Thank you for standing by. This is the conference operator. Welcome to the OpenText Corporation Second Quarter Fiscal 2025 Financial Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, star then zero. I would now like to turn the conference over to Greg Secord, Head of Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone.

Welcome to OpenText's second quarter fiscal 2025 earnings call. With me on the call today are OpenText's Chief Executive Officer and Chief Technology Officer, Mark J. Barrenechea, OpenText President, Chief Financial Officer, and Leader of Corporate Development Madhu Ranganathan. And joining us for today's Q&A session are OpenText President Worldwide Sales, Todd Cione, and OpenText President and Chief Customer Officer, Paul Duggan.

Okay. Excuse me. Today's call is being webcast live and recorded with a replay available shortly thereafter on the OpenText Investor Relations website, which is investors.opentext.com. Earlier today, we posted a press release on our website, including our investor presentation, a supplemental RPO disclosure, and all of those are available on the OpenText Investor Relations website. OpenText will be participating in the following upcoming investor conferences: Susquehanna Financial Group on February 28th, which is a virtual conference, Morgan Stanley Technology Conference on March 3rd in San Francisco where I'll be joined by Madhu, and the Scotiabank Telecom Media and Technology Conference on Wednesday, March 5th in Toronto I'll also be joined by Madhu. Now, on to the reading of our Safe Harbor statement. During this call, we will be making forward-looking statements relating to the future performance of OpenText. These statements are based on the current expectations, assumptions, and other material factors that are subject to risks and uncertainties, and actual results could differ materially from the forward-looking statements made today. Additional information about the material factors that could cause actual results to differ materially from such forward-looking statements, as well as risk factors that may impact future performance results of OpenText, are contained in OpenText's recent forms 10-Ks and 10-Q, as well as in our press releases that were distributed earlier today and 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 again are available on our website. And with that, I'll hand the call over to Mark.

Thank you, Greg, and welcome to our Q2 earnings call. Since the Micro Focus acquisition and the AMC divestiture, I've been focused on getting our business model right and building a solid operating foundation to support our full growth potential. Our number one priority was margin. And with our first half performance and strong Q2 operating results, we've delivered. Now we're ready to make growth our new number one priority. Today, I'm going to provide insight into our large growth opportunity, outline some of our challenges that are in focused areas, provide insight into our revised FY25 outlook as well as provide expanded and new insights into RPO and cloud CRPO, and overall, you will notice a new style and approach to communications today. We look forward to your continued feedback as we build a market-leading information management company. In Q2, we delivered $501 million of adjusted EBITDA dollars or 37.6% adjusted EBITDA margin. $307 million of free cash flow, $1.11 of adjusted EPS, each of these metrics up significantly excluding AMC. We grew our quarter-over-quarter cash to $1.12 billion and within the quarter, we purchased and retired 2.2 million shares at an average price of $29.82. And over the last three quarters, we deployed approximately $300 million in cash and purchased and retired 10 million shares at an average price of $30.30 USD. Expect us to continue to implement our current buyback program and reduce our shares outstanding. On revenue, we delivered $1.33 billion, down 4.9% excluding AMC. Cloud revenues grew 2.7% and we closed $250 million of new cloud contract value. This is a record quarter of customer demand for cloud and new bookings with 6.1% year-over-year growth. Further, in January, we completed the significant transition services agreement with Rocket Software related to our $2.28 billion acquisition of…

But for large-scale organizations who are writing software.

This is a really good place to be as we are all software companies today. Our top industry focus includes software and cloud companies, financial services, auto, telecommunications, biotech, and more. With this new strategy and with TitaniumX, we have two key SaaS wins already in Q2, at Pfizer and Lilly. I am confident we'll return to growth with TitaniumMax SaaS AI and our top-of-market focus. We're also live internally across ten thousand engineers. For requirements management, productivity insight, lease management, and quality. We took all our requirements and put them in the product, and now that's part of Titanium X. I find when you can run the software yourself and gain value, you build strong momentum from there. Next growth opportunity continues to be with our hyperscale of partners. Who play an expanded role in our cloud growth. Real simple, Microsoft. We've decided to bring our XDR to market on Azure. An integrated with Microsoft Security Copilot. Our new SaaS platform and our new sovereign capabilities run on GCP. Our private cloud runs across all the hyperscalers for customer choice, but AWS, GCP, and Azure our SAP products run-in the SAP cloud and across all hyperscalers, and as I said at OpenText World, we make multi-cloud work. And these partnerships will contribute markedly. And finally, in addition to all these organic programs, we will continue to evaluate strategic opportunities to create value and or increase our growth rate through divestitures, or combinations. With growth as our new number one priority, I want to present our new RPO disclosures and new cloud CRPO metric that will provide insight into our cloud growth over time. There are two strategic points I'd like to make, and then Madhu will go into detail. First, we are now providing further insight into RPO. Both for cloud and maintenance, both current and non-current.

