EX-99.1 2 dex991.htm PRESS RELEASE

Press Release

Exhibit 99.1

PRESS RELEASE

Open Text Reports Second Quarter Fiscal 2008 Financial Results

Waterloo, ON – February 7, 2008 – Open Text™ Corporation (NASDAQ:OTEX) (TSX:OTC), a leading provider of Enterprise Content Management (ECM) software, today announced unaudited financial results for its second quarter that ended December 31, 2007. (1)

Total revenue for the second quarter was $182.5 million, up 12% compared to $163.3 million for the same period in the prior fiscal year and up 11% compared to $164.0 million in the previous quarter. License revenue in the second quarter was $55.2 million, up 7% compared to $51.4 million in the second quarter of the prior fiscal year and up 25% compared to $44.3 million in the previous quarter.

Adjusted net income in the quarter was $26.2 million or $0.50 per share on a diluted basis, up 46% compared to $18.0 million or $0.35 per share on a diluted basis for the same period in the prior fiscal year and up 19% compared to $22.1 million or $0.43 per share on a diluted basis in the previous quarter. Net income in accordance with U.S. generally accepted accounting principles (“US GAAP”) was $10.7 million or $0.20 per share on a diluted basis, up 365% compared to $2.3 million or $0.04 per share on a diluted basis for the same period in the prior fiscal year and up 37% compared to $7.8 million or $0.15 per share on a diluted basis in the previous quarter. (2)

Operating cash flow in the second quarter of fiscal 2008 was $39.3 million, up 25% compared to $31.4 million in the second quarter of the prior fiscal year and up 22% compared to $32.2 million in the previous quarter.

“I am very pleased with our performance in the quarter,” said John Shackleton, President and Chief Executive Officer of Open Text. “We have grown license revenue while maintaining our profitability targets and generating strong operating cash flow. Sales in the quarter were led by the telecommunications, energy and government sectors and our strategic partner programs with SAP, Microsoft, Oracle and Accenture continue to gain traction.”

The cash, cash equivalents and short-term investments balance as of December 31, 2007 was $159.7 million compared to $150.0 million at June 30, 2007. Accounts receivable as of December 31, 2007, totaled $120.6 million, compared to $128.8 million as of June 30, 2007, and Days Sales Outstanding (DSO) was 60 days at the end of the second quarter of fiscal 2008, compared to 66 days at June 30, 2007.

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 February 7, 2008 at 5:00 p.m. ET to discuss the final financial results for its second quarter.

		Date:		Thursday, February 7, 2008
		Time:		5:00 p.m. ET/2:00 p.m. PT
		Length:		60 minutes
		Where:		416-640-1907

Please dial-in approximately 10 minutes before the teleconference is scheduled to begin. A replay of the call will be available beginning February 7, 2008 at 7:00 p.m. ET through 11:59 p.m. on February 21, 2008 and can be accessed by dialing 416-640-1917 and using pass code 21258637 followed by the number sign.

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For more information or to listen to the call via Web cast, please use the following link:

http://www.opentext.com/events/event.html?id=6643048

About Open Text

Open Text™ 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.

# # #

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 – This press release contains forward-looking statements, including statements about the financial conditions, results of operations and earnings and revenue outlook for Open Text Corporation (“Open Text” or “the Company”). Forward-looking statements in this press release are not promises or guarantees of future performance and are subject to risks and uncertainties that could cause the Company’s actual results to differ materially from those anticipated. The Company cautions you not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. The results included in this press release are unaudited and therefore are deemed to be forward-looking statements. Factors that may cause actual results or earnings to differ materially from such forward-looking statements include, among others, 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 thereunder; (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; (ix) demand for the Company’s products; and (x) other risks detailed from time to time in the Company’s filings with the Securities and Exchange Commission (SEC), including the Company’s Annual Report on Form 10-K for the year ended June 30, 2007 and Form 10-Q for the quarter ended September 30, 2007 . Forward-looking statements are based on management’s beliefs and opinions at the time the statements are made, and the Company does not undertake any obligation to update forward-looking statements should circumstances or management’s beliefs or opinions change.

Notes

(1) Based on comparison of historic 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) In addition to these GAAP and adjusted results, the Company has provided financial information, in the table below, that adds-back maintenance revenue eliminated due to the impact of purchase accounting entries on deferred revenue and the impact of interest expense. Management believes that the furnishing of these adjustments provide a consistent basis for comparison between quarters and help to more accurately reflect Open Text’s underlying operating results.

