Slide 1: Barclays High Yield Bond & Syndicated Loan Conference
Barclays High Yield Bond & Syndicated Loan Conference June 8, 2017 NASDAQ: OTEX | TSX: OTEX
Slide 2: Safe Harbor Statement
Safe Harbor Statement Certain statements in this presentation, including statements about the focus of Open Text Corporation (“OpenText” or “the Company”) in our fiscal year ending June 30, 2017 (Fiscal 2017) on growth in earnings and cash flows, creating value through investments in broader Enterpr
Slide 3: About OpenText
About OpenText NASDAQ: OTEX | TSX: OTEX OpenText is the global leader in Enterprise Information Management (EIM). We acquire businesses within that market strategy using our proven approach to M&A. We then operate those businesses leveraging the OpenText Business System, creating superior products,
Slide 4: Growing Cash Flow by Acquiring Strong Businesses
Growing Cash Flow by Acquiring Strong Businesses $600 HP CEM Assets 24% CAGR $500 Operating Cash Flow ($ M) $400 $526M $300 $200 $100 $61M $0 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 OpenText Confidential. ©2017 All Rights Reserved. 4
Slide 5: Global Organization
Global Organization Annual sales of approximately $2 billion USD and 84% recurring revenues(1) EMEA HQ Grasbrunn, DE Total Revenues: Americas(1): WW HQ 58%, EMEA: 33%, APJ: 9% Waterloo, ON Business Network Japan HQ Over 100,000 customers, Tokyo, JP Gaithersburg, MD approximately 12,000(2) US H
Slide 6: From Strategy to Value Creation
From Strategy to Value Creation EIM OpenText Creating Market M&A Business Superior Strategy System Value • $35B plus market, • Leading growth driver • Proven business system • Cash flow growth 9.1% growth rate to unlocking value • Returns oriented • Large recurring revenues • Hundreds of • Different
Slide 7: OpenText's EIM Product Suite
OpenText’s EIM Product Suite OpenText EIM Suite Information Management Platform Business Networks Analytics ECM BPM CEM DIS Business Enterprise Content Business Process Customer Experience Analytics Discovery Networks Management Management Management OpenText Confidential. ©2017 All Rights Reserved.
Slide 8: OpenText Leadership Validated by Verticals
OpenText Leadership Validated by Verticals Retail Government Manufacturing Automotive Food/Beverage Technology Finance/Insurance Healthcare Transportation Energy OpenText Confidential. ©2017 All Rights Reserved. 8
Slide 9: OpenText Leadership Validated by Analysts
OpenText Leadership Validated by Analysts ECM Business Content Services1 Customer Communications Enterprise Business Intelligence Digital Asset Management1 Management2 Platforms1 As of April 2017 As of March 2015 As of August 2017 ECM Transactional Content Customer Communications Services1 Enterpris
Slide 10: M&A is Our Leading Growth Driver
M&A is Our Leading Growth Driver M&A is core to our growth and market leadership. We see a continuum of M&A business models from Platform Operators to Asset Optimizers. Asset Optimizers are those businesses that purchase individual assets and operate them standalone. Platform Operators have a strate
Slide 11: M&A is Core to Our Business Model
M&A is Core to Our Business Model M&A Overview Looking Forward • We operate strategic platforms • Expect to close more transactions with more predictability • Proven approach to M&A with 56 completed acquisitions • The EIM market has ample asset classes and hundreds of businesses available • Deploye
Slide 12: M&A: What and How We Target
M&A: What and How We Target What We Target - Unlocking Value How We Target - Proven Methodology • Evaluate businesses within the context of our • Dedicated in-house Corporate Development EIM strategy team: from sourcing through integration • Fill functional white spaces, vertical capacities • Cost s
Slide 13: ECD Acquisition Overview
ECD Acquisition Overview The ECD business is expected to contribute strong recurring revenues, adjusted operating income and cash flow to OpenText ~74% of ECD’s revenues are recurring with ~50% of their revenues derived from software maintenance ECD operates as an integrated business, Day 1
