They have an amazingly talented engineering organization and now they have more tools to leverage as do all parts of engineering. So real affirmation of great people, great products move faster, which is our 90-day cycles and provide more cloud options. Private cloud for many is the destination, more API work as well. So Dan, I’d say this is a — it was a very strong affirmation of our strategic rationale.
Daniel Chan: Sounds good. Thanks for that. And then maybe switching gears to the renewals business. Based on our prior conversations, it sounds like you had some pretty big structural shifts in changing micro focuses renewals business. So what’s the time line on completely revamping that business? And how long do you think it will take before we start seeing those renewal rates start to improve?
A €“ Mark Barrenechea: So their renewal rates are in the low 80s. You saw ours in the mid-90s for Q2. Our business practice has taken our renewal rate over time to an expansion business. And I do hope over time to talk expansion rates versus renewal rates. And that’s the big prize on the hill, right, is advancing as we get more and more — as we approach this $2 billion cloud business and beyond, our narrative will change from renewal rates to an expansion rate. But that said, for a moment, we have strong performance in the mid-90s. They’re operating in low -80s. We’re in full motion on deploying the OpenText love model, land operate value expand, centralization of renewals, new procedures, new authorities, APA doing this direct, not through partners.
And we expect to uplift them to our renewal rates by the end of FY 2025 and make steady progress along the way, right? Renewals happen in one-year cycles. We’ll start to integrate. And it’s really the things below that the renewal rate is a lagging indicator. It’s not a leading indicator. So as we get on our 90-day release cycles, as we get private cloud, as we accelerate public cloud, as we build more confidence, we put all the procedure in place — things in place. We will see steady progress, but that landing zone of getting to, kind of, our rate, we believe we’ll land there by the end of F 2025 with steady progress along the way, and we’ll keep you updated along the way.
Daniel Chan: Thank you.
Operator: The next question comes from Steven Li of Raymond James. Please, go ahead.
Steven Li: Hey, guys. Hi, Mark. Hi, Madhu. So I understand IFRS to GAAP has an impact on it. But the free cash flow also looks a bit off. So what I’m looking at is OpenText on its own TTM generated $800 million. The free cash flow with Micro Focus for 2023 is below that and for 2024 is $800 million to $900 million. And I already had OpenText in that range. So my question is why is Micro Focus not additive to free cash flow for the first six quarters?
Madhu Ranganathan: Yes. So it’s a good question. Thank you, Steve. So if I could just refer back to the category of expenses I talked about, right? So, certainly, the $400 million cost reduction is at play, again, when we think of fiscal 2023 and fiscal 2024. And add on to that is the special charges, the integration charges. I want to clear what is non-GAAP or otherwise, all of these costs impact free cash flow. And we are having about $80 million in integration expense, somewhere in the $380 million, $220 million on special charges, cash outflow as well as how we rationalize global entity. The combined company is going to be pretty large and complex in terms of its global operations. And sort of rationalizing that is usually — it requires investments and expenses, right?
