Open Text Corporation
Q2 2017 Earnings Call Transcript

Published: 3 Feb 2017

[Operator:]

Welcome to the Open Text Corporation Second Quarter 2017 Conference Call. As a reminder, all participants are in a listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. I would like to turn the conference over to Greg Secord, Vice President, Investor Relations. Please go ahead.

[Greg Secord:]

Thank you, operator, and good afternoon, everybody. On the call today is OpenText Chief Executive Officer and Chief Technology Officer, Mark J. Barrenechea; our Chief Financial Officer, John Doolittle; and our President, Steve Murphy. We will read prepared remarks, followed by a question-and-answer session. The call will last approximately 60 minutes, with the replay available shortly thereafter. I'd like to take a moment and direct investors to the front page of the Investor Relations section of our website, where we've posted PowerPoints that will be referred to during this call. And now, I'll 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 conclusion while making a forecast in a projection as reflected in the forward-looking information. 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 and the material factors or assumptions that were applied in drawing the conclusion while making a forecast or projection, as reflected in the forward-looking information, as well as risk factors that may project future performance results of OpenText are contained in OpenText Form 10-K and 10-Q as well as in the press release that was distributed earlier this afternoon, each of 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. Reconciliation 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'll hand the call over to John Doolittle.

[John Marshall Doolittle:]

Okay. Thank you, Greg. Welcome to the call, everyone. Before we get started, I want to remind everyone that on December 21, 2016, we announced that our board of directors approved a two-for-one share split of our outstanding common shares. As a result of the two-for-one share split, all of our current and historical period's per share data, number of common shares outstanding and share-based compensation awards are presented on a post share split diluted basis. Also during the quarter and as part of our ECD Business acquisition financing plan, we issued 19.8 million common shares in December through a public offering of our shares for net proceeds of approximately $585 million. This negatively impacted GAAP and adjusted EPS by $0.01. Now, let's go through the numbers. My references will all be in millions of U.S. dollars and compare to the same period of the prior fiscal year, unless I indicate otherwise. Total revenue for the quarter was $543 million, up 17% both from last year and on a constant-currency basis. Revenue was negatively impacted by $4 million due to acquisition accounting rules, and by $3 million due to foreign exchange. Year-to-date total revenue was $1,034 million, up 15% from last year and up 16% on a constant currency basis. Recurring revenue was $445 million, up 16% from last year and up 17% on a constant currency basis. Year-to-date recurring revenue was $876 million, up 14% from last year and up 15% on a constant currency basis. License revenue for the quarter was $98 million, up 19% from last year and up 20% on a constant currency basis. Year-to-date licensing revenue, $158 million, up 19% from last year and up 20% on a constant currency basis. Cloud Services and Subscriptions revenue for the quarter was $175 million, up 17% from last year and up 18% in constant currency. New MCV bookings this quarter were down slightly $54 million compared to $57 million in the same period last year. And year-to-date Cloud Services and Subscription revenue was $345 million, up 16% from last year and up 17% on a constant currency basis. Customer Support revenue for the quarter was $220 million, up 19% from last year and up 20% in constant currency. Year-to-date Customer Support revenue was $430 million, up 16% from last year and up 17% on a constant currency basis. Customer support revenue for the quarter was $220 million, up 19% from last year and up 20% in constant currency. Year-to-date Customer Support revenue was $430 million, up 16% from last year and up 17% on a constant currency basis. Professional Services and Other for the quarter was $50 million, flat compared to last year and up 1% in constant currency. And year-to-date Professional Services and Other was $101 million, up 1% from last year and up 3% on a constant currency basis. Impact of foreign exchange negatively impacted revenue by $3 million in the quarter but had no impact on adjusted EPS. Year-to-date foreign exchange negatively impacted revenue by $8 million and negatively impacted adjusted EPS by $0.01. The negative impact of $8 million by revenue is

[Stephen Murphy:]

