Summary

• OpenText is a world leader in Information Management, helping companies securely capture, govern and exchange information on a global scale.
• OpenText solves digital business challenges for customers, ranging from small and mid-sized businesses to the largest and most complex organizations in the world.
• The company has approximately 14,300 individuals employee serving in 34 countries
• Its initial public offering was on the NASDAQ in 1996 and we were subsequently listed on the Toronto Stock Exchange (TSX) in 1998.

Company Overview

Headquartered in Waterloo, Ontario, Canada, OpenText (NYSE:OTEX, TSX:OTEX) is a world leader in Information Management, helping companies securely capture, govern and exchange information on a global scale.¹

OpenText solves digital business challenges for customers, ranging from small and mid-sized businesses to the largest and most complex organizations in the world. Empowering customers with the most complete and integrated Information Management platform, OpenText solutions integrate and protect data and content inside and outside their organization.

The company's initial public offering was on the NASDAQ in 1996 and the company were subsequently listed on the Toronto Stock Exchange (TSX) in 1998.

Global Footprint

As of June 30, 2021, the company employed a total of approximately 14,300 individuals, of which 6,800 or 48% are in the Americas, 2,600 or 18% are in EMEA and 4,900 or 34% are in Asia Pacific. Currently, Open Text has employees in 34 countries enabling strong access to multiple talent pools while ensuring reach and proximity to its customers.

 With corporate headquarters in Waterloo company has wide geographical presence. The approximate composition of its employee base is as follows .²

• 2,400 employees in sales and marketing
• 4,200 employees in product development
• 3,300 employees in cloud services
• 1,400 employees in professional services
• 1,100 employees in customer support
• 1,900 employees in general and administrative roles.

Products and Services

OpenText has a complete and integrated portfolio of Information Management solutions delivered at scale in the OpenText Cloud, helping organizations master modern work, power modern experiences and optimize their digital supply chains. To do this, the company bring together its Content Cloud, Business Network Cloud, Experience Cloud, Security and Protection Cloud and Developer Cloud with advanced technologies such as AI, analytics and automation. The company's solutions improve business insight, employee productivity, customer experiences, asset utilization, collaboration, supply chain efficiency and risk management. The company's software capabilities connect information across people, systems and Internet of Things (IoT) devices and securely manage, store, access and mine it with analytics for actionable and relevant insights. Below is a listing of its Information Management solutions.³

Content Cloud

The company's Content Cloud empowers customers to master modern work through robust content management, improved integrations and intelligent automation. It connects content to the digital business to eliminate silos and provide convenient, secure and compliant remote access to both structured and unstructured data - boosting productivity and reducing risk. The company's solutions manage the lifecycle, distribution and use of information across the organization, from capture through to archiving and disposition.

The company's Content Services solutions range from content collaboration and intelligent capture to records management and archiving, and are available off-cloud, on a cloud provider of the customer’s choice, as a subscription in the OpenText Cloud, in a hybrid environment or as a managed service. The company's Content Services solutions enable customers to capture documents and data from paper, electronic files, and other sources and transform it into digital content delivered directly into enterprise content management solutions and business processes. The company's customers can protect critical historical information within a secure, centralized archiving solution.

The company's Content Services integrate with the applications that manage critical business processes, such as SAP® S/4HANA, SAP® SuccessFactors®, Salesforce®, Microsoft® Office 365® and other enterprise software, establishing the foundation for intelligent business process and content workflow automation. By connecting unstructured content with structured data workflows, its Content Services allow users to have the content they need, when they need it, reducing errors and saving valuable time.

Additionally, OpenText Content Services adhere to the Content Management Interoperability Services (CMIS) standard and support a broad range of operating systems, databases, application servers, and enterprise applications.

