FY12-Q3 INVESTOR PRESENTATIONmimage.opentext.com/alt_content/binary/ot/investor/... · 2010-2015...

Copyright © Open Text Corporation. All rights reserved.

May 1, 2012

FY12-Q3

INVESTOR PRESENTATION

DisclaimerCertain statements in this presentation constitute forward-looking statements or forward-looking information within the meaning of applicable securities laws (“forward-looking statements”). Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Open Text, or developments in Open Text’s business or in its industry, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements. The historical increases in the Company's revenues and earnings do not assure the revenues and earnings will not decrease in the future. Forward-looking statements include all disclosure regarding possible events, conditions or results of operations that is based on assumptions about future economic conditions and courses of action. Forward-looking statements may also include any statement relating to future events, conditions or circumstances. Open Text cautions you not

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any statement relating to future events, conditions or circumstances. Open Text cautions you not to place undue reliance upon any such forward-looking statements, which speak only as of the date they are made. Forward-looking statements relate to, among other things, changes in the ECM market; the market focus of Open Text, Open Text’s revenue mix and margin targets; Open Text’s operations priorities; and Open Text’s strategy for its products and solutions. The risks and uncertainties that may affect forward-looking statements include, among others, the completion and integration of acquisitions, the possibility of technical, logistical or planning issues in connection with deployments, the continuous commitment of Open Text's customers, demand for Open Text 's products and other risks detailed from time to time in Open Text's filings with the Securities and Exchange Commission and Canadian provincial securities regulators, including Open Text's Annual Report on Form 10-K for the year ended June 30, 2011 and Quarterly Report on Form 10-Q for the quarters ended September 30, 2011, December 31, 2011 and March 31, 2012. Fforward-looking statements are based on management’s current plans, estimates, projections, beliefs and opinions, and the Company does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change.

Copyright © 2010 Open Text Corporation. All rights reserved.2Copyright © 2012 Open Text Corporation. All rights reserved.

Reconciliation of Selected Non-GAAP Measures – Q3 FY11Footnotes

1 Adjustment relates to the exclusion of share based compensation expense from our non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results

2 Adjustment relates to the exclusion of amortization expense from our non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.

3 Adjustment relates to the exclusion of Special charges from our non-GAAP-based operating expenses as Special charges are generally incurred in the aftermath of acquisitions and are not indicative or related to continuing operations and are hence excluded from our internal analysis of operating results.

4 Adjustment relates to the exclusion of Other income (expense) from our non-GAAP-based operating expenses as Other income (expense) relates primarily to the transactional impact of foreign exchange and are generally not indicative or related to continuing operations and are hence excluded from our internal analysis of operating results.

5 Adjustment relates to differences between the GAAP-based tax recovery of approximately 20% and a non-GAAP-based tax rate of 14%; these rate differences are due to the income tax effects of expenses that are excluded for the purpose of calculating non-GAAP-based adjusted net income. The GAAP-based tax recovery is primarily due to "one-time" tax benefits relating to ongoing internal reorganizations and mergers of international subsidiaries acquired; these reorganizations and mergers cause a change in the tax status of these subsidiaries resulting in a reduction in deferred tax liabilities recorded upon the acquisition of these subsidiaries, and a corresponding reduction in income tax expense.

� (Nasdaq: OTEX, TSX: OTC)

� $1B+ global revenue

� #1 in ECM*

Scale and Momentum


6 Reconciliation of non-GAAP-based adjusted net income to GAAP-based net income:

Three months ended March 31, 2011

Per share

Non GAAP net income 53,378 0.91

Less:

Amortization 27,779 0.48

Share-based compensation 3,095 0.05

Special charges 4,437 0.08

Other (income) expenses (3,078) (0.05)

GAAP based provision for (recovery of) income taxes

(5,995) (0.10)

Tax on Non-GAAP based provision (8,690) (0.16)

GAAP net income 35,830 0.61

� #1 in ECM*

� 4,600 employees

� 20 years of proven innovation

� 31 country offices

� 141 countries supported

*as per Gartner Group

Why OpenText

� Largest independent provider of Enterprise Content Management (ECM)

� Investing in new markets: Business Process Management (BPM)

� Demonstrated earnings power and operational discipline

� TTM cash flow of $238.6* million and large recurring maintenance revenues

Slide 44

Copyright © 2010 Open Text Corporation. All rights reserved.Copyright © 2012 Open Text Corporation. All rights reserved.

revenues

� $508.9 million in cash*

� Strategic growth opportunities: geographies, verticals and partners

� Market share gains over IBM and EMC

� Global scale: products, people and process

� Proven acquirer

* As of March 31, 2012

Why Customers Buy. Paths to Growth.

