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Open Text Reports Fourth Quarter and Fiscal Year 2010 Financial Results

^{Published on 2010-08-18 13:10:47 - Market Wire}
 

 Date: Wednesday, August 18, 2010 Time: 5:00 p.m. ET/2:00 p.m. PT Length: 60 minutes Where: 416-644-3414 800-814-4859 (Toll Free) 

 Non GAAP-based Adjusted Operating Margin and Adjusted Net income*: -------------------------------------------------------------------- Three Open Text months Year Fiscal ended ended 2010 In millions June 30, Percent- June 30, Percent- Target USD 2010 age 2010 age Model -------------- ----------- ----------- ---------- ----------- ----------- Revenue: License....... $ 68.5 28.5% $ 238.1 26.1% 25-30% Customer Support...... 129.1 53.8% 507.4 55.6% 50-55% Service and Other........ 42.4 17.7% 166.5 18.3% 20-25% ----------- ----------- Total Revenue. 240.0 912.0 Cost of revenues (excluding amortization of acquired technology- based in- tangible assets)...... 60.3 236.0 ----------- ----------- Gross profit excluding amortization of acquired technology- based in- tangible assets....... 179.7 74.9% 676.0 74.1% 72-75% Operating expenses: Development... 31.8 13.3% 129.4 14.2% 14-16% Sales & Marketing.... 47.6 19.8% 198.2 21.7% 24-26% General & Admin- istration.... 21.3 8.9% 83.3 9.1% 9-10% Depreciation.. 4.4 1.8% 17.4 1.9% 2% ----------- ----------- 105.1 428.3 Gross margin less operat- ing expenses. 74.6 247.7 Add: Share- based comp- ensation expense...... 2.6 6.6 ----------- ----------- Non GAAP-based Adjusted Operating Margin....... 77.2 32.2% 254.3 27.9% 22-27% Less: Interest expense...... 2.0 10.4 ----------- ----------- Sub-total..... 75.2 243.9 Less: tax @ 27% .... 20.3 65.9 ----------- ----------- Non GAAP-based Adjusted Net Income....... $ 54.9 $ 178.0 ----------- ----------- ----------- ----------- Non GAAP-based Adjusted Net Income per share........ $ 0.95 $ 3.10 ----------- ----------- ----------- ----------- Reconciliation of Non GAAP-based Adjusted Operating Margin to GAAP-based Net Income: ------------------------------------------------------------------------- Non GAAP-based Adjusted Operating Margin.......................................... $ 77.2 $ 254.3 Less: Amortization..................................... 25.5 96.4 Share-based compensation expense................. 2.6 6.6(xx) Special charges.................................. 8.6 43.7 Other expense, net............................... 4.6 8.3 Interest expense, net............................ 2.0 10.4 GAAP-based provision for (recovery of) income taxes........................................... (17.6) 1.3 ----------- ----------- GAAP-based net income for the period............. $ 51.5 $ 87.6 ----------- ----------- ----------- ----------- Reconciliation of Non GAAP based Adjusted Net income to GAAP-based Net Income: ------------------------------------------------------------------------- per per share share Non GAAP-based Adjusted Net Income $ 54.9 $ 0.95 $ 178.0 $ 3.10 Less: Amortization................... 25.5 0.44 96.4 1.68 Share-based compensation expense....................... 2.6 0.04 6.6(xx) 0.11 Special charges................ 8.6 0.15 43.7 0.76 Other expense, net............. 4.6 0.08 8.3 0.14 GAAP-based provision for (re- covery of) income taxes....... (17.6) (0.30) 1.3 0.02 Tax on non GAAP-based adjusted net income (per above) ....... (20.3) (0.35) (65.9) (1.14) ------------------------------------------ GAAP-based net income for the period........................ $ 51.5 $ 0.89 $ 87.6 $ 1.53 ------------------------------------------ ------------------------------------------ * Amounts may differ from those shown on the face of the financial statements due to non-material rounding adjustments. (xx) In addition $3.2 million of share-based compensation is included within Special charges. 