As you can see from ending Q2,

Cloud RPO was $2.3 billion and larger than our maintenance RPO at $1.8 billion. Please note, this is now for the entirety of our cloud business and fully includes enterprise and SMB. There's no more asterisk on our disclosure. Including this, not including this. This is our full cloud business. Second, we're also introducing a new metric cloud CRPO. And what flows in and what flows out and a common-sense formula to calculate the change in cloud CRPO from a beginning period to an ending period. We also include an example contract waterfall. We designed our disclosure after viewing market-leading cloud companies, including SAP in Salesforce. And, of course, we welcome your continued feedback to improve even more. Now we're also including periods ending June 30th, 2024, September 30th, 2024, December 31st, 2024, and we'll provide these new disclosures every quarter going forward. When we complete this fiscal year, you can then begin to gain further insight by tracking year-over-year cloud CRPO compares and growth. With always a good time to provide a deeper insight into RPO. Let me move on to our financial targets. And turn to our updated FY25 targets. We're revising our revenue downward by $130 million to a range of $5.175 billion to $5.27 billion. The $130 million is broken out approximately 25% FX, 25% DXC impacting license and maintenance, and 50% from ITOM and ADM performance impacting license and maintenance. And we added a slide nine to our investor presentation to provide detailed insight into the $130 million. Now conjunctive with this, our cloud revenue range is unchanged. Our adjusted EBITDA percent target is unchanged. Our new cloud bookings growth range is 20% to 25% representing a very strong second half and momentum into 2026. We're raising our free cash flow range to $600 to…

Let me wrap up.

Some qualitative comments as we look over the remainder of fiscal '25. Post AMC divestiture, margin was clearly our number one priority. With our first half results, and our Q2 delivery, we have delivered. Now that we've delivered, we're setting a new number one priority, which is growth. We have our business model right, and our operating foundation strong and with a Q2 adjusted EBITDA of 37.6%, $307 million of free cash flow, and raising our free cash flow outlook for the year.

Our growth challenges are in

focused areas, and we have a clear plan to resolve them in the short term with a more focused leadership team. We expect Q4 to have bright line total revenue growth in this sets us up for a successful FY26. We're excited about the opportunity of growth in Titanium X, content, security, AI, SaaS, getting ITOM and ADM to its best, improved sales execution, open pass for license, advanced customer services for maintenance, all expanding our competitive advantage. I'd also like to note that near 60% of our business is in the US. And the new administration is focused on pro-growth initiatives and investments like SMB and expanding manufacturing. We're excited about these pro-growth opportunities ahead of us in the United States. Growth plus competitive advantage plus margin and free cash flow expansion plus capital return is the OpenText formula for creating exceptional shareholder value. You asked for more transparency into the exceptional items and our cloud so I hope you find the deeper insights helpful today. You have my full commitment to continue this style of communication. But let me end with, we're making progress, leadership team is focused, and we will not rest nor will be satisfied until we deliver photo growth, cloud growing faster and back to maintenance growth. With that, let me turn the call over to Madhu.

