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OpenText Reports First Quarter Fiscal Year 2023 Financial Results

B2B Integration is the Backbone of a Digital-First, Resilient Supply Chain
OpenText logo (PRNewsfoto/Open Text Corporation) (PRNewsfoto/Open Text Corporation)

Record Q1 Revenues Powered by Cloud Revenue Growth and Continued Strong Cloud Bookings

Fiscal 2023 First Quarter Highlights

Total Revenues

(in millions)


Annual Recurring Revenues

(in millions)


Cloud Revenues

(in millions)


Reported

Constant
Currency


Reported

Constant
Currency


Reported

Constant
Currency









$852

$892


$722

$754


$405

$417









+2.4 %

+7.1 %


+4.4 %

+8.9 %


+13.5 %

+16.9 %


Annual Recurring Revenues represent 85% of Total Revenues

  • Total revenues of $852 million, up 2.4% Y/Y or up 7.1% in constant currency

  • Annual recurring revenues of $722 million, up 4.4% Y/Y or up 8.9% in constant currency, a record 85% of total revenues

  • Cloud revenues of $405 million, up 13.5% Y/Y or up 16.9% in constant currency

  • Strong quarterly enterprise cloud bookings(1) of $112 million, up 37% Y/Y

  • Operating cash flows were $132 million and free cash flows(3) were $96 million

  • TTM operating cash flows(2) were $924 million and TTM free cash flows(2)(3) were $821 million

  • GAAP-based net income (loss) of ($117) million including $181 million of pretax unrealized losses on mark-to-market valuations related to derivative transactions in connection with the Micro Focus acquisition

  • Adjusted EBITDA(3) of $304 million, margin of 35.7% and TTM Adjusted EBITDA(2)(3) of $1,246 million, margin of 35.5%

  • GAAP-based diluted earnings (loss) per share (EPS) of ($0.43), Non-GAAP diluted EPS(3) of $0.77

WATERLOO, ON, Nov. 3, 2022 /CNW/ -- Open Text Corporation (NASDAQ: OTEX), (TSX: OTEX), today announced its financial results for the fourth quarter ended September 30, 2022.

"OpenText demonstrated outstanding execution and delivered record Q1 revenues and enterprise cloud bookings, up 37% Y/Y, amidst a dynamic macro environment," said Mark J. Barrenechea, OpenText CEO & CTO. "Total revenues of $852 million grew 2.4% year-over-year or 7.1% in constant currency. Cloud revenues of $405 million grew 13.5% year-over-year or 16.9% in constant currency, driven by increased cloud consumption. Annual recurring revenues of $722 million grew 4.4% year-over-year or 8.9% in constant currency, representing 85% of total revenues and achieving seven consecutive quarters of cloud and ARR organic growth in constant currency."

"OpenText empowers organizations to drive cloud-based digital transformations, helping customers excel in a world of rapid change," added Mr. Barrenechea. "On August 25, 2022, we announced our intention to acquire Micro Focus International plc, and on October 18, Micro Focus shareholders approved the offer - an important milestone in our path towards completing the acquisition. With the planned acquisition of Micro Focus, OpenText will be one of the world's largest software and cloud businesses with a $170 billion market opportunity. We remain on track to close the Micro Focus acquisition in the first calendar quarter of 2023."

"We are pleased with our first fiscal quarter performance where we continued to lead with operational excellence in a dynamic environment," said Madhu Ranganathan, OpenText EVP, CFO. "With approximately $1.7 billion in cash as of September 30, 2022, our balance sheet and liquidity position remain solid. OpenText's strong momentum reflects continued execution of OpenText strategic priorities and positions us well for the upcoming integration of Micro Focus."

(1) Enterprise cloud bookings is defined as the total value from cloud services and subscription contracts, entered into in the period that are new, committed and incremental to our existing contracts, excluding the impact of Carbonite and Zix.

(2) TTM is calculated as the full year FY'22 amount, less Q1FY'22, plus Q1FY'23 included within our current and historical filings on Forms 10-Q and 10-K.

(3) Please see Note 2 "Use of Non-GAAP Financial Measures" to the consolidated financial statements below.


