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)
For further information: Paul McFeeters, Chief Financial Officer, Open Text Corporation, (905) 762-6121, [email protected]; Greg Secord, Vice President, Investor Relations, Open Text Corporation, (519) 888-7111 ext.2408, [email protected]
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