OPEN TEXT CORP - FORM 8-K - EX-99.1 - PRESS RELEASE

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8-K - FORM 8-K - OPEN TEXT CORP	d8k.htm

Exhibit 99.1

LOGO

OpenText Reports Third Quarter Fiscal 2011 Financial Results

Waterloo, ON, April 27, 2011—Open Text(TM) Corporation (NASDAQ:OTEX) (TSX: OTC), today announced unaudited financial results for its third quarter ended March 31, 2011. (1)

Total revenue for the third quarter of fiscal 2011 was $263.0 million, up 23.6% compared to $212.8 million for the same period in the prior fiscal year. License revenue for the third quarter of fiscal 2011 was $67.8 million, up 37.0% compared to $49.5 million for the same period in the prior fiscal year.

Adjusted net income for the third quarter of fiscal 2011 was $52.5 million or $0.90 per share on a diluted basis, up 30.3% compared to $40.3 million or $0.70 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 $35.8 million or $0.61 per share on a diluted basis, compared to $13.1 million or $0.23 per share on a diluted basis for the same period in the prior fiscal year. (2)

Operating cash flow in the third quarter of fiscal 2011 was $82.3 million, compared to $78.0 million for the same period in the prior fiscal year.

The cash and cash equivalents balance as of March 31, 2011 was $237.7 million. Accounts receivable as of March 31, 2011 totaled $150.2 million, compared to $132.1 million as of June 30, 2010 and Days Sales Outstanding (DSO) was 49 days in the third quarter of fiscal 2011, compared to 52 days in the third quarter of fiscal 2010.

“I am pleased with our performance this quarter,” said John Shackleton, President and Chief Executive Officer of OpenText. “With strong sales in all geographies, we are seeing increased demand for both compliance based solutions and productivity centric applications that integrate workflow processes with ERP systems.”

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

OpenText will host a conference call on April 27, 2011 at 5:00 p.m. ET to discuss its final financial results.


Date:		Wednesday, April 27, 2011
Time:		5:00 p.m. ET/2:00 p.m. PT
Length:		60 minutes
Where:		416-644-3419 866-250-4892 (Toll Free)

Investors should dial in approximately 10 minutes before the teleconference is scheduled to begin. A replay of the call will be available beginning April 27, 2011 at 7:00 p.m. ET through 11:59 p.m. on May 11, 2011 and can be accessed by dialing 416-640-1917 and using passcode 4431709 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/global/ex_event.html?evtype=events&id=701D0000000Uo1wIAC

About OpenText

OpenText (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. OpenText supports approximately 46,000 customers in 114 countries and 12 languages. For more information about OpenText, 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 (“OpenText” 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 OpenText; (ii) the ability of OpenText 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 ^© 2011 by Open Text Corporation. “OPENTEXT”, “OPENTEXT EVERYWHERE” and the “OPENTEXT 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 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. OpenText 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 OpenText’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 (unaudited) reconciliations of US GAAP based financial measures to non-US GAAP based financial measures for the three and nine months ended March 31, 2011, as referred to in this press release:

Non GAAP-based Adjusted Operating Margin and Adjusted Net income*:


In ‘000s of USD	Three months ended March 31, 2011		Percentage			Nine months ended March 31, 2011		Percentage			OpenText Fiscal 2011 Target Model
*Revenue:*
License	$	67,794		25.8	%	$	189,644		25.3	%		25-30	%
Customer Support		143,126		54.4	%		409,585		54.8	%		52-57	%
Service and Other		52,037		19.8	%		148,621		19.9	%		18-23	%

*Total Revenue*		262,957					747,850
Cost of revenues (excluding amortization of acquired technology-based intangible assets)		70,301					196,435

Gross profit (excluding amortization of acquired technology-based intangible assets)		192,656		73.3	%		551,415		73.7	%		73-75	%

*Operating expenses:*
Research & Development		41,324		15.7	%		106,555		14.2	%		14-16	%
Sales & Marketing		61,132		23.2	%		163,915		21.9	%		21-23	%
General & Administrative		23,323		8.9	%		62,611		8.4	%		8-10	%
Depreciation		5,917		2.3	%		16,050		2.1	%		2	%

		131,696					349,131
Gross profit less operating expenses		60,960					202,284
Add: Share -based compensation expense		3,095					8,431

Non GAAP-based Adjusted Operating Margin		64,055		24.4	%		210,715		28.2	%		25-30	%
Less: Interest expense		2,977					9,585

