Open Text Reports Second Quarter Fiscal 2008 Financial Results



    WATERLOO, ON, Feb. 7 /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 second quarter that ended
December 31, 2007.(1)
    Total revenue for the second quarter was $182.5 million, up 12% compared
to $163.3 million for the same period in the prior fiscal year and up 11%
compared to $164.0 million in the previous quarter. License revenue in the
second quarter was $55.2 million, up 7% compared to $51.4 million in the
second quarter of the prior fiscal year and up 25% compared to $44.3 million
in the previous quarter.
    Adjusted net income in the quarter was $26.2 million or $0.50 per share
on a diluted basis, up 46% compared to $18.0 million or $0.35 per share on a
diluted basis for the same period in the prior fiscal year and up 19% compared
to $22.1 million or $0.43 per share on a diluted basis in the previous
quarter. Net income in accordance with U.S. generally accepted accounting
principles ("US GAAP") was $10.7 million or $0.20 per share on a diluted
basis, up 365% compared to $2.3 million or $0.04 per share on a diluted basis
for the same period in the prior fiscal year and up 37% compared to
$7.8 million or $0.15 per share on a diluted basis in the previous quarter.(2)
    Operating cash flow in the second quarter of fiscal 2008 was
$39.3 million, up 25% compared to $31.4 million in the second quarter of the
prior fiscal year and up 22% compared to $32.2 million in the previous
quarter.
    "I am very pleased with our performance in the quarter," said John
Shackleton, President and Chief Executive Officer of Open Text. "We have grown
license revenue while maintaining our profitability targets and generating
strong operating cash flow. Sales in the quarter were led by the
telecommunications, energy and government sectors and our strategic partner
programs with SAP, Microsoft, Oracle and Accenture continue to gain traction."
    The cash, cash equivalents and short-term investments balance as of
December 31, 2007 was $159.7 million compared to $150.0 million at June 30,
2007. Accounts receivable as of December 31, 2007, totaled $120.6 million,
compared to $128.8 million as of June 30, 2007, and Days Sales Outstanding
(DSO) was 60 days at the end of the second quarter of fiscal 2008, compared to
66 days at June 30, 2007.
    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 February 7, 2008 at 5:00 p.m. ET
to discuss the final financial results for its second quarter.

                       Date:    Thursday, February 7, 2008
                       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
February 7, 2008 at 7:00 p.m. ET through 11:59 p.m. on February 21, 2008 and
can be accessed by dialing 416-640-1917 and using pass code 21258637 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=6643048

    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, 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 and
Form 10-Q for the quarter ended September 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 in the table below 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.


    
    (in millions of US dollars                            Three months ended
     except share data)                                    December 31, 2007

    GAAP Revenue                                                     $ 182.5
    Maintenance revenue adjustment for purchase
     accounting                                                          0.3
                                                          -------------------
    Non-GAAP revenue                                                 $ 182.8
                                                          -------------------
                                                          -------------------

    Adjusted Income                                                  $  26.2
    Maintenance revenue adjustment for purchase
     accounting                                                          0.3
    Net Interest Expense                                                 7.6
    Income tax effect                                                   (2.4)
                                                          -------------------
    Non-GAAP net income                                              $  31.7
                                                          -------------------
                                                          -------------------
    

    (3) Use of Non- US 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 December 31,
    ----------------------------------------------------------------------
    2007 and 2006:
    --------------

                                   Three months ended     Three months ended
                                    December 31, 2007      December 31, 2006

    GAAP based "Net Income"                    $ 10.7                 $  2.3
    Special Charges/(recovery)                    0.0                    4.8
    Amortization of intangibles                  17.8                   17.8
    Other (Income)/Expense                        3.7                   (0.3)
    Share-based compensation                      0.7                    1.3
    Tax Impact on Above                          (6.7)                  (7.9)
    Non-GAAP based "Adjusted
     Net Income"                               $ 26.2                $  18.0

    Reconciliation of (unaudited) US GAAP based EPS to non-US GAAP based EPS
    ------------------------------------------------------------------------
    (calculated on a diluted basis) for the quarters ended December 31 2007
    -----------------------------------------------------------------------
    and 2006:
    ---------

                                   Three months ended     Three months ended
                                    December 31, 2007      December 31, 2006

    GAAP based "Net Income"                    $ 0.20                 $ 0.04
    Special Charges/(recovery)                   0.00                   0.10
    Amortization of intangibles                  0.34                   0.35
    Other (Income)/Expense                       0.07                  (0.01)
    Share-based compensation                     0.01                   0.03
    Tax Impact on Above                         (0.12)                 (0.16)
    Non-GAAP based "Adjusted
     Net Income"                               $ 0.50                 $ 0.35



