Thank you for standing by. This is the conference operator. Welcome to the Open Text Corporation Fourth Quarter and Year-End Fiscal 2020 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.

[Operator Instructions] I would now like to turn the conference over to Harry Blount, Senior Vice President, Investor Relations. Please go ahead..

Thank you, operator, and good afternoon everyone. On the call today is Open Text’s Chief Executive Officer and Chief Technology Officer, Mark J. Barrenechea; and our Executive Vice President and Chief Financial Officer, Madhu Ranganathan. We have some prepared remarks, which will be followed by a question-and-answer session.

This call will last approximately 60 minutes, with a replay available shortly thereafter. I would like to take a moment and direct investors to the Investor Relations section of our website, investors.opentext.com, where we have posted two presentations that will supplement our prepared remarks today.

First, our strategic overview titled Open Text Investor Presentation August 2020. The second titled Q4 FY2020 Financial Results includes information and financials specific to our quarterly results, notably our updated Quarterly Factors on Page 8.

During the month of August and September, Open Text management will be pleased to virtually meet with investors at the following conferences. Oppenheimer's Annual Technology Internet and Communications Conference on August 11th, BMO's Virtual Technology Summit on August 26th.

Citi's Global Technology Virtual Conference on September 8th, Deutsche Bank Technology Conference on September 14th, and Jeffrey's Virtual Software Conference on September 15th. In addition, I'm pleased to announce that we will be hosting an Investor Day on Thursday, November 12th.

This virtual event will consist of our annual investor update, featuring strategic presentations from key members of our executive leadership team. Please save the date in your calendar and contact investors at opentext.com to register for the event. Please feel free to reach out to me or the IR team for additional information.

And now, I will 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 and assumptions were applied in drawing any such statement.

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 as well as the risk factors including in relation to the current global pandemic that may project future performance results of OpenText are contained in OpenText's recent forms 10-K and 10-Q as well as in our press release that was distributed earlier this afternoon, 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 will hand the call over to Mark..

Thank you, Harry. Good afternoon to everyone, and thank you for joining today's call. I wish everyone health, well being, and happiness. The last six months has made it very clear that digital technologies are the key to business resilience and durability.

Organizations that own their digital capacity will recover faster and emerge stronger from this ongoing crisis. Resilience is the ability to recover quickly, durability is permanent, the ability to resist stress before.

It is also very clear that while the crises persist, there will be economic volatility and uncertainty, and there will be challenges and opportunities alike. Fiscal 2020 was a seminal year for OpenText. We rally around the principles of resilience, durability, change and opportunity to guide us through this difficult time.

The pandemic has validated our purpose to help companies digitize and transform. Now more than ever, customers trust and rely on OpenText's products and expertise to help them digitize their business as they navigate through a changing global environment.

The world runs on information from the debate on truth, the global pandemic response to the modern civil rights movement. The fact is information is more important than ever. For nearly 30 years, we have helped companies on a global basis across all industries, build cultures of knowing with our information management software and expertise.

Our leadership position and information management has never been stronger, and customers of all sizes continue to trust Open Text as they reset to a new equilibrium at work at home and at play.

The preemptive actions we took at the beginning of the pandemic are enabling us now to make significant investments in sales products and more automation positioning us to compete better and to gain market share regardless of the economic scenarios ahead. Let me begin by discussing our 20 results and accomplishments.

For fiscal 20 Open Text delivered record revenue, record annual recurring revenue, record cloud revenue, record gross margin dollars, operating cash flow and record free cash flow all during the most challenging economic period in our lifetime.

Total revenue of 3.1 billion of 8% year-over-year, record annual recurring revenue is 2.4 billion up 13% year-over-year, and now 78% of total revenues, 305 bps higher than fiscal 19. Cloud revenues of 1.2 billion of 28% year over year with a 347 bps margin increased to 61%.

Record customer support revenues of 1.3 billion up 2% year over year with a 25 bps margin increased to 90.4%. We also completed the year with record enterprise customer support renewal rates of 93.8%.

We generated 1.15 billion of adjusted EBITDA dollars, up 4% or 37% of total revenues, record operating cash flow of 955 million, up 9% year-over-year, record free cash flow of 882 million up 9% or 28.4% of revenue. Please note we're going to be using free cash flow going forward versus operating cash flows.

We ended the quarter with 1.69 billion in cash and the net leverage ratio approximately two times. Looking back from fiscal 11 through today, just looking back a little bit through today, AAR has expanded from 54% to 78% of total revenues. Cloud revenues have grown from zero to 1.2 billion or 37% of total revenues.

Licensed mixes only 13% of our business today compared to near 30% in fiscal 11.

And we deliver strong, gross margins over time, regardless of the mix of business that strong gross margins in the low to mid 70s and we expect continuous improvements in the future, and we've grown adjusted EBITDA from the high 20s to the high 30s from fiscal '11 through today.

