OpenText Buys EasyLink; Reports Third Quarter Fiscal Year 2012 Financial Results

(PRNewswire) — Open Text(TM) Corporation (NASDAQ: OTEX) (TSX: OTC), announced today that is has entered into an agreement to acquire EasyLink Services International Corporation ("EasyLink") (Nasdaq: ESIC) ( www.EasyLink.com), a global provider of cloud-based electronic messaging and business integration services, for $7.25 per share in cash, for a purchase price of approximately $310 million, inclusive of debt. Headquartered in Atlanta, Georgia, EasyLink has approximately 550 employees and TTM revenues of approximately $186 million. (1)

The Board of Directors of EasyLink has unanimously approved the transaction. The transaction is expected to close by mid-to-late summer 2012, subject to EasyLink's stockholder approval, certain regulatory approvals and customary closing conditions.

"Easylink is a recognized leader in cloud-based Secure Information Exchange.  We see strong opportunities for our mutual customers, partners, employees and product roadmap," said OpenText CEO Mark J. Barrenechea.  "EasyLink has demonstrated operational discipline and earnings as reflected in their financial results.  Once the transaction is closed, we look forward to the market opportunities of offering a best-in-class combined portfolio of cloud-based services."

OpenText also announced unaudited financial results for its third fiscal quarter ended March 31, 2012.

Financial Highlights for Q3 FY12

  • Total revenue for the period was $292.3 million up 11.1% Y/Y
  • License revenue was $61.0 million, down 10.1% Y/Y; up approximately 14% on a year-to-date basis, Y/Y
  • GAAP-based EPS was $0.59 compared to $0.61 Y/Y; Non-GAAP-based EPS was $1.01 compared to $0.91 Y/Y up 11% Y/Y (2)
  • GAAP-based income from operations was $27.3 million and 9.3% of revenues; Non-GAAP-based operating income was $73.6 million and 25.2% of revenues(2)
  • Operating cash flow was $96.6 million, with an ending cash balance of $509 million

Mark J. Barrenechea said "OpenText delivered our best third quarter adjusted earnings per share and cash from operations, and on a year-to-date basis our adjusted earnings per share was up 14 percent.  However, our license revenue performance was impacted by sales execution issues in North America and within our Business Process Solutions (BPS) group.  We've moved swiftly to take corrective actions and are confident that our organizational changes and enhancements will have a positive impact on our execution moving forward."

Barrenechea added, "After my first 120 days on the job, I am even more excited about OpenText's market position and long-term growth potential.  We are a clear, trusted leader in Enterprise Content Management (ECM), and are positioned to deliver an expanding suite of secure solutions in ECM, Business Process management (BPM) and Customer Experience Management (CEM).  Moreover, our large customer base, significant global distribution and expanding product capabilities puts us in an excellent position to leverage our business in rapidly growing Cloud and mobile environments.  Our pipeline of opportunities is strong, and I am highly focused on putting the company in the best position to capitalize on our large and dynamic market opportunities."

Business Highlights

  • Technology, services, government and financial verticals saw the most demand
  • Customer successes in the third quarter include Sumitomo Heavy Industry, Conoco Phillips, NTT Comware, News International, Trinity Mirror and the Spanish Lottery
  • Integrated BPM sales force; now selling BPM globally
  • OpenText named one of The Financial Post's 10 Best Companies to Work For in Canada
  • OpenText Extended ECM for SAP® Solutions Version 10 now includes support for the SAP Customer Relationship Management (SAP CRM) and SAP Supplier Relationship Management (SAP SRM) applications
  • OpenText Tempo Enterprise and Express Editions now available for easy sharing of content in private clouds

               
Summary of Quarterly Results              
  Q3 FY12 Q2 FY12 Q3 FY11 % Change (Q/Q)     % Change (Y/Y)    
               
Revenue (million) $292.3 $321.5 $263.0 (9.1)%   11.1%  
GAAP-based gross margin 63.6% 67.1% 66.5% (350) bps (290) bps
GAAP-based operating income margin 9.3% 17.2% 10.9% (790) bps (160) bps
GAAP-based EPS $0.59 $0.81 $0.61 (27.2)%   (3.3)%  
Non-GAAP-based gross margin (2) 71.0% 73.8% 73.3% (280) bps (230) bps
Non-GAAP-based operating margin (2) 25.2% 30.7% 24.4% (550) bps 80 bps
Non-GAAP-based EPS (2) $1.01 $1.39 $0.91 (27.3)%   11.0%  

           
Summary of Year to Date Results          
  Q3 FY12 Q2 FY12 Q3 FY11 % Change (Y/Y)    
           
Revenue (million) $901.8 $ 609.5   $747.9 20.6%  
GAAP-based gross margin 65.2% 66.0% 67.1% (190) bps
GAAP-based operating income margin 12.2% 13.5% 15.2% (300) bps
GAAP-based EPS $2.00 $ 1.41   $1.63 22.7%  
Non-GAAP-based gross margin (2) 72.3%     72.9%   73.8% (150) bps
Non-GAAP-based operating margin (2) 27.2%     28.1%   28.2% (100) bps
Non-GAAP-based EPS (2) $3.43 $ 2.42   $3.02 13.6%  
           

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