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OpenText Reports Second Quarter Fiscal Year 2022 Financial Results

OpenText Reports Second Quarter Fiscal Year 2022 Financial Results

Organic Growth Powers Record Q2 Revenues, Annual Recurring Revenues (ARR) and Cloud Revenues

WATERLOO, ON, Feb. 3, 2022 /PRNewswire/ —

Second Quarter Highlights

Total Revenues

(in millions)


Annual Recurring Revenues

(in millions)


Cloud Revenues

(in millions)

Reported

Constant
Currency


Reported

Constant
Currency


Reported

Constant
Currency

$876.8

$878.8


$699.8

$700.4


$364.9

$365.0

+2.5%

+2.7%


+2.2%

+2.3%


+4.1%

+4.2%

Annual Recurring Revenues represent 80% of Total Revenues

 

  • Record Q2 results reflective of our Cloud-first strategy to drive organic growth

  • Continued investments in talent, innovation, digital marketing and global sales coverage

  • Operating cash flows were $216.6 million and free cash flows were $206.0 million

  • GAAP-based net income of $88.3 million, up 234.9% Y/Y, margin of 10.1%, up 1,780 basis points Y/Y

  • Adjusted EBITDA of $343.5 million, margin of 39.2%

  • GAAP-based diluted EPS of $0.32, up 233.3% Y/Y

  • Non-GAAP diluted EPS of $0.89, down 6.3% Y/Y

  • Strengthened Security offering with acquisition of Zix Corporation for $896.0 million and Bricata Inc.

  • Issued $1.5 billion of senior notes to refinance existing debt and provide $650 million of incremental capital

  • During the quarter, the company repurchased and cancelled 1.8 million shares for $91.0 million under our share repurchase plans

Open Text Corporation (NASDAQ: OTEX), (TSX: OTEX), today announced its financial results for the second quarter ended December 31, 2021.

"We delivered another robust quarter of organic growth driven by demand for OpenText Cloud Editions, closed the Zix acquisition and we are raising our Fiscal 2022 target model to include cloud growth of up to 10% and total revenue growth of up to 4%. The first half of Fiscal 2022 provides demonstrable progress towards our Fiscal 2024 Aspirations to include up to 4% organic growth," said Mark J. Barrenechea, OpenText CEO & CTO. "Total revenues of $876.8 million grew 2.5% year-over-year and were led by Cloud revenues of $364.9 million, up 4.1% year-over-year. Total Annual Recurring Revenues of $699.8 million grew 2.2% year-over-year, representing 80% of our total revenues."

"OpenText brings a complete and integrated suite of Information Management solutions to customers of all sizes, while providing the layers of defense needed to help organizations secure their users, end points, and networks in the face of ever-increasing cyber threats and ransomware. With the addition of Zix to our Security & Protection Cloud, OpenText leads the market in cyber resiliency with a powerhouse SMB platform for data protection, threat management, email security and compliance solutions," said Mr. Barrenechea.

"I am very pleased with OpenText's performance in Q2. We delivered $343.5 million of adjusted EBITDA and $206.0 million in free cash flows while purchasing Zix Corporation for $896.0 million," said Madhu Ranganathan, OpenText EVP, CFO. "With our recent refinancing of outstanding debt, we have approximately $1.5 billion of cash as of December 31, 2021, and a net leverage ratio of 2.0x. Our balance sheet and liquidity position remain strong as we continue to focus on investments that advance our products and systems to drive our organic growth, while supporting the integration and profitability of current and future acquisitions."

