Open Text Reports First Quarter Fiscal 2010 Financial Results

WATERLOO, ON, Oct. 27 /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 ended September 30, 2009.(1)

Total revenue for the first quarter was $211.4 million, up 16% compared to $182.6 million for the same period in the prior fiscal year. License revenue in the first quarter was $47.3 million, down 6% compared to $50.1 million in the first quarter of the prior fiscal year.

Adjusted net income in the quarter was $32.8 million or $0.58 per share on a diluted basis, up 16% compared to $28.2 million or $0.53 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 $1.7 million or $0.03 per share on a diluted basis, compared to $14.7 million or $0.28 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, 2009 was $212.2 million. Accounts receivable as of September 30, 2009, totaled $135.6 million, compared to $108.3 million as of September 30, 2008, and Days Sales Outstanding (DSO) was 58 days in the first quarter of fiscal 2010, compared to 53 days in the first quarter of fiscal 2009.

"We met our profit and revenue goals in what has seasonally been our toughest quarter. License revenue fell short of our expectations, mainly due to deferred purchase decisions for our Web Content Management (WCM) products," said John Shackleton, President and Chief Executive Officer of Open Text. "We are seeing a continued demand for compliance solutions, as well as companies laying the groundwork for ECM 2.0 solutions. In the current economic environment we remain committed to meeting our annual profitability targets, while focusing on capturing market share by leveraging our strategic partnerships."

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.

Open Text Renews Normal Course Issuer Bid

The Company also announced its intention to renew its Normal Course Issuer Bid (the "Bid") through the facilities of the NASDAQ Global Select Market ("NASDAQ").

Purchases over the NASDAQ could commence in November, 2009 if desirable. As of October 26, 2009, Open Text had 56,380,735 issued and outstanding common shares. The Bid will expire one year from the commencement date.

The maximum number of shares that may be purchased is calculated as 5% of the outstanding common shares of Open Text at the beginning of the Bid.

Teleconference Call

Open Text will host a conference call on October 27, 2009 at 5:00 p.m. ET to discuss the final financial results of its first quarter.

    
                     Date:     Tuesday, October 27, 2009
                     Time:     5:00 p.m. ET/2:00 p.m. PT
                     Length:   60 minutes
                     Where:    800-814-4861
    

Please dial-in approximately 10 minutes before the teleconference is scheduled to begin. A replay of the call will be available beginning October 27, 2009 at 7:00 p.m. ET through 11:59 p.m. on November 10, 2009 and can be accessed by dialing 416-640-1917 and using pass code 4169327 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/wa-event.html?id=7735475.

Supplemental materials regarding new accounting rules - Topic 805: Business Combinations - which will be discussed on the call are available for download on the Investor Relations section of the Open Text web site at: http://mimage.opentext.com/alt_content/binary/ot/investor/2010/fy2010q1.pdf.

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 large 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, and results of operations and earnings 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 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, 2009. 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 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. 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, 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 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 (unaudited) of US GAAP based financial measures to non-US GAAP based financial measures referred to in this press release:

    
    Reconciliation (unaudited) of US GAAP based Net Income to Adjusted Net
    ----------------------------------------------------------------------
    Income (in millions of US dollars) for the quarters ended September 30,
    -----------------------------------------------------------------------
    2009 and 2008:
    --------------

                                     Three months ended   Three months ended
                                     September 30, 2009   September 30, 2008

    GAAP based "Net Income"                        $1.7                $14.7
    Special Charges/(recovery)                     18.6                    -
    Amortization of intangibles                    23.1                 19.0
    Other (Income)/Expense                         (3.4)                (0.7)
    Share-based compensation                        1.5                  1.4
    Tax Impact on Above                            (8.7)                (6.2)
    -------------------------------------------------------------------------
    Non-GAAP based "Adjusted Net Income"          $32.8                $28.2
    -------------------------------------------------------------------------


    Reconciliation (unaudited) of US GAAP based EPS to non-US GAAP based EPS
    ------------------------------------------------------------------------
    (calculated on a diluted basis) for the quarters ended September 30, 2009
    -------------------------------------------------------------------------
    and 2008:
    ---------

                                     Three months ended   Three months ended
                                     September 30, 2009   September 30, 2008

    GAAP based "Net Income"                       $0.03                $0.28
    Special Charges/(recovery)                     0.33                    -
    Amortization of intangibles                    0.41                 0.36
    Other (Income)/Expense                        (0.06)               (0.01)
    Share-based compensation                       0.03                 0.03
    Tax Impact on Above                           (0.16)               (0.13)
    -------------------------------------------------------------------------
    Non-GAAP based "Adjusted Net Income"          $0.58                $0.53
    -------------------------------------------------------------------------