Thank you, Mark, and thank you all for joining us today. Please refer to the IR materials posted on our website. In Q2, we demonstrated the strength of our operating model delivering 37.6% adjusted EBITDA, a significant achievement and that reflects our operational efficiency as a larger company. Today, I will also present expanded disclosures and new metrics relating to RPO and CRPO. In specific instances, I will provide year-over-year comparison excluding the impact of AMC divestiture. And moving to financial metrics, GAAP net income was $229.9 million or $0.87 diluted EPS. Non-GAAP diluted EPS was $1.11 down 10.5% due to the impact of AMC divestiture. GAAP gross margin of 73.3% was down from 73.6% year over year. Non-GAAP gross margin of 77.2% compared to 78.6% due to higher margin license revenue in the prior year from AMC and IP rights. Non-GAAP cloud gross margin was strong at 63.3%. Adjusted EBITDA of $501.5 million or 37.6% and continues to reflect our extreme operational focus to capture our large margin opportunity. Operating cash flows of $348 million and free cash flows of $306.7 million DSOs at 43 days one day higher than 42 days from last quarter, and down four days from Q2 last year at 47 days and that reflects the strength of our working capital in what is seasonally the highest billing quarter for us. Moving to Outlook. First, let me draw your attention to our Q3 quarterly fact included in slide twelve of our investor presentation. We expect $1.26 billion to $1.3 billion of total revenue and ARR of $1.025 billion to $1.045 billion. We're targeting Q3 adjusted EBITDA margin of 29% to 30%. And let me recall that while our fiscal year-end is June 30th, January of each year stops the clock for employee salary uplifts, the higher benefits and vacation accruals. To note, our total spend in Q3 would be approximately 8% higher on a quarter-over-quarter basis due to the factors I just noted. Yet 3% lower on a year-over-year as we continue to optimize our expense models. Mark has provided you with an insight into our updated fiscal 2025 outlook and that there is a clear path ahead to address on near-term challenges. We remain on target for our fiscal 2025 adjusted EBITDA target of 33% to 34% and have increased the free cash flow range to $600 million to $650 million for the year. Now let me offer more details on our expanded disclosures relating to RPO. Please refer to supplemental materials on our IR website which include their expanded disclosures to be read alongside our Form 10-Q, page thirteen of the filing today.

You will see

total RPO of $4.1 billion including cloud RPO $2.3 billion and customer support aka maintenance and other RPO $1.8 billion. For cloud, Current CRPO is a new metric. The percentage to be recognized for the next twelve months is approximately 50%. The remainder is the balance beyond twelve months. We want to provide additional insights and sharing two numbers relating to cloud revenue in any given twelve months. Approximately 60% of the cloud revenue arises from CRPO current RPO balance and remainder of the 40% is contributed in year by revenue from in-year new business, revenue from in-year renewals, and do refer to our strong cloud renewal rates, revenue from in-year uncommitted business, which include business not uncommitted contracts and contracts more aligned to consumption models like our business network. Page four of our supplemental materials for details on cloud CRP your model. And a cloud contract example on pages five and eight. Our enterprise cloud bookings $250 million for Q2 flow completely into the cloud RPO balances and only the current portion of those bookings flow into CRPO. For customer support, the percentage to be recognized for the next twelve months is 79%. Given the predominantly annual nature of support contracts and ratable revenue recognition. RPO balances can fluctuate from quarter to quarter. We are a global company operating in multiple industries and verticals, and seasonality is inherent in our business. Calendar year-end and our fiscal fourth quarter June would generally see stronger bookings. In summary, I would like to close with our previously communicated four-point strategy to create shareholder value. As we continue to accelerate cloud growth, capturing the large margin opportunity and cash flow expansion remain front and center. Alongside disciplined capital allocation, all enabled by the OpenText business system. Our strong operational improvements during the last…

I would now request the operator to open the call for your questions. Thank you. We'll now begin the analyst question and answer session.

Tone telephone will hear a tone acknowledging your request. If you're using a speakerphone, please ensure that you listen to the handset before pressing any key. If you wish to remove yourself from the question queue, you may press star then one. Anyone who has a question may press star then one at this time. Our first question is from Raimo Lenschow with Barclays. Please go ahead.

Perfect. Thank you, Congrats on the extra disclosure. I'm really looking forward to kind of digging into that. One area that is obviously, like, helping you or not helping you is currently the economy. Mark, can you kind of talk a little bit about what you saw in the quarter what you saw in the different regions that would be a great start for us. Thank you.

Yep. Thanks, Raimo, and thanks for the comments. We're excited to provide that increased visibility, and you have my commitment to continue that style of communications. Look, I think around the globe, the only area I'd shout out is Europe. And growth is hard in Europe right now. But we are in very good industries. We're in strategic manufacturing. We're in communications. We're deep with governments. And that's really the only macro area that I would shout out. We're quite excited about the pro-growth American investment initiatives happening in SMB, and US-based manufacturing. And there's no doubt that currency the new US administration is focused on the US currency. Which is creating FX challenges for everyone who is a global business. We are not subject to tariffs as a digital company. We'll see where that progresses over time, but it's really on physical goods not digital services and that just creates some uncertainty for others. Actually, we're here to help customers to think about moving manufacturing or supply chains to kind of know, right balance their portfolios. So we're not subject to the tariffs. We're helping customers. We're excited about the pro-growth investments in the US. But I'd say growth in Europe is elusive right now but I like the industries we're in.