Why Customers Buy Paths To Growth

� Compliance and Regulations

� Core ECM Share Gains

� Business Process

5Copyright © 2012 Open Text Corporation. All rights reserved.

� Unstructured Data

� Information Security

� Mobility

� Cloud

� Standardization and Best Practices

� Business Process Management (BPM)

� Customer Experience Management (CEM)

� SAP and Microsoft

� New Verticals

� Public Sector

� Emerging Markets

Diverse Global Customer Base

6Slide 6

Copyright © 2012 Open Text Corporation. All rights reserved.

� Largest newspaper publisher in the UK

� Extended its use of OpenText Semantic solutions, to become a

Customer win: News International

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Semantic solutions, to become a key part of their Newsroom 360 transformation project

� Creates and distributes news content across all digital channels



Customer Win: The Spanish National Lottery

� Selected OpenText Web Experience Management to create their new website

Copyright © Open Text Corporation. All rights reserved. Slide 8Copyright © Open Text Corporation. All rights reserved. Slide 8

� Will be the main communication channel for their organization in the future

Customer win: Trinity Mirror plc

� Over the next 18 months all Trinity Mirror image desks will be consolidated in to the single database

� All its published digital assets, pages, articles and video

Copyright © Open Text Corporation. All rights reserved. Slide 9

pages, articles and video

� This will form a powerful and agile content hub - allows Trinity Mirror to leverage any digital asset against any of its titles, in print, on-line or tablet.

Customer win: Emergency Medicine Physicians

� Purchased OpenText Tempo™

� Information securely available allowing users to work with it as they need, using desktop, laptops, tablets, and mobile

Copyright © Open Text Corporation. All rights reserved. Slide 10Copyright © Open Text Corporation. All rights reserved. Slide 10

laptops, tablets, and mobile devices.

“Realizing that Dropbox did not meet our security requirements, EMP purchased

OpenText Tempo for secure file sharing from multiple devices. OpenText is a company we

can trust with our secure data needs. We couldn't be happier with the solution.”

-- David Peppard, Chief Information and Technology Officer, Emergency Medicine

Physicians.

OpenText Partner Ecosystem

Applications SI / FSI Transformation


The Value of Enterprise Information Management

Meet growing compliance and

Protect your valuable business

Support productive, secure and

Make optimal use of resources by

Information Governance

InformationSecurity

Information Exchange

InformationProcesses

compliance and regulatory

requirements to reduce exposure

and legal risk in the process of value

creation.

valuable business information from outside intruders and inside leaks.

secure and engaging

collaboration and communication in

the new social world.

of resources by empowering people with the information and processes they

need to be successful.

Slide 12Confidential: Open Text Corporation. All rights reserved.

Enterprise Information Management$13 Billion Opportunity, 10% Growth

2012$4.6B Market7.2% growth

ECM

2012$2.6B Market7.9% Growth

BPM

2012$3.2B Market11.4% Growth

InformationExchange

20121.35B Market14% Growth

CEM

2012$1.4B Market14% Growth

Discovery

7.2% growth

2011 - 20169.9% CAGR

Slide 13Confidential: Open Text Corporation. All rights reserved.