Financial Highlights for Q1 Fiscal 2023 with Year Over Year Comparisons

Summary of Quarterly Results









(In millions, except per share data)

Q1 FY'23

Q1 FY'22

$ Change

% Change


Q1 FY'23
in CC*

% Change
in CC*


Revenues:









Cloud services and subscriptions

$404.7

$356.6

$48.1

13.5 %


$416.8

16.9 %


Customer support

317.4

335.2

($17.9)

(5.3) %


336.9

0.5 %


Total annual recurring revenues**

$722.0

$691.8

$30.2

4.4 %


$753.6

8.9 %


License

62.5

73.5

($11.0)

(14.9) %


66.4

(9.7) %


Professional service and other

67.5

67.0

$0.5

0.8 %


71.8

7.2 %


Total revenues

$852.0

$832.3

$19.7

2.4 %


$891.8

7.1 %


GAAP-based operating income

$146.4

$182.7

($36.3)

(19.9) %


N/A

N/A


Non-GAAP-based operating income (1)

$280.9

$302.0

($21.1)

(7.0) %


$296.4

(1.9) %


GAAP-based net income (loss) attributable to OpenText

($116.9)

$131.9

($248.8)

(188.6) %


N/A

N/A


GAAP-based EPS, diluted

($0.43)

$0.48

($0.91)

(189.6) %


N/A

N/A


Non-GAAP-based EPS, diluted (1)(2)

$0.77

$0.83

($0.06)

(7.2) %


$0.83

— %


Adjusted EBITDA (1)

$304.0

$323.4

($19.3)

(6.0) %


$319.7

(1.1) %


Operating cash flows

$132.0

$189.7

($57.7)

(30.4) %


N/A

N/A


Free cash flows (1)

$95.6

$163.0

($67.3)

(41.3) %


N/A

N/A



(1) Please see Note 2 "Use of Non-GAAP Financial Measures" to the consolidated financial statements below.


(2) Please also see Note 14 to the Company's Fiscal 2018 Consolidated Financial Statements on Form 10-K. Reflective of the amount of net tax benefit arising from the internal reorganization assumed to be allocable to the current period based on the forecasted utilization period.


Note: Individual line items in tables may be adjusted by non-material amounts to enable totals to align to published financial statements.


*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.


**Annual recurring revenue is defined as the sum of Cloud services and subscriptions revenue and Customer support revenue.

Dividend

As part of our quarterly, non-cumulative cash dividend program, the Board declared on November 2, 2022, a cash dividend of $0.24299 per common share. The record date for this dividend is December 2, 2022 and the payment date is December 22, 2022. OpenText believes strongly in returning value to its shareholders and intends to maintain its dividend program. Any future declarations of dividends and the establishment of future record and payment dates are all subject to the final determination and discretion of the Board of Directors.

Quarterly Business Highlights

  • OpenText announced its intention to acquire Micro Focus International plc and fund the all-cash offer with existing cash, new debt and a draw on our existing revolving credit facility

  • Micro Focus shareholders approved all cash offer by OpenText

  • Key customer wins in the quarter include: Al Ahli Bank of Kuwait, Alcatel Lucent, Auto Club Group of Michigan, The City of Calgary, Close Brothers Group, DataExpert, Engie, Fifth Third Bank, Industry Data Exchange Association, KMD Nexus, Penn Mutual, People's Education Press, Sutter Health, Serious Fraud Office, University of Winchester and Water Board Hoogheemraadschap

  • OpenText kicked off OpenText World introducing Cloud Editions 22.4 and Project Titanium

  • OpenText unveiled new integrations and innovations with Google Cloud at OpenText World 2022

  • OpenText announced 2030 Pledge Zero-in with ambitious ESG targets and programs

Summary of Quarterly Results









Q1 FY'23

Q4 FY'22

Q1 FY'22

% Change
(Q1 FY'23 vs
Q4 FY'22)


% Change
(Q1 FY'23 vs
Q1 FY'22)


Revenue (millions)

$852.0

$902.5

$832.3

(5.6) %


2.4 %


GAAP-based gross margin

69.7 %

70.2 %

69.0 %

(50)

bps

70

bps

Non-GAAP-based gross margin (1)

75.2 %

75.9 %

75.7 %

(70)

bps

(50)

bps

GAAP-based EPS, diluted

($0.43)

$0.38

$0.48

(213.2) %


(189.6) %


Non-GAAP-based EPS, diluted (1)(2)

$0.77

$0.80

$0.83

(3.8) %


(7.2) %



(1) Please see Note 2 "Use of Non-GAAP Financial Measures" to the consolidated financial statements below.


(2) Please also see Note 14 to the Company's Fiscal 2018 Consolidated Financial Statements on Form 10-K. Reflective of the amount of net tax benefit arising from the internal reorganization assumed to be allocable to the current period based on the forecasted utilization period.

Conference Call Information

OpenText posted an investor presentation on its Investor Relations website at http://investors.opentext.com and invites the public 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 10 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/investor-events-and-presentations.

A replay of the call will be available beginning November 3, 2022 at 7:00 p.m. ET through 11:59 p.m. on November 17, 2022 and can be accessed by dialing 1-855-669-9658 (toll-free) or +1-604-674-8052 (international) and using passcode 9454 followed by the number sign.

