OpenText Reports Third Quarter Fiscal Year 2015 Financial Results
Misses on Revenue and EPS forecast
Highlights
- Recurring revenue was $383.6 million, up 4%; in constant currency*, up 10%
- Cloud services revenue was $143.8 million, up 12%; in constant currency, up 17%
- Record operating cash flow of $143.1 million and raises quarterly dividend to $0.20
- Total revenue was $447.6 million, up 1%; in constant currency, up 8%
Open Text Corporation (NASDAQ: OTEX) (TSX: OTC) announced today its financial results for the third quarter ended March 31, 2015.
| Financial Highlights for Q3 FY15 with Year Over Year Comparisons (1) | |||||||||||
| Summary of Quarterly Results |
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Q3 FY15 |
Q3 FY14 |
$ Change |
% Change |
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| Revenues: (in millions) |
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| Cloud services |
$143.8 |
|
$128.4 |
|
$15.4 |
|
12.0 |
% |
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| Customer support |
184.3 |
|
180.3 |
|
4.0 |
|
2.2 |
% |
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| Professional service and other |
55.5 |
|
61.0 |
|
(5.5) |
|
(9.0) |
% |
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| Total Recurring revenues |
$383.6 |
|
$369.7 |
|
$13.9 |
|
3.8 |
% |
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| License |
64.0 |
|
73.1 |
|
(9.1) |
|
(12.4) |
% |
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| Total revenues |
$447.6 |
|
$442.8 |
|
$4.8 |
|
1.1 |
% |
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| Non-GAAP-based operating margin(2) |
25.7 |
% |
29.1 |
% |
n/a |
|
(340) |
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| GAAP-based operating margin |
11.8 |
% |
15.1 |
% |
n/a |
|
(330) |
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|||
| Non-GAAP-based EPS, diluted (2) |
$0.66 |
|
$0.84 |
|
($0.18) |
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(21.4) |
% |
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| GAAP-based EPS, diluted |
$0.22 |
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$0.38 |
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($0.16) |
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(42.1) |
% |
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| Operating cash flows (in millions) |
$143.1 |
|
$141.4 |
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$1.7 |
|
1.2 |
% |
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| Summary of Quarterly Results – Constant Currency |
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Q3 FY15 re-presented on a constant currency basis |
Q3 FY14 |
$ Change |
% Change |
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FX impact – higher (lower) |
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| Revenues: (in millions) |
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| Cloud services |
$149.9 |
|
$128.4 |
|
$21.5 |
|
16.7 |
% |
|
$ |
(6.1) |
|
| Customer support |
198.2 |
|
180.3 |
|
17.9 |
|
9.9 |
% |
|
(13.9) |
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| Professional service and other |
60.1 |
|
61.0 |
|
(0.9) |
|
(1.5) |
% |
|
(4.6) |
|
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| Total Recurring revenues |
$408.2 |
|
$369.7 |
|
$38.5 |
|
10.4 |
% |
|
$ |
(24.6) |
|
| License |
$70.3 |
|
73.1 |
|
(2.8) |
|
(3.8)% |
|
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(6.3) |
|
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| Total revenues |
$478.5 |
|
$442.8 |
|
$35.7 |
|
8.1 |
% |
|
$ |
(30.9) |
|
| Non-GAAP-based operating margin (2) |
26.3 |
% |
29.1 |
% |
n/a |
|
(280) |
|
bps |
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| Non-GAAP-based EPS, diluted (2) |
$0.73 |
|
$0.84 |
|
($0.11) |
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(13.1) |
% |
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($0.07) |
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“In Q315, our cloud revenue grew 12%, up 17% in constant currency and we closed 7 iX deals over $1 million, the benefit of which we will see in our future ongoing cloud revenues,” said OpenText CEO Mark J. Barrenechea. “Our products and services are resonating with enterprise customers and OpenText is well positioned to lead the digital transformation in the cloud.”
Barrenechea further added, “As for our quarterly financial results, we did not meet our full financial objectives. As for revenue, we were affected by foreign exchange and customers transitioning to our cloud; as for profit, we were affected by foreign exchange and unique items in the quarter, such as acquisitions, litigation costs and others, the benefits of which should be seen in future quarters. With that said, I am pleased that our recurring revenues grew by 4%, up 10% in constant currency, and we had record operating cash flows of $143.1 million in the quarter.”
