Open Text Q1 2011 Earnings Conference Call Transcript

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

Question: Scott Penner - TD Newcrest/Waterhouse Securities - Analyst : Thanks. Just the first of all, Paul just to clarify I think you said or implied, that there was a $7 million impact from cash restructuring in the quarter?

Question: Scott Penner - TD Newcrest/Waterhouse Securities - Analyst : What is left to come if anything this year?

Question: Scott Penner - TD Newcrest/Waterhouse Securities - Analyst : Okay. And then John, just your guidance or your statement on the industry analysts outlook. I just want to make sure I'm clear versus what you are saying last quarter, 6% to 8% between now and 2013, I believe last quarter you said 4% to 8%. I'm just kind of wondering whether you're actually feeling more optimistic about it, or whether you're now saying, it's now between 2013, there could be a lot of volatility in the meantime?

Question: Scott Penner - TD Newcrest/Waterhouse Securities - Analyst : Okay. And just -- there's been some commentary, that specifically that you are losing large customers to Microsoft SharePoint, I wondered if you could address that directly? And then just give an update on how Microsoft is affecting your SharePoint (inaudible) so far.

Question: Scott Penner - TD Newcrest/Waterhouse Securities - Analyst : And just lastly from me, on the acquisition of StreamServe -- the I guess you said slightly accretive, Paul? What should we look at the for the quarterly progression? Is it going to be dilutive in the first quarter, and how long does it take to get to the operating model?

Question: Scott Penner - TD Newcrest/Waterhouse Securities - Analyst : Okay, thanks guys

Question: Michael Abramsky - RBC Capital Markets - Analyst : Yes, thanks very much. So, John, just again, on kind of macro outlook and your market (inaudible) are you --when you talk about making up for the rest of the year, does it come from a view that you will get benefit from a budget flush for next quarter? And you are seeing sort of an interim slip? Or is there more of a more fundamental slip on some larger deals or delays? And you think that that's more of the back half phenomenon, starting kind of at the beginning or in January? What is?

Question: Michael Abramsky - RBC Capital Markets - Analyst : And Europe has just gone through major budget review, as I'm sure you're aware. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies.

Question: Michael Abramsky - RBC Capital Markets - Analyst : Do you see some sustained over hang from that review?

Question: Michael Abramsky - RBC Capital Markets - Analyst : Okay. And your EBIT margins came in very strong, and towards the high end of your 25 to 30 guidance. And I think you maintain that guidance throughout the rest of the year. But could you give us a sense of what levers you've got to pull, in terms of maintaining your margins to anticipate those levels?

Question: Michael Abramsky - RBC Capital Markets - Analyst : Okay, and --

Question: Michael Abramsky - RBC Capital Markets - Analyst : Well, you guys always do a good job of delivering good margins, even in tough environments, and you did certainly for this quarter. And lastly on the SharePoint question. I acknowledge that you reflect that you're suggesting that clients -- there is still relevance for Open Text. At the same time SharePoint 2010 is only just starting to get to deployed. So is it possible that (inaudible) with regard to how SharePoint will impact your business or not?

Question: Michael Abramsky - RBC Capital Markets - Analyst : Okay,John, thanks.

Question: Tom Liston - Versant Partners Inc. - Analyst : Hi, thank you, good afternoon. Just on the license question when you look at your cost which is obviously well managed this quarter, certainly R&D and sales and marketing were lowest end of the range, even with a bit of a shortfall in license. So how do you look at the levers and connected to, because if you are pulling back maybe on sales and marketing resources, pulling back on development, maybe if you lever that up a bit, you could get higher license number . How do you look at the coordination between the two? Maybe more resources means deals can close on a more meaningful way. Can you help us understand, as you cut that, how does it affect potential future

Question: Tom Liston - Versant Partners Inc. - Analyst : Sure. And just on StreamServe, I apologize if mentioned, but when does a close? And can you also give us a flavor for how there license -- sorry -- how their revenue components are broken out? Growth rates, rough profitability type margin historically?

Question: Tom Liston - Versant Partners Inc. - Analyst : And I think you have a few OEM agreements in the channel, how are those recognized?

Question: Tom Liston - Versant Partners Inc. - Analyst : Okay, and then just rough historical growth rates and profitability margin?

Question: Tom Liston - Versant Partners Inc. - Analyst : And do you have a handle on any restructuring charges?

