OpenText: Fiscal 2Q20 Financial Results

• Annual recurring revenue represents 73% of total revenues
• GAAP net income of $107.5 million, up 2.9% Y/Y
• Adjusted EBITDA of $317.0 million, up 2.8%, margin of 41.1%, down 80 basis points Y/Y
• GAAP diluted EPS of $0.40, up 2.6% Y/Y
• Non-GAAP diluted EPS of $0.84, up 5.0%, and $0.86 in constant currency, up 7.5% Y/Y
• Operating cash flows were $860.5 million during the trailing 12 months
• Declares cash dividend of $0.1746 per common share

Open Text Corporation announced its financial results for the second quarter ended December 31, 2019.

“With the addition of Carbonite, we have a strategic market-opportunity to bring information management to all sizes of customers, from the largest of enterprises, governments, mid-size companies, small companies, and consumers. We are excited and energized to write the next chapter for OpenText as our vision expands and advances to information management, helping customers to migrate into the cloud and reinvent their businesses processes“, said Mark J. Barrenechea, CEO and CTO. “We are a partner-oriented company with the talent and culture to make an SMB channel wildly successful. With Carbonite this partner opportunity gets stronger and deeper as we leverage OpenText’s proven expertise and successful track record of building powerful global partner programs. Our 2Q20 results reflect an increasing demand for OpenText products as we delivered strong top-line growth. In constant currency, total revenus grew to $781.8 million, up 6.3% Y/Y, annual recurring revenue grew to a record $570.8 million, up 7.8% Y/Y, representing 73% of total revenue, driven by cloud services and subscriptions revenue of $250.2 million, which increased by 14.1% Y/Y.“

“OpenText demonstrated solid operational performance during the second quarter, delivering to our Total Growth Strategy. We put our capital to work, while maintaining a strong balance sheet with a net leverage ratio of 2.3x, and generated solid operating cash flows of $207.2 million, supported by equally strong A-EBITDA results,” said EVP and CFO, Madhu Ranganathan. “The Carbonite transaction closed efficiently, financed by our internal cash and existing revolver. The integration has kicked off with strength and we remain on target to complete the Carbonite integration by the end of FY21.“

Integration of Carbonite and Restructuring Plan
As OpenText integrates the acquisition, it anticipates a one-time deferred revenue adjustment that will result in a reduction in Carbonite revenue. In addition to this deferred revenue adjustment impact, it expects Carbonite revenue contribution to be down for the next few quarters due to typical integration activities, and then normalize to historical levels thereafter.

The company is also announcing a restructuring plan that will impact its global workforce and consolidate certain real estate facilities to further streamline our operations, inclusive of Carbonite. The anticipated cost is expected to be approximately $26 million to $34 million. These restructuring activities are anticipated to be completed by the end of FY21, and once completed, OpenText anticipates annualized cost savings of approximately $37 million to $41 million. It expects any savings realized during the remainder of FY20 to be offset by one-time Carbonite integration costs.