Thank you for standing by. This is the conference operator. Welcome to the OpenText Corporation Second Quarter Fiscal 2023 Financial Results 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. [Operator Instructions] I would like to turn the conference over to Harry Blount, Senior Vice President, Investor Relations. Please, go ahead, sir.

Thank you, operator. Good afternoon, everyone, and welcome to OpenText's second quarter fiscal 2023 earnings call. With me on the call today are OpenText’s Chief Executive Officer and Chief Technology Officer, Mark J. Barrenechea; and our Executive Vice President and Chief Financial Officer, Madhu Ranganathan. Today’s call is being webcast live and recorded with a replay available shortly thereafter on the OpenText Investor Relations website. Earlier today, we posted our press release and investor presentation online. These materials will supplement our prepared remarks and can be accessed on the OpenText Investor Relations website, at investors.opentext.com. I’m pleased to inform you that OpenText management will be participating in the following upcoming conferences: Bernstein's Technology, Media, Telecom and consumer one-on-one forum on March 1 in New York and Scotiabank's TMT Conference on March 7 in Toronto. 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 current -- 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 Mark.

Thank you, Harry, and welcome, everyone, to our fiscal 2023 Q2 call. Madhu and I are delighted to be hosting today's call from Ottawa. Tomorrow, we ring the opening bells to NASDAQ live from the nation's capital. It is NASDAQ's first opening from Canada and tomorrow is a recognition and celebration of Canada’s and OpenText’s leading role in global technology innovation. We're a differentiated young company and we're just getting started. Let me get right to the most important points today. OpenText had a truly superb Q2, achieving overall constant currency revenue growth of 7.8%, which reflects very strong cloud revenue growth of 16%, excellent renewals performance and continued focus on efficiency with 37.7% adjusted EBITDA margin, even as many of our team members also worked very hard to prepare for the close and integration of Micro Focus. Many of the same secular factors that contributed to our growth have only increased our confidence and the potential that we see in the acquisition of Micro Focus. Specifically, in an increasingly connected and data-intensive world, our customers need actionable insights and information, strong security and continuing innovation and the tools that they need to accelerate, the digital evolution of their complex business environments, in order to securely deliver on their customers' expectations and do so efficiently. We are on track to deliver on every commitment we made at the time of the Micro Focus acquisition announcement. I'll elaborate later, but we are more confident than ever about the value we can create for our shareholders, customers and our employees and the performance we can realize by applying the OpenText business system at very experienced integrators. We have a proven track record that has been refined through the course of integrating many large acquisitions over the last decade. In addition, you'll hear…

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 unless I state otherwise. During Q2, at OpenText, we redefined one more time what consistent and solid execution means. We delivered a superb quarter of results better than the expectations of our target growth strategy shared with you on the last earnings call and proceeded towards closing Micro Focus acquisition on the 31st in line with our planned timing. OpenText is entering an exciting new phase acquiring Micro Focus from a solid position of strength with momentum and confidence in our total growth and integration plan. On Q2 results, we are very pleased with our Q2 revenue performance. On a year-over-year basis, Enterprise cloud bookings of $145 million, up 12% year-over-year. And foreign exchange in Q2 was a revenue headwind of $48 million, approximately 45% in customer support and 31% in cloud. Cloud revenue of $409 million, up 12% as reported and 15% in constant currency. Strong renewals was 94% Enterprise Cloud, and 95% in off-cloud. ARR, annual recurring revenue of $725 million up 3.6% as reported and 8.7% in constant currency and representing 81% of total revenue. Total revenue of $897 million, up 2.4% as reported and 7.8% in constant currency. Q2 was the eighth consecutive quarter of organic growth in constant currency for both Cloud and ARR. And moving to other financial metrics. GAAP net income of $259 million, up from $88 million due to a non-cash mark-to-market benefit are micro focus-related derivatives and lower debt extinguishment cost. Note that the mark-to-market benefit in Q2 is a reversal of Q1 loss, partially reflective of the significant currency movements of euro and GBP to…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Paul Treiber of RBC. Please go ahead.

Hello. Thanks very much and good afternoon. Just a couple of open-ended questions. Just first, on the product road map, you sound very excited about the combined product road map. Among all the acquisitions that you -- that OpenText has done, how would you rate the product fit in the potential revenue synergy opportunity just coming from products alone between these two companies?

