OpenText Reports First Quarter Fiscal Year 2012 Financial Results

Oct 26, 2011, 16:01 ET from Open Text Corporation

WATERLOO, ON, Oct. 26, 2011 /PRNewswire/ - Open Text(TM) Corporation (NASDAQ: OTEX) (TSX: OTC), today announced financial results for its first quarter ended September 30, 2011.(1)

Total revenue for the first quarter of fiscal 2012 was $288.0 million, up 32.5% compared to $217.4 million for the same period in the prior fiscal year. License revenue for the first quarter of fiscal 2012 was $65.0 million, up 52.5% compared to $42.6 million for the same period in the prior fiscal year.

Adjusted net income for the first quarter of fiscal 2012 was $59.0 million or $1.01 per share on a diluted basis, up 18.0% compared to $50.0 million or $0.86 per share on a diluted basis for the same period in the prior fiscal year.  Net income in accordance with U.S. generally accepted accounting principles ("US GAAP") was $35.0 million or $0.60 per share on a diluted basis, compared to $21.7 million or $0.37 per share on a diluted basis for the same period in the prior fiscal year. (2)

The cash and cash equivalents balance as of September 30, 2011 was $119.3 million. Accounts receivable as of September 30, 2011 totaled $143.8 million, compared to $154.6 million as of June 30, 2011 and Days Sales Outstanding (DSO) was 45 days in the first quarter of fiscal 2012, compared to 43 days in the first quarter of fiscal 2011.

"With strong sales globally and particular strength in emerging markets, I am pleased with our performance in the first quarter," said John Shackleton, President and Chief Executive Officer, Open Text. "As we address an even larger global market, we continue to win new business with the breadth of functionality in our integrated ECM Suite."

Please see  note (2) below for a reconciliation of non-US GAAP based financial measures used in this press release, to US GAAP based financial measures.

Teleconference Call

OpenText will host a conference call on October 26, 2011 at 5:00 p.m. ET to discuss its financial results.

  Date: Wednesday, October 26, 2011
  Time: 5:00 p.m. ET/2:00 p.m. PT
  Length: 60 minutes
                                                                            Where: 416-644-3416 800-814-4860 (Toll Free)

Investors should dial in approximately 10 minutes before the teleconference is scheduled to begin. A replay of the call will be available beginning October 26, 2011 at 7:00 p.m. ET through 11:59 p.m. on November 9, 2011 and can be accessed by dialing 416-640-1917 and using passcode 4480255 followed by the number sign.

For more information or to listen to the call via web cast, please use the following link: http://www.opentext.com/2/global/ex_event.html?evtype=events&id=701D0000000V0mAIAS.

About OpenText

OpenText (TM) is the world's largest independent provider of Enterprise Content Management software. The company's solutions manage information for all types of business, compliance and industry requirements in large companies, government agencies and professional service firms. OpenText supports approximately 46,000 customers in 114 countries and 12 languages. For more information about OpenText, visit www.opentext.com.

Certain statements in this press release, including statements about the financial conditions, and results of operations and earnings for Open Text Corporation ("OpenText" or "the Company"),  may contain words such as "could", "expects", "may", "should", "will", "anticipates", "believes", "intends", "estimates", "targets", "plans", "envisions", "seeks" and other similar language and are considered forward-looking statements or information under applicable securities laws. These statements are based on the Company's current expectations, estimates, forecasts and projections about the operating environment, economies and markets in which the Company operates. These statements are subject to important assumptions, risks and uncertainties that are difficult to predict, and the actual outcome may be materially different. The Company's assumptions, although considered reasonable by the Company at the date of this press release, may provide to be inaccurate and consequently the Company's actual results could differ materially from the expectations set out herein.

