Open Text Corp. Q1 FY2025 earnings call

• Q1 results included delivering $1.27 billion in revenues, with adjusted EBITDA of 35% year-over-year and exceeded expectations in adjusted EPS.
• Strengthening competitive advantage with Titanium X, the next-generation autonomous information management platform powered by AI and security, with final delivery expected in the second half of fiscal 2025.
• New go-to-market investments in people, customers, and innovation, with a unified global sales organization structure and internal use of OpenText AI (olli.ai) to accelerate sales velocity.
• Expanding partner contribution, leveraging strategic partnerships across layers of the enterprise stack, including with SAP, Google, Microsoft, and Salesforce.
• Increasing customer success through a new digital renewal center, which went live July 1, aiming to scale the business with lower friction and cost.

In Q1, OpenText delivered $1.27 billion in revenues, within the quarterly range of $1.25 billion to $1.3 billion. Revenue by geo: America accounts for 57%, EMEA 33%, and APAC and Japan 10%. Cloud revenue was $457 million, marking the 15th consecutive quarter of organic growth, up 1.3% year-over-year. Adjusted EBITDA was $443.8 million, representing a 35% year-over-year growth, reflecting sustained efficiency gains even after the divestiture of the AMC business.

• Fiscal 2025 targets: total revenues of $5.3 billion to $5.4 billion (constant to 1% growth, ex-AMC), adjusted EBITDA of 33% to 34%, and free cash flow of $575 million to $625 million.
• Expect a stronger second half of fiscal 2025 driven by four factors: demand for Titanium X, new go-to-market investments, expanding partner contribution, and new customer service investments.
• Q2 expected total revenues of $1.29 billion to $1.34 billion, with continued adjusted EBITDA strength of 34% to 35% and enterprise booking strength ramping towards the annual target of 25% growth.

• Monitoring economic volatility in Europe, North America, APAC, and Japan, and being prepared to adjust approach if needed. The company's Four Point Strategy assumes stable externalities and positive economic drivers, and any deviation could impact performance.

Q: What is the demand environment like and any shift in deals?

A: The demand environment is stable. We see a stronger second half driven by the largest release of software and cloud (Titanium X), new SMB platform live, and significant SaaS push. We're monitoring economic volatility but executing well.

Q: Can you remind us about the IP right impact for 2Q and confidence in second half execution?

A: The IP right impact in 2Q includes a one-time royalty from certain IP grants from a year ago. Confidence comes from on-track delivery of Titanium X, at-capacity sales force, up 20% cloud pipeline year-over-year, and internal use of OpenText AI to increase response velocity and win rate.

Q: How do you think about adoption patterns between Aviator offerings and Microsoft Copilot?

A: Adoption is steady with Aviators and agents permeated through Titanium X. It's commonplace like a search button, with 20 wins related to GenAI Aviators in Q1. Progress is steady, supporting bookings growth and 25% cloud bookings target.

Q: Any further opportunities to streamline the company for growth like the AMC divestiture?

A: The main thrust is on organic growth. Focus is on driving growth with Titanium X, new AI offering, Business AI, Business Technology, and security. Pipeline is up 20% year-over-year for cloud and AI, with main focus on organic growth.

Q: What are factors contributing to the cloud growth range of 2% to 5%?

A: Factors include SaaS adoption with Titanium X, Aviator and AI contribution, and product-specific pieces like security (XDR-as-a-Service). These contribute to the top and bottom ends of the growth range.

Q: Where are you in the hiring cycle of AEs and contribution of cohorts?

A: We're at capacity in hiring AEs, with success in attracting both fresh graduates (entering as inside sales/account development) and skilled professionals (7-15 years experience). Both cohorts are supported by AI (olli.ai) to accelerate sales processes.