Open Text Reports Second Quarter Fiscal 2009 Financial Results



    WATERLOO, ON, Jan. 28 /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,
ending December 31, 2008. (1)
    Total revenue for the second quarter was $207.7 million, up 14% compared
to $182.5 million for the same period in the prior fiscal year. License
revenue in the second quarter was $64.9 million, up 18% compared to $55.2
million for the same period in the prior fiscal year.
    Adjusted net income for the second quarter was $34.0 million or $0.64 per
share on a diluted basis, up 30% compared to $26.2 million or $0.50 per share
on a diluted basis, for the same period in the prior fiscal year. Net income
for the second quarter, in accordance with U.S. generally accepted accounting
principles ("U.S. GAAP"), was $0.8 million or $0.01 per share on a diluted
basis, compared to $10.7 million or $0.20 per share on a diluted basis, for
the same period in the prior fiscal year. (3)
    Total cash and cash equivalents, as of December 31, 2008 was $172.9
million compared to $254.9 million as of June 30, 2008. Accounts receivable as
of December 31, 2008, totaled $126.8 million, compared to $134.4 million as of
June 30, 2008, and Days Sales Outstanding (DSO) was 53 days at the end of the
second quarter of Fiscal 2009, compared to 60 days at June 30, 2008.
    "We are seeing consistent customer demand for compliance based solutions
across all verticals, as well as demand for solutions that streamline customer
functions," said John Shackleton, Chief Executive Officer of Open Text. "We
are pleased with our progress this quarter, we're executing well on a global
basis, the Captaris integration is on schedule and our focus on the bottom
line continues to drive our strong results."
    Please see notes (2) and (3) below for a reconciliation of non-U.S. GAAP
based financial measures used in this press release, to U.S. GAAP based
financial measures.

    Teleconference Call

    Open Text will host a conference call on January 28, 2009 at 5:00 p.m. ET
to discuss the financial results of its second quarter ending December 31,
2008.

    
                     Date:    Wednesday, January 28, 2009
                     Time:     5:00 p.m. ET/2:00 p.m. PT
                     Length:           60 minutes
                     Where:           416-915-5761
    

    Please dial-in approximately 10 minutes before the teleconference is
scheduled to begin. A replay of the call will be available beginning January
28, 2009 at 7:00 p.m. ET through 11:59 p.m. on February 11, 2009 and can be
accessed by dialing 416-640-1917 and using pass code 21293951 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=6814863

    About Open Text

    Open Text(TM) Corporation is the world's largest independent provider of
ECM 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 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; (viii) the demand for the
Company's product, the extent of deployment of the Company's products in the
ECM marketplace and delays in the purchasing decisions of its customers; (ix)
risks related to the integration of acquisitions and related restructuring
efforts, including the quantum of restructuring charges and the timing
thereof; (10) fluctuations in currency exchange rates; and (xi) technical,
logistical or planning issues in connection with the deployment of the
Company's products or services. More information about other risks and other
potential factors that could affect the Company's business and financial
results are detailed from time to time in the Company's filings with the
Securities and Exchange Commission, including the Company's Annual Report on
Form 10-K for the year ended June 30, 2008. 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 ECM sector. All dollar amounts
              in this press release are expressed in U.S. 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 provides a consistent basis for comparison
              between quarters and helps to more accurately reflect Open
              Text's underlying operating results.

    (in millions of US dollars                            Three months ended
     except share data)                                    December 31, 2008

    GAAP Revenue                                                     $ 207.7
    Maintenance revenue adjustment for purchase
     accounting                                                          0.5
                                                          -------------------
    Non-GAAP revenue                                                 $ 208.2
                                                          -------------------
                                                          -------------------

    Adjusted Income                                                  $  34.0
    Maintenance revenue adjustment for purchase
     accounting                                                          0.5
    Net Interest Expense                                                 5.3
    Income tax effect                                                   (1.7)
                                                          -------------------
    Non-GAAP net income                                              $  38.1
                                                          -------------------
                                                          -------------------

        (3) Use of U.S. Non-GAAP financial measures

        In addition to reporting financial results in accordance with U.S.
        GAAP, the Company provides adjusted net income and adjusted earnings
        per share  (EPS), which are non U.S. GAAP financial measures. The
        Company uses adjusted EPS and adjusted net income to supplement the
        information provided in its consolidated financial statements, which
        are presented in accordance with U.S. GAAP. The Company believes the
        provision of these non U.S. 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 for
        period-to-period comparison of operating performance.

