Welcome to the Open Text Corporation Fourth Quarter and Fiscal Year 2014 Financial Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Greg Secord, Vice President, Investor Relations. Please go ahead, sir.

Thank you, Operator. Good afternoon, everybody. I'd like to start the call with a reading of our Safe Harbor statement. Please note that during the course of this conference call, we may make statements relating to the future performance of Open Text that contain forward-looking information. While these forward-looking statements represent our current judgment, actual results could differ materially from our conclusions, forecast or projection in the forward-looking statements made today. Certain material factors or assumptions were applied in drawing any such conclusion while making any forecast or projection as reflected in the forward-looking information. Additional information about the material factors that could cause actual results to differ materially from the conclusion, forecast or projection in the forward-looking information and the material factors or assumptions that were applied in drawing the conclusion while making the forecast or projection as reflected in the forward-looking information, as well as the risk factors that may project the future performance results of Open Text, are contained in Open Text 's Forms 10-K and 10-Q, as well as in our press release that was distributed earlier today, each of 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 will include a discussion of certain non-GAAP financial measures. Reconciliations of all non-GAAP financial measures to their most directly comparable GAAP measures have been included in today's press release, which may be found on our website. With that, I'd like to welcome everybody to the call. With me today is Open Text's President and CEO, Mark J. Barrenechea; as well as our Chief Financial Officer, Paul McFeeters. As with our previous calls, we will read prepared remarks followed by a question-and-answer session. The call will last approximately one hour, with the replay available shortly thereafter. I would also like to direct investors to the Investor Relations section of our website, where we have posted an updated PowerPoint that will be referred to during the call, as well as a summary table highlighting Open Text's historical trend and financial metrics. In the coming months, Open Text will be presenting at several investor conferences, notably RBC Markets Technology Conference in Toronto on September 3rd, The Citi Global Technology Conference in New York City on September 4th. The Deutsche Bank Technology Conference in Las Vas on September 11. More details about these and all other investor events in the Investor Relations section of the Open Text website. With that, I will hand the call over to Paul.

Thank you, Greg. Turning to the financial results I will highlight our fourth quarter then fiscal year 2014. Total revenue for the quarter was $494 million, up 42% compared to $347.3 million for the same period last year. Regionally, the Americas contribute 35%, EMEA 34% and Asia Pacific 11%. License revenue for the quarter was $99.7 million, up 27% compared to $78.8 million reported in the same period last year. The acquisition of GXS contributes $1.5 million of licenses revenue this quarter. We saw license revenue broken down by vertical sectors 22% from basic materials, 15% from technology, 15% from services, 15% from financial services, 9% from public sector, 9% from industrial goods, 7% from consumer goods, 6% from healthcare and 5% from utilities. Cloud services revenue for the quarter was $149 million, up 255% compared to $42 million in the same period last year. Cloud services gross margins were 62.5% in the current quarter compared to 57.8% for the same period last year. The acquisition GXS contributed $107 million of cloud services revenue this quarter. The increase in cloud services margin was primarily due to efficiency in network operations and telecom savings. The margin was positively impacted by 90 basis points, due to the reversal of previous sales tax accruals. Customer support revenue for the quarter was $184 million, up 12% compared to $155 million in the same period last year. Customer support gross margins were 86.8% in the current quarter compared to 84.6% for the same period last year. The acquisition of GXS contributed $7.3 million of customer support revenues. The increased in customer support margins was primarily due to a reduction third-party technology cost and operational efficiencies. Professional services and other revenue for the quarter was $61.6 million compared to $61.7 million in the same period last…

