Welcome to the OpenText Corporation Second Quarter Fiscal 2022 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Harry Blount, Senior Vice President, Investor Relations. Please go ahead.

Thank you, Operator. Good afternoon everyone, and welcome to OpenText’s second quarter fiscal 2022 earnings call. With me on the call today are OpenText’s Chief Executive Officer and Chief Technology Officer, Mark Barrenechea; and our Executive Vice President and Chief Financial Officer, Madhu Ranganathan. Please note that we have shortened our prepared remarks this quarter to allow more time for the question-and-answer session. Today’s call is being webcast live and recorded with replay available shortly thereafter on the OpenText’s Investor Relations website. Earlier today, we posted our inaugural quarterly shareholder letter along with our press release and investor presentation. These materials will supplement our prepared remarks and can be accessed on the OpenText’s Investor Relations website investors.opentext.com. Before I proceed with the reading of our Safe Harbor statement, I would like to inform investors that OpenText 2022 Investor Day will take place virtually on March 1. Registration for the event will be available in the coming days on our investor relations website. In addition, OpenText management will be participating at the Scotiabank TMT conference on March 8 and the Morgan Stanley TMT conference on March 9. And now for 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, including in relation to the current global pandemic that may project future performance. Results of OpenText’s are contained in OpenText 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, it’s a great pleasure to hand the call over to Mark.

Thank you, Harry. Well, good afternoon to everyone and thank you for joining today’s call. Today we are introducing our new call format. Earlier today, we published our inaugural quarterly shareholder letter in addition to our press release in investor presentation all available on investors.opentext.com. The three documents are intended to provide more insight into our strategy, aspirations, growth programs and results over short, medium and long-term horizons. Going forward, you can expect a quarterly shareholder letter and shorter prepared remarks from doing myself leaving more time for Q&A. Today we’ll spend a bit more time in our remarks to ensure a smooth transition to our new format. We welcome your continued feedback on how to improve our communication. Onto Q2 accomplishments, we had an amazing quarter financially and strategically. We provided the [indiscernible] progress towards our longer term fiscal ‘24 aspirations of up to 4% organic growth, 38% to 40% adjusted EBITDA margin, and free cash flow of $1.2 billion plus. Today we increased our fiscal ‘22 targets to include total growth of up to 4% and cloud revenue growth of up to 10%. This reinforces our aspiration to generate over $6 billion in cumulative cash flows over the next five years. Please recall, our plan to return 33% of free cash flow to investors in the form of dividends and buybacks while investing the majority of our cash in organic growth and in corporate purposes, primarily M&A. Our capital return strategy has two fundamental pillars one, returning 20% to trailing 12 -month free cash flow via dividends, and two keeping our share count constant via our buyback program. We believe our cash generation prospects and capital allocation strategy puts us in a stellar position to create sustained long-term value. I listed our quarterly accomplishments in the shareholder letter.…

Thank you, Mark. And thank you all for joining us today. This is a new call format. And we’ll focus on selected financial highlights rather than a line-by-line review. On the investor relations section of our website at opentext.com, please find on the Q2 the latest quarterly results. You will see the PDF of our earnings, the PDF of our shareholder letter as well as the quarterly investor presentation. All references are in millions of USD and compared to the same period in the prior fiscal year and are on a reported basis on the safety database. Q2 fiscal 2022 results, we are very pleased with our record Q2 revenue, our record annual recurring revenue and record cloud revenue. Growth, annual recurring revenue, ARR and cloud bookings, we grew total revenues low single-digit organically. We posted another quarter of double-digit enterprise cloud bookings, cloud revenues saw its four consecutive quarters of low single-digit organic growth with positive organic growth in all of our cloud market domains. Strong renewal rates in cloud and off-cloud. And Q2 annual recurring revenue at 80% of our total revenues on a first half year basis, ARR was 81% of total revenues. On the bookings front, enterprise cloud bookings were strong across many products and geographies and a large deal trend was up. GAAP-based net income was $88.3 million during the quarter, higher than Q2 of fiscal ‘21, loss of $65.5 million primarily due to the tax settlement recorded in the prior year. Adjusted EBITDA for Q2 was $343.5 million or 39.2% down slightly from Q2 fiscal 2021 of $360.8 million primarily due to investments and talent across the board including restoration of compensation, sales coverage and growth initiatives. Turning to operating and free cash flows. We generated $216.6 million in operating cash flows in the…

Thank you. We will now begin the question and answer session. [Operator Instructions] Our first question comes from Raimo Lenschow of Barclays. Please go ahead.

