OpenText Reports First Quarter Fiscal Year 2025 Financial Results
Total Revenues of $1.27B, 15 Consecutive Quarters of Cloud Organic GrowthDelivers Net Income Margin of 7%, Robust Adjusted EBITDA Margin of 35.0%GAAP EPS of $0.32, Non-GAAP EPS of $0.93Purchased and Canceled 7.72M Shares Over the Last Two Quarters
Fiscal 2025 First Quarter Highlights
Total Revenues
(in millions)
Annual Recurring Revenues
(in millions)
Cloud Revenues
(in millions)
$1,269
$1,053
$457
(11.0) %
(8.4) %
+1.3 %
Annual Recurring Revenues represent 83% of Total Revenues
"In our first full quarter after the AMC divestiture, we delivered $1.27 billion in total revenues, 35% Adjusted EBITDA Margin, and our 15th consecutive quarter of organic cloud revenue growth," said Mark J. Barrenechea, OpenText CEO & CTO. "Further, we remain on track to return record capital to shareholders in Fiscal 2025, of approximately $570 million, and the company has purchased and canceled 7.72 million shares over the last two quarters."
Mr. Barrenechea added: "OpenText continues to invest in the future of Information Management, and we look forward to showcasing our exciting innovation roadmap at our upcoming OpenText World User Conference in Las Vegas. We will be highlighting strong progress in our trusted Business Clouds, Business AI and Business Technology including Cyber Security."
Mark J. Barrenechea, OpenText CEO & CTO
"The strength of the OpenText operating model has resulted in strong margin performance this quarter. We continue to focus on driving operational efficiencies across the organization and we have a defined path in place for future margin and cash flow growth," said Madhu Ranganathan, OpenText President, CFO and leader of Corporate Development. "Based on this foundation of operational excellence we continue to invest in our growth and have the capital flexibility to deliver on our Fiscal 2025 Targets."
Madhu Ranganathan, OpenText President & CFO
WATERLOO, ON, Oct. 31, 2024 /PRNewswire/ -- Open Text Corporation (NASDAQ:OTEX), (TSX:OTEX), today announced its financial results for the first quarter ended September 30, 2024.
First Quarter Financial Highlights Y/Y
Total revenues of $1.27 billion, down 11.0% Y/Y or down 1.8% when adjusted for the AMC divestiture
Annual recurring revenues (ARR) of $1.05 billion, or down 8.4% Y/Y or down 1.1% when adjusted for the AMC divestiture
Cloud revenues of $457 million, up 1.3% Y/Y
Quarterly enterprise cloud bookings(1) of $133 million, up 10.3% Y/Y
Operating cash flows of ($78) million and free cash flows(2) of ($117) million, reflecting expected one-time tax payment for the AMC divestiture
GAAP-based net income of $84 million, GAAP-based diluted earnings per share (EPS) of $0.32
Adjusted EBITDA(2) of $444 million, margin of 35.0%, above Company's Q1 targets
Non-GAAP diluted EPS(2) of $0.93
Returned $154 million of capital to shareholders consisting of $69 million of dividends and $85 million of share repurchases
(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, entered into with our enterprise based customers.
(2)
Please see Note 2 "Use of Non-GAAP Financial Measures" to the condensed consolidated financial statements below.
Financial Highlights for Q1 Fiscal 2025 with Year Over Year Comparisons
Summary of Quarterly Results
(In millions, except per share data)
Q1 FY'25
Q1 FY'24
$ Change
% Change
Q1 FY'25 in CC*
% Changein CC*
Revenues:
Cloud services and subscriptions
$457
$451
$6
1.3 %
$459
1.7 %
Customer support
595
698
($102)
(14.7) %
598
(14.3) %
Total annual recurring revenues**
$1,053
$1,149
($96)
(8.4) %
$1,057
(8.0) %
License
126
173
($47)
(27.3) %
126
(27.2) %
Professional service and other
91
104
($13)
(12.5) %
91
(12.5) %
Total revenues
$1,269
$1,425
($156)
(11.0) %
$1,273
(10.7) %
GAAP-based operating income
$206
$213
($7)
(3.1) %
N/A
N/A
Non-GAAP-based operating income (1)
$412
$461
($49)
(10.7) %
$410
(11.0) %
GAAP-based net income attributable to OpenText
$84
$81
$3
4.3 %
N/A
N/A
GAAP-based EPS, diluted
$0.32
$0.30
$0.02
6.7 %
N/A
N/A
Non-GAAP-based EPS, diluted (1)(2)
$0.93
$1.01
($0.08)
(7.9) %
$0.93
(7.9) %
Adjusted EBITDA (1)
$444
$495
($51)
(10.3) %
$442
(10.6) %
Operating cash flows
($78)
$47
($125)
(265.1) %
N/A
N/A
Free cash flows (1)
($117)
$10
($127)
(1,322.3) %
N/A
N/A
(1)
Please see Note 2 "Use of Non-GAAP Financial Measures" to the condensed consolidated financial statements below.
