Summary
OpenText reported fiscal 2021 fourth quarter revenue of $893.5 million, up 8.1% from the prior-year quarter. Constant currency growth was 4.0%. The recurring base carried the quarter, with annual recurring revenue representing 78% of total revenues, and for the full fiscal year that share was 81%. Cloud revenue grew 21.6% for the fiscal year. Full-year revenue was $3,386.1 million, up 8.9%, or up 6.3% after factoring in the favorable impact of $81.3 million of foreign exchange rate changes.
Margins expanded on a GAAP basis. Gross profit was $621.8 million, up 9.9%, and gross margin reached 69.6%, up 1.1 percentage points from 68.5%. Operating income rose 88.2% to $171.7 million, and operating margin was 19.2%, up 8.2 percentage points from 11.0%. Net income attributable to OpenText was $181.3 million, up 586.9%. For the full fiscal year, operating income was $740.9 million, up 47.1%, net income attributable to OpenText was $310.7 million, up 32.6%, and diluted EPS was $1.14, up 32.6%. The non-GAAP picture was softer. Adjusted EBITDA of $314.8 million was down 0.8% in the quarter, with a margin of 35.2%, down 320 basis points, and non-GAAP diluted EPS of $0.80 was flat. For the year, adjusted EBITDA was $1,315.0 million, up 14.5%, and non-GAAP diluted EPS was $3.39, up 17.3%.
Cash generation was steady. Operating cash flow for the quarter was $296.2 million, up 5.7%, and free cash flow was $268.8 million, up 2.4%. Capital expenditures were $27.4 million, up 54.8%. Full-year operating cash flow was $876.1 million, down 8.2%, and full-year free cash flow was $812.4 million, which includes the IRS settlement payment of $299.6 million. Deferred revenue, current portion, was $852.6 million at June 30, 2021, up 5.0% from a year earlier, and remaining performance obligations were $1.4 billion. Cash and cash equivalents stood at $1,607.3 million, and the net leverage ratio was 1.5x.
Capital returns got a lift. The board raised the quarterly dividend by 10% to $0.2209 per common share, payable September 24, 2021 to holders of record on September 3, 2021. The company repurchased and cancelled 2.5 million common shares for $119.1 million during the quarter. Management expects to allocate approximately 33% of free cash flows toward the dividend and share repurchase programs in the next fiscal year.
Two operational metrics deserve attention. The cloud renewal rate, excluding Carbonite, was approximately 93% for fiscal 2021, compared with approximately 96% for fiscal 2020, while the customer support renewal rate held at approximately 94%. Tax matters remain the biggest overhang. The IRS settlement produced charges of $300.5 million during the year. The Canada Revenue Agency has disputed transfer pricing for fiscal 2012 through fiscal 2016, where the estimated potential aggregate liability was approximately $74 million as of June 30, 2021, and the company has provisionally paid approximately $28 million. A proposal letter for fiscal 2017 could result in an income tax expense of up to approximately $470 million if the company is unsuccessful. Litigation includes the Carbonite securities class action, now on appeal, and the Realtime Data patent suit.
For fiscal 2022, management said the focus is on growth, cloud growth and market share gains, and it typically targets research and development spending of 12% to 14% of revenues each fiscal year. COVID-19 remains a stated uncertainty, and the company accrued a special one-time cash performance bonus of approximately $18 million as at June 30, 2021.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2021 | Q3 FY2021 | QoQ | Q4 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $893.5M | $832.9M | +7.3% | $826.6M | +8.1% |
| Gross profit | $621.8M | $571.7M | +8.8% | $565.9M | +9.9% |
| Gross margin | 69.6% | 68.6% | +1.0 pp | 68.5% | +1.1 pp |
| Research & development | $117.2M | $110.1M | +6.5% | $100.8M | +16.3% |
| Sales & marketing | $183.2M | $158.7M | +15.5% | $152.9M | +19.9% |
| General & administrative | $73.0M | $71.5M | +2.1% | $62.6M | +16.7% |
| Total operating expenses | $450.1M | $419.3M | +7.4% | $474.7M | -5.2% |
| Operating income (loss) | $171.7M | $152.4M | +12.7% | $91.2M | +88.2% |
| Operating margin | 19.2% | 18.3% | +0.9 pp | 11.0% | +8.2 pp |
| Net income (loss) | $181.4M | $91.5M | +98.2% | $26.4M | +586.4% |
| Net margin | 20.3% | 11.0% | +9.3 pp | 3.2% | +17.1 pp |
| Diluted EPS | $0.66 | $0.33 | +$0.33 | $0.10 | +$0.56 |
Risks
The COVID-19 pandemic continues to create significant uncertainty in the global economy and for OpenText, with risks to demand, sales operations, supply chain of hardware for SaaS offerings, and product development; restrictions may be reinstated due to variants. MD&A states the extent of adverse impact remains difficult to fully predict.
Remote work during COVID-19 has increased phishing targeting employees, vendors, and third-party service providers and decreased physical supervision, while pre-existing controls were not specifically designed for the work from home environment. A breach could disrupt operations and expose customer data.
Cloud renewal rate, excluding Carbonite, was approximately 93% for the year ended June 30, 2021 compared to approximately 96% for the year ended June 30, 2020. Service contracts are generally renewable at customer option, so cancellations or non-renewals could reduce revenues.
The IRS Settlement resulted in charges of $300.5 million during the year ended June 30, 2021, and the CRA has reassessed Fiscal 2012 through Fiscal 2016 with estimated potential liability of approximately $74 million. A proposed Fiscal 2017 reassessment could result in income tax expense of up to approximately $470 million to reduce deferred tax assets.
Acquisitions are a critical component of OpenText's growth strategy, and MD&A says the company regularly evaluates acquisition opportunities. Integration risks include debt incurrence, restructuring charges, management strain, and inability to achieve expected benefits.
Term Loan B and Revolver have variable rates tied to LIBOR, and LIBOR settings will cease or become non-representative after December 31, 2021 for certain currencies and after June 30, 2023 for remaining USD settings. Replacement rates may be higher or lower and could increase debt costs.
The length of OpenText's sales cycle can fluctuate significantly because licensing and implementation involve a comprehensive customer commitment. Delays in customer decisions or implementations could cause revenues to be lower than expected in a period and the company may not adjust costs quickly enough.
OpenText depends on executive officers and key employees, and competition for top research developers and experienced salespeople is intense. Compensation tied to stock options and long-term incentive plan targets may hinder retention if share price or performance targets are not met.
International sales are a significant portion of revenues and expose OpenText to political and economic instability, regulatory and tax complexity, longer sales and collection cycles, and Brexit uncertainty. MD&A notes international operations may be exacerbated by COVID-19 and Brexit.
The Information Management market is intensely competitive, and larger well-capitalized competitors or industry consolidation could pressure pricing and margins. Competitors may offer alternative delivery methods or enter exclusive arrangements with customers.
OpenText's COVID-19 Restructuring Plan includes a move to a significant work from home model and reduction in real estate footprint, and restructuring costs may exceed estimates. MD&A notes an approximately $18 million special one-time cash performance bonus accrued as of June 30, 2021.
OpenText operates under extensive privacy laws including GDPR and CCPA, and breaches or unauthorized disclosures could lead to penalties, fines, litigation, and reputational harm. The risk increases as web-based and cloud-based offerings and countries of operation expand.
SaaS KPIs
All quarters →Summary, forecast, risks and KPIs are extracted from OPEN TEXT CORP's SEC filings for Q4 FY2021 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 1, 2026.