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 September 30, 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 ¨
As of November 8, 2004, there were 50,656,400 outstanding Common Shares of the registrant.
TABLE OF CONTENTS
| Page No. | ||||
| Item 1. |
||||
| 3 | ||||
| 4 | ||||
|
Unaudited Condensed Consolidated Statements of Deficit |
5 | |||
| 6 | ||||
| 7 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial |
25 | ||
| Item 3. |
38 | |||
| Item 4. |
39 | |||
| Item 1. |
40 | |||
| Item 2. |
40 | |||
| 41 | ||||
2
Item 1. Condensed Consolidated Financial Statements
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In US Dollars)
(in thousands, except share data)
| As of September 30, 2004 |
As of June 30, |
|||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 111,453 | $ | 156,987 | ||||
| Accounts receivable - net of allowance for doubtful accounts of $3,686 as of September 30, 2004 and $3,628 as of June 30, 2004 |
66,141 | 82,996 | ||||||
| Income taxes recoverable (note 5) |
12,651 | 7,041 | ||||||
| Prepaid expenses and other assets |
8,703 | 6,550 | ||||||
| Deferred tax assets (note 5) |
19,545 | 18,776 | ||||||
| Total current assets |
218,493 | 272,350 | ||||||
| Long term assets: |
||||||||
| Capital assets (note 4) |
26,795 | 24,678 | ||||||
| Goodwill, net of accumulated amortization of $12,807 at September 30, 2004 and June 30, 2004 (note 10) |
238,629 | 223,752 | ||||||
| Deferred tax assets |
23,060 | 27,668 | ||||||
| Acquired intangible assets (note 11) |
134,093 | 116,588 | ||||||
| Other assets |
6,708 | 5,719 | ||||||
| Total assets |
$ | 647,778 | $ | 670,755 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Accounts payable and accrued liabilities (note 3) |
$ | 81,235 | $ | 94,075 | ||||
| Deferred revenues |
63,500 | 62,661 | ||||||
| Deferred tax liabilities (note 5) |
14,586 | 10,892 | ||||||
| Total current liabilities |
159,321 | 167,628 | ||||||
| Long term liabilities: |
||||||||
| Deferred revenues |
762 | 915 | ||||||
| Deferred tax liabilities (note 5) |
30,586 | 35,536 | ||||||
| Accrued liabilities (note 3) |
21,676 | 23,620 | ||||||
| Total long term liabilities |
53,024 | 60,071 | ||||||
| Minority interest |
10,159 | 10,051 | ||||||
| Shareholders’ equity: |
||||||||
| Share capital |
||||||||
| 50,651,902 and 51,054,786 Common Shares issued and outstanding at September 30, 2004 and June 30, 2004, respectively |
425,903 | 427,015 | ||||||
| Warrants issued |
21,980 | 22,705 | ||||||
| Accumulated other comprehensive income: |
||||||||
| Cumulative translation adjustment |
3,161 | 1,814 | ||||||
| Accumulated deficit (note 7) |
(25,770 | ) | (18,529 | ) | ||||
| Total shareholders’ equity |
425,274 | 433,005 | ||||||
| Total liabilities and shareholders’ equity |
$ | 647,778 | $ | 670,755 | ||||
See accompanying notes to condensed consolidated financial statements
3
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In US Dollars)
(in thousands, except per share data)
| Three months ended September 30, |
||||||||
| 2004 |
2003 |
|||||||
| (unaudited) | ||||||||
| Revenues: |
||||||||
| License |
$ | 23,904 | $ | 16,867 | ||||
| Customer support |
40,792 | 19,421 | ||||||
| Service |
20,900 | 7,897 | ||||||
| Total revenues |
85,596 | 44,185 | ||||||
| Cost of revenues: |
||||||||
| License |
2,154 | 1,291 | ||||||
| Customer support |
7,494 | 3,181 | ||||||
| Service |
16,654 | 7,203 | ||||||
| Total cost of revenues |
26,302 | 11,675 | ||||||
| Gross profit |
59,294 | 32,510 | ||||||
| Operating expenses: |
||||||||
| Research and development |
14,683 | 8,031 | ||||||
| Sales and marketing |
25,497 | 13,807 | ||||||
| General and administrative |
11,858 | 3,354 | ||||||
| Depreciation |
2,399 | 1,187 | ||||||
| Amortization of acquired intangible assets |
5,429 | 1,188 | ||||||
| Total operating expenses |