7.9% Growth

2011-20167.2%CAGR

11.4% Growth

2010-201511.4% CAGR

14% Growth

2009 -201414.3% CAGR

14% Growth

2010 – 201515.9% CAGR

Sources: • ECM, BPM: Gartner Forecast Enterprise Software Markets, 2009-2016 1Q12 Update• InfoExchange: Research and Markets, Computer-based Fax Markets, 2010-2015, Gartner Enterprise Software Markets, 2009 – 2016

1Q12 Update, Davidson Consulting, Fax Server Industry Forecast, 2011-2016• CEM: Gartner Magic Quadrant for Web Content Management, 10 Nov. 2011• Discovery: Gartner Market Trends: Expect Disruption and Divergence in the E-Discovery Software Market, 16 Dec 2011

Only 4% of Web content (~8 billion pages)is available via search engines like Google

The Public Web

The Big Picture

7.9

Source: The Deep Web: Semantic Search Takes Innovation to New Depths

The Deep Web

Approximately 96% of the digital universe is on Deep Web sites

protected by passwords

7.9Zettabytes

Why OpenText Will Lead the Market

1. Market evolving from Content Management to Enterprise Information Management

2. OpenText is well positioned to lead this category with broad product offerings and industry expertise

Slide 15Slide 15


product offerings and industry expertise

3. A trusted vendor - strong partner relationships with SAP and Microsoft/SharePoint

4. Delivering packaged applications that are content-centric not transaction-centric

FY12 – Q3 Business Highlights

� Technology, services, government and financial verticals saw the most demand

� Customer successes in the third quarter include Sumitomo Heavy Industry, NTT Comware, Conoco Phillips, News International, Trinity Mirror and The Spanish Lottery

� Integrated BPM sales force; now selling BPM globally

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� 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



FY12 – Q3 Financial Highlights

� 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

� 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*

� GAAP-based operating margin was 9.3%

� Non-GAAP-based operating margin was 25.2%**

Slide 17

� Non-GAAP-based operating margin was 25.2%**

� Gross Margin 63.6%

� Operating cash flow $96.6 million

� Cash and cash equivalents $508.9 million



* See reconciliation of Non-GAAP measures to GAAP measures at the end of this presentation**before taxes and interest expense

FY12 – Q3 Financial Stats

� Americas 53% of total revenue, EMEA 38% and Asia Pacific 9%

� License revenue 21%, customer support 57% and services/other 22%

� Partners contributed 52% of license revenue

� Average deal size: $227K

� Deals over $1 million: 1, compared to 5 Y/Y

� Deals between $500K and $1 million: 11, compared to 4 Y/Y

� License revenue from new accounts: 47%

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� License revenue from new accounts: 47%

� Total employees: approximately 4600

� Quota carrying sales reps: 442 (with overlay)

� Days sales outstanding: 54

� Shares outstanding 58.8 million

� Non-GAAP tax rate: 14%



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 gross margin 63.6% 67.1% 66.5% (350) bps (290) bps

GAAP operating income margin

9.3% 17.2% 10.9% (790) bps (160) bps

Slide 1919



GAAP EPS $0.59 $0.81 $0.61 (27.2%) (3.3%)

Non-GAAP gross margin *

71.0% 73.8% 73.3% (280) bps (230) bps

Non-GAAP operating margin**

25.2% 30.7% 24.4% (550) bps 80 bps

Non-GAAP EPS* $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 gross margin 65.2% 66.0% 67.1% (190) bps

GAAP operating income margin

12.2% 13.5% 15.2% (300) bps

Slide 2020



GAAP EPS $2.00 $1.41 $1.63 22.7%

Non-GAAP gross margin *

72.3% 72.9% 73.8% (150) bps

Non-GAAP operating margin**

27.2% 28.1% 28.2% (100) bps

Non-GAAP EPS* $3.43 $2.42 $3.02 13.6%

Summary of Quarterly Revenue Results

In millions Q3 FY12 Q2 FY12 Q3 FY11% Change

(Q/Q)% Change

(Y/Y)

License $61.0 $89.7 $67.8 (32.0%) (10.0%)

Customer support

166.0 165.4 143.1 0.4% 16.0%

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support

Service and other

65.3 66.4 52.1 (1.7%) 25.3%

Total $292.3 $321.5 $263.0 (9.1%) 11.1%

Summary of YTD Revenue Results

In millions Q3 FY12 Q2 FY12 Q3 FY11% Change

(Q/Q)% Change

(Y/Y)