Yes. Paul, thanks for the question. Great to hear your voice. The -- well, this is the largest expansion of information management that we've done. Documentum effectively bought market share and some capabilities in a couple of industries. GXS certainly put us in business networks, and we've added to that over time, like Liaison. And our acquisition of Carbonite and Zix put us -- gave us a footprint, a solid footprint in cybersecurity. So this is the largest expansion of our mission, large expansion of information management. As I noted in my remarks, this has created a cybersecurity business of scale that will rival our content business in terms of scale and resources. We're entering a whole new application automation space, which we think is essential for the needs of digitalization, digital operations management. And we're bringing on Global 10,000 critical technologies. We're the market leader in EDI. We're going to be the market leader in Mainframe technologies and bringing those workloads distributed. So Paul, and then, of course, Vertica and some other tools. So it's the large expansion, brings our TAM up to over 200 billion. And at this scale, I'll bridge back to what I said on our fiscal 2024 plan. We'll -- on this growth rate, we're looking to generate $2.1 billion to $2.24 billion in adjusted EBITDA. So it's also the largest expansion of being able to generate profit and EBITDA. So it's the largest step forward we've made.

The -- that's good to hear. The -- there's a lot of work, obviously, with the integration that you need to chew through over the next couple of quarters or maybe years. What are the most important factors that need to happen in your view for this acquisition to workout very well for shareholders here?

Yes. Again, thank you, Paul. We're off to a great start. I mean the energy and excitement internally has -- in week one has just been electric. And look, we wanted to put out there our F '24 preliminary plan. And I asked -- and look, it's -- I have confidence in what we're doing and the results are going to speak for themselves. And in our F '24 plan, we're looking to deliver $5.75 billion to $5.8 billion in total revenues, $2.1 billion to $2.24 billion in adjusted EBITDA and up to $900 million of free cash flow. Supporting that are the beginning of the transformation of how they engage customers and getting their renewal rates are -- and underneath that is an accelerated product road map every 90 days underneath that is long-term value, accelerating customers to the private cloud than more public cloud. So it's just as we outlined, Paul, of -- the gameplay we outlined pre-closed is the same post close. And it's relatively straightforward. Get the renewal rate up, how do you do that, high correlation, it’s product innovation. The piece where we feel that OpenText can add the most value is our private cloud, accelerate innovation and then more public cloud services. We know how to run this play. It's the same preannouncement as it is today, and we have the confidence to present to you today our F '24 plan of $2.2 billion to $2.24 billion in adjusted EBITDA, 15% Enterprise Cloud bookings growth and revenue is up to $5.8 billion.

Thank you. I’ll pass it on.

The next question comes from Steven Enders of Citi. Please go ahead.

Hi. This is George on for Steve. Congrats on closing the deal. It's very exciting. I wanted to talk about the FY '23 guide. I'm understanding correctly, the organic revenue growth guide came down a couple of points despite a really strong quarter. So I guess I'm wondering how much macro is potentially baked in there? How much conservatism, if you could just talk through that change. Thank you.

Thank you again for your comments. It's Madhu here. So when you look at fiscal -- when you look at fiscal '23, the OpenText growth trajectory, there's no change in it, right? As we bring micro focus on for the five months, and when you look at it in aggregate, we are bringing Micro Focus on at a baseline in fiscal '24 of $2.3 billion we shared, and we've also given you the five-month numbers. I would also urge that we -- it's not going to be reasonable to annualize the five-month number, just given their own seasonality and how their license and other aspects operate, which we understand quite well and then able to provide the baseline for fiscal '24. So I would say OpenText organic growth rate is strong. Our cloud revenue growth rate remains strong, and it's really the micro focus piece that we're incorporating to the five months.

Got it. That makes sense. Thank you. And then one quick follow-up. You announced this headcount reduction cost savings plan. I'm just wondering, is that fully just according to your acquisition preplanned cost out or is there any element of kind of responding to some of the same pressures that some of your peers are facing that are going through similar programs? Thank you.

Yes, Mark, do you want to take that and I can add as needed.

Yes, sure, George. Thanks for the question. We announced conjunctive with our announcement of our intent to acquire Micro Focus. We said we'd take out $400 million. And after closing here, we're confirming we're going to take out $400 million of expense. And our 8% reduction, rebalancing of the workforce is completely due to the acquisition. Our cloud bookings growth is growing 15% plus, as you can see. We had a stealth superb of Q2. And it's interesting when you look at the economy and the factors out there, my best way to describe it is it's uneven. There are very specific issues to companies and they need to all talk about their own companies. In relation to OpenText, our demand is strong. Digitalization is the only answer. And you're seeing that in our 16% cloud revenue growth, near 8% total revenue growth and our increased confidence in growing enterprise cloud bookings at 15% plus. The factors exist out there, for sure. But it's uneven and disproportional. And digitalization is the only answer, and we're doing well in this volatile time.

