Open Text Reports Third Quarter Fiscal 2010 Financial Results

WATERLOO, ON, April 29 /CNW/ - Open Text(TM) Corporation (NASDAQ: OTEX) (TSX:OTC), today announced unaudited financial results for its third quarter ended March 31, 2010. (1)

Total revenue for the third quarter of Fiscal 2010 was $212.8 million, up 11% compared to $192.0 million for the same period in the prior fiscal year. License revenue in the third quarter was $49.5 million, down 5% compared to $51.9 million for the same period in the prior fiscal year.

Adjusted net income in the quarter was $40.3 million or $0.70 per share on a diluted basis, up 28% compared to $31.4 million or $0.59 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 $13.1 million or $0.23 per share on a diluted basis, compared to $22.0 million or $0.41 per share on a diluted basis for the same period in the prior fiscal year. (2)

The cash and cash equivalents balance as of March 31, 2010 was $321.3 million, compared to $275.8 million as of June 30, 2009. During the nine months ended March 31, 2010, the net cash paid for the Vignette acquisition was $90.6 million. Net accounts receivable as of March 31, 2010, totaled $122.6 million, compared to $115.8 million as of June 30, 2009, and Days Sales Outstanding (DSO) remained stable at 52 days in both the third quarter of Fiscal 2010, and in the same period in the prior fiscal year. Operating cash flow in the third quarter of Fiscal 2010 was $78.0 million.

"I am pleased that we maintained our margin targets and met our profit goals", said John Shackleton, President and Chief Executive Officer of Open Text. "We experienced greater seasonality than in previous years, however I'm confident that Fiscal 2010 is tracking to plan. With the addition of Nstein's analytics-based search technology and a number of new product releases, we are delivering additional powerful solutions that will help our customers gain greater value from their content."

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 April 29, 2010 at 5:00 p.m. ET to discuss the financial results of its third quarter.

    
           Date:    Thursday, April 29, 2010
           Time:    5:00 p.m. ET/2:00 p.m. PT
           Length:  60 minutes
           Where:   416-644-3416
                    800-814-4860 (Toll Free)
    

Please dial-in approximately 10 minutes before the teleconference is scheduled to begin. A replay of the call will be available beginning April 29, 2010 at 7:00 p.m. ET through 11:59 p.m. on May 13, 2010 and can be accessed by dialing 416-640-1917 and using pass code 4282062 followed by the number sign.

For more information or to listen to the call via Web cast, please use the following link:

http://www.opentext.com/2/ex_event.html?evtype=events&id=701200000003U3hAAE

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.

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

Actual results or events could differ materially from those contemplated in forward-looking statements as a result of the following: (i) the future performance, financial and otherwise, of 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 there under; (iii) the risks associated with bringing new products to market; (iv) fluctuations in currency exchange rates; (v) delays in the purchasing decisions of the Company's customers; (vi) the competition the Company faces in its industry and/or marketplace; (vii) the possibility of technical, logistical or planning issues in connection with the deployment of the Company's products or services; (viii) the continuous commitment of the Company's customers; and (ix) demand for the Company's products.

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

Copyright (C) 2010 by Open Text Corporation. "OPEN TEXT", "OPEN TEXT EVERYWHERE" and the "OPEN TEXT ECM SUITE" are trademarks or registered trademarks of Open Text Corporation in the United States of America, Canada, the European Union and/or other countries. This list of trademarks is not exhaustive. Other trademarks, registered trademarks, product names, company names, brands and service names mentioned herein are property of Open Text Corporation or other respective owners.

Notes

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

(2) Use of US Non-GAAP financial measures

In addition to reporting financial results in accordance with US GAAP, the Company provides certain non-US GAAP financial measures in this press release 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 intangible assets, restructuring costs, share-based compensation, other income (expense) and the taxation impact of these items. These items are excluded based upon the manner in which management evaluates the business of the Company and are not excluded in the sense that they may be used under US GAAP. The Company believes the provision of supplemental non-US GAAP measures allows investors to evaluate the operational and financial performance of the Company's core business using the same evaluation measures that management uses, and is therefore a useful indication of 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 a 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 periods indicated:
    -------------------------------------------------------------

                                     Three months ended   Three months ended
                                         March 31, 2010       March 31, 2009
                                    -----------------------------------------
    GAAP based "Net Income"                       $13.1                $22.0
    Special charges                                 6.1                  1.8
    Amortization of intangibles                    24.0                 22.8
    Other (income) expense                          5.6                (11.7)
    Share-based compensation                        1.3                  1.4
    Tax Impact on above                            (9.8)                (4.9)
                                    -----------------------------------------
    Non-GAAP based "Adjusted Net
     Income"                                      $40.3                $31.4
                                    -----------------------------------------
                                    -----------------------------------------


