Aug 11, 2011
Executives
Paul McFeeters - Chief Financial Officer John Shackleton - Chief Executive Officer, President and Director Greg Secord - Vice-President of Investor Relations
Analysts
Kris Thompson - National Bank Financial, Inc. Brian Freed - Wunderlich Securities Inc.
Sera Kim - GMP Securities L.P. Paul Steep - Scotia Capital Inc.
Mike Abramsky - RBC Capital Markets, LLC Richard Tse - Cormark Securities Inc. James Wood - Susquehanna Financial Group, LLLP Stephanie Price Gabriel Leung - Paradigm Capital, Inc.
Scott Penner - TD Newcrest Capital Inc. Steven Li - Raymond James Ltd.
Eyal Ofir - Canaccord Genuity Tom Liston - Versant Partners Inc.
Operator
Good afternoon, ladies and gentlemen. Thank you for standing by.
Welcome to the Open Text Corp. Fourth Quarter and Fiscal Year 2011 Financial Results Conference Call.
[Operator Instructions] I'd like to remind everyone that this conference call is being recorded today, Wednesday, August 10, 2011. I will now turn the conference over to Mr.
Greg Secord, Vice President, Investor Relations. Please go ahead.
Greg Secord
Good afternoon, and thank you for joining us. Please note that during the course of the conference call, we may make projections or other forward-looking statements relating to the future performance of Open Text or its subsidiaries.
These oral statements may contain forward-looking information, and actual results could differ materially from a conclusion, forecast or projection in the forward-looking information. Certain material factors or assumptions were applied in drawing a conclusion or while making a forecast or projection, as reflected in the forward-looking information.
Additional information about material factors or assumptions 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 a conclusion while making a forecast or projection, as reflected in the forward-looking information, are contained in Form 10-K and Form 10-Qs of Open Text, as well as in our press release that was issued earlier today. And with that, I'll turn the call over to Paul.
Paul McFeeters
Thank you, Greg. Turning to the financial results.
I will highlight our fourth quarter and end of fiscal year 2011. Total revenue for the quarter was $285 million, up 19% compared to $240 million for the same period last year.
License revenue for the quarter was $80 million, up 16% compared to $69 million reported for the same period last year. Maintenance revenue for the quarter was $151 million, up 17% compared to $129 million in the previous year.
Services and other revenues in the quarter were $55 million, up 31% compared to $42 million in the same period last year. Gross margin for the fourth quarter before amortization of acquired technology was 73.2% compared to 74.9% in the fourth quarter last year.
Services margins were lower in the current quarter due to supporting customers from our recent acquisitions to achieve previous commitments and delivery of service for lower than our normal rates. This negatively affected overall gross margins by 1%.
The pretax adjusted operating margin before interest expense was $74 million this quarter compared to $77 million in Q4 last year. Adjusted net income increased 12% to $52 million this quarter from $55 million in the fourth quarter last year.
Fourth quarter adjusted earnings per share was $1.05 on a diluted basis, up 11% from $0.95 per share for the same period a year ago. The sequential effect of foreign currency movement on adjusted earnings per share for Q4 was a positive $0.02.
Net income for the fourth quarter in accordance with GAAP was $29 million or $0.49 per share on a diluted basis, compared to $53 million or $0.92 per share on a diluted basis for the same period a year ago. This decrease was primarily related to the onetime tax credit last year due to our corporate reorganization that we have previously discussed.
There were approximately 58.6 million shares outstanding on a fully diluted basis for the quarter. Turning now to our fiscal 2011 results.
Total revenue was $1.033 billion, up 13% from $912 million in fiscal 2010. License revenue was $269 million, up 13% compared to $238 million last year while maintenance revenue was $551 million, up 10% compared to $507 million last year.
Services and other revenue increased 22% to $204 million. Gross margin for the fiscal year before amortization of acquired technology was 74%, which remained the same as in the previous year.
Pretax adjusted operating margin before interest was $285 million for fiscal 2011 compared to $254 million in the previous year. Adjusted net income for fiscal year 2011 was $234 million or $4.02 per share on a diluted basis compared to $178 million or $2.10 per share on a diluted basis for fiscal 2010.
This represents an increase of 32% in adjusted net income and an increase of 30% in earnings per share. Overall, our fiscal 2011 tax rate for adjusted earnings is 14%.
On a go forward basis, for fiscal 2012, we expect the tax rate for adjusted earnings to remain at 14%. We reported GAAP net income for the year of $123 million or $2.11 per share on a diluted basis, up 38% compared to net income of $89 million or $1.55 per share on a diluted basis in fiscal 2010.
On a year-to-date basis, operating cash flow was $223 million compared to $180 million last year, an increase of $43 million. On the balance sheet at June 30, 2011, deferred revenue was $266 million, compared to $230 million, as of June 30, 2010, and accounts receivable was $155 million compared to $132 million at the end of last year.
Days sales outstanding was 49 days, as of June 30, 2011, compared to 50 days at the end of last year. On July 13, 2011, we announced our acquisition of Global 360.
The total consideration paid was approximately $250 million in cash. We expect this acquisition to be accretive to our operations in fiscal 2012.
We will record an accounting adjustment in the range of $4 million to $5 million to the acquired deferred revenue from Global 360. We also anticipate special charges in the range of $15 million to $20 million.