Open Text business model is based on recurring revenue, which is significantly predictable. Strong margin and strong cash flows, and we've de-risked away from a volatile license led model, an exceptional accomplishments in the software industry. Let me transition to provide a few highlights from the quarter.

Within Q4 total revenues of 827 million, up 11% year-over-year, ARR of 658 million up 18% year over year, ARR was 79.5% of total revenue, card revenue of 333 million up 38%. Adjusted EBITDA of 317 million up 12% and a 38.4% margin, OCF was 284 million up 22% within the quarter, and free cash flow of 263 million up 21% within the quarter.

And in constant currency, this quarter also represents a 22nd consecutive quarter of year-over-year growth in total revenue and ARR. We're now cloud forest company with a rich installed base of customers. For the second consecutive quarter, cloud has become our largest revenue line. Cloud gross margins are 31.3% for the year, and 65.1% for the quarter.

And we have more room for margin improvement to scale, mix and more automation. As the cloud business continues to scale, it will get more efficient. Overall, it was a great quarter by all measures and I'm so proud of my colleagues for their focus and commitment to our customers. We continue to generate cash grow and have returns in the right places.

Leveraging the increased predictability that they are brings to our business model. We continue to take market share. We had many notable customer wins in Q4 that included the National Institute of Allergy and Infectious Diseases, the NIAID or NIH, which we announced today. Becton Dickinson, rapid radiology, U.S.

Defense Health Agency, Panasonic, Michelin, Merck, The Williams Companies and Amway. Let me highlight two today. The National Institute of Allergy and Infectious diseases, it's the leading research to understand, treat and prevent infectious immunologic allergenic diseases, including COVID-19.

The NIAID is expanding its partnership with Open Text and selected Open Text content suite. And app works to support enterprise wide, business operations to advance the NIH mission of turning discovery into health. We're very proud of our partnership with the NIH. Rapid Radiology is one of the largest teleradiology providers in the U.S.

Now they selected Open Text business network to streamline the delivery of radiology test results to electronic medical records.

The Open Text Business Network solution delivers the industry's only cloud integration service provide interoperability between all our chronic medical record systems and the long-term care market, ensuring seamless delivery of clinical results between providers and improving patient care.

This is particularly important with the move to increase remote work, as physicians and nurses are able to review lab results online and support personnel can review orders remotely. These wins highlight how information management is relevant and imperative and the digital technologies are the key business resilience and durability.

Customer purchasing decisions in the quarter continued to support the acceleration to digitize and the demand trends we outlined in our last call. Content services is being driven by the urgent need to digitize and migrate to the cloud.

Content services are a particular strength in healthcare and government, but we also saw notable wins and other industries. The momentum and content services is a direct result of the investments made in both R&D and vertical go-to-market since our acquisition of Documentum.

In business network, we saw volumes begin to recover from the quarter as supply chain reconfiguration continues, offset by lower secure messaging volumes in some impacted industries. In cyber resilience, we saw a very strong quarter given work from anywhere is here to stay.

In digital experience, the shift to supporting a customer through their entire lifecycle via an omni-channel digital delivery, direct-to-consumer, and contactless experiences. Our cloud based digital experience will become even stronger with some of our upcoming quarterly product releases.

Turning to our F '20 acquisitions, Carbonite delivered another strong quarter of operations, validating our expansion into SMBC markets and enhancing the strength of our cyber resiliency offerings.

Carbonite delivered $116 million of revenues in Q4 or $235 million since the date of acquisition, and continues to be accretive to adjusted earnings and cash flows and is on track to be on our operating model by the end of fiscal '21.

In fiscal '21, we will release new security enterprise offerings that leverage the capabilities of Carbonite, Webroot, BrightCloud, integrated with our existing encase offerings.

We had other notable accomplishments in fiscal ‘20 we strengthened and extended partnerships with Google and Amazon as part of our Open Text anywhere strategy and enhance our long standing relationship with SAP for cloud based content management.

We launched our next generation platform, the Open Text cloud editions in April, our CE20.2 and recently extended our content services technology for Microsoft Teams. Four years ago, we releasing product every 15 months. Today, we are releasing products every 90 days. Each release has more features and 20.3 is on schedule for this quarter.

Our delivery speed and capability is a long term competitive advantage. We used to get haircuts every six weeks, but now we really software every 12 weeks.

Finally, we were recognized by SAP as their Pinnacle award winner as the SAP Solution extensions provider of the year was our 13th consecutive year and by IDC and Aspire for a leadership in customer communications management.

Let me transition begin to look forward to the quarter in the years ahead, we continue to execute on our total growth strategy, of routine grow and acquire that we outlined our last investor day from New York City. Let me touch base briefly on each of these three pillars.

First retains, we have a rich installed base of customers, customer support and cloud renewal, a highly for a highly predictable business that continues to expand in parallel with our growth in the cloud.

We remain committed to giving customers choice in how they buy our products, where they deploy our products and giving them world class support, maintenance, and update rights.

