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OpenText Reports Third Quarter Fiscal Year 2016 Financial Results

- Record operating cash flow of $190 million; up 33% Y/Y - Total revenue of $441 million, down 2%; up 2% Y/Y in CC* - Non-GAAP-based EPS of $0.80, up 21%; up 23% Y/Y in CC - Release 16 launched; the world's first integrated digital information platform - Increases quarterly cash dividend by 15%WATERLOO, Ontario, April 27, 2016 /PRNewswire/ -- Open Text Corporation OTEX, -0.50% (OTC) announced today its financial results for the third quarter ended March 31, 2016. "OpenText's strategic and financial progress is evident in our results as we delivered record operating cash flow of $190 million, up 33% year over year. Total revenue for the quarter was $455 million in constant currency, up 2%, and we delivered these results on 13% less operating expense," said OpenText CEO and CTO Mark J. Barrenechea. "With the confidence in our strategy, financial model and future cash flows, we are raising our quarterly dividend by 15%, to $0.23 per share." Barrenechea further added, "Release 16 is now available to customers and the early feedback is extremely positive. We also announced entering into definitive agreements for two acquisitions, each expected to close in the fourth quarter of Fiscal 2016. First, we will be acquiring certain Customer Experience Management software and services assets from HP Inc. and second, we will be acquiring ANXeBusiness Corp. (ANX), a leading provider of cloud-based information exchange services to the Automotive and Healthcare industries. We expect these two acquisitions to deliver approximately $115 to $125 million of aggregate new revenues in Fiscal 2017." Barrenechea concluded, "With an intelligent approach to M&A and Release 16 availability, OpenText is in a leading position to enable the digital transformation of our customers and deliver stellar financial performance."

Financial Highlights for Q3 FY16 with Year Over Year Comparisons (1)

Summary of Quarterly Results









Q3 FY16

Q3 FY15

$ Change

% Change(Y/Y)


Q3 FY16 in CC*

% Change in CC*

Revenues: (in millions)








Cloud services and subscriptions

$147.5


$147.5


$—


—%



$151.2


2.5%


Customer support

183.6


184.2


(0.6)


(0.3)%



189.2


2.7%


Professional service and other

45.0


52.3


(7.3)


(13.9)%



47.3


(9.6%)


Total Recurring revenues

$376.1


$384.0


($7.9)


(2.0)%



$387.7


1.0%


License

64.4


63.6


0.8


1.3%



67.4


6.0%


Total revenues

$440.5


$447.6


($7.1)


(1.6)%



$455.1


1.7%


Non-GAAP-based operating margin (2)

31.4%


25.7%


n/a


570 bps



30.5%



GAAP-based operating margin

20.1%


11.8%


n/a


830 bps





Non-GAAP-based EPS, diluted (2)

$0.80


$0.66


$0.14


21.2%



$0.81


22.7%


GAAP-based EPS, diluted

$0.57


$0.22


$0.35


159.1%





Operating cash flows (in millions)

$189.9


$143.1


$46.8


32.7%





"Our strong liquidity position gives us flexibility to grow the business and support OpenText's acquisition strategy. We boosted our cash balance and short-term investments by 25% to approximately $900 million since the beginning of the fiscal year. Solid business execution, with a focus on adjusted operating margins and cash flow continues to be our priority," said OpenText CFO John Doolittle.

*CC: Constant currency for this purpose is defined as the current period reported revenues/expenses/earnings represented at the prior comparative period's foreign exchange rate.

OpenText Quarterly Business Highlights

  • OpenText launches Release 16, delivering the most comprehensive digital platform for enterprise digital transformation
  • OpenText signs definitive agreement to acquire certain customer experience software assets of HP Inc.
  • OpenText signs definitive agreement to acquire ANX
  • 18 customer transactions over $1 million, 8 cloud contract signings in the OpenText Cloud and 10 on-premises
  • Financial, services and consumer goods industries saw the most demand in cloud
  • Financial, public and technology industries saw the most demand in license
  • Cloud customer successes in the quarter include Standard Insurance Company, Cooperation Manufacturing Plant Aguascalientes, MDR a Dun & Bradstreet Company, SAP, Stokke, 7PSolutions, SharkNinja Operating LLC, DC Comics and BRF
  • On-premises customer successes in the quarter include Public Broadcasting Service (PBS), Bosch, Diebold, Cancer Treatment Centers of America, Public Works and Government Services Canada, Government of the Northwest Territories, National Bank of Canada, Carl Zeiss Meditec AG, Mainova, SMC Corporation of America, Cameron LNG, Cooper Tire and Rubber Company, Linde AG, Applied Informatics and Research Inc, Department of International Affairs, Arvato Bertelsmann, Bank of Montreal, Nielsen, DnB Finans, Tillväxtverket and Sampension
  • OpenText announces SAP® Hybris® Digital Documents by OpenText, offering a unified platform for engaging digital content and communications
  • OpenText Innovation Tour 2016 events in over 10 countries and 5,000 customers

Dividend Program Highlights

Cash Dividend

As part of our quarterly, non cumulative cash dividend program the Board declared on April 26, 2016 a cash dividend of $0.23 per Common Share. The record date for this dividend is May 27, 2016 and the payment date is June 17, 2016. Future declarations of dividends and the establishment of future record and payment dates are subject to the final determination and discretion of our Board of Directors.

