Open Text Corporation
Q2 2020 Earnings Call Transcript

Published: 31 Jan 2020

[Operator:]

Thank you for standing by. This is the conference operator. Welcome to the OpenText Corporation Second Quarter Fiscal 2020 Conference Call. [Operator Instructions].I would now like to turn the conference over to Harry Blount, Senior Vice President, Investor Relations. Please go ahead.

[Harry Blount:]

Thank you, Ariel, and good afternoon, everyone. On the call today is OpenText's Chief Executive Officer and Chief Technology Officer, Mark Barrenechea; and our Executive Vice President and Chief Financial Officer, Madhu Ranganathan. We have some prepared remarks, which will be followed by a question-and-answer session. This call will last approximately 60 minutes with a replay available shortly thereafter.I would like to take a moment and direct investors to the Investor Relations section of our website, investors.opentext.com, where we have posted 2 presentations that will supplement our prepared remarks today. First, our strategic overview, titled OpenText Investor Presentation, January 2020; the second, titled Q2 FY 2020 Financial and Business Results, includes information and financials specific to our quarterly results, notably our updated quarterly factors on Page 8.In February and March, OpenText management is pleased to meet with investors throughout Canada and the United States. We look forward to attending the following conferences. The 8th capital Digital Disruption Forum on February 27, in Toronto; the Morgan Stanley Technology, Media & Telecom Conference on March 3, in San Francisco; and CIBC's tech tour on March 5, in Ottawa. Please feel free to reach out to me or the IR team for additional information.And now I will proceed with the reading of our safe harbor statement. Please note that during the course of this conference call, we may make statements relating to the future performance of OpenText that contain forward-looking information. While these forward-looking statements represent our current judgment, actual results could differ materially from a conclusion, forecast or projection in the forward-looking statements made today. Certain material factors and assumptions were applied in drawing any such statement. Additional information about the material factors that could cause actual results to differ materially from a conclusion, forecast or projection in the forward-looking information as well as the risk factors that may project future performance results of OpenText are contained in OpenText's recent forms 10-K and 10-Q as well as in our press release that was distributed earlier this afternoon, and which 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 are available on our website. And with that, I will hand the call over to Mark.

[Mark Barrenechea:]

Thank you, Harry. Good afternoon to everyone, and thank you for joining today's call. There are a variety of key topics I'd like to discuss today, our strategy, including the momentum of our cloud business and how the intelligent edge is going to play a larger role for OpenText. Second, Carbonite and our road map ahead. I'd like to discuss today our strong Q2 results, our go-to-market opportunity and partner strategy, the general M&A environment as we see it. And we introduced a guiding principle of durable in September of 2019. I plan to spend some time on that today in the OpenText's operating model and lastly, our financial outlook, both short and longer term.Let me jump right in and speak to the strategy, the cloud and what I call the intelligent edge. We have successfully transformed into a modern cloud company, servicing the information needs of the world's largest enterprises and governments. And with Carbonite, we will bring the cloud and information management to customers of all sizes. From 0 cloud revenue in 2012 to today, our cloud business has grown at 30% CAGR. And the OpenText cloud is on track to be the largest business segment in fiscal '21, approaching 3 extra license business and larger than our maintenance business.We have built a cloud business and delivered incredible growth while expanding license, expanding maintenance, expanding adjusted EBITDA and expanding cash flows. Our guide was to find new revenue dollars, not substitute an existing dollar or another one. This highlights our culture, the OpenText way and the OpenText business system. We now have 3 primary cloud businesses of scale and significant total growth opportunities within each

[Madhu Ranganathan:]

