Thank you for standing by. This is the conference operator. Welcome to the Open Text Third Quarter 2017 Conference Call. As a reminder, all participants are in a listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. I would like to turn the conference over to Greg Secord, Vice President, Investor Relations. Please go ahead.

Thank you, operator, and good afternoon, everyone. On the call today is OpenText's Chief Executive Officer and Chief Technology Officer, Mark J. Barrenechea; and our Chief Financial Officer, John Doolittle. We will read prepared remarks, followed by a question-and-answer session. The call will last approximately 60 minutes, with the replay available shortly thereafter. I would like to take a moment to direct investors to the front page of the Investor Relations section of our website, where we have posted presentation that will be referred to during this call. And now, I'll proceed with the 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 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 or assumptions were applied in drawing any such conclusion while making a 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 a conclusion, forecast or projection in the forward-looking information and the material factors or assumptions that were applied in drawing the conclusion while making a forecast or projection, as reflected in the forward-looking information, as well as risk factors that may project future performance results of OpenText are contained in OpenText Form 10-K and 10-Q as well as in our press release which was distributed earlier this afternoon, all 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 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'll hand the call over to John.

Greg, thank you very much. Welcome to the call, everybody. Let's go through the numbers and my references will all be rounded in millions of U.S. dollars and compared to the same period of the prior fiscal year unless I indicate otherwise. Total revenue for the quarter of $593 million, up 35% from last year and $600 million, up 36% on a constant currency basis. Revenue was negatively impacted by $21 million, $14 million due to acquisition related accounting rules and $7 million due to foreign exchange. Year-to-date total revenue was $1,628 million, up 21% from last year and $1,642 million, up 23% on a constant currency basis. Recurring revenue of $506 million, up 34% from last year and $512 million, up 36% on a constant currency basis. Year-to-date recurring revenue, $1,382 million, up 21% from last year and $1,395 million, up 22% on a constant currency basis. License revenue for the quarter of $87 million, up 35% from last year and $88 million, up 37% on a constant currency basis. Year-to-date license revenue of $246 million, was up 24% from last year and $247 million, up 25% on a constant currency basis. Cloud Services and Subscriptions revenue for the quarter of $177 million, up 20% from last year and $179 million, up 21% in constant currency. New MCV bookings this quarter were approximately $52 million, up compared to $46 million in the same period last year. Year-to-date Cloud Services and Subscription revenue of $522 million, up 17% from last year and $526 million, up 18% on a constant currency basis. Customer Support revenue for the quarter of $263 million, up 43% from last year, and $267 million up 45% in constant currency. Year-to-date Customer Support revenue of $693 million was up 25% from last year and $701 million, up…

Thank you, John, for your remarks and thanks for your leadership. We achieved 35% year-over-year revenue growth or 36% in constant currency, that is $600 million in total revenue and $512 million in recurring revenues and a tremendous 46% quarter-over-quarter operating cash flow growth. Our recurring revenues are now on an annualized run rate of greater than $2 billion and year-to-date, total revenue was up 21% or 23% in constant-currency, these are solid metrics. Let me also note that Q3 results do not include $21 million of lost revenue, $7 million due to foreign exchange and $14 million due to acquisition accounting, $11 million from ECD, $3 million from others. There is also a partial quarter of ECD operations, which means we carried higher costs on lower revenues. Timing is always a factor in acquisitions, and a couple weeks earlier or a couple weeks later affects millions in revenues. OpenText first principle is long-term growth of intrinsic value. I use the word intrinsic, because it means essential. I use the word long-term, because over the last 10 years, we have grown on a compounded rate, operating cash flows by 24%, revenues by 16%, and adjusted operating margins have expanded from 18% to 34% last fiscal year. The company's historical performance provides us with the experience, expertise and understanding of what is possible within our business and culture, and it gives us the confidence to achieve it going forward. This fiscal year, we continue to attain double-digit revenue growth and we're on the same path for next fiscal year. We take long-term views and make long-term strategic decisions to grow the intrinsic value of OpenText. This long-term view gives us greater insight into the annual cycles of our business with the benefit of lessons learned from yearly trends. Over the last…

We'll now begin the question-and-answer session. The first question is from Richard Tse, National Bank Financial. Please go ahead.

Yes, Richard, go ahead.

Yes, a bit more of a color on the ECD acquisition in terms of what needs to be done that sort of headcounts, products, facilities and really trying to get an understanding here of how that opportunity is going to scale over the next 12 months?