Congrats on the solid numbers. Mark, the more bigger picture question. The one thing that gets discussed a lot with software investors here at the moment is the demand situation in terms of spending with customers. Digital transformation was a big theme in the last couple of years, the pandemic kind of really sharpened people’s mind here. And then so it’s kind of notion there, we kind of overspent a little bit over the last year and now we’re coming back to kind of more normal levels. What are you seeing in terms of how this is playing out for you? And I had one follow up for Madhu please.

Yes, thanks Raimo and good to hear from you. Like I said in my prepared remarks, I mean, coming into calendar ‘22 is a vastly more positive year for us. And I mean, look at our customer wins. Novartis and new machine learning and capture, Volkswagen building a new platform for electric cars and rough math, 10 million cars, 10 billion documents a year across purchasing delivery, assembly, service warranty, and more. U.S. Army Corps of Engineer big new projects going on in the U.S. 600 dams to 2,000 levies and they’re all on Cloud edition. So, we see increased demand not shortening demand as we come into calendar ‘22. And we’re very focused on also upgrading and migrating our installed base into our cloud edition. So at least OpenText position is more positivity coming into ‘22 than we had over the last two years.

That’s good to hear. And for Madhu, if I think about your EBITDA guidance, if I do the math, it came down a little bit. Can you talk a little bit about the drivers in terms of, if I look at the absolute level, if I look at the drivers here in terms of between FX kind of investment to business, higher employee costs, etcetera, just could you break down a little bit? Thank you and congrats.

Yes, thank you Raimo for the comments. So I’ll pick FX first and certainly on the top line on revenue FX does play a big role. We’re calling it out in our quarterly factors. And the two lines that FX impacts the most is the cloud services line as well as customer support. And we’re definitely seeing that in Q3. And where we sit today, I would say expect a similar FX impact in Q4. Again, where we sit today, but the underlying business as I said, is absolutely growing and growing from an organic basis. As far as the adjusted EBITDA growth, I put the number one Zix’s acquisition, and which is not uncommon for us. If you go back to the Carbonite acquisition, we did the quarter immediately following. Yes, we did take a downward tick on adjusted EBITDA and then you saw how we came back up. So the number one reason is going to be Zix’s and we’re targeting to get Zix’s to our operating model in our usual timeframe of a year plus. And number two, as you outlined, yes, we did have some savvy forbearance accomplish duration, but more importantly, we did pass through to better increases and we’re investing in talent overall. In addition, investing in talent from an expansion perspective, as we shared sales coverage, marketing, R&D products and innovation. So in terms of the order of the reasons that go anytime you do a live acquisition, Zix in number one, and you’re number two people investment and more go-to-market and products as well.

Our next question comes from Paul Steep of Scotia Capital. Please go ahead.

Two quick ones, Mark, maybe you could just update us on the roadmap for 22.2 and maybe other key releases that should be on our radar screen. And then Madhu just can you when we get to it? Can you go back because it doesn’t look like the transcript caught your third comment after gross margins, low 80s in terms of maybe the impact on customer that we broke up on my side as well. And then just one last one on gross versus net at Zix’s? Thanks.

Yes, Paul, thank you for the question and good to hear from you. And we’re going to have a large and important product update at Investor Day. So I am going to save some of the gunpowder for March 1. But in advance of that, for our 22.2 and 22.3 first, we remain on our 90-day cadence which is our battle cry. And the reason we can look forward to over the next 90 days is our content cloud all support for partners. And embedding extended ECM on the content side, which is really enabling sales force, ServiceNow, SAP, Google, Microsoft, so that this notion of extended ECM. On the business network cloud and we actually have a supply chain summit coming up in a couple weeks. We have a new global invoicing capability supporting about 60 countries that are going to enable what we call just in case supply chains, not just in time, but just in case. And we’re bringing to market our new mid-market offering directly targeted at SPS commerce in the mid-market with a product line called freeway. On the experienced cloud, we have a new SeaPass platform in the marketplace and enhanced over the next 90 days. We’re going to be integrating Zix’s very rapidly for email protection and encryption within the security and protection cloud and more advanced API’s, Magellan risk guard, go send us content, we’ll send you back a content score. Does it have a SIM number and it does have a social security number? Is it in violation of GDPR? We just want a real nice win that Paladin cyber for threat API and over a dozen SAP customers for machine learning and capture. So it’d be more machine learning capabilities. So that’s a bit of a flavor across our five clouds and 22.2. But please expect a very important significant product roadmap update at Investor Day in March.

