Transcription
Investor PresentationNASDAQ: OTEX TSX: OTEXAugust 6, 2020
Safe Harbor StatementThis presentation may contain forward-looking statements. These forward-looking statements are made pursuant to the safe harborprovisions of the Private Securities Litigation Reform Act of 1995, and created under the Securities Act of 1933, as amended (theSecurities Act), and the Securities Exchange Act of 1934, as amended, the Securities Act (Ontario) and Canadian securities legislationin each of the provinces of Canada. All statements other than statements of historical facts are statements that could be deemedforward-looking statements. When we use words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,”“may,” “could,” “would”, “will” and variations of these words or similar expressions, we do so to identify forward-looking statements. Inaddition, any statements that refer to expectations, beliefs, plans, projections, objectives, performance or other characterizations offuture events or circumstances, including any underlying assumptions, are forward-looking statements, and are based on our currentexpectations, forecasts and projections about the operating environment, economies and markets in which we operate. Forward-lookingstatements reflect our current estimates, beliefs and assumptions, which are based on management’s perception of historic trends,current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. Theseforward-looking statements are based on certain assumptions and involve known and unknown risks as well as uncertainties, whichinclude actual and potential risks and uncertainties relating to the ultimate geographic spread of COVID-19, the severity of the diseaseand the duration of the COVID-19 pandemic. The actual results that we achieve may differ materially from any forward-lookingstatements, which reflect management's current expectations and projections about future results only as of the date hereof. Weundertake no obligation to revise or publicly release the results of any revisions to these forward-looking statements. A number offactors may materially affect our business, financial condition, operating results and prospects. For additional information with respect torisks and other factors which could occur, see our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other securitiesfilings with the Securities and Exchange Commission and other securities regulators. Any one of these factors may cause our actualresults to differ materially from recent results or from our anticipated future results. Readers are cautioned not to place undue relianceupon any such forward-looking statements, which speak only as of the date made.OpenText Confidential. 2020 All Rights Reserved.2
The worldruns oninformationFrom the debate on truth, to a globalpandemic response, to a modern civilrights movement, the fact is,information is more important thanever.
OpenText: The Information Management LeaderAbout OpenTextLeader in Information Management market #1 in Business Networks(1) #1 in Content Services(1) Leader in Cyber Resilience Leader in Digital ExperienceTotal Growth drives share gainsDurable, resilient, predictable business (78% ARR)(2)Expanding EBITDA marginsStrong Free Cash Flows(3) and Balance SheetHistorical dividend payout of 20% of TTM OCFValue Creation PlaybookOrganic Growth Accretive Acquisitions Cloud Growth ARR Growth Margin Expansion Cash Flow Growth Dividends1. See slides titled “#1 in Business Network”, “#1 in Content Services” and “Leader in Digital Experience” in this presentation.2. Annual Recurring Revenues (ARR) as a percentage of Total Revenues for the year ended June 30, 2020. ARR is defined as the sum of cloud services andsubscriptions revenue and customer support revenue.3. Free Cash Flows Operating Cash Flows minus Capital Expenditures (or “Additions to property & equipment” in the Statement of Cash Flow).InnovationReinvest forGrowthCapitalStructureOpenText Confidential. 2020 All Rights Reserved.4
