It’s about ADM and having that end-to-end life cycle. And our platform, Athena, has many components from ADM. So getting — bringing AI — business AI and Aviators into the developer experience. We introduced a new IoT platform based on core Vertica and something called the GPAC modules. You can find it on our website. And we’re very excited to bring in higher scale machine transaction data into our information cloud. And then of course all things cloud. Private cloud, SaaS, and AI embedded across ITOM, security, ADM, IoT. I’ll also note in my comments of our 63% cloud bookings growth, and I raised outlook for the year to 25% to 30% cloud bookings growth. Microsoft, I keep calling them Microsoft, so we didn’t buy Microsoft, we bought Micro Focus.
I noted that Micro Focus cloud bookings contributed to that 63% growth as well and will begin to contribute more over time.
Unidentified Analyst: Got it. Thank you.
Mark Barrenechea: Thank you, I did not announce our acquisition of Microsoft today, so just to be clear. Yes, thank you, Jeremy.
Operator: The next question is from Stephanie Price with CIBC. Please go ahead.
Stephanie Price: Good afternoon, Mark. You mentioned M&A, so some people will go there. Not Microsoft, but you did mention strategic M&A in your prepared remarks. So how should we think about the balance between M&A and organic investments and insurer-holder capital return here post the AMC divestiture?
Mark Barrenechea: Yes, sounds great. Thank you, Stephanie. Well, look, we’re excited to complete the divestiture. And as I noted, we’re on track, you know, subject to closing additions and regulatory approvals. And we expect to close by the end of our fiscal year. And when we do so, our intent is to de-lever and bring our leverage under 3 times and to return to a full-stack capital allocator. As you’ll see in the investor materials, we’re looking to return 30% of our, approximately 30% of our free cash flow via dividends and buyback. And that allows 70% of our available capital available for other purposes including M&A. And you should expect us to return to M&A. So that M&A will be strategic. It will be focused on ARR and cloud assets that drive future organic growth.
Stephanie Price: Okay, thank you. And then I also want to circle back on the investments in AI cloud and security. Should we think, assume these investments continue post fiscal ‘24, and how should we think about R&D as a percentage of revenue going forward from here?
Madhu Ranganathan: Yes, absolutely, I’ll take that Stephanie. So today we’re actually looking at, we actually called out R&D as a percentage of revenue at 14% to 16%. So at the larger scale, expect that to continue. In terms of AI investments, it’s both, it’s R&D and sales and marketing. And for fiscal ‘24, it is 18% to 20%. So I would say expect us to keep in that range, obviously, at the scale the dollars will be higher as well. And also the deployment of R&D, as Mark mentioned, 800 engineers deployed towards AI and related activities. So the teams are spending a lot of time not just on the investments, but where the investments are going.
Stephanie Price: Great. Thank you very much.
Mark Barrenechea: Yes. And thank you, Stephanie, and just to amplify a point from Madhu, platform Athena, so it’s going to significantly raise our productivity and output. And this is, I look through two decades, three decades of leading engineering organizations and how they’ve evolved over time and how organizations like OpenText have looked to balance our incredible talent globally and through automation and through systems, through open source wave, through better tools. There’s another wave coming, which is called AI. And some companies will use it, while some may stumble along the way. For us, we have a very clear vision and we’re going to be building our proprietary platform internally to manage roughly a billion lines of software and how to auto-generate cases, how to auto-generate interfaces to APIs, how to accelerate learning.
I think the talent we hire in the future in engineering is going to be radically different and radically elevated. Athena will be able to take descriptions and generate code. So that next wave of efficiency, and we’ll talk more about that when we get to our F ‘25 plan, that in the R&D expense percent, the nature of this in large scale tech companies are going to change, because there’s a very interesting wave of AI coming and how we’re going to be building software.
Madhu Ranganathan: Yes, and Stephanie, if I could just add one more, R&D is a very broad category, just given our spectacular cloud bookings growth, and we talked about visibility into ‘25 and ‘26. We are also investing in what we call information security, the CECL organization. We are also investing in cloud operations and cloud infrastructure and sort of hyperscale a cost. So I did want to mention in terms of investments, it’s going sort of above the line and below the line as well.
Stephanie Price: Great, thank you for the color.
Madhu Ranganathan: Thank you.
Operator: The Next question is from Paul Treiber with RBC Capital Markets. Please go ahead.
Paul Treiber: Thanks very much and good afternoon. Your recent comments on Athena were very helpful to understanding what it is, and using AI to improve the productivity of your R&D teams, do you expect or do you see improving productivity across the entire organization through AI over the next several years. Is that something that we could expect going forward?