Thank you, Mark, and thank you all for joining us today. First of all, a huge welcome to all members of Carbonite. The OpenText and Carbonite teams worked diligently together to close the second quarter, and our integration is commenced with strength. We closed Carbonite on December 24. And during the 8 days in Q2, Carbonite contributed $9.5 million in revenues and a net loss of $3.7 million on a GAAP basis, primarily on account of intangible amortization and onetime fees of special charges. Carbonite was accretive on a non-GAAP basis. As we turn to the details of our quarterly results, all financials discussed are inclusive of Carbonite's 8 days of contribution. Please note that our updated fiscal '20 target model is included in our Q2 investor presentation posted on the IR website and will be addressed in my comments. Our long-term fiscal '22 aspirations remain unchanged. Similar to prior quarters, my references will be in millions of USD and compared to the same period in the prior fiscal year.And let me start with revenues and earnings. Total revenues were $771.6 million, up 4.9% or up 6.3% on a constant currency basis. Foreign exchange continues to be meaningful. There was a $10 million FX negative impact to revenue in the quarter. Year-to-date, total revenues were $1.5 billion, up 4.7% or up 6.1% on a constant currency basis.Earnings per share. For the quarter, GAAP earnings per share diluted was $0.40 and up from $0.39. And in the quarter, non-GAAP earnings per share diluted was $0.84, up from $0.80 or up $0.06 on a constant currency basis. On a year-to-date basis, GAAP earnings per share diluted was $0.67, up from $0.52 and primarily due to increase in revenues. Year-to-date non-GAAP earnings per share diluted was $1.48, up $0.08 or up $0.11 per share on a constant currency basis. The geographical split of revenues of total revenue in the quarter was Americas, 58%; EMEA, 33%; and APJ, 9%. Annual recurring revenues were $563.8 million, up 6.5% or up 7.8% on a constant currency basis. Year-to-date annual recurring revenue was $1.1 billion, up 6.1% or up 7.4% on a constant currency basis. Annual recurring revenues as a percent of total revenues was 73% for the quarter, up from 72% in the prior year and 76% year-to-date, up from 75% in the prior year. Our cloud revenues are particularly strong at $248.3 million, up 13.3% or up 14.1% on a constant currency basis. Year-to-date, cloud revenues of $485.6 million, up 13.6% or up 14.5% on a constant currency basis. Our customer support revenues were $315.5 million up 1.7% or 3.3% up on a constant currency basis. Year-to-date, customer support revenues were $627.8 million, up 0.9%, and are up 2.6% on a constant currency basis. Our customer support renewal rate was up slightly to approximately 93% from 92% last quarter. Our license revenues were $138.1 million, up 4% or up 5.6% on a constant currency basis. Year-to-date, our license revenues were $216 million, up 3% or up 4.6% on a constant currency basis. Our professional services revenues were $69.6 million, down 4.5% or down 2.9% on a constant currency basis. Year-to-date, professional services revenues were $139 million, down 3.1% or down 1.4% on a constant currency basis.Turning to margins. GAAP gross margin was 69.9%, up 90 basis points. Year-to-date, GAAP gross margin was 68.6%, up 100 basis points. Our adjusted gross margin was 75.5%, down 20 basis points. Year-to-date, adjusted gross margin was 74.4%, also down 20 basis points. During both periods, adjusted gross margin is well within the range of our fiscal '20 target model.Also, on an adjusted basis, cloud margin was 58.4% a 130 basis point improvement from Q1 fiscal '20 but down from 59.7% last year. Year-to-date, cloud margin was 57.8%, down from 58.9%. Our customer support margin was 90.7%, up from 90%. Year-to-date, customer support margin was 90.7%, up from 90.2%. Our license margin was 97.8%, up from 97.2%. Year-to-date, license margin was 97.5%, up from 96.4%. Our professional services margin was 23.5% and consistent with last year. Year-to-date, professional services margin was 22.8%, up from 22%. Adjusted EBITDA was $317 million, up 2.8% or up 4.9% on a constant currency basis. Margin-wise, this represents 41.1%, down slightly compared to 41.9% last year. Year-to-date, adjusted EBITDA was $571.2 million, up 3% or up 4.9% on a constant currency basis. Margin-wise, this represents 38.9%, down slightly by 60 basis points. Our adjusted net income was $227 million, up 5.2% or up 8.1% on a constant currency basis. Year-to-date, adjusted net income was $400.5 million, up 6.1% or up 8.8% on a constant currency basis. GAAP net income was $107.5 million, up 2.9%. Year-to-date, GAAP net income was $181.9 million, up 29.2% and primarily due to increase in revenues.Turning to operating cash flows. It was $207.2 million, an increase of 9.6%. Year-to-date, operating cash flows were $344.7 million, down by 4.4%. Our collection efficiencies remained strong with our current quarter DSO at 57 days lower by 2 days compared to Q2 fiscal '19. Improving all aspects of working capital efficiency for OpenText and Carbonite will be a key focus for us.Balance sheet. From a balance sheet