EX-99.1 2 dex991.htm PRESS RELEASE

Press Release

Exhibit 99.1

Open Text Reports First Quarter Fiscal 2010 Financial Results

Waterloo, ON, October 27, 2009—Open Text(TM) Corporation (NASDAQ:OTEX) (TSX:OTC), a leading provider of Enterprise Content Management (ECM) software, today announced unaudited financial results for its first quarter ended September 30, 2009. (1)

Total revenue for the first quarter was $211.4 million, up 16% compared to $182.6 million for the same period in the prior fiscal year. License revenue in the first quarter was $47.3 million, down 6% compared to $50.1 million in the first quarter of the prior fiscal year.

Adjusted net income in the quarter was $32.8 million or $0.58 per share on a diluted basis, up 16% compared to $28.2 million or $0.53 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 $1.7 million or $0.03 per share on a diluted basis, compared to $14.7 million or $0.28 per share on a diluted basis for the same period in the prior fiscal year. (2)

The cash and cash equivalents balance as of September 30, 2009 was $212.2 million. Accounts receivable as of September 30, 2009, totaled $135.6 million, compared to $108.3 million as of September 30, 2008, and Days Sales Outstanding (DSO) was 58 days in the first quarter of fiscal 2010, compared to 53 days in the first quarter of fiscal 2009.

“We met our profit and revenue goals in what has seasonally been our toughest quarter. License revenue fell short of our expectations, mainly due to deferred purchase decisions for our Web Content Management (WCM) products,” said John Shackleton, President and Chief Executive Officer of Open Text. “We are seeing a continued demand for compliance solutions, as well as companies laying the groundwork for ECM 2.0 solutions. In the current economic environment we remain committed to meeting our annual profitability targets, while focusing on capturing market share by leveraging our strategic partnerships.”

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.

Open Text Renews Normal Course Issuer Bid

The Company also announced its intention to renew its Normal Course Issuer Bid (the “Bid”) through the facilities of the NASDAQ Global Select Market (“NASDAQ”).

Purchases over the NASDAQ could commence in November 2009 if desirable. As of October 26, 2009, Open Text had 56,380,735 issued and outstanding common shares. The Bid will expire one year from the commencement date.

The maximum number of shares that may be purchased is calculated as 5% of the outstanding Common Shares of Open Text at the beginning of the Bid.

Teleconference Call

Open Text will host a conference call on October 27, 2009 at 5:00 p.m. ET to discuss the final financial results of its first quarter.

Date:		Tuesday, October 27, 2009
Time:		5:00 p.m. ET/2:00 p.m. PT
Length:		60 minutes
Where:		800-814-4861

Please dial-in approximately 10 minutes before the teleconference is scheduled to begin. A replay of the call will be available beginning October 27, 2009 at 7:00 p.m. ET through 11:59 p.m. on November 10, 2009 and can be accessed by dialing 416-640-1917 and using pass code 4169327 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/events/wa-event.html?id=7735475.

Supplemental materials regarding new accounting rules—Topic 805:  Business Combinations—which will be discussed on the call are available for download on the Investor Relations section of the Open Text web site at: http://mimage.opentext.com/alt_content/binary/ot/investor/2010/fy2010q1.pdf.

About Open Text

Open Text(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. 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, and results of operations and earnings 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 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, 2009. 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 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. 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, 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 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 (unaudited) of US GAAP based financial measures to non-US GAAP based financial measures referred to in this press release:

Reconciliation (unaudited) of US GAAP based Net Income to Adjusted Net Income (in millions of US dollars) for the quarters ended September 30, 2009 and 2008:

		Three months ended September 30, 2009				Three months ended September 30, 2008
GAAP based “Net Income”		$	1.7			$	14.7
Special Charges/(recovery)			18.6				—
Amortization of intangibles			23.1				19.0
Other (Income)/Expense			(3.4	)			(0.7	)
Share-based compensation			1.5				1.4
Tax Impact on Above			(8.7	)			(6.2	)
Non-GAAP based “Adjusted Net Income”		$	32.8			$	28.2