 Non GAAP-based Adjusted Operating Margin and Adjusted Net income*: -------------------------------------------------------------------- Three Open Text months Year Fiscal ended ended 2009 In millions June 30, Percent- June 30, Percent- Target USD 2009 age 2009 age Model -------------- ----------- ----------- ---------- ----------- ----------- Revenue: License....... $ 63.0 31.0% $ 229.8 29.3% 25-30% Customer Support...... 104.5 51.4% 405.4 51.6% 50-55% Service and Other........ 35.9 17.6% 150.5 19.2% 20-25% ----------- ----------- Total Revenue. 203.4 785.7 Cost of revenues (excluding amortization of acquired technology- based in- tangible assets)...... 51.3 204.2 ----------- ----------- Gross profit excluding amortization of acquired technology- based in- tangible assets....... 152.1 74.8% 581.5 74.0% 72-75% Operating expenses: Development... 28.8 14.2% 116.2 14.8% 14-16% Sales & Marketing.... 47.9 23.5% 186.5 23.7% 24-26% General & Admin- istration.... 19.2 9.4% 73.8 9.4% 9-10% Depreciation.. 3.2 1.6% 12.0 1.5% 2% ----------- ----------- 99.1 388.5 Gross margin less operat- ing expenses. 53.0 193.0 Add: Share- based comp- ensation expense...... 1.1 5.0 ----------- ----------- Non GAAP-based Adjusted Operating Margin....... 54.1 26.6% 198.0 25.2% 22-27% Less: Interest expense...... 2.8 13.6 ----------- ----------- Sub-total..... 51.3 184.4 Less: tax @ 23.5% and 28%, respectively. 12.1 51.6 ----------- ----------- Non GAAP-based Adjusted Net Income $ 39.2 $ 132.8 ----------- ----------- ----------- ----------- Non GAAP-based Adjusted Net Income per share........ $ 0.73 $ 2.49 ----------- ----------- ----------- ----------- Reconciliation of Non GAAP-based Adjusted Operating Margin to GAAP-based Net Income: ------------------------------------------------------------------------- Non GAAP-based Adjusted Operating Margin......... $ 54.1 $ 198.0 Less: Amortization..................................... 17.3 81.0 Share-based compensation expense................. 1.1 5.0 Special charges.................................. 1.2 14.4 Other expense, net............................... 3.0 3.2 Interest expense, net............................ 2.8 13.6 GAAP-based provision for income taxes............ 9.2 23.9 ----------- ----------- GAAP-based net income for the period............. $ 19.5 $ 56.9 ----------- ----------- ----------- ----------- Reconciliation of Non GAAP based Adjusted Net income to GAAP-based Net Income: ------------------------------------------------------------------------- per per share share Non GAAP-based Adjusted Net Income $ 39.2 $ 0.73 $ 132.8 $ 2.49 Less: Amortization................... 17.3 0.32 81.0 1.52 Share-based compensation expense....................... 1.1 0.02 5.0 0.09 Special charges................ 1.2 0.02 14.4 0.27 Other expense, net............. 3.0 0.06 3.2 0.06 GAAP-based provision for income taxes......................... 9.2 0.17 23.9 0.45 Tax on non GAAP-based adjusted net income (per above)........ (12.1) (0.22) (51.6) (0.97) ----------------------------------------- GAAP-based net income for the period........................ $ 19.5 $ 0.36 $ 56.9 $ 1.07 ----------------------------------------- ----------------------------------------- * Amounts may differ from those shown on the face of the financial statements due to non-material rounding adjustments. (3) The following table provides a composition of our major currencies for revenue under U.S. GAAP and expenses, expressed as a percentage, for the fourth quarter and fiscal year ended June 30, 2010: Fourth quarter of fiscal 2010 -------------------- % of % of Ex- Currencies Revenue penses* ---------------------------------------------------- --------- ---------- EURO................................................ 25% 20% GBP................................................. 9% 8% CHF................................................. 5% 2% CAD................................................. 10% 31% USD................................................. 44% 31% Others.............................................. 7% 8% --------- ---------- Total............................................... 100% 100% --------- ---------- --------- ---------- Fiscal 2010 -------------------- % of % of Ex- Currencies Revenue penses* ---------------------------------------------------- --------- ---------- EURO................................................ 25% 22% GBP................................................. 10% 8% CHF................................................. 5% 3% CAD................................................. 8% 26% USD................................................. 44% 33% Others.............................................. 