OTEX
$45.34
Open Text Cp
$.31
.69%
Earnings Details
3rd Quarter March 2020
Thursday, April 30, 2020 4:01:00 PM
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Summary

Open Text Cp (OTEX) Recent Earnings

Open Text Cp (OTEX) reported 3rd Quarter March 2020 earnings of $0.10 per share on revenue of $814.7 million. The consensus earnings estimate was $0.56 per share. Revenue grew 13.3% on a year-over-year basis.

Open Text Corp provides software products & services. It assist organizations in finding, utilizing, & sharing business information. It is engaged in the design, development, marketing & sales of Enterprise Information Management software and solutions.

Results
Reported Earnings
$0.10
Earnings Whisper
-
Consensus Estimate
$0.56
Reported Revenue
$814.7 Mil
Revenue Estimate
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

OpenText Reports Third Quarter Fiscal Year 2020 Financial Results

Record Cloud, Annual Recurring Revenues (ARR) and Operating Cash Flows

WATERLOO, Ontario, April 30, 2020 /CNW/ --

Third Quarter Highlights

Total Revenues

(in millions)


Annual Recurring Revenues

(in millions)


Cloud Revenues

(in millions)

Reported

Constant
Currency


Reported

Constant
Currency


Reported

Constant
Currency

$814.7

$820.4


$662.3

$666.3


$339.5

$340.6

+13.3%

+14.1%


+20.6%

+21.3%


+42.3%

+42.8%

Annual Recurring Revenues represents 81% of Total Revenues

 

  • Record Operating Cash Flows of $329.6 million in the quarter, up 15.2% Y/Y and $904.1 million for the trailing twelve months
  • Declares cash dividend of $0.1746 per common share
  • GAAP net income of $26.0 million, down 64.3% Y/Y
  • Adjusted EBITDA of $259.5 million, down 0.9%, margin of 31.8%, down 460 basis points Y/Y
  • GAAP diluted EPS of $0.10, down 63.0% Y/Y
  • Non-GAAP diluted EPS of $0.61, down 4.7%, and $0.62 in constant currency, down 3.1% Y/Y
  • Announces COVID-19 restructuring plan and compensation update

Open Text Corporation (NASDAQ: OTEX), (TSX: OTEX), "The Information Company," today announced its financial results for the third quarter ended March 31, 2020.

OpenText logo (PRNewsfoto/Open Text Corporation) (PRNewsfoto/Open Text Corporation)

"On behalf of the OpenText community, we honor the brave women and men who are serving on the front lines of this pandemic: our healthcare professionals, first responders, infrastructure experts and other essential workers who are keeping us healthy and safe," said Mark J. Barrenechea, OpenText CEO & CTO.  "OpenText's solid third quarter performance is a reflection of our business model resilience amid these challenging times.  In constant currency, total revenues in the quarter grew 14.1% year-over-year to $820.4 million, Cloud Services and Subscriptions revenues, now our largest business revenue stream, grew a record 42.8% year-over-year to $340.6 million and our Annual Recurring Revenues which represent a record 81% of total revenues, grew 21.3% year-over-year to $666.3 million. These results reflect the strength of OpenText and the mission-critical nature of our product portfolio."

"Our investments in technology and infrastructure enabled us to serve our customers around the globe with more than 95% of our employees working from home.  I am proud of the dedication and professionalism of our employees who put customers first.  Further, OpenText's release of Cloud Editions (CE) 20.2 fully positions us as a cloud first company and provides customers with options to empower and protect the value of their information assets," said Barrenechea. "Our leadership position in Information Management has never been stronger and with the addition of cyber resilience products from the Carbonite acquisition, our customers continue to trust OpenText as they adapt to a changing business climate defined by new ways to work." 

"OpenText delivered a solid Q3 with Adjusted EBITDA of $259.5 million and record Operating Cash Flows of $329.6 million," said OpenText EVP, CFO, Madhu Ranganathan.  "We ended the quarter with a strong balance sheet of $1.45 billion in cash and a 2.3x consolidated net leverage ratio.  Further, we have taken pre-emptive measures to manage expenses and introduced a COVID-19 restructuring plan that continues our operational rigor, while supporting key initiatives that drive our Total Growth strategy."

 Financial Highlights for Q3 Fiscal 2020 with Year Over Year Comparisons

Summary of Quarterly Results









(in millions except per share data)

Q3 FY20

Q3 FY19

$ Change

% Change

(Y/Y)


Q3 FY20

in CC*

% Change

in CC*


Revenues:









Cloud services and subscriptions

$339.5


$238.6


$100.9


42.3

%


$340.6


42.8

%


Customer support

322.9


310.8


12.1


3.9

%


325.7


4.8

%


Total annual recurring revenues**

$662.3


$549.4


$113.0


20.6

%


$666.3


21.3

%


License

81.1


98.7


(17.7)


(17.9)

%


81.9


(17.0)

%


Professional service and other

71.3


71.1


0.2


0.3

%


72.1


1.5

%


Total revenues

$814.7


$719.1


$95.5


13.3

%


$820.4


14.1

%


GAAP-based operating income

$95.1


$135.9


($40.8)