Financial Highlights for Q2 Fiscal 2022 with Year Over Year Comparisons

Summary of Quarterly Results









(In millions, except per share data)

Q2 FY'22

Q2 FY'21

$ Change

% Change


Q2 FY'22 in
CC*

% Change
in CC*


Revenues:









Cloud services and subscriptions

$364.9

$350.5

$14.4

4.1%


$365.0

4.2%


Customer support

334.9

334.5

0.4

0.1%


335.4

0.3%


Total annual recurring revenues**

$699.8

$684.9

$14.8

2.2%


$700.4

2.3%


License

109.5

107.3

2.1

2.0%


110.5

3.0%


Professional service and other

67.5

63.4

4.2

6.6%


67.8

7.0%


Total revenues

$876.8

$855.6

$21.2

2.5%


$878.8

2.7%


GAAP-based operating income

$192.9

$234.5

($41.6)

(17.7)%


N/A

N/A


Non-GAAP-based operating income (1)

$321.8

$340.5

($18.7)

(5.5)%


$326.1

(4.2)%


GAAP-based net income (loss) attributable to OpenText

$88.3

($65.5)

$153.8

234.9 %


N/A

N/A


GAAP-based earnings (loss) per share (EPS), diluted

$0.32

($0.24)

$0.56

233.3%


N/A

N/A


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

$0.89

$0.95

($0.06)

(6.3)%


$0.90

(5.3)%


Adjusted EBITDA (1)

$343.5

$360.8

($17.2)

(4.8)%


$347.8

(3.6)%


Operating cash flows

$216.6

$282.5

($65.8)

(23.3)%


N/A

N/A


Free cash flows (1)

$206.0

$274.8

($68.8)

(25.0)%


N/A

N/A




Summary of YTD Results









(In millions, except per share data)

FY'22 YTD

FY'21 YTD

$ Change

% Change


FY'22 YTD
in CC*

% Change
in CC*


Revenues:









Cloud services and subscriptions

$721.5

$691.4

$30.0

4.3%


$718.2

3.9%


Customer support

670.1

663.9

6.2

0.9%


663.9

—%


Total annual recurring revenues**

$1,391.6

$1,355.3

$36.3

2.7%


$1,382.1

2.0%


License

183.0

175.9

7.2

4.1%


183.0

4.1%


Professional service and other

134.5

128.5

6.0

4.7%


133.4

3.9%


Total revenues

$1,709.1

$1,659.7

$49.5

3.0%


$1,698.5

2.3%


GAAP-based operating income

$375.6

$416.8

($41.3)

(9.9)%


N/A

N/A


Non-GAAP-based operating income (1)

$623.8

$660.9

($37.1)

(5.6)%


$625.9

(5.3)%


GAAP-based net income attributable to OpenText

$220.2

$37.9

$182.3

481.1%


N/A

N/A


GAAP-based EPS, diluted

$0.81

$0.14

$0.67

478.6%


N/A

N/A


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

$1.72

$1.84

($0.12)

(6.5)%


$1.73

(6.0)%


Adjusted EBITDA (1)

$666.9

$703.1

($36.2)

(5.2)%


$668.8

(4.9)%


Operating cash flows

$406.3

$516.4

($110.0)

(21.3)%


N/A

N/A


Free cash flows (1)

$369.0

$493.4

($124.4)

(25.2)%


N/A

N/A



(1) Please see note 2 "Use of Non-GAAP Financial Measures" 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.

• Organic revenue growth is calculated by removing the revenue contribution from newly acquired companies for the first year post acquisition.

Dividend Program

As part of our quarterly, non-cumulative cash dividend program, the Board declared on February 2, 2022, a cash dividend of $0.2209 per common share. The record date for this dividend is March 4, 2022 and the payment date is March 25, 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 buys Zix Corporation

  • OpenText announces significant expansion in partner relationship with Google

  • Key customer wins in the quarter include Novartis Pharmaceuticals, Kimberly-Clark, Volkswagen AG, Hyundai Motor Company, Bank of New York Mellon Corporation, CNX Resources Corporation, Becton Dickinson, The Auto Club Group, Lids Sports Group, B. Braun, PillPack, Inc., Aspen Dental Management, Hawaiian Electric Company, US Army Corps of Engineers and National Food Industries

  • OpenText announces executive appointments

  • OpenText named one of Canada's most admired corporate cultures for 2021

  • OpenText strengthens Security & Protection Cloud with Network Detection & Response

  • OpenText empowers companies to Be Digital at OpenText World

  • OpenText extends leadership in Global Digital Commerce with Business Network Cloud

