Open Text Reports First Quarter Fiscal 2008 Financial Results



    WATERLOO, ON, Nov. 1 /CNW/ - Open Text(TM) Corporation (NASDAQ:  OTEX)
(TSX:OTC), a leading provider of Enterprise Content Management (ECM) software,
today announced unaudited financial results for its first quarter that ended
September 30, 2007.(1)
    Total revenue for the first quarter was $164.0 million, compared to
$101.2 million for the same period in the prior fiscal year. License revenue
in the first quarter was $44.3 million, compared to $28.8 million in the first
quarter of the prior fiscal year.
    Adjusted net income in the quarter was $22.1 million or $0.43 per share
on a diluted basis, compared to $12.2 million or $0.24 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
$7.8 million or $0.15 per share on a diluted basis, compared to $7.3 million
or $0.15 per share on a diluted basis for the same period in the prior fiscal
year.(2)
    Operating cash flow in the first quarter of fiscal 2008 was
$32.2 million, compared to $9.6 million in the first quarter of fiscal 2007.
    "The Company plans to make an additional debt prepayment of
$30.0 million. This will reduce our debt from $390 million at the time of the
Hummingbird acquisition to approximately $296.3 million. We are pleased with
our accelerated repayment of the debt ahead of schedule and plans for future
lump sum debt repayments will continue to be reviewed on a periodic basis,"
said Paul McFeeters, Chief Financial Officer of Open Text.
    The cash, cash equivalents and short-term investments balance as of
September 30, 2007 was $150.3 million. Accounts receivable as of September 30,
2007, totaled $117.0 million, compared to $76.7 million as of September 30,
2006, and Days Sales Outstanding (DSO) was 64 days in the first quarter of
fiscal 2008, compared to 68 days in the first quarter of fiscal 2007. "I am
pleased with our performance in the quarter," said John Shackleton, President
and Chief Executive Officer of Open Text. "We experienced strong sales in the
pharmaceutical and energy sectors, meeting our profitability targets and
generating strong operating cash flow. We are well on our way to meeting our
objectives for fiscal 2008."
    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

    Open Text will host a conference call on November 1st, 2007 at 5:00 p.m.
ET to discuss the final financial results for its first quarter.

    
        Date: Thursday, November 1, 2007
        Time: 5:00 p.m. ET/2:00 p.m. PT
        Length: 60 minutes
        Where: 416-640-1907
    

    Please dial-in approximately 10 minutes before the teleconference is
scheduled to begin. A replay of the call will be available beginning November
1, 2007 at 7:00 p.m. ET through 11:59 p.m. on November 15, 2007 and can be
accessed by dialing 416-640-1917and using pass code 21249297 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/events/event.html?id=6638677

    About Open Text

    Open Text(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 the world's
largest companies, government agencies and professional service firms. Open
Text supports approximately 46,000 customers in 114 countries and 12
languages. For more information about Open Text, visit www.opentext.com.

    Safe Harbor Statement under the Private Securities Litigation Reform Act
of 1995 - This press release contains forward-looking statements, including
statements about the financial conditions, results of operations and earnings
and revenue outlook for Open Text Corporation ("Open Text" or "the Company").
Forward-looking statements in this press release are not promises or
guarantees of future performance and are subject to risks and uncertainties
that could cause the Company's actual results to differ materially from those
anticipated. The Company cautions you not to place undue reliance upon any
such forward-looking statements, which speak only as of the date made. The
results included in this press release are unaudited and therefore are deemed
to be forward-looking statements. Factors that may cause actual results or
earnings to differ materially from such forward-looking statements include,
among others, the following: (i) the future performance, financial and
otherwise, of Open Text; (ii) the ability of Open Text 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 thereunder; (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; (ix) demand for
the Company's products; and (10) other risks detailed from time to time in the
Company's filings with the Securities and Exchange Commission (SEC), including
the Company's Annual Report on Form 10-K for the year ended June 30, 2007.
Forward-looking statements are based on management's beliefs and opinions at
the time the statements are made, and the Company does not undertake any
obligation to update forward-looking statements should circumstances or
management's beliefs or opinions change.

    Notes

    (1) Based on comparison of historic 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) In addition to these GAAP and adjusted results, the Company has
provided financial information that adds-back maintenance revenue eliminated
due to the impact of purchase accounting entries on deferred revenue and the
impact of interest expense. Management believes that the furnishing of these
adjustments provide a consistent basis for comparison between quarters and
help to more accurately reflect Open Text's underlying operating results.

