OpenText Corp Q4 2014 Earnings Call Transcript

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

Question: Kris Thompson - National Bank Financial - Analyst : Great, thanks. Congratulations again, guys, on a great end to the fiscal year. Paul, for you, on the target operating margin should we hop into that range right out of the gate in Q1 or are you going to work on that towards the end of the year?

Question: Kris Thompson - National Bank Financial - Analyst : Good stuff. Mark, for you, on the average deal size this quarter, I think that is a record, and the number of license generated from your installed base, again, is another record. Can you just tell us, is there is any unusually large transactions in there? And should we start thinking about licensed revenue from new customers as a major driver looking forward the next few quarters when you get more traction with your recently introduced product suites? Thanks, guys. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 30, 2014 / 9:00PM, OTEX.TO - Q4 2014 OpenText Corp Earnings Call

Question: Kris Thompson - National Bank Financial - Analyst : Thanks, I'll pass the line.

Question: Blair Abernethy - Cantor Fitzgerald Canada - Analyst : Thanks very much. Nice quarter, guys. I guess just two questions for you, Mark, on the license side. First off, was there -- could you call out some strengths in any one of your pillars, i.e., discovery versus business process management or ECM, any one of those that might have been driving your business more than the others?

Question: Blair Abernethy - Cantor Fitzgerald Canada - Analyst : Okay. Great. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 30, 2014 / 9:00PM, OTEX.TO - Q4 2014 OpenText Corp Earnings Call And then if I look at your new target model for FY2015, and if we sort of reverse engineer the cloud services and maintenance businesses which are fairly stable, and professional services which really hasn't changed that much in the last few years, you kind of come up with a range on your license that if it's going to be 15% to 20% of total revenue, kind of kicks out, you know, $275 million to $380 million. That's a pretty broad range. That's like negative 10% to plus 20%-odd. Do you have a sense of where you think or where you expect your license to fall next year that might be a little bit narrower than that range?

Question: Blair Abernethy - Cantor Fitzgerald Canada - Analyst : Okay. Great. Thanks, guys.

Question: Richard Tse - Cormark Securities - Analyst : Mark, you addressed some notable wins here against some competitors. Could you maybe give us a feel of what your win rates would be across all of those silos that you point to?

Question: Richard Tse - Cormark Securities - Analyst : I guess related to that question, has the competitive environment changed any over the past 6 to 12 months here? Obviously IBM is in the mix, but maybe a comment about what EMC is doing and some of the upstarts in the market?

Question: Richard Tse - Cormark Securities - Analyst : Okay. And then just one last question on GXS, have you come up with a plan to sort of drive that product set into your existing base? And where are you at there and what would that opportunity be for you guys?

Question: Richard Tse - Cormark Securities - Analyst : That's great. Thank you, Mark.

Question: Michael Nemeroff - Credit Suisse - Analyst : Mark, for you, on the license front this quarter, could you give us maybe a sense of the split of term license versus perpetual licenses? I know with the bundles things change a little bit. Hello?

Question: Michael Nemeroff - Credit Suisse - Analyst : Were those 5 to 7 greater than $1 million?

Question: Michael Nemeroff - Credit Suisse - Analyst : Okay. And then, Paul, for you, I guess, first, it has been a pleasure working with you and congratulations on your retirement.

Question: Michael Nemeroff - Credit Suisse - Analyst : On the tax line you, called out 18%, I think, for FY2015. Is that sustainable going forward? Should we model that in for 2016 and the out years?

Question: Michael Nemeroff - Credit Suisse - Analyst : And will you adjust any of the expenses to try and offset the 300 basis point improvement or will you just bite the bullet, so to speak, on the tax. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 30, 2014 / 9:00PM, OTEX.TO - Q4 2014 OpenText Corp Earnings Call

Question: Michael Nemeroff - Credit Suisse - Analyst : And lastly for Mark, on the number of sales people you have currently, any changes, or what kind of an increase should we expect in the number of sales capacity that you plan to add through FY2015?