Yes. And thank you, Mark. I was just going to add that before COVID or during COVID, the OpenText operating model has always been very thoughtful and measured adding the resources that is very conjunctive with growth and innovation. So the factors you hear outside are absolutely not applicable to us. Even now the rebalancing the workforce, as Mark shared in his comments will continue to hire in the sales and the product innovation areas.

Great. Thanks for taking the questions.

Yeah. Thank you, George.

The next question comes from Kevin Krishnaratne from Scotiabank. Please go ahead.

Hey there, good evening. Congrats on the deal. Very exciting times. Just a question for you on the -- your outlook, 2024 to 2026 it’s an improving organic growth profile there. I'm just wondering, a lot of different moving pieces there, but how do we think about the contributions of, say, call it, straight-up cross-sell versus helping Micro Focus be maybe better cloud-enabled when it gets on to your cloud, private cloud platform versus renewal rate improvements. Just walk through the different pieces and what might be the bigger contributors to the improving organic growth rates over the next few years?

Yeah. Thank you, Kevin. The first is, as I outlined in my remarks, we want to win each of the markets. And so I don't think of that as cross-selling per se, but winning that stack. We want to win the cybersecurity full stack. It's suite selling. Win the cybersecurity suite, win the content suite, win the business network suite. And that is a straightforward growth on-ramp for us to win the stack in each of those six markets. Second is select strategic integrations across the six markets like Vertica and Magellan across the six, security across the six, private cloud, our cloud APIs across the six. So it's a very straightforward play for us, and we've actually organized the company around that. Ted in enterprise, sales apprentices or we're giving cybersecurity, a lot of focus, apprentice leading cybersecurity. We have James McGourlay leading Enterprise Sales, Paul Duggan running all worldwide of renewals through Customer Success and Kristina leading our Corporate Sales. So we structure follows strategy, and we put that structure underneath that growth play of winning each. Now there's, some very select things that we think are going to stand out, Idle and Content Services. Our ability to compete against FileNet, Fox, Highland and others by incorporating facial recognition, voice immitery, we're going to take a big step up with this capability. It's a gem. And they would like to integrate security, voltage into content and having the most secure content platform. So play number one is, win the stack. Number two, select integrations; and then three, fixing the things that need fixing Micro Focus, Acceleration in private cloud, get the renewal rate up as we outlined. And Kevin, it's a pretty straightforward run of plate, easy to articulate, and we're putting it all in motion.

Okay. Thanks for that color, Mark Maybe just a follow-up there then. Microsoft integrations sound really unique and interesting. I'm wondering, how do we think about once they're integrated and up and running and being offered to customers, is the opportunity more that they're opening up new TAMs or in your use cases? Or are these -- are you being are these better competitive products and you're displacing? Just how do you think about where and how the wins are coming when you're looking at the other end?

Yeah. I mean, the -- these markets are bringing us to a galactic TAM of $200 billion, right? So we don't need to TAM expansion. This says we got a big playing field in front of us at $200 billion plus. Its two things, we have new use cases we can go after. Smart cities, smart transportation, as we move, X and Y move from using their fingers and using more voice, we're in a great position to capture that. So there's, just new use cases and I'm just giving one in content, new market, cybersecurity for us. We'll be larger in some brand names out there like RSA, which is a comprehensive stack that we have. And our competitive position is going to increase. It's the same competitors out there. Our positioning at FileNet just got stronger. Our position against Box just got stronger. Our position against Sterling Commerce just got stronger. Our position against some of the security providers just got stronger. So it's new use cases. We love the TAM, don't need to expand it, win the full stack, stronger against our competitors. And we'll spend more time on that, at an Investor Day and another presentation to lay out that competitive landscape. But it's a really interesting question, and thanks for it.

Great. Look forward to the progress and congrats again and pass the line.

Thank you.

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

Good evening and thanks for taking my question.

Hi Stephanie.

Hi. I wanted to just focus in on that fiscal 2023 and fiscal 2024 target markets oh, sorry, target model. And maybe talk a little bit about where you potentially baked in some conservatism and what you think kind of get you to exceed potentially the targets that you've set out, especially on the margin side?

