can you talk a bit about the incremental $75 million in cloud investments in fiscal 23? What are the major investments in the roadmap? And maybe related, it looks like these investments will continue into the future given the fiscal 25 aspirational margins, about 100 basis points below the fiscal 24 one. So maybe talk a bit about what you're seeing going forward there.

Yeah, very good. I'd put that 75 million additional in total, 1 billion in R&D and cloud operations. Number one titanium objective, public cloud parity to our amazing private and off-cloud capabilities. Top of the list. Second is security and compliance. We just see a just a huge opportunity to be the trusted cloud operator in information management. They are meet the requirements of a data zone in France, a data zone in Germany. We're seeing customers post Russia's war in Ukraine. We're seeing commercial customers ask for banking level type security in the private cloud. We think literally only a handful. four or five companies around the globe can deliver these type of requirements, whether they be HIPAA, SOX, BOFIN, data zones, sovereignty type data zones and sovereignty type requirements. So that would be the second area. And then third is what we call the open tech zone. We're gonna compete, we're just getting started in SMB. I mean, what an amazing two year journey. from zero to, you know, approaching $700 million in revenues. And there's a lot of automation we're going to put behind the growing our MSP and RMMs all through automation, self-service, trying, buying, downloading, install-based management. So those are the three big areas that we're going to see the lion's share of the $75 million.

That's helpful. Thank you very much. The next question comes from Ramo Lenschel of Barclays.

Please go ahead.

Great, thank you. This is Jeremy on for RIBO tonight. I wanted to ask also on cloud, just on the performance in the quarter, can you speak to how much of that is net new versus customers migrating over from licenses? And then in terms of product, did anything kind of stand out across content? or business network or security, or would you say it was pretty consistent for past quarters across the board? Thank you.

Yeah, so, Jeremy, thanks for the question. Yeah, we're not breaking out that which is brand new versus that which is a migration or just like a pure migration or migration and a new workload or a new customer. But I can tell you it was really a mixture of all of that. And look, I think the second half of last year was stronger than the first half for our cloud booking. So we look at the $466 million of, this is new value. This isn't the total value of what we booked. This is only the incremental value to those cloud bookings. So the second half of the year was certainly stronger than the first. We're going to keep everyone updated quarterly here on a trailing 12-month basis so you can track our progress to this double-digit new booking value for enterprise cloud growth. But, Jeremy, I'd say it was a mixture of those, the install base migrating, which is still the number one opportunity we have to migrate our install base, to migrate and add new workloads. Like, you know, we've had some customers add e-signature that were either migrating or just moved. And then completely new customers, like Close Brothers, in the cloud. So a mixture of all three.

thank you the next question comes from Richard Chi from National Bank Financial please go ahead yes thank you so kudos on the continued execution there with respect to the macro environment I understand you said that it's in your outlook but what are your customers saying today about their budgets for tech spending as we look to the remainder of this year are they feeling kind of continually optimistic, or are they kind of perhaps putting some pause or slowing the cadence of some of the projects?

Richard, yeah, thanks for the question. Good to hear from you. I would say on the demand side, in aggregate, our demand is steady. We have strong visibility, and it supports our outlook for the year. And this is a strong outlook. A double-digit, 15% plus cloud bookings growth. We're looking to grow our cloud revenue, which takes bigger bookings, right, between 6% to 8%, and then total growth between 3% to 4%. So I'd say in aggregate, demand is steady. We got very strong visibility, and it supports the outlook we have for the year. Let me drill down just into a little bit, maybe into three places around the world. In Germany, there's a lot of attention on Germany, of course. A lot of activity, fuel costs, a lot of headline news. We're very strong in government, heavy manufacturing, heavy industries manufacturing. Should there be a downturn in Germany, we're in a great position because we're going to be where customers are spending. Government, defense, aerospace, heavy industries, manufacturing. There's always been a – look, in our history there, over a decade, it's well chronicled that we're this all-weather business in Germany because of our sector exposure. We're paying a lot of attention to the U.K. as well. And that's a little more on the inflation side versus the spend side. And we talked about our wind program with inflation now. We've got a lot of campaigns around that. And I'll tell you, in the U.S., demand is very strong. And, you know, the U.S. economy is not predetermined to go red, not predetermined. So, you know, look, our demand is steady. We've got very strong visibility. We're paying attention to Germany and U.K. very uniquely and more up arrow in the U.S. right now.

All right. Okay. And then you made some comments on the cloud bookings, and thanks for providing more disclosure going forward on that. I just want to clarify, is that kind of all organic here or does that include some acquisitions?

One hundred percent organic.

Okay, okay. And the last question for me is, obviously the labor market has been fairly tight. Given your stability, are you finding it easier to retain talent and bring on new talent?

