Greg Secord - Open Text Corp. John Marshall Doolittle - Open Text Corp. Mark J. Barrenechea - Open Text Corp..

Richard Tse - National Bank Financial, Inc. Paul Steep - Scotia Capital, Inc. Paul Treiber - RBC Dominion Securities, Inc. Thanos Moschopoulos - BMO Capital Markets (Canada) Eyal Ofir - Eight Capital Phillip Huang - Barclays Capital Canada, Inc..

Thank you for standing by. This is the conference operator. Welcome to the Open Text Third Quarter 2017 Conference Call. As a reminder, all participants are in a listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions.

I would like to turn the conference over to Greg Secord, Vice President, Investor Relations. Please go ahead..

Thank you, operator, and good afternoon, everyone. On the call today is OpenText's Chief Executive Officer and Chief Technology Officer, Mark J. Barrenechea; and our Chief Financial Officer, John Doolittle. We will read prepared remarks, followed by a question-and-answer session.

The call will last approximately 60 minutes, with the replay available shortly thereafter. I would like to take a moment to direct investors to the front page of the Investor Relations section of our website, where we have posted presentation that will be referred to during this call.

And now, I'll proceed with the reading of our Safe Harbor statement. Please note that during the course of this conference call, we may make statements relating to the future performance of OpenText that contain forward-looking information.

While these forward-looking statements represent our current judgment, actual results could differ materially from a conclusion, forecast or projection in the forward-looking statements made today.

Certain material factors or assumptions were applied in drawing any such conclusion while making a forecast or projection as reflected in the forward-looking information.

Additional information about the material factors that could cause actual results to differ materially from a conclusion, forecast or projection in the forward-looking information and the material factors or assumptions that were applied in drawing the conclusion while making a forecast or projection, as reflected in the forward-looking information, as well as risk factors that may project future performance results of OpenText are contained in OpenText Form 10-K and 10-Q as well as in our press release which was distributed earlier this afternoon, all of which may be found on our website.

We undertake no obligation to update these forward-looking statements unless required to do so by law. In addition, our conference call may include discussions of certain non-GAAP financial measures.

Reconciliations of any non-GAAP financial measures to their most directly comparable GAAP measures may be found within our public filings and other materials, which are available on our website. And with that, I'll hand the call over to John..

Greg, thank you very much. Welcome to the call, everybody. Let's go through the numbers and my references will all be rounded in millions of U.S. dollars and compared to the same period of the prior fiscal year unless I indicate otherwise.

Total revenue for the quarter of $593 million, up 35% from last year and $600 million, up 36% on a constant currency basis. Revenue was negatively impacted by $21 million, $14 million due to acquisition related accounting rules and $7 million due to foreign exchange.

Year-to-date total revenue was $1,628 million, up 21% from last year and $1,642 million, up 23% on a constant currency basis. Recurring revenue of $506 million, up 34% from last year and $512 million, up 36% on a constant currency basis.

Year-to-date recurring revenue, $1,382 million, up 21% from last year and $1,395 million, up 22% on a constant currency basis. License revenue for the quarter of $87 million, up 35% from last year and $88 million, up 37% on a constant currency basis.

Year-to-date license revenue of $246 million, was up 24% from last year and $247 million, up 25% on a constant currency basis. Cloud Services and Subscriptions revenue for the quarter of $177 million, up 20% from last year and $179 million, up 21% in constant currency.

New MCV bookings this quarter were approximately $52 million, up compared to $46 million in the same period last year. Year-to-date Cloud Services and Subscription revenue of $522 million, up 17% from last year and $526 million, up 18% on a constant currency basis.

Customer Support revenue for the quarter of $263 million, up 43% from last year, and $267 million up 45% in constant currency. Year-to-date Customer Support revenue of $693 million was up 25% from last year and $701 million, up 27% on a constant currency basis.

Professional Services and other revenue for the quarter $65 million, up 45% from last year and $66 million, up 47% in constant currency. Year-to-date Professional Services and Other revenue of $167 million, up 15% from last year and $169 million, up 17% on a constant currency basis.