Customer support is an important contributor to our ARR and we achieved the highest enterprise customer retention in our history this year at 93.8% and enterprise cloud renewal in the mid 90s.

As good as it is, we can we continue to see opportunities to improve, how? Compelling new features and expanded product offerings, factor cloud native product releases, products designed with automation for upsell and increase consumption built-in and apply our best-in-class customer support capabilities for SMBC channel.

Second pillar growth, we intend on growing and taking share regardless of the economic environment through continued investments and sales coverage, partnerships, cross-selling opportunities and product innovation. Let me double click on each one of those. First, continue to broaden sales coverage and expand our sales force in fiscal '21.

Second, continue to deepen sales coverage for the expansion of specialized sales groups, especially in the public sector security by scientists and legal tax. Third, deepen relationships with enterprise partners such as SAP, Google, Amazon, and Microsoft, so the number of partners in our SMB Channel.

In addition, each of our specialty sales units has built a partnership growth strategy. For cross selling our products, we will introduce an enterprise ready security platform in the second half of fiscal '21 that leverage is the combined capabilities of Carbonite, Webroot, BrightCloud and Encase.

We're also now selling select OpenText products such as OpenText Core and Hightail for our enhanced SMB channel. And finally, we are delivering more products to market at a faster pace than ever before.

Open Text's future product releases will include more SaaS offerings, self service on-boarding, seamless app to app and cloud-to-cloud integration, the new industry specific capabilities. And the third pillar is acquisitions. We continue to be a strategic disciplined value based buyer of companies.

This is an important aspect of our total goal strategy. With these strategic acquisitions we are better positioned to expand our product portfolio and improve our ability to innovate. We have the proven track record of integration, and we will continue to acquire businesses that deepen and strengthen our platform.

We believe return on invested capital ROIC is the best measure of success of our strategy and in fiscal '20, we achieved a ROIC of 17.6%, which remains consistent with our target range in the upper teens. We have a robust pipeline of acquisition opportunities that span the entire portfolio.

And our companies of all sizes we do expect to close deals in fiscal '21. These are all three pillars, retain grow and acquire. Let me turn to business outlook. First and foremost, we view our business as an annual business that has annual performance and annual trends over the long term that creates value. 90 day cycles are just too short the measure.

The economic volatility remains high and will persist during the global pandemic. We have some customer areas that negatively impacted like auto, airlines, retail, construction and services. We have some areas positively affected like government, customer experience management, security and work from anywhere technologies.

However, as of today, the positives do not outweigh the negatives given the global crisis. With that introduction, let me detail our annual business outlook for fiscal '21. We expect on a year-over-year basis, as it relates to revenue, cloud revenue to grow low double digit, customer support revenue to be constant, the ARR to grow mid single digit.

Licensed and professional services businesses to the client, which is consistent with the trends in the broader software industry impacted by the pandemic and consistent with our multiyear transition to cloud and ARR. And for total revenue to be constant and perhaps we get a few points of growth, so the economy recovers sooner.

For constant total revenue is our base case in this volatile economy. On innovation, let me call out engineering investments to expand to 12% to 14% of revenues, continue on our business outlook on non-GAAP margin, cloud margin targets expanding 500 basis points to 63% to 65%.

Total gross margin targets improving 150 bps to 74% to 76% and adjusted EBITDA targets expanding 200 basis points to 37% to 38%. Lastly and as noted earlier, we expect to deploy capital via acquisitions in fiscal '21. Our balance sheet and pipeline are strong.

The strength of our business model and operating excellence is demonstrated in our annual historical results and strong F '21 business outlook. For fiscal 21 Q1 we expect total revenue to increase high single digit year-over-year and adjusted EBITDA dollars to increase low double digits. FX is expected to be neutral in the quarter.

As for our fiscal 23 aspirations, our three year aspirations and with global crisis we are simply shifting our F '22 aspirations or adjusted EBITDA and cash flows out 12 months to fiscal 23, if the economy recover sooner, we will adjust the aspirations as appropriate, but specifically our F '23 adjusted EBITDA margin aspiration is in the range of 38% to 40%.

Now fiscal 23 free cash flow aspirations is 0.9 billion to 1 billion. Remember we're moving to free cash flow of our operating cash flow. The outlook continues to represent upper quad pile performance and adjusted EBITDA and free cash flow.

Also note that a long-term growth planning remains unchanged and we expect to continue to reinvest incremental adjusted EBITDA margin above 40% back into the business, supporting our long-term objective of driving further organic growth in a normalized demand environment. Today, we declared a regular dividend quarterly dividend of $0.17.46 per year.

The same as the prior quarter, Open Text strongly believes in returning value to its shareholders. And we intend on holding our dividend constant during the pandemic subject to board approval. Today, I'm also pleased to announce that our inaugural corporate citizen report will be released on our website next week on August 14th.