The OpenText Business SystemTotal GrowthROICSystems, Tools, lenceOpenTextDividend,Capital Investment,Talent InvestmentDiligenceThe InformationCompanyBest TeamsWinARR, A-EBITDA , MetricsOpenText Confidential. 2020 All Rights Reserved.5
Driving Shareholder ReturnsContinuedInvestmentin GrowthInitiatives Cloud Migration Cyber-Resilience - Bundle, Cross-Sell, Integrate Accelerated sales coverage and product innovation High-teens ROIC - Upper Quartile(1) Self-funding M&A modelCapitalEfficiencyBusinessPredictability FY’20 78.2% ARR FY’21 Target Model of 80% to 82%We returned over 900 million in dividends since FY’131. Based on a group of 30 SaaS and Enterprise Software peers with data provided by BloombergOpenText Confidential. 2020 All Rights Reserved.6
Positioned To Gain Market ShareDemandDrivers12345DigitalAccelerationGlobal SupplyChainRestructuringWork FromAnywhereCustomerExperienceSecurity(Contactless and Direct)(Cloud and Edge)OpenText Confidential. 2020 All Rights Reserved.7
(1)Leadership in Information Management#1Total Revenue Growth in CC9.7%6Leader#1ConsecutiveYears of 15FY'161,5001,0005000FY'17FY'18FY'19FY'20Leader89 of the world’s largest 100 companies are OpenText customers1.IDC MarketScape: Worldwide Multi-Enterprise Supply Chain Commerce Network 2018 Vendor Assessment, Simon Ellis, December 2018,Forrester Wave : ECM Content Platforms, Q3 2019, Cheryl McKinnon, July 24, 2019IDC MarketScape: Worldwide Customer Communications Management Vendor Assessment, March 2020OpenText Confidential. 2020 All Rights Reserved.8
#1 in Business NetworkBusiness NetworkOpenTextLEADERSInfor GT NexusSPS CommerceBamboo RoseVeccoE2openTrueCommerceOne NetworkMAJOR PLAYERSSecular Growth Drivers: Supply chain restructuring, near-shoring,optimization Active Invoice with Compliance (AIC) Sustainable, ethical supply chainsCONTENDERS “Zero-trust” supply chainPARTICIPANTSSTRATEGIESIDC MarketScape: Worldwide Multi-Enterprise Supply Chain CommerceNetwork 2018 Vendor Assessment, Simon Ellis, December 20181.21 of the 25 largest supply chains in the world(1)are OpenText Business Network customersGartner Supply Chain Top 25 Results for 2020, Mike Griswold, June 26, 2020OpenText Confidential. 2020 All Rights Reserved.9
Customer Story: Business NetworkInformation helps Nestléoptimize supply chain operations“Nestlé has leveraged the OpenText Business Network for almost a decade to helpoptimize our supply chain operations from an IT standpoint. Like many other companies,Nestle is working through the COVID-19 crisis and appreciates the support andwillingness of OpenText to work diligently with us during these challenging times.”Ravindranath (Ravi) Arunasalam, Director Partner Productivity & Delivery,Business Solution Integration, NestleProducts:OpenText B2B Managed ServicesActive IntelligenceActive Invoices with ComplianceActive OrdersOpenText Confidential. 2020 All Rights Reserved.10
OpenText’s Business NetworkOpenText’s cloud platform that securely connectsdata with people, systems and things andmanages messaging and data between tradepartnersKEY SOLUTIONSIdentity and Access ManagementOn-prem and hybrid faxOpenText ANX NetworkOpenText Covisint ConnectOpenText Easylink Trade GatewayOpenText Information Exchange (Trading Grid)OpenText Confidential. 2020 All Rights Reserved.11
#1 in Content ServicesContent RSSTRONGOpenTextMicrosoftNewgen SoftwareSER FERING Paper to Digital ecular Growth Drivers:Box Enables digital workers to work from anywhere Growing compliance & regulatory requirementsiManageMicro FocusWEAKWEAKSTRATEGYSTRONGForrester Wave : ECM Content Platforms, Q3 2019, Cheryl McKinnon, July 24, 2019All the right data, in the right place, alwaysup-to-date, in the same contextOpenText Confidential. 2020 All Rights Reserved.12