The impact of foreign exchange for the quarter negatively impacted revenue by $7 million and had a negative impact of $0.01 per share on adjusted EPS. The negative effect of $7 million by revenue type is broken down as follows. Customer Support $3 million, Cloud $2 million, PS $1 million and License $1 million.

Year-to-date foreign exchange has negatively impacted revenue by $15 million and negatively impacted adjusted EPS by $0.02. Negative impact on revenue of $15 million, CS of $7 million, Cloud of $4 million, PS of $2 million and License of $2 million. Gross margins for the quarter, License was 95%, down slightly from 96% last year.

Cloud was 56% compared to 58% last year, down primarily due to increased head count, which includes a mix of employees from different geographies and position levels acquired from recent acquisitions.

Customer Support of 87%, down slightly from 88% last year and PS margins were 15%, down slightly from 16% last year.PS service margins of the acquired ECD Business affected our quarterly performance. Adjusted operating income $173 million this quarter, up 25%. However, adjusted operating margin was down slightly at 29% compared to 31%.

Our adjusted operating margin was negatively impacted by ECD which had an adjusted operating margin in the low teens this quarter and I'll talk more about ECD results in a minute. On a constant currency basis, adjusted operating income was $176 million, up 27%.

Year-to-date adjusted operating income was $509 million, up 11% and adjusted operating margin was 31% compared to 34% last fiscal year. On a constant currency basis, adjusted operating income was $513 million, up 12%.

Adjusted net income increased by 22% to $120 million this quarter, and on a constant currency basis, adjusted net income was $123 million, up by approximately 26%. Year-to-date adjusted net income was $359 million, up 11% on a constant currency basis. It was $363 million, up 12%.

Interest expense was $32 million in the quarter, which is in line with the estimated run rate we provided on our last earnings call.

An important achievement this quarter, we renegotiated our interest rate on our term loan B, extending the loan and the reduction in the rates will lead to savings of approximately $4 million per year and absent changes in LIBOR, we expect to see our quarterly interest reduce to $31 million.

Adjusted earnings per share for the quarter was $0.45 per share on a diluted basis, compared to $0.40 for the same period last year, up 13% and up 15% on a constant currency basis of $0.46.

Adjusted earnings per share year-to-date of $142 million on a diluted basis compared to $132 million for the same period last year, up 8% and up 9% on a constant currency basis at $144 million. GAAP net income for the quarter was $22 million or $0.08 per share on a diluted basis, down compared to $69 million or $0.28 per share on a diluted basis.

The decrease in GAAP net income mainly due to a few things. First, an increase in amortization expense of approximately $35 million, primarily due to the impact of newly acquired intangible assets from recent acquisitions.

Second, an increase in operating expenses primarily due to increase in special charges of approximately $22 million which is largely associated with our fiscal 2017 restructuring plan and acquisition related costs and the remainder of the increase is in accordance with the growth of our business.

As a percentage of revenue, each of our respective operating expense line items is largely in line with our fiscal 2017 target model expectations.

GAAP net income was also down due to increase of $16 million relating to interest expense, primarily associated with the additional senior notes issued in fiscal 2017 and an increase of $6 million relating to higher tax expense, relating to the IP reorganization to consolidate ownership management and development of intellectual property to Canada in July 2016.

The increases in these expenses discussed above is partially offset by higher revenues of $153 million. GAAP net income year-to-date was $980 million or $3.88 compared to $198 million or $0.81. We recorded a significant tax benefit applied to our first quarter only of $876 million specifically tied to the IP reorganization that occurred.

Consolidate our intellectual property in Canada ensures appropriate legal protections for our consolidated IP, simplified legal accounting and tax compliance and improves our global cash management.

Consistent with this planning, the recent acquisition of the ECD Business was purchased by OT Canada and now resides as part of our Canadian-based IP portfolio.