        The presentation of adjusted net income and adjusted EPS is not meant
        to be a substitute for net income or EPS presented in accordance with
        U.S. GAAP, but rather should be evaluated in conjunction with and as
        a supplement to such U.S. GAAP measures. These non U.S. 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 U.S. 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 attempts to compensate 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 U.S. 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. Open Text strongly encourages
        investors to review its financial information in its entirety and not
        to rely on a single financial measure.

        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 expense, and special charges
        (recoveries), 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 and is based on the way the Company's management evaluates
        the performance of the Company's business for use in the Company's
        internal reports and makes operating decisions. The term "non-
        operational charge" is defined by the Company as a charge that does
        not impact operating decisions taken by the Company's management and
        excludes certain items, such as amortization of acquired intangibles,
        other income (expense), share-based compensation expense, special
        charges (recoveries), and the taxation impact of these items.

        The following unaudited charts provide a reconciliation of U.S. GAAP
        based financial measures to non U.S. GAAP based financial measures
        referred to in this press release:

    Reconciliation of (unaudited) U.S. GAAP based Net Income to Adjusted Net
    Income (in millions of U.S. dollars) for the three months ended
    December 31, 2008 and 2007:

                                   Three months ended     Three months ended
                                    December 31, 2008      December 31, 2007
                                   -------------------    -------------------
    GAAP based "Net Income" ...... $              0.8     $             10.7
    Special Charges/(recovery) ...               11.4                    0.0
    Amortization of intangibles ..               21.9                   17.8
    Other (Income)/Expense .......               12.5                    3.7
    Share-based compensation .....                1.1                    0.7
    Tax Impact on Above ..........              (13.7)                  (6.7)
                                   -------------------    -------------------
    Non-GAAP based "Adjusted
     Net Income" ................. $             34.0     $             26.2



    Reconciliation of (unaudited) US GAAP based EPS to non-U.S. GAAP based
    EPS (calculated on a diluted basis) for the three months ended
    December 31, 2008 and 2007:

                                   Three months ended     Three months ended
                                    December 31, 2008      December 31, 2007
                                   -------------------    -------------------
    GAAP based "Net Income" ...... $             0.02     $             0.20
    Special Charges/(recovery) ...               0.21                   0.00
    Amortization of intangibles ..               0.41                   0.34
    Other (Income)/Expense .......               0.23                   0.07
    Share-based compensation .....               0.02                   0.01
    Tax Impact on Above ..........              (0.25)                 (0.12)
                                   -------------------    -------------------
    Non-GAAP based "Adjusted
     Net Income" ................. $             0.64     $             0.50



        (4)   The following table provides a composition of our major
              currencies for revenue and expenses, expressed as a percentage,
              for the second quarter of Fiscal 2009:

          Currencies                           % of Revenue  % of Expenses(*)
          -------------------------------  ----------------  ----------------
          EURO ..........................               27%              25%
          GBP ...........................                9%               8%
          CHF ...........................                6%               3%
          CAD ...........................                6%              22%
          USD ...........................               45%              36%
          Others ........................                7%               6%
                                           ----------------  ----------------
          Total                                        100%             100%
                                           ----------------------------------
                                           ----------------------------------

           (*)   Expenses include all cost of revenues and operating expenses
                 included within the Condensed Consolidated Statements of
                 Income, except for amortization of intangible assets, share-
                 based compensation and special charges.



                            OPEN TEXT CORPORATION

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

                                                    December 31,    June 30,
                                                        2008         2008
                                                    ------------ ------------
                             ASSETS                  (unaudited)

    Current assets:
      Cash and cash equivalents                     $   172,870  $   254,916
      Accounts receivable trade, net of allowance
       for doubtful accounts of $4,128 as of
       December 31, 2008 and $3,974 as of
       June 30, 2008                                    126,757      134,396
      Inventory                                           2,227            -
      Income taxes recoverable                            6,655       16,763
      Prepaid expenses and other current assets          12,029       10,544
      Deferred tax assets                                16,604       13,455
                                                    ------------ ------------
    Total current assets                                337,142      430,074