Perfect. Thank you. And one follow-up. Go ahead. You talked a lot about a Yeah. Had one follow-up. Like, you talked a lot about, like, ITOM. And you may have mentioned observability, ITSM, etcetera. The one question I get a lot from you as investors is around, like, how should we think about you in the market? Because, obviously, there is, like, you know, there's ServiceNow on the ITSM ITOM side. There's, like, the observability guys out there, like, how where do you think you kind of play in where do you win? Thank you. Congrats for me.

Yeah. Thank you. Well, I like very much that's why I highlighted we want to outperform in key categories. And the three key categories are content, security, and, what we call ITOM today. So if you think of our ability to discover a company, through observability and monitor it, be able to manage all its unstructured content, intelligent content collaboration and workflows, but on top of that, have our own package staff, not just for IT, service management, but for HR help desk, for supply chain help desk, and corporate employee experiences, I think we're very well positioned in that core stack to outcompete and outperform. So expect us to focus on, observability, and service management being real focused in those two areas but combined with security and combined with our strength in

Okay. Thank you.

The next question is from Samad Samana with Jefferies. Please go ahead.

I appreciate the question. This is Billy Fitzsimmons on for Samad from Jefferies. Mark, you highlighted multiple growth opportunities in the prepared remarks. Maybe expanding on the previous answer, one of those growth opportunities you talked about was security. Maybe it's a double click there. Can you talk about where you do particularly well in security today? And additional areas of investment. You're making right now to grow that market?

Yep. Very great. Very happily, and thank you. Just a little echo on the phone there. So where we're focusing where we are today is core identity applications, network, and forensics. That's where we excel today. And I highlighted some of our new SaaS wins. In that area. Nestle, for example, a Ford a code level security, cross bank and voltage for transaction encryption, and Capgemini in identity management. Our next deliverable or the next market segment for us is XDR. Right? The ability to ingest, detect, and respond as Micro Focus, as well as the vertical database, of our own technology, and we partner with Microsoft. We built this integrated to Azure. We've built this integrated with Security Copilot. We're gonna go to market with Microsoft and we believe we're gonna be a composable solution. Now we don't think we have to go in and displace anyone, actually. We want to incorporate them all. Into what we do. We think we can provide value on top of them all. To be able to literally ingest billions of events to a day and process them down to multiple you know, a needle in multiple haystacks. Next area is we want to bring all that to our installed base. So when we launched TitaniumX next quarter, the SDR capabilities will be pre-integrated to our content platform and pre-integrated to our business network platform. So we can go into our install base, and not just try to win SDR standalone, XDR on top of other vendors, but pre-integrated into our own software. So that's why I highlighted it as my second point of growth and in a category, we're gonna outcompete it and we put into to lead the engineering side of the business, we repositioned Mui Mazou to do nothing but security. So that's why we feel pretty confident here.

Thanks, Mark. And then if I could sneak in a second one maybe. A big focus during the presentations at OpenText World was on some of the go-to-market changes across the business. Can you just remind us of some of those announcements and obviously, it's only been a few months and things take time, but maybe updates on progress thus far and maybe where there's still more work to be done.

Yeah. We have Todd Cione with us. So, Todd, you want to jump in?

Yeah. Absolutely. Thanks for the question. Look, we've been heavily investing in our Salesforce capability across a comprehensive and global sales excellence program. That commenced a couple of quarters ago, and we're beginning to see outcomes from that investment now. In Q2, we actually saw improvement of AE productivity, both tenured and new AEs. And in the second half, the sales excellence program investments continuing. Myself, San Deono, our marketing leader are gonna be on the road in Asia, ANZ, Europe, and US markets driving this with our sales force. So we're excited about the productivity gains that it's driving. And then in addition, look, we're in the people business. So there's been a lot of improvement in boosting of leadership within our sales organization as well.

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

Hi. Good afternoon. Mark, can you expand a bit in terms of the challenges in ADM and ITOM? Was that more on the product side or on the go-to-market side or a bit of both, responded maybe just those products that having been classified and how you're dressing up with HaneyMax. Just any color would be helpful.