And I encourage everyone to read it. At the age of information disruption we see opportunity use technology for the greater good, and we aspire to unlock its potential to advance the siren goals and accelerate positive change.

That's the normal report establishes our ESG baseline and we intend to hold ourselves accountable to and we will report to you annually, we welcome your feedback and continuing and contributing to a better world. Let me summarize my prepared remarks.

The world runs on information and we are the leader in information management against the backdrop of the most challenging economic environment in our lifetime.

We delivered record results because we have the products that matter, customer relationships that matter a balance sheet that gives customers confidence that we will deliver on our commitments and an experienced leadership team that is ready for all scenarios.

We're in a new equilibrium in a new world, and we intend to gain market share regardless of the economic environment, because we're delivering more product innovation to the market faster than in our history. We continue to make investments and initiatives that would generate further in future organic growth.

We are a cloud force company that is committed to providing our rich install base of customers, that choice of cloud, all cloud integration, and a combination of both. We remain committed to our proven total growth strategy and we'll deploy capital when the right opportunity presents itself.

We also remain highly disciplined and are dedicated to driving shareholder returns through growth and free cash flows, transparent communications, and we turn a capital through dividends. On behalf of Open Text, we commend the brave women and men serving on the front lines of this pandemic, giving us healthy, safe, and productive.

I'd like to thank our shareholders or customers, partners, and 14,000 plus employees all contributing to our success and fiscal 2020. I'm so proud of the resilience and durability that Open Text employees continue to demonstrate. Open Text truly represents the culture of humble and hungry.

And our resolve is only strengthened by the energy and transformative impact of our customers, such as the NIAID, the U.S. Defense Health Agency, Panasonic, Merck, and Williams Companies, the most trusted companies truly trust Open Text. It's my pleasure to turn the call over to Madhu Ranganathan, Open Text Chief Financial Officer.

Madhu?.

Thank you, Mark. And thank you all for joining us today. Our fiscal 20 was a groundbreaking year in many respects. One with the Open Text operational excellence came through with its results. I'm humbled and proud to share them with you today. I will speak to Q4 to fiscal '20, fiscal 21 target model and our long term activation.

Please go to investor presentation that are posted on our IR website will also refer to my comments. All references will be in millions of USD and compared to prior fiscal year. And let me start with revenues and earnings. Total revenue for the quarter was 826.6, up 10.6% or up 12.2% on a constant currency basis.

For fiscal '20, our total revenue of 3.1 billion, up 8.4% or up 9.7% on a constant currency basis, there was an unfavorable FX impact to revenue of $12 million in Q4 and $37 million in fiscal '20. The geographical split of total revenues in the year with Americas 61%, EMEA 30% and APJ 89%.

Annual recurring revenues for the quarter were 657.5, up 18% or up 19.5% on constant currency basis. For fiscal '20 ARR was 2.4 billion, up 12.9% or up 14.1 on a constant currency basis, as a percent of total revenues ARR was 80% for the quarter and 78% for fiscal 20, up from 75% in fiscal '19.

Our cloud revenues are particularly strong at 232.6 to Q4, up 37.5% or up 38.8% on a constant currency basis. For fiscal '20, cloud revenues were 1.2 billion, up 27.5% or up 28.4% on a constant currency basis. The growth was primarily driven by continued successes with in business networks and the integration of Carbonite.

Our cloud renewal rate in the quarter remains in the mid-90. Our customer support revenues were 324.9 in Q4, up to 2.1% or up 4.7% on a constant currency basis.

For fiscal '20, customer support revenues of 1.3 billion, up to 2.2% or up to 3.7% on a constant currency basis, approximate the full renewal rate for fiscal 20 was 94% reflecting the strength of our rich installed base even during COVID times.

Off cloud revenues which represent our license and professional services revenues of 169.1 in Q4, down 11% and 676.5 in fiscal 20 downside 0.1%. Our license revenues were 105.8 in Q4, down 11.6% or down 10.3% on a constant currency basis.

For fiscal '20 license revenues were 402.9 down 5.9% or down 4.5% on a constant currency basis, primarily COVID related. Our professional services revenues were 63.3 in Q4 down 10.1% or down 7.7% on a constant currency basis. Our fiscal '20 PS revenues were 273.6 down 4% and down to 2.2% on a constant currency basis, in line with declining licenses.

Turning to GAAP net income and GAAP earnings per share, they were both impacted by Carbonite acquisitions related idle and special charges due to our recent good cash flow.

GAAP net income was 26.4 in Q4 down 53.3% and primarily due to $47 million of intangible amortization from Carbonite and 74 million of special charges relating to our recent restructuring. For fiscal '20, GAAP net income was 234.2 down 18%, adjusted net income was 217.8 in Q4, up 12% or up 12.5% on a constant currency basis.

For fiscal '20 adjusted net income was 784.5 up 5.2% or 7.3% on a constant currency basis. GAAP earnings per share diluted was $0.10 in Q4 down from $0.47 and $0.86 in fiscal '20, down $0.20 from $1.06. Non-GAAP earnings per share diluted was $0.80 in Q4, up $0.08 and $0.32, and also up $0.08 on a constant currency basis.