    Investments in marketable securities                  2,789            -
    Capital assets                                       40,163       43,582
    Goodwill                                            577,244      564,648
    Acquired intangible assets                          383,325      281,824
    Deferred tax assets                                  62,305       59,881
    Other assets                                          9,656       10,491
    Long-term income taxes recoverable                   40,776       44,176
                                                    ------------ ------------
                                                    $ 1,453,400  $ 1,434,676
                                                    ------------ ------------
                                                    ------------ ------------

              LIABILITIES AND SHAREHOLDERS' EQUITY

    Current liabilities:
      Accounts payable and accrued liabilities      $   123,715  $    99,035
      Current portion of long-term debt                   3,412        3,486
      Deferred revenues                                 169,858      176,967
      Income taxes payable                                  140       13,499
      Deferred tax liabilities                            3,366        4,876
                                                    ------------ ------------
        Total current liabilities                       300,491      297,863
    Long-term liabilities:
      Accrued liabilities                                21,718       20,513
      Pension liability                                  16,243            -
      Long-term debt                                    300,307      304,301
      Deferred revenues                                   6,957        2,573
      Long-term income taxes payable                     51,240       54,681
      Deferred tax liabilities                          144,701      109,912
                                                    ------------ ------------
        Total long-term liabilities                     541,166      491,980
    Minority interest                                         -        8,672
    Shareholders' equity:
      Share capital
        51,887,209 and 51,151,666 Common Shares
         issued and outstanding at December 31, 2008
         and June 30, 2008, respectively; Authorized
         Common Shares: unlimited                       444,512      438,471
      Additional paid-in capital                         48,441       39,330
      Accumulated other comprehensive income             55,827      110,819
      Retained earnings                                  62,963       47,541
                                                    ------------ ------------
    Total shareholders' equity                          611,743      636,161
                                                    ------------ ------------
                                                    $ 1,453,400  $ 1,434,676
                                                    ------------ ------------
                                                    ------------ ------------


                            OPEN TEXT CORPORATION

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

                             Three months ended         Six months ended
                                 December 31,              December 31,
                          ------------------------- -------------------------
                              2008         2007         2008         2007
                          ------------ ------------ ------------ ------------
    Revenues:
      License             $    64,852  $    55,158  $   114,926  $    99,418
      Customer support        100,438       90,614      198,867      176,918
      Service and other        42,361       36,762       76,481       70,165
                          ------------ ------------ ------------ ------------
        Total revenues        207,651      182,534      390,274      346,501
                          ------------ ------------ ------------ ------------
    Cost of revenues:
      License                   5,281        4,649        8,174        8,203
      Customer support         17,356       14,191       32,923       26,789
      Service and other        31,881       30,192       59,610       57,696
      Amortization of
       acquired
       technology-based
       intangible assets       11,799       10,308       22,546       20,460
                          ------------ ------------ ------------ ------------
        Total cost of
         revenues              66,317       59,340      123,253      113,148
                          ------------ ------------ ------------ ------------
    Gross profit              141,334      123,194      267,021      233,353
                          ------------ ------------ ------------ ------------
    Operating expenses:
      Research and
       development             29,948       26,147       58,526       50,130
      Sales and marketing      49,347       42,300       94,179       80,159
      General and
       administrative          18,280       16,955       36,667       33,965
      Depreciation              2,920        3,752        5,618        6,736
      Amortization of
       acquired
       customer-based
       intangible assets       10,138        7,514       18,353       14,929
      Special charges
       (recoveries)            11,446          (47)      11,446         (108)
                          ------------ ------------ ------------ ------------
        Total operating
         expenses             122,079       96,621      224,789      185,811
                          ------------ ------------ ------------ ------------
    Income from operations     19,255       26,573       42,232       47,542
                          ------------ ------------ ------------ ------------
    Other income (expense),
     net                      (12,532)      (3,683)     (11,803)      (5,510)
    Interest income
     (expense), net            (5,347)      (7,567)      (8,341)     (15,439)
                          ------------ ------------ ------------ ------------
    Income before income
     taxes                      1,376       15,323       22,088       26,593
    Provision for income
     taxes                        683        4,511        6,615        7,854
                          ------------ ------------ ------------ ------------
    Net income before
     minority interest            693       10,812       15,473       18,739
    Minority interest             (68)         127           51          254
                          ------------ ------------ ------------ ------------
    Net income for the
     period               $       761  $    10,685  $    15,422  $    18,485
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------
    Net income per
     share-basic          $      0.01  $      0.21  $      0.30  $      0.37
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------
    Net income per
     share-diluted        $      0.01  $      0.20  $      0.29  $      0.35
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Weighted average
     number of Common
     Shares outstanding-
     basic                     51,873       50,736       51,586       50,511
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    Weighted average
     number of Common
     Shares outstanding-
     diluted                   53,242       52,689       52,955       52,224
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------