Thank you, Mark and Paul let me address this Zix’s piece as well. Again, keeping in mind Zix’s was a public company before we acquired them. That’s certainly data and information out there about Zix. We want to take the opportunity to clarify how we’re approaching Zix. So as I mentioned, we closed the acquisition on December 23. We will record revenues on a net revenue basis, we’ve done our complete and thorough diligence. And that’s the appropriate way in our view. And by the way, keep in mind that our sales channel, the partner channel, get all bringing in business from a growth perspective and that’s what it’s supposed to do, right? So this doesn’t sort of discount the totality of the efforts that goes into the business did what emphasize that financial reporting, we will be recording on a net revenue basis, all in Zix revenues goes in as part of cloud and gross margin is in the low 80s. During integration, we generally do this for every acquisition, we do factor a year-one customer partner disruption in our overall revenue models, we certainly strive to meet the higher end of it. But it is prudent in our view to factor some discount to the normal run rate, just given year-one customer partner disruptions. And that was my point number two. And the third point was, we’ll share with you at the end of this fiscal year, the combined growth prospects at SMB powerhouse that Mark talked about in his commentary.

Your last line was what we’ve missed. So on the integration, should we think to the traditional, I believe we were used to be 18% to 20% sort of step-down. Is that what sort of embedded into the thought process at this point?

Yes, I would agree. Yes, thank you.

And last clarification, I’ll leave it I promise. Can you give us a sense, what that sort of translation, obviously from gross to net is on their revenues, since certain folks are going to be looking at the Zix’s numbers and trying to read across understandable and you stated already, the deal that you were going to recast it in your IFRS standard?

Right, a totality of growth to the totality of math. Again, I would think somewhere in the range of, look they have to two different types of businesses, right. And the resale business is where we’re taking the position that we will go to a net revenue based system, without getting into the hairy components here. On the resale side, it really translates into somewhere in the 30% to 35% of $1 of resell revenue.

Perfect. Thank you very much, folks.

Our next question comes from Thanos Moschopoulos of BMO Capital Markets. Please go ahead.

Hi, good afternoon, maybe just to follow up on Zix’s and accounting. When we look at your deferred revenue balance, would that have been some resale revenue in there that needs to be marked down to a net basis or with the stuff they had in deferred as a public company that all pertain to the stuff that you’re recognizing that anyway?

Yes. Again, it’s a great question. Zix’s had adopted gross revenue accounting for their entire business so that applies to the deferred revenue as well.

So even the resale revenue has some different elements in it that would be deferred revenue balance?

Actually different elements. Yes, yes.

Also, given that it’s going to be a higher gross margin profile. Does that mean that once integrated it might actually be above your target operating model?

Yes, in fact, the convergence to a target operating model is absolutely the goal as we come up with integration that mentioned the gross margin is important too, because we would expect that from sort of a SAP Cloud based business in the low 80s. And that’s why we want to make it a point very akin to Carbonite.

Then finally, Mark, just touching on M&A. You obviously announced a new head of corporate developments. And we’re seeing valuations come down on the public markets. I’m not sure if you’re seeing that yet at this point, in terms of assets you might be exploring, but any color update on that front? Thanks.

Yes, very happy to and thank you Thanos and good to hear from you. So first, I’m pleased to give my first live voice to the promotion of Doug leading corp dev and reporting to me and somewhat expansion of the team. We have a fantastic in-house corporate development organization and Doug is just a fantastic leader and delighted to have him reporting to me, and let me just use this also opportunity to add my voice to Gordon’s retirement. He’s been a great partner over the last decade and we wish him all the best in his continued journey in his retirement. So Doug is promoted working for me expanded team in corp dev. And we are seeing more assets today than we were a year ago. We’re seeing a better valuation as well. So there’s more optionality that we see. You should expect us to complete more deals here in calendar ‘22. And I’d also note that if you look at our cash flows and the strength of our cash flows, we can be bold here, but we can fund double-digit acquired growth straight from our cash flow. And we may choose to use other instruments, but our cash flows are strong enough that we can now fund double-digit acquired growth straight from our cash flows. So those are the things I would note for M&A. Doug reporting to me, expanded team, seeing more assets, improvement in valuation or expecting to get more deals done in calendar ‘22. And the strength of our cash flows directly implies strong acquired growth straight from cash flows.