Customer Story: Content ServicesInformation makes Agilitymore responsive.“Visibility into supply has been critical to helping us navigatethe disruption brought by the COVID-19 pandemic.OpenText has helped us optimize customer service,allowing us to focus on getting goods to market.”Deepak Sharma, Global IT Director,Business Solutions & Support, AgilityProducts:OpenText DocumentumOpenText Documentum xCPOpenText InfoArchiveOpenText Intelligent CaptureOpenText Professional ServicesOpenText Confidential. 2020 All Rights Reserved.13
OpenText’s Content ServicesOpenText’s Content Services integrates with datarepositories to deliver content lifecyclemanagement, information access, governance,document and records management, data capture,indexing, version control, workflow managementand analytics.KEY SOLUTIONSOpenText Content SuiteOpenText DocumentumOpenText Extended ECMOpenText InfoArchiveOpenText Intelligent CaptureOpenText Confidential. 2020 All Rights Reserved.14
Leader in Cyber ResilienceThe OpenText Cyber Resiliency BundleThreatIntelligenceIntrusionPreventionBackup &RecoveryCyberForensicsSecular Growth Drivers: 5G Work From Anywhere MobilityWinner of Readers' Choice Awards 2020: Security Suite Software by PCMag(1)“Best Antivirus Software of 2020” by US News & World Report (2)“Best Antivirus Software for Mac 2020” by US News & World Report (3)1. 020-antivirus-security-suite-software2. antivirus-software3. antivirus-software-for-macOpenText Confidential. 2020 All Rights Reserved.15
Customer Story: Cyber ResilienceInformation acceleratesdigital transformation at Switch“The OpenText solution has helped us categorize, streamline,de-duplicate, thread, and then prioritize the data in a way thatwould not otherwise be possible. OpenText has helped us deliver50% faster than the other providers we used previously.”Sam Castor, EVP, Policy and Deputy General Counsel, SwitchProducts:OpenText AxcelerateOpenText EnCase eDiscoveryOpenText InsightOpenText Professional ServicesOpenText Confidential. 2020 All Rights Reserved.16
OpenText’s Cyber ResilienceOpenText’s Cyber Resilience productsempowers customers to prevent, detect, reactand recover from breaches and data loss.KEY SOLUTIONSBrightCloud Threat DetectionCarbonite Data BackupOpenText Security SuiteWebroot Endpoint ProtectionOpenText Confidential. 2020 All Rights Reserved.17
Leader in Digital ExperienceDigital Experience - CCMOpenTextISIS ParyrusLEADERSSyncsortQuadientMessagepoint Smart XMPieAdobe Contactless retail and direct to consumer Physical to digital businessNintexMAJOR PLAYERSHylandSecular Growth Drivers:CongaCONTENDERS Omni-channel customer engagement Digital asset managementPARTICIPANTSSTRATEGIESIDC MarketScape: Worldwide Customer Communications Management VendorAssessment, March 2020Offers marketers greater insight andunderstanding into their campaigns by capturingdata from interactions across web, social, mobile,email, call centers, forms and surveysOpenText Confidential. 2020 All Rights Reserved.18
Customer Story: Digital ExperienceInformation enables compellingdigital experiences at RBC“We chose OpenText to deliver compelling digital experiences for ourcustomers and employees and AWS is a central plank of our cloudinfrastructure. It is great to see these companies working together to buildstrong managed services and support options for their joint customers.”Patrick Chiu, Director, Enterprise Content Services,Digital Workplace Solutions, Corporate Systems, RBCProducts:OpenText TeamSiteOpenText LiveSiteOpenText Confidential. 2020 All Rights Reserved.19
