UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended on March 31, 2004
OR
| ¨ | TRANSITION QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 0-27544
OPEN TEXT CORPORATION
(Exact name of registrant as specified in its charter)
| ONTARIO | 98-0154400 | |
| (State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
185 Columbia Street West, Waterloo, Ontario, Canada N2L 5Z5
(Address of principal executive offices)
Registrant’s telephone number, including area code: (519) 888-7111
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
At April 30, 2004 there were 50,725,475 outstanding Common Shares of the registrant.
TABLE OF CONTENTS
| Page No. | ||||
| Item 1. |
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|
Condensed Consolidated Balance Sheets (Unaudited) as of |
3 | |||
| 4 | ||||
| 5 | ||||
| Notes to Condensed Consolidated Financial Statements (Unaudited) |
6 | |||
| Item 2. |
Management’s Discussion and Analysis of Financial |
24 | ||
| Item 3. |
41 | |||
| Item 4. |
42 | |||
| Item 2. |
Changes in Securities, and Use of proceeds and Issuer Purchases of Equity Securities |
43 | ||
| Item 6. |
44 | |||
| 45 | ||||
2
Item 1. Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of US Dollars, except per share data)
(Unaudited)
| March 31, 2004 |
June 30, 2003 |
|||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 153,344 | $ | 116,554 | ||||
| Accounts receivable - net of allowance for doubtful accounts of $3,931 as of March 31, 2004 and $1,933 as of June 30, 2003 |
88,434 | 35,855 | ||||||
| Income taxes recoverable (note 4) |
8,041 | 484 | ||||||
| Prepaid expenses and other assets |
9,488 | 3,541 | ||||||
| Deferred tax asset (note 4) |
10,125 | 7,688 | ||||||
| Total current assets |
269,432 | 164,122 | ||||||
| Capital assets |
23,939 | 10,011 | ||||||
| Goodwill, net of accumulated amortization of $12,807 at March 31, 2004 and June 30, 2003 (note 9) |
211,030 | 32,301 | ||||||
| Deferred tax asset (note 4) |
13,794 | 8,674 | ||||||
| Acquired intangibles (note 10) |
120,665 | 20,517 | ||||||
| Other assets |
7,786 | 3,062 | ||||||
| $ | 646,646 | $ | 238,687 | |||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Accounts payable and accrued liabilities (note 3) |
$ | 95,376 | $ | 31,596 | ||||
| Deferred revenues |
66,891 | 38,086 | ||||||
| Deferred tax liability (note 4) |
9,090 | — | ||||||
| Total current liabilities |
171,357 | 69,682 | ||||||
| Long term liabilities: |
||||||||
| Deferred revenues |
1,135 | 1,696 | ||||||
| Deferred tax liability (note 4) |
30,375 | — | ||||||
| Accrued liabilities |
18,629 | 4,912 | ||||||
| 50,139 | 6,608 | |||||||
| Minority interest (note 13) |
9,913 | — | ||||||
| Shareholders’ equity: |
||||||||
| Share capital |
||||||||
| 50,629,212 and 39,136,518 Common Shares issued and outstanding at March 31, 2004 and June 30, 2003 respectively |
417,215 | 204,343 | ||||||
| Warrants |
24,313 | — | ||||||
| Accumulated other comprehensive income: |
||||||||
| Cumulative translation adjustment |
1,210 | (119 | ) | |||||
| Accumulated deficit (note 6) |
(27,501 | ) | (41,827 | ) | ||||
| Total shareholders’ equity |
415,237 | 162,397 | ||||||
| $ | 646,646 | $ | 238,687 | |||||
See accompanying notes to condensed consolidated financial statements
3
CONDENSED CONSOLIDATED INCOME STATEMENTS
(in thousands of US Dollars, except per share data)