perspective, we ended the quarter with approximately $675 million in cash compared to approximately $999 million in Q1 fiscal '20, down in a large measure due to cash used to complete the Carbonite acquisition. And looking back, our efforts to build balance sheet strength over the past several fiscal years have paid off. Our consolidated net leverage ratio was 2.3x. We also remain confident in our ability to bring our net leverage ratio down below 2x in the next 4 to 5 quarters.The acquisition of Carbonite, as mentioned, on December 24, 2019, acquired Carbonite for $1.4 billion, financed by cash on hand and our existing revolver. We have recorded a $75 million deduction in Carbonite's deferred revenue as purchase price allocation adjustment. I will refer you to the slide, called Carbonite update and revenue impact in our Q2 Investor Relations presentation, posted on our website and in our 10-Q for further details.For the second half of fiscal '20, we expect Carbonite revenue to be between $195 million to $200 million after PPA and typical business disruption of up to 10% due to integration activities. As a reminder, we expect Carbonite to be on our operating model by the end of fiscal '21.Carbonite integration and restructuring plan. We are committed to a thoughtful and fast integration of Carbonite into OpenText. Carbonite will be accretive during fiscal '20. We expect the integration to be completed by the end of fiscal '21 or sooner. Today, we're announcing a restructuring plan that integrates Carbonite into OpenText and also into streamlining operations at OpenText. The anticipated cost is expected to be approximately $26 million to $34 million. These restructuring activities are anticipated to be completed by the end of fiscal '21, and once completed, OpenText anticipates annualized cost savings of approximately $37 million to $41 million. We expect any savings realized during the remainder of fiscal '20 to be largely offset by onetime Carbonite integration costs, with the majority of the financial benefits to be realized in fiscal '21.Our fiscal '20 target operating model and long term aspirations. We're executing well to our business plan. The impact of restructuring have been considered in the fiscal '20 target model framework that we're sharing with you today. We highlight the following changes. With the acquisition of Carbonite, we have increased the contribution of cloud revenues from 31% to 35% to 34% to 38%. We expect 100 basis point increase in our annual recurring revenue range of 75% to 77%. We're also increasing the fiscal '20 target model ranges for non-GAAP cloud gross margins to 58% to 60%. We expect Carbonite to be accretive and increase the adjusted EBITDA dollars. This is reflected in the adjusted EBITDA margin range of 36% to 37% in our fiscal target model. Please refer to our IR deck for further details of other aspects of our target model.Our fiscal '22 aspirations. We remain on track to meet our fiscal '22 long-term aspirations. Our current fiscal '22 aspirations include 38% to 40% adjusted EBITDA with margins above this range reinvested for future growth, including product, sales capacity, partners and marketing, $1 billion to $1.1 billion operating cash flows during fiscal '22. With the inclusion of Carbonite, we see upside opportunities to our operating cash flows, which we will update during our annual fiscal '20 earnings call.Our quarterly factors. And let me summarize here and reiterate the quarterly factors that we anticipate for our upcoming Q3. I would emphasize a few items. As we look at where FX rates are today as well as a geographical component of our business, we note that the FX headwind for the first half of fiscal '20, was $20 million to revenues. We continue to expect that approximately $35 million annual FX headwind for fiscal '20, inclusive of Carbonite. And furthermore, inclusive of Carbonite, we expect low double-digit revenue growth in Q3 on a year-over-year basis. Expect non-GAAP total operating expenses in Q3 to be up approximately 30%, compared to Q2 fiscal '20 of $286.1 million as we included a full quarter of Carbonite's operations and seasonal increases relating to our annual performance cycle. Our adjusted EBITDA dollars to be flat to slightly up on a year-over-year basis.A tax update with respect to the IRS matter. We remain in the appeal space. The standard IRS process continues, and our resolve remain strong as we vigorously defend our position. Dividend. Turning to our dividend program. Today, we announced a quarterly dividend of $0.1746 per share payable on March 20, 2020. Our rate is based on distributing approximately 20% of our trailing 12-month operating cash flows. And to reiterate, our annual dividend approach will be communicated following our fiscal year-end.In summary, we are pleased with our Q2 results. We have kicked off an integration of Carbonite with strength and remain focused on our fiscal '20 and long-term targets.And finally, I'd like to thank you, our shareholders whose trust and confidence we greatly value, and the OpenText team for their deeply committed efforts.And now I would like to turn the call over to the operator for questions. Operator?