Slide 14: Financial Impact from the Acquisition
Financial Impact from the Acquisition FY’16 Pro Forma GAAP Financial Impact (1) Total Revenue Operating Income Diluted EPS +32% +19% +4% Total Revenue Operating Income Diluted EPS(2) ($ in millions) ($ in millions) (US$/share) $2,404 $2,500 $500 $1.40 $440 $1.22 $1.20 $1.17 $2,000 $1,824 $400 $369 $
Slide 15: M&A Drives Revenue Growth
IR Updated Jan.30, M&A Drives Revenue Growth Over the last year OpenText put $2.4B of capital to work on five acquisitions which are expected to add up to approximately $850M in annualized revenues Factoring the integration of the ECD Business, we expect our adjusted operating margin for F17 to
Slide 16: The OpenText Business System
The OpenText Business System Six Foundational Elements The Best Teams Innovation Customer and Proven Methods and Disciplined Integration Produces Win Defines our Future Partner Success Tools Capital Allocation Scalability and Efficiency • Attract, retain and • Customer-centric • Net Promoter Score •
Slide 17: Creating Superior Value
Creating Superior Value $2400 M Total Revenue ($M) $2111 (3) $800 M Adjusted Operating Income(2) ($M) (3) FY06 - FY16 CAGR 16% $617 $667 $2100 M $1,852 $1,824 $700 M FY06 - FY16 CAGR 24% $573 $1800 M $1,625 $600 M $503 $1,363 $500 M $1500 M $1,207 $400 $1200 M $1,033 $400 M $330 $912 $285 $786 $254
Slide 18: Liquidity Profile & Balance Sheet
Liquidity Profile & Balance Sheet Liquidity • Strong operating cash flow reflects high margins, superior earnings quality, and efficient working capital management Balance Sheet As of March 31, 2017 • Well diversified and solid liquidity profile Cash & Short-term Investments $ 452M • Next major prin
Slide 19: Disciplined Capital Allocation
Disciplined Capital Allocation • Strong balance sheet • Revolving credit facility recently increased to $450M • Cash position of $449M as of Consolidated net leverage ratio of 2.50, as of March Capacity 31, 2017, well within debt covenant of 4.0:1 March 31, 2017 • 53% increase since 2013(1) • Divide
Slide 20: FY17 Q3 Business and Financial Highlights
FY17 Q3 Business and Financial Highlights • 19 customer transactions over $1 million, 12 OpenText Cloud contract signings License Revenue Total revenue $593.1M up 35% Y/Y and 7 on-premise Cloud Revenue $177.1M up 20% Y/Y Up 35% Y/Y • Financial, Services, Technology, Consumer Goods, Industrial Go
Slide 21: Path to 2020 with Target Model
Path to 2020 with Target Model 2020 Continued focus on growing recurring aspirations revenue profile (includes acquisitions) Unwavering focus on margin 2017 improvement to maximize value Ten year revenue growth CAGR of 16% 31 -36% 50% Revenues from the Cloud Revenues from the Cloud Revenue g
Slide 22: Well Positioned for Future Growth
Well Positioned for Future Growth 1 Growth and significant value creation from superior M&A model • Active and growing pipeline of target companies • Strong balance sheet to support our acquisition focus. Current portfolio is well positioned for organic growth 2 • Strong portfolio of businesses with
Slide 23: OpenText Confidential. ©2017 All Rights Reserved. 23
OpenText Confidential. ©2017 All Rights Reserved. 23
Slide 24: Appendix A: Use of Non-GAAP Financial Measures
Appendix A Use of Non-GAAP Financial Measures In addition to reporting financial results in accordance with U.S. GAAP, the Company provides certain financial measures that are not in accordance with U.S. GAAP (Non-GAAP).These Non-GAAP financial measures have certain limitations in that they do not h
Slide 25: FY17 External Target Model
FY17 External Target Model* • Factoring the integration of the ECD Business, we expect our adjusted operating margin for Fiscal 2017 to be close to the midpoint of our published 30% to 34% target margin range Fiscal 2016 Target Model Fiscal 2016 Actuals Fiscal 2017 Target Model Revenue Type: Annual