Summary of Quarterly Results









Q3 FY16


Q2 FY16


Q3 FY15


% Change

(Q3 FY16 vsQ2 FY16)


% Change

(Q3 FY16 vsQ3 FY15)


Revenue (million)

$440.5


$465.3


$447.6


(5.3)%


(1.6)%


GAAP-based gross margin

67.9%


70.0%


66.0%


(210) bps


190 bps


GAAP-based operating margin

20.1%


23.6%


11.8%


(350) bps


830 bps


GAAP-based EPS, diluted

$0.57


$0.72


$0.22


(20.8)%


159.1%


Non-GAAP-based gross margin (2)

72.0%


74.2%


71.1%


(220) bps


90 bps


Non-GAAP-based operating margin (2)

31.4%


37.0%


25.7%


(560) bps


570 bps


Non-GAAP-based EPS, diluted (2)

$0.80


$1.01


$0.66


(20.8)%


21.2%


Summary of Year to Date Results







Q3 FY16 YTD

Q3 FY15 YTD

$ Change

% Change


Revenues: (in millions)






Cloud services and subscriptions

$444.4


$456.3


($11.9)


(2.6)%



Customer support

553.4


547.6


5.8


1.1%



Professional service and other

145.0


168.2


(23.2)


(13.8)%



Total Recurring revenues

$1,142.8


$1,172.1


($29.3)


(2.5)%



License

197.6


197.1


0.5


0.2%



Total revenues

$1,340.4


$1,369.2


($28.8)


(2.1)%



Non-GAAP-based operating margin (2)

34.2%


31.0%


n/a


320 bps



GAAP-based operating margin

20.5%


19.4%


n/a


110 bps



Non-GAAP-based EPS, diluted (2)

$2.65


$2.59


$0.06


2.3%



GAAP-based EPS, diluted

$1.62


$1.35


$0.27


20.0%



Operating cash flows (in millions)

$406.6


$391.2


$15.4


3.9%



OpenText Investor Day

Institutional investors and financial analysts are invited to join us for our Investor Day on Thursday, May 12, 2016 at the Lotte New York Palace in New York. To register, please contact Sonya Mehan, Senior Manager, Investor Relations at smehan@opentext.com.

Conference Call Information

The public is invited to listen to the earnings conference call today at 5:00 p.m. ET (2:00 p.m. PT) by dialing 1-800-319-4610 (toll-free) or +1-604-638-5340 (international). Please dial-in 15 minutes ahead of time to ensure proper connection. Alternatively, a live webcast of the earnings conference call will be available on the Investor Relations section of the Company's website at http://investors.opentext.com/events.cfm.

A replay of the call will be available beginning April 27, 2016 at 7:00 p.m. ET through 11:59 p.m.May 11, 2016 and can be accessed by dialing 1-855-669-9658 (toll-free) or +1-604-674-8052 (international) and using passcode 00366 followed by the number sign.

Please see below note (2) for a reconciliation of non-U.S. GAAP-based financial measures used in this press release, to U.S. GAAP-based financial measures.

About OpenText

OpenText is the largest independent software provider of Enterprise Information Management (EIM). For more information please visit www.opentext.com.