There's no change to our pretax adjusted operating model for this quarter, and we expect our annual operating net margin model to continue to be in the range of 25% to 30%. The acquisitions in fiscal '11 impacted our adjusted operating margins by slightly over 1%.
These acquisitions alone with Global 360, which closed at the beginning of this quarter, will continue to have a similar impact on the overall operating margins in fiscal '12 as we continue to bring them up to Open Text operating model. We anticipate that this will improve through the year, but will not be fully on target until fiscal '13.
The full details of our operating model is available on our website. As previously announced, we anticipate that Open Text will raise $600 million of term loan B debt in September subject to market conditions.
Approximately 1/2 of the proceeds will go to pay off the existing term loan B, plus an amount to fully repay the remaining outstanding line of credit of $73.5 million used to close the Global 360 transaction. Based on the new terms, debt of 7 years, we would expect to swap some of the floating rate interest to fixed rate just as we did with the previous debt.
I would estimate that an all-new rate, including the swap rate, would be between 4% and 5%. Now I'll turn the call over to John.
John Shackleton
Thank you, Paul, and good afternoon, everybody. I'm pleased with our performance this quarter and for the fiscal year.
With a 30% increase in adjusted earnings per share, we delivered strong value to our shareholders in fiscal 2011. All regions showed strength, and even with the continued tough economy our pipeline continues to grow.
As Paul mentioned, in the quarter, we generated $80 million in license revenue. With North America responsible for 51% of the revenue, Europe for 42%, with the remaining 7% coming from Asia Pac.
While we're still navigating the economic challenges of global IT spend, we're seeing particular pick up in emerging markets with areas like Brazil and China. Overall, we closed the quarter with a combined sales force of approximately 400 quota carrying sales executives, in line with last quarter.
While compliance-based solutions were responsible for many of the large transactions, we continue to see an increase in productivity-driven solutions particularly around Web Content Management, Digital Asset Management and our ERP integration offerings. In Q4, we saw license revenue broken down by vertical, as 23% from financial services, 14% from healthcare, 14% from service companies, 14% from public sector, 13% from technology, 9% from base materials, 5% from consumer goods and 4% from utilities.
In the quarter, 40% of our license revenue came for new customers, slightly higher than usual. Taking a closer look at the transactions in the quarter, we had 9 transactions over $500,000, an additional 5 transactions over $1 million.
This compared to 11 transactions over $500,000 and 4 transactions over $1 million in the same period last fiscal year. On an annual basis, we had 30 transactions over $500,000 and 23 additional transactions over $1 million.
Examples of significant wins in the quarter include Munich Re, a longtime Open Text customer who selected the Open Text suite enterprise-wide. This ECM suite will integrate with Munich Re's main business applications including SAP and their existing SharePoint environment.
A large cabinet-level department of the U.S. Federal Government has extended its Open Text ECM deployment with several new solutions, extending their compliance solutions across the enterprise.
RheinEnergie, an existing customer as well, also expanded ECM deployment with the purchase of Open Text Document Access for SAP solutions, Content Lifecycle Management, E-mail Management and Case Management Framework. SAP, Oracle and Microsoft all continue to report increasing product demand for ECM solutions in archiving, records management and compliance.
License revenue from partners and resellers was approximately 36% in the quarter and 40% for the full fiscal year. SAP continues to track at approximately 10% of our annual license revenue.
In the quarter, we were named a Microsoft Global Launch Partner for SQL Server Denali, a new cloud-ready offering that will support our core ECM products. At SAP Annual SAPPHIRE Conference in May, Open Text was awarded 2 Pinnacle Awards: One, the Global Software Solutions Partner of the Year and Global Enterprise Support Partner of the Year.
We also introduced a new Travel Receipts Management Solution that will be resold by SAP. Sales of Open Text Oracle-related products are up 140% from last year, and we added several new and prominent customers this past quarter.
We continue to see growing demand for Open Text Content Access and Accounts Payable for Oracle applications, which complement Oracle's e-Business suite, as well as PeopleSoft and JD Edwards applications. In the quarter, we announced several government partnering initiatives.
We signed an agreement with the Commonwealth Secretariat to create Commonwealth Connects, an innovative Internet gateway to connect governments across the British Commonwealth, allowing members to share information and collaborate online. In the quarter, we announced the new major release of Open Text Social Workplace that offers full integration with our ECM Suite.
In the quarter, Open Text also joined forces with the Institute of Public Administration of Canada to launch a cloud-enabled collaboration and social media site. Based on our new Social Workplace software, this site will connect all levels of international public service employees.
Our mobility strategy remains a focus, and with the addition of weComm technology early this year, we're building our wireless apps for a growing number of new mobility platforms. We also see BPM workflow becoming an essential part of ECM deployments where employees are reliant on the use of their mobile devices to perform day-to-day duties.
In July, we announced our acquisition of Global 360, a prominent BPM provider based out of Texas. This acquisition furthers our strategy to consolidate leading BPM technologies.
As we integrate these functions into our comprehensive ECM suite, we'll be focusing on distributing BPM solutions to an even larger global market. At this time, we're planning to consolidate.
We expect some typical disruption in first year license sales. The license revenue run rates for both Metastorm and Global 360 businesses are expected to decline at about the 10% range in the first year, unlike the usual 20% to 30% decline we normally see.