(Unaudited)
| Three months ended March 31, |
Nine months ended March 31, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Revenues: |
||||||||||||||||
| License |
$ | 34,534 | $ | 19,025 | $ | 79,294 | $ | 51,869 | ||||||||
| Customer support |
28,578 | 16,190 | 69,926 | 44,735 | ||||||||||||
| Service |
17,103 | 8,744 | 36,854 | 28,024 | ||||||||||||
| Total revenues |
80,215 | 43,959 | 186,074 | 124,628 | ||||||||||||
| Cost of revenues: |
||||||||||||||||
| License |
2,610 | 1,601 | 6,451 | 4,868 | ||||||||||||
| Customer support |
5,608 | 2,734 | 12,843 | 7,452 | ||||||||||||
| Service |
11,992 | 6,606 | 28,321 | 20,288 | ||||||||||||
| Total cost of revenues |
20,210 | 10,941 | 47,615 | 32,608 | ||||||||||||
| Gross profit |
60,005 | 33,018 | 138,459 | 92,020 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Research and development |
10,529 | 7,611 | 28,484 | 20,624 | ||||||||||||
| Sales and marketing |
23,234 | 13,190 | 55,541 | 38,991 | ||||||||||||
| General and administrative |
6,841 | 3,592 | 15,082 | 10,378 | ||||||||||||
| Depreciation |
1,808 | 1,297 | 4,474 | 3,741 | ||||||||||||
| Amortization of acquired intangible assets |
3,062 | 822 | 5,884 | 2,047 | ||||||||||||
| Restructuring |
10,005 | — | 10,005 | — | ||||||||||||
| Total operating expenses |
55,479 | 26,512 | 119,470 | 75,781 | ||||||||||||
| Income from operations |
4,526 | 6,506 | 18,989 | 16,239 | ||||||||||||
| Other income |
817 | 876 | 1,305 | 1,991 | ||||||||||||
| Interest income |
517 | 239 | 954 | 971 | ||||||||||||
| Income before income taxes |
5,860 | 7,621 | 21,248 | 19,201 | ||||||||||||
| Provision for income taxes |
1,556 | 829 | 5,897 | 829 | ||||||||||||
| Income from continuing operations before minority interest |
4,304 | 6,792 | 15,351 | 18,372 | ||||||||||||
| Minority interest |
1,025 | — | 1,025 | — | ||||||||||||
| Net income for the period |
$ | 3,279 | $ | 6,792 | $ | 14,326 | $ | 18,372 | ||||||||
| Deficit, beginning of the period |
$ | (30,780 | ) | $ | (57,937 | ) | $ | (41,827 | ) | $ | (60,004 | ) | ||||
| Repurchase of Common Shares |
— | — | — | $ | (9,513 | ) | ||||||||||
| Deficit, end of the period |
$ | (27,501 | ) | $ | (51,145 | ) | $ | (27,501 | ) | $ | (51,145 | ) | ||||
| Basic earnings per share |
$ | 0.07 | $ | 0.17 | $ | 0.35 | $ | 0.47 | ||||||||
| Diluted earnings per share |
$ | 0.07 | $ | 0.16 | $ | 0.32 | $ | 0.45 | ||||||||
| Weighted average number of Common Shares outstanding - basic |
43,988 | 38,816 | 41,385 | 38,984 | ||||||||||||
| Weighted average number of Common Shares outstanding - diluted |
47,777 | 41,334 | 44,649 | 41,136 | ||||||||||||
See accompanying notes to condensed consolidated financial statements
4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of US Dollars)
(Unaudited)
| Three months ended March 31, |
Nine months ended March 31, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Cash flows from operating activities: |
||||||||||||||||
| Net income for the period |
$ | 3,279 | $ | 6,792 | $ | 14,326 | $ | 18,372 | ||||||||
| Non-cash items: |
||||||||||||||||
| Depreciation and amortization of acquired intangible assets |
4,851 | 2,119 | 10,339 | 5,788 | ||||||||||||
| Gain on sale of investments |
— | (77 | ) | — | (77 | ) | ||||||||||
| Undistributed earnings related to minority interest | ||||||||||||||||