Thanks, John. Let me talk a bit about Q2. So, our second quarter was exceptionally strong with standout License revenue growth and equally commendable performance of our Customer Support and Cloud businesses. Our sales organization is scaling well and our focus on the fundamentals of account planning, quote attainment and pipeline management is paying off. We managed sales growth with an equal focus on the bottom line, attaining our margin targets across the board. Our business model is scaling, and I'm pleased with our progress. Let me share some quick relevant statistics

[Mark J. Barrenechea:]

Thank you, Steve, and thank you, John, for your remarks. We are executing to plan. Our strategy and business model is creating value. Q2 results were solid, and I'm excited about our overall progress. For the first half of fiscal 2017, we delivered to our internal plan, and we're on track for the same in the second half of the year. The quarter was about execution

[Operator:]

We will now begin the question-and-answer session. The first question comes from Richard Tse with National Bank Financial. Please go ahead.

[Richard Tse:]

Thank you. Mark, you're getting pretty close to your $3 billion of capital deployment target on acquisitions. Would you be in a position anytime soon to sort of increase that target?

[Mark J. Barrenechea:]

Hey, Richard. Thanks for the question. We clearly have to update that $3 billion number. Look, the model – so I'd like to kind of remove that $3 billion target, if you will. That's sort of an old number and sort of an old-style metric for us. Our model rejuvenates itself, if you will. We'll bring an asset on board. We'll get it integrated. We'll get it on to our operating model. It will generate cash flows, and then that capital becomes available to redeploy. We clearly have work to do to integrate ECD, which we're in full execution mode on, but it's also an active market. So we're continuing to evaluate acquisition candidates. So we haven't hit a pause or stop button in corporate development, but we're very mindful of the work that we need to do in the next quarter or two to integrate ECD. So, I'd like to kind of just maybe hit a reset button on that $3 billion. Our model rejuvenates itself, if you will. And we're continuing to evaluate acquisition candidates.

[Richard Tse:]

Okay. Thanks. So you guys have done a ton of acquisitions and some meaningfully large ones here. When you say integrated, should we assume that those products are running on a single platform and that they're sort of interoperable with each other? And I ask that question because when you look at your innovation chart in your deck and you're moving to Project BANFF and then YOHO eventually, is there an opportunity to actually scale your margins when they do become fully integrated?

[Mark J. Barrenechea:]

Well, I would – as a rule, what we're trying to do is, in the next big release cycle, be able to bring the products on to an OpenText standard platform. So, every time we get to a major release is when that – if we acquire – when we acquire a technology platform, the next major release, we look to have it integrated on to our platform. I think probably the bigger opportunity on more technology integration is the ease to sell the next module, if you will, versus maybe margin performance. It's being able to be inside a customer and turn on modules two, three and four because of the common technology, if you will. So I'd look more towards efficiency of sale versus margin expansion as the big opportunity there.

[Richard Tse:]

Okay. And just a last one for Steve, if I might. Steve, clearly a much bigger company with a lot more products. When you look at the sales force, I know you touched on it, but I was wondering if you could give us a bit more color in terms of how that sales force is going to be structured. Are they all going to sell all the products? Give us a sense of how you divide the markets in terms of size, et cetera? Just wanted a better understanding on that. Thanks.

[Stephen Murphy:]

Yeah, the first rule is geographic coverage, just making sure we have strong leadership, accountability and coverage by every major region. Within those regions, within our matrix, we do have specialization but there is cross-sell. So, for instance, within Enterprise Content sales, that person could also be selling Discovery and Analytics and vice versa. So I think that this is a great fit along every one of those criteria as far as the kinds of things we sell, the customers we talk to, the purchase process we're working in. But again, it's geography first. It's either industry specialization or product specialization next. And then, on top of that, we layer a cross-sell where it makes sense.

[Richard Tse:]

Okay. That's great. Thanks, guys.

[Mark J. Barrenechea:]

Sure.

[Stephen Murphy:]

Thanks, Richard.

[Operator:]

The next question is from Stephanie Price with CIBC. Please go ahead.

[Stephanie Price:]

Hi. Can you talk...

[Stephen Murphy:]

Hey, Stephanie.