    
                                                          Three months ended
                                                          September 30, 2007
    GAAP Revenue                                                     $ 164.0
    Maintenance revenue adjustment for
     purchase accounting                                                 1.3
                                                         --------------------
    Non-GAAP revenue                                                 $ 165.3
                                                         --------------------
                                                         --------------------

    Adjusted Income                                                  $  22.1
    Maintenance revenue adjustment for
     purchase accounting                                                 1.3
    Net Interest Expense                                                 7.9
    Income tax effect                                                   (2.8)
                                                         --------------------
    Non-GAAP net income                                              $  28.5
                                                         --------------------
                                                         --------------------

    Adjusted EPS  Diluted                                               0.43
    Non GAAP Adjustments (net of tax)
     - Maintenance                                                      0.02
     - Interest                                                         0.11
                                                         --------------------
    Non-GAAP EPS                                                     $  0.56
                                                         --------------------
                                                         --------------------
    

    (3) 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 unaudited condensed 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. Open Text
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 intangibles, restructuring
costs, other income (expense), share-based compensation 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 Open Text'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
reconciliation of (unaudited) US GAAP based financial measures to non-US GAAP
based financial measures referred to in this press release:

    
    Reconciliation of (unaudited) US GAAP based Net Income to Adjusted Net
    ----------------------------------------------------------------------
    Income (in millions of US dollars) for the quarters ended September 30,
    ----------------------------------------------------------------------
    2007 and 2006:
    --------------

                                      Three months ended  Three months ended
                                      September 30, 2007  September 30, 2006
    GAAP based "Net Income"                         $7.8                $7.3
    Special Charges/(recovery)                       0.0                (0.5)
    Amortization of intangibles                     17.6                 7.2
    Other (Income)/Expense                           1.8                (0.4)
    Share-based compensation                         1.1                 1.3
    Tax Impact on Above                             (6.2)               (2.7)
    Non-GAAP based "Adjusted Net Income"           $22.1               $12.2


    Reconciliation of (unaudited) US GAAP based EPS to non-US GAAP based EPS
    ------------------------------------------------------------------------
    (calculated on a diluted basis) for the quarters ended September 30, 2007
    -------------------------------------------------------------------------
    and 2006:
    ---------

                                      Three months ended  Three months ended
                                      September 30, 2007  September 30, 2006
    GAAP based "Net Income"                        $0.15               $0.15
    Special Charges/(recovery)                      0.00               (0.01)
    Amortization of intangibles                     0.34                0.14
    Other (Income)/Expense                          0.04               (0.01)
    Share-based compensation                        0.02                0.03
    Tax Impact on Above                            (0.12)              (0.06)
    Non-GAAP based "Adjusted Net Income"           $0.43               $0.24



                            OPEN TEXT CORPORATION

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

                                                   September 30,   June 30,
                                                        2007         2007
                                                   ------------- ------------
                                                     (Unaudited)
                       ASSETS

    Current assets:
      Cash and cash equivalents...................  $   150,306  $   149,979
      Accounts receivable trade, net of allowance
       for doubtful accounts of $2,152 as of
       September 30, 2007 and $2,089
       as of June 30, 2007........................      117,038      128,781
      Income taxes recoverable....................       27,834       31,060
      Prepaid expenses and other current assets...       10,765       10,368
      Deferred tax assets.........................       30,671       30,248
                                                   ------------- ------------
      Total current assets........................      336,614      350,436
    Capital assets................................       43,909       43,614
    Goodwill......................................      548,817      528,312
    Acquired intangible assets....................      328,735      343,324
    Deferred tax assets...........................       44,063       42,078
    Other assets..................................        9,417        9,524
    Investment tax recoverable....................        9,400        9,557
                                                   ------------- ------------
                                                    $ 1,320,955  $ 1,326,845
                                                   ------------- ------------
                                                   ------------- ------------


         LIABILITIES AND SHAREHOLDERS' EQUITY

    Current liabilities:
      Accounts payable and accrued liabilities....  $    93,473  $   100,211
      Current portion of long-term debt...........        3,793        4,048
      Deferred revenues...........................      141,278      143,097
      Income taxes payable........................       30,409       33,705
      Deferred tax liabilities....................        1,840        1,601
                                                   ------------- ------------
      Total current liabilities...................      270,793      282,662
    Long-term liabilities:........................
      Accrued liabilities.........................       23,386       22,516
      Long-term debt..............................      336,883      366,765
      Deferred revenues...........................        2,259        3,840
      Deferred tax liabilities....................      120,178      120,019
                                                   ------------- ------------
      Total long-term liabilities.................      482,706      513,140
    Minority interest.............................        7,373        6,975
    Shareholders' equity:
        Share capital
           50,585,848 and 50,180,118 Common Shares
            issued and outstanding at September 30,
            2007 and June 30, 2007, respectively;
            Authorized Common Shares: unlimited...      432,075      426,188
      Additional paid-in capital..................       36,771       35,311
      Accumulated other comprehensive income......       88,902       68,034
      Accumulated deficit.........................        2,335       (5,465)
                                                   ------------- ------------
        Total shareholders' equity................      560,083      524,068
                                                   ------------- ------------
                                                    $ 1,320,955  $ 1,326,845
                                                   ------------- ------------
                                                   ------------- ------------



                            OPEN TEXT CORPORATION

            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
            (in thousands of U.S. Dollars, except per share data)