Yes. If there's any model questions of Target, I hand that to Madhu first, and then I can take maybe the second part. Any questions on the model you want to go through, Steph?

Just more generally on where you might have baked in some conservatism in that fiscal 2023 and fiscal 2024 target model. Just thinking about upside from here.

Yes, for sure. I'll take that Stephanie. So, a couple of things, whether it's conservative or not, we have a very educated baseline for Micro Focus, right? That's actually number one. And we've shared very exclusively the five months, there's plenty of seasonality to support us and to support you, we've shared where we see since you're asking about fiscal 2023, the Micro Focus numbers come in. Vis-à-vis the historical adjusted EBITDA, it is getting burdened by the three items I outlined, including some of the license and second, lease accounting and also the R&D capitalization. So, the entry point Micro Focus coming in is definitely from IFRS to US GAAP, and we've made sure we've aligned that as well. In fiscal 2023, as you look at our annual model ranges, we continue to have enterprise cloud booking the 15% plus. And our cloud revenue, including Micro Focus is actually at 11% to 13% and -- previously, it was 8% to 10% from an OpenText only. So, I mean, so again, as we see the demand strong about the cloud bookings and cloud revenue, the target model, I would say, fully represents what we see in the market and integration begins. And I've shared color on some of the integration costs that we are going to incur and we factored and we factored all of those in.

And Stephanie, and I would amplify -- or rather not amplify, I'd add two things, right, to the great comments from Madhu. Things I think about to deliver these great targets, right, are they conservative or exceed them. But to deliver these great targets we put out there, I'm very confident in the pace and speed given our track record over the last decade of many large acquisitions. But to the extent we can go faster, the results would thus be accelerated. I'd be very pleased with landing between $2.1 billion and $2.24 billion in adjusted EBITDA for 2024, but it's a little faster. These results should improve. Second thing, I actually like our euro exposure of our business. And with OpenText and now the Micro Focus customers, part of OpenText, a rising euro rises OpenText. And so I also like the mix of business that we have geographically and so to the extent that the euro goes up, we're in a good place.

Thanks for that. Just one final one for me. Just curious about the R&D and how you think about the combined R&D in the business. What areas are you looking to prioritize post the -- post Micro Focus acquisition?

Yes. Well, on -- as we bring the two -- as we brought the two organizations together already, you'll note in fiscal 2023, on our target model range, our engineering investment is between 14% to 16%.

The partial year.

On the partial year. And you can expect it on a combined basis to pick up from the previous OpenText model, right? So, it's not just up on a combined basis, it's up because we're going to be investing to accelerate cloud. Continue to accelerate cloud 15% plus bookings growth. And you can see our F 2026 aspirations of obviously to the organic

Give the 7% to 9%.

7% to 9% organic cloud revenue growth in F 2026. That's a big number, very important number, a strategic set of initiatives for us. So you can see that R&D percent up 15% plus cloud bookings growth, and 7% to 9% organic cloud revenue growth as we approach at 26%. So where is that investment going to go? It's going to go right to where I highlight it in my script today. I won't repeat it, but we'll go back to the transcript I outlined quite precisely where the priority is going to be.

And Mark, I was just going to add and certainly amplify definitely the global footprint of R&D, new professionals we at acquiring to add to the OpenText team is quite incredible. Then it's going to be somewhere to 8,000 people. We have a huge concentration in India now and including Canada, Germany, et cetera. So I mean I was just going to add the quality and caliber of the skill sets of the R&D professionals I mean, it's really going to be very strong.

Great. Thank you very much.

Thank you.

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

Hi. Good afternoon. Madhu, can you clarify the difference between IFRS US GAAP that you referenced on the licenses? Is it that they were booking upfront license on multiyear terms and you're going to recognize it ratably or what's the dynamic there as you go from Micro scale?

Yes, of course, happy to. I specifically mentioned the license renewals, which means the IFRS allows you to take it upon signing of a renewal contract, whether it's in the U.S. GAAP, you start to take revenue obviously on a ratable basis upon the official date of the renewal when you start delivering the services, so that's the big difference. And the other two pieces, as I mentioned, IFRS allows a higher rate of R&D capitalization than US GAAP does and lease accounting in US GAAP is treated as rent, so it goes into the operating expense model, as a full appreciation.

Great. And then just to clarify since it's hard for us to do an apples-to-apples comparison, if we look at your FY 2023 revenue contribution from Micro Focus, apples-to-apples, does that sort of imply a single-digit type of organic decline or might it be larger than that initially because of some of the near-term integration?