[Stephanie Price:]

Hey. Can you talk a bit more about cross-selling products into your customer base? And how should we think about the potential with ECD and the progress that you've made potentially on the couple of acquisitions you've done recently?

[Stephen Murphy:]

Yes, you bet. A couple of things about cross-selling that I look at would be, when we take on an acquisition like this and we look at account planning and quota at the rep level, and you basically Venn diagram where do we have people who were selling the same things to the same person. And the good news here is, almost nowhere. ECD had focused really, really high at the top of the pyramid, the Global 100, Global 200. We're kind of more across the first half of the Global 10,000, and there's a lot of room for those people that are selling ECD to a specific customer to keep doing that and sell OpenText, our product or sell Analytics, sell Discovery, sell the Autonomy products as far as CEM and the customer management product. I think that from a size of the sale, the price point it sells at, the signature authority and the type of product, there's just a fantastic fit. It's a home run as far as cross selling. As far as the compensation goes, we won't stack compensation but what I'll typically do is, I'll do a split ahead of time. It's well understood so there's some teaming, and we'll do a 60/40 or something like that just to make sure that all parties cooperate, communicate, but I won't stack compensation because that wouldn't fit the model. And I don't think anyone else that's making good margins here does that.

[Stephanie Price:]

Okay. Thanks.

[Stephen Murphy:]

Sure.

[Stephanie Price:]

And then, in terms of competitive positioning in the core ECM market, can you talk a bit about your positioning now that you've acquired ECD?

[Mark J. Barrenechea:]

Sure thing. Thanks, Stephanie. We continue to be primarily focused, as Steve intimated, on the global 10,000. And the majority of those workloads are on premise with some of the workloads in the cloud, and thus are hybrid model. And we now see our primary competitor as FileNet, and we're going to continue to differentiate. We're going to differentiate against FileNet now with being able to have our CEM capabilities and our Discovery capabilities and fill out Enterprise Information Management, just like in the days of ERP when customers wanted sort of integrated financials and supply chain and HR and then move to eBusiness suites. So we're very focused on FileNet, the features and capabilities, and being able to offer more of a suite approach and a hybrid approach against FileNet. So, for us, it's all eyeballs on FileNet.

[Stephanie Price:]

Great. Thank you.

[Operator:]

The next question comes from Paul Treiber with RBC Capital Markets. Please go ahead.

[Paul Treiber:]

Thanks very much. I just wanted to hone in a little bit more on your comment about the revenue normalizing back to historical levels. Considering that when we look at the public filings from EMC, the Documentum's revenue has been declining for a couple of years, do you expect that that revenue to stabilize? Or is that going to naturally stabilize? Or do you expect some potential revenue synergies through cross-selling to help you get back up to those historical levels?

[Mark J. Barrenechea:]

Paul, Mark here. Thanks for the question. We fundamentally believe we can grow Documentum, as I said, from sort of day one of the announcement through today. Step one here is, as John highlighted, we have purchase price accounting to work through, and then next is just sort of the normal integration activities where we expect to see the business, in addition to that BPA, down 5% to 10% for the integration activities we go through, sort of those typical sort of activities. And we expect that for a few quarters, right? In Q3, plus some, and you'll have to apply some judgment there. And of course, it depends on execution as well. From there, we believe we can grow the business through cross-selling opportunity, being able to migrate and sell additional cloud services, being able to sell additional EIM capabilities such as EIM and Discovery. But we fundamentally believe we can grow the business over time from their historical levels.

[Paul Treiber:]

Okay. Good to understand. Shifting to R&D and spending, it's up significantly this quarter. I assume a lot of that's from acquisitions, but can you speak to perhaps the organic growth per se in R&D spend? And what are the key priorities for R&D spending from here?

[Mark J. Barrenechea:]

So, yeah, on the R&D side, I don't have the exact ratio in front of me, John, but it's – falls (42

[Paul Treiber:]

One last one for John. Just in regards to the acquisition being structured as an asset purchase, in terms of working capital build up, how much do you anticipate and in over what time period would you expect that?