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(in millions of US dollars except share data)		Three months ended December 31, 2007
GAAP Revenue		$	182.5
Maintenance revenue adjustment for purchase accounting			0.3
Non-GAAP revenue		$	182.8
Adjusted Income		$	26.2
Maintenance revenue adjustment for purchase accounting			0.3
Net Interest Expense			7.6
Income tax effect			(2.4	)
Non-GAAP net income		$	31.7

(3) Use of Non- US 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 unaudited condensed 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 intangibles, restructuring costs, other income (expense), share-based compensation 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 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 quarters ended December 31, 2007 and 2006:

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		Three months ended December 31, 2007				Three months ended December 31, 2006
GAAP based “Net Income”		$	10.7			$	2.3
Special Charges/(recovery)			0.0				4.8
Amortization of intangibles			17.8				17.8
Other (Income)/Expense			3.7				(0.3	)
Share-based compensation			0.7				1.3
Tax Impact on Above			(6.7	)			(7.9	)
Non-GAAP based “Adjusted Net Income”		$	26.2			$	18.0

Reconciliation of (unaudited) US GAAP based EPS to non-US GAAP based EPS (calculated on a diluted basis) for the quarters ended December 31 2007 and 2006:

		Three months ended December 31, 2007				Three months ended December 31, 2006
GAAP based “Net Income”		$	0.20			$	0.04
Special Charges/(recovery)			0.00				0.10
Amortization of intangibles			0.34				0.35
Other (Income)/Expense			0.07				(0.01	)
Share-based compensation			0.01				0.03
Tax Impact on Above			(0.12	)			(0.16	)
Non-GAAP based “Adjusted Net Income”		$	0.50			$	0.35

For more information, please contact:

Paul McFeeters

Chief Financial Officer

Open Text Corporation

+1-905-762-6121

pmcfeeters@opentext.com

Greg Secord

Director, Investor Relations

Open Text Corporation

+1-519-888-7111 ext.2408

gsecord@opentext.com

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OPEN TEXT CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

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

		December 31, 2007			June 30, 2007
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	159,709		$	149,979
Accounts receivable trade, net of allowance for doubtful accounts of $2,966 as of December 31, 2007 and $2,089 as of June 30, 2007			120,588			128,781
Income taxes recoverable			19,599			31,060
Prepaid expenses and other current assets			10,518			10,368
Deferred tax assets			32,410			30,248
Total current assets			342,824			350,436
Capital assets			42,879			43,614
Goodwill			552,079			528,312
Acquired intangible assets			313,118			343,324
Deferred tax assets			29,201			42,078
Other assets			11,119			9,524
Long-term income taxes recoverable			36,945			9,557
		$	1,328,165		$	1,326,845
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	101,403		$	100,211
Current portion of long-term debt			3,488			4,048
Deferred revenues			134,399			143,097
Income taxes payable			11,701			33,705
Deferred tax liabilities			1,198			1,601
Total current liabilities			252,189			282,662
Long-term liabilities:
Accrued liabilities			22,338			22,516
Long-term debt			306,458			366,765
Deferred revenues			3,313			3,840
Long-term income taxes payable			41,893			—
Deferred tax liabilities			102,246			120,019
Total long-term liabilities			476,248			513,140
Minority interest			7,763			6,975
Shareholders’ equity:
Share capital
50,872,016 and 50,180,118 Common Shares issued and outstanding at December 31, 2007 and June 30, 2007, respectively; Authorized Common Shares: unlimited			435,422			426,188
Additional paid-in capital			37,795			35,311
Accumulated other comprehensive income			105,728			68,034
Retained earnings (deficit)			13,020			(5,465	)
Total shareholders’ equity			591,965			524,068
		$	1,328,165		$	1,326,845

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OPEN TEXT CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