Operating cash flow for the quarter was $156 million, up from $107 million last quarter and $73 million in Q1 2017, yet down 18% from last fiscal year primarily due to an increase in taxes paid in 2016, of which $6 million is paid on account of a one-time gain arising from the IP reorganization and increase in payments related to special charges of approximately $15 million, primarily associated with our new fiscal 2017 restructuring plan and commitment fees paid to Barclays Bank relating to the acquisition of the ECD Business.

Our cash collections were solid this quarter. And our DSO at 54 days is now in line with where it was last year. In fact, we have record collections and made significant progress on reducing DSOs of our acquired companies.

On the balance sheet at March 31, deferred revenues were $632 million compared to $411 million at June 30, primarily as a result of recent acquisitions. Tax update, there is nothing new to report on our ongoing discussions with the IRS, but we will continue to keep you updated on any material new developments.

While there is no new update on this front, we have realized the disclosure of our estimated aggregate liability in our 10-Q to $575 million, which is up from a previously disclosed $550 million, solely relating to estimated interest that is accrued.

To reiterate, our adjusted tax rate for the quarter is 15% and is expected to be the same for the remainder of this fiscal year. We see no impact on the rate as a result of the ECD acquisition. Accounts receivable was $360 million at March compared to $286 million at June 30.

Days sales outstanding, as I mentioned earlier, was 54, flat compared to last year, and up one day compared to 53 at June 2016. I will highlight as an example the progress we made here. We've reduced the DSOs for our Recommind acquisition by approximately 30 days from where it was when we acquired it.

Also, our Board of Directors declared a 15% increase on our cash dividend to $0.132 per share for shareholders of record on May 26, payable on June 16, 2017. Now, moving on to ECD. We're progressing well with our integration. A few items to note.

We recorded a one-time total adjustment of $52 million on ECD deferred revenue consistent with what we were expecting and discussed during our last earnings call. We brought over net $164 million of deferred revenue to our balance sheet as of the acquisition date.

We've provided a deferred revenue waterfall table in our Q3 IR supplemental deck which is posted on our website. ECD contributed total revenues for the quarter of $80 million.

This is consistent with our expectation considering ECD's historical revenues, timing of the closing, the impact of purchase price adjustments, as well as factoring in an annual disruption of 5% to 10% decline to the ECD Business which is typically higher in the initial periods.

ECD's adjusted operating margin came in lower this quarter in the low teens as compared to their historical run rate which was in the mid-to-high 20s.

However, I want to remind everyone that this was an asset deal, and the very nature of a carve-out acquisition makes it inherently more difficult to assume operations day one upon closing and integrate activities. We want to reiterate that we expect ECD Business to be on our operating model within 12 months from closing.

Revenues in Q4 are expected to increase by approximately 30% on an absolute basis from the 80% delivered in Q3. A quick update on our bank revolver. On May 5, 2017, we were very pleased to amend the revolver to, among other things, extend the maturity from December 22, 2019 to May 5, 2022 and to reduce the interest rate margin by 50 basis points.

We're also affirming our 2020 aspirations of non-GAAP operating margins of 34% to 38% and 90% recurring revenue. Details on these and other metrics mentioned today are contained in the Investor Presentation posted on our website.

There is no change to our fiscal 2017 target model of 30% to 34% as previously disclosed in our invest materials and we expect to perform close to the midpoint of that range. As I think about Q4, here are a few things to note.

Keep in mind my comments on ECD revenues and margins, keep in mind that we expect the foreign exchange headwind to continue and impact revenues by approximately $10 million versus our planned rates. And lastly, keep in mind that we expect purchase price adjustments to impact revenues by $13 million in the quarter.

With that, I will turn it over to Mark..

value-added resellers, ecosystem partners and system integrators. With the addition of HPCCM, HPCEM and ECD, we now manage 500 value-added resellers, or VARs, for short. Three examples of our top VARs in the last six months include Canon, Fujitsu and Hewlett-Packard.

