Open Text : Third Quarter 2026 Conference Call Transcript

Published: 2026-05-11 13:55:05 ET OTEX.TO

Published on 05/11/2026 at 01:55 pm EDT

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EDITED TRANSCRIPT

OTEX.TO - Q3 2026 Open Text Corp Earnings Call

EVENT DATE/TIME: MAY 07, 2026 / 9:00PM GMT

Thank you for standing by. This is the conference operator. Welcome to the Open Text Corporation third quarter fiscal 2026 financial results conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. (Operator Instructions)

‌I would now like to turn the conference over to Greg Secord, Head of Investor Relations. Please go ahead.

Thank you, operator, and good afternoon, everyone. Welcome to OpenText's third quarter fiscal 2026 earnings call. With me on the call today are OpenText's Chief Executive Officer, Ayman Antoun; together with James McGourlay, our President and Chief Client Officer;` Steve Rai, our Executive Vice President and Chief Financial Officer; and Tom Jenkins, our Executive Chair. Today's call is being webcast live and recorded with a replay available shortly thereafter on the OpenText Investor Relations website, that's investors.opentext.com.

Earlier today, we posted our press release and investor presentation online. These materials will supplement our prepared remarks and can be accessed on OpenText Investor Relations website. Please see our investor presentation for further details of our core and non-core revenues by product categories.

Now turning to upcoming investor events. OpenText will be participating in the Needham Virtual Technology Teleconference on May 14; the Barclays Leverage Finance Conference in Austin, Texas, on May 19; the CIBC Technology Conference in Toronto on May 21; the TD Cowen TMT Conference in New York on May 27; and the Jefferies Technology Conference in Newport Beach, California, on May 28. We look forward to meeting with you there.

And now on to reading our Safe Harbor statement. During this call, we will be making forward-looking statements relating to the future performance of OpenText. These statements are based on current expectations, assumptions, and other material factors that are subject to risks and uncertainties, and actual results could differ materially from the forward-looking statements made today. Additional information

about the material factors that could cause actual results to differ materially from such forward-looking statements as well as the risk factors that may impact future performance results of OpenText are contained in OpenText's recent Forms 10-K and 10-Q as well as in the press release that was distributed earlier today. This may all 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'll hand the call over to Ayman.

Good afternoon, everyone. Thank you for joining us today. I'm excited to be here as CEO of this iconic Canadian technology company with global reach. To get started, I wanted to begin by sharing why I joined OpenText. We're living in the world of AI. Reliable, quality, curated, governed, integrated, and secure data is critical for credible AI outcomes that are traceable, explainable, and most importantly, deliver value. Simply put, data is not a feature, data is the foundation.

Data is foundational across every organization, every industry, and every economy. Nowhere is that more true than in financial services, healthcare, and regulated sectors, where the cost of getting it wrong is simply too great. OpenText is a global leader in data management.

This company is built for this moment. That's why I'm here. Today marks my 14th working day as CEO. I'd like to share where my focus has been and where it will continue to be in the period ahead.

Four clear priorities are guiding me right now. First, listen. Listening to our clients, partners, colleagues, investors, and shareholders. On the morning of day one as CEO, I reached out to over 100 clients and 20 business partners to arrange one-on-one conversations with each of them. Those meetings are underway. I'm also meeting with colleagues and individually with investors. There's no substitute for first-hand feedback and data to strengthen our go-forward strategy.

My second priority is to learn. I'm spending dedicated time understanding every aspect of our business and the full depth of our portfolio, specifically our core portfolio, where we have a genuinely differentiated value proposition. Our core portfolio is where we will continue to invest, enhance, and build on.

My third priority is to assess. I have started a detailed review of every part of the business, understanding the areas that are working well and need to continue, and the places where we can get better outcomes. In particular, I'm focused on where we can sharpen our go-to-market deployment and execution, deepen our strategic relationships with ecosystem partners, and strengthen our core portfolio value proposition.