Thank you, Paul. Welcome everyone to our Q4 full year earnings call for fiscal 2014. We had a record Q4, a record fiscal year and we have positive momentum as we enter fiscal 2015, a fiscal year that I expect to be driven by value, growth and leadership. There are four main topics that I am looking to speak to today. First, a review of Q4 and full year results as well as key accomplishments throughout the fiscal year. Second, I would like to speak to our business model. The Open Text business model is unique, compelling. We called it the Open Text Intelligent Growth Business System or OTIGS for short. I think it's important that you better understand how we think, how we operate and the priorities within that model. Third, our appointment of John Doolittle as our new CFO. Fourth, our top priorities, as we enter our new fiscal year 2015. These are the four topics I am going to spend time on today before I take your questions and that's the full agenda, so let's get right into it. We are well aligned to the strategic priorities of our customers, including our vision, our products, our services, our customer engagement model and our roadmap. The Open Text vision is to enable a digital-first world. In the past, I have spoken about our products direction in terms of four functional pillars, our functional pillars. Many of you are familiar with these, ECM, CEM, iX, BPM and Discovery. We remained focused on being number one in each of these functional pillars. As a company, our strength and uniqueness to get the crossroads of information management, B2B integration and compliance. The more we can help our customers simplify, transform and accelerate their information needs, the more successful will be. Collectively,…

Thank you. The first question comes from Kris Thompson, National Bank Financial. Please go ahead.

Great. Thanks. Congratulations again, guys, on a great end of the fiscal year. Paul, just for you on the target operating margin, should we hop into that range right out of the gate in Q1 or are you going to work towards that towards the end of the year?

Well, it's an annual model, so as you know we still have seasonality in our quarters, so I won't respond to your question quarterly. As you can see how we ended our fiscal year, I think, it was reasonably clear that we are pushing the upper end of that range already, but I will just make the comment for the year and not for the quarters.

Good stuff. Mark, for you on the average deal size this quarter, I think that is a record and the number of license generated from your installed base again is another record. Can you just tell us is there is any unusually large transactions in there? Should we start thinking about licensed revenue from new customers as a major driver looking forward the next few quarters when you get more traction with your recently introduced product suites? Thanks, guys.

Yes, Kris. Thanks for the question. We had 16 transactions over $1 million in license and 10 transactions over $1 million for Cloud Services. No asterisk on the $100 million of license. It was a good blend of deals in those 16 and we are not calling any one out of those 16. Look, what drove the solid license performance was we are in the middle of a very strong product cycle with our EIM suites, the field is very focused, great leadership, executing well and, we talked last quarter, we are executing on 9 out of 10 cylinders and we executed on 10 out of 10 cylinders in the quarter. We also have some momentum as we come here into '15, but I will hold on to that for a moment.

Thanks. I will pass the line.

Thanks, Kris.

Thank you. The next question comes from Blair Abernethy from Cantor Fitzgerald. Please go ahead.

Thanks very much. Nice quarter guys. I guess, just two questions for you, Mark, on the license side. First off, could you call out some strength in any one of your pillars i.e. discovery versus business process management or ECM, any one of those that might have been driving your business more than the others?

Blair, we had a good quarter across our pillars. I mean, we had some strong competitive replacements in the ECM stack, we had some nice wins in CEM, such as Ralph Lauren. Process Suite, which is really the coming together of many acquisitions for us, Cordys, ICCM, Assure, Global, Meta, coming together in a unified product platform. We had some nice case management wins. Our strategy of integrating deeper into ERP continues to work well for us as well as opening the platform up to developers, so we had strength and good wins in each of our pillars, ECM, CEM, BPM. I would call those three out.

Okay. Great. Then if I look at your new target model for fiscal '15, and if we sort of reverse engineer the cloud services and maintenance businesses, which are fairly stable and professional services which hasn't really changed that much in the last few years, you kind of come up with a range on your license that if it is going to be 15% to 20% of total revenue, kind of, kicks out $275 million to $380 million. That's a pretty broad range. That's like negative 10% to plus 20 odd percent. Do you have a sense of where you think or where you expect your license to fall next year that might be a little bit narrower than that range?

Appreciate the question. We look at the full year for 2014, we ended the year just around 11%. Organically for the year, we delivered 8% year-over-year growth and the market is growing between 10% and 11%. As I've said previously, this train, the next stop is growing at the market rate, our internal target is still to try to drive to the market rate of growth. I'm not here to give guidance or to narrow the range. You will need to do that work as you see fit, but we had 11% blended in the year. Organically, it was 8%. Note the markets growing between 10% and 11% and we continue to think of that as our next big milestone.

Okay. Great. Thanks, guys.

Thank you. The next question comes from Richard Tse from Cormark Securities. Please go ahead.

Yes. Thank you. Mark, you addressed some notable wins here against some competitors. Could you maybe give us a feel of what your win rates would be across all of those silos that you point to?