[John Marshall Doolittle:]

Yeah, I don't know a number, Paul. But it is fair to say and we saw this with the HP acquisition, we're not getting receivables, so the receivables will be billed as revenues come in. And it'll take a couple of quarters, I think, to normalize itself. And so that would be my expectation. I expect good working capital performance from the underlying business this quarter given our revenues.

[Paul Treiber:]

Okay, thanks. I pass the line.

[John Marshall Doolittle:]

Yeah.

[Mark J. Barrenechea:]

Thanks, Paul.

[Operator:]

The next question is from Phillip Huang with Barclays. Please go ahead.

[Phillip Huang:]

Hi, thanks. Good afternoon. Just a couple of clarification questions on the integration process just for modeling purposes. So, in terms – for the initial decline due to – revenue decline due to the set of normal integration process, do you expect it to be more front-end loaded with bigger declines at the beginning or pretty evenly spread out over the next several quarters?

[Mark J. Barrenechea:]

I'd probably say, our experience sort of suggest evenly declined – evenly spread, if you will.

[John Marshall Doolittle:]

I gave you, Phil. I gave you the historical numbers, so you can get some sense of the seasonality that was in the underlying business.

[Mark J. Barrenechea:]

Yes.

[Phillip Huang:]

Right. Got it. Okay. That's helpful. And then secondly...

[Stephen Murphy:]

Philip, I don't mean to interrupt but just I'll take it as an opportunity, if you well. These are normal activities, right. We have AEs working on contract innovations, right. And customers learning more about the joint portfolio that we have to offer. So just this activity that goes on as you integrate a business, where, I don't know if this is our 57th or 58th acquisition, so we tend to model down that first year of revenue for the normal activity.

[Phillip Huang:]

Right, got it. And just so that I've got it clear in my head, so ECD was declining basically around mid-teens range over the – I guess, more recent history. And then, on top of that, there is going to be 5% to 10%. So basically, for next several quarters...

[John Marshall Doolittle:]

Phil, they've been declining – yeah, they've been declining about 2% to 3% per year.

[Mark J. Barrenechea:]

Yeah, low single digits.

[Phillip Huang:]

2% to 3% per year.

[John Marshall Doolittle:]

Yeah.

[Phillip Huang:]

Got it. Okay. Got it. And so we just added to the 5% to 10% over the next several quarters and then basically moderates from there before it returns to growth?

[John Marshall Doolittle:]

That's the reasonable way to think about it, yeah.

[Phillip Huang:]

Got it. And then, maybe if – I was wondering, just further on Mark's remarks regarding the process of integration, would you be able to elaborate a little bit about the types of revenues or contracts that you're thinking of that will kind of go down in the near-term? Is it mainly lower margin relationships or is there anything that you can kind of help us soft of better understand that process?

[Stephen Murphy:]

Hey. Murphy here. What I do think is – what I will say here is, we will scrutinize everything as far as business-by-business, deal-by-deal, margin-by-margin. And what we're going to get is a business that was operating in the 20%s. And we want to get it on the OpenText model within 12 months, which I think we will. And part of that's going to be better quality as far as the sales cycle and expectations around margin. But I do expect that to answer your question, there'll be license deals, for instance, that take a little longer, because we're going to expect more as far as the quality of the contract versus – or the SLAs. With Professional Services, I look very carefully at all businesses out there, and I'll expect that that business migrates towards our 20-or-better-percent. I think I don't have anything other than a weighted average. And I take a look at the current source of revenue and say, I'm probably going to equally apply it, maybe a little more to the Professional Services.

[Phillip Huang:]

Right. That's super helpful. And then, a final one from me. Even though ECD is the biggest deal in your company's history, I mean, just given how well you know the business, is it fair to assume that you expect a relatively straightforward integration process? It sounds like you guys never really hit the pause button in terms of looking at future M&A opportunities, but I was wondering if you could kind of maybe comment a bit on that?