                            OPEN TEXT CORPORATION

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


                                                  December 31,       June 30,
                                                         2007           2007
                                                  ------------   ------------
                                                   (Unaudited)
                          ASSETS
    Current assets:
      Cash and cash equivalents.................. $   159,709    $   149,979
      Accounts receivable trade, net of
       allowance for doubtful accounts of
       $2,966 as of December 31, 2007 and
       $2,089 as of June 30, 2007................     120,588        128,781
      Income taxes recoverable...................      19,599         31,060
      Prepaid expenses and other current
       assets....................................      10,518         10,368
      Deferred tax assets........................      32,410         30,248
                                                  ------------   ------------
      Total current assets.......................     342,824        350,436
    Capital assets...............................      42,879         43,614
    Goodwill.....................................     552,079        528,312
    Acquired intangible assets...................     313,118        343,324
    Deferred tax assets..........................      29,201         42,078
    Other assets.................................      11,119          9,524
    Long-term income taxes recoverable...........      36,945          9,557
                                                  ------------   ------------
                                                  $ 1,328,165    $ 1,326,845
                                                  ------------   ------------
                                                  ------------   ------------

         LIABILITIES AND SHAREHOLDERS' EQUITY
    Current liabilities:
      Accounts payable and accrued liabilities... $   101,403    $   100,211
      Current portion of long-term debt..........       3,488          4,048
      Deferred revenues..........................     134,399        143,097
      Income taxes payable.......................      11,701         33,705
      Deferred tax liabilities...................       1,198          1,601
                                                  ------------   ------------
      Total current liabilities..................     252,189        282,662
    Long-term liabilities:
      Accrued liabilities........................      22,338         22,516
      Long-term debt.............................     306,458        366,765
      Deferred revenues..........................       3,313          3,840
      Long-term income taxes payable.............      41,893              -
      Deferred tax liabilities...................     102,246        120,019
                                                  ------------   ------------
      Total long-term liabilities................     476,248        513,140
    Minority interest............................       7,763          6,975
    Shareholders' equity:
      Share capital
        50,872,016 and 50,180,118 Common
         Shares issued and outstanding at
         December 31, 2007 and June 30, 2007,
         respectively; Authorized Common
         Shares: unlimited.......................     435,422        426,188
      Additional paid-in capital.................      37,795         35,311
      Accumulated other comprehensive income.....     105,728         68,034
      Retained earnings (deficit)................      13,020         (5,465)
                                                  ------------   ------------
      Total shareholders' equity.................     591,965        524,068
                                                  ------------   ------------
                                                  $ 1,328,165    $ 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     Six months ended
                                        December 31,         December 31,
                                   --------------------  --------------------
                                       2007       2006       2007       2006
                                   ---------  ---------  ---------  ---------
    Revenues:
      License..................... $ 55,158   $ 51,425   $ 99,418   $ 80,250
      Customer support............   90,614     78,022    176,918    126,310
      Service.....................   36,762     33,814     70,165     57,856
                                   ---------  ---------  ---------  ---------
        Total revenues............  182,534    163,261    346,501    264,416
    Cost of revenues:
      License.....................    4,649      3,322      8,203      6,122
      Customer support............   14,191     12,659     26,789   $ 19,646
      Service.....................   30,192     29,108     57,696     49,408
      Amortization of acquired
       technology-based
       intangible assets..........   10,308     10,396     20,460     15,242
                                   ---------  ---------  ---------  ---------
        Total cost of revenues....   59,340     55,485    113,148     90,418
                                    --------- ---------  ---------  ---------
                                    123,194    107,776    233,353    173,998
                                   ---------  ---------  ---------  ---------
    Operating expenses:
      Research and development....   25,924     22,595     49,656     36,813
      Sales and marketing.........   42,523     43,824     80,633     68,696
      General and administrative..   16,955     15,474     33,965     26,693
      Depreciation................    3,752      3,907      6,736      6,899
      Amortization of acquired
       customer-based intangible
       assets.....................    7,514      7,369     14,929      9,751
      Special charges
       (recoveries)...............      (47)     4,843       (108)     4,375
                                   ---------  ---------  ---------  ---------
        Total operating expenses..   96,621     98,012    185,811    153,227
                                   ---------  ---------  ---------  ---------
    Income from operations........   26,573      9,764     47,542     20,771
    Other income (expense)........   (3,683)       329     (5,510)       702
    Interest income (expense),
     net..........................   (7,567)    (7,512)   (15,439)    (7,120)
                                   ---------  ---------  ---------  ---------
    Income before income taxes....   15,323      2,581     26,593     14,353
    Provision for income taxes....    4,511        173      7,854      4,507
                                   ---------  ---------  ---------  ---------
    Net income before minority
     interest.....................   10,812      2,408     18,739      9,846
    Minority interest.............      127        131        254        268
                                   ---------  ---------  ---------  ---------
    Net income for the period..... $ 10,685   $  2,277   $ 18,485   $  9,578
                                   ---------  ---------  ---------  ---------
                                   ---------  ---------  ---------  ---------
    Net income per share-basic.... $   0.21   $   0.05   $   0.37   $   0.20
                                   ---------  ---------  ---------  ---------
                                   ---------  ---------  ---------  ---------
    Net income per share-diluted.. $   0.20   $   0.04   $   0.35   $   0.19
                                   ---------  ---------  ---------  ---------
                                   ---------  ---------  ---------  ---------
    Weighted average number of
     Common Shares outstanding-
     basic........................   50,736     49,152     50,511     49,063
                                   ---------  ---------  ---------  ---------
                                   ---------  ---------  ---------  ---------
    Weighted average number of
     Common Shares outstanding-
     diluted......................   52,689     50,739     52,224     50,497
                                   ---------  ---------  ---------  ---------
                                   ---------  ---------  ---------  ---------