8% 8% --------- ---------- 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 expense and special charges. OPEN TEXT CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands of U.S. dollars, except share data) June 30, June 30, 2010 2009 ------------ ------------ ASSETS Cash and cash equivalents...................... $ 326,192 $ 275,819 Accounts receivable trade, net of allowance for doubtful accounts of $4,868 as of June 30, 2010 and $4,208 as of June 30, 2009........... 132,143 115,802 Income taxes recoverable....................... 44,509 4,496 Prepaid expenses and other current assets...... 21,086 18,172 Deferred tax assets............................ 15,714 20,621 ------------ ------------ Total current assets......................... 539,644 434,910 Investments in marketable securities........... - 13,103 Capital assets................................. 54,286 45,165 Goodwill....................................... 671,624 576,111 Acquired intangible assets..................... 328,193 315,048 Deferred tax assets............................ 27,405 69,877 Other assets................................... 44,454 13,064 Long-term income taxes recoverable............. 48,418 39,958 ------------ ------------ Total assets $ 1,714,024 $ 1,507,236 ------------ ------------ ------------ ------------ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities..... $ 119,604 $ 116,992 Current portion of long-term debt............ 15,486 3,449 Deferred revenues............................ 219,752 189,397 Income taxes payable......................... 39,666 10,356 Deferred tax liabilities..................... 28,384 508 ------------ ------------ Total current liabilities.................. 422,892 320,702 Long-term liabilities: Accrued liabilities.......................... 15,755 21,099 Pension liability............................ 15,888 15,803 Long-term debt............................... 285,026 299,234 Deferred revenues............................ 10,085 7,914 Long-term income taxes payable............... 64,699 47,131 Deferred tax liabilities..................... 13,459 108,889 ------------ ------------ Total long-term liabilities................ 404,912 500,070 Shareholders' equity: Share capital 56,825,995 and 52,716,751 Common Shares issued and outstanding at June 30, 2010 and June 30, 2009, respectively; Authorized Common Shares: unlimited........ 602,868 457,982 Additional paid-in capital................... 61,298 52,152 Accumulated other comprehensive income....... 44,021 71,851 Retained earnings............................ 192,033 104,479 Treasury stock, at cost (307,579 and nil shares, respectively at June 30, 2010 and June 30, 2009).............................. (14,000) - ------------ ------------ Total shareholders' equity..................... 886,220 686,464 ------------ ------------ Total liabilities and shareholders' equity..... $ 1,714,024 $ 1,507,236 ------------ ------------ ------------ ------------ OPEN TEXT CORPORATION CONSOLIDATED STATEMENTS OF INCOME (In thousands of U.S. dollars, except per share data) Year ended June 30, -------------------------------------- 2010 2009 2008 ------------ ------------ ------------ Revenues: License......................... $ 238,074 $ 229,818 $ 219,103 Customer support................ 507,452 405,310 363,580 Service and other............... 166,497 150,537 142,849 ------------ ------------ ------------ Total revenues................ 912,023 785,665 725,532 Cost of revenues: License......................... 16,922 16,204 15,415 Customer support................ 83,741 68,902 58,764 Service and other............... 135,396 118,998 117,037 Amortization of acquired technology-based intangible assets......................... 60,472 47,733 41,515 ------------ ------------ ------------ Total cost of revenues........ 296,531 251,837 232,731 ------------ ------------ ------------ Gross profit...................... 615,492 533,828 492,801 ------------ ------------ ------------ Operating expenses: Research and development........ 129,378 116,164 107,206 Sales and marketing............. 198,208 186,533 172,873 General and administrative...... 83,295 73,842 69,985 Depreciation.................... 17,425 12,012 12,017 Amortization of acquired customer-based intangible assets......................... 35,940 33,259 30,759 Special charges (recoveries).... 43,666 14,434 (418) ------------ ------------ ------------ Total operating expenses...... 507,912 436,244 392,422 ------------ ------------ ------------ Income from operations............ 107,580 97,584 100,379 ------------ ------------ ------------ Other income (expense), net....... (8,349) (3,238) (1,521) Interest expense, net............. (10,366) (13,620) (22,859) ------------ ------------ ------------ Income before income taxes........ 88,865 80,726 75,999 Provision for income taxes........ 