Richard, we don't kind of get down to that level externally against win rates. We win more than we lose. I would like to compete in more RFPs. We are still a relatively young company striving for more coverage both, in established markets and fast-growth markets. IBM has perfect account covers. There is not an account IBM doesn't cover. We just don't have that scale, yet, thus we try to up for that and augment that with partners' alliances, so we win more than we lose. I would like to compete in more RFPs, because we win more than we lose. Our partner efforts will get us in more opportunities, but we don't get pillar-by-pillar by win or loss rate.

Okay. I guess related question. Has the competitive environment changed any over the past 6 to 12 months here? Obviously IBM is in the mix, but maybe a comment about what EMC is doing and some of the upstarts in the market?

Fair enough, so we are competing effectively against Documentum in EMC and we are actually looking to do more focus on competitive replacement programs here in '15, so we are competing effectively against some of the incumbents in ECM, Documentum and FileNet. Our latest release of ECM with a full HML5 JAVA stack, CCS stack, a very modern technology stack, is competing well against Adobe. I feel what we are on a positive uptick competitively on the license side. On the cloud side, I would probably point out Sterling Commerce as our top competitor over on the B2B integration and we too feel like we are on a competitive uptick against that as well, so I would say the large enterprise providers, the teams are feeling that we are competing fairly well at this point against Documentum, FileNet, Adobe Marketing Cloud, Pega as well as IBM Sterling Commerce. When we can bring it all together in a suite-deal or unified information platform, we become even more differentiated.

Okay. Then just one last question on GXS, You come up with a plan to sort of drive those products into your existing base and where are you at there and what would that opportunity be for you guys?

It's certainly one of the things we are focused on is being able to bring GXS into the Open Text installed base, so we have programs and incentives in place to do that this year, Richard. It's still very early days, probably one of our top Greenfield opportunities, we have already won some accounts that are kind of crossover accounts, companies like Tata Steel , Schneider Electric are a couple of customers I would call out that have some portion of core EIM products that are now GXS customers as well.

That's great. Thank you, Mark.

Thank you, Richard.

The next question comes from Michael Nemeroff from Credit Suisse. Please go ahead.

Hey, guys. Thanks for taking my questions. Mark for you on the license front this quarter, could you give us maybe a sense of the split of term license versus perpetual licenses? I know that with the bundles things change a little bit.

Yes. Paul, maybe you have a closer metric on that?

Yes. We had about between five and seven term licenses, Mike, in the quarter.

Were those five to seven greater than $1 million?

Not all, but they were sizeable.

Okay. Then, Paul, for you, I guess, first, it has been a pleasure working with you and congratulations on your retirement. On the tax line you, called out 18%, I think, for fiscal '15. Is that sustainable going forward? Should we model that in for '16 and out years?

The best information I have today, things will change, obviously, in out years, so I can't give you a better number to model than the 18%, but I would never want to commit beyond what I see in the short-term, which is the 18% number.

Will you adjust any of the expenses to try and offset the 300-basis point improvement or will you just bite the bullet, so to speak, on the tax?

Well, I think, you know, Mike, and certainly under Mark's leadership here, we are very focused on the bottom-line and the value proposition and we have increased our margins quite significantly, so I know the company will continue to be focused that way, but it's hard to. The taxes kind of what it is and we have done a pretty effective job over time of optimizing our tax position, I think as you know and I think we are continuing to do that even at the rate that we have stated.

Lastly for Mark, on the number of sales people you have currently, any changes or what kind of an increase should we expect in the number of sales capacity that you plan to add through fiscal '15?

Yes, Mike. Thanks for the question. I will talk about the areas. I would say that our priority for us to add all funded within our margin and our targets, but not get down to kind of an absolute number. Some of our larger opportunities include our fast-growth markets where we are looking for more coverage. We see mid-market opportunity in our B2B business, as well as inside sales expansion into EMEA and a new global account team that's going to be quite laser-focused on some of our top customers as well as additional capacity in our established markets, so I would say that's probably the rank order of where we are looking to put quota-carrying sales professionals in fiscal '15.

Could you give me a percentage increase instead of 10%, 15% increase in that neighborhood?

No.

Okay. Thanks, again, Paul. Pleasure. Thanks very much.