My fourth priority is to build. Using everything I learned from listening, learning, and assessing, we will build a sustainable organic growth plan with a clear set of KPIs to guide our disciplined execution with milestones so that we can measure our progress, hold ourselves accountable along the way. Our intense focus on our clients is the foundation for these priorities. Our methodical approach to execution, our disciplined focus, our data-driven strategy will be anchored in serving our clients.

When we consistently partner with clients to solve their most pressing challenges and realize the full value of their AI investment, they reward us with growth, loyalty, and value creation for our shareholders. As we move through these four priorities, I will share progress with you. You should expect transparency and consistency from me going forward on what is working, where we are making changes, and how we're tracking against the clear plan we set out.

Before I hand it over to James, let me leave you with this. I am deeply excited about the opportunity and equally confident in where we are headed. I look forward to meeting with many of you in the coming weeks. Thank you.

Thank you, Ayman, and welcome everyone to our Q3 fiscal 2026 earnings call. I want to take the opportunity to welcome Ayman to OpenText, and I'm really looking forward to working together with Ayman in my new role as President and Chief Client Officer.

Since August, our goal has been to ensure that our clients receive strategic support from OpenText as they progress through their cloud journey while rapidly advancing their AI readiness. The secure information management capabilities that we have provided to our clients for 30 years delivers and protects the same data that AI requires to gain additional value and insight from their content, and most importantly, the metadata wrapped around that content.

Turning to Q3, we ended off the quarter with solid performance in total revenues, beating our own expectations for free cash flow and adjusted EPS. Our results for the quarter and year-to-date of fiscal 2026 continue to demonstrate a strengthening business and momentum in the cloud, especially in our flagship business of content management in the cloud.

Steve Rai will go through our quarterly results in more detail. However, I would like to highlight that in Q3, we generated total revenues of approximately $1.28 billion, led by overall cloud growth of 6.6% year on year. We introduced disclosure on the revenue performance of our product categories in September of last year, and you can see that our total content business, which consists of 44% of our total revenues, grew 6% year on year in Q3. If you look specifically at cloud revenue for content, it grew 22% year on year.

Content, which is our largest and fastest growing business, continues to demonstrate strength, and it also leads our cloud growth. As I mentioned last quarter, the revenues for our core business continue to grow at approximately twice the pace of total revenues. We see opportunity for our core product groups to continue growing in the cloud as our clients make fundamental decisions on their cloud and AI needs. Some notable Q3 and year-to-date metrics include Q3 cloud revenue of $493 million is the highest in the company history.

Q3 core cloud business up 12% year on year. Q3 adjusted EPS of $1.01 is the highest in Q3 company history. Year-to-date adjusted EPS of

$3.19 is tied with our highest Q3 year-to-date figure ever in Q3 FY 2024. Year-to-date, we have $651 million in enterprise cloud bookings, also the highest in Q3 year-to-date in company history.

We saw 41 cloud deals greater than $1 million in Q3, an increase of 28% year-on-year. Q3 year-to-date cash flow of $686 million is the highest Q3 in company history. Turning to some of our client wins this quarter that highlight the growth trajectory of our core business. Michelin in our business network. Michelin navigated an increase of market consumption for e-invoices that required integration with Microsoft and our business network as part of the company's innovation program.

Through their expanded relationship with OpenText, Michelin can capitalize on the implementation of our business network for self-service, apply AI to those B2B workflows, and supply chain use cases supporting their business needs. Hargassner in content. Hargassner aimed to establish a single source of truth for enterprise content across all business applications, including their current deployment of SAP public cloud.

By implementing a unified content platform, Hargassner expects to contextualize their content effectively and ensure every stakeholder has access to the right information, enhancing productivity and decision-making. Third, HPE Aruba Networking in our cyber enterprise. HPE Aruba Networking requires best-in-class threat intelligence to enrich their controllers, access points, and switching products with cyber protection. OpenText provides dynamic real-time threat intelligence for URLs, IPs, and cloud services intelligence for cloud applications.