Actual results or events could differ materially from those contemplated in forward-looking statements as a result of the following: (i) the future performance, financial and otherwise, of OpenText; (ii) the ability of OpenText to bring new products to market and to increase sales; (iii) the strength of the Company's product development pipeline; (iv) the Company's growth and profitability prospects; (v) the estimated size and growth prospects of the ECM market; (vi) the Company's competitive position in the ECM market and its ability to take advantage of future opportunities in this market; (vii) the benefits of the Company's products to be realized by customers; and (viii) the demand for the Company's product and the extent of deployment of the company's products in the ECM marketplace. Forward-looking statements may also include, without limitation, any statement relating to future events, conditions or circumstances. The risks and uncertainties that may affect forward-looking statements include, but are not limited to: (i) integration of acquisitions and related restructuring efforts, including the quantum of restructuring charges and the timing thereof; (ii) the possibility that the Company may be unable to meet its future reporting requirements under the Securities Exchange Act of 1934, as amended, and the rules promulgated there under; (iii) the risks associated with bringing new products to market; (iv) fluctuations in currency exchange rates; (v) delays in the purchasing decisions of the Company's customers; (vi) the competition the Company faces in its industry and/or marketplace; (vii) the possibility of technical, logistical or planning issues in connection with the deployment of the Company's products or services; (viii) the continuous commitment of the Company's customers; and (ix) demand for the Company's products.

For additional information with respect to risks and other factors which could occur, see the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other securities filings with the SEC and other securities regulators. Unless otherwise required by applicable securities laws, the Company disclaims any intention or obligations to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Copyright © 2011 by Open Text Corporation. "OPENTEXT", "OPENTEXT EVERYWHERE" and the "OPENTEXT ECM SUITE" are trademarks or registered trademarks of Open Text Corporation in the United States of America, Canada, the European Union and/or other countries. This list of trademarks is not exhaustive. Other trademarks, registered trademarks, product names, company names, brands and service names mentioned herein are property of Open Text Corporation or other respective owners.

Notes (1) Based on comparison of historical revenue figures publicly disseminated by companies in the Enterprise Content Management ("ECM") sector. All dollar amounts in this press release are in US Dollars unless otherwise indicated.

(2) Use of US Non-GAAP financial measures

In addition to reporting financial results in accordance with US GAAP, the Company provides certain non-US GAAP financial measures that are not in accordance with US GAAP. These non-US GAAP financial measures have certain limitations in that they do not have a standardized meaning and thus the Company's definition may be different from similar non-US GAAP financial measures used by other companies and/or analysts and may differ from period to period. Thus it may be more difficult to compare the Company's financial performance to that of other companies. However, the Company's management compensates for these limitations by providing the relevant disclosure of the items excluded in the calculation of adjusted net income and adjusted EPS both in its reconciliation to the US GAAP financial measures of net income and EPS and its consolidated financial statements, all of which should be considered when evaluating the Company's results. The Company uses the financial measures adjusted EPS and adjusted net income to supplement the information provided in its consolidated financial statements, which are presented in accordance with US GAAP. The presentation of adjusted net income and adjusted EPS is not meant to be a substitute for net income or net income per share presented in accordance with US GAAP, but rather should be evaluated in conjunction with and as a supplement to such US GAAP measures. OpenText strongly encourages investors to review its financial information in its entirety and not to rely on a single financial measure. The Company therefore believes that despite these limitations, it is appropriate to supplement the disclosure of the US GAAP measures with certain non-US GAAP measures for the reasons set forth below. Adjusted net income and adjusted EPS are calculated as net income or net income per share on a diluted basis, excluding, where applicable, the amortization of acquired intangible assets, other income (expense), share-based compensation, and restructuring, all net of tax. The Company's management believes that the presentation of adjusted net income and adjusted EPS provides useful information to investors because it excludes non-operational charges. The use of the term "non-operational charge" is defined by the Company as those that do not impact operating decisions taken by the Company's management and is based upon the way the Company's management evaluates the performance of the Company's business for use in the Company's internal reports. In the course of such evaluation and for the purpose of making operating decisions, the Company's management excludes certain items from its analysis, such as amortization of acquired intangible assets, restructuring costs, share-based compensation, other income (expense) and the taxation impact of these items. These items are excluded based upon the manner in which management evaluates the business of the Company and are not excluded in the sense that they may be used under US GAAP. The Company believes the provision of supplemental non-US GAAP measures allows investors to evaluate the operational and financial performance of the Company's core business using the same evaluation measures that management uses, and is therefore a useful indication of OpenText's performance or expected performance of recurring operations and facilitates period-to-period comparison of operating performance. As a result, the Company considers it appropriate and reasonable to provide, in addition to US GAAP measures, supplementary non-US GAAP financial measures that exclude certain items from the presentation of its financial results in this press release.