Yeah. Very good. Thanks for the question. Yeah. As I committed to gonna have a new style of communication. And so when we have exceptional items or things to communicate, we're gonna provide the detail. And that's what we're doing today, inclusive of materials in our IR deck. So, you know, within the $130 million, 25% is FX, 25% is DXC. That really focuses on focuses us down to just ADM and ITOM of $65 million to $70 million where is the core challenge. And it's related to license and maintenance, not the cloud side. So we got the security business back on track. So in ITOM, it's about Titanium X. It's our new observability cloud. It's our service management cloud. We believe we're ready now including some of the investments Todd was talking about, and we're simply gonna relaunch with Titanium Max and reengage our 5,000 customers. On ADM, we have now refocused the portfolio to be top of market. And this idea of to be everything to all things, which was the previous strategy, just ain't the new strategy going forward. We're not here for a single developer. We're here for large-scale developer organizations. We're now live on the product. I got 10,000 engineers in the product. Every single day. We've taken all those advancements put them back in the product and they're released with Titanium X. Thus wins like at Pfizer, and Eli Lilly that we talked about. So we're confident that here in the short term, we're gonna return those two pieces back to growth. I'd also like to take the opportunity, if I can, again, less the IP licensing, license will grow this year. Less the IP and FX, our business is constant this year. Unless DXC we'd be growing. So we're very focused on that area of ITOM, an ADM. License maintenance, $65 million to $70 million and I believe we got the right plan here in the short term to return them to growth.

Great. And then you touched on the new licensing model in your prepared remarks, which should be a bit of a tailwind. Just any further color on that and when specifically was that launched?

Yeah. We launched it in January. This is the OpenText Pella. And look. We have a large license installed base, and we're in the license business. And there are a couple of models in the industry. That when you get, you know, pretty mature in this space, customers want to keep for those customers who want to keep running on-premise, we're off cloud. We want to help support them. And, you know, they've grown. They've acquired. They may want to expand to new divisions, add more users, so we're gonna make it easy for them. We're gonna allow them to go enterprise-wide. Not have to count anymore. And that will require a license uplift, a maintenance uplift, and we'll give them some cloud credits along the way. So when they're ready to move to the cloud, they're even more invested in the OpenText solution. So you know, again, less the IP licensing, licenses growing this year, and we want to continue that momentum with this new open path mechanism.

But the premise is that the clients pay more but in exchange get unlimited licenses, is that the core of it?

That's correct. They will pay more in license they'll pay a little more in maintenance, but in exchange for that, they'll be able to go unlimited and they'll no longer have to count.

Great. Thanks, Mark.

Thank you.

Operator, next question.

Apologies. The next question is from Stephanie Price with CIBC. Please go ahead.

Good afternoon. Just in light of some of the recent news around large language models such as DeepSeq, just curious how you're thinking about planned investments in AI and whether you think you can benefit from some of the cost reduction LMS space?

Yeah. We're, you know, I said earlier, Stephanie, welcome to the call, a criteria question. I said very early on, there'll be a thousand language models and let a thousand models bloom. To quote a poem, there was tulips, not language models, the little thousand tulips bloom. So let a thousand models bloom. We like the spirit of DeepSeq. To lower the cost of language models. And we're already embedding some open-source models into parts of our solution for easy deployment, predictability of expense, and lower expense. So we applaud the spirit behind DeepSeq and we think this trend will continue. Now for a technical point, we have DeepSeq in a quarantined area. Fully installed. We've tried the R1 model. And it doesn't really work. So it's actually more expensive than running Llama. So I don't want to get into the technical aspects of what the version in China of how it may be running the technical back end, but we've done just a pure test in a quarantine Faraday cage and it simply doesn't outperform Llama. And is not more cost-effective. But we applaud this idea of innovation, open-source models, and lowering the cost, and we will benefit from them.

Thanks for the color. And then in your prepared remarks, you mentioned evaluating strategic alternatives to increase value either through divestitures or combinations. Just hoping you can expand on how you think that capital allocation at this point.

Yeah. Well, great question. And look I think it goes like this. With margin was our number one priority. Post the MC divestiture, and I couldn't be more proud of the team and how they delivered in the first half including Q2. I mean, half a billion of adjusted EBITDA dollars. So we have a new number one priority. We have, you know, we have multiple priorities. This is the number one overriding priority at the company, which is now growth. And is across all BUs and maintenance. We're gonna return to BrightLine growth in Q4. And yes, we all want more growth. And we expect more growth. And we'll return to growth in Q4. That's our current focus. Now in parallel, we're gonna continue to evaluate strategic opportunities. And what does that mean? In some cases, I think it will mean for BU, an acquisition. I think some other cases, it could mean a combination of divestiture. But my macro point is this and my intention for purposely saying it on the call and my script, is I want to deliver more path and more reasons to buy our stock. And I think those answers are total growth, higher cloud growth, higher margins to higher free cash flows, upper quartile capital return, and unlocking the value of each of our business units beyond organic growth through this strategic thinking. So clearly, we're focused right now on record capital return in 2025. You'll complete the divestiture and getting the margin operation engine boy, it's just a whole different level of oxygen with the growth as our number one priority. And as we focus on each BU to do that, I wanted to kind of walk through just how I was thinking you know, in parallel to just focusing on organic growth. Hope that's helpful.