License $215.7 $154.7 $189.6 39.4% 13.8%

Customer support

493.4 327.4 409.6 50.7% 20.5%

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support

Service and other

192.7 127.4 148.6 51.3% 29.7%

Total $901.8 $609.5 $747.8 48.0% 20.6%

21%

57%

22%

53%38%

9%

FY12 – Q3 Revenue BreakdownGlobal Revenue by Geography Global Revenue Mix

19%

15%

15%14%

14%

7%

5%

5%4%

2% Technology

Services

Public Sector

Financial

Basic Materials

Healthcare

Consumer Goods

Industrial Goods

Utilities

Conglomerates

Customer SupportService* LicenseEMEA Asia Pac Americas

Slide 23Slide 23

Copyright © 2010 Open Text Corporation. All rights reserved.23Copyright © 2012 Open Text Corporation. All rights reserved. *Includes under 1% of hardware revenue

License Revenue by industry

Revenue Type Fiscal 2012 Target

Model

Three months

ended Mar 31, 2012

(Actual)

Nine months ended

Mar 31, 2012

(Actual)

Product License 25-30% 20.9% 23.9%

Product Maintenance 52-57% 56.8% 54.7%

Professional Services 18-23% 22.3% 21.4%

Non-GAAP Gross

Margin

73-75% 71.0% 72.3%

Previously Announced Revenue Mix & Margin Internal Target Model*

Margin

Non-GAAP

Operating Expenses

Development 14-16% 13.9% 13.9%

Sales & Marketing 21-23% 22.9% 21.8%

General & Admin 8-10% 7.1% 7.6%

Depreciation 2% 1.9% 1.8%

Non-GAAP Ops

Margin

25-30% 25.2% 27.2%

24*This target model is not guidance.Copyright © 2012 Open Text Corporation. All rights reserved.

About EasyLink

� Public Company (Nasdaq ESIC)

� Cloud-based offerings

� Fax (production, desktop, broadcast) and Messaging (email, telex, notifications, EDI)

� TTM revenue of $186 million

Slide 2525


� TTM revenue of $186 million

� Operate profitably

� Revenue splits: 60% Americas, 23% APAC, 17% EMEA.

� Approximately 550 Employees

� Headquarters in Atlanta, GA

* As of March 31, 2012

Business Rationale

� Secure Information Exchange: $3.2B market, 11.4% CAGR*

� Upon close, transaction will be immediately accretive

� Cloud platform for Fax and Messaging

� Scalable architecture � Scalable architecture

� Leverage platform for other OpenText software

Copyright © 2011 Open Text Corporation. All rights reserved. 26

*InfoExchange: Research and Markets, Computer-based Fax Markets, 2010-2015, Gartner Enterprise Software Markets, 2009 – 2016 1Q12 Update, Davidson Consulting, Fax Server Industry Forecast, 2011-2016

Transaction Details

� All cash bid

� $7.25 per share in cash, purchase price of approximately $310 million, inclusive of debt

� Subject to customary closing conditions and approvalsapprovals

� Expected to close in mid-to-late summer 2012

Copyright © 2011 Open Text Corporation. All rights reserved. 27

Thank YouThank You


Reconciliation of Selected Non-GAAP Measures – Q3 FY12

(in ‘000s USD) Three months ended March 31, 2012

GAAP Adjustments

FN Non- GAAP

Cost of Revenues:

Customer support $ 27,987 $ (53) 1 $ 27,934

Service and other 52,596 (203) 1 52,393

Amortization of acquired technology-based intangibles 21,264 (21,264) 2

Gross profit 185,951 21,520 207,471

Operating expenses:

Research and development 41,738 (1,028) 1 40,710Research and development 41,738 (1,028) 1 40,710