So fiscal ‘20 its $2.89 up $0.13 from 2.76 or up $0.18 per share on a constant currency basis. Turning to margins, GAAP gross margin for the quarter was 68.5%, up 20 basis points and fiscal '20 were 67.7%, up 10 basis points.

Adjusted gross margin for the quarter was 75.8% up 160 basis points and for fiscal '20 was 74.5% up 40 basis points, both solid improvement on a year-over-year basis.

Also on a adjusted basis, cloud margin was 65.1%, for Q4, and 61.2% for fiscal '20, up from 57.8%, driven by continued improvements and higher, even though at gross margins from Carbonite revenue which are predominantly cloud. Our customer support margin was 90.1% for Q4, and 90.4% for fiscal '20 up from 90.1%.

The second continued stronger deliver performance. Our license margin was 96.8% for Q4, and was 97.2% for fiscal ‘20, up from 96.6%. Our professional services margin was 24.1% for Q4 and with 22.7% for fiscal ‘20, up from 41.8%. Adjusted EBITDA was 317.4, this quarter, up 11.8% or up 12.1% on a constant currency basis.

For fiscal ‘20 adjusted EBITDA was 1.1 billion, up 4.2% or up 5.7% on a constant currency basis.

This represents a 36.9% margin down from 38.4% as we integrate Q4 quarters of Carbonite and higher than 25 models range of 35% to 36%.For our fiscal ‘20 target model, we ended fiscal ‘20 at or at the high end of our target model changes, notably in annual recurring revenue, trial gross margin, overall gross margin and adjusted EBITDA margin.

Turning to operating cash flow, it was excellent performance 280.3 for the quarter and effective 954.5 for fiscal ‘20 up 8.9%. Our free cash flows for fiscal ‘20 was strong at $882 million an increase of 8.5% Q4 DSO was 51 days, compare to 6 days in Q4 '19.

Our continued investment in occupations and treatments and the integration of Carbonite, led to higher collection efficiencies, lower DSOs and strong cash conversion cycles.

Additionally, during Q4, we declared approximately 41 million in tax payments primarily as a result of the CARES Act that was enacted in the United States in that first quarter the fiscal '20 and other COVID-19 related tax relief programs in EMEA. These deferrals will be paid during fiscal '21 and '22.

We have built a tight and near real-time framework internally to closely monitor customer trends and remain watchful of economic backdrop as it relates to both our enterprise and SMB customers base. And looking ahead, we are introducing free cash flow metrics and our long-term aspiration.

Turning to balance sheet, we ended the year with approximately 1.7 billion in cash, given our strong cash flow performance. Our 600 million revolver remain strong as a preemptive measure in the current environment. Our consolidated net leverage ratio is 2.04 time than improve 30.25 times last quarter.

And update them Carbonite, Q4 is the second full quarter with Carbonite results. Our proven fact record of integration experience is being illustrated through Carbonite.

Since the close of the acquisition on December 24, 2019, the integration activities have remained steadfast in every aspect of the business, go-to-market, products and engineering, G&A and systems. You see proof in our results.

Carbonite delivered another strong quarter of results, adding to critical elements of a financial model, annual recurring revenues, cloud margin, adjusted EBITDA and working capital. We remain on target to get Carbonite to our operating model into fiscal 2021.

And now to our restructuring plan, during the quarter, we implemented COVID driven restructuring activities to streamline operations and reduce real estate around the world, as previously announced during our fiscal Q3 earnings call. We incurred approximately 54 million of special charges relating to these activities during the course.

As a reminder, we anticipate annualized expense savings of approximately 65 million to 75 million once completed. The substantial utilization of the savings to start in fiscal '21 and incorporated in our target module for fiscal '21.

Quarterly factors, so let us summarize the quality factors we anticipate for upcoming Q1 also provided in our quality deck with IR website. On a year-over-year basis, we expect Q1 fiscal '21 FX impact to be constant, our revenues in three parts of the budget and adjusted EBITDA dollars to increase in the low double-digit.

Now turning to fiscal '21 targets model, we published a model today which as a reminder is included in our quarterly deck on the IR website. First, and for the first time, ARR is expected in the range of 80% to 82% of total revenues, up from our full fiscal '20 results of 78.2% of revenues.

Also for the first time, cloud services and prescriptions revenues increased to a range of 41% to 42%, up from 37.2%. Our customer support will remain in the range of 38% to 42%.

Off cloud revenues licensed to decrease to a range of 10% to 13% and professional services to decrease to a range of 6% to 9%, we're expanding our gross margin by 100 basis points to a range of 74% to 76% and adjusted EBITDA margin rate also expanded to 37% to 38%. So let me provide more context of expensive margins.