That is. Thank you very much.

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

Thanks very much and good afternoon. Just want to ask a question on bookings. And your expectations for bookings going forward. I think the outlook calls for a pickup in growth in the second half of the year. What do you see as the primary driver of that is do you expect Titanium X to drive a surge or do you just see less seasonality than the past in, you know, two hundred million or so on bookings per quarter as sort of the new normal going forward.

Yeah. Yeah. Paul, let me just jump in the hand. I'll hand to Todd. Look, a percent basis, it was, you know, a little over six percent in Q2, but it was a record high watermark of $250 million of guaranteed new bookings that flowed right into RPO. So that is a high watermark. And clearly, we're expecting a very strong second half. And, Todd, I'll let you talk to the strong second half.

Yes. Thanks, Mark, and thanks for the question. So mean, just as Mark mentioned, we're super proud and excited about that record quarter of customer demand for cloud and new bookings. And we see this continuing into the because we've got a solid pipeline in Q3 and in Q4, we have our largest cloud pipeline ever. That means we've got really strong coverage. In addition to that, we've launched already a focused list of programs and incentives to convert that pipeline. And we also fully expect that TitaniumMax being completed next quarter is going to provide a tailwind for that pipeline conversion as well. So we're super bullish.

That's great to hear. Thanks for the explanation. Fee, shifting gears and speaking on AI, could you walk through you know, you touched in the past, like, there's internal initiatives around AI. Do you have any metrics that you can share in terms of, you know, either productivity gains, that you've seen or ways that you can be more efficient with your spending internally so perhaps you can shift those dollars to focus on growth initiatives.

Yeah. Great question. Thank you, Paul. We're not ready to put a quantum on it. But we have two large initiatives. And there'll be a third and a fourth that's right on the event horizon for us. The first is our platform Athena. Where, you know, you can imagine the breadth of software we build in development environments. You know, we're close to ten billion lines of code across multiple environments and IDEs and all of that. We've built a proprietary AI platform internally for our developers, to use Athena, we don't use Copilot. To use Athena, for things such as the following. Explain a piece of code to me. I'm a new developer, and I gotta learn a piece of code. Explain it to me. I need to fix a bug. Help me. I need to write an interface to an API. Generate the code. I need to localize it in Hautagana. Or in left-to-right languages. So generate the screens and GUIs for me. So that's gonna uplift productivity. Is that five, ten percent? We'll see. You know, it could be mid-single digit, could be low double-digit. And if we can do that, I just added a thousand developers. With no extra cost. On the sales side, we are live on a platform we call internally ollie.ai. Ollie was the original name for our pre-demo environment back in the LiveLink days. And we've advanced it to ollie.ai. Where we're helping we demoed it at OpenText World to generate RFPs. You know, can that uplift sales productivity five to ten percent, fifteen percent increase our win rate? Todd, any comments you want to provide on ollie.ai?

Yeah. So if you're a presales leader at OpenText, that is your first stop. When you have an RFP right now. It's live and it's active. And we are at the precipice in Q3 of expanding that into capabilities for the entire sales force account executives, will have new information at their fingertips via mobile as well. So we're really excited about AI boosting our efficiency in worldwide sales.

Yeah. So next stop is tech support. And one of the next stops post that is helping increase our win rate and competing in more opportunities. So look, from what we've seen from theory to test beds to version one, even version twos internally, I'm absolutely convinced we'll raise productivity. And engineering, sales, support, and helping us compete more and win more. But not really to put a hard dollar number on it yet, Paul. But we'll keep you updated.

The next question is from Seth Gilbert with UBS. Please go ahead.

Thanks for the questions. Maybe two, if I may. You know, to start, you made a comment in the beginning of your prepared remarks about the upgrade to Titanium X and reengaging the 5,000 customers and you know, upgrade fees kind of rising over time. I was wondering if you could talk about the upgrade journey to TitaniumX. How's it going? Is there maybe a plan to migrate a certain percent of customers in FY25?