Sales and marketing 69,572 (2,594) 1 66,978

General and administrative 21,999 (1,287) 1 20,712

Amortization – customer based intangibles 13,462 (13,462) 2

Special charges 6,450 (6,450) 3

GAAP income from operations/ Non-GAAP operating income 27,303 46,341 73,644

Other income, net (1,804) 1,804 4

Provision for (recovery of) income taxes (14,036) 23,680 5 9,644

GAAP net income/ Non GAAP net income $ 34,774 $ 24,465 6 $ 59,239

GAAP EPS/ Non GAAP EPS - diluted $ 0.59 $ 0.42 6 $ 1.01




Footnotes









Per share


Less:




Other (income) expenses 1,804 0.03

GAAP based provision for (recovery of )income taxes

(14,036) (0.24)



Reconciliation of Selected Non-GAAP Measures – Q3 YTD FY12

(in ‘000s USD) Nine months ended March 31, 2012

GAAP Adjustments FN Non- GAAP

Cost of Revenues:




Gross profit 588,350 63,827 652,177

Operating expenses:






GAAP income from operations/ Non-GAAP operating income

109,670 135,437 245,107

Other income, net 10,145 (10,145) 4







Footnotes








Nine months ended March 31, 2012

Per share


Less:





GAAP based provision for (recovery of )income taxes

(8,542) (0.15)




(in ‘000s USD) Three months ended December 31, 2011

GAAP Adjustments

FN Non- GAAP

Cost of Revenues:




Gross profit 215,761 21,393 237,154

Operating expenses:

Research and development 42,652 (768) 1 41,884Research and development 42,652 (768) 1 41,884


General and administrative 25,126 (813) 1 24,313




Other expenses, net 2,637 (2,637) 4

Provision for income taxes 6,819 6,472 5 13,291






Footnotes





5 Adjustment relates to differences between the GAAP-based tax rate of approximately 13% and a non-GAAP-based tax rate of 14%; these rate differences are due to the income tax effects of expenses that are excluded for the purpose of calculating non-GAAP-based adjusted net income.



Three months ended December 31, 2011

Per share


Less:





GAAP based provision for income taxes 6,819 0.12




(in ‘000s USD) Six months ended December 31, 2011

GAAP Adjustments

FN Non- GAAP

Cost of Revenues:




Gross profit 402,399 42,306 444,705

Operating expenses:






GAAP income from operations/ Non-GAAP operating income 320,032 (46,790) 273,242








Footnotes





5 Adjustment relates to differences between the GAAP-based tax rate of approximately 6% and a non-GAAP-based tax rate of 14%; these rate differences are due to the income tax effects of expenses that are excluded for the purpose of calculating non-GAAP-based adjusted net income.



Six months ended December 31, 2011

Per share


Less:









(in ‘000s USD) Three months ended March 31, 2011

GAAP Adjustments

FN Non- GAAP

Cost of Revenues:




Gross profit 174,979 17,809 192,788

Operating expenses:

Research and development 41,324 (653) 1 40,671Research and development 41,324 (653) 1 40,671


General and administrative 23,323 (873) 1 22,450









Reconciliation of Selected Non-GAAP Measures – Q3 FY11Footnotes









Per share


Less:





GAAP based provision for (recovery of) income taxes

(5,995) (0.10)




(in ‘000s USD) Nine months ended March 31, 2011

GAAP Adjustments

FN Non- GAAP

Cost of Revenues:




Gross profit 501,891 49,881 551,772

Operating expenses:







Other expenses, net (660) 660 4






Footnotes





5 Adjustment relates to differences between the GAAP-based tax rate of approximately 11% and a non-GAAP-based tax rate of 14%; these rate differences are due to the income tax effects of expenses that are excluded for the purpose of calculating non-GAAP-based adjusted net income. The GAAP-based tax recovery is primarily due to "one-time" tax benefits relating to ongoing internal reorganizations and mergers of international subsidiaries acquired; these reorganizations and mergers cause a change in the tax status of these subsidiaries resulting in a reduction in deferred tax liabilities recorded upon the acquisition of these subsidiaries, and a corresponding reduction in income tax expense.



Nine months ended March 31, 2011

Per share


Less:




Other (income) expenses 660 0.01




FY12-Q3 INVESTOR PRESENTATIONmimage.opentext.com/alt_content/binary/ot/investor/... · 2010-2015...

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