[Operator:]

[Operator Instructions]. Our first question comes from Raimo Lenschow of Barclays.

[Raimo Lenschow:]

I had a couple of quick ones. First, Mark, so we owned Carbonite for like a bit over a month now. Can you just see what your strategy around cyber resilience? What was the initial customer feedback that you've seen so far?

[Mark Barrenechea:]

Yes, thanks for the question. The feedback has been amazingly positive. It's a very natural extension to want to provide in our information management strategy the protection and resiliency of information, not just the kind of the management of it in content services or the exchange and connectivity of it through business network but now to be able to provide data protection and security and threat intelligence around it. So I'd say, extremely positive. And it's a very talented workforce. We love the channel that they have built. The cultures are coming together very nicely. And we have opportunities both ways. We have product to be able to provide the SMB channel from OpenText and the ability to take data protection and BrightCloud into the enterprise. So when things are natural, they tend to come together.

[Raimo Lenschow:]

Okay, perfect. And then the quick other question because you're kind of, obviously, one of the very large of the larger leading software vendors, and you have like a bigger global footprint than other people. What are you seeing in terms of end demand out there because a couple of quarters, that was something that you highlighted? If I look at the results, it looks like everything is kind of going well out there.

[Mark Barrenechea:]

Yes. As I said in my remarks and sort of our quarterly factors. We're expecting positive organic growth this year on an annual basis. The M&A environment continues to be healthy for us in building pipeline. But the hotspots around the world sort of continue to include manufacturing. You got to continue to watch trade and tariffs. It's a bit unpredictable. And though our business is de minimis in China, obviously, we're all watching the coronavirus very carefully and how that might affect travel, transportation and a few other sectors. But if we look at our results of total revenues up near 5% in reported and near 7% in constant currency, we're seeing a stronger demand for digitalization in our solution.

[Raimo Lenschow:]

Okay. Perfect. And then one last question. And Madhu, operating cash flow was very strong this quarter. Were there any particular drivers you wanted to point out to?

[Madhu Ranganathan:]

I mean as I said in my comments, we continue to improve sort of the working capital framework. Our DSOs were two days lower than prior year. And you should sort of expected to see that gradual progress as we get into fiscal '20 and '21 as well.

[Operator:]

Our next question comes from Daniel Jester of Citi Bank.

[Daniel Jester:]

So Mark, you mentioned in your prepared remarks about the 24-city cloud tour that you hosted this fall. I'm just wondering if you could share with us some of the feedback you got from that. And specifically, I'm wondering if you learned anything that revises kind of your expectations for the Cloud Edition launch later this year.

[Mark Barrenechea:]

Yes, thanks for the question. We're just reflecting back over 7 years of growing from zero cloud revenues to the incredible scale we have today and looking back, it's a 30% CAGR over near 7 years, the quarter up 14%. And we kind of revised upwards our fiscal '20 view to where we're going to see about 20%-plus growth in the cloud. The cloud tour was about a part of our cloud, which is our managed services. And that's primarily what the cloud tour was about, about the enterprise and about managed services. And it just reinforces that in the enterprise, we differentiate on being able to allow customers to get their competitive advantage by really tailoring software to their needs, both in the business network and in content services. We have those things that are more standard via SaaS, like core and our new e-signature offering, and there are things even more standard, right, that's going to be at more volume through SMB. But specifically to the question, the cloud tour was really about managed services. Having customers migrate from off cloud to the OpenText cloud, and we have thousands of customers today that run off cloud. And what we learned is continue to stay on your hybrid strategy and managed services has a big role in the OpenText future.

[Daniel Jester:]

Great. And then just a follow-up. One of the points you stressed a lot in your tech today was about the durability of the business model and how the acquisition of Carbonite has made you more durable. Does that change how you view your balance sheet? You also sound pretty positive about the M&A environment. So given the increased durability of the business, would you look to deploy your balance sheet differently in the future?