Question: Michael Nemeroff - Credit Suisse - Analyst : Could you give me a percentage increase instead of -- 10%, 15% increase, in that neighborhood?

Question: Michael Nemeroff - Credit Suisse - Analyst : Okay. Thanks. Again, Paul, pleasure, thanks very much.

Question: Paul Steep - Scotiabank - Analyst : Mark, maybe you could talk to, in the cloud area, the trends that drove those large transactions? And then I guess secondly, where in terms of managed services the long-term target might be?

Question: Paul Steep - Scotiabank - Analyst : The second part just related to managed services. I think before to deal with GXS they were around 45%, I believe, of their revenues. What is the target to lift that percentage higher over time here, aspirationally?

Question: Paul Steep - Scotiabank - Analyst : Fair enough. Paul, congratulations on the retirement. Thanks a lot.

Question: Stephanie Price - CIBC World Markets - Analyst : Good afternoon. In terms of cross selling between the different EIM pillars, can you give us a sense of what inning we are in there and how much more there is, much more possibility with cross-selling and how you see that opportunity?

Question: Stephanie Price - CIBC World Markets - Analyst : Great. And then in terms of acquisitions, can you give us a bit more sense of what verticals are looking interesting to you at the moment and how we should be thinking about acquisitions?

Question: Stephanie Price - CIBC World Markets - Analyst : Great. Thank you very much.

Question: Eyal Ofir - Clarus Securities - Analyst : Congratulations, guys, on a great quarter. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 30, 2014 / 9:00PM, OTEX.TO - Q4 2014 OpenText Corp Earnings Call I wanted to touch base -- you talked, I think, in the opening remarks that about half the client base now is upgraded to version 10. Maybe that is actually a very important data point. You said their upgrades are in process. Is there any way to split what percentage has been upgraded and what percentage is currently in process? I guess in terms of the outlook as well, in terms of the upgrade cycle to version 10.5 here, how long you think this upgrade cycle you think will last?

Question: Eyal Ofir - Clarus Securities - Analyst : That sounds great. I just want to ask about this, as well. The transition here, in the quarter itself, do you see more of the licensed revenue growth due to the upgrade to version 10? Or are you seeing some bigger transition here to 10.5, or is that still coming?

Question: Eyal Ofir - Clarus Securities - Analyst : One more question before I pass the line. In terms of going out into new markets, obviously you talked about additional channels you can open up here, especially with this upgrade cycle coming, you're also penetrating net new accounts. Where do you think you can add more from a channel standpoint? I mean, more regionally? Is it specific to maybe a large global organization? What should we look for from you guys to do over the next call it 6 to 12 months in terms of partnerships? And I'll pass the line after that. Thanks. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 30, 2014 / 9:00PM, OTEX.TO - Q4 2014 OpenText Corp Earnings Call

Question: Eyal Ofir - Clarus Securities - Analyst : Okay. Perfect. I'll pass the line. I just want to say also to Paul, congrats on the retirement. Great working with you for the last eight years.

Question: Scott Penner - TD Securities - Analyst : Mark, can you give an update on the AppWorks initiative, just in terms of, I don't know, what kind of metrics you track internally there, but it always seems like a nice growth adjunct to me in terms of new licenses to the core. Wondering what you can provide.

Question: Scott Penner - TD Securities - Analyst : Okay. The cloud services business picked up what looked like more than just the extra piece of GXS in the quarter. Is that a function of some growth in the EasyLink business or is that more of a function of the growth in the managed services side?

Question: Scott Penner - TD Securities - Analyst : And lastly just so I understand here, you said half of the installed base has version 10.4, was that right?

Question: Scott Penner - TD Securities - Analyst : Okay.

Question: Scott Penner - TD Securities - Analyst : Okay. No, that's clear. Thank you.