We're also building groundwork for our ecosystem partners, and the SAP business continues with new momentum. For example, last week, we signed an overarching cloud reseller agreement with SAP, extending our relationship many years into the future. We are now a strategic SAP partner in the SAP Cloud.

Major SAP wins in the quarter included KUKA Robot and EDF Luminus. We're also integrated into SAP SuccessFactors and recently won SRP and ABB in Q3 for this new solution, adding to success this year at British American Tobacco, Barclays and PepsiCo. Our new Salesforce product added the regional appeal on Ontario and Tesoro (27:17).

We also won Ciox Health, Humana and senior care customers with AT&T. Lastly, we have a new relationship with Cerner through Documentum further strengthening our solutions in life Sciences and healthcare.

Our system integrator investments continue to see traction across Deloitte, Accenture, CGI and others and together we won business in the state of Tennessee, at Merck and with the Government of Alberta. I will keep you posted on our progress in the partner business.

This is an investment area where we can grow revenue, drive high performance and build long-term intrinsic value. Let me add to John's comments on ECD. First and foremost, we are on plan. We delivered to our Q3 internal goals and are on track for our overall integration plan.

We are also on track to have the business operating on our model in 12 months from closing as John noted. Customer employees are engaged. Let me highlight a few key additional points. OpenText is now number one in content services. Content services is at the core of digitalization and AI.

We have opportunity in key verticals such as life sciences, financial services, energy and engineering, manufacturing and government. ABB is a great example of a joint customer win. We have an opportunity in cross-selling such as Extended ECM for SAP and Salesforce, Managed Services and InfoArchive.

As previously noted, Q3 was a partial quarter or a sub-quarter, which means we had lower revenue and higher cost. Within the quarter, we tracked ahead of our internal business plan exceeding the revenue and margin targets, and on a non-GAAP basis business was accretive, despite the partial quarter of ownership.

We also onboarded a low margin PS business that we're working on correcting because it doesn't fit our business model. We should expect lower ECD PS revenues and increased margin in the medium-term. And finally, integrating asset purchases is more difficult in the first few quarters than purchasing entire companies, looking to have higher returns.

With asset purchases, we spend more time upfront on organization structure, compensation plan, benefit assessment, customer agreement, novation and assignment, employee transitions, facilities and systems and other topics. We've done many asset deals in our careers.

These are all non-revenue producing activities or are typical of an asset purchase, and with time the business normalizes. With ECD integration, we have streamlined our organization and further empowered our executive leadership team.

It also caused us to step back and consider our optimal organization structure and whether we required a President role or a single head of revenue to maximize performance. Ultimately, we decided to clap the layer (30:16) and streamline the management structure.

As a result, we have eliminated the President position and Steve Murphy has left the company. I'd like to thank Steve for his contribution to the company, and wish him the best in the future. Effective immediately, his direct reports now report to me.

As we complete fiscal 2017, some of our top priorities include, continue to scale our capital deployment strategies and invest in the M&A team, scale ECD revenues and reduce costs, deliver to our fiscal 2017 objectives with double-digit revenue growth, expect adjusted operating margin to be closer to the mid-point of our 30% to 40% target range, and increase momentum as we come into fiscal 2018, continue to drive customer adoption of Release 16 EP2, educate and invest in our cross-selling opportunities, Extended ECM, CEM, Managed Services, InfoArchive, enhance performance of our partners that they have an expanded portfolio of solutions go-to-market with, and of course have a successful Enterprise World and Magellan launch, and increase that momentum as we enter fiscal 2018.

We can win in AI with open source and content analytics. Let me summarize my remarks. We are executing to plan. 35% year-over-year revenue growth and 46% quarter-over-quarter operating cash flow growth are solid metrics, and we still haven't realized the full benefit of ECD and other recent acquisitions.

Our first principle is the long-term growth of OpenText intrinsic value and we are building a steady, predictable business with strong recurring revenues, now on an annualized $2 billion run rate.

We are continuously learning from high performance conglomerates and from our own experiences as we improve our business model, financial results and execution.