However, we will be consolidating both the Global 360 and Metastorm into one operation and expect these BPM businesses to return to normal growth in fiscal 2013. Turning to our outlook for FY '12, the industry analysts continue to tell us that they expect ECM license revenue growth in the 7% to 11.5% range over the next few years.
After examining these projections, we remain confident that with our overall pipeline, we're happy with our current operating model. We continue delivering on our published annual margin and profitability targets.
With that, I'd like to open up the lines for questions.
Operator
[Operator Instructions] Your first question comes from the line of Mike Abramsky with RBC Capital Markets.
Mike Abramsky - RBC Capital Markets, LLC
Yes, John, and just kind of referring back to a question you answered last quarter on your license outlook. You had sort of indicated I think that you were expecting a slightly higher, I think, 20% to 30% quarter-over-quarter.
You delivered about 17%. So I'm just wondering if -- yet you're still I think in a positive sense talking about sustained good pipeline opportunities despite the macro.
So can you just kind of reconcile that a little bit for us?
John Shackleton
I think some of the issue might be around the new acquisitions that we've done. So as we get them on board, it should well probably be at 20%, but our core business was right on target where we expected it.
Mike Abramsky - RBC Capital Markets, LLC
Can you just expand on that a little bit, John, just so we understand what the kind of down step in license is going to be on, is that just an interim or is that kind of a bit of a steady state, lower run rate for now? And then you talked about the impact of consolidation on license run rate, so can you give us some direction on that?
John Shackleton
Actually, Mike, I think it was just as we're on ramping the company it was just a short term. What I actually see is that this quarter as we go into the new Q1, I do see, as we've mentioned before, getting closer to our original seasonality so that I do see the Q1 should be picking up much more in the 20%, 25% range that it has in the past.
So I would see certainly -- that was from the Metastorm side, I would see it picking up -- sorry, the 20% to 25% would be down over Q4 as opposed to the 35%.
Mike Abramsky - RBC Capital Markets, LLC
From Q4 to Q1 would be typically down 20% to 25%?
John Shackleton
Right.
Mike Abramsky - RBC Capital Markets, LLC
And that's on license?
John Shackleton
Exactly.
Mike Abramsky - RBC Capital Markets, LLC
So that's kind of the pattern. And where you are in the quarter right now, are you still -- how are you feeling about either the issue of deal slippage and lumpiness which is kind of typically a factor for you the risks of those things?
John Shackleton
Right. As we've said, I think we're back -- we should be back to our normal seasonality, and it's looking pretty good.
Mike Abramsky - RBC Capital Markets, LLC
And then lastly on the margins, your sales and marketing expense was up to 26% of revenue. You had 23% in Q3 and 20% last Q4.
So can you just give a sense is this a leading indicator for investment? Because typically, if you guys see bigger headwinds, you historically you've tended to kind of pull back cost pretty quickly.
So can you sort of give us some color on what's going on there?
Paul McFeeters
Mike, it's Paul. That really has most to do with, again, Q4 seasonality and I know you pointed out compared to Q4 last year.
So even on a seasonality basis, yes it's a little higher than you might expect, and that has to do with a few larger transactions, a little more skewing of accelerators on the overall sales team. So my answer to your question about going forward is no, you would see that normalize again to our operating model going into Q1 and through the year?
John Shackleton
Yes.
Mike Abramsky - RBC Capital Markets, LLC
And what would that operating model just remind us on that line?
Paul McFeeters
It's in the 21% to 23%, in that range.
Mike Abramsky - RBC Capital Markets, LLC
21% to 23%?
Paul McFeeters
Yes.
Operator
Our next question comes from the line of Tom Liston with Versant Partners.
Tom Liston - Versant Partners Inc.
Just on a theme, could you just comment overall on how StreamServe and Metastorm are integrating? And it sounds like the license might have been slightly throwing this off, but just an overall commentary on integration?
John Shackleton
StreamServe is doing very well. In fact, a little over target for the year and the integration in general is going well.
We're very pleased with it. On the Metastorm, as you may know in the BPM side, they do have some larger transactions and so if things slipped, it can have an impact for them.
We are working on smoothing those pipelines out for them. And so as I said I believe it's just a one blip as we're coming onboard.
From an actual just integration and operations in general, it's going very well. I think we're right on schedule, if not a little ahead of schedule on the integration.
And it's a good team of folks that we've seen.
Tom Liston - Versant Partners Inc.
Do you think there was maybe some hesitation as you're acquiring for some of the bigger deals just to see how things to shake out?
John Shackleton
Could've been. There was a couple of delays that we saw, and I think that probably was the reason why.
Tom Liston - Versant Partners Inc.
And on Global 360, one of the reports were talking about strategic BPM growth recently being in the 30% range. Could you kind of define that for us and help talk about the profile, the revenues?
John Shackleton
Actually, I think the analyst got our IDC, et cetera. They're talking more in the 11% to 13% range through FY '13 which seems to be more in line with what we're seeing, but a healthy pipeline I believe.
Tom Liston - Versant Partners Inc.
But you would see that obviously coming down a bit as some of the stuff on integration?
John Shackleton
Yes, so what we'd see is it's a little bit off that as we integrate the 2 together.
Greg Secord
Just to be clear, Tom, that, that was a side view. That was a subset of the business that they were talking about.