    (3) The following table provides a composition of our major currencies
        for revenue and expenses, expressed as a percentage, for the first
        quarter of Fiscal 2010:

    Currencies                                 % of Revenue  % of Expenses*
    --------------------------------------- ---------------- ----------------
    EURO...................................             25%              23%
    GBP....................................             12%               9%
    CHF....................................              6%               4%
    CAD....................................              6%              23%
    USD....................................             44%              34%
    Others.................................              7%               7%
                                            ---------------- ----------------
    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, depreciation, share-based compensation and
        special charges.




                            OPEN TEXT CORPORATION
                         CONSOLIDATED BALANCE SHEETS
            (In thousands of U.S. dollars, except per share data)

                                              September 30        June 30
                                                  2009              2009
                                            ---------------   ---------------
                 ASSETS                        Unaudited          Audited

    Current assets:
      Cash and cash equivalents             $      212,190    $      275,819
      Short-term investments                        19,768                 -
      Accounts receivable trade, net of
       allowance for doubtful accounts of
       $4,464 as of September 30, 2009 and
       $4,208 as of June 30, 2009                  135,575           115,802
      Income taxes recoverable                       6,225             4,496
      Prepaid expenses and other current
       assets                                       27,858            18,172
      Deferred tax assets                           22,185            20,621
                                            ---------------   ---------------
      Total current assets                         423,801           434,910
    Investments in marketable securities                 -            13,103
    Capital assets                                  57,435            45,165
    Goodwill                                       718,600           576,111
    Acquired intangible assets                     384,242           315,048
    Deferred tax assets                             75,211            69,877
    Other assets                                    18,871            13,064
    Long-term Income taxes recoverable              42,391            39,958
                                            ---------------   ---------------
    Total assets                            $    1,720,551    $    1,507,236
                                            ---------------   ---------------
                                            ---------------   ---------------

       LIABILITIES AND SHAREHOLDERS' EQUITY

    Current liabilities:
      Accounts payable and accrued
       liabilities                          $      128,660    $      115,018
      Current portion of long-term debt              3,489             3,449
      Deferred revenues                            205,998           189,397
      Income taxes payable                           7,707            10,356
      Deferred tax liabilities                       2,083               508
                                            ---------------   ---------------
      Total current liabilities                    347,937           318,728

    Long-term liabilities:
      Accrued liabilities                           21,506            23,073
      Pension liability                             16,510            15,803
      Long-term debt                               299,182           299,234
      Deferred revenues                             10,969             7,914
      Long-term income taxes payable                53,465            47,131
      Deferred tax liabilities                     134,543           108,889
                                            ---------------   ---------------
      Total long-term liabilities                  536,175           502,044

    Shareholders' equity:
      Share capital:
      56,373,651 and 52,716,751 Common
       Shares issued and outstanding at
       September 30, 2009 and June 30, 2009,
       respectively; Authorized Common
       Shares: unlimited                           588,871           457,982
      Additional paid-in capital                    55,307            52,152
      Accumulated other comprehensive income        86,052            71,851
      Retained earnings                            106,209           104,479
                                            ---------------   ---------------
      Total shareholders' equity                   836,439           686,464
                                            ---------------   ---------------
    Total liabilities and shareholders'
     equity                                 $    1,720,551    $    1,507,236
                                            ---------------   ---------------
                                            ---------------   ---------------



                            OPEN TEXT CORPORATION
                      CONSOLIDATED STATEMENTS OF INCOME
       (In thousands of U.S. dollars, except share and per share data)
                                 (Unaudited)

                                             Three months ended September 30,
                                            ---------------------------------
                                                      2009              2008
                                            ---------------------------------
    Revenues:
      License                               $       47,329    $       50,074
      Customer support                             123,649            98,429
      Service and other                             40,444            34,120
                                            ---------------------------------
      Total revenues                               211,422           182,623
                                            ---------------------------------
    Cost of revenues:
      License                                        3,145             2,893
      Customer support                              20,939            15,567
      Service and other                             33,294            27,729
      Amortization of acquired
       technology-based intangible assets           14,142            10,747
                                            ---------------------------------
      Total cost of revenues                        71,520            56,936
                                            ---------------------------------
    Gross profit                                   139,902           125,687
                                            ---------------------------------