Question: Tom Liston - Versant Partners Inc. - Analyst : Okay. Fair enough, I'll get off the line.

Question: Richard Tse - Cormark Securities - Analyst : Paul, just on the revenue with respect to the StreamServe, what do you expect to see I guess cut off in terms of that $50 million run rate you typically sort of ratchet down the revenue base, would that be typical of previous transactions or?

Question: Richard Tse - Cormark Securities - Analyst : As well as with the strong relationship with SAP and Oracle and others, we think we can integrate it fairly quickly. So while there might be an initial dip with the integration is going on, we are anticipating it won't be as large as usual. Okay, and I guess getting back to the SharePoint question. Have you guys lost any sort of core ECM platform LiveLink customers to SharePoint?

Question: Richard Tse - Cormark Securities - Analyst : Right, and I guess -- you seem confident that you're going to pickup some of the losses after the next quarter? Can you sort of get into specific as to why that's the case, like if you had some sort of commitments that you could maybe give us some specificity on why you have that confidence you do?

Question: Richard Tse - Cormark Securities - Analyst : Okay, but you can't say anything more specific than that I guess?

Question: Richard Tse - Cormark Securities - Analyst : What would be the largest deal in that pipe lines?

Question: Richard Tse - Cormark Securities - Analyst : All right

Question: Richard Tse - Cormark Securities - Analyst : Okay, thank you

Question: Chris Thompson - National Bank Financial - Analyst : Great, thanks. John, maybe just touch on the Oracle relationship here, you mentioned it's progressing as planned. Can you just update us on kind of what the plan is over the next two to three quarters?

Question: Chris Thompson - National Bank Financial - Analyst : So if you wanted to kind of align our expectations here, is it maybe two years to get to the 10% level? What your internal budget?

Question: Chris Thompson - National Bank Financial - Analyst : Did you mentioned the SAP contribution to license this quarter is a 10% or more?

Question: Chris Thompson - National Bank Financial - Analyst : Okay and just back to your peer, I don't want to beat a dead horse here. But all the commentary out of pretty well every other vendor that has reported this quarter, said that Europe is really strong. SAP, even pointed out Germany as a really strong region this morning. Is it just a couple large deals that are getting pushed? Or do we have to start worrying that maybe you're getting customers share, and maybe not seeing it?

Question: Chris Thompson - National Bank Financial - Analyst : Okay. And, Paul, maybe on the CapEx, can you outline how much of that CapEx is for the Waterloo expansion this quarter? And how we should model that for the rest of the year? I think it's going to tick up.

Question: Chris Thompson - National Bank Financial - Analyst : Okay, thanks for taking my questions. All the best.

Question: Dushan Batrovic - Dundee Securities Corporation - Analyst : Hi, thank you. John, there has been a time in the past when you would comment on First Call consensus for the next quarter. This time, I don't think you made a comment, anything to read into that?

Question: Dushan Batrovic - Dundee Securities Corporation - Analyst : And full-year and quarterly? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies.

Question: Dushan Batrovic - Dundee Securities Corporation - Analyst : Okay, and given that you've had a couple of deals that have already been signed this quarter, would we too, assume that maybe that the seasonality for Q2 might be a bit higher than typical?

Question: Dushan Batrovic - Dundee Securities Corporation - Analyst : Okay. The deals that slipped -- is there -- did those deals grow in size, I mean is that one of the things that contribute to them slipping? Is the scope and the magnitude grew?

Question: Dushan Batrovic - Dundee Securities Corporation - Analyst : Question on your OpEx. It was down quite a bit sequentially. Is it fair to assume that you are pretty comfortable with ballpark as to where your OpEx is right now? Or would you expect even more sequential declines going forward?

Question: Dushan Batrovic - Dundee Securities Corporation - Analyst : And I guess another way to ask the question, is your operating margins will the growth be more based on revenue growth or further cost cutting? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies.

Question: Dushan Batrovic - Dundee Securities Corporation - Analyst : Okay, last question from me, and we'll probably hear this at Analyst Day.. But any new updates on your mobile offerings, as far as uptake -- any pilots out there, and how things are going?

Question: Dushan Batrovic - Dundee Securities Corporation - Analyst : Okay, I will leave it there.Thank you

Question: Eyal Ofir - Canaccord Genuity - Analyst : Thank you very much. Just to clarify, some of the -- you were talking about the deal slippage, are you going to see that made up in the rest of the fiscal year or next, just wondering?