Tom Liston - Versant Partners Inc.
Yes. No, that's what I was trying to hone in on.
And Paul, just for clarity, typical operating margins of 25% to 30%, you say -- I believe you said about a 1% hit. Does that mean off of Q4 up to 25.8% or the bottom end of the range might come in slightly below that in the first part of the year?
Paul McFeeters
Usually, Tom, in this case also I think about our operating model on an annualized basis because, as you know, the seasonality affects the margin. So there was the 1% I referred to in the gross margins when I talked about the services cost.
And the other part, that was brought up earlier about sales cost, I would say that was about 1% off, I would call, kind of a normalized, even seasonality normalized Q4. So reconciling that, I'd put those sort of 2 points back in on a normal basis.
Talking about our operating model, on an annual basis, I think you'll continue to see us in the range that we have on an annual basis because the continuing impact of the acquisitions is about 1% as I mentioned.
Operator
Your next question comes from the line of Richard Tse with Cormark Securities.
Richard Tse - Cormark Securities Inc.
John, historically, you guys have been fairly aggressive on moving out the costs here on acquisitions. It seems like less so for the recent acquisitions.
Can you elaborate in a bit more detail as to why that's the case here?
John Shackleton
Particularly on the BPM side, so obviously, we'll do the usual back office integration, et cetera. But both -- if you look at Global 360 and Metastorm, they're actually quite complementary.
The Global 360 is more focused on the content -- BPM from a content aspect. The Metastorm is much more of the actual process.
They're both dot net based and so putting the two coats together, we see this as quite complementary. The other piece would be from a sales force, they've got good strong sales force and we want to continue as we see that potential growth.
Richard Tse - Cormark Securities Inc.
And with respect to the acquisition environment, can you give us a bit of color in terms of down the road, let's say 2 years from now, what are you going to be looking at in terms of acquisitions? It looks like you're consolidating the BPM market and what else is out there just to clarify that?
John Shackleton
Yes, actually what I see is the BPM market, the workflow piece, if you will, to me is the glue to content. It's the connection to content.
And so I would see us building applications in this space. For example, Global 360 has a lot of opportunities and customers in the financial service space.
Metastorm has quite a lot of companies in the healthcare and medical space. So I would see us building applications around that.
But you're correct, I would certainly see significant growth, both internally but also from acquisitions in this BPM space and related to BPM.
Operator
Our next question comes from the line of Stephanie Price with CIBC.
Stephanie Price
Just following on that question, can you talk a bit more about the cross selling opportunities that you can see between Metastorm and Global 360 in your existing operations?
John Shackleton
Yes, so again as we said with the different focuses on industry sectors, financial services versus healthcare, et cetera, I do see an opportunity with the ECM products, particularly with things like our Web Content Management, as well as our repositories archiving as an opportunity for cross selling into both of their existing bases where we can sell our existing products into those bases.
Stephanie Price
And in terms of the pipeline, could you talk a bit about what you're seeing it and if you're seeing any sort of an impact from the economy right now and also U.S. government spending?
John Shackleton
Yes. So on the pipeline is as we mentioned before, this past year, we've really been focusing on looking 2 and 3 quarters out, with our goal of saying that so this quarter, we'd want to see 2x in the pipeline.
Next quarter, we'd want to see 4x in the pipeline and beyond that, 8x. We're getting pretty close to those numbers across the board.
We are seeing, in certain governments, that they're having a tough time so we are kind of switching resources away from that to other areas. But in general so, for example, the U.K.
because of some of the issues that they've been going through IT restructuring, et cetera, had a tough time. Although what we have seen is in their kind of security areas, their CIA equivalents, et cetera.
They seem to be doing quite a bit of work. We are beginning to see opportunities in North America and the U.S.
more in the state and local side, but we are seeing Canadian government is coming back strong, as well as some of these opportunities in places like Brazil and the Commonwealth countries for government.
Stephanie Price
And just finally, on larger transactions, can you talk a little bit about the solutions in verticals that were driving the larger transactions and whether you're seeing any sort of slowdown in those markets and people are sort of switching to smaller transactions?
John Shackleton
You're right in that. Actually, this is the kind of -- the puzzling issue is we're seeing bigger transactions, and it seems to be across industries.
So, for example, one was major insurance company was a large one. Another was a major healthcare company or health care provider, if you will.
And we're seeing others in high tech manufacturing and the government. So it seems to be across sectors and they're not getting smaller.
Although we are intentionally trying to break these up into some smaller multiyear transactions.
Operator
Our next question comes from the line of Scott Penner with TD Securities.
Scott Penner - TD Newcrest Capital Inc.
Just first of all, a couple of clarifications. So when you talk about the seasonality of 20% to 25%, that is on the base of business in Q4 and then we add in what we believe on Global 360?
Paul McFeeters
That's right.
Scott Penner - TD Newcrest Capital Inc.
And then just on the Metastorm. I guess, Paul, in the past in your filings, you've given the quarterly or annual revenue from StreamServe and Metastorm.
Could you give that again?
Paul McFeeters
I'm just reaching for it Scott. If you have another question, I'll come right back to you.
Scott Penner - TD Newcrest Capital Inc.
Sure. Maybe while he's doing that, I'll give him lots of time here, John, and ask you just in general, these larger transactions it seems like over the last couple of quarters, you talked more and more about productivity-related solutions and obviously, with the idea of purchases of BPM.