Richard, Mark here and thanks for the question. We closed the acquisition in late January, so it was simply a partial quarter of results, and as we said on the call, we are ahead of our internal plan. So this will be the first full quarter that we have and in the coming two to four quarters, we'll complete kind of facility moves. We couldn't move all employees day one, asset purchase. We will continue to integrate all our systems in the coming quarters, and we'll unveil our first integrated products in the coming quarters as well. Specifically, like on the PS business, we inherited a set of contracts, we honor those customer commitments, some of those contracts have been at low margin, which we simply need to work through and replace that with an OpenText style business. So, this quarter will be a full quarter of operations, and then in the next one to two quarters we complete facilities, first product releases, and more and more systems integration.

Richard, the only other thing I would highlight there is just a note that we announced a restructuring plan last quarter and we're part way through that restructuring plan. So there will be some people-related cost reductions as we move into this quarter.

Okay. And then a broader question, you guys have added a lot of products through acquisitions over the past few years. And I think I've asked this question before, but just trying to get an update here, in terms of the ability to sort of up-sell and cross-sell, I'm not sure what metrics you guys track internally, but maybe you could give us a bit of color in terms of the success there and whether it's a dollar spent per customer basis and where you may be at, I think really 2016, certainly had a lot to do with that but perhaps, give us an update on that, please? Thank you.

So, Richard, we have bright line opportunity in cross-sell. And I highlighted the main areas where we're focusing on education and investment and those include Managed Services, Extended ECM, CEM and InfoArchive. So those are the areas that we've picked to be able to educate our sales force, educate our customers and go hard into the install base to go cross-sell. The more and more we integrate our products, the ability to up-sell increases. EP2 is a more integrated release than EP1. EP3 will be more integrated and there will be further consolidation of technology component. So on the cross-sell opportunity, I think we've done a really nice job identifying those core solutions go into the joint install bases with. And there are four or five things we're going to go take to our entire install base. And up-sell remains an upside opportunity for us. And it's directly related to deeper and deeper integration and release after release, products get more and more integrated.

Okay. And just the last one from me, Magellan, is that going to be commercially available this year because I understand that IBM has been selling Watson through FileNet over the past six to 12 months, just kind of curious what the timeline is on that? That's it. Thank you.

Yes. We're on target to release Magellan into GA early next fiscal year and we'll unveil it at Enterprise World.

Okay. Thanks a lot.

Yes. Thanks, Richard.

The next question is from Paul Steep, Scotia Capital. Please go ahead.

Great. Thanks. Mark, could you just – I want to clarify and make sure when you made the change and sort of delayered, have there been any other changes that are noteworthy within the sales force or was it sort of mainly a management change at the upper level?

No, the only change is the elimination of the President role and Steve directs will now report to me. So, it's, at the end of day, a change in one person in one role.

Okay. And then in terms of PS, can you just go back in terms of the magnitude of how much revenue we're talking about in terms of the lower margin contracts and then sort of what you're thinking about in terms of the time to sort of call that out of the portfolio?

Yes, I am – we – when we look – when we've gotten deeper into the ECD PS business, there are just simply contracts of lower margin and it doesn't meet kind of our standard. And we're interested in value over volume. I don't think, John, we've put a specific number on it. I mean, it's less than 10% of the business if you will, maybe around or less than 10% of the business, it will take us one to two quarters to work through

Okay. And then the final one, I guess, I was curious, you went over it a little bit in the partner section, which was great, could you talk a bit maybe some of the new partners you brought on? I know with the EP1 and I guess I'm thinking specifically of sales force, where that is because that looks like a good sizable opportunity for you down the road? Thanks.

Yeah. So, I think of our partner business are second sales force. And currently I decided to highlight it in my prepared remarks. As we get into fiscal 2018, it's a driver for our business. So, we think of it in three areas. The first is, value-added resellers and Canon, Fujitsu are great examples of new bars that are performing for us. Ecosystem partners, we signed last week a new agreement with SAP, bringing our relationship into the next-generation. I mean, we're now a major and a strategic partner in the SAP cloud, our new sales force solution extends our ecosystem partners. Cerner, relationship that comes over from Documentum, very key reseller engagement for us. System implementers getting stronger with Accenture, Deloitte, CGI, TCS as well. So this is our second sales force, as I like to call it, our momentum is clearly up after four important acquisitions this year. And those are some examples in those three categories of ours, ecosystems and system implementers.

Thank you.

Yeah. Thank you, Paul.

The next question is from Paul Treiber, RBC Capital Markets. Please go ahead.

Oh, thanks very much and good evening. Just want to continue a little bit on the partner theme. What's the strategy for EMC as a channel partner going forward and then with the separation of Documentum from EMC, was there any disruption in the quarter – license sales in the quarter because of that process?

Paul, thanks for the question. Like I said, in my prepared remarks, you close the deal a week or two earlier in a quarter or a week or two later and that revenue adds up. So, it's purely timing. We have not entered into a reseller agreement with Dell and though we're continuing to work with Dell and EMC customers on an opportunistic basis. So no, I wouldn't say there was disruption from a reseller perspective, where we had sales activities, we continued on them. But, we don't have a formal resell agreement in place, though we continue to engage opportunistically.