Cautionary Statement Regarding Forward-Looking Statements

Certain statements in this press release, including statements about the focus of Open Text Corporation ("OpenText" or "the Company") in Fiscal 2016 on growth in earnings and cash flows, creating value through investments in broader Enterprise Information Management (EIM) capabilities, distribution, the Company's presence in the cloud and in growth markets, its financial condition, results of operations and earnings, announced acquisitions, ongoing tax matters, purchases of common shares by OpenText pursuant to the NCIB, declaration of quarterly dividends, and other matters, may contain words such as "anticipates", "expects", "intends", "plans", "believes", "seeks", "estimates", "may", "could", "would", "might", "will" and variations of these words or similar expressions are considered forward-looking statements or information under applicable securities laws. In addition, any information or statements that refer to expectations, beliefs, plans, projections, objectives, performance or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking, and based on our current expectations, forecasts and projections about the operating environment, economies and markets in which we operate. Forward-looking statements reflect our current estimates, beliefs and assumptions, which are based on management's perception of historic trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances, such as certain assumptions about the economy, as well as market, financial and operational assumptions. Management's estimates, beliefs and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events and, as such, are subject to change. We can give no assurance that such estimates, beliefs and assumptions will prove to be correct. Such forward-looking statements involve known and unknown risks, uncertainties and other factors and assumptions that may cause the actual results, performance or achievements to differ materially. Such factors include, but are not limited to: (i) the future performance, financial and otherwise, of OpenText; (ii) the ability of OpenText to bring new products and services 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 EIM market; (vi) the Company's competitive position in the EIM market and its ability to take advantage of future opportunities in this market; (vii) the benefits of the Company's products and services to be realized by customers; (viii) the demand for the Company's products and services and the extent of deployment of the Company's products and services in the EIM marketplace; (ix) the Company's financial condition and capital requirements; and (x) statements about the impact of "Open Text Release 16". 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 and services 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 final determination of litigation, tax audits and other legal proceedings; (viii) the possibility of technical, logistical or planning issues in connection with the deployment of the Company's products or services; (ix) the continuous commitment of the Company's customers; and (x) 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 Securities and Exchange Commission (SEC) and other securities regulators. Readers are cautioned not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. Unless otherwise required by applicable securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

For more information, please contact:

United States:

Greg SecordVice President, Investor Relations Open Text Corporation San Francisco: 415-963-0825 gsecord@opentext.com

Canada:

Sonya MehanSenior Manager, Investor Relations Open Text Corporation Waterloo: 519-888-7111 ext. 2446 smehan@opentext.com

Copyright ©2016 Open Text Corporation. OpenText is a trademark or registered trademark of Open Text SA and/or Open Text ULC. The list of trademarks is not exhaustive of other trademarks, registered trademarks, product names, company names, brands and service names mentioned herein are property of Open Text SA or other respective owners. All rights reserved. For more information, visit: http://www.opentext.com/2/global/site-copyright.html_SKU.

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

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

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March 31, 2016


June 30, 2015


(unaudited)



ASSETS




Cash and cash equivalents

$

877,405



$

699,999


Short-term investments

13,008



11,166


Accounts receivable trade, net of allowance for doubtful accounts of $7,932 as of March 31, 2016 and $5,987 as of June 30, 2015

266,450



284,131


Income taxes recoverable

15,577



21,151


Prepaid expenses and other current assets

56,030



53,191


Deferred tax assets

27,952



30,711


Total current assets

1,256,422



1,100,349


Property and equipment

172,020



160,419


Goodwill

2,169,637



2,161,592


Acquired intangible assets

558,571



679,479


Deferred tax assets

156,148



155,411


Other assets

75,286



85,576


Deferred charges

26,575



37,265


Long-term income taxes recoverable

8,706



8,404


Total assets

$

4,423,365



$

4,388,495


LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable and accrued liabilities

$

212,886



$

241,370


Current portion of long-term debt

8,000



8,000


Deferred revenues

368,020



358,066


Income taxes payable

20,906



17,001


Deferred tax liabilities

734



997


Total current liabilities

610,546



625,434


Long-term liabilities:




Accrued liabilities

31,357



34,682


Deferred credits

9,503



12,943


Pension liability

58,292



56,737


Long-term debt

1,574,000



1,580,000


Deferred revenues

33,868



28,223


Long-term income taxes payable

142,616



151,484


Deferred tax liabilities

52,701



69,185


Total long-term liabilities

1,902,337



1,933,254


Shareholders' equity:




Share capital




121,220,097 and 122,293,986 Common Shares issued and outstanding at March 31, 2016 and June 30, 2015, respectively; Authorized Common Shares: unlimited

809,708



808,010


Additional paid-in capital

140,406



126,417


Accumulated other comprehensive income

51,248



51,828


Retained earnings

933,791



863,015


Treasury stock, at cost (633,647 shares at March 31, 2016 and 625,725 at June 30, 2015, respectively)

(25,268)



(19,986)


Total OpenText shareholders' equity

1,909,885



1,829,284


Non-controlling interests

597



523


Total shareholders' equity

1,910,482



1,829,807


Total liabilities and shareholders' equity

$

4,423,365



$

4,388,495


OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

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

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(unaudited)



Three Months Ended March 31,


Nine Months Ended March 31,


2016


2015


2016


2015

Revenues:








License

$

64,397



$

63,561



$

197,584



$

197,137


Cloud services and subscriptions

147,505



147,513



444,394



456,342


Customer support

183,636



184,204



553,440



547,576


Professional service and other

45,005



52,299



145,007



168,154


Total revenues

440,543



447,577



1,340,425



1,369,209


Cost of revenues:








License

2,480



2,980



7,190



...

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