Another great question. The short answer is yes, our talent and company brand has never been stronger. I'm just back from a great trip in Europe. I was with customers and our team in France and Germany, the Netherlands, UK. I've been traveling throughout the US. I'm here in Waterloo right now. I'm preparing for a trip to India next month. Let me zone in on India because it's probably our largest hiring market. We are 100% back to work in India, 100%. And it's invigorating to see the teams back with such intrepidness and robustness. So our talent and corporate brand has never been stronger. We are competitive in the market. And this is going to support our 2% headcount expansion. Like a lot of companies, we're going to put a lot of – a weight behind performance reviews this year, right, and raise the bar internally on our expectations of all of us. But we're in great shape, Richard, for hiring and meeting our talent needs for the year, specifically in places like India and the Philippines. That's great.

Yeah, and I could just, yeah, I'm sorry, if I could just add, this is Madhu here, to your question on the bookings. for the benefit of you and maybe others on the call as well when Mark explained organic. So these are new. These are incremental. These are CODA to a sales team, and this is what the sales team brings, new business, new contract value each year. Again, I just wanted to expand on your question and Mark's answer. Is this new? Is it organic 100%?

Okay, wonderful. It's like the milk carton, 100% organic. So, Madhu, if I just can, if you don't mind me calling on you, you're just back from India. Maybe share your voice on your trip to India and Team OpenText India.

Yeah, fantastic. Well, thank you, Mark. So, as Mark said, I was in India in June, and we've had a longstanding presence in India. And first of all, it was just great to be there. We have amazing talent in the field of engineering, cloud operations, in customer solutions groups. And everyone just valued the time, the time in person, the appetite there for learning, for growth, and just the pride there sitting in India and delivering to a marquee customer base around the globe product and innovation. It's very high. And as Mark said, we look forward to even going further in India.

That's great. Thank you. Yeah, thanks, Richard. Thank you.

The next question comes from Thanos Moskopoulos from BMO Capital Markets. Please go ahead.

Hi, good afternoon. Mark, Microsoft had called you out as some BSOP missing reporter. Can you comment on what you're seeing there, I guess, both within ZIX and more broadly, given that that seems to be a bit more of a macro sensitive area?

I'm sorry, Thanos. There was a little break up in the line. I couldn't hear the first part of that. Yep.

Yeah, sorry, Mark. I was saying Microsoft called out some softness in SMB during the quarter. So if you could comment on what you're seeing within VIX and more broadly in your SMB business, and also in terms of the resiliency you expect and the downturn within SMB.

Yes, fair enough. So, yeah, maybe starting at putting it all in context for us, you know, we've created our SMB and C business from zero. to approaching your $700 million. And this is just our second fiscal year. The business is growing. It's growing organically. We've got gross margins in the high 80s. And we're taking a very unique distribution model. We don't sell direct to SMBs. There's always a little bit around the edges. But the 90% plus of what we do is trying to build this unique distribution model to MSPs and RMMs, and doing that through a unique platform. We've written the software. We've written salesforce.com for MSPs and RMMs, and we're expanding that massively to go out and attract RMMs and MSPs to come to our OpenText zone, register, download, try, purchase, distribute the software, collect install-based information from their customers, to manage, monitor what they're doing. So it's a very unique distribution strategy and we got over 100 people writing software for SMB to automate the selling. We're looking, our biggest partner of course is Microsoft. It is all about a Microsoft ecosystem. They are just getting started on their new commerce experience platform. So, um, you know, I want to speak about what were the expectations externally about when NCE would start to ramp, uh, but NCE is now in the market and we're, we're a top five partner for, uh, for their conversion to NCE. So we're in a great position or right there with Microsoft. Second is we see the opportunity to resell ZIX into the Carbonite install base. We see a lot of disruption with Datto. We're investing in the zone. We got SMB and C M&A opportunities in our pipeline. So we had a great second year. We've only been at it for two years. And we expect to grow and grow organically, Thanos, here in fiscal 23.

Great. Just to clarify, so then at this point, not really seeing slowdown in the macro within SMBs?

No. No, we have a lot of great levers here because we can bring ZIX into the Carbonite install base. We can bring Carbonite into the ZIX install base. So those are things unique to us that are levers that others don't have. Also, there is some real disruption with data. And we're going to be there to be helpful to those MSPs. And Microsoft's just getting started in their conversion to NCE, and we're in the top five CFPs to help them. So you put all that together, and sure, there's some demand aspects out there, but that all together, it sort of mutes any demand noise out there for us.