The following charts provide (unaudited) reconciliations of US GAAP based financial measures to non-US GAAP based financial measures for the three months ended September 30, 2011, as referred to in this press release:

Non GAAP-based Adjusted Operating Margin and Adjusted Net income*:

In '000s of USD Three months ended September 30, 2011 Percentage OpenText Fiscal 2012 Target Model
Revenue:      
License......................................................................................................................   $             65,028 22.6% 25-30%
Customer Support..................................................................................................... 161,997 56.2% 52-57%
Service and Other..................................................................................................... 61,021 21.2% 18-23%
Total Revenue......................................................................................................... 288,046    
       
Cost of revenues (excluding amortization of acquired technology-based intangible assets).................................................. 80,618    
Gross profit (excluding amortization of acquired technology-based intangible assets).................................................. 207,428 72.0% 73-75%
Operating expenses:      
Research & Development.......................................................................................... 43,458 15.1% 14-16%
Sales & Marketing..................................................................................................... 64,880 22.5% 21-23%
General & Administrative........................................................................................... 25,761 8.9% 8-10%
Depreciation.............................................................................................................. 5,258 1.8% 2%
  139,357    
Gross profit less operating expenses................................................................. 68,071    
Add: Share -based compensation expense................................................................ 4,844    
Non GAAP-based Adjusted Operating Margin..................................................... 72,915 25.3% 25-30%
Less: Interest expense............................................................................................... 4,348    
Sub-total.................................................................................................................... 68,567    
Less: tax @ 14% 9,599    
Non GAAP-based Adjusted Net Income $              58,968    
       
Non GAAP-based Adjusted Net Income per share.............................................. $                  1.01    

Reconciliation of Non GAAP-based Adjusted Operating Margin to GAAP-based Net Income:

In '000s of USD Three months ended September 30, 2011
Non GAAP-based Adjusted Operating Margin........................................................ $                      72,915  
Less:    
Amortization................................................. 33,831  
Share-based compensation expense.......... 4,844  
Special charges........................................... 7,105  
Other income, net........................................ (9,274)  
Interest expense, net.................................... 4,348  
GAAP-based recovery for income taxes...... (2,925)  
GAAP-based net income for the period.......     $                    34,986  
     
Reconciliation of  Non GAAP based Adjusted  Net income to GAAP-based Net Income:
In '000s of USD (except per share data)   Per share
Non GAAP-based Adjusted Net Income $                     58,968       $  1.01
Less:    
Amortization.................................................. 33,831                 0.58
Share-based compensation expense........... 4,844                 0.08
Special charges............................................ 7,105                 0.12
Other income, net......................................... (9,274) (0.16)
GAAP-based recovery for income taxes....... (2,925) (0.05)
Tax provision on non GAAP-based adjusted net income (per above), @14%....................                                       (9,599) (0.16)
GAAP-based net income for the period........ $                     34,986 $    0.60
     

*Amounts may differ from those shown on the face of the financial statements due to non-material rounding adjustments.