    Operating expenses:
      Research and development                      31,542            28,578
      Sales and marketing                           50,690            44,832
      General and administrative                    21,225            18,387
      Depreciation                                   4,147             2,698
      Amortization of acquired
       customer-based intangible assets              8,917             8,215
      Special charges                               18,589                 -
                                            ---------------------------------
      Total operating expenses                     135,110           102,710
                                            ---------------------------------
    Income from operations                           4,792            22,977
                                            ---------------------------------
    Other income, net                                3,440               729
    Interest expense, net                           (3,046)           (2,994)
                                            ---------------------------------
    Income before income taxes                       5,186            20,712
    Provision for income taxes                       3,456             5,932
                                            ---------------------------------
    Net income before minority
     interest                                        1,730            14,780
    Minority interest                                    -               119
                                            ---------------------------------
    Net income for the period               $        1,730    $       14,661
                                            ---------------------------------
                                            ---------------------------------
    Net income per share - basic            $         0.03    $         0.29
                                            ---------------------------------
                                            ---------------------------------
    Net income per share - diluted          $         0.03    $         0.28
                                            ---------------------------------
                                            ---------------------------------

    Weighted average number of
     Common Shares outstanding - basic              55,388            51,298
                                            ---------------------------------
                                            ---------------------------------

    Weighted average number of
     Common Shares outstanding - diluted            56,469            52,990
                                            ---------------------------------
                                            ---------------------------------



                            OPEN TEXT CORPORATION
                     CONSOLIDATED STATEMENTS OF CASHFLOWS
                       (In thousands of U.S. Dollars)

                                                          Unaudited
                                            ---------------------------------
                                                      Three months ended
                                                          September 30
                                            ---------------------------------
                                                      2009              2008
                                            ---------------------------------
    Cash flows from operating activities:

    Net income for the period               $        1,730    $       14,661
      Adjustments to reconcile net income
       to net cash provided by operating
       activities:
      Depreciation and amortization                 27,206            21,660
      Share-based compensation expense               3,506             1,423
      Employee long-term incentive plan              2,675             1,059
      Excess tax benefits on share-based
       compensation expense                           (691)           (6,629)
      Undistributed earnings related to
       minority interest                                 -               119
      Pension expense                                  192                 -
      Amortization of debt issuance costs              266               224
      Unrealized (gain) loss on financial
       instruments                                  (2,390)             (722)
      Release of unrealized gain on marketable
       securities to income                         (4,353)                -
      Deferred taxes                                (2,957)             (256)
      Changes in operating assets and
       liabilities:
      Accounts receivable                            7,928            27,946
      Prepaid expenses and other current
       assets                                       (3,218)           (1,926)
      Income taxes                                  (4,787)            4,731
      Accounts payable and accrued
       liabilities                                  (9,343)          (18,369)
      Deferred revenue                             (12,437)          (19,430)
      Other assets                                   1,175               322
                                            ---------------------------------
    Net cash provided by operating
     activities                                      4,502            24,813
    Cash flows from investing activities:
      Additions of capital assets, net              (7,665)           (3,887)
      Purchase of Vignette Corporation,
       net of cash acquired                        (90,600)                -
      Purchase of eMotion LLC, net of cash
       acquired                                          -            (3,635)
      Purchase of a division of Spicer
       Corporation                                       -           (10,836)
      Purchase consideration for prior
       period acquisitions                          (4,801)           (3,293)
      Investments in marketable securities               -            (3,608)
      Maturity of short-term investments            27,171                 -
                                            ---------------------------------
    Net cash used in investing activities          (75,895)          (25,259)
    Cash flows from financing activities:
      Excess tax benefits on share-based
       compensation expense                            691             6,629
      Proceeds from issuance of Common shares        4,477             5,542
      Repayment of long-term debt                     (864)             (867)
      Debt issuance costs                           (1,024)                -
                                            ---------------------------------
    Net cash provided by financing
     activities                                      3,280            11,304
                                            ---------------------------------
    Foreign exchange gain (loss) on
     cash held in foreign currencies                 4,484           (15,641)
    Decrease in cash and cash equivalents
     during the period                             (63,629)           (4,783)
    Cash and cash equivalents at
     beginning of the period                       275,819           254,916
                                            ---------------------------------
    Cash and cash equivalents at end
     of the period                          $      212,190    $      250,133
                                            ---------------------------------
                                            ---------------------------------
    

SOURCE Open Text Corporation

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


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