Open Text Corp Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Raimo Lenschow - Barclays - Analyst : 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 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.

Question: Raimo Lenschow - Barclays - Analyst : Perfect, thank you. And one follow-up. Can you talk a lot about -- I have one follow-up, like you talked a lot about like ITOM, and you mentioned observability, ITSM, et cetera. The one question I get a lot from US investors is around like how should we think about you and the market? Because REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 10:00PM, OTEX.TO - Q2 2025 Open Text Corp Earnings Call obviously, there is like there's ServiceNow on the ITSM, ITOM side. There's like the observability guys out there. Like where do you think you kind of play and where do you win? Thank you and congrats from me.

Question: Billy Fitzsimmons - Jefferies LLC - Analyst : I appreciate the question. This is Bill 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 to 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 in that market?

Question: Billy Fitzsimmons - Jefferies LLC - Analyst : And then if I could sneak in a second one. 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.

Question: Thanos Moschopoulos - BMO Capital Markets - Analyst : Mark, can you expand a bit in terms of the challenges in ADM and ITOM, was that more on the go-to-market side, or a bit of both as part of it maybe just those products that having been classified and how you're addressing that with Titanium X? Just any color would be helpful.

Question: Thanos Moschopoulos - BMO Capital Markets - Analyst : 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?

Question: Thanos Moschopoulos - BMO Capital Markets - Analyst : But the premise is that the clients pay more but in exchange, get unlimited licenses. Is that the core of it?

Question: Stephanie Price - CIBC World Markets - Analyst : Just in light of some of the recent news around large language models such as DeepSeek, just curious how you're thinking about planned investments in AI and whether you think you can benefit from some of the cost reductions in the LLM space?

Question: Stephanie Price - CIBC World Markets - Analyst : 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're thinking about capital allocation at this point?

Question: Paul Treiber - RBC Capital Markets - Analyst : I just wanted 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? Do you expect Titanium X to drive a surge? Or do you just see less seasonality than the past and $200 million or so in bookings per quarter as sort of the new normal going forward?

Question: Paul Treiber - RBC Capital Markets - Analyst : That's great to hear, thanks for the explanation. Shifting gears and speaking on AI, could you walk through -- you touched in the past like there's internal initiatives around AI. Do you have any metrics that you can share in terms of either productivity gains that you've seen or ways that you can be more efficient when you're spending internally, so perhaps you can shift that -- those dollars to focus on growth initiatives?

Question: Seth Gilbert - UBS Securities LLC - Analyst : Thanks for the questions. Maybe two, if I may. To start, you made a comment in the beginning of your prepared remarks about the upgrades in Titanium X reengaging the 5,000 customers and upgrade fees kind of rising over time. I was wondering if you could talk about the upgrade journey in Titanium X. How is it going? Is there maybe a plan to migrate a certain percent of customers in FY25? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 10:00PM, OTEX.TO - Q2 2025 Open Text Corp Earnings Call

Question: Seth Gilbert - UBS Securities LLC - Analyst : 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?

Question: Kevin Krishnaratne - Scotiabank - Analyst : A question on the cloud business that had a nice uptick in growth this quarter, but you've maintained the guide 2% to 5% 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, what would -- is there anything to think about that would make the revenue growth in the cloud be closer to the 2% range rather than the 5% range? Just wondering about the guidance and your thoughts there.

Question: Kevin Krishnaratne - Scotiabank - Analyst : I really appreciate that extra color. I just want to slip one last one in here. Can you remind us how big your government opportunity is? How much -- sorry, how much rent exposure do you have in the US? And maybe any thoughts on DOGE potential benefits or things to consider there? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 10:00PM, OTEX.TO - Q2 2025 Open Text Corp Earnings Call

Question: Richard Tse - National Bank Financial, Inc - Analyst : Just quickly, can you provide some metrics on how Aviator is performing?

Question: Richard Tse - National Bank Financial, Inc - Analyst : Okay. And just a last quick one here for me. I appreciate you sharing those RPO metrics. I think in the past, you've talked about sort of expanding your disclosures. And so as you go forward, are you going to be looking at disclosing things like net expansion rate? And I only ask that because a big part of your strategy here is selling into 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?