(30.0)

%


N/A

N/A


Non-GAAP-based operating income (1)

$234.7


$236.8


($2.1)


(0.9)

%


$238.5


0.7

%


GAAP-based EPS, diluted

$0.10


$0.27


($0.17)


(63.0)

%


N/A

N/A


Non-GAAP-based EPS, diluted (1)(2)

$0.61


$0.64


($0.03)


(4.7)

%


$0.62


(3.1)

%


GAAP-based net income attributable to OpenText

$26.0


$72.8


($46.8)


(64.3)

%


N/A

N/A


Adjusted EBITDA (1)

$259.5


$261.8


($2.3)


(0.9)

%


$263.1


0.5

%


Operating cash flows

$329.6


$286.0


$43.6


15.2

%


N/A

N/A


 

Summary of YTD Results

(in millions except per share data)

FY20 YTD

FY19 YTD

$ Change

% Change

(Y/Y)


FY20 YTD
in CC*

% Change
in CC*


Revenues:









Cloud services and subscriptions

$825.1


$665.9


$159.1


23.9

%


$830.1


24.7

%


Customer support

950.7


932.7


18.0


1.9

%


963.5


3.3

%


Total annual recurring revenues**

$1,775.7


$1,598.6


$177.1


11.1

%


$1,793.7


12.2

%


License

297.0


308.4


(11.3)


(3.7)

%


301.3


(2.3)

%


Professional service and other

210.3


214.6


(4.2)


(2.0)

%


213.7


(0.4)

%


Total revenues

$2,283.1


$2,121.5


$161.6


7.6

%


$2,308.7


8.8

%


GAAP-based operating income

$412.3


$409.0


$3.3


0.8

%


N/A

N/A


Non-GAAP-based operating income (1)

$765.0


$743.7


$21.3


2.9

%


$779.9


4.9

%


GAAP-based EPS, diluted

$0.77


$0.79


($0.02)


(2.5)

%


N/A

N/A


Non-GAAP-based EPS, diluted (1)(2)

$2.09


$2.04


$0.05


2.5

%


$2.14


4.9

%


GAAP-based net income attributable to OpenText

$207.8


$213.5


($5.7)


(2.7)

%


N/A

N/A


Adjusted EBITDA (1)

$830.7


$816.4


$14.3


1.8

%


$845.1


3.5

%


Operating cash flows

$674.3


$646.5


$27.8


4.3

%


N/A

N/A



(1) Please see note 2 "Use of Non-GAAP Financial Measures" below

(2) Please also see note 14 to the Company's Fiscal 2018 Consolidated Financial Statements on Form 10-K. Reflective of the amount of net tax benefit arising from the internal reorganization assumed to be allocable to the current period based on the forecasted utilization period.

Note: Individual line items in tables may be adjusted by non-material amounts to enable totals to align to published financial statements.


*CC: Constant currency for this purpose is defined as the current period reported revenues/expenses/earnings represented at the prior comparative period's foreign exchange rate.

**Annual recurring revenue is defined as the sum of Cloud services and subscriptions revenue and Customer support revenue.

Balance Sheet Update

On March 19, 2020, OpenText proactively drew down $600 million from its Revolving Credit Facility as a pre-emptive measure in order to increase our cash position and preserve financial flexibility in light of current macro-economic uncertainty. The proceeds from the Revolver were invested in money market funds primarily comprised of AAA US T-bills and are reflected in our Balance Sheet as of March 31, 2020.   In February 2020, OpenText successfully raised $1.8 billion primarily to refinance existing debt, in 8 and 10-year senior notes at historically low rates that extends our debt maturity profile, and drives interest expense savings.  

Restructuring Plan and Compensation update

As a result of COVID-19, OpenText is adopting a hybrid return to workplace strategy. The company will undertake a restructuring plan which will impact our global workforce and consolidate certain real estate facilities to further streamline our operations as we accelerate work from home initiatives. The cost of the restructuring is expected to be approximately $80 million to $100 million and related activities are anticipated to be completed by the end of Fiscal 2021. Once completed, OpenText anticipates annualized cost savings of approximately $65 million to $75 million.

The Company is also taking a number of pre-emptive measures due to the impact of COVID-19, including reduced discretionary spending and temporarily reducing the salaries of its executives, senior leadership, and other employees, as well as its Board of Directors.

Dividend Program

As part of our quarterly, non-cumulative cash dividend program, the Board declared on April 29, 2020 a cash dividend of $0.1746 per common share. The record date for this dividend is May 29, 2020 and the payment date is June 19, 2020. 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.    