Sub-total		61,078					201,130
Less: tax @ 14%		8,551					28,158

Non GAAP-based Adjusted Net Income	$	52,527				$	172,972

Non GAAP-based Adjusted Net Income per share	$	0.90				$	2.98

Reconciliation of Non GAAP-based Adjusted Operating Margin to GAAP-based Net Income:


In ‘000s of USD	Three months ended March 31, 2011						Nine months ended March 31, 2011
Non GAAP-based Adjusted Operating Margin	$	64,055					$	210,715
Less:
Amortization		27,779						77,683
Share-based compensation expense		3,095						8,431
Special charges		4,437						11,093
Other (income) expense, net		(2,905	)					618
Interest expense, net		2,977						9,585
GAAP-based provision for (recovery of) income taxes		(7,158	)					8,694

GAAP-based net income for the period	$	35,830					$	94,611


Reconciliation of Non GAAP based Adjusted Net income to GAAP-based Net Income:
In ‘000s of USD (except per share data)				Per share						Per share
Non GAAP-based Adjusted Net Income	$	52,527		$	0.90		$	172,972		$	2.98
Less:
Amortization		27,779			0.48			77,683			1.34
Share-based compensation expense		3,095			0.05			8,431			0.14
Special charges		4,437			0.08			11,093			0.19
Other (income) expense, net		(2,905	)		(0.05	)		618			0.01
GAAP-based provision for (recovery of) income taxes		(7,158	)		(0.12	)		8,694			0.15
Tax provision on non GAAP-based adjusted net income (per above), @14%		(8,551	)		(0.15	)		(28,158	)		(0.48	)

GAAP-based net income for the period	$	35,830		$	0.61		$	94,611		$	1.63

* Amounts may differ from those shown on the face of the financial statements due to non-material rounding adjustments.

The following tables present non GAAP-based measures and their reconciliation to GAAP, for the three and nine months ended March 31, 2010:

Non GAAP-based Adjusted Operating Margin and Adjusted Net income*:


In ‘000s of USD	Three months ended March 31, 2010		Percentage			Nine months ended March 31, 2010		Percentage			OpenText Fiscal 2010 Target Model
*Revenue:*
License	$	49,527		23.3	%	$	169,547		25.2	%		25-30	%
Customer Support		124,443		58.5	%		378,375		56.3	%		50-55	%
Service and Other		38,807		18.2	%		124,067		18.5	%		20-25	%

*Total Revenue*		212,777					671,989
Cost of revenues (excluding amortization of acquired technology-based intangible assets).		55,835					175,767

Gross profit (excluding amortization of acquired technology-based intangible assets).		156,942		73.8	%		496,222		73.8	%		72-75	%
*Operating expenses:*
Research & Development		31,654		14.9	%		97,543		14.5	%		14-16	%
Sales & Marketing		45,983		21.6	%		150,564		22.4	%		24-26	%
General & Administrative		18,405		8.6	%		62,007		9.2	%		9-10	%
Depreciation		4,437		2.1	%		12,982		1.9	%		2	%

		100,479					323,096
Gross profit less operating expenses		56,463					173,126
Add: Share -based compensation expense **		1,334					3,990

Non GAAP-based Adjusted Operating Margin		57,797		27.2	%		177,116		26.4	%		22-27	%
Less: Interest expense		2,625					8,387

Sub-total		55,172					168,729
Less: tax @ 27%		14,896					45,557

Non GAAP-based Adjusted Net Income	$	40,276				$	123,172

Non GAAP-based Adjusted Net Income per share	$	0.70				$	2.15


Reconciliation of Non GAAP-based Adjusted Operating Margin to GAAP-based Net Income:
In ‘000s of USD	Three months ended March 31, 2010						Nine months ended March 31, 2010
Non GAAP-based Adjusted Operating Margin	$	57,797					$	177,116
Less:
Amortization		23,954						70,900
Share-based compensation expense		1,334						3,990
Special charges		6,083						35,095
Other expense, net		5,554						3,785
Interest expense, net		2,625						8,387
GAAP-based provision for income taxes		5,133						18,914

GAAP-based net income for the period	$	13,114					$	36,045


Reconciliation of Non GAAP based Adjusted Net income to GAAP-based Net Income:
In ‘000s of USD (except per share data)				Per share						Per share
Non GAAP-based Adjusted Net Income	$	40,276		$	0.70		$	123,172		$	2.15
Less:
Amortization		23,954			0.41			70,900			1.24
Share-based compensation expense		1,334			0.02			3,990			0.07
Special charges		6,083			0.11			35,095			0.61
Other expense, net		5,554			0.10			3,785			0.07
GAAP-based provision for income taxes		5,133			0.09			18,914			0.33
Tax on non GAAP-based adjusted net income (per above), @27%		(14,896	)		(0.26	)		(45,557	)		(0.80	)

GAAP-based net income for the period	$	13,114		$	0.23		$	36,045		$	0.63

* Amounts may differ from those shown on the face of the financial statements due to non-material rounding adjustments.