Business Network Cloud

The company's Business Network Cloud provides a foundation for digital supply chains and secure e-commerce. The company's Business Network manages all data within the organization and outside the firewall, connecting people, systems and IoT devices at a global scale. For its customers, this delivers streamlined connectivity, secure collaboration and real-time business intelligence in a single, unified platform. Organizations can build global and sustainable supply chains, rapidly onboard new trading partners, comply with regional mandates, assess their credit quality and ethics scores, provide electronic invoicing and remove information silos across the extended enterprise.

The company's Trading Grid connects trading partners globally and is used across a variety of industries. Delivered as a cloud service, the company enable data integration, data management, messaging, communications, and secure data exchange across an increasingly complex network of off-cloud and cloud applications, connected devices and business partners or customers.

The platform comprises solutions such as digital fax, identity and access management, digital business integration, supply chain optimization, data management and security, omnichannel communications, industrial IoT and more. These solutions simplify the inherent complexities of business-to-business (B2B) data exchange and offer insights that help drive operational efficiencies, accelerate time to transaction and improve customer satisfaction.

Experience Cloud

The company's Experience Cloud powers modern experiences that drive revenue growth and customer loyalty. The company's Digital Experience solutions create, manage, track and optimize omnichannel interactions throughout the customer journey, from acquisition through to retention, and integrates with systems of record such as Salesforce® and SAP®. The OpenText Digital Experience platform enables businesses to gain insight into their customer interactions and optimize them to improve customer lifetime value. This includes solutions and extensions that deliver highly personalized content and engagements along a continuous customer journey. With AI-powered analytics, the Experience Cloud can evaluate and deliver optimized user experiences at scale to ensure every point of interaction, whether physical or digital, on any device, is engaging and personalized.

The Digital Experience cloud platform includes a range of solutions from Customer Communications Management (CCM), Web Content Management (WCM), Digital Asset Management (DAM), Customer Analytics, AI & Insights, Digital Fax and Secure Messaging, Voice of Customer (VoC), Workforce Optimization (WFO), Intelligent Forms Automation, as well as customer journey, testing and segmentation.

Security and Protection Cloud

The company's Security and Protection Cloud provides peace of mind with cybersecurity, data protection, digital forensic and endpoint security solutions. Businesses of all sizes benefit from a comprehensive solution for proactively defending against cyber threats and preparing for business continuity and response in the event of a breach. It delivers multiple layers of defense to detect, protect against, forensically investigate and remediate security threats or data loss. The company protect information managed by individuals, businesses, and governments within applications and at the endpoints. For highly regulated organizations, its digital investigation and forensic security solutions enable them to find and collect complex evidence faster, reduce risk and detect and respond to cyberthreats remotely.

OpenText security solutions address information cyber resilience needs with leading digital forensic tools and endpoint detection and response. The company provide 360-degree visibility across all endpoints, devices and networks, for proactive discovery of sensitive data, identification and remediation of threats and discreet, forensically-sound data collection and investigation. With the launch of Managed Detection and Response (MDR), OpenText Security analysts and threat hunters now deliver services 24x7, 365 days a year, combining front-line experience with industry leading automation, AI technology and OpenText software to help organizations detect threats in real time, rather than days or weeks.

The company's Carbonite and Webroot product lines expand its data security and protection capabilities further for Enterprise, SMB and consumers, delivering continuous threat monitoring, remote endpoint protection, and automated cloud backup and recovery to protect employees and customer data while allowing organizations to prepare for, respond to, and recover quickly from cyberattacks.

The company's Discovery platform provides leading forensics and unstructured data analytics for searching and investigating organizational data to manage legal obligations and risk. It has powerful machine learning capabilities to help legal and compliance teams quickly find critical information for litigation discovery, investigations, compliance, data breach response, business projects, and financial contract analysis.

Developer Cloud

The company's Developer Cloud makes it faster and easier to build, extend and customize Information Management applications using a collection of Cloud services, applications, Application Programming Interfaces (APIs) and Software Development Kits (SDK). The company's solutions help research and development (R&D) teams streamline new development initiatives, utilizing fewer resources and reducing time to delivery for their projects. With its Developer Cloud's language-neutral protocols and cloud API services, its customers can reduce infrastructure spend, improve time-to-market and minimize the time and effort of adding new capabilities. Every new product that the company release will be available as a service in the Developer Cloud.