M&A remains our leading growth driver, and we will continue to grow and invest in our M&A team, further scaling up our capital deployment, we've returned over $400 million to shareholders and raised our quarterly dividend by 15% today.

This fiscal year, we'll continue to attain double-digit revenue growth, and are on the same path for next fiscal year. Customers need to pick a digital platform and that right choice is OpenText and the EIM market thesis gets stronger with artificial intelligence.

John and I will be participating at the CIBC, MUFG, and Barclays conferences this quarter and we're also hosting an Investor Day in Enterprise World on July 11 with the OpenText leadership team. Please join us there for these in-person discussions. With those remarks, operator, I'd like to open the call to questions..

We'll now begin the question-and-answer session. The first question is from Richard Tse, National Bank Financial. Please go ahead..

Yes, Richard, go ahead..

Yes, a bit more of a color on the ECD acquisition in terms of what needs to be done that sort of headcounts, products, facilities and really trying to get an understanding here of how that opportunity is going to scale over the next 12 months?.

Richard, Mark here and thanks for the question. We closed the acquisition in late January, so it was simply a partial quarter of results, and as we said on the call, we are ahead of our internal plan. So this will be the first full quarter that we have and in the coming two to four quarters, we'll complete kind of facility moves.

We couldn't move all employees day one, asset purchase. We will continue to integrate all our systems in the coming quarters, and we'll unveil our first integrated products in the coming quarters as well.

Specifically, like on the PS business, we inherited a set of contracts, we honor those customer commitments, some of those contracts have been at low margin, which we simply need to work through and replace that with an OpenText style business.

So, this quarter will be a full quarter of operations, and then in the next one to two quarters we complete facilities, first product releases, and more and more systems integration..

Richard, the only other thing I would highlight there is just a note that we announced a restructuring plan last quarter and we're part way through that restructuring plan. So there will be some people-related cost reductions as we move into this quarter..

Okay. And then a broader question, you guys have added a lot of products through acquisitions over the past few years.

And I think I've asked this question before, but just trying to get an update here, in terms of the ability to sort of up-sell and cross-sell, I'm not sure what metrics you guys track internally, but maybe you could give us a bit of color in terms of the success there and whether it's a dollar spent per customer basis and where you may be at, I think really 2016, certainly had a lot to do with that but perhaps, give us an update on that, please? Thank you..

So, Richard, we have bright line opportunity in cross-sell. And I highlighted the main areas where we're focusing on education and investment and those include Managed Services, Extended ECM, CEM and InfoArchive.

So those are the areas that we've picked to be able to educate our sales force, educate our customers and go hard into the install base to go cross-sell. The more and more we integrate our products, the ability to up-sell increases. EP2 is a more integrated release than EP1.

EP3 will be more integrated and there will be further consolidation of technology component. So on the cross-sell opportunity, I think we've done a really nice job identifying those core solutions go into the joint install bases with. And there are four or five things we're going to go take to our entire install base.

And up-sell remains an upside opportunity for us. And it's directly related to deeper and deeper integration and release after release, products get more and more integrated..

Okay. And just the last one from me, Magellan, is that going to be commercially available this year because I understand that IBM has been selling Watson through FileNet over the past six to 12 months, just kind of curious what the timeline is on that? That's it. Thank you..

Yes. We're on target to release Magellan into GA early next fiscal year and we'll unveil it at Enterprise World..

Okay. Thanks a lot..

Yes. Thanks, Richard..

The next question is from Paul Steep, Scotia Capital. Please go ahead..

Great. Thanks.

Mark, could you just – I want to clarify and make sure when you made the change and sort of delayered, have there been any other changes that are noteworthy within the sales force or was it sort of mainly a management change at the upper level?.

No, the only change is the elimination of the President role and Steve directs will now report to me. So, it's, at the end of day, a change in one person in one role..

Okay.