    Reconciliation of (Unaudited) US GAAP based EPS to non-US GAAP based EPS
    ------------------------------------------------------------------------
    (calculated on a diluted basis) for the periods indicated:
    ----------------------------------------------------------

                                     Three months ended   Three months ended
                                         March 31, 2010       March 31, 2009
                                    -----------------------------------------
    GAAP based "Net Income"                       $0.23                $0.41
    Special charges                                0.11                 0.03
    Amortization of intangibles                    0.41                 0.43
    Other (income) expense                         0.10                (0.22)
    Share-based compensation                       0.02                 0.03
    Tax Impact on Above                           (0.17)               (0.09)
                                    -----------------------------------------
    Non-GAAP based "Adjusted Net
     Income" per share                            $0.70               $ 0.59
                                    -----------------------------------------
                                    -----------------------------------------
    

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

    
    Currencies                                 % of Revenue  % of Expenses*
    --------------------------------------- ---------------- ----------------
    EURO...................................             24%              23%
    GBP....................................             10%               8%
    CHF....................................              5%               3%
    CAD....................................              7%              25%
    USD....................................             45%              32%
    Others.................................              9%               9%
                                            ---------------- ----------------
    Total..................................            100%             100%
                                            ---------------- ----------------
                                            ---------------- ----------------
    *   Expenses include all cost of revenues and operating expenses
        included within the Consolidated Statements of Income, except for
        amortization of intangible assets, share-based compensation and
        special charges.
    

(4) The following table sets forth our revenue type as a percentage of total revenue, certain operating expenses by function and certain operating expenses as a percentage of total revenue compared to our "forecasted" percentage range within our "operating model", as communicated in our investor relations presentation, posted on our corporate website at the following web address: http://www.opentext.com/2/global/company/investors.html

    
    (in millions       Three months ended      Nine months ended   "operating
      of USD)              March 31, 2010         March 31, 2010      model"
                  -----------------------------------------------
                               Percentage             Percentage

    Revenue:
    License         $    49.5       23.3%   $   169.5      25.2%     25-30%
    Customer
     Support            124.5       58.5%       378.4      56.3%     50-55%
    Service and
     Other               38.8       18.2%       124.1      18.5%     20-25%
                   -----------             -----------
    Total Revenue       212.8                   672.0
                   -----------             -----------
                   -----------             -----------

    Gross profit
     excluding
     amortization
     of acquired
     technology-based
     intangible
     assets             156.9       73.7%       496.2      73.8%     72-75%

    Operating expenses:
    Research and
     development         31.6       14.8%        97.5      14.5%     14-16%
    Sales and
     marketing           46.0       21.6%       150.6      22.4%     24-26%
    General and
     administrative      18.4        8.6%        62.0       9.2%      9-10%
    Depreciation          4.4        2.1%        13.0       1.9%         2%
                   -----------             -----------
                        100.4                   323.1
                   -----------             -----------
    Gross margin
     less operating
     expenses            56.5                   173.1
                   -----------             -----------

    Add: Share-based
     compensation
     expense              1.3                     4.0
                   -----------             -----------
    Pre-tax adjusted
     operating
     margin         $    57.8       27.2%   $   177.1      26.4%     22-27%
                   -----------             -----------
                   -----------             -----------


    Reconciliation of (unaudited) pre-tax adjusted operating margin to US
    ---------------------------------------------------------------------
    GAAP-based net income:
    ----------------------

                                     Three months ended    Nine months ended
    (in millions of USD)                 March 31, 2010       March 31, 2010
                                    -----------------------------------------
    Pre-tax adjusted operating margin         $    57.8            $   177.1
    Less:
    Amortization                                   24.0                 70.9
    Share-based compensation                        1.3                  4.0
    Special charges                                 6.1                 35.1
    Other (income) expense, net                     5.6                  3.8
    Interest expense, net                           2.6                  8.4
    Provision for income taxes                      5.1                 18.9
                                    -----------------------------------------
    US GAAP-based net income for
     the period                               $    13.1            $    36.0
                                    -----------------------------------------
                                    -----------------------------------------



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

                                                       March 31,     June 30,
                                                           2010         2009
                                                    ------------ ------------
                                                     (unaudited)