Maybe if you could just give us a little bit of the idea of the relative deal sizes of some of the productivity-based solutions and the sales cycles relative to some of your other solutions?
John Shackleton
Yes, so for some of these larger transactions, we're looking in excess of $10 million over say a 2-year period. And it's interesting in that they're looking at using legacy systems, but accessing those systems through some kind of web-based portal, if you will.
Still tying all these systems together so you're integrating with SAP, Microsoft Outlook, et cetera. And but also then including mobile access where people can access corporate information on a global basis.
So it's those kind of applications where you're still using older legacy systems, but using it in new ways that are giving greater productivity gains. So even like the SAP Expense Management, what we're seeing is significant abilities to process their expenses faster at a much lower cost to a company for doing that.
Is that the kind of question you're asking?
Scott Penner - TD Newcrest Capital Inc.
Yes, I mean the sales cycles given that these are the profile of transactions it seems to involve a lot more systems. Are they 12 to 24 months?
I mean, just some idea relative to your other businesses.
John Shackleton
To be honest, it's a mix. Some of the very large one obviously are 12, 18 months.
And one in particular was 2 years. But some of the ones we're seeing because of the productivity gains that we can prove, the ROI, we're actually seeing a slightly shorter sale cycle because it's clear that they can do this fast, because they're using existing legacy systems.
They're just connecting those systems.
Scott Penner - TD Newcrest Capital Inc.
Okay.
Paul McFeeters
Your StreamServe Q4 total revenue is $13.8 million, and Metastorm Q4 total revenue is $16.6 million
Scott Penner - TD Newcrest Capital Inc.
So Metastorm looks to be, call it, $2 million, $3 million below what the run rate would be. Is that a good indication of what impact that deal slippage may have had?
Paul McFeeters
Yes, that would point to a good portion of it, correct, yes.
Scott Penner - TD Newcrest Capital Inc.
Just a couple more things. Paul, you mentioned the margins on services and the rationale for that.
How long is that likely to extend?
Paul McFeeters
I would say it would be, it would improve next quarter and probably back on our sort of normal tracking, say 17% to 19% by Q2, but you'll see some impact at the end [ph] of this quarter.
Scott Penner - TD Newcrest Capital Inc.
And lastly just on the acquisitions that you've done, obviously, you have a very strong presence within the Microsoft systems. Just what initiatives beyond, just being happier to work together, are there underway to work a little closer with Microsoft?
John Shackleton
Yes, and actually Scott, even before this, we have seen the Microsoft relationship really picking up. Some of these large deals that we talked about are with Microsoft.
And it's -- the field force within Microsoft are working very well together with us, so I would see, obviously, with these solutions as well, it's picking up even further.
Operator
Our next question comes from the line of Paul Steep with Scotia Capital.
Paul Steep - Scotia Capital Inc.
John, you've talked a little bit about it, but maybe just go over on Global 360. I guess the timing, and even maybe the deal size, in terms of valuation seem to be slightly out of character for the past.
What's sort of pushing you to maybe move faster than in the past and take on 2 decent-sized deals in a fairly short timeframe?
John Shackleton
So what we believe is, as I mentioned earlier, within the ECM suite, we see BPM as the glue to a lot of this. So we think that it will -- a lot of our customers will use a lot more pieces of the suite with the glue of BPM.
We see in this market, in the current market with budgets being so tight that the ability to automate processes, reduce cost, and as I said, utilize legacy systems, but while accessing new web-based social media, et cetera, we see BPM being the catalyst for driving a lot of that. So what we believe is, is that given our customer base, given our partnerships, that we can drive the BPM, of both of them better than they could if they'd been a standalone company.
And so and given the kind of code base that we saw, we're familiar with both companies, we felt that it was a good fit putting them together.
Paul Steep - Scotia Capital Inc.
And in terms of timing, I'm just making [indiscernible] thinking, since it seems to be a little bit of a divergence and it looks like you're doing a little more for growth in these 2 deals, which makes sense. In terms of the timeframe to roll solutions out and sort of go maybe deeper into almost a sort of a service-oriented architecture market and deeper into that, should we be thinking about revenue synergies more from this deal?
John Shackleton
So one key thing to think about is if we had just done Metastorm alone, it would have been fairly easy to just integrate synergies with the existing base quickly. As we bring the 2 on, obviously the first goal will be to integrate the 2 together and get the synergies from the 2.
And then the next step then will be to integrate and get synergies from the whole -- our whole customer base. So it would probably take 2 to 3 quarters to get those the first step done and then you will certainly see the growth that we believe you will see in this area, more in the 11% to 13% range fairly quickly.
And as you pointed out, building applications or application templates around the BPM is a key goal that we'll be going after. Both of these companies do have some of these on the shelf today that we think we can activate and sell into our customer base.
Paul Steep - Scotia Capital Inc.
Should we look for -- just to tie this off and then one last one for Paul, should we look for a step-up theoretically in 2013, in fiscal 2013 to CapEx or I guess fiscal even in the likely 2013 is when you'd have a step up as you ramp to add headcount to try to tackle more apps?
John Shackleton
No, I don't think we would need to ramp up to do that. I think given our existing team, we can do that.
Paul Steep - Scotia Capital Inc.