(2)
For periods prior to Fiscal 2025, this is reflective of the amount of net tax benefit arising from the internal reorganization assumed to be allocable to the period based on the forecasted utilization period. Please also see Note 14 to the Company's Fiscal 2018 Consolidated Financial Statements on Form 10-K.
Note: Items in tables may not add due to rounding. Percentages presented are calculated based on the underlying amounts.
*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 October 29, 2024, a cash dividend of $0.2625 per common share. The record date for this dividend is November 29, 2024 and the payment date is December 20, 2024. 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.
Share Repurchase
OpenText also announced that in the first quarter of Fiscal 2025, it repurchased $85 million of common shares for cancellation under the Fiscal 2025 Repurchase Plan. Under the Fiscal 2025 Repurchase Plan, for the period commencing August 7, 2024 until August 6, 2025, OpenText intends to purchase for cancellation in open market transactions, from time to time, up to US$300 million of its issued and outstanding common shares, subject to a maximum of 21,179,064 common shares.
Quarterly Business Highlights
Key customer wins in the quarter include: Alaska Airlines, Beyond ONE-Virgin Mobile, Bombardier, CHT Security, Dick's Sporting Goods, Digital Intelligence, European Medicines Agency, Fedex-DXC, Ford O'Brien Landy LLP, Linde Plc, National Bank, Nippon Gases, Raytheon Systems Limited, SICK AG, Standard
OpenText named a leader in IDC MarketScape: Worldwide Intelligent Content Services 2024
OpenText harnesses AI to revolutionize DevSecOps at Global Virtual Summit
OpenText IT Management Platform achieves FedRAMP® authorization
OpenText named one of the world's best companies by TIME Magazine for the second consecutive year
Summary of Quarterly Results
Q1 FY'25
Q4 FY'24
Q1 FY'24
% Change
(Q1 FY'25 vsQ4 FY'24)
% Change
(Q1 FY'25 vsQ1 FY'24)
Revenue (millions)
$1,269
$1,362
$1,425
(6.8) %
(11.0) %
GAAP-based gross margin
71.7 %
72.5 %
71.4 %
(80)
bps
30
bps
Non-GAAP-based gross margin (1)
75.8 %
76.4 %
77.3 %
(60)
bps
(150)
bps
GAAP-based earnings (loss) per share, diluted
$0.32
$0.91
$0.30
(64.8) %
6.7 %
Non-GAAP-based EPS, diluted (1)(2)
$0.93
$0.98
$1.01
(5.1) %
(7.9) %
(1)
Please see Note 2 "Use of Non-GAAP Financial Measures" to the condensed 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 and invites the public to listen to the earnings conference call webcast today at 9:00 a.m. ET (6:00 a.m. PT) from the Investor Relations section of the Company's website at https://investors.opentext.com. To join the webcast instantly, use this webcast link. A webcast replay will be available shortly following completion of the live call.
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 is the leading Information Management software and services company in the world. We help organizations solve complex global problems with a comprehensive suite of Business Clouds, Business AI, and Business Technology. For more information about OpenText (NASDAQ/TSX:OTEX), please visit us at www.opentext.com.
Cautionary Statement Regarding Forward-Looking Statements
Certain statements in this press release, including statements about Open Text Corporation ("OpenText" or "the Company") on growth, profitability and future of Information Management, including executing on strategic programs including stronger competitive advantage, accelerating cloud growth, driving margin expansion and executing the Company's capital allocation strategy, including expected return to shareholders; achieving Fiscal 2025 Financial Targets; level of performance through the fiscal year; cloud bookings, demand, scale and revenue growth; future organic growth initiatives and deployment of capital; innovation fueled by cloud, AI and security technologies; future revenues, operating expenses, margins, free cash flows, interest expense and capital expenditures; market share of our products; innovation road map; intention to maintain a dividend program, including any targeted annualized dividend; expected size and timing of the Fiscal 2025 Repurchase Plan, including execution thereof; future tax rates; renewal rates; new platform and product offerings, including OpenText AI products, and associated benefits to customers; internal automation and AI leverage, including our AI strategy, vision and growth; strategy to build shareholder value; 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 intended to identify forward-looking statements or information under applicable securities laws (forward-looking statements). In addition, any statements or information that refer to expectations, beliefs, plans, projections, objectives, performance or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements, and are 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, including statements regarding future targets and aspirations, are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events and, as such, are subject to change and are not considered guidance. We can give no assurance that such estimates, beliefs and assumptions will prove to be correct. Future declarations of dividends are also subject to the final determination and discretion of the Board of Directors, and an annualized dividend has not been approved or declared by the Board. Forward-looking statements involve known and unknown risks and uncertainties such as those relating to: all statements regarding the expected future financial position, results of operations, revenues, expenses, margins, cash flows, dividends, share buybacks, financing plans, business strategy, budgets, capital expenditures, competitive positions, growth opportunities, plans and objectives of management, including any anticipated synergy benefits; incurring unanticipated costs, delays or difficulties, including as a result of the integration of Micro Focus, the divestiture of the AMC business or the execution of our business optimization plan; 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. We rely on a combination of copyright, patent, trademark and trade secret laws, non-disclosure agreements and other contractual provisions to establish and maintain our proprietary rights, which are important to our success. From time to time, we may also enforce our intellectual property rights through litigation in line with our strategic and business objectives. The actual results that OpenText achieves may differ materially from any forward-looking statements. 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. Further, readers should note that we may announce information using our website, press releases, securities law filings, public conference calls, webcasts and the social media channels identified on the Investors section of our website (https://investors.opentext.com). Such social media channels may include the Company's or our CEO's blog, X, formerly known as Twitter, account or LinkedIn account. The information posted through such channels may be material. Accordingly, readers should monitor such channels in addition to our other forms of communication.