Yes. Thanks, Mike.

Thank you. The next question comes from Paul Steep from Scotia Capital. Please go ahead.

Thanks. Mark, maybe you could talk to in the cloud area, the trends drove those large transactions? Then, I guess, secondly, where in terms of managed services the long-term target might be?

First question sort of trends, I would say platform consolidation, global nature of supply chain, security and compliance. Those would be the sort of the top themes that I saw of getting to a provider that has a kind of a trusted network global, ability to on-board many thousands of trading partners and provide the service level agreements necessary to run supply chains that can push commerce or transactions in the many hundreds of millions of dollars, so I would say those would be the trends that I saw on how we differentiated. I am sorry, what was the second part of the question?

The second part it was just related to managed services. I think, before to deal with GXS, they were around 45%, I believe of their revenues. What is the target to sort of lift that percentage maybe higher over time here aspirationally?

I am not so much focused on a percent of revenue, because I think, we have opportunities in the band business, which is getting just more traffic on the network with or without managed services. If I look at over the last, what, two quarters between kind of core Open Text and core GXS, we have added close to 100 new managed service customers in our first six months. We are up to about 800 companies running either their information management or B2B integration or compliance platform in the Open Text cloud, managed by Open Text professionals, so we will obviously want to keep growing that, we are going to add upgrade cycles. It's a good juncture to say, upgrade and upgrade to our cloud, upgrade to our managed services, so we are keeping this as a top priority, but I am not focused on whether it is 45% of the mix with band services. I would like to grow them both.

Fair enough. Paul, congratulations on the retirement. Thanks a lot.

Thanks, Paul.

Thank you. The next question comes from Stephanie Price from CIBC. Please go ahead.

Good afternoon.

Hi.

Hi. In terms of cross-selling between the different EIM pillars, can you give us a sense of what inning we are in there and how much more there is much more possibility with cross-selling and how you see that opportunity?

Yes. Thanks for the question. It's still early days. I mean, the suites, and this is our second full quarter, I think now, of having the suites in the market and the suites make for, that cross-selling makes the enablement of the deployment much more easy and straightforward. We are still in the early innings of customers fully adopting either our information platform or fully adopting our B2B solutions, so still early days and a good opportunity for us.

Great. Then in terms of acquisitions, can you give us a bit more sense of what verticals are looking interesting to you at the moment and how we should be thinking about acquisitions?

Yes. Fair enough, so I typically don't get into too much detail here, so I won't get into geos or verticals, but I think the piece of information that I wanted to provide today is that, with kind of the on-boarding of GXS to our operating model, sooner than expected, the organization is ready now to be back to sort of business as usual, if you will, in how we operate in corporate development and ready to on-board any potential acquisition as and when appropriate, We are sort of back to our normal cadence in corporate development now that we are tracking ahead of schedule on the on-boarding of GXS. I won't get into any verticals or industries.

Great. Thank you very much.

Thank you.

Thank you. The next question comes from Eyal Ofir from Clarus Securities. Please go ahead.

Thank you very much. Congratulations guys on a great quarter.

Thanks, Eyal.

I just wanted to touch base on, you talked, I think, in the opening remarks about half the client base now is upgraded to version 10. I think that's actually a very important data point. Is there any way - upgrade are in process, is there any way to split kind what percentage has been upgraded and what percentage is currently in process? I guess in terms of the outlook as well, in terms of the upgrade cycle to version to10.5 here, how long you think this upgrade cycle will last?

I'm not going to split out kind of there or are in process. If you're in process, I expect to get there. That's right, so the customers have that gotten there are in the process of getting to version 10, which is an important data point, thanks for highlighting it, because it is sort of that platform where folks then move on to 10.5, which is project Red Oxygen, or EIM suites. Upgrade cycles can range from if there has been less customizations and it's out of the box it can be a 30-day process. If it's heavily customized and deep integrated, it can be sort of a two to three-quarter exercise, always outliers on both sides of that. To be clear, our suites are the default shipping product now, so as we bring in new customers on board and win new customers and new logos, they are seeing our EIM suites, right? That is what they see in a new sales cycle. Then have the opportunity in our installed base to get them upgraded and then adopting new modules. I feel pretty confident this product cycle will keep us going all the way through Blue Carbon. We will kind of unveil the details of that in November.