[Mark J. Barrenechea:]

Yeah. Let me – thanks a lot. Though ECD is larger on a purchase price, we actually on-boarded more employees with GXS when we – with the GXS acquisition. And ECD is slightly larger revenues, if you will. So, the two are kind of comparable in scale, even though ECD, the purchase price is a little larger than GXS. We integrated day one the people, and that's done. So, the sales force, we went down – Murphy and team went down multiple layers and picked the best management teams and plugged them into the GOs and regions. We integrated literally day one the renewals team, engineering is plugged in, legal, HR, IT. So, the people side is plugged into the organization coming out of the gate. And we had fourth months roughly of pre-integration planning. And we were able to use that time really well to study and understand the teams, and thus being able to, two weeks later, as John highlighted, announce our restructuring plan, which is a thoughtful plan of now understanding the mutual teams and where there is overlap and efficiency to gain.

[Phillip Huang:]

That is very helpful. Thanks very much.

[Operator:]

The next question is from Steven Li with Raymond James. Please go ahead.

[Steven Li:]

Thank you. Just a quick one for me. John, the $60 million of cost savings, do you get that in year one or is it more back-end loaded and therefore in year two?

[John Marshall Doolittle:]

Yeah, Steven. So we'll try and take, as I mentioned, substantially all of the people actions this fiscal year, but we do have some one-time integration costs for ECD. So I'm not expecting to see net savings in the next couple of quarters. We'll realize substantially all the savings in fiscal 2018. And there is a facilities component as well. It's a much smaller savings relative to the people, but it will take longer to implement. So that's the way it will roll out.

[Steven Li:]

So, the way I should think about it is – your comment is ECD is on-boarded on the operating model within 12 months, and then there's going to be a little bit more from the restructuring after that?

[John Marshall Doolittle:]

Yes.

[Steven Li:]

In terms of cost savings.

[John Marshall Doolittle:]

Well, the cost savings – it's a combination. We're going to onboard ECD and we're going to get it to our operating model, and the restructuring is part of that.

[Steven Li:]

Yeah. Okay. Sounds good. Thanks.

[John Marshall Doolittle:]

Okay. Yeah.

[Mark J. Barrenechea:]

Thanks, Steven.

[Operator:]

The next question is from Daniel Chan with TD Securities. Please go ahead.

[Daniel Chan:]

Hi, guys. Just on the $60 million, is that the final number that you expect from this integration or do you think it can go higher from here?

[John Marshall Doolittle:]

That's our best estimate at the moment.

[Daniel Chan:]

Is there opportunity for it to go higher in 2018 though?

[John Marshall Doolittle:]

We'll have to wait and see. We'll come back to everybody. We're in early days here. It's the best estimate we have. And we'll re-up on 2018 before we start the fiscal.

[Daniel Chan:]

Okay.

[John Marshall Doolittle:]

So that's our number.

[Daniel Chan:]

All right. Got it.

[John Marshall Doolittle:]

Yeah.

[Daniel Chan:]

And then, just switching gears from – on the license deal, the deal size increased significantly this quarter. So, can you talk about the drivers behind that and whether you believe this is sustainable?

[Mark J. Barrenechea:]

Yeah. A couple of things. I've been here about a year, and I think one of the first things we focused on was the selling higher and getting access to the executive suite. And holding the line on pricing and taking a look at, as far as internal controls and discounts, how do we make sure that deal-by-deal we get as much as we possibly can? And as far as account reviews, really just the really basic mundane things around account planning and close plants. And I think that while I don't see this going up exponentially, I think that it will continue to improve, and I think that we will see more and more of a sales force that has the confidence to close seven-figure deals and word-of-mouth gets out, right. People see the commissions made on these and they're excited to do it, and it's a role model. So, I think it's here to stay, and I think we'll do more and more of these. But it's something that builds over time based on really those fundamental building blocks, which is where I'm focusing.

[Daniel Chan:]

Can you give us any update on Release 16? How is that doing? And was that a contributor to any of the license deal size?

