Paul Treiber: Thanks very much and good afternoon. Just the — your outlook to achieve 20% cloud bookings growth this quarter is great. And it seems like an inflection from Q1, which is only 8%. Is that the right way to characterize it? Is that new AI products are likely to drive an inflection and growth for OpenText or is that reading too much into it? And there’s maybe just quarterly dynamics between Q1 and Q2?
Mark Barrenechea: Paul, thanks for the question. Thanks for your first question to me. So I appreciate that. Just kidding. So, no our 20% bookings growth, we’re going to see our first AI bookings, in that number. So AI is going to contribute. As we talked about two quarters ago, we announced our direction. We have a strong history over a decade of innovation in AI. We presented for customers how to get practical value. We announced our roadmap. Now we’ve delivered Wave 1. We’re delivering Wave 2. And it’s being very well understood where we can start to unlock value across our platform being built in, our trust services, search, IoT and each of the Aviator business clouds. And it’s interesting, kind of a new language we’re hearing from customers and we’re helping them get there.
Is that through our business clouds, we’re helping them build these AI personas. So they have contract administrators today but now they’re going to go the AI persona of the contract administrator, or mortgage advisor or technical support assistance. Now that 20% expected bookings growth year-over-year has AI contribution to it. And look, our Q1 is always seasonally light. And that’s just it’s our Q1. I know it’s the world’s Q3, but it’s our Q1. And so our customers are trained that way. But that number reflects our next set of wins in AI. And I can’t wait to present them to you.
Paul Treiber: And you’ve had product releases and product cycles in the past. You sound quite enthusiastic about AI. Could you give us some context around, how customer interest and the sales pipeline for your new AI products compare versus previous product releases?
Mark Barrenechea: Well, sure. I think this is, I’d say two things. The first is I don’t have to spend a dollar of marketing on AI. The whole world talked about it. So that’s sort of an interesting new dynamic, right. So customers are proactively engaging. The world is very focused on generative AI. We, of course, think the landing zone is a general AI because there’s a lot more to it than just the generative aspect. So Paul, dynamic number one that’s different is, the world’s talking about it, and it’s got a big awareness aspect built in. Second is we have very relevant product sitting on top of very large datasets that we’ve helped to build for our customers over the last year. And we believe this is the inflection point. The singular, powerful concept that unlocks information management to its next level in the enterprise.
There was inflection points for ERP, in CRM of integrated e-business suites. This is an inflection point for information management, to unlock the value of those datasets. So you got natural demand being driven by market, and breakthroughs in technology, the [indiscernible] and number two, we have very relevant and very timely technology on top of our platform. And as I said at OpenText World, It is okay to speak this way. We were late in SaaS. We are not late in AI. And we’re going to capture the opportunity here for the company.
Paul Treiber: Thanks for taking the questions.
Mark Barrenechea: Yes, thank you.
Operator: The next question comes from Kevin Krishnaratne with Scotiabank. Please go ahead.
Kevin Krishnaratne: Hey there. Good evening. Just a couple of clarifications. You said Micro Focus contributed $563 million in the quarter. Is that correct. And if so, was that sort of within your expectations, or is it going better? And do we have a margin for Micro Focus in the quarter?
Madhu Ranganathan: Yes, Kevin, it’s Madhu here. Thank you. So yes, $563 million in revenue. And as we mentioned, the integration is going very well. We are ahead of our internal plan. And from a margin perspective, I would point you to the fact that, being ahead of the plan, we are able to the projected Micro Focus will be on our 36% to 38% this fiscal year, which is really the first full fiscal year since the transaction.
Kevin Krishnaratne: Okay. And then a second clarification here, just on the SMB dynamic, I think you’d mentioned a $10 million to $15 million year-over-year revenue headwind. Is that correct? I’m just curious if you can dig into that a bit more and then remind us, if you can on how big SMB is in your base?
Madhu Ranganathan: Yes, I mean I’ll comment and I’m sure Mark will chime in as well. So $10 million to $15 million revenue headwind is what we see in Q2. We pay attention to couple cycles. Obviously, the PC cycles and of course, all things associated with Microsoft as it intersects with our SMB business. Now having said that, I think Paul also mentioned in his note that we do have some products and innovation and new items to bring to market, and we’ve factored those into account for the second half of the fiscal year. And overall, we remain on target for our fiscal ’24 revenues, including the cloud revenue. Mark, anything to add?
Mark Barrenechea: Yes, sure. Thank you, Madhu. This is not an OpenText challenge. This is a market challenge. And we all read the same headlines about the challenges in SMB. And SMB is less than 10% of our business. It’s an important. It’s a new area for us. We’ve only been in this area two to three years. We’re never going to realize our full potential information management if we can’t get to that mid-market. And we’re much more interested in the mid-market than the S, the small part of the market. So as Micro Focus actually, Microsoft has recently said it’s the most important sector for them. And as they do well, we will do well. As PC shipments rebound, we will do better. We’re also bringing new product into this area, like our service management, mid-market, business network capabilities.
So, it’s really not our challenge. It’s the market’s challenge right now. And we’re so well positioned that if the market picks up, we’re going to be a beneficiary of it. But we wanted to call it out just to be clear on our cloud momentum, and help you model the business.
Kevin Krishnaratne: Good stuff. Yes, I appreciate the color. I’ll pass the line. Thanks.
Operator: The next question comes from Stephanie Price with CIBC. Please go ahead.
Stephanie Price: Hi, good evening. I just wanted to circle back on the focus on achieving organic growth at Micro Focus in fiscal ’24. Just curious if you can share what organic growth at Micro Focus was this quarter. And how you expect to trend over the fiscal year. As you work towards organic growth at Micro, obviously maintenance is going to be the key driver, but I’ll be curious if there’s anything else we should be thinking about there as we think about organic growth in business by the end of fiscal ’24?
Madhu Ranganathan: Yes, Stephanie, it’s Madhu here. So I’ll take the first part, how to think about Micro Focus organic growth in the quarter. It’s going to be a hard year-over-year compare. As we said, in the last couple of calls, our starting point is $2.3 billion of revenue. You take IFRS to GAAP, you take the digital safe, divestiture and we did decide to shed some contracts and not carry them forward. And $2.3 billion is in our baseline. And at $563 million, we’ve done well. It is our first quarter of this fiscal year and we do expect to grow organically in the entire year. And everything you heard so far on the Microsoft integration, the customers, the partners, all of that is going to play at all for us to exceed the $2.3 billion number.
Mark Barrenechea: Yes and Stephanie let me jump in as well. We’re doing exactly what we said we would do. And we’re going to show you Micro Focus every quarter for the fiscal year. But we don’t have to through disclosure what we’re going to. If you take $2.3 billion, divide it by 4, that is 575, our first quarter, seasonally small, a light quarter for us in Q1. We delivered 563, and you’ll see that momentum build. And it’s really that simple. We are very confident where we’re turning Micro Focus to organic growth. We’re off to a great start. And as Paul talked about the renewals, our strong product cycle, with private cloud, new SaaS offerings, Fortify on Demand, NetIQ, UCMDB SaaS, a first set of AI on top of Micro Focus, which they would never been able to get to if not part of OpenText. So, we’re doing exactly what we said we’d do. We’re going to show you, every quarter along the way. And we’re off to a great start at 563.