The following tables present non GAAP-based measures and their (unaudited) reconciliation to GAAP, for the three months ended September 30, 2010:

Non GAAP-based Adjusted Operating Margin and Adjusted Net income*:

In '000s USD Three months ended September 30, 2010 Percentage Open Text Fiscal 2011 Target Model
Revenue:      
License....................................................................................................................................... $             42,646 19.6% 25-30%
Customer Support...................................................................................................................... 129,757 59.7% 52-57%
Service and Other...................................................................................................................... 45,002 20.7% 18-23%
Total Revenue.......................................................................................................................... 217,405    
       
Cost of revenues (excluding amortization of acquired technology-based intangible assets)................................................................... 57,971    
Gross profit (excluding amortization of acquired technology-based intangible assets)................................................................................... 159,434 73.3% 73-75%
Operating expenses:      
Research & Development........................................................................................................... 30,963 14.3% 14-16%
Sales & Marketing...................................................................................................................... 44,180 20.3% 21-23%
General & Administrative............................................................................................................ 19,810 9.1% 8-10%
Depreciation............................................................................................................................... 4,875 2.3% 2%
  99,828    
Gross profit less operating expenses................................................................................. 59,606    
Add: Share -based compensation expense................................................................................ 2,600    
Non GAAP-based Adjusted Operating Margin 62,206 28.6% 25-30%
Less: Interest expense................................................................................................................ 4,135    
Sub-total..................................................................................................................................... 58,071    
Less: tax @ 14% 8,130    
Non GAAP-based Adjusted Net Income $             49,941        
       
Non GAAP-based Adjusted Net Income per share.............................................................. $                 0.86    

Reconciliation of  Non GAAP-based Adjusted Operating Margin  to GAAP-based Net Income:

 
In '000s USD Three months ended September 30, 2010
Non GAAP-based Adjusted Operating Margin................................................................................................... $                           62,206  
Less:    
Amortization............................................................................................ 24,228  
Share-based compensation expense..................................................... 2,600  
Special charges...................................................................................... 3,195  
Other income, net...................................................................................                     (2,480)  
Interest expense, net.............................................................................. 4,135  
GAAP-based provision for  income taxes................................................   8,857  
GAAP-based net income for the period.................................................. $                           21,671  
     
Reconciliation of  Non GAAP based Adjusted  Net income to GAAP-based Net Income:
In '000s USD (except per share data)   Per share
Non GAAP-based Adjusted Net Income................................................................................................... $                      49,941 $     0.86
Less:    
Amortization............................................................................................ 24,228 0.42
Share-based compensation expense..................................................... 2,600 0.04
Special charges...................................................................................... 3,195 0.06
Other income, net...................................................................................   (2,480) (0.04)
GAAP-based provision for income taxes................................................. 8,857 0.15
Tax on non GAAP-based adjusted net income (per above), @14%................................................................................ (8,130) (0.14)
GAAP-based net income for the period $                      21,671 $     0.37
     

*Amounts may differ from those shown on the face of the financial statements due to non-material rounding adjustments.

(3) The following table provides a composition of our major currencies for revenue and expenses, expressed as a percentage, for the three months ended September 30, 2011:

  Three months ended September 30, 2011
         
Currencies     % of Revenue     % of Expenses*  
EURO.............................................       25%    18%
GBP................................................                     9%   11%
CHF................................................    4%   2%
CAD................................................    8%   23%
USD................................................    43%   34%
Other..............................................    11%   12%
Total................................................          100%                  100%
         
Expenses include all cost of revenues and operating expenses included within the Consolidated Statements of Income, except for amortization of intangible assets, share-based compensation and special charges

(4) The following table provides details of our adjustment related to deferred maintenance revenue, on account of purchase price accounting, for the three months ended September 30, 2011 and for future quarters:

In '000s USD Total
Q1 Fiscal Year 2012……………………………………………. $ 1,991
Q2 Fiscal Year 2012…………………………………………….. 1,662
Q3 Fiscal Year 2012…………………………………………….. 560
Q4 Fiscal Year 2012…………………………………………….. 283
Fiscal year 2013…………………………………………………… 244
Total Fiscal Year 2012………………………………………… $4,740
   
