CIMdata PLM Industry Summary Online Archive
5 October 2004
Financial News
Open Text Announces Preliminary First Quarter 2005 Financial Results
Open TextT Corporation announced preliminary financial results for its first fiscal quarter ended September 30, 2004. (1)
Based on preliminary financial data for its first fiscal quarter, the Company expects to report total revenue in the range of $84.0 to $86.0 million. Earnings per share (EPS) for the quarter is expected to be in the range of $0.03 to $0.06 on an adjusted basis, and in the range of ($0.04) to ($0.01) on a GAAP basis. (2)
"Our first quarter results were impacted by a number of varying-sized deals that did not close during the quarter. While we are disappointed in our first quarter results, we see no material change to the ECM environment, and our guidance for the fiscal 2005 year is unchanged," stated Tom Jenkins, Open Text's CEO.
The Company emphasizes that these results are unaudited and preliminary, and its actual results may vary. Final results for the first quarter of fiscal 2005 will be reported by the Company on October 28, 2004.
Open Text will host a conference call on October 5th, 2004, at 5:00 p.m. EST to discuss its preliminary financial results. A replay of the call will be available beginning October 5th, at 7:00 p.m. EST through 11:59 p.m. on October 19th, 2004 and can be accessed by dialing 416-640-1917 and using pass code #21096990. For more information or to listen to the call via Web cast, please use the following link: http://www.opentext.com/investor/investor_events/ .
Notes
(1) All dollar amounts in this press release are in US Dollars unless otherwise indicated.
(2) The Company uses the financial measure of adjusted EPS and adjusted net income to supplement its consolidated financial statements, which are presented in accordance with US GAAP. The presentation of adjusted EPS and adjusted net income is not meant to be a substitute for net income per share presented in accordance with GAAP, but rather should be evaluated in conjunction with such GAAP measure. Adjusted EPS and adjusted net income are calculated as net income (or per share, as applicable), excluding the following estimated amounts (a) the amortization of acquired intangible assets net of tax ($4.0 million), (b) other income, gain (loss) on investments (nil), (c) income tax on equity gain (nil) (d) restructuring charges including charges that will be incurred as a result of the acquisition of IXOS (nil). All of the aforementioned amounts are provided net of tax and extraordinary gains or losses. The term adjusted EPS and adjusted net income does not have a standardized meaning prescribed by GAAP, and therefore the Company's definition is unlikely to be comparable to similar measures presented by other companies. The Company's management believes that the presentation of adjusted EPS and adjusted net income provides useful information to investors because it excludes non-operational charges and is a better indication of Open Text's profitability or expected profitability from recurring operations. The items excluded from the computation of adjusted EPS and adjusted net income, which are otherwise included in the determination of net income per share prepared in accordance with GAAP, are items that Open Text does not consider to be meaningful in evaluating the Company's past financial performance or future prospects and may hinder a comparison of its period-to-period profitability.
On August 31, 2004, the Company provided guidance for the Company's fiscal year ending June 30, 2005 (FY05) (which commenced July 1, 2004), indicating that the Company expects revenue of $420 to $450 million with adjusted EPS of $1.10 to $1.30.
The guidance presented is based on (a) financial information prepared by Open Text consistent with the manner in which it reports its revenue, adjusted EPS and net income per share in accordance with GAAP and (b) the assumptions referred to in this note (2). This guidance assumes minimal fluctuations of currency exchange rates.
The following assumptions of Company management are an integral part of the guidance presented for FY05. These assumptions represent the current expectations of Open Text but must be considered preliminary as they will be reviewed and revised, perhaps materially, based upon Open Text's assessment of the operations of IXOS. Open Text's actual results for future periods may vary from the guidance presented and such variations may be material.
(a) The guidance assumes a fully diluted share count for the fiscal year ending June 30, 2005 of 57.6 million shares.
(b) Guidance for adjusted EPS and net income per share is calculated on a fully-diluted basis, giving effect to the exercise of the common share purchase warrants issued.
(c) Income taxes are assumed at a rate in the mid 20% range on a GAAP net income basis.
(d) Assumptions have been made concerning revenue growth and income tax rates that will be in effect and which may change depending upon both the timing and jurisdiction of future revenues.
The Company has provided a reconciliation in note (2) above of its guidance for adjusted EPS to net income per share, which is the most comparable financial measure calculated and presented in accordance with GAAP. With respect to amortization of acquired intangible assets, the Company has retained the services of an independent valuator to assist in the valuation of intangible assets acquired through the business combination with IXOS. The Company estimates that the additional amortization will be approximately $2.5 million per quarter (net of tax) for the next 5 to 7 years and is based on previous experience with similar transactions. The specific amount of this amortization expense for future periods will be determined once this valuation work is completed.
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