                                  ASSETS
    Cash and cash equivalents...................... $   321,328  $   275,819
    Accounts receivable trade, net of allowance
     for doubtful accounts of $5,207 as of
     March 31, 2010 and $4,208 as of June 30, 2009.     122,557      115,802
    Income taxes recoverable.......................      24,998        4,496
    Prepaid expenses and other current assets......      21,156       18,172
    Deferred tax assets............................      16,765       20,621
                                                    ------------ ------------
        Total current assets.......................     506,804      434,910
    Investments in marketable securities...........           -       13,103
    Capital assets.................................      54,835       45,165
    Goodwill.......................................     699,833      576,111
    Acquired intangible assets.....................     334,770      315,048
    Deferred tax assets............................      64,472       69,877
    Other assets...................................      17,760       13,064
    Long-term income taxes recoverable.............      46,007       39,958
                                                    ------------ ------------
        Total assets............................... $ 1,724,481  $ 1,507,236
                                                    ------------ ------------
                                                    ------------ ------------

                        LIABILITIES AND SHAREHOLDERS' EQUITY
    Current liabilities:
      Accounts payable and accrued liabilities..... $   114,419  $   116,992
      Current portion of long-term debt............      15,782        3,449
      Deferred revenues............................     212,655      189,397
      Income taxes payable.........................      13,083       10,356
      Deferred tax liabilities.....................       2,354          508
                                                    ------------ ------------
        Total current liabilities..................     358,293      320,702
    Long-term liabilities:
      Accrued liabilities..........................      16,682       21,099
      Pension liability............................      15,363       15,803
      Long-term debt...............................     285,774      299,234
      Deferred revenues............................      11,151        7,914
      Long-term income taxes payable...............      55,740       47,131
      Deferred tax liabilities.....................     118,961      108,889
                                                    ------------ ------------
        Total long-term liabilities................     503,671      500,070
    Shareholders' equity:
      Share capital
        56,600,540 and 52,716,751 Common Shares
         issued and outstanding at March 31, 2010
         and June 30, 2009, respectively;
         Authorized Common Shares: unlimited.......     593,397      457,982
      Additional paid-in capital...................      58,623       52,152
      Accumulated other comprehensive income.......      69,973       71,851
      Retained earnings............................     140,524      104,479
                                                    ------------ ------------
    Total shareholders' equity.....................     862,517      686,464
                                                    ------------ ------------
      Total liabilities and shareholders' equity... $ 1,724,481  $ 1,507,236
                                                    ------------ ------------
                                                    ------------ ------------



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

                                    Three months ended    Nine months ended
                                         March 31,             March 31,
                                 ---------------------- ---------------------
                                       2010       2009       2010       2009
                                 ----------- ---------- ---------- ----------
    Revenues:
      License.................... $  49,527  $  51,919  $ 169,547  $ 166,845
      Customer support...........   124,443    101,949    378,375    300,816
      Service and other..........    38,807     38,167    124,067    114,648
                                 ----------- ---------- ---------- ----------
        Total revenues...........   212,777    192,035    671,989    582,309
                                 ----------- ---------- ---------- ----------
    Cost of revenues:
      License....................     3,744      4,496     11,522     12,670
      Customer support...........    20,777     17,304     63,209     50,227
      Service and other..........    31,314     30,288    101,036     89,898
      Amortization of acquired
       technology-based
       intangible assets.........    15,044     11,625     44,338     34,171
                                 ----------- ---------- ---------- ----------
        Total cost of revenues...    70,879     63,713    220,105    186,966
                                 ----------- ---------- ---------- ----------
    Gross profit.................   141,898    128,322    451,884    395,343
                                 ----------- ---------- ---------- ----------
    Operating expenses:
      Research and development...    31,654     28,809     97,543     87,335
      Sales and marketing........    45,983     44,426    150,564    138,605
      General and administrative.    18,405     17,937     62,007     54,604
      Depreciation...............     4,437      3,229     12,982      8,847
      Amortization of
       acquired customer-based
       intangible assets.........     8,910     11,176     26,562     29,529
      Special charges............     6,083      1,788     35,095     13,234
                                 ----------- ---------- ---------- ----------
        Total operating expenses.   115,472    107,365    384,753    332,154
                                 ----------- ---------- ---------- ----------
    Income from operations.......    26,426     20,957     67,131     63,189
                                 ----------- ---------- ---------- ----------
    Other income (expense), net..    (5,554)    11,655     (3,785)      (199)
    Interest expense, net........    (2,625)    (2,431)    (8,387)   (10,772)
                                 ----------- ---------- ---------- ----------
    Income before income taxes...    18,247     30,181     54,959     52,218
    Provision for income taxes...     5,133      8,146     18,914     14,761
                                 ----------- ---------- ---------- ----------
    Net income for the period.... $  13,114  $  22,035  $  36,045  $  37,457
                                 ----------- ---------- ---------- ----------
                                 ----------- ---------- ---------- ----------
    Net income per share-basic... $    0.23  $    0.42  $    0.64  $    0.72
                                 ----------- ---------- ---------- ----------
                                 ----------- ---------- ---------- ----------
    Net income per share-diluted. $    0.23  $    0.41  $    0.63  $    0.71
                                 ----------- ---------- ---------- ----------
                                 ----------- ---------- ---------- ----------
    Weighted average number of
     Common Shares outstanding-
     basic.......................    56,537     52,312     56,106     51,825
                                 ----------- ---------- ---------- ----------
                                 ----------- ---------- ---------- ----------
    Weighted average number of
     Common Shares outstanding-
     diluted.....................    57,696     53,441     57,214     53,122
                                 ----------- ---------- ---------- ----------
                                 ----------- ---------- ---------- ----------