And last one then for Paul, just to wrap up here. The $600 million term loan, where are you in the process?
And if things sort of go astray in the next little while, have we got secured financing already in place, Paul?
Paul McFeeters
Yes, I mean, again, if markets remain a bit tumultuous like they've been in the last while and we need a little bit more time, that won't affect us because essentially we drew on our own operating line as I mentioned, $70.5 million. But as you know, we're net cash positive every quarter.
So we'd be willing to enable to pay that down over time, and we still have over $100 million on our balance sheet. So it won't constrain our day-to-day operations.
So -- but clearly, we expect the markets and we hope, maybe is a better word, to stabilize and we fully intend to go out and raise the $600 million.
Paul Steep - Scotia Capital Inc.
And just as a backstop, the revolver which were news in October is already basically pre-done. You're sounding highly confident of this.
I just want to sort of put this to rest.
Paul McFeeters
Yes. The renewal on the revolver is secured.
Operator
Our next question comes from the line of Kris Thompson from National Bank Financial.
Kris Thompson - National Bank Financial, Inc.
John, just on the 10% license decline that you expect on the Meta and the Global 360 deals, is that business that you guys are targeting as less profitable and culling or is that just what you expect some of your customers to, or your acquired customers to abandon?
John Shackleton
Chris, usually as I said it's 20% to 30% where we do, do a culling where we look at unprofitable areas that they might be in, et cetera. The 10% is much more of just the distraction as we're putting the 2 companies together.
There's not the focus that you would have while you're doing this. So we don't see a drop off of customers or it's really more of just a normal disruption of the business as we put the 2 things together.
Kris Thompson - National Bank Financial, Inc.
And in the past I think you guys have suggested about 70% of your total revenues are compliance- or regulatory-related of which is somewhat resilient to the economy here and recessionary outlook. What is your revenue mix now that you've done these 2 deals and you're talking more Web Content Management a lot more.
You've got Nstein and developing mobile applications now. Are you getting a little bit more into a riskier revenue profile in kind of an economic downturn?
John Shackleton
We're seeing the compliance piece at about more like 60% now, but on the new ROI, things that we're doing. The thing about BPM is it's very sticky so that we don't see it as a lot of risk.
It's not like iPhone apps that are in vogue for 6 weeks and then you're on to something else. This is you're running, you go call mission-critical apps with it.
We see it as fairly safe. But to answer your question, we'd see it at about 60% this past quarter, compliance.
Kris Thompson - National Bank Financial, Inc.
And just I might have missed this. I'm not sure if you touched on the visibility, but last quarter you said the pipeline was strong, visibility is improving and I know the world's kind of changed in the last couple of weeks.
Are you feeling the same way or are you a little bit less confident now?
John Shackleton
From the kind of businesses that we're doing, what we're seeing is the delays have been more in the governments. Like the U.K.
government's had a tough time; Italy, Spain and Europe. Germany is doing extremely well.
And then what we're seeing is between Canada and Brazil, Latin America, it's offsetting some of the slowness in the U.S. government.
But then on the U.S. public sector or on the private sector, sorry, it looks to be picking up.
Now, obviously, with what's going I'm sure people are stepping back and hesitating, wondering what's going to be next. But in general, the pipeline looks very positive; and again, across all sectors, across all geographies.
Kris Thompson - National Bank Financial, Inc.
Okay and also on the last call, I'm not sure if you mentioned your ASPs this call, but I think they were lower last quarter around $250,000, and you mentioned that reflects pipeline of customers taking a nibble and then hopefully converting those into some larger deals. And this quarter, it looks like your transaction's greater than $500,000 and $1 million is actually lower than the last couple.
So are we going to expect to see some convergence?
John Shackleton
It's around $300,000, but the big deals are getting bigger, so it is kind of offsetting that.
Kris Thompson - National Bank Financial, Inc.
Just 2 more for me. Paul, on the special charges for Global 360, the $15 million to $20 million, how much of that is headcount versus facilities?
Paul McFeeters
We don't have any specific details, but typically it's about 80% headcount, 20% facilities. And if I look at the past transactions.
Kris Thompson - National Bank Financial, Inc.
And for the Waterloo CapEx, how much of that was spent this quarter and what's remaining, please?
Paul McFeeters
About in total for the year, perhaps to manage that way, we spent about $19 million and we have about $5 million left.
Operator
Our next question comes from the line of Sera Kim with GMP Securities.
Sera Kim - GMP Securities L.P.
For the Global 360 sales force, last quarter, you mentioned Metastorm had a different sales strategy, in terms of selling to functional managers versus CIOs for the regular business. What does Global 360 sales force do?
Is it different? And so is that going to require more integration effort or is it pretty similar to Metastorm?
John Shackleton
It's pretty similar, Sera. It's similar just they go after different verticals, slightly different verticals so there's not a lot of overlap, but the kind of make up of a BPM salesperson from both sides are very similar.
Sera Kim - GMP Securities L.P.
And do you see BPM as a way to drive more business than the traditional ECM offering? Is that what the strategy is?
John Shackleton
Absolutely, yes. As I mentioned before, we see this as the glue.
All this content that you're using, whether it be from your SAP systems, your website, your mobile apps, the BPM is the glue that pulls all this together and automates many of these processes.
Sera Kim - GMP Securities L.P.