The OpenText Developer Cloud delivers a broad and deep set of Information Management as a Service capability for organizations to extend their existing OpenText implementations or include its capabilities into their own custom solutions, such as for customer, supplier and partner collaboration. The Developer Cloud also includes IoT capabilities for organizations to dynamically integrate multi-tiered supply chain communities and build IoT solutions for greater efficiency, agility, and new value-added services. Data security is embedded into everything so the developer can focus on building differentiated user experiences.

Key developer API services include multi-channel capture and advanced recognition, secure and flexible content services, prescriptive and predictive analytics and reporting capabilities, low-code / no-code process and dynamic case management, enterprise federated search and electronic discovery, remote desktop and virtual desktop infrastructure, content customization / personalization and output management, information and end-point security capabilities, and the IoT platform.

The company's Information Management platform can also be expanded with its low-code development tools, product APIs and SDK across the portfolio, cloud API services and out-of-the-box integrations designed to support the developer with a unified application development environment.

Advanced Technologies

The company's Advanced Technologies are applied horizontally across all of its platforms and applications to accelerate digital transformation for customers. They enrich data and deliver valuable insights at scale with machine learning and artificial intelligence, optimize processes with insight, automation and data-driven decision making, and allow organizations to quickly adopt new technologies or adapt processes with API driven products and developer services. OpenText is regularly innovating to ensure its customers are armed with the technology they need to create Information Advantage.

AI and Analytics

The company's AI and Analytics platform leverages structured or unstructured data to help organizations improve decision-making, gain operational efficiencies and increase visibility through interactive dashboards, reports and data visualizations. It leverages a comprehensive set of data analytics software - such as text mining, natural language processing (NLP), interactive visualizations and machine learning - to identify patterns, relationships, risks and trends that are used for predictive process automation and accelerated decision making.

The company's AI platform supports composite AI for improved accuracy and incorporates Apache Spark, a powerful, open-source computing foundation that lets customers take advantage of the flexibility, extensibility, and diversity of an open product stack while maintaining full ownership of their data and algorithms. Open Text is able to turn repositories of information into clean and integrated “data lakes” that can be mined by AI to extract useful knowledge and insight for its customers.

Digital Process Automation (DPA)

The company's automation solutions enable organizations to transform into digital, data-driven businesses. DPA delivers and supports a variety of process-driven applications that address complex business needs, while simultaneously providing a flexible platform for rapidly building and deploying customer-centric applications. Through DPA, Open Text is helping customers reengineer processes and quickly adapt to customer needs to deliver seamless customer and employee experiences. The company speed the development of case- and process-driven applications with low-code, drag-and-drop components, reusable building blocks and pre-built accelerators to build and deploy solutions more easily.

Managed Services

OpenText provides a range of Managed Services, whether off-cloud, in the OpenText Cloud, in hybrid scenarios or even in other clouds, including its partners: Google Cloud Platform, Amazon Web Services (AWS) and Microsoft Azure. The company's team provides full managed services for Information Management solutions to meet the needs of its customers. Cloud Managed Services aims to help keep customers current on the latest technology, reduce the burden on information technology staff and ensure optimal application management by trusted experts.

With OpenText Managed Services, organizations can focus resources on their core business priorities and rest assured that their infrastructure, applications, integrations, and upgrades are all managed, monitored and optimized for security, performance and compliance. The company's Cloud Managed Services offering provides customers with a single point of contact and a single service level agreement for OpenText solutions managed in its partner’s clouds.