And then in terms of PS, can you just go back in terms of the magnitude of how much revenue we're talking about in terms of the lower margin contracts and then sort of what you're thinking about in terms of the time to sort of call that out of the portfolio?.

Yes, I am – we – when we look – when we've gotten deeper into the ECD PS business, there are just simply contracts of lower margin and it doesn't meet kind of our standard. And we're interested in value over volume. I don't think, John, we've put a specific number on it.

I mean, it's less than 10% of the business if you will, maybe around or less than 10% of the business, it will take us one to two quarters to work through.

Okay.

And then the final one, I guess, I was curious, you went over it a little bit in the partner section, which was great, could you talk a bit maybe some of the new partners you brought on? I know with the EP1 and I guess I'm thinking specifically of sales force, where that is because that looks like a good sizable opportunity for you down the road? Thanks..

Yeah. So, I think of our partner business are second sales force. And currently I decided to highlight it in my prepared remarks. As we get into fiscal 2018, it's a driver for our business. So, we think of it in three areas. The first is, value-added resellers and Canon, Fujitsu are great examples of new bars that are performing for us.

Ecosystem partners, we signed last week a new agreement with SAP, bringing our relationship into the next-generation. I mean, we're now a major and a strategic partner in the SAP cloud, our new sales force solution extends our ecosystem partners. Cerner, relationship that comes over from Documentum, very key reseller engagement for us.

System implementers getting stronger with Accenture, Deloitte, CGI, TCS as well. So this is our second sales force, as I like to call it, our momentum is clearly up after four important acquisitions this year. And those are some examples in those three categories of ours, ecosystems and system implementers..

Thank you..

Yeah. Thank you, Paul..

The next question is from Paul Treiber, RBC Capital Markets. Please go ahead..

Oh, thanks very much and good evening. Just want to continue a little bit on the partner theme.

What's the strategy for EMC as a channel partner going forward and then with the separation of Documentum from EMC, was there any disruption in the quarter – license sales in the quarter because of that process?.

Paul, thanks for the question. Like I said, in my prepared remarks, you close the deal a week or two earlier in a quarter or a week or two later and that revenue adds up. So, it's purely timing. We have not entered into a reseller agreement with Dell and though we're continuing to work with Dell and EMC customers on an opportunistic basis.

So no, I wouldn't say there was disruption from a reseller perspective, where we had sales activities, we continued on them. But, we don't have a formal resell agreement in place, though we continue to engage opportunistically..

Okay. On the comment about the EMC, ECD structured as an asset purchase and the amount of work that that required out of the gate, in terms of the impact on cost, are you primarily referring to the – in regards to professional services working through those costs or those other costs introduced? Elaborate, if there are any..

Yeah. I may be talk a little structurally then and ask John to comment. You can see in our filings on the asset purchase, we entered into a transition services agreements with Dell-EMC, TSA. And TSAs are very typical of when you're doing an asset purchase.

And our TSA costs are higher upfront, as we rely on their systems, we rely on their network and we rely on their people to conduct business. So, our TSA cost are higher in the first few quarters and then trail down over time. So John, I don't know, if there is anything..

No. That's completely fair. And as we on board some of these things and take these people into our facilities and put them on our systems Paul, we'll see those third-party costs from Dell coming down..

Okay. Thanks so much. I'll pass from here..

Yeah..

The next question is from Thanos Moschopoulos, BMO Capital Markets. Please go ahead..

Hi. Good afternoon.

Looking at ECD's quarterly revenue trajectory in calendar 2016, seems like the seasonality of that business is somewhat different from yours, would you expect that seasonal cadence to persist or to become more similar to yours as you retain (44:22) the asset?.

Thanos, I have kind of precisely studied their seasonality or what – kind of made that 10-year rhythm sort of click, if you will. We look at our business in Q1, $80 million. John, talked about the PPA, purchase price accounting, within the quarter. We're looking at 30% growth quarter-over-quarter as we onboard the business.

So, let's maybe come back to that in a quarter or two and I think we can comment on the seasonality or kind of the rhythm of the business that we see..

