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Open Text Corp. isn’t visibly sweating a recent proposed tax increase in their now-three-year-long battle with the U.S. Internal Revenue Service over a proposed tax adjustment dating back eight years.

As the enterprise-information-management company reported its fourth-quarter 2018 results Thursday afternoon, it revealed revenue of US$754-million, up 14 per cent over the same period last year, leading to what executives called a “record year” with US$2.82-billion in annual revenue, itself up 23 per cent. Investors cheered the quarter, pushing NASDAQ-listed shares up nearly 4 per cent to US$38.86 in extended trading.

Along with the results, the company issued an update on its IRS dispute. Open Text first revealed a draft “notice of proposed adjustment” from the IRS three years ago that sought an increase its U.S. federal taxes for the 2010 and 2012 tax years. In a U.S. filing last month after receiving subsequent notices, the company said its “potential aggregate liability” now stands at US$725-million.

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That figure represents an increase of US$120-million to what had been previously reported, and includes taxes, penalties and interest. Open Text, which regularly snaps up other software firms to add value through their intellectual property (IP), has said in U.S. filings that the IRS’s concern relates to an internal reorganization and the consolidation of some IP ownership in Luxembourg and Canada in the years in question. Subsequent tax years are not affected.

On a conference call with analysts Thursday, chief financial officer Madhu Ranganathan said the receipt of the new notices in July provided the company with “long awaited” certainty “on the maximum potential liability being sought based on the IRS finalizing their proposal.”

While she told analysts that the notices do not immediately oblige Open Text to pay the amount, “we continue to strongly disagree with the IRS position and intend to vigorously contest the proposed adjustment to our taxable income.”

Analysts skipped over the issue on the call, focusing more on the company’s metrics and competition. But in a research note last month, RBC Dominion Securities analyst Paul Treiber wrote that “finalization of the liability may lead to a potential settlement. We believe OpenText settling for an amount below the current $725MM potential liability would be positive for the stock.”

The software consolidator also announced a US$29-million restructuring program as it moves further into the private- and public-cloud markets – it announced the cloud-based “OT2” platform in July – which Ms. Ranganathan said the company expected would save the company as much as US$50-million in fiscal-year 2020.

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