OTEX-F
Copyright ©2024 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: https://www.opentext.com/about/copyright-information.
OPEN TEXT CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars, except share data)
September 30, 2024
June 30, 2024
ASSETS
(unaudited)
Cash and cash equivalents
$ 1,000,219
$ 1,280,662
Accounts receivable trade, net of allowance for credit losses of $14,509 as of
September 30, 2024 and $12,108 as of June 30, 2024
592,614
626,189
Contract assets
70,203
66,450
Income taxes recoverable
96,633
61,113
Prepaid expenses and other current assets
220,425
242,911
Total current assets
1,980,094
2,277,325
Property and equipment, net of accumulated depreciation of $768,438 as of
September 30, 2024 and $751,174 as of June 30, 2024
365,451
367,740
Operating lease right of use assets
219,514
219,774
Long-term contract assets
42,314
38,684
Goodwill
7,502,649
7,488,367
Acquired intangible assets
2,357,997
2,486,264
Deferred tax assets
954,813
932,657
Other assets
302,387
298,281
Long-term income taxes recoverable
54,072
96,615
Total assets
$ 13,779,291
$ 14,205,707
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities
$ 862,973
$ 931,116
Current portion of long-term debt
35,850
35,850
Operating lease liabilities
75,312
76,446
Deferred revenues
1,450,456
1,521,416
Income taxes payable
74,948
235,666
Total current liabilities
2,499,539
2,800,494
Long-term liabilities:
Accrued liabilities
45,197
46,483
Pension liability, net
133,666
127,255
Long-term debt
6,353,277
6,356,943
Long-term operating lease liabilities
213,400
218,174
Long-term deferred revenues
162,397
162,401
Long-term income taxes payable
99,286
145,644
Deferred tax liabilities
135,642
148,632
Total long-term liabilities
7,142,865
7,205,532
Shareholders' equity:
Share capital and additional paid-in capital
265,545,938 and 267,800,517 Common Shares issued and outstanding at
September 30, 2024 and June 30, 2024, respectively; authorized Common
Shares: unlimited
2,290,191
2,271,886
Accumulated other comprehensive income (loss)
(74,456)
(69,619)
Retained earnings
2,065,221
2,119,159
Treasury stock, at cost (3,899,507 and 3,135,980 shares at September 30, 2024
and June 30, 2024, respectively)
(145,646)
(123,268)
Total OpenText shareholders' equity
4,135,310
4,198,158
Non-controlling interests
1,577
1,523
Total shareholders' equity
4,136,887
4,199,681
Total liabilities and shareholders' equity
$ 13,779,291
$ 14,205,707
OPEN TEXT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands of U.S. dollars, except share and per share data)
(unaudited)
Three Months Ended September 30,
2024
2023
Revenues:
Cloud services and subscriptions
$ 457,024
$ 451,014
Customer support
595,490
697,713
License
125,813
173,026
Professional service and other
90,678
103,676
Total revenues
1,269,005
1,425,429
Cost of revenues:
Cloud services and subscriptions
175,257
171,412
Customer support
62,574
75,014
License
6,657
3,839
Professional service and other
66,915
79,922
Amortization of acquired technology-based intangible assets
47,244
76,824
Total cost of revenues
358,647
407,011
Gross profit
910,358
1,018,418
Operating expenses:
Research and development
190,693
226,231
Sales and marketing
245,882
280,007
General and administrative
106,730
131,211
Depreciation
32,171
34,091
Amortization of acquired customer-based intangible assets
81,504
120,192
Special charges (recoveries)
47,136
13,794
Total operating expenses
704,116
805,526
Income from operations
206,242
212,892
Other income (expense), net
(35,655)