[Mark Barrenechea:]

Yes, yes. Thanks for the question. Yes, we were all about annual recurring revenues, whether it comes from the cloud or comes from maintenance, right? And they both have similar durability, high longevity, high renewal rates, great margin. So it's cloud or very recurring maintenance. And that's what we like in the durability. .Now that becomes -- as cloud grows and ARRS grows, the predictability of our business gets a little better every quarter, gets more better, if that's proper English, yes, every year, year-over-year. And you can see that percent increasing. There's a few years ago, we're in the mid- to low 60s, we're in the mid-70s this year, we'll creep up into the mid- to high 70s next year. So we really like that predictability.We're also a patient deployer of capital. We're sitting at about 2.3x ratio. We'll be back under 2x in 4 to 5 quarters, but we're going to remain strategic. We're going to remain patient. And right now, over the next quarter to 2, the most value we can unlock is via the Carbonite integration. Getting Carbonite, Webroot integrated, getting them integrated into OpenText, initiating and completing our restructuring plan, growing their SMB channel. Getting Europe up and running and getting a couple of wins in the OpenText enterprise. And that's really where the most value we can unlock right now over the next 1 to 2 quarters.

[Operator:]

Our next question comes from Richard Tse of National Bank Financial.

[Richard Tse:]

Yes. I was wondering if you need to do anything with the prior portfolio to sell into the SMB channel. Obviously, it seems like Carbonite is bringing a pretty extensive channel there. And I'm kind of curious to see whether you need to rejig the products in any way.

[Mark Barrenechea:]

Richard, it's Mark. Thanks for the question. Thanks for joining the call. At present the focus is to look at a handful of solutions that's currently in our portfolio and get greater distribution through the Carbonite channel.Take a couple of examples, a few examples. First is EnCase. We bring digital forensics to the enterprise. But the product is built for law enforcement organizations, which look a lot like SMB organization. So in the first half of calendar '20 here, right? We got Carbonite focused on Carbonite. They'll then pick up EnCase and bring that into the SMB market. We also have EasyLink solutions that have historically been a portion of which is SMB oriented. So EnCase product, ready to go. EasyLink, ready to go. Hightail, I think, will benefit as well from that channel.So Phase 1 is, the most value we can unlock is getting the Carbonite integration complete. And getting that kind of well established. Second is to bring existing products that we have to the channel. And I think products as core and e-signature grow and mature, I think it will be a very natural fit for the high end of SMB and for the enterprise as well, which would be a little more like a Phase 3. Rich, I hope that's helpful.

[Richard Tse:]

Yes. It makes a lot of sense. So I guess, maybe in a related question, with respect to one of the initiatives you talked about at your Investor Day in the fall. In regards to targeting the Global 10,000, can you maybe give us a progress update in terms of where you are there?

[Mark Barrenechea:]

Yes, we don't have a specific count today, except to say that we expect to have our coverage doubled in -- I think, near 2/3 of the G10K covered over the next 10 years. One piece of update I did provide today is we put a new global account management team in place recently. And that team is fully in place, operational. We brought a couple of existing we recast, if you will, some of our great internal talent. We went outside and brought some new talent in. We have a great leader Benoit out of Paris, leading this group for us. And we're targeting our top 100 accounts, and just giving those top 100 accounts a laser focus. One sort of account executive to manage all the opportunity across the General Motors, for example, or across a British Petroleum, as examples. So we're marching towards near 65%, 70% coverage over the next 2.5 years or so when we stated that goal. And one big step was putting that global account management team in place, which is now established.

[Richard Tse:]

Okay, great. And just one last quick one for me. There's no doubt you've got the capacity financially to do more acquisitions here. Do you have the capacity to do it from a management personnel perspective? And maybe sort of what's your willingness to sort of do more acquisitions over the next 12 months, considering that you just closed Carbonite?

[Mark Barrenechea:]

Yes. Well, the financial capacity is certainly there. We've set up the integration of Carbonite. We think this has an opportunity to talk a bit about the integration of our new SMB consumer group in a little language, if you will. We think Carbonite that was a public company, of course. We think there were three strong product lines here. Carbonite, Webroot and BrightCloud. Those are three product lines underneath the Carbonite banner.The enterprise team is unaffected by this integration. Craig is reporting to me directly, [indiscernible] great engineer reporting into Muhi, and all the back offices are direct line in -- HR to HR, finance to finance, legal to legal, IT to IT. So the enterprise team is unaffected by this, except that they're going to get more product to sell. So there's bandwidth on the enterprise side. But right now, over the next couple of months and quarter or 1.5 quarter, the greatest value we can do is to unlock those value plays inside of Carbonite. But we'll note it, we get the balance sheet. We continue to work top of pipeline. Companies tend to shed assets in environments like this, and I'll note that the enterprise team is really unaffected by Carbonite -- structurally unaffected by the acquisition and integration.