Okay. On the comment about the EMC, ECD structured as an asset purchase and the amount of work that that required out of the gate, in terms of the impact on cost, are you primarily referring to the – in regards to professional services working through those costs or those other costs introduced? Elaborate, if there are any.

Yeah. I may be talk a little structurally then and ask John to comment. You can see in our filings on the asset purchase, we entered into a transition services agreements with Dell-EMC, TSA. And TSAs are very typical of when you're doing an asset purchase. And our TSA costs are higher upfront, as we rely on their systems, we rely on their network and we rely on their people to conduct business. So, our TSA cost are higher in the first few quarters and then trail down over time. So John, I don't know, if there is anything.

No. That's completely fair. And as we on board some of these things and take these people into our facilities and put them on our systems Paul, we'll see those third-party costs from Dell coming down.

Okay. Thanks so much. I'll pass from here.

Yeah.

The next question is from Thanos Moschopoulos, BMO Capital Markets. Please go ahead.

Hi. Good afternoon. Looking at ECD's quarterly revenue trajectory in calendar 2016, seems like the seasonality of that business is somewhat different from yours, would you expect that seasonal cadence to persist or to become more similar to yours as you retain (44:22) the asset?

Thanos, I have kind of precisely studied their seasonality or what – kind of made that 10-year rhythm sort of click, if you will. We look at our business in Q1, $80 million. John, talked about the PPA, purchase price accounting, within the quarter. We're looking at 30% growth quarter-over-quarter as we onboard the business. So, let's maybe come back to that in a quarter or two and I think we can comment on the seasonality or kind of the rhythm of the business that we see.

Fair enough. And then through the margins, I appreciate the disclosure you provided on the ECD margins, if we look at the HP assets, Recommind and ANX, can you provide some color there, are they under target or is there more work to be done as far as getting them to where you want them to be?

Yeah. I think they're on plan, Thanos, in terms of the guidance that we provided in getting them on to our operating models, I look across those acquisition they're tracking to that outlook.

Great. And then just one last one, Mark, could you elaborate what prompted your decision to make the change to the management structure at this juncture. When you created the role of President, the business was smaller than it is now. So at this juncture, what prompted the decision to deal here?

Yeah. I mean, I look at our maintenance business on an annualized $1 billion run rate, our recurring revenues on a $2 billion run rate. And I'm looking out over the next three years to five years in our continued growth as a business. And we fundamentally believe that our business unit structure is the right structure for the business. Now you take that view that the role is just no longer required to be able to continue with our deployment of capital, our growth rates and aspirations for the business. So, we made that call at the – here recently and I'm very comfortable with our kind of going forward the business unit structure and having Steve's previous directs just reporting directly to me and we're moving that later.

Great. Thanks for that one.

Yeah. Thank you. Operator, any additional questions?

You dropped? You there operator?

So with that, thank you for your questions today. John, I'd like to thank you for joining the call. Hello, do we have another question operator? Okay. I don't know if we have technical difficulty.

Yes.

Okay, operator, go ahead.

The line is live for Eyal Ofir of Eight Capital.

Yeah. Thanks. Thanks for making the time for me as well.

Yeah, Eyal.

Just a quick question for you on, obviously, the integration with ECD business. It seems like just on the base OpenText business, the quarter was fairly well, and there has been no hiccups, whatsoever. Can you just talk about from an ECD standpoint, obviously, first two months post-integration, how it was and how it looks like as it stands today in terms of pipeline and employee and everything else in terms of what's going on there?

Eyal, thank you for the question, and I can't say it anymore simply except to say we're on track. So I mean customers are engaged, employees are engaged. We own the business for 60 days in our Q3, it's a large asset purchase. So there is a lot of time, a lot of precise time spent to carve-out a multi $100 million maintenance business to carve-out 2,000 employees across a couple dozen facilities to be able to integrate networks and be able to run our systems and conduct business, and the team performed miraculously in Q3, and we tracked head of our internal plan and quarter-over-quarter, we expect to grow that business around 30%. So, I'm very pleased with where we are. We closed a week earlier or two, or a week later or two and it impacts revenue. So there are certainly some timing things in precision of a week or two, but I couldn't be more pleased with the acquisition, the strategic nature of it and its trajectory.

Okay. Great. Thanks. And then maybe a question for John. Thanks for the bridge on the cash flow, but one question from me is because it was an asset purchase, I imagine you had to fund a piece of the business in the first 60 days here. So, is there a metric you can give us in terms of how much you actually had to deploy into working capital for the ECD acquisition? Otherwise, it would have actually probably been greater than that? Thanks.