Throughout our history as the mix of license and proudly shifted, they have continually expanded the gross margins from 72.2% in fiscal '15 income to 74.5% in fiscal 20. We expect this trend to continue as a cloud shift company, a rich installed base of customers with high renewal rates and high and expanding annual reporting revenue.

Our cloud revenue should grow in the low double digit in fiscal 21, the gross margin target model things it's between 50% and 65% aided by Carbonite in the low 80s gross margin along with continued improvements to scale in mix of automation.

With respect to customer support, while revenues remain costumes in fiscal 21, our expanded product offerings, compelling features, including those designs automation for up sell will enabled up to maintain and even gross margins for customer support.

The expanded gross margin range of 74% to 76%, will enabled us to fully integrate Carbonite, expand our R&D investment to living that 12% to 14% of revenue and delivered an adjustment 37% to 38%.

And also long-term aspirations as outlined in March in my earlier comment, growing annual recurring revenue and expanding margins has been a highly successful multi-year journey at Open Text. We expect that trend to continue as reflected in our long-term aspiration.

So looking into fiscal 23, we’re targeting adjusted EBITDA aspirations of 38% to 40% and reminding you of our plan to reinvest any margin gains above 40% into additional growth initiative. Our long-term aspirations include SPS. For fiscal 23, our SPS targets is 900 million to 1 billion and our OCS target is 1 billion to 1.1 billion.

For a tax update the IRS matter is still reappeal pace and our results remain strong as you continue to vigorously defend that position. Finally turning to our dividend program today, we announced a quarterly dividend to $17.46 per share payable on September 25, 2020.

Organic growth in an annual and year-over-year basis, annual recurring revenue, ARR, it's remained in the continued to be a key indicator of our organic growth. In constant currency, our ARR grew organically by 0.5% total fiscal 20. Total organic revenue was down.

1.3% is constant currency during fiscal 20, in practice primarily, but licensed volatility gives a pandemic and global macro environment, noting that'd be attracting to what's positive organic growth in fiscal 20, prior to the pandemic.

Now turning to ROIC, our return on invested capital it was 17.6% compared to 18.7% last year, which remains within our target range to be in the upper teen. But in summary, we humbly and proudly take a solid fiscal 20 result as a platform to strongly navigate the macro environment challenges into fiscal 21 and the long-term.

We believe they're well positioned to take market regardless of the economic environment. And finally, especially thank you the entire Open Text community for their incredible efforts and to our shareholders who’s trust and competency greatly value and wish you in future all safety and good health.

I would now like to turn the call over for your questions, operator..

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Raimo Lenschow of Barclays. Please go ahead..

This is Frank on for Raimo congrats for another really strong quarter. Just one from you in the customer conversations, so last quarter, you've mentioned that the pandemic made things very binary, where if you had a need, you put something on board very quickly.

Could you give a little bit more color into how those customer conversations kind of progressed throughout the quarter?.

Yes, thanks Mark here. Thanks for the question. Yes, just like I kicked off my introductory remarks on the script. The last six months have just made it very clear that digital technologies are the key to this business resilience and durability.

So, we've seen very solid conversations around kind of core digitalization, the ability to support a work from anywhere environment as a data management, collaboration, workflows, electronic signatures. So, that's an area that we think that will continue to accelerate for us. Second is in the world of contactless and direct-to-consumer.

We've seen a real strong interest in our digital experience platform, which was another place of strength for us. So, the conversations on digital continue to accelerate.

They are right in the core of our wheelhouse of content services, plus our technologies of work from anywhere and customer, customer experiences in our customer experience platform calling direct-to-consumer and in contactless activity..

Our next question comes from Stephanie Price of CIBC World Markets. Please go ahead..

I guess you could dig into the fiscal '21 revenue expectations a little bit more.

And I guess I'm talking about the puts and takes, led to an expectation of constant revenue growth, maybe specifically in the off cloud business and the cloud X Carbonite?.

As we look into fiscal '21, we expect cloud revenue to grow low double digit, customer support revenue to remain constant in the year, and that sort of models out annual recurring revenue to grow in the mid single digits.

And we're communicating today that we expect license to professional services to decline sort of consistent with the broader trends in the software industry impacted by the pandemic and the deferral by some companies of transactions here in the short term, airlines, auto, hospitality, retail, those industries are down for us.

But we're also seeing industries off like government, healthcare manufacturing, work-from-home, but the up areas don't offset or the down areas at this point. So, we think it's prudent to kind of look at our licensed and professional services to decline.

And that brings us to that brings us to total revenue, which we're expecting to be constant year-over-year, but if we get some help from the economy, we're hoping to get a few points of growth, but that's more dependent on the economy than us. I'll also note, we are not losing to competitors, right. In fact, we see competitive strengths.

This is more driven by the demand environment than by a competitive environment. Within cloud, we see Carbonite on plan, our managed services remain strong, but the transactional volumes, as we talked about last call did decline.