“Foreign currency volatility continued to have a significant impact on our results in the quarter and on a year-to-date basis,” said John Doolittle, OpenText CFO. “Although we are fighting currency headwinds, we are pleased with our growth in recurring revenues and our operating cash flow performance, attributed to our strong working capital management this quarter. Based on the operating cash performance, our strong liquidity position and our focus on delivering value to shareholders, we have increased our quarterly dividend to $0.20.”
*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.
Business Highlights
- OpenText buys Actuate Corporation and Informative Graphics Corporation
- 10 customer transactions over $1 million, 7 cloud contract signings in the OpenText Cloud and 3 on-premises
- Financial, services and public sector industries saw the most demand
- Cloud customer successes in the quarter include Hasbro, SleepMed, Roche Diagnostics, KPN and Pillar Administration
- On-premises customer successes in the quarter include BLS AG, Dover Corp, FACC Operations GmbH, Annenberg Foundation Center, State of Maine Office of Information Technology, Tangerine Bank, Serco and Region of Peel
- OpenText completes EIM Suite enhancements (SP1) to deliver customer success in the digital-first world
- OpenText adds analytics for B2B transactions to provide greater supply chain insight
- OpenText offers a new communications hub for omni-channel interactions in the cloud
- OpenText announces new contract management system to automate contract processing
- OpenText announces new compliance and performance capabilities to ensure fast, secure transfer of files
- OpenText wins patent infringement trial against Box and Carahsoft
Dividend Program Highlights
Cash Dividend – Raised by 16%
As part of our quarterly, non cumulative cash dividend program the Board declared on April 27, 2015 a sixteen percent increase in its quarterly cash dividend from $0.1725 to $0.20 per Common Share. The record date for this dividend is May 29, 2015 and the payment date is June 19, 2015. 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 |
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Q3 FY15 | Q2 FY15 | Q3 FY14 | % Change(Q3 FY15 vs Q2 FY15) |
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% Change(Q3 FY15 vs Q3 FY14) |
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| Revenue (million) |
$447.6 |
|
$467.8 |
|
$442.8 |
|
(4.3) |
% |
|
1.1 |
% |
|
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| GAAP-based gross margin |
65.7 |
% |
68.1 |
% |
67.3 |
% |
(240) |
|
bps |
(160) |
|
bps | ||||||||
| GAAP-based operating margin |
11.8 |
% |
23.6 |
% |
15.1 |
% |
(1,180) |
|
bps |
(330) |
|
bps | ||||||||
| GAAP-based EPS, diluted |
$0.22 |
|
$0.60 |
|
$0.38 |
|
(63.3) |
% |
|
(42.1) |
% |
|
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| Non-GAAP-based gross margin (2) |
70.8 |
% |
72.2 |
% |
71.3 |
% |
(140) |
|
bps |
(50) |
|
bps | ||||||||
| Non-GAAP-based operating margin (2) |
25.7 |
% |
32.8 |
% |
29.1 |
% |
(710) |
|
bps |
(340) |
|
bps | ||||||||
| Non-GAAP-based EPS, diluted (2) |
$0.66 |
|
$0.97 |
|
$0.84 |
|
(32.0) |
% |
|
(21.4) |
% | |||||||||
| Summary of Year to Date Results | |||||||||||
| Q3 FY15 YTD | Q3 FY14 YTD | % Change | |||||||||
| Revenue (million) |
$1,369.2 |
$1,130.7 |
21.1 |
% | |||||||
| GAAP-based gross margin |
67.1 |
% |
68.3 |
% |
(120) |
bps | |||||
| GAAP-based operating margin |
19.4 |
% |
17.1 |
% |
230 |
bps | |||||
| GAAP-based EPS, diluted |
$1.35 |
$1.08 |
25.0 |
% | |||||||
| Non-GAAP-based gross margin (2) |
71.5 |
% |
73.0 |
% |
(150) |
bps | |||||
| Non-GAAP-based operating margin (2) |
31.0 |
% |
30.1 |
% |
90 |
bps | |||||
| Non-GAAP-based EPS, diluted (2) |
$2.59 |
$2.32 |
11.6 |
% | |||||||