Fair enough.

And then through the margins, I appreciate the disclosure you provided on the ECD margins, if we look at the HP assets, Recommind and ANX, can you provide some color there, are they under target or is there more work to be done as far as getting them to where you want them to be?.

Yeah. I think they're on plan, Thanos, in terms of the guidance that we provided in getting them on to our operating models, I look across those acquisition they're tracking to that outlook..

Great. And then just one last one, Mark, could you elaborate what prompted your decision to make the change to the management structure at this juncture. When you created the role of President, the business was smaller than it is now.

So at this juncture, what prompted the decision to deal here?.

Yeah. I mean, I look at our maintenance business on an annualized $1 billion run rate, our recurring revenues on a $2 billion run rate. And I'm looking out over the next three years to five years in our continued growth as a business. And we fundamentally believe that our business unit structure is the right structure for the business.

Now you take that view that the role is just no longer required to be able to continue with our deployment of capital, our growth rates and aspirations for the business.

So, we made that call at the – here recently and I'm very comfortable with our kind of going forward the business unit structure and having Steve's previous directs just reporting directly to me and we're moving that later..

Great. Thanks for that one..

Yeah. Thank you.

Operator, any additional questions?.

You dropped? You there operator?.

So with that, thank you for your questions today. John, I'd like to thank you for joining the call. Hello, do we have another question operator? Okay. I don't know if we have technical difficulty..

Yes..

Okay, operator, go ahead..

The line is live for Eyal Ofir of Eight Capital..

Yeah. Thanks. Thanks for making the time for me as well..

Yeah, Eyal..

Just a quick question for you on, obviously, the integration with ECD business. It seems like just on the base OpenText business, the quarter was fairly well, and there has been no hiccups, whatsoever.

Can you just talk about from an ECD standpoint, obviously, first two months post-integration, how it was and how it looks like as it stands today in terms of pipeline and employee and everything else in terms of what's going on there?.

Eyal, thank you for the question, and I can't say it anymore simply except to say we're on track. So I mean customers are engaged, employees are engaged. We own the business for 60 days in our Q3, it's a large asset purchase.

So there is a lot of time, a lot of precise time spent to carve-out a multi $100 million maintenance business to carve-out 2,000 employees across a couple dozen facilities to be able to integrate networks and be able to run our systems and conduct business, and the team performed miraculously in Q3, and we tracked head of our internal plan and quarter-over-quarter, we expect to grow that business around 30%.

So, I'm very pleased with where we are. We closed a week earlier or two, or a week later or two and it impacts revenue. So there are certainly some timing things in precision of a week or two, but I couldn't be more pleased with the acquisition, the strategic nature of it and its trajectory..

Okay. Great. Thanks. And then maybe a question for John. Thanks for the bridge on the cash flow, but one question from me is because it was an asset purchase, I imagine you had to fund a piece of the business in the first 60 days here.

So, is there a metric you can give us in terms of how much you actually had to deploy into working capital for the ECD acquisition? Otherwise, it would have actually probably been greater than that? Thanks..

Yeah, Eyal, I can't give you an actual number. I think that question was asked last quarter, and I did in fact say that there would be some working capital drain as a result of ECD. We did in fact see that.

You'll appreciate that we weren't able to bill and collect certainly on the license side, much by way of revenues in the quarter and that's going to turn as we move along quarter-by-quarter. So, I don't really have an exact number for you other than to say that there was some working capital used to on the acquisition..

Okay. Perfect. Thanks. And then actually before I pass the line, just last question for Mark.

Just on the, what inning would you say you're in, in terms of actually transitioning over the employees and the facilities on the TSA front, because I imagine that's where you will actually start chasing greater cost synergy as well, once you bring them on the OpenText model? Thanks. And I'll pass the line..

Yeah. Fair enough.

So look, I think, this will be a big quarter for us to kind of complete the employee transition and continue to be in the heavy side of our TSA costs and we enter fiscal 2018, and we should be – by the next time, we have our next call, we should be majority, I mean, 90% plus employees, 90%, 95% employee work completed and through the most expensive part of the TSA..