[Operator:]

Our next question comes from Thanos Moschopoulos of BMO Capital Markets.

[Thanos Moschopoulos:]

Mark, with respect to the restructuring, you mentioned that part of it will be for streamlining the business outside of Carbonite. I thought you were already running quite a tight ship. So could you expand on what you'll be doing there?

[Mark Barrenechea:]

Yes. I've always appreciated the Snapple logo, which is the best things on Earth, keep getting better. So we do run a tight ship, as you well know, but you also need to challenge yourself to keep getting better.And so the restructuring is sort of 2 parts. The first part is completing the acquisition into completing the integration of Carbonite, Webroot and integrating that into OpenText. Well studied, very thoughtful, we believe in quick integration and quick cost out. And here we are in January, really, 30 days, 35 days after the acquisition, and we got our plans defined and announced.The other part of this is, in looking at how we would integrate Carbonite into OpenText, we have some opportunities to leverage better our centers of excellence. Carbonite had outsourced parts of engineering in India, had outsourced support to a third party. And through that aperture, we're able to scale up a little more, India, Philippines, Canada through our centers of excellence, but took this as an opportunity to look across OpenText and complete some of those opportunities.

[Thanos Moschopoulos:]

Great. And then in terms of -- on the M&A front, you established the portfolio group recently. I saw that you did a small buck in this quarter. Can you update us in terms of the pipeline of smaller deals you're seeing and the cadence that we might see there?

[Mark Barrenechea:]

Yes. We're remised to not mention in our prepared remarks, the Fax guys that we acquired. And that was a reseller of our fax business, primarily in the U.S., great style acquisition for us. A known entity, small but solid add of new revenues. It will actually -- it's small, but it will exceed the corporate ROIC. It will have a high return on invested capital. And those are the type of deals we're looking to do through OPG of the portfolio group. So they're building a very robust pipeline, and we'll get OPG deals done here in calendar '20. So just watch the space, we'll get deals done here in OPG in calendar '20.

[Operator:]

Our next question comes from Paul Treiber of RBC Capital Markets.

[Paul Treiber:]

Just was hoping you could follow up on your last comment just on the integration plan for Carbonite. At a high level, how does your game plan differ from prior acquisitions, particularly in light of the SMB and consumer channel that they have? And what do you see as the biggest opportunities and then potentially also the potential challenges that you may need to address with it?

[Mark Barrenechea:]

Yes, Paul, thanks for the question. So three parts in there. The first is perhaps how does this differs than previous integrations. So on the kind of supporting operations, finance, HR, IT, traditional back office doesn't differ at all. It's straight-line integration, functional integration.What's different is we're really keeping a go-to-market group together under Craig and having him report to me directly. Our integration philosophy is really to integrate at the business unit level and to gain that go-to-market strength. So Craig's organization is a complete organization. They own their demand generation. They own their presales. They own sales, are going own support as well. The support's deeply integrated into the process. So Craig's organization has a slightly wider scope and really owns that SMB and consumer go-to-market.So coming out of the gate here, we're going to keep this more as a sort of general management group business unit going to market. How? Who's going to lead engineering? Who's going to report directly into Muhi? And look, we're serious about cyber resilience, and we're serious about the edge, and we're serious about SMB. And just like we did in content services, we're over 25 years. We completed near city acquisitions in the business network. We've completed near 15 acquisitions, and you can expect us to deploy capital and innovate in this group as well. So the plan is just slightly different, where we're having a wider scope of responsibility with Craig as we set up the SMB group.Opportunity, right? There's opportunity to expand their OEM group and BrightCloud. I'm very excited about brightcloud.com and what that can bring. They're just getting started in MSPs and RMMs, roughly 16,000 out of a total market opportunity of 60,000 international expansion. And then very select but high-power value place to bring into the enterprise like data protection, file integrity and the OEM opportunity. Challenges. It's minimizing disruption. And talent, right? We've got a -- it's still a war on talent, and we've got to keep fighting for the best people and high retention rates.

[Operator:]

This concludes time allocated for questions on today's conference call. I will now hand the call back over to Mr. Barrenechea for closing remarks.

[Mark Barrenechea:]

All right. Well, our prepared remarks were longer than usual tonight, but we had a lot we wanted to communicate. So we do, and I thank you for joining our call this evening. And I hope you have a great evening. So thank you very much.

[Madhu Ranganathan:]

Yes. Thank you all.

[Operator:]

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