Reconciliation (unaudited) of US GAAP based EPS to non-US GAAP based EPS (calculated on a diluted basis) for the quarters ended September 30, 2009 and 2008:

		Three months ended September 30, 2009				Three months ended September 30, 2008
GAAP based “Net Income”		$	0.03			$	0.28
Special Charges/(recovery)			0.33				—
Amortization of intangibles			0.41				0.36
Other (Income)/Expense			(0.06	)			(0.01	)
Share-based compensation			0.03				0.03
Tax Impact on Above			(0.16	)			(0.13	)
Non-GAAP based “Adjusted Net Income”		$	0.58			$	0.53

(3) The following table provides a composition of our major currencies for revenue and expenses, expressed as a percentage, for the first quarter of Fiscal 2010:

Currencies		% of Revenue			% of Expenses*
EURO		25	%		23	%
GBP		12	%		9	%
CHF		6	%		4	%
CAD		6	%		23	%
USD		44	%		34	%
Others		7	%		7	%
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, depreciation, share-based compensation and special charges.

For more information, please contact:

Paul McFeeters

Chief Financial Officer

Open Text Corporation

905-762-6121

pmcfeeters@opentext.com

Greg Secord

Vice President, Investor Relations

Open Text Corporation

519-888-7111 ext.2408

gsecord@opentext.com

OPEN TEXT CORPORATION

CONSOLIDATED BALANCE SHEETS

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

		September 30, 2009			June 30, 2009
		(Unaudited)			(Audited)
ASSETS
Current assets:
Cash and cash equivalents		$	212,190		$	275,819
Short-term investments			19,768			—
Accounts receivable trade, net of allowance for doubtful accounts of $4,464 as of September 30, 2009 and $4,208 as of June 30, 2009			135,575			115,802
Income taxes recoverable			6,225			4,496
Prepaid expenses and other current assets			27,858			18,172
Deferred tax assets			22,185			20,621
Total current assets			423,801			434,910
Investments in marketable securities						13,103
Capital assets			57,435			45,165
Goodwill			718,600			576,111
Acquired intangible assets			384,242			315,048
Deferred tax assets			75,211			69,877
Other assets			18,871			13,064
Long-term Income taxes recoverable			42,391			39,958
Total assets		$	1,720,551		$	1,507,236
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	128,660		$	115,018
Current portion of long-term debt			3,489			3,449
Deferred revenues			205,998			189,397
Income taxes payable			7,707			10,356
Deferred tax liabilities			2,083			508
Total current liabilities			347,937			318,728
Long-term liabilities:
Accrued liabilities			21,506			23,073
Pension liability			16,510			15,803
Long-term debt			299,182			299,234
Deferred revenues			10,969			7,914
Long-term income taxes payable			53,465			47,131
Deferred tax liabilities			134,543			108,889
Total long-term liabilities			536,175			502,044
Shareholders’ equity:
Share capital:
56,373,651 and 52,716,751 Common Shares issued and outstanding at September 30, 2009 and June 30, 2009, respectively; Authorized Common Shares: unlimited			588,871			457,982
Additional paid-in capital			55,307			52,152
Accumulated other comprehensive income			86,052			71,851
Retained earnings			106,209			104,479
Total shareholders’ equity			836,439			686,464
Total liabilities and shareholders’ equity		$	1,720,551		$	1,507,236

OPEN TEXT CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

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

(Unaudited)