** For the three and nine months ended March 31, 2010, nil and $3.2 million, respectively, of share-based compensation was included within Special charges.

(3)	The following table provides a composition of our major currencies for revenue and expenses, expressed as a percentage, for the three and nine months ended March 31, 2011:


	Three months ended March 31, 2011
Currencies	% of Revenue			% of Expenses*
EURO		25	%		20	%
GBP		9	%		9	%
CHF		5	%		2	%
CAD		9	%		27	%
USD		43	%		31	%
Others		9	%		11	%

Total		100	%		100	%


	Nine months ended March 31, 2011
Currencies	% of Revenue			% of Expenses*
EURO		25	%		20	%
GBP		9	%		9	%
CHF		5	%		3	%
CAD		8	%		28	%
USD		44	%		30	%
Others		9	%		10	%

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.

For more information, please contact:

Greg Secord

Vice President, Investor Relations

Open Text Corporation

519-888-7111 ext. 2408

gsecord@opentext.com

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands of U.S. dollars, except share data)


	March 31, 2011			June 30, 2010
	(Unaudited)
ASSETS
Cash and cash equivalents	$	237,747		$	326,192
Accounts receivable trade, net of allowance for doubtful accounts of $5,446 as of March 31, 2011 and $4,868 as of June 30, 2010		150,160			132,143
Income taxes recoverable		26,478			44,509
Prepaid expenses and other current assets		33,567			21,086
Deferred tax assets		19,048			20,242

Total current assets		467,000			544,172
Capital assets		73,526			54,286
Goodwill		832,558			666,055
Acquired intangible assets		374,321			328,193
Deferred tax assets		45,447			30,420
Other assets		20,920			16,896
Deferred charges		55,407			27,558
Long-term income taxes recoverable		52,814			48,102

Total assets	$	1,921,993		$	1,715,682


LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	127,066		$	119,604
Current portion of long-term debt		15,787			15,486
Deferred revenues		256,382			219,752
Income taxes payable		32,814			39,666
Deferred tax liabilities		3,641			28,384

Total current liabilities		435,690			422,892
Long-term liabilities:
Accrued liabilities		13,057			15,755
Deferred credits		5,323			—
Pension liability		18,584			15,888
Long-term debt		282,781			285,026
Deferred revenues		11,613			10,085
Long-term income taxes payable		106,963			64,699
Deferred tax liabilities		43,406			13,459

Total long-term liabilities		481,727			404,912
Shareholders’ equity:
Share capital
57,236,987 and 56,825,995 Common Shares issued and outstanding at March 31, 2011 and June 30, 2010, respectively; Authorized Common Shares: unlimited		612,445			602,868
Additional paid-in capital		71,174			61,298
Accumulated other comprehensive income		59,154			44,021
Retained earnings		288,302			193,691
Treasury stock, at cost (572,413 and 307,579 shares, respectively at March 31, 2011 and June 30, 2010)		(26,499	)		(14,000	)

Total shareholders’ equity		1,004,576			887,878

Total liabilities and shareholders’ equity	$	1,921,993		$	1,715,682

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands of U.S. dollars, except share and per share data)

(Unaudited)


	Three months ended March 31,						Nine months ended March 31,
	2011			2010			2011			2010
Revenues:
License	$	67,794		$	49,527		$	189,644		$	169,547
Customer support		143,126			124,443			409,585			378,375
Service and other		52,037			38,807			148,621			124,067

Total revenues		262,957			212,777			747,850			671,989

Cost of revenues:
License		3,772			3,744			12,737			11,522
Customer support		22,699			20,777			63,597			63,209
Service and other		43,830			31,314			120,101			101,036
Amortization of acquired technology-based intangible assets		17,677			15,044			49,524			44,338

