OpenText Reports Fourth Quarter and Fiscal Year 2015 Financial Results

 

"I am very pleased with our bottom line performance in the quarter and for fiscal year 2015, as we increased our operating cash flow by $106 million or 25% year-over-year," said OpenText CFO John Doolittle. "On an adjusted basis, we have delivered 7 year cumulative growth rates of 19% for non-GAAP EPS, 18% for operating cash flow and 22% for non-GAAP net income."

*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.

Quarterly Business Highlights

  • Q415: 26 customer transactions over $1 million, 11 cloud contract signings in the OpenText Cloud and 15 on-premises
  • Q415: Financial, services and industrial goods industries saw the most demand
  • Cloud customer successes in the quarter include athenahealth, Wacom Co, SCL Health, Genpact, The Tennessee Valley Authority (TVA) and Local Search Association
  • On-premises customer successes in the quarter include St. Lawrence Seaway Management Corporation (SLSMC), European Central Bank (ECB), City of Calgary, PriceSmart, U.S. Department of State, Haya Real Estate SI and ASR Verzekeringen NV 
  • OpenText CEO resumes full involvement in day-to-day operations
  • OpenText CEO Mark J. Barrenechea named Results-Oriented CEO of the Year, by CEO World
  • OpenText awarded "Top Job" seal by the Institute for Leadership and HR Management at the University Of St. Gallen
  • Released new version of xECM for SAP®  with OpenText Business Center, new SAP HANA® solutions and received its 8th SAP® Pinnacle award

Update on IRS Tax Matters

As we have previously disclosed in our public filings, the United States Internal Revenue Service ("IRS") is examining certain of our tax returns for Fiscal 2010 through Fiscal 2012, and in connection with those examinations is reviewing our internal reorganization in Fiscal 2010 to consolidate certain intellectual property ownership in Luxembourg and Canada and our integration of certain acquisitions into the resulting structure. 

As part of these examinations, we received from the IRS a Notice of Proposed Adjustment ("NOPA") in draft form proposing a one-time approximately $280 million increase to our U.S. federal taxes arising from the reorganization in Fiscal 2010 and proposing penalties equal to 20% of the additional taxes, plus interest at the applicable statutory rate (which will continue to accrue until the matter is resolved and may be substantial).  A NOPA is an IRS position and does not impose an obligation to pay tax.  The draft NOPA may be changed before the final NOPA is issued, including because the IRS reserved the right in the draft NOPA to increase the adjustment.  Based on our discussions with the IRS, we expect we will receive an additional NOPA proposing an approximately $80 million increase to our U.S. federal taxes for Fiscal 2012 arising from the integration of Global 360 Holding Corp. into the structure that resulted from the reorganization, accompanied by proposed penalties and interest (although there can be no assurance that this will be the amount reflected in the NOPA when received).  Depending upon the outcome of these matters, additional state income taxes plus penalty and interest may be due.

We strongly disagree with the IRS' position and intend to vigorously contest the proposed adjustments to our taxable income.  We have not recorded any material accruals in respect of these examinations in our Consolidated Financial Statements.  See our Annual Report on Form 10-K filed today for additional information on these matters.

Normal Course Issuer Bid

The Company also announced today that it intends to purchase in open market transactions, from time to time over the next 12 months, if considered advisable, up to an aggregate of $200,000,000 of its common shares on NASDAQ Global Select Market, the Toronto Stock Exchange (the "TSX") and/or other exchanges and alternative trading systems in Canada and/or the United States, if eligible. The price that OpenText will pay for common shares in open market transactions will be the market price at the time of purchase or such other price as may be permitted by applicable law or stock exchange rules.

The Board believes that the proposed purchases are in the best interests of the Company and are a desirable use of corporate funds. The share purchases will be effected in accordance with Rule 10b-18 under the U.S. Securities Exchange Act of 1934 and the TSX's normal course issuer bid rules, which contain restrictions on the number of shares that may be purchased on a single day (being 77,957 common shares in the case of the TSX) based on the average daily trading volumes of OpenText's common shares on the applicable exchange (being 311,828 common shares for the past six months in the case of the TSX), subject to certain exceptions for block purchases. The purchases over the TSX will be made pursuant to a normal course issuer bid ("NCIB"), which the TSX has accepted notice of. Under the NCIB, up to 5% of its 122,337,654 common shares outstanding as of July 27, 2015, or 6,116,882 common shares, are permitted to be purchased commencing on August 6, 2015 until August 5, 2016. All common shares purchased by OpenText pursuant to the NCIB will be cancelled.

OpenText also announced that it has entered into an automatic share purchase plan pursuant to which its designated broker may undertake purchases of its common shares under the NCIB, subject to certain parameters, during pre-determined trading blackout periods when OpenText would not otherwise be permitted to purchase its common shares.

Dividend Program Highlights

Cash Dividend

As part of our quarterly, non cumulative cash dividend program the Board declared on July 28, 2015 a cash dividend of $0.20 per Common Share. The record date for this dividend is August 28, 2015 and the payment date is September 18, 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 Annual Results




FY15

FY14

% Change


Revenue (million)

$1,851.9


$1,624.7


14.0

%


GAAP-based gross margin

67.5

%

68.5

%

(100)


bps

GAAP-based operating margin

18.8

%

18.5

%

30


bps

GAAP-based EPS, diluted

$1.91


$1.81


5.5

%


Non-GAAP-based gross margin (2)

72.0

%

72.9

%

(90)


bps

Non-GAAP-based operating margin (2)

30.9

%

30.9

%


bps

Non-GAAP-based EPS, diluted (2)

$3.46


$3.37


2.7

%



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