Open Text Q1 2004 Earnings Conference Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: David Shore - Desjardins Securities - Analyst : Yeah, thanks. Just looking at the margins. The service margins were a lot lower than we were modeling. Can you talk about that?

Question: Paul Steep - Orion Securities - Analyst : Good morning. John, could you talk a little bit about either the internal or external factors during Q1 that adversely impacted license revenues and...

Question: Scott Penner - TD Newcrest - Analyst : Thanks. Could you just, Alan, update - are you still comfortable with $50m of aggregate cash flow from operations for the year? And then the - whether the updated guidance is still based on a 35% tax rate for the year as a whole. And just, Tom - if you could follow on and just the - the updated revenue guidance, whether you're still sort of assuming about a $10m contribution from the [Gaios] acquisition.

Question: Scott Penner - TD Newcrest - Analyst : And what's the difference of that? It's probably a penny?

Question: Andre Krueger - SWS Securities - Analyst : Yes. This is actually Andre Krueger [ph] for Brad Whitt. Could you comment on the vertical breakdown? Any verticals showing weakness or strength in the quarter?

Question: Jeffrey Fan - UBS Warburg - Analyst : Hi, a question for John. You mentioned that you're keeping two separate product divisions but yet you plan to integrate these two products - I'm talking about Ixos here. Why are you keeping two separate product divisions if you're going to integrate them? Can you just verify that statement and explain why?

Question: Mike Abramsky - Canaccord Capital - Analyst : Yeah, guys. Could you just - obviously in terms of your increased guidance for the rest of the year, given the shortfall against your guidance for this quarter, are you being a bit more conservative? Is there anything changed about the way that you're looking at your outlook and what factor does Gauss play to give you that increased confidence to give the increased guidance, given the bit of a shortfall here?

Question: Byron Berry - National Bank Financial - Analyst : Sure. Can you highlight where you think the biggest opportunity from Ixos is going to come? Is it going to come from selling Ixos products to Livelink customers or vice versa?

Question: Peter Misek - Scotia Capital - Analyst : Hi, guys. Just want to ask you about the - on the cash flow statement, the income taxes payable amount, a reduction to cash flow of about $4m. Can you walk through what that is? Weren't expecting you to pay that kind of level in taxes and just want to make sure that we're not making some wrong presumptions here. Thanks.

Question: Peter Misek - Scotia Capital - Analyst : And that was due to what? The transition...

Question: David Wright - BMO Nesbitt Burns - Analyst : Thanks. I'd just like to go back on the services question to get a clarification. Your margins in the services business have ranged between sort of 20% and 40%, and the latest quarter was 9%. I guess if you're using partners more, then I should expect a lower margin. But I was just wondering is that kind of the guidance that you want to give that's sort of in the 10% range for the coming year, because it's different than the current modeling. And also...

Question: Greg Smith - Haywood Securities - Analyst : Hey, guys. I've just got a question on Ixos, on its tax loss carry forwards after they did those two acquisitions last year. Just wanted to know what is that level currently and what can you expect to use?

Question: Scott Kessler - Standard and Poor's - Analyst : Hi, thanks very much. I think one of the issues that's kind of been alluded to during the call is the fact that there seems to be a discrepancy between what analyst outlook for quarterly revenues were and perhaps what your expectations were, and I think that disconnect is one of the reasons why your stock is currently down about 8%. So I was wondering if you could - you indicated obviously that there were some deferrals of deals going from say Q1 to Q2. And this has at this point only been kind of alluded to. If you could kind of provide us with a little bit more detail in terms of what you were expecting with respect to revenues, maybe why there was that disconnect - I think it might not be a bad idea to try to ensure that there isn't that disconnect. And if you could talk about some of the deferrals and if, in fact, those deferrals have, in fact, become revenues in the current quarter. Thank you.

Question: Howard Lis - Griffiths McBurney and Partners - Analyst : Good morning. Just want to go back to the clarification on guidance and tax rates and I think there's still a little bit of confusion on that. You've indicated that you're raising guidance. The prior guidance, as I understood it to be, was about, split adjusted, 66 cents, and I think we were under the assumption that was using a 35% tax rate. Your new guidance of 67 cents - it sounds like the tax rate is lower than 35. Possibly even 30, which is where it was this quarter. Can you just clarify that matter and indicate as well if there's any break fees on the Ixos deal. Thanks.

Question: Brandon Osten - Sprott Securities - Analyst : Oh, hi, guys. Just, you know, to - I don't want to beat a dead horse here, but on this license revenue issue, you know, if you look at $15.5m last year in Q1 and you guys bought [inaudible] and [inaudible] since, the implication there seems to be that your license revenue was flat year over year, and, you know, in Q3 and Q4 of last year you guys were showing a real ramp. Is this not the slightest bit disappointing to you in terms of growth in that revenue line?