Question: Eyal Ofir - Canaccord Genuity - Analyst : Okay so when we look at seasonality, in terms of the previous question, it shouldn't be quite the same sequential growth rate that we saw last year in the second quarter then?

Question: Eyal Ofir - Canaccord Genuity - Analyst : Okay, that's good. And not to beat a dead horse again on Europe, outside of the UK and Germany as you talked earlier, was there any other countries that were relatively weak for you this quarter, and are you seeing some competitive pressures, maybe not from a specific competitors, maybe more from a pricing standpoint?

Question: Eyal Ofir - Canaccord Genuity - Analyst : Okay, and then I guess most of the slippage was also related to government contracts.

Question: Eyal Ofir - Canaccord Genuity - Analyst : Okay, perfect, I think that's it for me. Thanks

Question: Blair Abernethy - Stifel Nicolaus & Company,Inc. - Analyst : Thank you. John, just a couple of questions just in terms of the new customer wins this quarter. I am wondering if you can just give us a little more color on what you see them buying, what are the new customers being attracted to you for? And who's driving that, is a your direct sales force or more partner driven?

Question: Blair Abernethy - Stifel Nicolaus & Company,Inc. - Analyst : Okay, great. And John in terms of the government vertical in the US specifically, I wonder if you can do is give us a little more color on how that performed this quarter?

Question: Blair Abernethy - Stifel Nicolaus & Company,Inc. - Analyst : Okay

Question: Blair Abernethy - Stifel Nicolaus & Company,Inc. - Analyst : Okay. And finally, just maintenance pricing, what's your what are your plans this year for maintenance ? I think usually you do in January, a price increase, is that still in the works this

Question: Blair Abernethy - Stifel Nicolaus & Company,Inc. - Analyst : Okay, great. Thanks, guys.

Question: Gabriel Leung - Paradigm Capital Inc. - Analyst : Thanks question for you, Paul, interest expense was there anything unusual in the number the figure little bit higher than the previous quarter run rates?

Question: Gabriel Leung - Paradigm Capital Inc. - Analyst : And that was in the interest expense, and that won't show up next order?

Question: Gabriel Leung - Paradigm Capital Inc. - Analyst : Okay, and then, John, just in terms of your commentary on your growth potential, I guess sort of a 6% to 8% figure, you were talking to. In the past you've in terms of guidance, you have always a alluded to sort of annual growth rates. The last quarter it was 4% to 8% on an annual basis. Just to be clear, when you talked about 6% to 8% you mean that on an annual basis right?

Question: Gabriel Leung - Paradigm Capital Inc. - Analyst : Without acquisitions.

Question: Gabriel Leung - Paradigm Capital Inc. - Analyst : That's great, thank you. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies.

Question: Stephanie Price - CIBC World Markets - Analyst : Hi, I'm wondering you talk about compliance as a growth driver. Could you talk about what parts of your business are seeing declines? You mentioned web content management, and I'm wondering about the Hummingbird business as well, and whether these declines are impacting the license declines you saw in the quarter?

Question: Stephanie Price - CIBC World Markets - Analyst : Okay, and in terms of the acquisition environment, could you talk a bit about the environment in which you are seeing there?

Question: Stephanie Price - CIBC World Markets - Analyst : All right, thank you.

Question: Chris Lee - GMP Securities - Analyst : Hi, guys. This is Chris Lee here for Sera Kim. Just quickly, did you say StreamServe was $15 million or $50 million, five zero?

Question: Chris Lee - GMP Securities - Analyst : Okay, good And last quarter, you said a number of customers were waiting for you to release your new ECM suite. Can you talk about what kind of interest you've been seeing on that so far?

Question: Chris Lee - GMP Securities - Analyst : Okay, and you said that from current customers, not new customers?

Question: Chris Lee - GMP Securities - Analyst : Thanks, guys.

Question: Richard Tse - Cormark Securities - Analyst : Just a couple of quick follow-up questions. Is it true that StreamServe as also resold by Adobe? And I guess what sort of the nature of that relationship, after Adobe acquired (inaudible).

Question: Richard Tse - Cormark Securities - Analyst : Okay, alright

Question: Richard Tse - Cormark Securities - Analyst : Right.

Question: Richard Tse - Cormark Securities - Analyst : How much did you acquire in terms of tax pools?

Question: Richard Tse - Cormark Securities - Analyst : All right, thank you.