59,866 | 27,567 | ||||||
| Income (loss) from operations |
(572 | ) | 4,943 | |||||
| Other expense |
(933 | ) | (380 | ) | ||||
| Interest income |
302 | 225 | ||||||
| Income before income taxes |
(1,203 | ) | 4,788 | |||||
| Provision (recovery) for income taxes |
(325 | ) | 1,434 | |||||
| Minority interest |
108 | — | ||||||
| Net income (loss) for the period |
$ | (986 | ) | $ | 3,354 | |||
| Basic income (loss) per share* (note 8) |
$ | (0.02 | ) | $ | 0.08 | |||
| Diluted income (loss) per share* (note 8) |
$ | (0.02 | ) | $ | 0.08 | |||
| Weighted average number of Common Shares outstanding - basic* (note 8) |
51,106 | 39,522 | ||||||
| Weighted average number of Common Shares outstanding - diluted* (note 8) |
51,106 | 42,213 | ||||||
| * | 2003 shares adjusted for stock split declared on October 8, 2003. |
See accompanying notes to condensed consolidated financial statements
4
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF DEFICIT
(In thousands of US Dollars)
| Three months ended September 30, |
||||||||
| 2004 |
2003 |
|||||||
| (unaudited) | ||||||||
| Deficit, beginning of period |
$ | (18,529 | ) | $ | (41,827 | ) | ||
| Repurchase of common shares |
(6,255 | ) | ||||||
| Net income(loss) |
(986 | ) | 3,354 | |||||
| Deficit, end of period |
$ | (25,770 | ) | $ | (38,473 | ) | ||
5
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of US Dollars)
| Three months ended September 30, |
||||||||
| 2004 |
2003 |
|||||||
| (unaudited) | ||||||||
| Cash flows from operating activities: |
||||||||
| Net income (loss) for the period |
$ | (986 | ) | $ | 3,354 | |||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization of acquired intangible assets |
7,828 | 2,375 | ||||||
| Undistributed earnings related to minority interest |
108 | — | ||||||
| Other |
— | 8 | ||||||
| Changes in operating assets and liabilities, net of assets acquired |
||||||||
| Accounts receivable |
18,735 | 8,011 | ||||||
| Prepaid expenses and other assets |
(1,861 | ) | (775 | ) | ||||
| Income taxes recoverable |
(2,446 | ) | (4,130 | ) | ||||
| Accounts payable and accrued liabilities |
(10,213 | ) | (4,437 | ) | ||||
| Deferred revenues |
(6,049 | ) | (4,398 | ) | ||||
| 5,116 | 8 | |||||||
| Cash flows used in investing activities: |
||||||||
| Purchase of capital assets |
(3,394 | ) | (828 | ) | ||||
| Acquisition of Vista, net of cash acquired of nil (note 14) |
(23,690 | ) | — | |||||
| Acquisition of Artesia, net of cash acquired of nil (note 14) |
(5,057 | ) | — | |||||
| Additional purchase consideration for prior period acquisitions |
(2,747 | ) | — | |||||
| Cash restricted for acquisitions |
— | (12,000 | ) | |||||
| Business acquisition costs |
(3,763 | ) | (1,041 | ) | ||||
| Other |
— | (693 | ) | |||||
| (38,651 | ) | (14,562 | ) | |||||
| Cash flow from financing activities: |
||||||||
| Payments of obligations under capital leases |
(48 | ) | (92 | ) | ||||
| Proceeds from issuance of Common Shares |
368 | 6,786 | ||||||
| Proceeds from warrants |
725 | — | ||||||
| Repurchase of Common Shares |
(11,034 | ) | — | |||||
| Repayment of short term loan |
(2,189 | ) | — | |||||
| (12,178 | ) | 6,694 | ||||||
| Foreign exchange gain on cash held in foreign currency |
179 | 53 | ||||||
| Decrease in cash and cash equivalents during the period |
(45,534 | ) | (7,807 | ) | ||||
| Cash and cash equivalents at beginning of period |
156,987 | 16,554 | ||||||
| Cash and cash equivalents at end of period |
$ | 111,453 | $ | 108,747 | ||||
| Supplementary cash flow information (see Note 12) |
||||||||
See accompanying notes to condensed consolidated financial statements
6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months Ended September 30, 2004 and 2003
(unaudited)
(Tabular dollar amounts in thousands of US Dollars, except share data)
NOTE 1—BASIS OF PRESENTATIO