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

About OpenText

OpenText, The Information Company™, enables organizations to gain insight through market leading information management solutions, powered by OpenText Cloud Editions. For more information about OpenText (NASDAQ: OTEX, TSX: OTEX) visit 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 our fiscal year ending June 30, 2023 (Fiscal 2023) on growth, future cloud growth and market share gains, future organic growth initiatives and deployment of capital, intention to maintain a dividend program, the proposed acquisition of Micro Focus International plc (the Acquisition) and associated benefits, future tax rates, new platform and product offerings and associated benefits to customers, scaling OpenText, and other matters, which 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 and uncertainties such as those relating to: inability to obtain required regulatory approvals for the Acquisition, the timing of obtaining such approvals and the risk that such approvals may result in the imposition of conditions that could adversely affect; the expected benefits of the Acquisition; the risk that a condition to closing of the Acquisition may not be satisfied on a timely basis or at all; uncertainties as to access to available financing (including refinancing of debt) on a timely basis and on reasonable terms; all statements regarding the expected future financial position, results of operations, cash flows, dividends, financing plans, business strategy, budgets, capital expenditures, competitive positions, growth opportunities, plans and objectives of management following the Acquisition, including any anticipated synergy benefits; our ability to integrate successfully Micro Focus' operations and programs, including incurring unanticipated costs, delays or difficulties; duration and severity of the COVID-19 pandemic, including any new strains or resurgence; and our ability to develop, protect and maintain our intellectual property and proprietary technology and to operate without infringing on the proprietary rights of others. For additional information with respect to risks and other factors which could occur, see the Company's Annual Report on Form 10-K, Quarterly Report 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.

OTEX-F

For more information, please contact:
Harry E. Blount
Senior Vice President, Global Head of Investor Relations
Open Text Corporation
415-963-0825
investors@opentext.com

Copyright ©2022 Open Text. OpenText is a trademark or registered trademark of Open Text. 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. All rights reserved. For more information, visit: http://www.opentext.com/who-we-are/copyright-information.


OPEN TEXT CORPORATION

CONSOLIDATED BALANCE SHEETS

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



September 30, 2022


June 30, 2022

ASSETS

(unaudited)



Cash and cash equivalents

$ 1,704,385


$ 1,693,741

Accounts receivable trade, net of allowance for credit losses of $15,410 as of September 30, 2022 and $16,473 as of June 30, 2022

378,143


426,652

Contract assets

27,802


26,167

Income taxes recoverable

8,856


18,255

Prepaid expenses and other current assets

124,868


120,552

Total current assets

2,244,054


2,285,367

Property and equipment

251,151


244,709

Operating lease right of use assets

201,374


198,132

Long-term contract assets

18,544


19,719

Goodwill

5,226,814


5,244,653

Acquired intangible assets

974,589


1,075,208

Deferred tax assets

814,471


810,154

Other assets

299,608


256,987

Long-term income taxes recoverable

46,483


44,044

Total assets

$ 10,077,088


$ 10,178,973

LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable and accrued liabilities

$ 601,074


$ 448,607

Current portion of long-term debt

10,000


10,000

Operating lease liabilities

58,969


56,380

Deferred revenues

848,789


902,202

Income taxes payable

58,692


51,069

Total current liabilities

1,577,524


1,468,258

Long-term liabilities:




Accrued liabilities

20,119


18,208

Pension liability

53,202


60,951

Long-term debt

4,208,547


4,209,567

Long-term operating lease liabilities

197,328


198,695

Long-term deferred revenues

85,514


91,144

Long-term income taxes payable

42,087


34,003

Deferred tax liabilities

42,626


65,887

Total long-term liabilities

4,649,423


4,678,455

Shareholders' equity:




Share capital and additional paid-in capital




269,880,769 and 269,522,639 Common Shares issued and outstanding at September 30, 2022 and June 30, 2022, respectively; authorized Common Shares: unlimited

2,067,881


2,038,674

Accumulated other comprehensive income (loss)

(42,576)


(7,659)

Retained earnings

1,978,442


2,160,069

Treasury stock, at cost (3,586,014 and 3,706,420 shares at September 30, 2022 and June 30, 2022, respectively)

(154,792)


(159,966)

Total OpenText shareholders' equity

3,848,955


4,031,118

Non-controlling interests

1,186


1,142

Total shareholders' equity

3,850,141


4,032,260

Total liabilities and shareholders' equity

$ 10,077,088


$ 10,178,973




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,


2022


2021

Revenues:




Cloud services and subscriptions

$ 404,651


$ 356,589

Customer support

317,351