Okay, that's helpful. And then just a quick one from Madhu. I think I heard you say in your remarks that it was 2.3% organic total revenue growth and 3.6% organic cloud growth for the fiscal year. Is that correct or did I mishear that?

Yes, 3.6% constant currency cloud growth.

Okay, I'm sorry. Had you disclosed organic total revenue growth or no?

So we do have an appendix as we do on an annual basis in our investor deck that spells out the organic growth details for the year.

Okay, sorry about that. Okay, thanks for the last one.

Yeah, great. Thank you. The next question comes from Paul Treiber of RBC Capital Markets. Please go ahead.

Thanks very much and good afternoon. Just try to dovetail a couple of things with your medium-term outlook. First, obviously, the enterprise cloud bookings is quite strong, and particularly relative to your TAM. Is it a fair statement that within enterprise cloud, you believe that you're gaining share relative to the TAM?

Yes. Okay, that's a starting point.

And the second question is, in medium-term growth, the 6% to 8% organic cloud growth, at what point does that start driving up overall organic revenue growth because it's still in the two to four percent range at what point does it reach the tipping point start driving that and you start seeing faster growth and also related to that you know should we expect other segments like license customer support professional services to decline uh over the medium term as you do that transition yeah so um paul let me take a part of it and then hand the park to uh to madhu and uh

I just wanted to be brief in my answer to you on the first part, if they can share. So the short answer is yes. Maybe just adding a sentence to that. Look, there's a real opportunity. You know, it's a time to standardize on companies like OpenTex. And it's a Darwin moment in technology where it's time to out-compete your rivals. It's a Darwinian moment. And so when I look at kind of these Tier 2 and Tier 3 competitors, And I don't mind calling them out. Colfax, Highland, SPS Commerce, Filenet, Sterling Commerce, Datto. I think it is a Darwinian moment to be more aggressive to out-compete your rivals. So, yeah, I think I'm very confident with this bookings growth, this new value enterprise bookings growth. We are taking shares. and it will flow into revenue as you're seeing it work through our model. If I look at our license business in the quarter, then I'll hand the microphone over to Madhu. Costing currency license was about 10% of our business. Remarkable, right? I mean, down from almost a third of our business 10 years ago to 10%. And cloud was up 9.8% or 137 million. So even though license was down about $15 million in absolute dollars, cloud was up $137 million. And I think trading $17 million for $137 million, as people call it, dances with wolves, that's a good trade. So we're going to continue to sell a license. Customers who purchase license today are in three camps. They look for long-term economic value. They look for some capacity expansion. And they look for a very trusted deployment. But license is also our largest cloud opportunity to convert that install base over time. So I love where we are methodically moving through that install base. So there are a couple real events to watch. License falling below 10%. That is a moment in time, and we're getting real close. Titanium, public cloud at parity to everything else. Those two events should be accelerators for us, accelerants, to more cloud growth? Let me hand the call over. Let me hand the microphone over to Madhu.

Thank you, Mark. I think you've shared a great set of perspectives here. I would just add saying if the question is how do we get beyond the current levels of organic growth in fiscal 25 about what we stated, I would just point out to what is getting bigger, right? The annual recurring revenue is at 82%. going to 85%. So our focus really within that the leading growth being cloud, that's what you sort of focused on, right. And certainly you should look beyond that above the current ranges. But I would also point out 1.8% cloud, constant currency fiscal 21, 3.6% in fiscal 22. And they're making a big leap to six to 8% organic growth in fiscal 25. So I would just say, As the 85% gets bigger, what's really going to drive the total is going to be that 85%, and within that is going to be the cloud growth.

Okay, that's helpful. One last one from me.

Just with the outlook for this current year, you're calling for license revenue growth, but it did contract this year. Why do you see the turnaround in the short term for license revenue?

It's sort of the nature of the visibility and pipeline, Paul, where we see these are sales cycles that are times multi-quarter. We can see we have the visibility and pipeline of customers looking to build very fortified and secured environments. We're calling it like we see it through the visibility and pipeline. It doesn't change the view that we think license is going to be relatively constant over time. As we just said, we disproportionately grow cloud. But we're going to see a bit... We expect to see a positive green carrot next to license this year.

Okay. Thank you for taking my questions.

Thank you. I will now have to call back over to Mr. Baranchay for closing remarks.

All right. Well... thank you everyone for uh joining us today and it was real delight uh to walk through our q4 results um our annual results our outlook for f23 on our aspirations for f25 um please read our corp citizenship report we're very proud of it and uh we're uh we look forward to and we value your feedback uh we look forward to being on the road uh at our investor conferences this year we do myself harry and greg i will personally be at the City Bank conference in New York and we'll be there in person and hope to see many of you there. Have a great afternoon and thanks for joining the call today.

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.