		Three months ended September 30,
		2009				2008
Revenues:
License		$	47,329			$	50,074
Customer support			123,649				98,429
Service and other			40,444				34,120
Total revenues			211,422				182,623
Cost of revenues:
License			3,145				2,893
Customer support			20,939				15,567
Service and other			33,294				27,729
Amortization of acquired technology-based intangible assets			14,142				10,747
Total cost of revenues			71,520				56,936
Gross profit			139,902				125,687
Operating expenses:
Research and development			31,542				28,578
Sales and marketing			50,690				44,832
General and administrative			21,225				18,387
Depreciation			4,147				2,698
Amortization of acquired customer-based intangible assets			8,917				8,215
Special charges			18,589				—
Total operating expenses			135,110				102,710
Income from operations			4,792				22,977
Other income, net			3,440				729
Interest expense, net			(3,046	)			(2,994	)
Income before income taxes			5,186				20,712
Provision for income taxes			3,456				5,932
Net income before minority interest			1,730				14,780
Minority interest			—				119
Net income for the period		$	1,730			$	14,661
Net income per share—basic		$	0.03			$	0.29
Net income per share—diluted		$	0.03			$	0.28
Weighted average number of Common Shares outstanding—basic			55,388				51,298
Weighted average number of Common Shares outstanding—diluted			56,469				52,990

OPEN TEXT CORPORATION

CONSOLIDATED STATEMENTS OF CASHFLOWS

(In thousands of U.S. dollars)

(Unaudited)

		Three months ended September 30,
		2009				2008
Cash flows from operating activities:
Net income for the period		$	1,730			$	14,661
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			27,206				21,660
Share-based compensation expense			3,506				1,423
Employee long-term incentive plan			2,675				1,059
Excess tax benefits on share-based compensation expense			(691	)			(6,629	)
Undistributed earnings related to minority interest			—				119
Pension expense			192				—
Amortization of debt issuance costs			266				224
Unrealized (gain) loss on financial instruments			(2,390	)			(722	)
Release of unrealized gain on marketable securities to income			(4,353	)			—
Deferred taxes			(2,957	)			(256	)
Changes in operating assets and liabilities:
Accounts receivable			7,928				27,946
Prepaid expenses and other current assets			(3,218	)			(1,926	)
Income taxes			(4,787	)			4,731
Accounts payable and accrued liabilities			(9,343	)			(18,369	)
Deferred revenue			(12,437	)			(19,430	)
Other assets			1,175				322
Net cash provided by operating activities			4,502				24,813
Cash flows from investing activities:
Additions of capital assets, net			(7,665	)			(3,887	)
Purchase of Vignette Corporation, net of cash acquired			(90,600	)			—
Purchase of eMotion LLC, net of cash acquired			—				(3,635	)
Purchase of a division of Spicer Corporation			—				(10,836	)
Purchase consideration for prior period acquisitions			(4,801	)			(3,293	)
Investments in marketable securities			—				(3,608	)
Maturity of short-term investments			27,171				—
Net cash used in investing activities			(75,895	)			(25,259	)
Cash flows from financing activities:
Excess tax benefits on share-based compensation expense			691				6,629
Proceeds from issuance of Common shares			4,477				5,542
Repayment of long-term debt			(864	)			(867	)
Debt issuance costs			(1,024	)			—
Net cash provided by financing activities			3,280				11,304
Foreign exchange gain (loss) on cash held in foreign currencies			4,484				(15,641	)
Decrease in cash and cash equivalents during the period			(63,629	)			(4,783	)
Cash and cash equivalents at beginning of the period			275,819				254,916
Cash and cash equivalents at end of the period		$	212,190			$	250,133

Slide 1

October 2009

October 2009

TOPIC 805

(Business Combinations)

vis-à-vis

Open Text Corporation

Slide 2

Disclaimer

Certain

statements

in

this

presentation

constitute

forward-looking

statements

or

forward-looking

information

within

the

meaning

of

applicable

securities

laws

(“forward-looking

statements”).

Such

forward-looking

statements

involve

known

and

unknown

risks,

uncertainties

and

other

factors

that

may

cause

the

actual

results,

performance

or

achievements

of

Open

Text,

or

developments

in

Open

Text’s

business

or

in

its

industry,

to

differ

materially

from

the

anticipated

results,

performance,

achievements

or

developments

expressed

or

implied

by

such

forward-looking

statements.

The

historical

increases

in

the

Company's

revenues

and

earnings

do

not

assure

the

revenues

and

earnings

will

not

decrease

in

the

future.