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

		Three months ended December 31,								Six months ended December 31,
		2007				2006				2007				2006
Revenues:
License		$	55,158			$	51,425			$	99,418			$	80,250
Customer support			90,614				78,022				176,918				126,310
Service			36,762				33,814				70,165				57,856
Total revenues			182,534				163,261				346,501				264,416
Cost of revenues:
License			4,649				3,322				8,203				6,122
Customer support			14,191				12,659				26,789				19,646
Service			30,192				29,108				57,696				49,408
Amortization of acquired technology-based intangible assets			10,308				10,396				20,460				15,242
Total cost of revenues			59,340				55,485				113,148				90,418
			123,194				107,776				233,353				173,998
Operating expenses:
Research and development			25,924				22,595				49,656				36,813
Sales and marketing			42,523				43,824				80,633				68,696
General and administrative			16,955				15,474				33,965				26,693
Depreciation			3,752				3,907				6,736				6,899
Amortization of acquired customer-based intangible assets			7,514				7,369				14,929				9,751
Special charges (recoveries)			(47	)			4,843				(108	)			4,375
Total operating expenses			96,621				98,012				185,811				153,227
Income from operations			26,573				9,764				47,542				20,771
Other income (expense)			(3,683	)			329				(5,510	)			702
Interest income (expense), net			(7,567	)			(7,512	)			(15,439	)			(7,120	)
Income before income taxes			15,323				2,581				26,593				14,353
Provision for income taxes			4,511				173				7,854				4,507
Net income before minority interest			10,812				2,408				18,739				9,846
Minority interest			127				131				254				268
Net income for the period		$	10,685			$	2,277			$	18,485			$	9,578
Net income per share—basic		$	0.21			$	0.05			$	0.37			$	0.20
Net income per share—diluted		$	0.20			$	0.04			$	0.35			$	0.19
Weighted average number of Common Shares outstanding—basic			50,736				49,152				50,511				49,063
Weighted average number of Common Shares outstanding—diluted			52,689				50,739				52,224				50,497

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OPEN TEXT CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. Dollars)

		Three months ended December 31,								Six months ended December 31,
		2007				2006				2007				2006
Cash flows from operating activities:
Net income for the period		$	10,685			$	2,277			$	18,485			$	9,578
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			21,574				21,672				42,125				31,892
In-process research and development			—				—				500				—
Share-based compensation expense			655				1,333				1,718				2,600
Employee long-term incentive plan			572				—				757				—
Excess tax benefits from share-based compensation			(369	)			(536	)			(766	)			(741	)
Undistributed earnings related to minority interest			127				131				254				268
Amortization of debt issuance costs			421				257				711				257
Unrealized loss on financial instruments			1,444				212				2,851				212
Deferred taxes			(3,408	)			(10,638	)			(4,113	)			(8,924	)
Changes in operating assets and liabilities:
Accounts receivable			(2,923	)			25,191				7,579				23,497
Prepaid expenses and other current assets			302				277				(197	)			894
Income taxes			8,070				(2,859	)			8,554				(3,813	)
Accounts payable and accrued liabilities			6,967				610				1,472				(4,913	)
Deferred revenues			(5,110	)			(10,475	)			(8,883	)			(13,437	)
Other assets			336				3,976				510				3,695
Net cash provided by operating activities			39,343				31,428				71,557				41,065
Cash flows from investing activities:
Acquisitions of capital assets			(2,170	)			(1,106	)			(3,386	)			(3,891	)
Additional purchase consideration for prior period acquisitions			(263	)			(1,390	)			(439	)			(1,723	)
Purchase of Hummingbird, net of cash acquired			—				(384,761	)			—				(384,761	)
Purchase of an asset group constituting a business			—				—				(2,209	)			—
Investments in marketable securities			—				—				—				(829	)
Acquisition related costs			(3,813	)			(17,752	)			(11,842	)			(20,200	)
Net cash used in investing activities			(6,246	)			(405,009	)			(17,876	)			(411,404	)
Cash flows from financing activities:
Excess tax benefits from share-based compensation			369				536				766				741
Proceeds from issuance of Common Shares			3,498				1,986				9,217				2,464
Repayment of long-term debt			(30,944	)			(1,074	)			(61,877	)			(1,173	)
Proceeds from long-term debt			—				390,000				—				390,000
Debt issuance costs			—				(7,412	)			(349	)			(7,433	)
Net cash provided by (used in) financing activities			(27,077	)			384,036				(52,243	)			384,599
Foreign exchange gain on cash held in foreign currencies			3,383				2,722				8,292				2,787
Increase in cash and cash equivalents during the period			9,403				13,177				9,730				17,047
Cash and cash equivalents at beginning of period			150,306				111,224				149,979				107,354
Cash and cash equivalents at end of period		$	159,709			$	124,401			$	159,709			$	124,401

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