[Stephen Murphy:]

It's definitely contributing. I think one of the cases that I gave, I don't think it was Siemens. Who was it? We had a big Release 16 win with Bruce Power, and I think that – yes, it is contributing.

[Daniel Chan:]

Great. Thank you.

[Mark J. Barrenechea:]

Thanks, Daniel.

[Operator:]

The next question is from Paul Steep with Scotia Capital. Please go ahead.

[Paul Steep:]

Great. Hey, Mark, could you talk a little bit about what the biggest key product opportunity you see out there for ECD being in terms of what you think you can leverage in the base not only within the technology side, but maybe Steve can comment a little bit on where he sees the largest lift as well? Thanks.

[Mark J. Barrenechea:]

Paul, thanks. It's like having three beautiful daughters and I have to pick one, if you only give me one. So I would – look, I think there are a handful of opportunities that seem equally attractive right now. Being able to bring CEM to the Documentum – Documentum, you wind the clock back five years, right. In a lot of ways, OpenText and Documentum were very focused on ECM. We placed a big bet on Big Data sources like ERP and email, and then grew into this EIM approach and vision. Documentum sort of doubled down on core ECM, content management. And they were two different strategies and we ended up in two different places. They went a little deeper into verticals and we went wider in breadth of capability. So, when we look into the 5,000 customers today, they are very deep and rich experts in content management and vertical expertise, but they don't have the customer experience management capabilities. They don't have the deep ERP capabilities like SAP, and they don't have the analytic capabilities. So, I'd kind of rank CEM, ERP, SAP and analytics as sort of top of the chart to go into the install base and cross-selling.

[Stephen Murphy:]

Yeah. And the only thing I would add is that, within pharma and life sciences, they have an outstanding solution. It demos great. All the content. They have industry vertical expertise with their solution consultants, and they beat just about everybody there that we do now, right. So I think that that goes both ways. We've got a lot of lifescience pharma coverage that they never had. So as far as the cross-sell, that's a slam dunk. And we will work that without revealing too much information, we're working that immediately. That's a huge source of upside.

[Mark J. Barrenechea:]

And Paul, I'll take the opportunity as well to go the other way, which is – I think, there is a gem in the Documentum portfolio, which is InfoArchive. As these data sources get bigger in age, as they get larger and they age more, information lifecycle management becomes more and more important. Being able to archive or if we have real time access over four, five, six years they have automated policies to demote and age infrastructure into deeper archiving. So we hope to bring InfoArchive to the entire OpenText install base over time. So that'd be a gem from ECD that we hope to bring to the broader OpenText portfolio.

[Paul Steep:]

I was going to leave it there but I've got to ask on that. So on InfoArchive, Mark, I think they bought it about a year ago. It was relatively small, maybe $60 million in net revenue is what we calculated out. Where did it sort of track out at the end of the time it was independent, because that was a fast-growing piece of Documentum?

[Mark J. Barrenechea:]

Yes. I won't – Paul, I won't break out the revenue per se, but it is a – they've done a fantastic job on the technology, understanding how to scale it. It is being used in some of the world's largest financial services organizations, and we're quite excited to introduce it to OpenText customers.

[Paul Steep:]

Great. Thank you.

[Operator:]

The next question is from Eyal Ofir with Dundee Capital Markets. Please go ahead.

[Eyal Ofir:]

Thanks. Thanks for taking my question. I'll start off just with John. Can you just clarify one thing for me? I think you pointed that you're going to hit the midpoint of your operating margin targets for the fiscal year, but I think that included the one-time integration cost. Is that correct?

[John Marshall Doolittle:]

Correct.

[Eyal Ofir:]

Okay. So if we back those out, you should actually be higher than the midpoint?

[John Marshall Doolittle:]

Well, I mean, they're going to be in there when we report. So, I would – that's why left them in, right.

[Eyal Ofir:]

Okay. But you'll be able to identify how much they are though?

[John Marshall Doolittle:]

Certainly we can, yeah.

