Stephanie Price: Hi. I wanted to just focus in on that fiscal 2023 and fiscal 2024 target markets oh, sorry, target model. And maybe talk a little bit about where you potentially baked in some conservatism and what you think kind of get you to exceed potentially the targets that you’ve set out, especially on the margin side?
Mark Barrenechea: Yes. If there’s any model questions of Target, I hand that to Madhu first, and then I can take maybe the second part. Any questions on the model you want to go through, Steph?
Stephanie Price: Just more generally on where you might have baked in some conservatism in that fiscal 2023 and fiscal 2024 target model. Just thinking about upside from here.
Madhu Ranganathan: Yes, for sure. I’ll take that Stephanie. So, a couple of things, whether it’s conservative or not, we have a very educated baseline for Micro Focus, right? That’s actually number one. And we’ve shared very exclusively the five months, there’s plenty of seasonality to support us and to support you, we’ve shared where we see since you’re asking about fiscal 2023, the Micro Focus numbers come in. Vis-Ã -vis the historical adjusted EBITDA, it is getting burdened by the three items I outlined, including some of the license and second, lease accounting and also the R&D capitalization. So, the entry point Micro Focus coming in is definitely from IFRS to US GAAP, and we’ve made sure we’ve aligned that as well. In fiscal 2023, as you look at our annual model ranges, we continue to have enterprise cloud booking the 15% plus.
And our cloud revenue, including Micro Focus is actually at 11% to 13% and — previously, it was 8% to 10% from an OpenText only. So, I mean, so again, as we see the demand strong about the cloud bookings and cloud revenue, the target model, I would say, fully represents what we see in the market and integration begins. And I’ve shared color on some of the integration costs that we are going to incur and we factored and we factored all of those in.
Mark Barrenechea: And Stephanie, and I would amplify — or rather not amplify, I’d add two things, right, to the great comments from Madhu. Things I think about to deliver these great targets, right, are they conservative or exceed them. But to deliver these great targets we put out there, I’m very confident in the pace and speed given our track record over the last decade of many large acquisitions. But to the extent we can go faster, the results would thus be accelerated. I’d be very pleased with landing between $2.1 billion and $2.24 billion in adjusted EBITDA for 2024, but it’s a little faster. These results should improve. Second thing, I actually like our euro exposure of our business. And with OpenText and now the Micro Focus customers, part of OpenText, a rising euro rises OpenText. And so I also like the mix of business that we have geographically and so to the extent that the euro goes up, we’re in a good place.
Stephanie Price: Thanks for that. Just one final one for me. Just curious about the R&D and how you think about the combined R&D in the business. What areas are you looking to prioritize post the — post Micro Focus acquisition?
Mark Barrenechea: Yes. Well, on — as we bring the two — as we brought the two organizations together already, you’ll note in fiscal 2023, on our target model range, our engineering investment is between 14% to 16%.
Madhu Ranganathan: The partial year.
Mark Barrenechea: On the partial year. And you can expect it on a combined basis to pick up from the previous OpenText model, right? So, it’s not just up on a combined basis, it’s up because we’re going to be investing to accelerate cloud. Continue to accelerate cloud 15% plus bookings growth. And you can see our F 2026 aspirations of obviously to the organic
Madhu Ranganathan: Give the 7% to 9%.