Do you think BPM could get to a size that's more, to a larger size much [ph] like your compliance base stuff or is just kind of be the wedge to kind of get you to sell more?
John Shackleton
I think if you look at the 2 companies alone, as we put these 2 together now, as well as with our customer base, I think they can grow to a significant size over the next 3, 5 years. I see them being a large group.
So as we're growing to $2 billion, I could see them being a significant piece of that.
Sera Kim - GMP Securities L.P.
And earlier you mentioned you wanted to chunk the business because you've got -- you see these larger deals coming. Does that mean you have better visibility into fiscal 2012 than you normally would?
John Shackleton
That's correct. So for example, as we did with one last year, what we did is we chunked it so that over 3 years -- so for example, this coming October, they would be another million dollars worth of licenses plus that is just part of their roll out of their enterprise.
So obviously we can -- the contract's already signed. The commitment's already there.
It's just as they pay their invoice, that's when we recognize the revenue. So obviously, that's much more visible.
Sera Kim - GMP Securities L.P.
So the contracts are signed so you have more visibility. So the only thing that could happen is maybe some of the deployments might get pushed out a little bit because of what's going on.
John Shackleton
In this case, no. It's actually a firm commitment.
Sera Kim - GMP Securities L.P.
And then just last question, can you provide an update on Oracle? I think in the past, you talked about them bringing in a couple of deals, but I think it was still in the early development phase.
So have things progressed since the last quarter, and do you see the pipeline building through Oracle?
John Shackleton
Right. So obviously compared with SAP and even Microsoft, it's still small, but it is progressing nicely.
The work that we're doing on the source code that they provided us is going -- is progressing nicely. And so over the coming year, we see that, that will continue to grow.
Operator
Our next question comes from the line of Eyal Ofir with Canaccord Genuity.
Eyal Ofir - Canaccord Genuity
First question for you, John. Obviously, you guys made some -- 2 acquisitions here on the BPM side.
Is there any other area in your portfolio you think you need to expand on and to continue to make acquisitions in?
John Shackleton
I think as I might have referred to earlier, I think there are certain vertical areas like financial services or utilities and where we could have domain expertise or applications in those spaces that would be kind of tied together with BPM to provide a whole content management suite. So there are -- we see a number of opportunities in this space.
What we're also seeing, given the economic climate, we're getting a lot of inbound calls for people interested in being acquired by us. So there is quite an opportunity.
Eyal Ofir - Canaccord Genuity
Okay, so this is not obviously the last move by you guys?
John Shackleton
Right.
Eyal Ofir - Canaccord Genuity
And to the size, though, what should we expect? Is it going to be similar size or is it going to be smaller tuck-ins?
John Shackleton
I would think it's kind of a mixture. It will be a mixture of tuck-ins and some size -- medium-size, large-size.
The net of it is, there's plenty out there.
Eyal Ofir - Canaccord Genuity
And then, obviously, you talked earlier about the relationship with Microsoft. With these acquisitions, obviously, that relationship just strengthened.
In terms of go-to market from the ECM standpoint, is it going to change it all for you guys because of these acquisitions?
John Shackleton
Not that we see at this point. I just think: One, it provides a good platform for SharePoint; and obviously that the SharePoint platform also allows us to then extend that platform with our products related to SAP, Oracle, archiving, et cetera.
So we think it will pull other products as well, as well as the BPM.
Eyal Ofir - Canaccord Genuity
And then final question for me is you talked earlier that you are seeing a pick up in emerging markets for you guys. Obviously, that's a new area that you've talked about over the last few quarters.
What kind of pick up are you seeing, and how big are these potential deals for you guys?
John Shackleton
So if you took Brazil, for example, I think it was a 300% growth last year and they are sizable. So for example, last quarter, one of the multimillion dollar plus deals was Brazil.
Eyal Ofir - Canaccord Genuity
So now we're getting into some of the good deals here?
John Shackleton
Yes.
Eyal Ofir - Canaccord Genuity
And in the pipeline you're seeing similar opportunities, I imagine?
John Shackleton
Yes.
Eyal Ofir - Canaccord Genuity
And in your pipeline as well, can you just break it out in terms of the largest opportunities, how they look from a geographic standpoint?
John Shackleton
It's fairly evenly spread. So if you look -- traditionally, if you look, for the past year, the spread has been roughly just over 50% from the Americas, about 40% from EMEA and then APJ would be 7%.
For the next coming year, I would see APJ growing, slightly larger, but maybe getting -- certainly over the next 2 years, I'd see them getting to the 10-plus percent because of China and other opportunities. And I think the other 2 should stay in line.
Eyal Ofir - Canaccord Genuity
And the strategy remains the same, primarily go into these emerging markets in Asia through your partnerships?
John Shackleton
Correct. Although in Brazil, we do have a direct sales force down there.
From the Vignette acquisition, they had a presence down there and that has grown.
Operator
Our next question comes from the line of Derrick Wood from Susquehanna.
James Wood - Susquehanna Financial Group, LLLP
Paul, I was wondering, could you give us a revenue breakdown on Global 360 by kind of licenses, maintenance and services? And then you gave the expectation on the license path [ph] for this year.
You've given color on maintenance and services as well. So could you talk about that?
