Summary
OpenText closed the March 2024 quarter with total revenues of $1.447 billion, up 16.3% from the prior-year quarter and up 16.0% in constant currency. Annual recurring revenues reached $1.146 billion, up 13.3% year over year, and represented 79% of total revenues. Cloud revenues were $455 million, up 4.4%. The Micro Focus acquisition, consolidated from February 1, 2023, contributed $564.7 million to quarterly revenues, which explains much of the gap between reported growth and the underlying cloud trend. Enterprise cloud bookings of $165 million rose 52.6% year over year, and the company closed 28 cloud services contracts greater than $1.0 million, compared with 13 a year earlier.
Profitability improved sharply. GAAP gross profit was $1.06 billion, up 20.7%, and gross margin rose to 73.0% from 70.3%. Operating income was $227.07 million, up 254.9%, lifting operating margin to 15.7% from 5.1%. Net income attributable to OpenText was $98.28 million, up 70.8%, and diluted EPS was $0.36, up from $0.21. Adjusted EBITDA, a non-GAAP measure, was $464 million, up 27.0%, at a 32.0% margin. Non-GAAP diluted EPS was $0.94. The gap between GAAP and non-GAAP results remains wide, driven by amortization of acquired intangibles, share-based compensation and special charges.
Operating cash flow was $384.70 million in the quarter, up 14.2%, and free cash flow was $348 million, up 13.9%. Capital expenditures were $36.54 million, up 17.0%. For the nine months, revenues were $4.41 billion, up 47.2%, net income was $216.86 million, up 8.9%, and diluted EPS was $0.80, up 8.1%. Nine-month operating cash flow was $782.47 million, up 17.9%. Deferred revenue, current portion only, was $1.58 billion, down 11.3% from the prior-year quarter, while remaining performance obligations were $2.60 billion, up 4.0%.
The company completed the sale of its AMC business to Rocket Software for $2.275 billion in cash before taxes, fees and other adjustments, and used net proceeds to prepay $2.0 billion of debt, including $1.06 billion on the Acquisition Term Loan and $940 million under Term Loan B. The board declared a quarterly dividend of $0.25 per share, payable June 18, 2024, and authorized a $250 million share repurchase plan running from May 7, 2024 to May 6, 2025, covering up to 13,643,472 shares, or 5% of shares outstanding as of April 26, 2024.
Risks remain. The cloud renewal rate, excluding Carbonite, Zix and Micro Focus, fell to 92% from 95%, even as the customer support renewal rate held at 95%. The Micro Focus restructuring plan, targeting an 8% workforce reduction of about 2,000 employees at an estimated cost of $155 million to $170 million, had incurred $133.5 million as of March 31, 2024 and is expected to finish by the end of Fiscal 2024. The Canada Revenue Agency dispute carries an estimated potential liability of about $79 million for Fiscal 2012 through Fiscal 2016 and a possible deferred tax asset reduction of up to $470 million for Fiscal 2017 through Fiscal 2019. The consolidated net leverage ratio stood at 3.82:1.00. Management said it does not expect the AMC divestiture to have a material impact on Fiscal 2024 operating results.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2024 | Q2 FY2024 | QoQ | Q3 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $1.45B | $1.53B | -5.7% | $1.24B | +16.3% |
| Gross profit | $1.06B | $1.13B | -6.5% | $874.9M | +20.7% |
| Gross margin | 73.0% | 73.6% | -0.6 pp | 70.3% | +2.7 pp |
| Research & development | $234.0M | $220.2M | +6.3% | $210.7M | +11.1% |
| Sales & marketing | $296.2M | $280.3M | +5.7% | $271.0M | +9.3% |
| General & administrative | $145.9M | $173.3M | -15.8% | $127.0M | +14.9% |
| Total operating expenses | $828.7M | $875.3M | -5.3% | $811.0M | +2.2% |
| Operating income (loss) | $227.1M | $253.9M | -10.6% | $64.0M | +254.9% |
| Operating margin | 15.7% | 16.5% | -0.8 pp | 5.1% | +10.6 pp |
| Net income (loss) | $98.3M | $37.7M | +160.6% | $57.6M | +70.7% |
| Net margin | 6.8% | 2.5% | +4.3 pp | 4.6% | +2.2 pp |
| Diluted EPS | $0.36 | $0.14 | +$0.22 | $0.21 | +$0.15 |
Risks
The completed AMC Divestiture may disrupt the remaining business, as constraints imposed by the divestiture terms, the sale of assets historically used in the business, and the obligation to provide transition services to the buyer for up to 24 months could impair execution of the business strategy. The divestiture could cause customers to delay or defer decisions or end relationships, and could result in turnover of key leaders or other personnel.
Cloud services and subscriptions gross margin decreased to 59% from 64% in the quarter ended March 31, 2024, and to 60% from 66% for the nine months ended March 31, 2024, driven by higher third-party network usage fees and labour-related costs. The cloud renewal rate, excluding Carbonite, Zix and Micro Focus, decreased to 92% from 95% over the quarter ended March 31, 2023.
OpenText may not achieve the intended benefits of the AMC Divestiture, which depend largely on its ability to focus on Cloud and AI opportunities within Information Management and achieve more predictable growth without the divested business. Some anticipated benefits may not occur for a significant period, and the company may retain certain liabilities related to the AMC Business.
The Micro Focus Acquisition substantially expanded scope and size and continues to require integration and restructuring. The Micro Focus Acquisition Restructuring Plan targets a reduction of approximately 8% of the combined workforce, or 2,000 employees, with an estimated cost of $155 million to $170 million, of which $133.5 million had been incurred as of March 31, 2024.
OpenText carries substantial indebtedness, with a consolidated net leverage ratio of 3.82:1.00 as of March 31, 2024, and interest expense related to total outstanding debt increased in the quarter and year to date. The company provided notices on May 1, 2024 to prepay $2.0 billion of aggregate outstanding debt using AMC Divestiture net proceeds.
The Canada Revenue Agency has disputed OpenText's transfer pricing methodology and issued reassessments for Fiscal 2012 through Fiscal 2019. If the company is ultimately unsuccessful for Fiscal 2017 through Fiscal 2019, the estimated impact could result in an income tax expense, with no immediate cash payment, to reduce the stated value of deferred tax assets of up to approximately $470 million.
OpenText continues to monitor inflation with respect to wages, services and goods, concerns regarding any potential recession, rising interest rates and financial market volatility, which could affect demand and costs. The company also flagged increased labour costs associated with attracting and retaining employees as an assumption risk.
OpenText continues to monitor geopolitical conflicts and diplomatic tensions, including the Russia-Ukraine and Israel-Hamas wars, and has ceased all direct business in Russia and Belarus and with known Russian-owned companies. The broader consequences of these conflicts on the global economy and on the company, its customers, partners and third party service providers cannot be predicted.
SaaS KPIs
All quarters →Adjusted EBITDA
Adjusted EBITDA Margin
Non-GAAP Gross Margin
Enterprise Cloud Bookings
Cloud Revenues
Free Cash Flow
Customer Support Renewal Rate
Cloud Services Contracts > $1.0M
Annual Recurring Revenues (ARR)
ARR as % of Total Revenues
Summary, forecast, risks and KPIs are extracted from OPEN TEXT CORP's SEC filings for Q3 FY2024 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 1, 2026.