We're off our lows and we're increasing again, but the new volumes don't completely offset the effective volumes, if you will. We haven't a lot of customers. We're not losing to competitors. But again, we did see -- as we talked about last time, volumes were down we are off those lows now..

Okay, great, thanks. That's good color.

And then in terms of Carbonite, sounds like it's still doing well, can you talk a little bit about the demand you're seeing especially in the SMB market there?.

Yes. The business has been incredibly resilient in our first six, seven months of owning it, we whining back to December when we closed the transaction our thesis was that it's not just the cloud alone, its Cloud plus the Edge and no edge, no cloud, no edge and here we are, we are all on the edge so to speak, working from everywhere.

So, the two go hand-in-hand and we really like the technologies of data protection, threat intelligence, threat protection and having those technologies available from work from anywhere. So we're pleased with our progress. We're on target to complete the integration. Here in fiscal '21. The basis has been on our internal plan.

The SMB channels have been very resilient. And we've actually in one of the areas of where demand is up. It's actually our work from home technology, work from anywhere technology. We are very please to our progress..

Our next question comes from Thanos Moschopoulos of BMO Capital Markets. Please go ahead..

Mark just extending on Carbonite, clearly much stronger than you'd expected.

So was that more payouts churn holding in better than expected or new customer activities being stronger than expected or a combination of both?.

Yes, it's a basket of activities. Overall, the business has been amazingly resilient here during the pandemic. The -- let's take it in its pieces. The OEM part of the business BrightCloud been very resilient that we've added, during the first six months, a few dozen new embedded partners.

The SMB channel, our channels probably a little more resistant than others, since we have larger RMMs that helped consolidate SMB for us. Renewal rates for end consumers have been very strong given work, work-from-anywhere, and our new kind of direct marketing activities has shown some early signs of promise.

And actually Thanos, we come into fiscal '21 one of our big efforts is cross-selling and having our enterprise teams now bring Carbonite to the enterprise. We are also on plan and all our integrations system, people, et cetera.

So it's a combination of renewals, combination of some new demand of work from anywhere, and some early signs of cross selling into the enterprise..

And you mentioned the launching the core and hightail through the channel moving a timing a bit, and how may the pandemic affect the uptake you might see?.

Yes, it's, like to start of any new fiscal year gives you an opportunity to do new things and align your organization. So we launched in July just a few weeks ago, having our SMB C teams bring core share core signature and hightail through the SMB channel.

So we've only been at it for a few weeks, but it's very relevant and applicable in a very elaborately sales play from how they bring Carbonite and Webroot to market. But we've only been at it for a few weeks, and we'll keep you updated as we go along here in fiscal '21..

Our next question comes from Paul Steep of Scotia Capital. Please go ahead..

Mark, could you talk a little bit about what changes, if any, you've made to sales comp or key metrics that might be looking to drive greater cloud revenues into fiscal 2021 and maybe further deemphasize the license side of the business?.

Paul, thanks for the question. We've had great stability in our sales organization, both the leadership or sort of field structure, we call them selling hubs, U.S. West, U.S., East Canada, Southern Europe, we call them, selling hubs, if you will. And we had great stability and kind of our named account model on the specifically in the enterprise.

So, as we come into fiscal '21, leadership very stable, structure very stable, we haven't changed our comp plans coming into fiscal '21, an AE is incented to hit an annual number that can be either retired through MCV, guaranteed cloud contract or license. And it's really driven by how the customer wants to consume.

And I've never believed that, quote unquote, back at corporate, we can tell an AE in Talos. France and their customers in Talos, right, how they should consume. So we haven't made any changes. We certainly go in and advocate clouds first in what we're doing. We have though made some changes around account prioritization.

We're emphasizing a little less the affected industries like airlines and auto, and spending more time on health care of government and manufacturing, but Paul no changes to the comp plan coming into fiscal '21..

One quick follow-up to that clarification, embedded in the numbers next year with the further acceleration of cloud.

Is there an implicit assumption that 20.3 or security offering actually force broader migration to the base?.

We are a cloud first company. We are -- it's very clear in our history of how we have transitioned to annual recurring revenue, which we expect for fiscal 21 to be between 80% to 82% of our business, we're releasing every 90 days new product releases and we release first into the cloud.

So, customer, we're still going to support customer choice of how they consume. We have one cloud line for cloud and off cloud. We released first into the cloud, other great benefit to being the cloud.

It's our largest opportunity we will, of course continue to sell licenses and support hybrid but it is a cloud first world and 20.3 certainly supports those principles..

Our next question comes from Richard Tse of National Bank Financial. Please go ahead..

Mark. I think you said you guys are still going to be active on acquisitions here. And my question is.

Can you maintain the same level of cadence in terms of the number of deals in terms of the magnitude? Can you also still pursue these larger opportunities assuming this backdrop continues for another more quarters or so?.

I believe we can, we have a very experienced team, very experienced both, got a great leader, Doug Parker of the organization. We have our approach and methodology.