  • OpenText announces pricing of senior unsecured fixed rate notes to redeem outstanding 2026 notes

 

Summary of Quarterly Results









Q2 FY'22

Q1 FY'22

Q2 FY'21

% Change

(Q2 FY'22 vs Q1
FY'22)


% Change

(Q2 FY'22 vs Q2
FY'21)


Revenue (millions)

$876.8

$832.3

$855.6

5.3%


2.5%


GAAP-based gross margin

70.2%

69.0%

70.5%

120

bps

(30)

bps

Non-GAAP-based gross margin (1)

76.4%

75.7%

77.1%

70

bps

(70)

bps

GAAP-based earnings (loss) per share, diluted

$0.32

$0.48

($0.24)

(33.3)%


233.3%


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

$0.89

$0.83

$0.95

7.2%


(6.3)%


(1) Please see note 2 "Use of Non-GAAP Financial Measures" 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 a quarterly shareholder letter and 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 February 3, 2022 at 7:00 p.m. ET through 11:59 p.m. on February 17, 2022 and can be accessed by dialing 1-855-669-9658 (toll-free) or +1-604-674-8052 (international) and using passcode 8296 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. Additionally, "off-cloud" is a term we use to describe license transactions.

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, 2022 (Fiscal 2022) on growth, future cloud growth and market share gains, future organic growth initiatives and deployment of capital, Fiscal 2024 Aspirations, declaration of quarterly dividends, potential share repurchases pursuant to its Repurchase Plan, future tax rates, new platform and product offerings, scaling OpenText to new levels in Fiscal 2022 and beyond, 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 and uncertainties such as those relating to the duration and severity of the COVID-19 pandemic, including any new strains or resurgences, as well as 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 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.

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

CONDENSED CONSOLIDATED BALANCE SHEETS

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



December 31, 2021


June 30, 2021

ASSETS

(unaudited)



Cash and cash equivalents

$1,511,792


$1,607,306

Accounts receivable trade, net of allowance for credit losses of $15,849 as of December 31, 2021 and $22,151 as of June 30, 2021

427,020


438,547

Contract assets

22,336


25,344

Income taxes recoverable

19,855


32,312

Prepaid expenses and other current assets

118,353


98,551

Total current assets

2,099,356


2,202,060

Property and equipment

243,850


233,595

Operating lease right of use assets

230,973


234,532

Long-term contract assets

22,920


19,222

Goodwill

5,195,078


4,691,673

Acquired intangible assets

1,355,003


1,187,260

Deferred tax assets

747,780


796,738

Other assets

228,142


208,894

Long-term income taxes recoverable

41,428


35,362

Total assets

$10,164,530


$9,609,336

LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable and accrued liabilities

$364,739


$423,592

Current portion of long-term debt

10,000


10,000

Operating lease liabilities

62,910


58,315

Deferred revenues

848,977


852,629

Income taxes payable

16,219


17,368

Total current liabilities

1,302,845


1,361,904

Long-term liabilities:




Accrued liabilities

16,401


28,830

Pension liability

75,055


74,511

Long-term debt

4,211,488


3,578,859

Long-term operating lease liabilities

214,824


224,453

Long-term deferred revenues

90,669


98,989

Long-term income taxes payable

34,133


34,113

Deferred tax liabilities

89,290


108,224

Total long-term liabilities

4,731,860


4,147,979

Shareholders' equity:




Share capital and additional paid-in capital




271,006,308 and 271,540,755 Common Shares issued and outstanding at December 31, 2021 and June 30, 2021, respectively; authorized Common Shares: unlimited

1,990,913


1,947,764

Accumulated other comprehensive income

31,349


66,238

Retained earnings

2,174,467


2,153,326

Treasury stock, at cost (1,476,420 and 1,567,664 shares at December 31, 2021 and June 30, 2021, respectively)

(67,966)


(69,386)

Total OpenText shareholders' equity

4,128,763


4,097,942

Non-controlling interests

1,062


1,511

Total shareholders' equity

4,129,825


4,099,453

Total liabilities and shareholders' equity

$10,164,530


$9,609,336

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