Aydem Energy in our ITOM business. Aydem has a strong focus on renewable energy and operates complex multi-regional systems that demand consistent governance and robust processes. Aydem expanded use of our ITOM platform delivers end-to-end test monitoring powered by GenAI, designed to provide a competitive, efficient, and scalable test environment.

Turning to our product news. A few weeks ago, we announced that select enterprise data and AI solutions will be available on the AWS Sovereign Cloud, extending its hybrid cloud deployment options in Europe. The offering is aimed at regulated EU clients requiring strict data residency and sovereignty while leveraging Amazon Web Services infrastructure. Strategically, this extends OpenText's addressable market in Europe and reinforces its positioning in secure content management for AI, though near-term financial impact is likely limited.

As a reminder, OpenText data AI platform is shipping this quarter, as well as a host of new tools for orchestration of data integration and agentic AI. Our AI data platform can facilitate any major LLM model and provide over 1,500 connectors to various ERP, CRM, ITOM systems such as Oracle, Salesforce, SAP, et cetera.

We are seeing our clients accelerate their moves to the cloud, but on their terms, whether that is on-prem, private cloud, public cloud, sovereign cloud, or a hybrid approach. This optionality is a strategic advantage and a differentiator for OpenText. Turning to our outlook, there is no change to our FY 2026 revenue target of 1% to 2% growth year on year once you adjust for $30 million of anticipated revenue that went away with our divestitures. Steve will talk more about this and some of our other metrics in our outlook.

I took on the role as interim CEO with the objective to maintain a steady ship for OpenText. This is an exciting time at the company, and we've made the right choices to set us up for the AI opportunity in front of us. We have had some great achievements over the last three quarters, especially in our Content Cloud business. In my new role as Chief Client Officer, I'm even closer to our clients, driving a culture at OpenText where client success is at our core.

‌With that, I would like to hand the call over to Steve.

Thanks, James. Good afternoon, everyone, and thank you all for joining the call today. Also, an official warm welcome to Ayman as CEO. We've been working very closely together the past few weeks at the Waterloo headquarters and are very excited to have you on board to help shape the next chapter at OpenText. OpenText had a strong Q3. This momentum positions us well for the final quarter of fiscal 2026. Our Q3 and year-to-date performance demonstrates how our cloud and AI offerings are resonating with our clients as they prepare their data for AI. While James talked about our strong cloud performance, I'd also like to highlight how OpenText continues to build on a solid foundation of margin and cash flow, which affords us the flexibility to allocate capital to investments that generate the highest return and adjust our priorities quickly in a rapidly changing environment.

Let me get to some key financial highlights for the quarter. We generated total revenues of $1.28 billion. Cloud revenue was $493 million, up 6.6%, mainly driven by Content Cloud. Please see our investor relations presentation for further details of our core and non-core revenues by product category.

Q3 represents our 21st consecutive quarter of organic cloud growth. Our cloud net renewal rate was 95%, down slightly by 1% year over year and consistent with our annual model. Customer support revenue in the quarter was $565 million, down slightly by 0.4%. Our customer support net renewal rate was 93%, up 3% year over year. Annual recurring revenue or ARR was $1.06 billion, up 2.7% year-over-year, and representing 82% of our total revenue and consistent year over year.

Turning to profitability, GAAP gross margin was 73.1%, and non-GAAP gross margin was 76.7%, both up by 150 basis points and 100 basis points respectively year over year. This was mainly driven by the increase in cloud, customer support, and license gross margins, partially offset by the decline in gross margins for professional services. Adjusted EBITDA was $438 million or a 34.1% margin. This was up 10.8% and 260 basis points respectively year over year. The increase was driven primarily by cost management actions and the business optimization plan.

The plan itself remains on track. We still expect to realize this year an additional approximately one third of the total estimated savings of between $490 million to $550 million. Please see our investor relations presentation for further details.

Disclaimer

Open Text Corporation published this content on May 11, 2026, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on May 11, 2026 at 17:54 UTC.