Research and Development

The industry in which the company compete is subject to rapid technological developments, evolving industry standards, changes in customer requirements and competitive new products and features. As a result, its success, in part, depends on its ability to continue to enhance its existing products in a timely and efficient manner and to develop and introduce new products that meet customer needs while reducing total cost of ownership. To achieve these objectives, Open Text has made and expect to continue to make investments in research and development, through internal and third-party development activities, third-party licensing agreements and potentially through technology acquisitions. The company's R&D expenses were $421.4 million for Fiscal 2021, $370.4 million for Fiscal 2020 and $321.8 million for Fiscal 2019. The company believe its spending on research and development is an appropriate balance between managing its organic growth and results of operations. The company expect to continue to invest in R&D to maintain and improve its products and services offerings.

Recent Acquisitions

The company regularly evaluate acquisition opportunities within the Information Management market and at any time may be in various stages of discussions with respect to such opportunities.

Below is a summary of the more material acquisitions Open Text has made over the last five fiscal years.

• On March 9, 2020, the company acquired XMedius, a provider of secure information exchange and unified communication solutions, for $73.5 million.
• On December 24, 2019, the company acquired Carbonite Inc. (Carbonite), a leading provider of cloud-based subscription backup, disaster recovery and endpoint security to SMB, consumers, and a wide variety of partners, for $1.4 billion.
• On December 2, 2019, the company acquired certain assets and certain liabilities of Dynamic Solutions Group (The Fax Guys) for $5.1 million.
• On January 31, 2019, the company acquired Catalyst, a leading provider of eDiscovery that designs, develops and supports market-leading cloud eDiscovery software, for $71.4 million.
• On December 17, 2018, the company acquired Liaison, a leading provider of cloud-based business to business integration, for $310.6 million.
• On February 14, 2018, the company acquired Hightail, a leading cloud service for file sharing and creative collaboration, for $20.5 million.
• On September 14, 2017, the company acquired Guidance, a leading provider of forensic security solutions, for $240.5 million.
• On July 26, 2017, the company acquired Covisint, a leading cloud platform for building Identity, Automotive, and IoT applications, for $102.8 million.
• On January 23, 2017, the company acquired certain assets and assumed certain liabilities of the enterprise content division of EMC Corporation, a Massachusetts corporation, and certain of its subsidiaries (ECD Business) for $1.62 billion.
• On July 31, 2016, the company acquired certain customer communications management software services assets and liabilities from HP Inc. (CCM Business) for $315.0 million. 
• On July 20, 2016, the company acquired Recommind, a leading provider of eDiscovery and information analytics, based in San Francisco, California, United States, for $170.1 million.

Financial Highlights

Total revenue for the year ended June 30, 2021 was $3,386.1 million, up 8.9% compared to the prior fiscal year; up 6.3% after factoring in the favorable impact of $81.3 million of foreign exchange rate changes.

Total annual recurring revenue, which the company define as the sum of cloud services and subscriptions revenue and customer support revenue, was $2,741.5 million, up 12.7% compared to the prior fiscal year; up 10.4% after factoring in the favorable impact of $54.9 million of foreign exchange rate changes.

Cloud services and subscriptions revenue was $1,407.4 million, up 21.6% compared to the prior fiscal year; up 20.0% after factoring in the favorable impact of $17.8 million of foreign exchange rate changes.

GAAP-based gross margin was 69.4% compared to 67.7% in the prior fiscal year.

Non-GAAP-based gross margin was 76.1% compared to 74.5% in the prior fiscal year.

GAAP-based net income attributable to OpenText was $310.7 million compared to $234.2 million in the prior fiscal year.

Non-GAAP-based net income attributable to OpenText was $927.2 million compared to $784.5 million in the prior fiscal year.

GAAP-based earnings per share (EPS), diluted, was $1.14 compared to $0.86 in the prior fiscal year.

Non-GAAP-based EPS, diluted, was $3.39 compared to $2.89 in the prior fiscal year.

Adjusted EBITDA was $1,315.0 million compared to $1,148.1 million in the prior fiscal year.