Yeah. Fair enough. So, Titanium X is fully delivered next quarter. Right? So we're almost there. And the 5,000 customers were just on ITOM, not the overall install base of 120,000. The opportunity is large for us. We want to get the entire install I mean, I'm just gonna start with a big general. I want the entire install base to be engaged and move to TitaniumX over time. Oh, we got to bring our installed base with us. And it's compelling. Gen AI and Aviators. Fifteen Aviators, a hundred agents. SaaS scale. I've already started to highlight some of the wins, SAP, BASF, Aldi. Frostcap, Gemini. Content plus in the content world, intelligent content plus AI workflow plus SaaS. ITOM, the one you highlighted, observability service cloud, ADM, the features that run OpenText can now run you BN control tower and AI on security XDR. So TitaniumMax is compelling. We're gonna start with those on older versions. Right? We're gonna kind of look at three major buckets. One of those buckets is the customers on, you know, three releases and back. Our goal, we have a world-class PS organization. They'll engage. They'll have upgrade programs. And that's the first place that we're gonna go to with Titanium X. And we respect customers who don't want to move, and we'll perfectly understand that. But we'll begin to raise your prices. And because our cost will go up of supporting you off cloud. So that's been on the opportunity. That's a bit of where we're gonna start, and we begin next quarter.

Got it. Very helpful. Maybe just as a follow-up, unless I missed it, I didn't see any of the disclosure around the business unit revenue split? I guess we were hopeful that we would see maybe a little bit of it this quarter. So even if and correct me if I maybe missed it in the filings. But even if not, quantitative, I was wondering if you could provide maybe some qualitative color on some of the faster-growing BUs, business units, and maybe some that are not growing as quickly. Thank you.

Yeah. Yeah. No. You didn't miss it. And what we did this quarter is focus on Cloud. And so the new RPO disclosure is very important and very strategic and ties to our number one priority. So we put our energy there because this is the long-life disclosure for us to give you the insight into the strength of our cloud growth over time. So that's where we put our energy to get, RPA both maintenance and cloud RPO. And cloud RPO, cloud CRPO. So that's fully available. We also focused our attention in the communication around and I just want to say it again. That again less the IP licensing licenses growing this year. New insight for you. Less IP and FX, the business is constant, new insight for you. Unless DXE, we'd be growing. So we focused on those insights versus breaking down each BU. We will, at the end of the year, provide our usual BU update, if you will. Content, our hot hand. With AI. Security growing. SMB, it was a negative year last year. We're performing constant this year with past to the second half growth. For example, we just delivered the new secure cloud Secure VPN or PC Optimizer. We have EDR on secure cloud. We have a whole new online presence at cybersecurity at opentext.com. So, SMB went from negative to constant, passive growth in the second half. Should be a positive contributor in the year out. We also provided some insight into ADM and ITOM on the call. Specifically around maintenance and license. So we thought that was a better usage of our time to give you that insight that's a little bit of the BU insight. But we'll have a full BU update at the end of the year.

Got it. Super helpful. Thank you, Mark.

And Seth, welcome to our call, and thank you for your questions.

The next question is from Kevin Krishnaratne with Scotiabank. Please go ahead.

Hey there. Good afternoon. Question on the cloud business. It had a nice uptick in growth this quarter, but you've maintained the guide two to five percent for the year. You sound really bullish on that business, you talked about a lot of different initiatives, big SaaS wins, and I'm just curious, you know, you know, what would is there anything to think about that would make, you know, the revenue growth in cloud be closer to two percent range rather than, you know, the five percent range? Just wondering both the guidance and your thoughts there.

Well, I highlighted a couple of things, and maybe Todd or Madhu jump in. One is record new commitments in Q4, $250 million flows right into the top of the RPO. And you can now see the RPO and you'll see it next quarter. Second is I highlighted large, strategic, SaaS wins before the full delivery of TitaniumX. By the way, when we deliver TitaniumX, customers don't have to upgrade those apps pieces. We upgrade them for them. On the content side, a large win at SAP. BASF. ALDI, Munich Re on the security side, we Frost, Capgemini, Nestle on ADM, Lilly, Pfizer, they're all SaaS wins. Faster time to revenue, and then the momentum around the delivery of So, yeah, we're focused on a $65 million, $70 million in ADM and ITOM. But, no, we're not moving our cloud view of fiscal 2025. I don't know if there's anything you want to add or we do?