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

                                    Three months ended    Nine months ended
                                         March 31,             March 31,
    Cash flows from operating    ---------------------- ---------------------
     activities:                       2010       2009       2010       2009
                                 ---------------------- ---------- ----------
    Net income for the period.... $  13,114  $  22,035  $  36,045  $  37,457
    Adjustments to reconcile net
     income to net cash provided
     by operating activities:
      Depreciation and amorti-
       zation....................    28,391     26,030     83,882     72,547
      In-process research and
       development...............         -          -          -        121
      Share-based compensation
       expense...................     1,334      1,424      7,154      3,957
      Excess tax benefits on
       share-based compensation
       expense...................      (207)    (1,729)      (904)    (8,382)
      Pension expense............       152        218        562      1,124
      Amortization of debt
       issuance costs............       330        281      1,064        831
      Unrealized (gain) loss on
       financial instruments.....     2,994       (941)      (878)      (134)
      Loss on sale and write
       down of capital assets....       136         84        136        353
      Release of unrealized gain
       on marketable securities..         -          -     (4,353)         -
      Deferred taxes.............    (2,414)    (7,492)    (3,714)    (3,577)
      Impairment charges.........       378          -        830          -
    Changes in operating assets
     and liabilities:
      Accounts receivable........    22,566     15,107     23,953     47,897
      Prepaid expenses and other
       current assets............     2,017     (2,275)    (1,306)    (3,745)
      Income taxes...............   (10,234)     3,187    (18,238)     9,656
      Accounts payable and
       accrued liabilities.......    (4,932)    (5,489)   (11,466)   (18,730)
      Deferred revenue...........    23,000     24,309     (1,029)    (1,304)
      Other assets...............     1,376     (1,862)     3,233       (528)
                                 ---------------------- ---------- ----------
    Net cash provided by
     operating activities........    78,001     72,887    114,971    137,543
    Cash flows from investing
     activities:
      Additions of capital
       assets-net................    (3,505)    (4,214)   (15,269)    (6,308)
      Purchase of Vignette
       Corporation, net of cash
       acquired..................         -          -    (90,600)         -
      Purchase of Captaris Inc.,
       net of cash acquired......         -          -          -   (101,033)
      Purchase of eMotion LLC,
       net of cash acquired......         -          -       (556)    (3,635)
      Purchase of a division of
       Spicer Corporation........         -       (601)         -    (11,437)
      Purchase consideration for
       prior period acquisitions     (3,167)    (4,824)   (11,407)   (17,190)
      Investments in marketable
       securities................         -     (5,322)         -     (8,930)
      Maturity of short-term
       investments...............     7,000         -      45,525          -
                                 ---------------------- ---------- ----------
    Net cash provided by
     (used in) investing
     activities..................       328    (14,961)   (72,307)  (148,533)
    Cash flow from financing
     activities:
      Excess tax benefits on
       share-based compensation
       expense...................       207      1,729        904      8,382
      Proceeds from issuance of
       Common Shares.............     2,795     11,635      8,937     17,674
      Repayment of long-term
       debt......................      (873)      (849)    (2,607)    (2,570)
      Debt issuance costs........         -          -     (1,024)         -
                                 ---------------------- ---------- ----------
    Net cash provided by
     financing activities........     2,129     12,515      6,210     23,486
    Foreign exchange loss on
     cash held in foreign
     currencies..................    (6,760)    (6,263)    (3,365)   (30,364)
    Increase (decrease) in cash
     and cash equivalents during
     the period..................    73,698     64,178     45,509    (17,868)
    Cash and cash equivalents at
     beginning of the period.....   247,630    172,870    275,819    254,916
                                 ---------------------- ---------- ----------
    Cash and cash equivalents at
     end of the period..........  $ 321,328  $ 237,048  $ 321,328  $ 237,048
                                 ---------------------- ---------- ----------
                                 ---------------------- ---------- ----------
    

(xx) DRAFT - NOT FOR DISTRIBUTION (xx)

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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