Total Fiscal Year 2013 and beyond……………………… $ 244

 

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands of U.S. dollars, except share data)

       
  September 30, 2011   June 30, 2011
ASSETS (Unaudited)    
Cash and cash equivalents........................................................................................  $ 119,294    $ 284,140 
Accounts receivable trade, net of allowance for doubtful accounts of $6,277 as of September 30, 2011 and $5,424 as of June 30, 2011................................................         143,837          154,568 
Income taxes recoverable..........................................................................................         17,183          18,911 
Prepaid expenses and other current assets..............................................................        34,987          29,678 
Deferred tax assets...................................................................................................         29,405          27,861 
    Total current assets..............................................................................................        344,706          515,158 
Capital assets............................................................................................................         84,590          77,825 
Goodwill......................................................................................................................         1,038,571         832,481 
Acquired intangible assets.........................................................................................         414,281          344,995 
Deferred tax assets.....................................................................................................       29,401          42,737 
Other assets..............................................................................................................         19,408          19,359 
Deferred charges.......................................................................................................         61,022          54,989 
Long-term income taxes recoverable.........................................................................         41,161          44,819 
       
  Total assets............................................................................................................  $ 2,033,140    $ 1,932,363 
       
LIABILITIES AND SHAREHOLDERS' EQUITY      
Current liabilities:      
  Accounts payable and accrued liabilities.................................................................. $ 138,005    $ 126,249 
  Current portion of long-term debt............................................................................         63,388          15,545 
  Deferred revenues...................................................................................................        249,097          254,531 
  Income taxes payable..............................................................................................         19,157          18,424 
  Deferred tax liabilities..............................................................................................         1,991          624 
    Total current liabilities...........................................................................................        471,638          415,373 
Long-term liabilities:      
  Accrued liabilities.....................................................................................................         13,834          13,727 
  Deferred credits.......................................................................................................         6,538          6,878 
  Pension liability........................................................................................................         18,171          18,478 
  Long-term debt........................................................................................................         281,285          282,033 
  Deferred revenues...................................................................................................        12,240          11,466 
  Long-term income taxes payable.............................................................................         103,310          101,434 
  Deferred tax liabilities...............................................................................................         54,850          43,529 
    Total long-term liabilities.......................................................................................        490,228          477,545 
Shareholders' equity:      
  Share capital.............................................................................................................      
  57,790,868 and 57,301,812 Common Shares issued and outstanding at September 30, 2011 and June 30, 2011, respectively; Authorized Common Shares: unlimited........................................................................................        622,337          614,279 
  Additional paid-in capital............................................................................................        79,454          74,301 
  Accumulated other comprehensive income................................................................        44,102          60,470 
  Retained earnings......................................................................................................        351,880          316,894 
  Treasury stock, at cost (572,413 shares at September 30, 2011 and June 30, 2011, respectively)......................................................................................        (26,499 )         (26,499 )
       
  Total shareholders' equity..........................................................................................        1,071,274          1,039,445 
       
  Total liabilities and shareholders' equity.............................................................  $ 2,033,140    $ 1,932,363 
       

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands of U.S. dollars, except per share data) (Unaudited)

