Release Date: February 06, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Open Text Corp (OTEX, Financial) exceeded expectations in adjusted EBITA and adjusted EPS for Q1 fiscal 2025.
- The company reported a 35% year-over-year growth in adjusted EBITA, showcasing sustained efficiency gains.
- Open Text Corp (OTEX) achieved its largest Q1 of enterprise cloud bookings in history, up 10% year-over-year.
- The company reaffirmed its fiscal 2025 targets, projecting total revenues of $5.3 billion to $5.4 billion.
- Open Text Corp (OTEX) is making strong investments in its enterprise and SMB go-to-market strategies, enhancing customer success and strategic partnerships.
Negative Points
- Q1 total revenue of $1.269 billion was down 11% year-over-year, or down 1.8% when adjusted for the AMC divestiture.
- The company reported negative $77.8 million in operating cash flows and negative $117.1 million in free cash flows for the quarter.
- Q2 is expected to be a tougher year-over-year comparison due to the large AMC contribution and license revenue from IP rights in the previous year.
- Cloud revenue growth was subdued in Q1, with only a 1.3% increase, reflecting typical seasonality.
- The company faces challenges in the developer segment, requiring further work to drive growth in this area.
Q & A Highlights
Q: Can you provide insights into the current demand environment and any shifts in deal activity?
A: Mark Barrenechea, CEO, stated that the demand environment is stable despite global volatility. The company anticipates a stronger second half due to the upcoming release of Titanium X, their largest software and cloud release. They are also seeing increased demand for their new SMB platform and security offerings.
Q: What gives you confidence in achieving your second-half targets?
A: Barrenechea highlighted several factors: the on-track delivery of Titanium X, full sales force capacity, a 20% year-over-year increase in pipeline for the second half, and the internal deployment of AI tools to enhance sales efficiency.
Q: How is Project Athena progressing, and what are the early results?
A: Barrenechea explained that Project Athena is focused on developer productivity, with early feedback being positive. The project aims to generate applications on top of Open Text's API services, with the first production apps expected by April 2025.
Q: Can you discuss the impact of AI and Microsoft Copilot on customer adoption patterns?
A: Barrenechea noted that AI is becoming a standard feature, akin to a search button, with 15 aviators and over 100 agents integrated into Titanium X. The company is making steady progress in embedding AI across its offerings, which is expected to support bookings and cloud revenue growth.
Q: What are the key drivers for cloud revenue growth in fiscal 2025?
A: Barrenechea identified three main drivers: customer adoption of SaaS capabilities in Titanium X, revenue contributions from AI and aviators, and product-specific growth, particularly in security with XTR as a service.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