Yeah. I'll take the pass and then talk this time. And so, Kevin, just specific question on why we left the ranges on right? I think the good news is that we did leave the ranges unchanged. Notwithstanding kind of the downward trend in the other buckets, license and maintenance. Right? Now two things. I'll remind us. Our enterprise cloud bookings are strong cloud bookings, still have a ramp to revenue. Right? There's about six to nine months ramp to the first dollar of revenue. So think of this as providing us more visibility into beyond 2025. And then the second part is mark out slide. S and P and C are very strong components of cloud revenue for this year for 2025. We are planning them at more neutral to constant. So those are the reasons why we've left the range unchanged.

And SaaS is picking up as you heard from Mark, and over time, beyond 2025, certainly, we think the SaaS mix and the overall cloud revenue will provide higher velocity from bookings to revenue.

Yeah. That would that would adding on to my comments I made about the direct sales force in the pipeline activation and conversion activity we have underway. Partnerships are playing an increasingly important role in our cloud business, and that's gonna only continue. Mark referenced a couple of those just to reinforce our industry-leading SAP partnership is driving accelerated cloud growth. Our relationships with the cloud service providers Microsoft and Google, are contributing. And then in our emerging market, and specific industries, resellers are playing an increasingly important role for us as well, and we're excited about that.

I really appreciate that extra color. I just want to slip one last win. In here. Can you remind us how big your government opportunity is? How much sorry. How much government exposure you have in the US and maybe any thoughts on Doge, you know, Thanks.

Yeah. No. We don't break out just our US government business. But I'd say globally, the public sector is, you know, roughly, fifteen percent of our revenues on a global basis. Look, we're on the business front, we are excited about the opportunities in the US. The mid-market, and manufacturing investments, it's sixty percent of our business in the US. And we're gonna be very present to help our customers take advantage of that. And do that digitally enabled. You know, part of the US government efficiency programs Doge, is about becoming more digital. And so we got a great presence in DC, we're fully represented both on the government intelligence side as well as standard agencies and NGOs as well as the large states in the US. So I think we're well-positioned that as opportunities come along, we'll be right there.

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

Oh, yes. Thanks for fitting me here through the hour. Just quickly, can you provide some metrics on how Aviators Performing.

Look, I think we're not disclosing specific bookings or revenue numbers. There is no doubt that our work fully delivered in TitaniumX is helping us win. These SaaS wins all have a part of AI. Again, I can't emphasize the strategic enterprise global nature of these SaaS wins. OpenText imagine these two words in the same sentence, OpenText and SaaS. And what TitaniumX we set out on TitaniumX to have, as part of it, a SaaS platform. The wins in Q2 SAP. The ASL. Aldi, Munich, Roxt, Capgemini Nestle, Lilly, Pfizer. I just couldn't be more proud of those wins. Most of them, have Aviator as part of it. So we're not here yet to kind of break out this much of revenue or this much of booking. But unequivocally a part of our platform. Part of our win strategy, part of the actual wins at this point. So stay tuned. There'll be more to follow here as we upgrade the TitaniumX. There'll be more to talk about on the AI platform.

Okay. And just a last quick one here for me. Appreciate you sharing those RPO metrics. Think in the past, you've talked about sort of expanding your disclosure. And so as you go forward, are you gonna be looking at disclosing things like net expansion rate? And I only ask that because a big part of your strategy here is selling in on the base. And I think having that metric in terms of understanding how that base is growing would be very helpful. So is that something on the radar here?

Thank you for the feedback. We're gonna assess the feedback. Clearly, it's not about renewal. It's about expansion over time. Yeah. Right? Yeah. So thank you for the feedback. We'll take it offline and process all the feedback. It's a big disclosure for us, as you know. It's both cloud and maintenance. It's current and long-term with a big emphasis on cloud CRPO then increased visibility. And so what are the commitments flowing in? What are the uncommitted portions in there? All the things we talked about. We disclosed a very simple formula. We looked at SAP and Salesforce of how they disclose. We have a net renewal rate as well. So a good comment on when you start to talk expansion. Take it as feedback. And we'll cut all the feedback and then understand what the next set is. So thank you for the question.

Thank you.

I'll now hand the call back over to Mr. Barrenechea for closing remarks.

Yes, very good. Thank you for being part of our Q2 call. Margin was our number one priority both AMS and with our Q2 and first-half performance, we delivered and our new number one priority is growth. Second, we're very excited about the opportunity that Titanium X and upgrades will bring us. And three, we look forward to your continued feedback on our new style of communications and the insights into our business, and did you find them helpful? And how we can continue to do that? Thank you very much and we look forward to seeing you at Morgan Stanley and elsewhere. Very much.

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