       
  Three months ended September 30,  
  2011     2010  
Revenues:      
  License.................................................................................................................. $ 65,028    $ 42,646 
  Customer support..................................................................................................        161,997          129,757 
  Service and other..................................................................................................        61,021          45,002 
    Total revenues.....................................................................................................       288,046          217,405 
Cost of revenues:      
  License...................................................................................................................        3,998          3,502 
  Customer support..................................................................................................        26,269          19,356 
  Service and other        50,351          35,113 
  Amortization of acquired technology-based intangible assets......................................         20,790          15,427 
    Total cost of revenues........................................................................................        101,408          73,398 
Gross profit..................................................................................................................        186,638          144,007 
Operating expenses:      
  Research and development.....................................................................................        43,458          30,963 
  Sales and marketing................................................................................................        64,880          44,180 
  General and administrative......................................................................................        25,761          19,810 
  Depreciation.............................................................................................................        5,258          4,875 
  Amortization of acquired customer-based intangible assets.........................................        13,041          8,801 
  Special charges........................................................................................................         7,105          3,195 
    Total operating expenses......................................................................................       159,503          111,824 
Income from operations...................................................................................................        27,135          32,183 
Other income, net............................................................................................................        9,274          2,480 
Interest expense, net.......................................................................................................        (4,348 )         (4,135 )
Income before income taxes............................................................................................        32,061          30,528 
Provision for (recovery of) income taxes.........................................................................         (2,925)          8,857 
Net income for the period................................................................................................  $ 34,986    $ 21,671 
Net income per share-basic...........................................................................................   $ 0.61    $ 0.38 
Net income per share-diluted.........................................................................................   $ 0.60    $ 0.37 
Weighted average number of Common Shares outstanding-basic..................................        57,412          56,883 
Weighted average number of Common Shares outstanding-diluted................................        58,599          57,922 

 

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands of U.S. dollars) (Unaudited)  

  Three months ended September 30,  
  2011   2010  
Cash flows from operating activities:      
Net income for the period ..................................................................................... $ 34,986   $ 21,671
Adjustments to reconcile net income to net cash provided by operating activities:      
  Depreciation and amortization of intangible assets .............................................       39,089         29,103
  Share-based compensation expense ................................................................        4,844         2,600
  Excess tax benefits on share-based compensation expense ..............................       (332)         (432)
  Pension expense ...............................................................................................       137         123
  Amortization of debt issuance costs ..................................................................        330         333
  Loss on sale and write down of capital assets ...................................................                    169         -
  Deferred taxes ..................................................................................................        (14,849)         (181)
  Impairment and other non cash charges ............................................................         (1,355)             -
Changes in operating assets and liabilities:      
  Accounts receivable ...........................................................................................       21,654         27,878
  Prepaid expenses and other current assets ......................................................       5,842         (2,528)
  Income taxes ......................................................................................................       17,696         32,862
  Deferred charges and credits ............................................................................       (9,046)         (27,725)
  Accounts payable and accrued liabilities ...........................................................       (21,407)         (25,991)
  Deferred revenue ..............................................................................................       (32,998)         (7,234)
  Other assets ......................................................................................................       588         (1,545)
Net cash provided by operating activities .............................................................       45,348         48,934
Cash flows from investing activities:      
  Additions of capital assets-net ...........................................................................       (7,902)         (6,943)
  Purchase of Operitel Corporation, net of cash acquired ....................................               (6,260)         -
  Purchase of Global 360 Holding Corp., net of cash acquired ............................           (247,711)         -
  Purchase consideration for prior period acquisitions .........................................       (274)         (1,406)
  Investments in marketable securities .................................................................       -         (668)
Net cash used in investing activities .....................................................................       (262,147)         (9,017)
Cash flow from financing activities:      
  Excess tax benefits on share-based compensation expense .............................       332         432
  Proceeds from issuance of Common Shares .....................................................       7,837         3,246
  Proceeds from long-term debt ...........................................................................       48,500         - 
  Repayment of long-term debt ............................................................................       (916)         (878)
Net cash provided by financing activities ..............................................................       55,753         2,800
Foreign exchange gain (loss) on cash held in foreign currencies ........................       (3,800)         15,783
Increase (decrease) in cash and cash equivalents during the period..................        (164,846)         58,500
Cash and cash equivalents at beginning of the period .........................................       284,140         326,192
Cash and cash equivalents at end of the period .................................................. $ 119,294   $ 384,692

 

 

 

 

 

 

 

 

 

SOURCE Open Text Corporation