1,311 23,788 22,993 ------------ ------------ ------------ Net income for the year........... $ 87,554 $ 56,938 $ 53,006 ------------ ------------ ------------ ------------ ------------ ------------ Net income per share-basic........ $ 1.56 $ 1.09 $ 1.04 ------------ ------------ ------------ ------------ ------------ ------------ Net income per share-diluted...... $ 1.53 $ 1.07 $ 1.01 ------------ ------------ ------------ ------------ ------------ ------------ Weighted average number of Common Shares outstanding-basic......... 56,280 52,030 50,780 ------------ ------------ ------------ ------------ ------------ ------------ Weighted average number of Common Shares outstanding-diluted....... 57,385 53,271 52,604 ------------ ------------ ------------ ------------ ------------ ------------ OPEN TEXT CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands of U.S. dollars) Year ended June 30, -------------------------------------- 2010 2009 2008 ------------ ------------ ------------ Cash flows from operating activities: Net income for the year......... $ 87,554 $ 56,938 $ 53,006 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization. 113,837 93,004 84,291 In-process research and development.................. - 121 500 Share-based compensation expense...................... 9,765 5,032 3,789 Excess tax benefits from share-based compensation..... (1,143) (8,631) (1,079) Pension expense............... 211 1,377 - Amortization of debt issuance costs........................ 1,390 1,099 1,220 Unrealized (gain) loss on financial instruments........ (878) (1,682) 3,178 Loss on sale and write down of capital assets............ 136 130 - Release of unrealized gain on marketable securities to income....................... (4,353) - - Deferred taxes................ (24,219) (9,914) (24,326) Impairment and Other non cash charges...................... 577 223 - Changes in operating assets and liabilities: Accounts receivable........... 24,521 43,761 (5,626) Prepaid expenses and other current assets............... (814) (3,080) (168) Income taxes.................. 5,066 23,274 12,600 Accounts payable and accrued liabilities.................. (11,340) (15,999) 3,566 Deferred revenue.............. 3,077 (6,861) 33,751 Other assets.................. (23,196) (2,622) 1,274 ------------ ------------ ------------ Net cash provided by operating activities....................... 180,191 176,170 165,976 Cash flows from investing activities: Additions of capital assets-net. (19,314) (12,150) (6,895) Purchase of Burntsand Inc., net of cash acquired........... (8,163) - - Purchase of Nstein Technologies Inc., net of cash acquired..... (20,370) - - Purchase of New Generation Consulting Inc................. (3,500) - - Purchase of Vignette Corporation, net of cash acquired....................... (90,600) - - Purchase of Vizible Corporation. - (850) - 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.................... - (11,437) - Purchase consideration for prior period acquisitions............ (12,843) (22,794) (21,522) Investments in marketable securities..................... - (8,930) - Maturity of short-term investments.................... 45,525 - - ------------ ------------ ------------ Net cash used in investing activities....................... (109,821) (160,829) (28,417) Cash flow from financing activities: Excess tax benefits on share- based compensation expense..... 1,143 8,631 1,079 Proceeds from issuance of Common Shares......................... 9,971 19,593 12,272 Purchase of Treasury Stock...... (14,000) - - Repayment of long-term debt..... (3,485) (3,426) (63,616) Debt issuance costs............. (1,024) - (349) ------------ ------------ ------------ Net cash provided by (used in) financing activities............. (7,395) 24,798 (50,614) Foreign exchange gain (loss) on cash held in foreign currencies.. (12,602) (19,236) 17,992 Increase in cash and cash equivalents during the year...... 50,373 20,903 104,937 Cash and cash equivalents at beginning of the year............ 275,819 254,916 149,979 ------------ ------------ ------------ Cash and cash equivalents at end of the year...................... $ 326,192 $ 275,819 $ 254,916 ------------ ------------ ------------ ------------ ------------ ------------ OPEN TEXT CORPORATION CONSOLIDATED STATEMENTS OF INCOME (In thousands of U.S. dollars, except per share data) Three months ended June 30, ------------------------- 2010 2009 ------------ ------------ Revenues: License...................................... $ 68,527 $ 62,973 Customer support............................. 129,077 104,494 Service and other............................ 42,430 35,889 ------------ ------------ Total revenues 240,034 203,356 Cost of revenues: License...................................... 