Total cost of revenues		87,978			70,879			245,959			220,105

Gross profit		174,979			141,898			501,891			451,884

Operating expenses:
Research and development		41,324			31,654			106,555			97,543
Sales and marketing		61,132			45,983			163,915			150,564
General and administrative		23,323			18,405			62,611			62,007
Depreciation		5,917			4,437			16,050			12,982
Amortization of acquired customer-based intangible assets		10,102			8,910			28,159			26,562
Special charges		4,437			6,083			11,093			35,095

Total operating expenses		146,235			115,472			388,383			384,753

Income from operations		28,744			26,426			113,508			67,131

Other income (expense), net		2,905			(5,554	)		(618	)		(3,785	)
Interest expense, net		(2,977	)		(2,625	)		(9,585	)		(8,387	)

Income before income taxes		28,672			18,247			103,305			54,959
Provision for (recovery of) income taxes		(7,158	)		5,133			8,694			18,914

Net income for the period	$	35,830		$	13,114		$	94,611		$	36,045

Net income per share—basic	$	0.63		$	0.23		$	1.66		$	0.64

Net income per share—diluted	$	0.61		$	0.23		$	1.63		$	0.63

Weighted average number of Common Shares outstanding—basic		57,133			56,537			57,010			56,106

Weighted average number of Common Shares outstanding—diluted		58,359			57,696			58,132			57,214

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars)

(Unaudited)


	Three months ended March 31,						Nine months ended March 31,
	2011			2010			2011			2010
Cash flows from operating activities:
Net income for the period	$	35,830		$	13,114		$	94,611		$	36,045
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of intangible assets		33,696			28,391			93,733			83,882
Share-based compensation expense		3,095			1,334			8,431			7,154
Excess tax benefits on share-based compensation expense		(1,015	)		(207	)		(1,577	)		(904	)
Pension expense		156			152			387			562
Amortization of debt issuance costs		343			330			1,012			1,064
Unrealized (gain) loss on financial instruments		—			2,994			—			(878	)
Unrealized gain on marketable securities		—			—			—			(4,353	)
Loss on sale and write down of capital assets		12			136			12			136
Deferred taxes		(6,958	)		(2,414	)		(10,789	)		(3,714	)
Impairment charges		—			378			—			830
Changes in operating assets and liabilities:
Accounts receivable		(5,131	)		22,566			4,538			23,953
Prepaid expenses and other current assets		813			2,017			124			(1,306	)
Income taxes		(15,039	)		(10,234	)		21,820			(18,238	)
Deferred charges and credits		95			—			(29,172	)		—
Accounts payable and accrued liabilities		(710	)		(4,932	)		(22,022	)		(11,466	)
Deferred revenues		37,585			23,000			12,813			(1,029	)
Other assets		(445	)		1,376			(2,657	)		3,233

Net cash provided by operating activities		82,327			78,001			171,264			114,971
Cash flows from investing activities:
Additions of capital assets-net		(11,954	)		(3,505	)		(26,536	)		(15,269	)
Purchase of weComm Limited, net of cash acquired		(20,198	)		—			(20,198	)		—
Purchase of Metastorm Inc., net of cash acquired		(168,657	)		—			(168,657	)		—
Purchase of StreamServe Inc., net of cash acquired		—			—			(57,221	)		—
Purchase of Vignette Corporation, net of cash acquired		—			—			—			(90,600	)
Purchase of eMotion LLC, net of cash acquired		—			—			—			(556	)
Purchase consideration for prior period acquisitions		(1,392	)		(3,167	)		(4,206	)		(11,407	)
Investments in marketable securities		—			—			(668	)		—
Maturity of short-term investments		—			7,000			—			45,525

Net cash provided by (used in) investing activities		(202,201	)		328			(277,486	)		(72,307	)
Cash flow from financing activities:
Excess tax benefits on share-based compensation expense		1,015			207			1,577			904
Proceeds from issuance of Common Shares		4,831			2,795			9,384			8,937
Purchase of Treasury Stock		—			—			(12,499	)		—
Repayment of long-term debt		(901	)		(873	)		(2,661	)		(2,607	)
Debt issuance costs		—			—			(29	)		(1,024	)

Net cash provided by (used in) financing activities		4,945			2,129			(4,228	)		6,210
Foreign exchange gain (loss) on cash held in foreign currencies		11,893			(6,760	)		22,005			(3,365	)
Increase (decrease) in cash and cash equivalents during the period		(103,036	)		73,698			(88,445	)		45,509
Cash and cash equivalents at beginning of the period		340,783			247,630			326,192			275,819

Cash and cash equivalents at end of the period	$	237,747		$	321,328		$	237,747		$	321,328

Attached files

OPEN TEXT CORP Reports

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