Yes. Is that question, Thanos to Micro Focus? Because if you look at our target model, OpenText, the organic growth is still making 1% to 2%, was your question specific to Micro Focus.

Specific to the Micro Focus contribution implied in the fiscal 2023 guidance, is that assume sort of apples-to-apples, yes?

Yes. Yes, I would say the best reference for the Micro Focus contribution is what we shared in 870 [ph] to 920 [ph] and then calling the baseline at 2.3 billion for fiscal 2024, sort of taking the negative out of like how much is it over or under, and this is our completely educated estimate of 870 to 920 for the year -- for the partial year and then 2.3 billion baseline for revenues for fiscal 2024.

Yes. Thanos just to add to that, look, I'm expecting solid performance from Micro Focus on these five months. It's really tough. And I don't actually think it's meaningful to look at those five months a year ago because they didn't run the business that way. And they don't have an end of March, right? They didn't have an end of March had an end of April, we have an end of March. They didn't have an end of June, right? They had an end of October. So we're going to get them on board to our periods, and we're going to drive performance hard. The team is quite motivated, right? So I'm expecting solid performance, as Madhu highlighted $870 million to $920 million do not annualize that number, because they didn't run as an IFS reporter every six months to our period. So we get all that period stuff out of the way, immediately, we can get all that noise out of the system. We've aligned to our calendar. And we wanted to make it easy for you and say, it's 820 – I'm sorry, $870 to $920 million. And next year, the baseline is 2.33. But we expect strong performance, strong customer wins. I can't wait to shout some out when we close the quarter.

Perfect. I appreciate all that and appreciate all the guidance and stuff you provided. Thanks.

Thank you.

Thank you.

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

Yes. Thanks for providing all the color. That's super helpful in terms of kind of helping us forecast the outlook. I just have one question. It looks like a great transaction from a valuation standpoint, everything. If there were any potential blind spots, where would they be sort of based on your kind of past experience with previous acquisitions?

Yeah, it, fair enough. Look, I always thought to the house is our talent, which we're off to a great start on understanding customer needs, and that's going to be a big outreach for us. On the system side, in this case, we're integrating to our systems. And I appreciate all the work that they've done historically, but we're taking their product line, and we're integrate into SAP, or integrate into our sales force. We'll integrate into our M365 teams environment. We'll integrate into our information system. So typically, there could be surprises on the system side, but we'll be integrating into our world-class tech stack that run and scales OpenText. So I think it's the usual markers that we're going to continue to pay, obviously, very close attention to people, customers and systems.

Okay. Great. Thank you.

The next question comes from Daniel Chan of TD Securities. Please go ahead.

Hey. Mark. Now that the deal is closed, I'm hoping you can give us more color on how some of those early conversations are going with Micro Focus' customers on being able to cross-sell cost services into the installations?

Yeah, early days, feedback from customers, I've obviously a busy week. I've spent, I've spoken to almost a dozen customers this week. And the overarching theme is we love where the products have landed, incredible talent, incredible products. We love where Micro Focus products landed. But two, lots of joint opportunity on integration. So, a lot of interesting use cases and potential coming out. And a real reaffirmation of where we feel the value drivers are faster integration. Now mind you, they haven't had this innovation culture per se, right? We have a CEO and CTO. We have a great Head of Engineering. We organized one of our -- heart has four valves, one of those valves is innovation and getting to our every 90 days accelerated innovation. They have an amazingly talented engineering organization and now they have more tools to leverage as do all parts of engineering. So real affirmation of great people, great products move faster, which is our 90-day cycles and provide more cloud options. Private cloud for many is the destination, more API work as well. So Dan, I'd say this is a -- it was a very strong affirmation of our strategic rationale.