Okay. Sounds great, then just wanted to ask about this as well. The transition here in the quarter itself, do you see more of the license revenue growth due to the upgrade to version 10 or are you seeing some bigger transition here to 10.5 or is that still coming?

Again, our default sale is on our suites, so we have new customers. There are certainly always folks always buying capacity, right, so you get capacity sales but it is new suites leadership and field execution that drove the strong license performance.

Okay. Great. Just one more question before I pass the line. In terms of going out into new markets, obviously, you talked about additional channels you can open up here, especially with this upgrade cycle coming, you are also penetrating that new accounts, where do you think you can add more from a channel standpoint? More regionally, is it specific to maybe a large global organization? What should we looking for from you guys to do over the next call it 6 to 12 months in terms of partnerships and I will pass the line after that. Thanks.

I think there are three key opportunities in partners and alliances. First, consistent with what I said in the past, I think the VAR business, value-added resellers is an incredible opportunity for us. Being able to get the right VARs and the right countries, getting multiple VARs in the right countries to adopt our solution is just an incredible distribution opportunity for us. Second is deeper with select system implementers and I think we are in a very strong position now, where we have an integrated suite for information management, B2B integration and a more highlighting our strength in compliance that we can attract some of the larger practices in the global Sis and bring our offerings to their practice to drive transformation for customers. Then third is continue to seek other large strategics and working together in the marketplace like SAP, so to me those are the three areas that I think can be a catalyst for our business, not just in a quarter, but in the years to come is strong alliances with SIs, building the world's best VAR program outside of GA and working to find a few larger strategic transformative partnerships.

Okay. Perfect. I will pass the line. I just want to say, also to Paul, congrats on the retirement. Great working with you for the last eight years. Thanks.

Thanks, Eyal.

Thank you. The next question comes from Scott Penner from TD Securities. Please go ahead.

Mark, could you give an update on the AppWorks initiative, just in terms of, I don't know, what kind of metrics you track internally there, but it always seems like there is a nice growth adjunct to me in terms of new licenses to the core. I wondering what you can provide.

Scott, thanks for the question. I actually don't have the AppWorks metrics handy today of all things. Part of the strength of our ECM pillar within the quarter, we have made a couple of strategic choices here that resonating. The first is, we have decided to take ECM and deeply integrate it to ERP, differentiates us. Second is opening up the platform for developers, and we saw a few wins in the quarter that were directly related to AppWorks, the ability to embed, extend, expand our Content Suite and Experience Suite, because of AppWorks, and that services layer, so I will follow up and see if we have some metrics on the subscriber growth. I don't have that handy today, Scott.

Okay. The Cloud Services business picked up, what look like more than just the extra piece of GXS in the quarter, is that a function of some growth in the EasyLink business or is that more of a function of the growth in the managed services side?

I would probably say a little more directed at managed services.

Okay. Then lastly just so I understand here, you said half of the installed base has version 10.4. Was that right?

About half of the installed base is either upgraded to or in process of upgrading to version 10.

Okay.

10.5, when we say project Red Oxygen that equals version 10.5, to get to 10.5, we want people to go through version 10.

Okay. Now, that's clear. Thank you.

Thank you. I would now like to pass the call back to Mr. Barrenechea.

Operator, thank you. Thank you for joining the call today. I couldn't be more pleased with our record Q4 in fiscal 2014 performance. You guys now have the numbers, you can also see some of the larger, more transformative, transactions with 26 deals over $1 million. I would like to leave you with the thought of, that as we enter fiscal 2015, we have some momentum. We are aligned to our customer priorities, we have field leadership and focus and we have added to our [leadership] of John Doolittle today. We are in a strong product cycle and we have laid out a practical, achievable, growth agenda, as well, in fiscal '15, leveraging our product cycle, new B2B markets, compliance, continuing to transition customers to managed services, partners and alliances and leveraging everything from established markets to our new global account teams and we are ready to consider more acquisitions. Thanks for joining today. I look forward to seeing you at our upcoming investor conferences.

Thank you. Ladies and gentlemen, this concludes the conference call for today. We thank you for your participation. You may now disconnect your line and have a great day.