Our next question comes from Richard Tse of National Bank Financial. Please go ahead.

Yes, thank you. Kind of following your website here and you’ve got a lot of material there on IBM. And it seems like you guys are still making some pretty big gains against them, has that sort of changed in any way in terms of those share gains that you’ve had over the past few quarters?

Richard, thanks for the question and good to hear from you. We launched at the beginning of January, a campaign called “Bye Bye Blue” and the campaign, which is very asset rich, very program rich, is communicating to File Net and Sterling Commerce customers, the challenge they have, when Kyndryl got carved out of IBM, that you now have two different companies, two different roadmaps, two different contracts, two different SLAs and the increased complexity of running your supply chains or information management platform. We think it’s a great time to call every File Net and Sterling Commercecustomer and provide an alternative because they’re not investing are in the upper right for Gartner. They’re not. We have a private cloud, they don’t. We have a SaaS alternative, they don’t. So this is going to yield wins, it’s going to yield wins, probably over the next one to three years. And so we just love the campaign, we have one customer, we’re building tools to make the automation of the IBM platform even more rapid. Let me just also note on the competitor front that in the mid-market, we’re very focused on bringing our business network into the mid-market that spent a lot of time on a product line, which we call freeway. And it’s now an alternative to SPS Commerce in the marketplace. And we’re very focused on winning Microsoft transition, helping customers support the Microsoft transition. So as Microsoft moves to their MCE program, we want to be right there to help Microsoft. And any competitor in our way is also going to be an important watchdog for us because we’re here to help Microsoft establish their MCE program. So that would be my comments on competitors.

And then I guess, kind of a related question on acquisitions is, they’re not investing. And they view that through information management business as non-core, they were to sort of think about spending that on an asset that you would consider looking at?

Well, the short answer, of course, is yes, we’d look at it. And it has to be a derive value, but of course we’d look at it. But I’m very happy with our competitive position. But of course, we look at it it’s been in the market way too. It’s been established for way too long. And of course we look at it. Having said that, I really like how we’re competing against them. And we’re going to keep competing, and we got a great campaign in the market.

[Operator Instructions] Our next question comes from Paul Treiber of RBC Capital Markets. Please go ahead.

Thanks very much and good afternoon. In the prepared remarks that you told that double-digit cloud bookings growth, and I was wondering how important was content cloud 21.4 the release this quarter the growth of bookings? And then, more generally speaking, how do we think about product cycles in the future, and do you expect the ebbs and flows in cloud bookings around more significant product releases or is that less of a factoring?

Yes, Paul, thank you for the question and good to hear from you. There’s no doubt that our content cloud is a call out right now. And if we look at some of our customer wins, Novartis, great content cloud customer bringing machine learning, capturing machine learning capabilities into many of their information rich processes from regulated documents to clinical trials. Volkswagen, I’d mentioned a little earlier 10 million cars times 100K documents equals 10 million documents a year from everywhere from purchasing to warranty. That’s a single platform of content. U.S. Army Corps of Engineers, I’m very proud of this win and very proud of partner with the one of the most prestigious engineering firms in the world, from everything from civilian to military construction. And everything from dams, locks, hydroelectric facilities, levees of water supply to over 100 cities in the U.S. one information platform content services, all on Cloud editions. So yes, our 90-day cycles, really important. 22.1 really brought up big capabilities. 22.2, as I highlighted earlier, and Investor Day, I’m real eager to get to March 1 to add some significant announcements for the roadmap ahead. So if you allow me, Paul, I’m going to hold on to some of our gunpowder for Investor Day in the big pieces of the roadmap ahead. But they’re significant. But yes, 21.4, 22.1 really contributed to some of these very impressive cloud edition wins, innovation matters.

My second question is, it maybe relates to roadmap, but I’ll try to speak about it more generally is just on SMB and the opportunity there, the products that you mentioned, have been acquired, to, build-out or further build-out your SMB portfolio, should we expect, the more sort of traditional enterprise grade software that OpenText has to be repositioned down into SMB or do you think that that is a distinct market and it would require distinct products?