5,400 3,534 Customer support............................. 20,532 18,675 Service and other............................ 34,360 29,100 Amortization of acquired technology-based intangible assets........................... 16,134 13,562 ------------ ------------ Total cost of revenues..................... 76,426 64,871 ------------ ------------ Gross profit................................... 163,608 138,485 ------------ ------------ Operating expenses: Research and development..................... 31,835 28,829 Sales and marketing.......................... 47,644 47,928 General and administrative................... 21,288 19,238 Depreciation................................. 4,443 3,165 Amortization of acquired customer-based intangible assets........................... 9,378 3,730 Special charges.............................. 8,571 1,200 ------------ ------------ Total operating expenses................... 123,159 104,090 ------------ ------------ Income from operations......................... 40,449 34,395 ------------ ------------ Other expense, net............................. (4,564) (3,039) Interest expense, net.......................... (1,979) (2,848) ------------ ------------ Income before income taxes..................... 33,906 28,508 Provision for (recovery of) income taxes....... (17,603) 9,027 ------------ ------------ Net income for the period...................... $ 51,509 $ 19,481 ------------ ------------ ------------ ------------ Net income per share-basic..................... $ 0.91 $ 0.37 ------------ ------------ ------------ ------------ Net income per share-diluted................... $ 0.89 $ 0.36 ------------ ------------ ------------ ------------ Weighted average number of Common Shares outstanding-basic............................. 56,802 52,648 ------------ ------------ ------------ ------------ Weighted average number of Common Shares outstanding-diluted........................... 57,897 53,670 ------------ ------------ ------------ ------------ OPEN TEXT CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands of U.S. dollars) Three months ended June 30, ------------------------- 2010 2009 ------------ ------------ Cash flows from operating activities: Net income for the period.................... $ 51,509 $ 19,481 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.............. 29,955 20,457 Share-based compensation expense........... 2,611 1,075 Excess tax benefits from share-based compensation.............................. (239) (249) Pension expense............................ (351) 253 Amortization of debt issuance costs........ 326 268 Unrealized (gain) loss on financial instruments............................... - (1,548) Deferred taxes............................. (20,505) (6,337) Impairment and Other non cash charges...... (253) - Changes in operating assets and liabilities: Accounts receivable........................ 568 (4,136) Prepaid expenses and other current assets.. 492 665 Income taxes............................... 23,304 13,618 Accounts payable and accrued liabilities... 126 2,731 Deferred revenue........................... 4,106 (5,557) Other assets............................... (26,429) (2,094) ------------ ------------ Net cash provided by operating activities...... 65,220 38,627 Cash flows from investing activities: Additions of capital assets-net.............. (4,045) (5,842) Purchase of Burntsand Inc., net of cash acquired.................................... (8,163) - Purchase of Nstein Technologies Inc., net of cash acquired............................ (20,370) - Purchase of New Generation Consulting Inc,... (3,500) - Purchase of Vizible Corporation.............. - (850) Purchase consideration for prior period acquisitions................................ (1,436) (5,604) ------------ ------------ Net cash used in investing activities.......... (37,514) (12,296) Cash flow from financing activities: Excess tax benefits on share-based compensation expense........................ 239 249 Proceeds from issuance of Common Shares...... 1,034 1,919 Purchase of Treasury Stock................... (14,000) - Repayment of long-term debt.................. (878) (856) ------------ ------------ Net cash provided by (used in) financing activities.................................. (13,605) 1,312 Foreign exchange gain (loss) on cash held in foreign currencies............................ (9,237) 11,128 Increase in cash and cash equivalents during the period.................................... 4,864 38,771 Cash and cash equivalents at beginning of the period.................................... 321,328 237,048 ------------ ------------ Cash and cash equivalents at end of the period. $ 326,192 $ 275,819 ------------ ------------ ------------ ------------