Form submit by countryOpenText’s Digital Experiences PlatformOpenText’s Digital Experience platformintegrates with ERP and CRM systems tocreate, manage and deliver individualizedcustomer experiences across all digitalchannels.Daily open rateKEY SOLUTIONSOpenText Experience PlatformOpenText ExstreamOpenText Media ManagementOpenText Confidential. 2020 All Rights Reserved.20
Total Growth StrategyRetainInformationManagementGrowAcquire 78.2% ARR (FY’20) Mid 90%’s Renewal Rates(1) Growing Sales Breadth and Depth Product Innovation Accretive Acquisitions On OpenText’s operating model in12 months1. Customer Support renewal rate was 94% for FY’20 and Cloud services and subscriptions renewal rate was in the mid-90’s (does not include Carbonite).OpenText Confidential. 2020 All Rights Reserved.21
Retain: Our World Class Customer BaseAnnual Recurring Revenue (ARR)(US M) 2,433125%RetainKey MetricsRenewal Rates(1):Cloud: Mid 90%’sOff Cloud CS: 94% 1,08096%Customer Satisfaction90%FY'14FY'201. As of June 30, 2020. Does not include Carbonite.Margin for CustomerSupportOpenText Confidential. 2020 All Rights Reserved.22
FY’21 Key Growth Initiatives1GrowthInitiatives4GrowContinue Migration to the Cloud2Broaden and Deepen Sales Coverage3Leverage Cyber ResilienceAccelerate Product InnovationOpenText Confidential. 2020 All Rights Reserved.23
Continue Migration to the CloudGrowCloud(US M)DigitalExperienceAdvancedTechnology 1,158210%BusinessNetwork 373ContentServicesCyberResilienceFY'14FY'20All OpenText products are cloud readyOpenText Confidential. 2020 All Rights Reserved.24
Broaden & Deepen Sales CoverageEnterprise SolutionsDirectStrategic Partners2,000 Field FacingProfessionalsGOALDouble coverage of Global 10Kfrom 40% to 80% in next 3 yearsthrough Direct and Partners(1)1. Target made on OpenText’s Investor Day 2019, Sept. 6, 2019GrowSMB & Consumer SolutionsChannel PartnersOnline & Retail16,000 Partners7M ConsumersGOALGrow the number of partners andbreadth of products offeredthrough the channelOpenText Confidential. 2020 All Rights Reserved.25
Leverage Cyber ResilienceBundle: Carbonite &Webroot offeringsGrowGrow: RMM and MSPPartners(1)Cross-Sell: to ourEnterprise CustomersIntegrate: Carbonite onOperating Model byend of FY’211. RMM – Remote Monitoring and Management, MSP – Managed Service ProviderOpenText Confidential. 2020 All Rights Reserved.26
Accelerate Product InnovationGrowNew CloudEditions 20.2Business NetworkContent ServicesCyber Resilience Standardized services platform Simplified sales and customer engagementDigital Experience Improved speed of customer deployment Seamless upgradeProduct Releases Every 90 DaysPastRecentPresentOpenText Confidential. 2020 All Rights Reserved.27
Acquire: Our M&A CriteriaLeadership inKey MarketsAcquireValue forCustomersMissionCriticalLarge InstallBaseStrongIP gSolid Track Record of Operating Cash Flows and High-Teens ROICOpenText Confidential. 2020 All Rights Reserved.28
Growing ARR While Expanding Margin(1),(2)Growing ARR and Expanding MarginA-EBITDA 0%ARR% of Total 1%15.5%14.9%10.0%13.0%0License% of Total 18FY'191. Please see Appendix A “Use of Non-GAAP Financial Measures” in our Q4 FY20 Financial Business Results presentation for reconciliation of GAAPto Non-GAAP measures.2. Refer to note 1 of our Fiscal 2019 10-K for details on the impact of recently adopted accounting standards on prior period results.FY'20OpenText Confidential. 2020 All Rights Reserved.29