It’s a bit of both, it is a distinct product. And going back to kind of our vision and our strategy for information management, it’s both in the cloud and at the edge. And we think both are really important, right? No edge, no cloud, no cloud, no edge, so they’re both really important. And at the edge it’s data protection, it’s information security, it’s email security, EDR, MDR, and forensics. And it’s helping customers constantly move information off the edge into more cloud-based solutions. But we spend our lives on the edge and we innovate at the edge. So there are unique technologies for the edge. And the edge is both SMB and its enterprise. It all take some Zix’s technology, we think the email encryption integrates really well into our experience cloud for security information in healthcare. We think the secure edge email security is going to be really helpful in the business network for our [Indiscernible] platform and those technologies scale up but they didn’t have a sales force to bring. We think our guidance software goes into SMB very well for law enforcement. But we didn’t have a big channel to do that. So its multi layered, right? It’s edging cloud. It’s SMB and enterprise. There are unique technologies for both, but that intersecting circle is large enough that we can bring technologies both ways.

Last one from me. I run your developer website today, and I went through all the API’s that are available, and there’s quite a number of them. What I was thinking through, though is, what’s the marketing strategy for developer cloud? And it seems quite different of a channel than then enterprise sales. So how do you, what’s the plan to raise awareness for OpenText API’s for developers?

Well, it’s a great, I’m delighted you’re on developer at opentext.com. So thanks for being there. So look, I think it’s one of the gems we have inside the company, and we haven’t cracked the scale code yet. It’s roughly $100 million business today inside of OpenText. And it’s a Twilio locked inside our company. So part of the strategy to unlock it was bringing Sandy Ono onboard our new Chief Marketing Officer, we set up a new internal group to go-to-market. We think being able to come in and attach an API sale to a platform sale is a good strategy. For example, back in Dickinson, we bought some API’s into that sale on our business network. We won over a dozen SAP customers for machine learning in capture. We’ve introduced some new API’s of Magellan risk guard and enhanced our threat intelligence. But it’s going to be a combination of things. We’ve got a new Chief Marketing Officer, who understands the market, we’ve set up a new selling team, reporting to Ted Harrison, we are going to attach it to platform sales. Christina and our customer success group is going to set up a PS organization to build applications on top of it, there’s going to be that comprehensive learning from Twilio and making this a future growth driver for us. But we have the technology, we have the know-how and now we’re going to crack the scale code.

Thanks.

You can hear the passion in my voice on this one, because it’s something very unique we have.

Our next question comes from Stephanie Price of CIBC. Please go ahead.

Can you talk a bit about the potential from the vehicle partnerships that you announced this afternoon? How are you thinking about that partnership evolving?

Yes, very good. And thanks for joining us, Stephanie and good to hear from you. Oh, yes, I purposely focused my prepared remarks on our enterprise partners. And we’ve just come a long way in developing out our technology and our strategy with partners. So in relation to Google, which we also announced today, we announced we put new MoU in place and a greatly enhanced partnership in the enterprise. One is we’re going to jointly innovate together. We are at OpenText going to consume more of their platform for our customers and our use. And we’re going to bring our content and experience platforms to their customers via their workspace platform. And we will build-out a joint selling team like what we’ve done at SAP and other places to engage with enterprise customers. So it’s a very evolved and complete strategy to move kind of the next level of engagement around joint innovation more mutual consumption and bringing our content cloud and experience cloud to the enterprise via their Google workspace and then layering around that a joint selling organization to create demand close deals and make customers very successful and happy. So that’s a bit more on the Google announcement today.

Great, thank you. Then switching to the SMB market, I’m curious about the ability to cross-sell other SMB solutions through Zix partner channel and what the timeline looks like for starting that?

Sure thing, I would highlight a couple of things today. The first opportunity is to bring Zix products to Carbonite and Webroot customers’ opportunity number one. Two is to bring Zix email security, which is a cloud service. They’re processing 100 million emails a day, like Proofpoint and bring that scale service into our SeaPass platform and experience to strengthen healthcare, auto and some other of our big EDI traffic, if you will. We think there’s a good relation, good opportunities and immediate opportunity there. We also think on the Microsoft reseller side, is we’ve identified close to 5,000 MSPs in the Carbonite Webroot world that doesn’t have a relationship with Microsoft and CEE and we’re going to -- we’re actively reaching out to them to bring the cloud service platform from Microsoft to those new 5,000 MSPs. And that’s immediate, active real time that we’re doing that. So those are -- definitely those are some of the immediate programs that we’re going to cross-sell and cross bond it.

That’s helpful. And finally, from the due customer support came down as a percentage of total overall revenue in the target model. Just curious about the puts and takes here?