                                                       Three months ended
                                                          September 30,
                                                   --------------------------
                                                        2007         2006
                                                   ------------- ------------
                                                     (Unaudited)  (Unaudited)
    Revenues:
      License.....................................  $    44,260  $    28,825
      Customer support............................       86,304       48,288
      Service.....................................       33,403       24,042
                                                   ------------- ------------
        Total revenues                                  163,967      101,155

    Cost of revenues:
      License.....................................        3,554        2,800
      Customer support............................       12,598        6,987
      Service.....................................       27,504       20,300
      Amortization of acquired
       technology intangible assets...............       10,152        4,846
                                                   ------------- ------------
        Total cost of revenues....................       53,808       34,933
                                                   ------------- ------------
                                                        110,159       66,222
    Operating expenses:
      Research and development....................       23,732       14,218
      Sales and marketing.........................       38,110       24,872
      General and administrative..................       17,010       11,219
      Depreciation................................        2,984        2,992
      Amortization of acquired intangible assets..        7,415        2,382
      Special charges (recoveries)................          (61)        (468)
                                                   ------------- ------------
        Total operating expenses..................       89,190       55,215
                                                   ------------- ------------
    Income from operations........................       20,969       11,007
    Other income (expense)........................       (1,827)         373
    Interest income (expense), net................       (7,872)         392
                                                   ------------- ------------
    Income before income taxes....................       11,270       11,772
    Provision for income taxes....................        3,343        4,334
                                                   ------------- ------------
    Net income before minority interest...........        7,927        7,438
    Minority interest.............................          127          137
                                                   ------------- ------------
    Net income for the period.....................  $     7,800  $     7,301
                                                   ------------- ------------
                                                   ------------- ------------
    Net income per share - basic..................  $      0.16  $      0.15
                                                   ------------- ------------
                                                   ------------- ------------
    Net income per share - diluted................  $      0.15  $      0.15
                                                   ------------- ------------
                                                   ------------- ------------
    Weighted average number of Common Shares
     outstanding - basic..........................       50,285       48,975
    Weighted average number of Common Shares
     outstanding - diluted........................       51,618       50,219
                                                   ------------- ------------
                                                   ------------- ------------



                            OPEN TEXT CORPORATION

          UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                       (In thousands of U.S. Dollars)

                                                       Three months ended
                                                          September 30,
                                                   --------------------------
                                                        2007         2006
                                                   ------------- ------------
                                                     (Unaudited)  (Unaudited)
    Cash flows from operating activities:
    Net income for the period.....................  $     7,800  $     7,301
    Adjustments to reconcile net income to net
     cash provided by operating activities:
      Depreciation and amortization...............       20,551       10,220
      In-process research and development.........          500            -
      Share-based compensation expense............        1,063        1,267
      Employee long-term incentive plan...........          185            -
      Excess tax benefits on share-based
       compensation expense.......................         (397)        (205)
      Undistributed earnings related to
       minority interest..........................          127          137
      Amortization of debt issuance costs.........          290            -
      Unrealized loss (gain) on
       financial instruments......................        1,407            -
      Deferred taxes..............................         (705)       1,714
    Changes in operating assets and liabilities:
      Accounts receivable.........................       10,502       (1,694)
      Prepaid expenses and other current assets...         (188)         617
      Income taxes................................          174         (954)
      Accounts payable and accrued liabilities....       (5,496)      (5,523)
      Deferred revenues...........................       (3,773)      (2,962)
      Other assets................................          174         (281)
                                                   ------------- ------------
    Net cash provided by operating activities.....       32,214        9,637
                                                   ------------- ------------
    Cash flows from investing activities:
      Acquisitions of capital assets..............       (1,216)      (2,785)
      Purchase of IXOS, net of cash acquired......         (176)        (333)
      Purchase of assets constituting a business..       (2,209)           -
      Investments in marketable securities........            -         (829)
      Acquisition related costs...................       (8,029)      (2,448)
                                                   ------------- ------------
    Net cash used in investing activities.........      (11,630)      (6,395)
                                                   ------------- ------------
    Cash flows from financing activities:
      Excess tax benefits on share-based
       compensation expense.......................          397          205
      Proceeds from issuance of Common Shares.....        5,719          478
      Repayment of long-term debt.................      (30,933)         (99)
      Debt issuance costs.........................         (349)         (21)
                                                   ------------- ------------
    Net cash provided by (used in)
     financing activities.........................      (25,166)         563
                                                   ------------- ------------
    Foreign exchange gain on cash held in
     foreign currencies...........................        4,909           65
                                                   ------------- ------------
    Increase in cash and cash equivalents
     during the period............................          327       3,870
    Cash and cash equivalents at
     beginning of period..........................      149,979     107,354
                                                   ------------- ------------
    Cash and cash equivalents at end of period....    $ 150,306   $ 111,224
                                                   ------------- ------------
                                                   ------------- ------------
    





For further information:

For further information: Paul McFeeters, Chief Financial Officer, Open
Text Corporation, (905) 762-6121, pmcfeeters@opentext.com; Greg Secord,
Director, Investor Relations, Open Text Corporation, (519) 888-7111 ext.2408,
gsecord@opentext.com


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