Proven Durable Business ModelAnnual Recurring Revenue (ARR)A-EBITDA & Margin(1),(2)Free Cash Flows(3)(US M)(US M)(US M) 2,433 882 1,148125%113% 1,080135%36.8%36.9% 53833.1%33.1%FY'14 37538.4%FY'14FY'2078% ARR in FY’20FY'14FY'20 380 bps since FY’14FY'20Strong Annualized Performance1. Please see Appendix A “Use of Non-GAAP Financial Measures” in our Q4 FY20 Financial Business Results presentation for reconciliation of GAAP to NonGAAP measures.2. Refer to note 1 of our Fiscal 2019 10-K for details on the impact of recently adopted accounting standards on prior period results.3. Free Cash Flows Operating Cash Flows minus Capital Expenditures (or “Additions to property & equipment” in the Statement of Cash Flow).OpenText Confidential. 2020 All Rights Reserved.30
FY’21 Target ModelRevenue Type:Annual Recurring Revenue (ARR)LicenseCloud Services and SubscriptionsCustomer SupportProfessional Services and OtherNon-GAAP Gross MarginLicenseCloud Services and SubscriptionsCustomer SupportProfessional Services and OtherNon-GAAP Gross Margin(1)Non-GAAP Operating Expenses:Research & DevelopmentSales & MarketingGeneral & AdminDepreciationA-EBITDA Margin(1)Interest and Other Related Expense USD millionAdjusted Tax Rate(2)Capital ExpendituresFiscal 2020 ModelFiscal 2020 ResultsFiscal 2021 Model(3)76% - 78%13% - 17%34% - 38%38% - 42%7% - 11%78.2%13.0%37.2%41.0%8.8%80% - 82%10% - 13%41% - 43%38% - 42%6% - 9%96% - 98%58% - 60%89% - 91%18% - 20%73% - 75%97.2%61.3%90.4%22.7%74.5%96% - 98%63% - 65%89% - 91%18% - 20%74% - 76%11% - 13%18% - 20%6% - 8%2% - 4%35% - 36% 147 - 15214% 72 - 7711.7%18.5%7.3%2.9%36.9% 146.414% 7312% - 14%18% - 20%6% - 8%2% - 4%37% - 38% 157 - 16214% 85 - 951. Please see Appendix A “Use of Non-GAAP Financial Measures” in our Q4 FY20 Financial Business Results presentation for reconciliation of GAAP to Non-GAAP measures.2. Please refer to historical filings, including our Forms 10-K and 10-Q, regarding the company’s adjusted tax rate.OpenText Confidential. 2020 All Rights Reserved.3. This model is not guidance.31
FY’21 OpenText Total Growth StrategyTotal Revenue Growth(1)Expected % Change y/y:(US M)CloudLow double-digit growth 3,110Customer Support11.4%CAGRARR 1,625Off Cloud (License & PS)FY'14ConstantMid-single digit growthDeclineTotal RevenueConstantNew M&AAdditiveFY'201. As of August 6, 2020OpenText Confidential. 2020 All Rights Reserved.32
FY’23 Aspirations: Continued Upper Quartile PerformanceA-EBITDAMarginFreeCash Flow38%-40% 0.9B- 1.0BOur 3-year aspirations remain constant during the pandemic crisis.We plan to reinvest any margin gains above 40% into growth initiatives.OpenText Confidential. 2020 All Rights Reserved.33
Strong Liquidity and Cash PositionTotal cash & short-term investments at 1.693B (Jun 30/20)Current Liquidity (US M)MarginTrendCashA-EBITDABalance(1)(2)Total Available & CommittedLiquidity(1) 1,8431,8001,6931,6001,453Millions 0Capital Expendituresas % of Total RevenueA-EBITDA Margin-(1)(2)(FY’14 to FY’20)4.5%4.2%4.0%A-EBITDA MarginDebt '19Millions USD3.0%Q4 FY'18 Q1 FY'19 Q2 FY'19 Q3 FY'19 Q4 FY'19 Q1 FY'20 Q2 FY'20 Q3 FY'20 01010101010CY'20CY'21CY'22CY'23CY'24FY'20TLB1. Excludes restricted cash. Includes Cash and the Undrawn Revolver of 150m as of June 30, 2020.900850Drawn RCFCY'25 CY'26Axis TitleUndrawn RCFCY'27CY'28CY'29CY'30Senior NotesOpenText Confidential. 2020 All Rights Reserved.34
Strong Cash Flow and Balance SheetTrended Consolidated Net Leverage Ratio(1)Cash Generated for M&AFY’20 (US M)Operating Cash Flows 9552.61x2.37xLess: CapEx2.30x 73Free Cash Flows 882Less: Principal 10Less: Dividends 189Cash Generatedfor M&A 683CarboniteAcquisitionClosing2.28x 2.25x2.01x1.86x2.04x1.89x1.72x1.70x1.53x 1.48xQ4 FY'17Q1 FY'18Q2 FY'18Q3 FY'181. Consolidated Net Leverage Ratio (pro forma) is calculated using bank covenant methodology.Q4 FY'
Forrester Wave : ECM Content Platforms, Q3 2019, Cheryl McKinnon, July 24, 2019 IDC MarketScape: Worldwide Customer Communications Management Vendor Assessment, March 2020 19.0% 2.8% 27.0% 19.7% 3.8% 9.7% 0 500 1,000 1,500 2,000 2,500 3,000 FY'15 FY'16 FY'17 FY'18 FY'19 FY'20 89 of