Yes, so Stephanie, I would say two things. One, it’s more of an adjustment as the cloud revenue you see going up the target model slightly. That’s the main driver, a customer support continues to have very strong renewal rates, as you see in our commentary and maybe the last comment and share is I spoke about the FX and FX impacts, the headwinds do impact customer support and the cloud lines as well.

Our next question comes from Howard Leung of Veritas Investment Research. Please go ahead.

Thanks. And thanks for taking my questions. It doesn’t sound like, I guess for the Zix’s acquisition, a lot of the focus on the call. The marks are about the cross-sell, which makes sense. And it sounds like I guess for the resale part of their business. Even with the larger side that OpenText and Zix combined are it doesn’t look like you’ll try to renegotiate those margins or trying to get a little bit of a list there.

Howard, welcome. And thanks for your question. And good to hear from you. There’s multiple vectors here of opportunity first, obviously, there are the Zix’s secure cloud products. And I note it kind of the better integration with data protection, information security and email security. And ultimately, our strategy is to have an integrated endpoint edge platform. And this is another strong component for us to do that across data protection, information and email security, plus our forensic offerings, and then eventually EDR and MDR. That’s the arc of our strategy to an integrated platform. Second is our ability to cross-sell across those companies. As noted, bringing Zix’s into Webroot and Carbonite customers bring Carbonite and Webroot into Zix’s customers. And then the resell opportunity. There’s just enormous opportunity, resale equals relation, the relationship is the power ultimately and the force multiplier for us. So the ability to go further with our great Microsoft relationship, bringing that relationship into the Carbonite, and Webroot. MSPs is very important and then expanding larger than 23,000 MSPs as well. And then on top of that, there’s no reason we can’t bring even other third-party resellers into that singular platform and I won’t go into the others. We’re working with on top of Microsoft, Microsoft complementary to bring in there for even a little more resell. So Howard, it’s a very comprehensive approach to create we do call the SMB powerhouse for assuming from an integrated platform at the edge through the power of the relationship with Microsoft and Microsoft complementary vendors.

Howard it’s Madhu here. Yes, I was just going to say thank you for the question as well.

Oh, yes. No, no, no problem. No problem. And then actually, just to follow up on the MSPs. Can you talk about your process of, how to onboard the -- or how you guys, I guess, introduced the new MSPs to your products? And maybe talk through that a bit?

Absolutely. And this is a very important question, because it’s all driven by software. And we’re going to speak a bit about that Investor Day. But effectively, our digital zone is a software running the cloud as a platform. The goal is to have a single pane of glass or one application that MSPs come to self-service. And after our selling and after our engagement and their tries and buys, but a single platform in the cloud where they can transact, and they can provision and they can support and they can renew. And so part of our strategic approach is to invest in that platform writing software to remove the friction from trying by remove the friction from selling, buying, renewing, monitoring, and we today call that our digital zone.

That’s really helpful. Thanks for explaining the process. And then just maybe one final one for me on the renewal rates. I know on the cloud side, I think it’s slipped a bit from 96, 93. Is there anything you want to call out there? Should we expect it to go back up or it’s -- I guess the growth directory is more about new deals and maybe less about the mid-90s retention?

Madhu you may be on mute.

Oh, my apologies. So Howard was saying we announced, I believe, a quarter ago, Paul Duggan, he is an oral convection in running a $5 billion annual business. He’s been heading up our argument in the world in a lot of new and interpretation ideas are coming along. So I would say stay tuned. And the second piece is that would also lead to continuous improvement in the cloud in the world rates, right? There were earlier questions about products and innovations and value and expect this organization to keep introducing that to our customers. There is churn, but I would say the value is going to be higher than the churn as we look ahead.

Any given quarter will vary on a cloud renewal rate. But trajectory is definitely into the mid-to-high nine?

This concludes the question and answer session. I will now hand the call back over to Mr. Barrenechea for any closing remarks.

All right. Very, very, very good. And thank you for joining today. And we welcome your feedback on our new format where our quarterly shareholder letter. Madhu and I are going to be very disciplined to keep our marks majoring in the majors and narrowing our prepared remarks provide more time in Q&A, which we think is the most important point of this call. I hope you’ll join us on March 1 for our Investor Day. The executive team will be all together out here in Silicon Valley live. And you’re most welcome to join us in person or virtually for our Investor Day on March 1 and look forward to seeing you then. Thank you.

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