Paul McFeeters
Derrick, so we just typically give ranges in our acquisitions, no specifics and what I would call in a fairly typical software model, but potentially in the lower error range. And when I say that, I say if you look at our models, 20% to 25% license it would be the lower end of range for that, probably a little higher, in the upper end of the range for maintenance, and then the balance for services.
That's on the revenue mix. As John's indicated, as we bring Global 360 and Metastorm together because of the disruption that causes, we're looking at the combined license revenue of those 2 businesses being down about 10% year-over-year before we see that growing out in fiscal '13.
And I think services, we'd find it slightly down as well, usually it bows in relation to license. Maintenance, though, should remain fairly steady between the combined operations.
James Wood - Susquehanna Financial Group, LLLP
And then the market trust [ph], you talked about 7% to 11.5% and you guys tracking at or perhaps a little above. Is that inclusive of your acquisition or is that on an organic basis?
John Shackleton
That's on an organic basis, Derrick.
James Wood - Susquehanna Financial Group, LLLP
And then last question, on the margin side, you guys gave a fairly wide range. Just kind of trying to get what you're thinking for this year.
Is this going to be, as you look at operating margins this year versus last year, are you thinking it being a year for growth and investments and perhaps operating margins could come down? Are you trying to keep them flat?
Or are you still thinking you could be in an operating margin expansion mode?
Paul McFeeters
Yes, that's a fair question, Derrick, and tried to give enough information, but I'll try to be clearer on it. We don't see it contracting on an annualized basis, I think fairly steady, potentially slightly up.
We are not going to over-invest. We're not going to change our operating model by starting to put expenses in the higher range of those ranges that we gave in the model.
Operator
Our next question comes from the line of Brian Freed with Wunderlich Securities.
Brian Freed - Wunderlich Securities Inc.
Real quick question on just your acquisition philosophy. Historically, you guys have tended to buy things at a fraction of revenue multiples.
The last 2 have been multiples, kind of more growth-oriented. Is there any shift in your longer-term philosophy towards buying companies and driving EPS leverage versus the past?
John Shackleton
No, not really Brian. I think, again, just like the size of the deals it will be a mix.
But I think over the time, you'll tend to see us more in our normal range that we've been in. So these are exceptions that will get back to the norm.
Brian Freed - Wunderlich Securities Inc.
And then my second question is around the competitive landscape. Obviously, you and IBM seem to be doing pretty well.
EMC was down 7% year-on-year. Can you talk a little bit about what you're seeing from a competitive standpoint, particularly with Documentum?
And if you see indications that they're regaining strength and will become more formidable? Or what is the issue there in your view?
John Shackleton
Yes, no. We're certainly not seeing them gain strength.
There seems to be continued decline. IBM, obviously, within their IBM areas, if it's a totally IBM shop, they would typically -- we wouldn't be brought into it.
But if it's a non-IBM shop, we compete very well against, FileNet, et cetera. And even in an IBM shop, if it's an SAP shop as well, we have a very good chance of competing there.
So it's -- we haven't seen a lot of change on the -- SharePoint, obviously, for the lower end it's a good -- but for us, that's an opportunity long term.
Brian Freed - Wunderlich Securities Inc.
And then lastly on the partner revenue front this quarter, partner-driven revenue was a little lower than typical. Is that primarily a function of the acquisitions you added on and do you think that will move up as they embrace some of the functionality or acquisitions will bring?
John Shackleton
I think it was more reflective of some of the larger deals that we did. And I think in general, I think the 40, 45 range I see for next year is about right.
Operator
Our next question comes from the line of Steven Li with Raymond James.
Steven Li - Raymond James Ltd.
Paul, I might have missed it earlier, but what's the services margin outlook? When do we see it back to a 20% level?
Paul McFeeters
By Q2, Q3 when you say 20%, Steven, I said we would cover some of it in Q1 and get back to, I think, I gave more of a 17% to 18% range is more historical where we achieve operating margins versus the 20%. And that would be, I'm expecting into Q2.
John Shackleton
Does that answer your question, Steven?
Steven Li - Raymond James Ltd.
Yes.
Operator
Our next question is from the Gabriel Leung from Paradigm Capital.
Gabriel Leung - Paradigm Capital, Inc.
John, just wonder if you can provide I guess a timeline of when you would expect the integrated BPM offering to sort of hit the market? And at that point, would you expect some of this margin compression you're seeing, you talked about several hundred basis points margin compression from the integration, start to alleviate?
John Shackleton
So on the actual, putting the 2 together, probably within 6 to 9 months. So 2 to 3 quarters, I would see us being done on the margin compression off of it.
Paul McFeeters
Steven, it's Paul, I'm indicating that for the full year, you would expect our margins to be pulled back by the acquisitions of -- the recent acquisitions and see us now moving that toward a model in FY '13 that you would expect through these acquisitions.
Gabriel Leung - Paradigm Capital, Inc.
But it sounded like in a previous question, you're still expecting on a full year basis for the year adjusted operating margins to at least stay steady with what you reported in '11. I think it was 27.5%.
Is that a fair assumption?
Paul McFeeters
That's a fair assumption.
John Shackleton
Okay. Thank you, everybody.
And so in summary, we believe we've had a good year overall. Pipeline remained strong for FY '12.
We'd like to thank everyone for questions and look forward to talking to you again next quarter.
Operator
Ladies and gentlemen, this concludes your conference call for today. Thank you for participating.
Please disconnect your lines.