[Eyal Ofir:]

Okay. Perfect. That's fine. And then, just for Mark and Steve, in terms of the ECD acquisition, how much of the revenue was actually driven by the partner network? And what do you think – how do you guys go about managing that channel, I guess without overwhelming them with the new cross-sell opportunity here?

[Stephen Murphy:]

What I am willing to say, the level of detail, is if you do a pie chart of what they sell direct versus channel versus OEM, very similar to our traditional business. What was the second part of your question?

[Eyal Ofir:]

In terms of managing the channel, so I imagine over time you're going to try and get the channel to also cross-sell the OpenText offerings. So how are you guys going to manage that? How long would that take to bring the channel on board as well?

[Stephen Murphy:]

Yes. Yes. With a few exceptions, most of their channel does already do business with us. There are a few big players in the SI and VAR space that are new. So that will take time; it won't happen overnight. But we'll take – that's not going to happen overnight. That'll take a little time. It doesn't hurt though that maybe three out of four of the bigger partners already know us pretty well, OpenText. Mark?

[Mark J. Barrenechea:]

No, I think that's right on. I mean, we shared some larger global centers (59

[Stephen Murphy:]

Yeah.

[Mark J. Barrenechea:]

But overall, it's sort of the same playbook, right, for the GSIs?

[Stephen Murphy:]

Yeah. The ECM offering, the content server as far as the concept is similar enough that I don't think there'll be massive retraining about what it is that we've acquired if they already understand our content server. It's just the collateral varies by vertical and they've got some – for instance, in pharma, they've got some collateral that's just dynamite, and yeah, that will take some training.

[Eyal Ofir:]

Okay. Okay, great. And then, Mark, for you from just on the M&A side of the equation though, obviously you've done a significant amount over the last 12 months. How should we think about what your thoughts would be for the next ones? I'm assuming it would be in a different category within the IM pie? Because you probably want to see the Documentum and the ECM portion of OpenText integrate and get that going. So I imagine it's other verticals you're looking at. What gets you excited, I guess, in the M&A pipeline?

[Mark J. Barrenechea:]

Yes. Fair enough, Eyal. Yeah, I wouldn't want to put another swimmer in the same swim lane as ECD right now, if you will. But if we look across the other sort of technology groups, yeah, I think there are all sort of open and fair game to consider. So, it's still sort of a rich pipeline market. I don't want to get into any particular swim lane or vertical, if you will. But, yeah, I mean, the ECM and information management group, they have a lot to do here in the coming months. I wouldn't want to get them distracted. But the rest of the company, certainly we're still open for business in corporate development.

[Eyal Ofir:]

Okay. And you guys are pretty comfortable now following the HP acquisitions and you're all integrated in those transactions and you can actually move on to the next one?

[Mark J. Barrenechea:]

Yeah, for sure. And usually one of the indicators are when the dialogue changes, right. When the dialogue changes...

[Stephen Murphy:]

The honeymoon's over.

[Mark J. Barrenechea:]

Yeah. And we're talking about growth plans and growth initiatives versus data integration. So I can usually just delve in the narrative and emails when the integration is done good (01

[Eyal Ofir:]

Okay. Great. Before I pass the line, just one more question. You guys hit it out of the park on the License side this quarter. Should we assume more seasonality into the next quarter? And then, also from a macro standpoint, what are your thoughts? And then I'll pass the line. Thanks.

[Mark J. Barrenechea:]

Thanks for the question. I don't think we want to get into seasonality at all. I mean, I would – as part of my opening remarks, we executed to our internal plan in the first half of the year. And we feel we're on our plan for the second half of the year. But I prefer not to get into any seasonality comment.

[Eyal Ofir:]

Okay, great. Thanks.

[Greg Secord:]

All right. Very good. Yeah, I'd like to thank everyone for joining us today. I will end where I started on our remarks, where I want to thank John and Steve for their commentary. We're executing the plan. We had a solid Q2. And we delivered to our internal plan for the first half of the year, and we're on our internal plan for the second half, and very excited about our opportunities with ECD. So thank you for joining today. And we'll speak with everyone soon.

[Operator:]

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