Sounds good. Thanks for that. And then maybe switching gears to the renewals business. Based on our prior conversations, it sounds like you had some pretty big structural shifts in changing micro focuses renewals business. So what's the time line on completely revamping that business? And how long do you think it will take before we start seeing those renewal rates start to improve? A – Mark Barrenechea: So their renewal rates are in the low 80s. You saw ours in the mid-90s for Q2. Our business practice has taken our renewal rate over time to an expansion business. And I do hope over time to talk expansion rates versus renewal rates. And that's the big prize on the hill, right, is advancing as we get more and more -- as we approach this $2 billion cloud business and beyond, our narrative will change from renewal rates to an expansion rate. But that said, for a moment, we have strong performance in the mid-90s. They're operating in low -80s. We're in full motion on deploying the OpenText love model, land operate value expand, centralization of renewals, new procedures, new authorities, APA doing this direct, not through partners. And we expect to uplift them to our renewal rates by the end of FY 2025 and make steady progress along the way, right? Renewals happen in one-year cycles. We'll start to integrate. And it's really the things below that the renewal rate is a lagging indicator. It's not a leading indicator. So as we get on our 90-day release cycles, as we get private cloud, as we accelerate public cloud, as we build more confidence, we put all the procedure in place -- things in place. We will see steady progress, but that landing zone of getting to, kind of, our rate, we believe we'll land there by the end of F 2025 with steady progress along the way, and we'll keep you updated along the way.

Thank you.

The next question comes from Steven Li of Raymond James. Please, go ahead.

Hey, guys. Hi, Mark. Hi, Madhu. So I understand IFRS to GAAP has an impact on it. But the free cash flow also looks a bit off. So what I'm looking at is OpenText on its own TTM generated $800 million. The free cash flow with Micro Focus for 2023 is below that and for 2024 is $800 million to $900 million. And I already had OpenText in that range. So my question is why is Micro Focus not additive to free cash flow for the first six quarters?

Yes. So it's a good question. Thank you, Steve. So if I could just refer back to the category of expenses I talked about, right? So, certainly, the $400 million cost reduction is at play, again, when we think of fiscal 2023 and fiscal 2024. And add on to that is the special charges, the integration charges. I want to clear what is non-GAAP or otherwise, all of these costs impact free cash flow. And we are having about $80 million in integration expense, somewhere in the $380 million, $220 million on special charges, cash outflow as well as how we rationalize global entity. The combined company is going to be pretty large and complex in terms of its global operations. And sort of rationalizing that is usually -- it requires investments and expenses, right? So there were no -- like, whether you think the OpenText ledger or the Micro Focus ledger. And, of course, you have like significant interest expense as well. So during fiscal 2023 and 2024, if you put aside interest expense, that is the period of time when all of these charges are coming into the cash flows. And then, we recover pretty quickly from there to get to the $1.5 billion plus, you'll start to see the recovery coming in the early part of fiscal 2025. From a working capital perspective, it's important to note that throughout this process, the model assumes that we're actually improving Micro Focus working capital very steadily from day one and we're maintaining the OpenText -- like, OpenText working capital performance as well.

Right. And Madhu, just to clarify. Micro Focus when they acquired HP, the HP assets, they had this reverse moving structure. Is that in your numbers, but which year does it go away? Does it -- is it already expired?

It's gone, does not exist. It's their history, does not exist at OpenText.

Right. I was just going to add that our efforts on this is going to be grounds up brand new taking what they have today and looking at the opportunities for optimization ahead. But I agree with Mark on the divers more a tough question.

Yeah, absolutely gone, doesn't exist. Stephen, if I can. I just want to note something, right? So we're being crystal clear on what our free cash flow targets are, right? $500 million to $600 million in F '23, $800 million to $900 million F '24 and $1.5 billion plus in fiscal '26. So I know you can see that place will be crystal clear, right, that we're providing that visibility today. As Madhu noted, I do want to make kind of three pieces of emphasis that in fiscal '24, we're not reaching our free cash flow potential yet. We're reaching our EBITDA potential of $2.1 billion in EBITDA to $2.24 billion in adjusted EBITDA, but we have three things going on that are really important. One is the integration expenses, as Madhu spoke about. We're going for a rapid integration, and we're going for simplification, right? We are going to simplify this business and we're going to do it upfront. Legal entity structures, all the things Madhu talked about, the word simplification and three, we're investing in our cloud. 15% plus cloud bookings growth, 7% to 9% organic cloud revenue growth in F '26, and that takes investment. Those are the three things that we've decided on to make, as you say, over the next six months, six quarters.

Thank you. Very helpful, Mark and Madhu.

Thank you as well.

Thank you. I will now hand the call back over to Mr. Barrenechea for closing remarks.

All right. Thank you, everyone. I know today's call ran a little longer than usual, and our script is a bit more fulsome than most. But Madhu and I felt it was very important to provide this level of visibility and simplification to how we're looking at the Micro Focus business and the -- and their products combined into OpenText. And I hope you'll join us live tomorrow as we open the NASDAQ from the National Arts Center here in Ottawa. Have a good evening.

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