Slide 26: Reconciliation of Selected Non-GAAP Measures | Q3 F17
Reconciliation of Selected Non-GAAP Measures | Q3 F17 Three Months Ended March 31, 2017 (in ‘000s USD) GAAP % of Non-GAAP % of GAAP Total Adjustments FN Non- GAAP Total Revenue Revenue COST OF REVENUES Cloud services and subscriptions $ 77,225 $ (268) (1) $ 76,957 Customer support 34,442 (261) (1) 3
Slide 27: Reconciliation of Selected Non-GAAP Measures | Q3 F17
Reconciliation of Selected Non-GAAP Measures | Q3 F17 FOOTNOTES 1 Adjustment relates to the exclusion of share based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results. Adjustment relates to the exclusion of amo
Slide 28: Reconciliation of Selected Non-GAAP Measures | Fiscal 2017 YTD
Reconciliation of Selected Non-GAAP Measures | Fiscal 2017 YTD Nine Months Ended March 31, 2017 (in ‘000s USD) GAAP % of Non-GAAP % of GAAP Total Adjustments FN Non- GAAP Total Revenue Revenue COST OF REVENUES Cloud services and subscriptions $ 220,667 $ (839) (1) $ 219,828 Customer support 87,529 (
Slide 29: Reconciliation of Selected Non-GAAP Measures | Fiscal 2017 YTD
Reconciliation of Selected Non-GAAP Measures | Fiscal 2017 YTD FOOTNOTES 1 Adjustment relates to the exclusion of share based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results. Adjustment relates to the exclusi
Slide 30: Reconciliation of Selected Non-GAAP Measures | Q2 F17
Reconciliation of Selected Non-GAAP Measures | Q2 F17 Three Months Ended December 31, 2016 (in ‘000s USD) GAAP % of Non-GAAP % of GAAP Total Adjustments FN Non- GAAP Total Revenue Revenue COST OF REVENUES Cloud services and subscriptions $ 73,150 $ (211) (1) $ 72,939 Customer support 27,349 (270) (1
Slide 31: Reconciliation of Selected Non-GAAP Measures | Q2 F17
Reconciliation of Selected Non-GAAP Measures | Q2 F17 FOOTNOTES 1 Adjustment relates to the exclusion of share based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results. Adjustment relates to the exclusion of amo
Slide 32: Reconciliation of Selected Non-GAAP Measures | Q3 F16
Reconciliation of Selected Non-GAAP Measures | Q3 F16 Three Months Ended March 31, 2016 (in ‘000s USD) GAAP % of Non-GAAP % of GAAP Total Adjustments FN Non- GAAP Total Revenue Revenue COST OF REVENUES Cloud services and subscriptions $ 61,298 $ (202) (1) $ 61,096 Customer support 22,427 (215) (1) 2
Slide 33: Reconciliation of Selected Non-GAAP Measures | Q3 F16
Reconciliation of Selected Non-GAAP Measures | Q3 F16 FOOTNOTES 1 Adjustment relates to the exclusion of share based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results. Adjustment relates to the exclusion of amo
Slide 34: Reconciliation of Selected Non-GAAP Measures | Q4 F16
Reconciliation of Selected Non-GAAP Measures | Q4 F16 Three Months Ended June 30, 2016 (in ‘000s USD) GAAP % of Non-GAAP % of GAAP Total Adjustments FN Non- GAAP Total Revenue Revenue COST OF REVENUES Cloud services and subscriptions $ 64,889 $ (312) (1) $ 64,577 Customer support 25,237 (269) (1) 24
Slide 35: Reconciliation of Selected Non-GAAP Measures | Q4 F16
Reconciliation of Selected Non-GAAP Measures | Q4 F16 FOOTNOTES 1 Adjustment relates to the exclusion of share based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results. Adjustment relates to the exclusion of amo
Slide 36: Reconciliation of Selected Non-GAAP Measures | Fiscal 2016 YTD
Reconciliation of Selected Non-GAAP Measures | Fiscal 2016 YTD Nine Months Ended March 31, 2016 (in ‘000s USD) GAAP % of Non-GAAP % of GAAP Total Adjustments FN Non- GAAP Total Revenue Revenue COST OF REVENUES Cloud services and subscriptions $ 179,132 $ (641) (1) $ 178,491 Customer support 64,624 (
Slide 37: Reconciliation of Selected Non-GAAP Measures | Fiscal 2016 YTD
Reconciliation of Selected Non-GAAP Measures | Fiscal 2016 YTD FOOTNOTES 1 Adjustment relates to the exclusion of share based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results. Adjustment relates to the exclusi