Open Text Corporation (
F1Q2011 Earnings Conference Call
October 27, 2010 5 PM ET
Greg Secord – VP, IR
Paul McFeeters – CFO
John Shackleton – President & CEO
Scott Penner – TD Newcrest
Mike Abramsky – RBC Capital Markets
Tom Liston – Versant Partners
Richard Gray – Cormark Securities
Chris Thompson – National Bank Financial
Dushan Batrovic – Dundee Securities
Eyal Ofir – Canaccord Genuity
Blair Abernethy – Stifel Nicolaus
Gabriel Leung – Paradigm Capital
Stephanie Price – CIBC World Markets
Chris Lee – GMP Securities
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Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Open Text Corporation FQ1 2011 financial results conference call. (Operator Instructions). I would like to remind everyone that this conference call is being recorded today, Wednesday, October 27, 2010, at 5:00 pm eastern time. I will now turn the conference over to Mr. Greg Secord, Vice President, Investor Relations. Please go ahead.
Good afternoon and thank you for joining us. Please note that during the course of the conference call we may make projections or other forward-looking statements relating to the future performance of Open Text or its subsidiaries. These are all statements that may contain forward-looking information and actual results could differ materially from a conclusion, forecast, or projection in the forward-looking information. Certain material factors or assumptions were applied in drawing a conclusion or while making a forecast or projection as reflected in the forward-looking information. Additional information about the material factors or assumptions that could cause actual results to differ materially from a conclusion, forecast or projection in the forward-looking information, and the material factors or assumptions that were applied in drawing a conclusion while making a forward-looking forecast or projection as reflected in the forward-looking information are contained in Form 10K and Form 10Q for Open Text as well as in our press release that was issued earlier today.
Before I get started, I would just like to comment on some recent and upcoming investor events. As I mentioned last quarter on September 13
Open Text held an analyst briefing at the Microsoft Campus in Redmond, Washington. With 11 representatives of Microsoft management participating, this briefing outlined the value our ECM suite brings to the Microsoft partnership. As a reminder, the presentation materials from the Microsoft analyst briefing are available in the investor relations section of our website.
In two weeks, on Wednesday, November 10
, we’ll be hosting an analyst and investor day at Content World, our annual users conference being held in Washington, D.C. The analyst briefing runs all day on Wednesday and features exclusive opportunities to meet with partners like Oracle and SAP, as well as the chance to meet with various Open Text executives. We will present a detailed overview of the product road map and host open discussions on our product development strategies. We integrate the analyst day with our regular conference program and allow our investors and analyst attendees freedom to meet and speak with customers at their leisure. If you’re interested in attending please email me directly and we’ll have someone from the IR team provide you with all the registration details.
And with that, I’ll turn the call over to Paul.
Thank you, Greg. I will highlight results of our Q1. Total revenue for the quarter was $217 million, up 3% compared to $211 million for the same period last year. License revenue for the quarter was $42.6 million, down 10% compared to $47.3 million reported for the same period last year. Maintenance revenue for the quarter was $130 million, up 5% compared to $124 million for the same period last year. Services and other revenue in the quarter was $45 million, up 11%, compared to $40 million in the same quarter last year.
Gross margin for the current quarter, before amortization of acquired technology was 73%, which remained unchanged from the same period last year. Gross margins for each of our revenue lines in the quarter were 92% for license, 85% for customer support, and 22% for services. Gross margins for the same quarter last year were 93% for license, 83% for customer support, and 18% for services.
Pretax adjusted operating income increased 29% year over year, from $48 million, or 22.7% in Q1 last year, to $62.1 million, or 28.6%, in the Q1 of this year. Adjusted net income increased 52% year over year, from $32.8 million to $50 million in the Q1 of this year. Q1 adjusted EPS was $0.86 on a diluted basis, up from $0.58 per share the same period a year ago. The adjusted tax rate for the quarter is 14%. We expect the fiscal year ‘11 tax rate to be in the 12% to 14% range, and cash taxes to be in the 5% to 10% range.
Net income for the Q1 in accordance with GAAP was $21.7 million, or $0.38 per share on a diluted basis, compared to $1.7 million, or $0.03 per share on a diluted basis for the same period a year ago. There are approximately 57.9 million shares outstanding on a fully diluted basis for the quarter.
Operating cash flow in the quarter was $48.9 million, compared to $4.5 million in the same period last year. Absent the impact of restructuring and direct acquisition-related costs incurred in the quarter, operating cash flow would have been approximately $56 million for the quarter versus approximately $14 million in the same period last year.