                            OPEN TEXT CORPORATION

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

                                    Three months ended     Six months ended
                                        December 31,         December 31,
                                   --------------------  --------------------
                                       2007       2006       2007       2006
                                   ---------  ---------  ---------  ---------
    Cash flows from operating
     activities:
    Net income for the period..... $ 10,685   $  2,277   $ 18,485   $  9,578
      Adjustments to reconcile
       net income to net cash
       provided by operating
       activities:
        Depreciation and
         amortization.............   21,574     21,672     42,125     31,892
        In-process research and
         development..............        -          -        500          -
        Share-based compensation
         expense..................      655      1,333      1,718      2,600
        Employee long-term
         incentive plan...........      572          -        757          -
        Excess tax benefits from
         share-based
         compensation.............     (369)      (536)      (766)      (741)
        Undistributed earnings
         related to minority
         interest.................      127        131        254        268
        Amortization of debt
         issuance costs...........      421        257        711        257
        Unrealized loss on
         financial instruments....    1,444        212      2,851        212
        Deferred taxes............   (3,408)   (10,638)    (4,113)    (8,924)
      Changes in operating assets
       and liabilities:
        Accounts receivable.......   (2,923)    25,191      7,579     23,497
        Prepaid expenses and other
         current assets...........      302        277       (197)       894
        Income taxes..............    8,070     (2,859)     8,554     (3,813)
        Accounts payable and accrued
         liabilities..............    6,967        610      1,472     (4,913)
        Deferred revenues.........   (5,110)   (10,475)    (8,883)   (13,437)
        Other assets..............      336      3,976        510      3,695
                                   ---------  ---------  ---------  ---------
    Net cash provided by
     operating activities.........   39,343     31,428     71,557     41,065
                                   ---------  ---------  ---------  ---------
    Cash flows from investing
     activities:
      Acquisitions of capital
       assets.....................   (2,170)    (1,106)    (3,386)    (3,891)
      Additional purchase
       consideration for prior
       period acquisitions........     (263)    (1,390)      (439)    (1,723)
      Purchase of Hummingbird,
       net of cash acquired.......        -   (384,761)         -   (384,761)
      Purchase of an asset
       group constituting a
       business...................        -          -     (2,209)         -
      Investments in
       marketable securities......        -          -          -       (829)
      Acquisition related costs...   (3,813)   (17,752)   (11,842)   (20,200)
                                   ---------  ---------  ---------  ---------
    Net cash used in
     investing activities.........   (6,246)  (405,009)   (17,876)  (411,404)
                                   ---------  ---------  ---------  ---------
    Cash flows from financing
     activities:
      Excess tax benefits from
       share-based compensation...      369        536        766        741
      Proceeds from issuance
       of Common Shares...........    3,498      1,986      9,217      2,464
      Repayment of long-term
       debt.......................  (30,944)    (1,074)   (61,877)    (1,173)
      Proceeds from long-term
       debt.......................        -    390,000          -    390,000
      Debt issuance costs.........        -     (7,412)      (349)    (7,433)
                                   ---------  ---------  ---------  ---------
    Net cash provided by
     (used in) financing
     activities...................  (27,077)   384,036    (52,243)   384,599
                                   ---------  ---------  ---------  ---------
    Foreign exchange gain on
     cash held in foreign
     currencies...................    3,383      2,722      8,292      2,787
                                   ---------  ---------  ---------  ---------
    Increase in cash and cash
     equivalents during the
     period.......................    9,403     13,177      9,730     17,047
    Cash and cash equivalents
     at beginning of period.......  150,306    111,224    149,979    107,354
                                   ---------  ---------  ---------  ---------
    Cash and cash equivalents
     at end of period............. $159,709   $124,401   $159,709   $124,401
                                   ---------  ---------  ---------  ---------
                                   ---------  ---------  ---------  ---------
    





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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