We also know that markets intimately, and I mean there are ample targets within our core markets of content services, business network, digital experience platform, cyber resilience and advanced technology. I wouldn't want to enter a new market segment at this point in time while lot pandemic present.

But Richard, we know our core markets extremely well. We know those competitors, we know their business models and it is ample pipeline and opportunity for us. So it's study as we go on M&A, our balance sheets ready, our team is ready, or the pipeline for data is stronger.

And we expected to deploy capital in fiscal 21 that the pandemic isn't going to slow us down a craft. Of course our due diligence is going to include how COVID-19 has affected a potential target and our customers. So that's important built, but it doesn't slow down our passing effect to kind of a target set for us..

Okay. That's fair. Thanks. I don't know if there's a fair question sort of looking at your investor deck that you have when you have the investor day down in your, into to the growth drivers was one expanding into the 10,000 customer base, and then to expanding adoption within the 74,000 customers.

I don't want to throw you in the backdrop, but can you give us maybe a sense of whether or push that those objectives out to your next investor day and looking at the 2021, or did you make quite a bit of progress on that in 2020?.

Let me just get a little drink of water there. I don't recall the specific metrics maybe you have them that we had in the New York investor deck, but I can say across two of our greatest thought enterprise sales opportunities is expanding the G-10K but we did expand coverage.

One of the things we did in fiscal '20 as we put a new global account management team in place. And I'm real pleased and excited about that dedicated team. I'm looking at global accounts, and we expanded the coverage to kind of see if there was a specific number there.

And cost volumes in install base, the great opportunity to cloud and continue to drive managed services, which is private clouds, cross selling opportunities, like customer experience management work-from-home technologies, Carbonite and other offerings and upgrading into 20.2 and 20.3.

So G-10K installed base remains, front and center for us for growth..

Thank you, Martin. I was just going to add. If you look at our investor deck on Page 25, we continue to do today that as a goal in terms of doubling the coverage of Global 10-K over the next few years, so like Mark said, absolutely font incentive for us..

And Richard, It's also an important point, if I can just add to it. In a time of like this, it's important to leverage existing relationships. And that's why the install base is so important.

We're a trusted provider, we have a proven track record, and being able to go into our install base and leverage that history, a track record of delivering benefits and balance sheet strength to sell the next module. The next platform is a long-term strength for us and one that will help us gain share over less stable competitors..

Our next question comes from Paul Treiber of RBC Capital Markets. Please go ahead..

Thanks very much and good afternoon.

In regards of the outlook for fiscal '21, in regards to the pandemic, do you see the headwinds or the delays from a pandemic weighing both equally on licensing cloud for new bookings? Are you seeing in cloud demand is more resilient or even increasing whereas majority of the headwinds are on licenses?.

Renewals have been amazingly resilient for us as you can see in the numbers. Renewals are not just support it's the ability to get value from the software, its ability to speak to experts just product updates, its security, patches, and updates services.

And as you can see in the numbers, that's been amazingly strong for us, year-over-year growth, great margins, high renewal rates. There is certainly in a time of crisis. It's accelerated customer interest and time to value. So, I would put the emphasis on time to value.

So, if we can show time to value in a managed service that could include a license or time to value in our cloud, there's really a premium on time to value. As you know through time, we've been on an ARR and cloud transition where back in fiscal '11 cloud was -- excuse me, license was near 30% of our business and today's 13% of our mix.

So, I think the pandemic is revealing the need for time to value. And we still can provide that regardless of the way a customer consumes. But it also does put a bit of an emphasis on cloud, so you typically you can get time to value in our managed service or in one of our SaaS offerings..

And then following up on that cloud additions to launched, now how is the pipeline building versus your expectations.

And how -- in terms of bookings or MCV for cloud products this past quarter, maybe without providing a specific number but just how was that the new deal close environment for cloud this past quarter?.

As you, -- with 20.2 and now 20.3 almost here, you're the reaction 20.2 has been really very, very favorable. We were on the VP releases and getting features out. And you see in the renewal rates, just how strong they are. You also see it and I think a strong cloud number from fiscal '20. So, customers have really liked our ability to release quickly.

So, we're getting better at having customers be able to consume it very quickly and we solved for releasing every 90 days. We've solved for having it run anywhere with two containers. We're now solving for the ease of consumption and the automatic way to turn on, on new modules. So, first take is very, very positive.

And as I highlight the script, I think this is a long term differentiator for us. But I think of it as a series of things, getting the time down, getting the features up, it's getting it to run anywhere. It's now turning into the ability to consume it much more quickly, and automatically turn on new capabilities..

This concludes the question-and-answer session. I will hand the call back over to Mr. Barrenechea for closing remarks..

All right, well, I'd like to thank everyone for joining today's call. And again, I wish everyone or health well being and happiness and look forward to continuing to engage in the coming days and reach, and see you digitally in our upcoming conferences. Thank you for joining today's call..

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