Yeah, Eyal, I can't give you an actual number. I think that question was asked last quarter, and I did in fact say that there would be some working capital drain as a result of ECD. We did in fact see that. You'll appreciate that we weren't able to bill and collect certainly on the license side, much by way of revenues in the quarter and that's going to turn as we move along quarter-by-quarter. So, I don't really have an exact number for you other than to say that there was some working capital used to on the acquisition.

Okay. Perfect. Thanks. And then actually before I pass the line, just last question for Mark. Just on the, what inning would you say you're in, in terms of actually transitioning over the employees and the facilities on the TSA front, because I imagine that's where you will actually start chasing greater cost synergy as well, once you bring them on the OpenText model? Thanks. And I'll pass the line.

Yeah. Fair enough. So look, I think, this will be a big quarter for us to kind of complete the employee transition and continue to be in the heavy side of our TSA costs and we enter fiscal 2018, and we should be – by the next time, we have our next call, we should be majority, I mean, 90% plus employees, 90%, 95% employee work completed and through the most expensive part of the TSA.

The next question is from Phil Huang of Barclays. Please go ahead.

Yeah. Thanks. Thanks for fitting me in as well. Just on the – maybe I'll ask about the ECD integration in a more general way. I was wondering, if there was anything new that you guys might have learnt about the business, aside from, I guess, identifying the low-margin contracts for optimization, which you guys have talked about, and how do other aspect of the business compared to, say, your expectations, are there any surprises both positive or negative?

Phil, thanks for the question. I'll say, you always have a upside or downside, surprise on anything that you do, right. I'd say on the upside, the employee and customer engagement is just fantastic. And I just look at our ITour campaign that we finished, where we're able to engage in roughly eight locations and 5,000 customers attending. The engagement was the best I've seen in my professional career of being able to get on the road and spend time face to face with customers. So on the upside, the passion and the engagement from customers and employees has just been fantastic. And at the end of the day, as I'd like to say, what makes great software, great people. And I'm just really thrilled with that. We have work to do on the integration, and this will be an important quarter for us to get through the facility side and the people transition. We bought an asset that was purchased, we did a carve-out of a carve-out, right. Documentum was inside of EMC that had just been purchased from Dell, and then we carved that out from Dell. We closed a few weeks earlier and we're carving out from EMC, not carving out from Dell. So that is probably running a little slower and a few lessons learnt there of a carve-out from a carve-out, but we're on target for overall plan, just a few timing issues.

Right, right. That's very helpful. And then I want to touch on the, I guess, delayering of the management as well. With the President's role now streamlined, I was wondering if you can maybe elaborate a bit how you expect things to improve from the change, I believe Mr. Murphy was primarily responsible for customer facing activity, sounds like you feel that perhaps a more decentralized approach to it might be a little bit more effective, is that what I read (54:59) to that and do you expect any sort of further structural changes as the integration progresses?

Yes, fair enough. We've eliminated the President role and we don't intend to un-eliminate it. We also feel, we don't need a head of revenue role for the business. We are organized around how customers buy and the activity of renewals and continuing the selling motion in a digital B2B business, we're organized around that with James McGourlay. When we look at how we are selling our cloud services and business network, we're organized around that with George Schulze, we look at our enterprise business organized around Ted Harrison, and our professional services with Prentiss Donohue, where now our business units are organized around how customers buy. So, we're not looking to re-add the role, we're not looking for a head of revenue, we're organizing for the foreseeable future around how customers purchase. And they'll report directly to me.

The next question is from Richard Tse of National Bank Financial. Please go ahead.

Yeah. I had a follow-up question on ECD. When you guys ball this out, would it be safe to say that given this was an asset purchase, you kind of cherry-picked the assets you wanted, and I guess on a relative basis, the return of that type of acquisition has that historically been better, did you sort of mall it better than your typical transactions?

That's a two-pronger.

Correct.

It's okay. Thanks for the question, Richard. In general, you prefer asset purchases because you get to pick what you want and organize how you want. But you tend to get off to a little slower start, as I said on a call, because you're spending your first few months on – your more time on non-revenue generating activity. So, I think, our historical experience of asset purchases generate more value, you get to organize the way you want, but you tend to get off to a slightly slowest start, I think, is going to run very true here in ECD. Similar pattern.

All right. Thanks.

All right. So, I think, this is officially the summary. So thank you Greg. Look, I'm going to end where I started. We achieved 36% year-over-year growth in constant currency and delivered $600 million in the quarter and just had a tremendous quarter-over-quarter, 46% operating cash flow growth. John and myself and the leadership team look forward to seeing you at Enterprise World for Investor Day. And John and I will be at the – one or both of us will be at CIBC, MUFG and the Barclay conferences this quarter. Thanks for attending the call. And look forward to speaking with you soon.

Thanks, everybody.

Thanks.

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