Operating cash flow was $876.1 million compared to $954.5 million in the prior fiscal year, down 8.2%.

During Fiscal 2021, the company made payments of $299.6 million relating to the IRS Settlement (as defined herein) and repaid the $600 million previously drawn under the Revolver (as defined herein) using cash on hand.

Cash and cash equivalents were $1,607.3 million as of June 30, 2021, compared to $1,692.9 million as of June 30, 2020.

Second Quarter Fiscal Year 2022 Results

02/03/2022 Open Text Corporation announced its financial results for the second quarter ended December 31, 2021.⁴

Record Q2 results reflective of its Cloud-first strategy to drive organic growth

• Continued investments in talent, innovation, digital marketing and global sales coverage
• Operating cash flows were $216.6 million and free cash flows were $206.0 million
• GAAP-based net income of $88.3 million, up 234.9% Y/Y, margin of 10.1%, up 1,780 basis points Y/Y
• Adjusted EBITDA of $343.5 million, margin of 39.2%
• GAAP-based diluted EPS of $0.32, up 233.3% Y/Y
• Non-GAAP diluted EPS of $0.89, down 6.3% Y/Y
• Strengthened Security offering with acquisition of Zix Corporation for $896.0 million and Bricata Inc.
• Issued $1.5 billion of senior notes to refinance existing debt and provide $650 million of incremental capital
• During the quarter, the company repurchased and cancelled 1.8 million shares for $91.0 million under its share repurchase plans

"The company delivered another robust quarter of organic growth driven by demand for OpenText Cloud Editions, closed the Zix acquisition and Open Text is raising its Fiscal 2022 target model to include cloud growth of up to 10% and total revenue growth of up to 4%.  The first half of Fiscal 2022 provides demonstrable progress towards its Fiscal 2024 Aspirations to include up to 4% organic growth," said Mark J. Barrenechea, OpenText CEO & CTO.  "Total revenues of $876.8 million grew 2.5% year-over-year and were led by Cloud revenues of $364.9 million, up 4.1% year-over-year.  Total Annual Recurring Revenues of $699.8 million grew 2.2% year-over-year, representing 80% of its total revenues."

"OpenText brings a complete and integrated suite of Information Management solutions to customers of all sizes, while providing the layers of defense needed to help organizations secure their users, end points, and networks in the face of ever-increasing cyber threats and ransomware. With the addition of Zix to its Security & Protection Cloud, OpenText leads the market in cyber resiliency with a powerhouse SMB platform for data protection, threat management, email security and compliance solutions," said Mr. Barrenechea.

"I am very pleased with OpenText's performance in Q2.  The company delivered $343.5 million of adjusted EBITDA and $206.0 million in free cash flows while purchasing Zix Corporation for $896.0 million," said Madhu Ranganathan, OpenText EVP, CFO.  "With its recent refinancing of outstanding debt, Open Text has approximately $1.5 billion of cash as of December 31, 2021, and a net leverage ratio of 2.0x.  The company's balance sheet and liquidity position remain strong as the company continue to focus on investments that advance its products and systems to drive its organic growth, while supporting the integration and profitability of current and future acquisitions."

As part of its quarterly, non-cumulative cash dividend program, the Board declared on February 2, 2022, a cash dividend of $0.2209 per common share. The record date for this dividend is March 4, 2022 and the payment date is March 25, 2022. OpenText believes strongly in returning value to its shareholders and intends to maintain its dividend program. Any future declarations of dividends and the establishment of future record and payment dates are all subject to the final determination and discretion of the Board of Directors.

References

1. ^ https://www.opentext.com/about
2. ^ https://www.opentext.com/about/office-locations
3. ^ https://s23.q4cdn.com/197378439/files/doc_financials/2021/ar/OpenText-2021-Annual-Report.pdf
4. ^ https://investors.opentext.com/press-releases/press-releases-details/2022/OpenText-Reports-Second-Quarter-Fiscal-Year-2022-Financial-Results/default.aspx