The next question is from Phil Huang of Barclays. Please go ahead..

Yeah. Thanks. Thanks for fitting me in as well. Just on the – maybe I'll ask about the ECD integration in a more general way.

I was wondering, if there was anything new that you guys might have learnt about the business, aside from, I guess, identifying the low-margin contracts for optimization, which you guys have talked about, and how do other aspect of the business compared to, say, your expectations, are there any surprises both positive or negative?.

Phil, thanks for the question. I'll say, you always have a upside or downside, surprise on anything that you do, right. I'd say on the upside, the employee and customer engagement is just fantastic. And I just look at our ITour campaign that we finished, where we're able to engage in roughly eight locations and 5,000 customers attending.

The engagement was the best I've seen in my professional career of being able to get on the road and spend time face to face with customers. So on the upside, the passion and the engagement from customers and employees has just been fantastic. And at the end of the day, as I'd like to say, what makes great software, great people.

And I'm just really thrilled with that. We have work to do on the integration, and this will be an important quarter for us to get through the facility side and the people transition. We bought an asset that was purchased, we did a carve-out of a carve-out, right.

Documentum was inside of EMC that had just been purchased from Dell, and then we carved that out from Dell. We closed a few weeks earlier and we're carving out from EMC, not carving out from Dell.

So that is probably running a little slower and a few lessons learnt there of a carve-out from a carve-out, but we're on target for overall plan, just a few timing issues..

Right, right. That's very helpful. And then I want to touch on the, I guess, delayering of the management as well. With the President's role now streamlined, I was wondering if you can maybe elaborate a bit how you expect things to improve from the change, I believe Mr.

Murphy was primarily responsible for customer facing activity, sounds like you feel that perhaps a more decentralized approach to it might be a little bit more effective, is that what I read (54:59) to that and do you expect any sort of further structural changes as the integration progresses?.

Yes, fair enough. We've eliminated the President role and we don't intend to un-eliminate it. We also feel, we don't need a head of revenue role for the business. We are organized around how customers buy and the activity of renewals and continuing the selling motion in a digital B2B business, we're organized around that with James McGourlay.

When we look at how we are selling our cloud services and business network, we're organized around that with George Schulze, we look at our enterprise business organized around Ted Harrison, and our professional services with Prentiss Donohue, where now our business units are organized around how customers buy.

So, we're not looking to re-add the role, we're not looking for a head of revenue, we're organizing for the foreseeable future around how customers purchase. And they'll report directly to me..

The next question is from Richard Tse of National Bank Financial. Please go ahead..

Yeah. I had a follow-up question on ECD.

When you guys ball this out, would it be safe to say that given this was an asset purchase, you kind of cherry-picked the assets you wanted, and I guess on a relative basis, the return of that type of acquisition has that historically been better, did you sort of mall it better than your typical transactions?.

That's a two-pronger..

Correct..

It's okay. Thanks for the question, Richard. In general, you prefer asset purchases because you get to pick what you want and organize how you want. But you tend to get off to a little slower start, as I said on a call, because you're spending your first few months on – your more time on non-revenue generating activity.

So, I think, our historical experience of asset purchases generate more value, you get to organize the way you want, but you tend to get off to a slightly slowest start, I think, is going to run very true here in ECD. Similar pattern..

All right. Thanks..

All right. So, I think, this is officially the summary. So thank you Greg. Look, I'm going to end where I started. We achieved 36% year-over-year growth in constant currency and delivered $600 million in the quarter and just had a tremendous quarter-over-quarter, 46% operating cash flow growth.

John and myself and the leadership team look forward to seeing you at Enterprise World for Investor Day. And John and I will be at the – one or both of us will be at CIBC, MUFG and the Barclay conferences this quarter. Thanks for attending the call. And look forward to speaking with you soon..

Thanks, everybody..

Thanks..

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day..