Forward-looking

statements

include

all

disclosure

regarding

possible

events,

conditions

or

results

of

operations

that

is

based

on

assumptions

about

future

economic

conditions

and

courses

of

action.

Forward-looking

statements

may

also

include

any

statement

relating

to

future

events,

conditions

or

circumstances.

Open

Text

cautions

you

not

to

place

undue

reliance

upon

any

such

forward-looking

statements,

which

speak

only

as

of

the

date

they

are

made.

Forward-looking

statements

relate

to,

among

other

things,

changes

in

the

ECM

market;

the

market

focus

of

Open

Text,

Open

Text’s

revenue

mix

and

margin

targets;

Open

Text’s

operations

priorities;

and

Open

Text’s

strategy

for

its

products

and

solutions.

The

risks

and

uncertainties

that

may

affect

forward-looking

statements

include,

among

others,

the

completion

and

integration

of

acquisitions,

the

possibility

of

technical,

logistical

or

planning

issues

in

connection

with

deployments,

the

continuous

commitment

of

Open

Text's

customers,

demand

for

Open

Text

's

products

and

other

risks

detailed

from

time

to

time

in

Open

Text's

filings

with

the

Securities

and

Exchange

Commission

and

Canadian

provincial

securities

regulators,

including

Open

Text's

Annual

Report

on

Form

10-K

for

the

year

ended

June

30,

2009

and

and

Quarterly

Report

on

Form

10-Q

for

the

quarter

ended

September

30,

2009.

Forward-looking

statements

are

based

on

management’s

current

plans,

estimates,

projections,

beliefs

and

opinions,

and

the

Company

does

not

undertake

any

obligation

to

update

forward-

looking

statements

should

assumptions

related

to

these

plans,

estimates,

projections,

beliefs

and

opinions

change.

Slide 3

Effective Date

Effective date:

FASB ASC Topic 805 (formerly known as FAS 141R) sets out the

new accounting rules for business combinations for annual reporting

periods beginning after December 15, 2008.

OTEX effective date:

July 1, 2009

The Vignette acquisition was accounted for per Topic 805.

Slide 4

What’s changed significantly?

(vis-à-vis Open Text)

Restructuring Costs

Transaction Costs

Taxation

Slide 5

Restructuring Costs

New rules:

Restructuring costs will not be recorded as assumed liabilities.

Restructuring initiatives commenced after acquisition date will be

included as charge to income.

OTEX impact:

OTEX includes these costs under Special Charges (were formerly

charged to Goodwill).

We recorded $9.6 million of such restructuring charges in connection

with the Vignette acquisition in Q1 FY10.

Slide 6

Transaction Costs

New rules:

Transaction costs are not considered a component of the fair value of

the business acquired and are required to be charged to income as

incurred.

OTEX impact:

OTEX includes these costs now under Special Charges (were formerly

charged to Goodwill).

We recorded $1.4 m of such costs in connection with the Vignette

acquisition in Q1 FY10.

Slide 7

Taxation: Change in valuation allowances and

income tax uncertainties

New rules:

If changes result from new information regarding facts and

circumstances that existed at date of acquisition (and these changes

are identified within the one year period):

–

Changes are recognized through Goodwill

All

other changes are offset to income tax expense. i.e.

–

Changes  not resulting from new information;

–

Changes after the one year period.

Applies to pre July 1, 2009 acquisitions as well.

OTEX impact:

Potential

volatility

in

future

overall

effective

tax

rates

-

for

GAAP

net

income.

Slide 8

Cost of Vignette Acquisition

Cost of Vignette Acquistion

321.4

less:

Equity Issued

125.2

Vignette Cash

92.3

Vignette S-T Investments

46.9

139.2

Vignette shares held by OTEX

13.3

Net Cash Spent

43.7

Reconciliation to 10Q Cash Flow

Net Cash paid per Statement of Cash Flows

90.6

less:

Vignette S-T Investments

46.9

Net Cash Spent

43.7

in USD millions

Slide 9

Thank You