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

                             Three months ended         Six months ended
                                 December 31,              December 31,
                              2008         2007         2008         2007
                          ------------ ------------ ------------ ------------
    Cash flows from
     operating activities:
    Net income for the
     period               $       761  $    10,685  $    15,422  $    18,485
    Adjustments to
     reconcile net income
     to net cash provided
     by operating
     activities:
      Depreciation and
       amortization            24,857       21,574       46,517       42,125
      In-process research
       and development            121            -          121          500
      Share-based
       compensation
       expense                  1,110          655        2,533        1,718
      Employee long-term
       incentive plan           1,746          572        2,805          757
      Excess tax benefits
       from share-based
       compensation               (24)        (369)      (6,653)        (766)
      Undistributed
       earnings related to
       minority interest          (68)         127           51          254
      Pension accruals            906            -          906            -
      Amortization of debt
       issuance costs             326          421          550          711
      Unrealized (gain)
       loss on financial
       instruments              1,529        1,444          807        2,851
      Loss on sale and
       write down of
       capital assets             269            -          269            -
      Deferred taxes            4,171       (3,408)       3,915       (4,113)
    Changes in operating
     assets and
     liabilities:
      Accounts receivable       4,844       (2,923)      32,790        7,579
      Inventory                  (609)           -         (609)           -
      Prepaid expenses and
       other current
       assets                   1,065          302         (861)        (197)
      Income taxes              1,738        8,070        6,469        8,554
      Accounts payable and
       accrued liabilities      2,272        6,967      (16,097)       1,472
      Deferred revenue         (6,183)      (5,110)     (25,613)      (8,883)
      Other assets              1,012          336        1,334          510
                          ------------ ------------ ------------ ------------
    Net cash provided by
     operating activities      39,843       39,343       64,656       71,557

    Cash flows from
     investing activities:
      Net (acquisitions)
       /disposals of
       capital assets           1,793       (2,170)      (2,094)      (3,386)
      Purchase of a
       division of Spicer
       Corporation                  -            -      (10,836)           -
      Purchase of eMotion
       LLC, net of cash
       acquired                     -            -       (3,635)           -
      Purchase of Captaris
       Inc., net of cash
       acquired              (101,499)           -     (101,499)           -
      Additional purchase
       consideration for
       prior period
       acquisitions            (4,577)        (263)      (4,612)        (439)
      Purchase of an asset
       group constituting
       a business                   -            -            -       (2,209)
      Investments in
       marketable
       securities                   -            -       (3,608)           -
      Acquisition related
       costs                   (4,030)      (3,813)      (7,288)     (11,842)
                          ------------ ------------ ------------ ------------
    Net cash used in
     investment activities   (108,313)      (6,246)    (133,572)     (17,876)

    Cash flows from
     financing activities:
      Excess tax benefits
       on share-based
       compensation expense        24          369        6,653          766
      Proceeds from
       issuance of Common
       Shares                     497        3,498        6,039        9,217
      Repayment of
       long-term debt            (854)     (30,944)      (1,721)     (61,877)
      Debt issuance costs           -            -            -         (349)
                          ------------ ------------ ------------ ------------
    Net cash provided by
     (used in) financing
     activities                  (333)     (27,077)      10,971      (52,243)
                          ------------ ------------ ------------ ------------
    Foreign exchange gain
     (loss) on cash held
     in foreign currencies     (8,460)       3,383      (24,101)       8,292
    Increase (decrease) in
     cash and cash
     equivalents during
     the period               (77,263)       9,403      (82,046)       9,730
    Cash and cash
     equivalents at
     beginning of the
     period                   250,133      150,306      254,916      149,979
                          ------------ ------------ ------------ ------------
    Cash and cash
     equivalents at end of
     the period           $   172,870  $   159,709  $   172,870  $   159,709
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------
    





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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