Quarterly Business Highlights

  • Key customer wins in the quarter included General Motors, Nestle S.A., United Health Services Hospitals, Diamond Pharmacy Services, Pathos Clinical Solutions, Astra Daihatsu Motor, Continental AG, Cree Lighting, Debeka Insurance, Grinnell Mutual Reinsurance, Home Credit International, Gendarmerie Nationale (France), Medline Industries, MRS Logistica, Praxair Distribution, Rosenthal & Rosenthal, Saipem Group, Zabka Polska.
  • OpenText announces cloud agreement with Amazon Web Services
  • OpenText announces new Cloud Editions (CE) for the resilient organization
  • OpenText launches new unified cloud integration platform, OpenText Trading Grid
  • OpenText Trading Grid to integrate Dun & Bradstreet data and insights to build trust and minimize risk in supply chains
  • OpenText hosts Enterprise World Europe Digital
  • OpenText buys XMedius, provider of secure information exchange and unified communication solutions
  • OpenText EnCase wins 10th straight SC Magazine Award for Best Forensic Solution
  • OpenText announces pricing of senior unsecured fixed rate notes to refinance outstanding debt
  • OpenText establishes new US Public Sector Group
  • OpenText makes new appointments to Executive Leadership Team

Summary of Quarterly Results









Q3 FY20

Q2 FY20

Q3 FY19

% Change

(Q3 FY20 vs
Q2 FY20)


% Change

(Q3 FY20 vs
Q3 FY19)


Revenue (million)

$814.7


$771.6


$719.1


5.6

%


13.3

%


GAAP-based gross margin

65.4

%

69.9

%

66.7

%

(450)


bps

(130)


bps

GAAP-based EPS, diluted

$0.10


$0.40


$0.27


(75.0)

%


(63.0)

%


Non-GAAP-based gross margin (1)

73.3

%

75.5

%

73.0

%

(220)


bps

30


bps

Non-GAAP-based EPS, diluted (1)(2)

$0.61


$0.84


$0.64


(27.4)

%


(4.7)

%



(1) Please see note 2 "Use of Non-GAAP Financial Measures" below

(2) Please also see note 14 to the Company's Fiscal 2018 Consolidated Financial Statements on Form 10-K. Reflective of the amount of net tax benefit arising from the internal reorganization assumed to be allocable to the current period based on the forecasted utilization period.

Conference Call Information

The public is invited to listen to the earnings conference call today at 5:00 p.m. ET (2:00 p.m. PT) by dialing 1-800-319-4610 (toll-free) or +1-604-638-5340 (international). Please dial-in 10 minutes ahead of time to ensure proper connection. Alternatively, a live webcast of the earnings conference call will be available on the Investor Relations section of the Company's website at http://investors.opentext.com/investor-events-and-presentations.

A replay of the call will be available beginning April 30, 2020 at 7:00 p.m. ET through 11:59 p.m. on May 14, 2020 and can be accessed by dialing 1-855-669-9658 (toll-free) or +1-604-674-8052 (international) and using passcode 4288 followed by the number sign.

Please see below note (2) for a reconciliation of U.S. GAAP-based financial measures used in this press release, to non-U.S. GAAP-based financial measures. Additionally, "off-cloud" is a term we use to describe license transactions.

About OpenText

OpenText, The Information Company™, enables organizations to gain insight through market leading information management solutions, on-premises or in the cloud. For more information about OpenText (NASDAQ: OTEX, TSX: OTEX) visit opentext.com.

Cautionary Statement Regarding Forward-Looking Statements
Certain statements in this press release, including statements about the focus of Open Text Corporation ("OpenText" or "the Company") in our fiscal year ending June 30, 2020 (Fiscal 2020) on growth, the financial and operational impact of COVID-19 and associated preemptive measures and restructuring plans, anticipated benefits of our partnerships and next generation product lines, the strength of our operating framework and balance sheet flexibility, continued investments in product innovation, go-to-market and strategic acquisitions, M&A continuing to be our leading growth contributor, our capital allocation strategy, creating value through investments in broader Information Management (IM) capabilities, the Company's presence in the cloud and in growth markets, expected growth in our revenue lines, total growth from acquisitions, innovation and organic initiatives, the focus on recurring revenues, improving operational efficiency, expanding cash flow and strengthening the business, adjusted operating income and cash flow, its financial condition, the adjusted operating margin target range, results of operations and earnings, announced acquisitions, ongoing tax matters, the integration of the acquired businesses, declaration of quarterly dividends, future tax rates, new platform and product offerings, scaling OpenText to new levels in Fiscal 2020 and beyond, and other matters, may contain words such as "anticipates", "expects", "intends", "plans", "believes", "seeks", "estimates", "may", "could", "would", "might", "will" and variations of these words or similar expressions are considered forward-looking statements or information under applicable securities laws. In addition, any information or statements that refer to expectations, beliefs, plans, projections, objectives, performance or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking, and based on our current expectations, forecasts and projections about the operating environment, economies and markets in which we operate. Forward-looking statements reflect our current estimates, beliefs and assumptions, which are based on management's perception of historic trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances, such as certain assumptions about the economy, as well as market, financial and operational assumptions. Management's estimates, beliefs and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events and, as such, are subject to change. We can give no assurance that such estimates, beliefs and assumptions will prove to be correct. Such forward-looking statements involve known and unknown risks, uncertainties and other factors and assumptions that may cause the actual results, performance or achievements to differ materially. Such factors include, but are not limited to: (i) the future performance, financial and otherwise, of OpenText; (ii) the ability of OpenText to bring new products and services to market and to increase sales; (iii) the strength of the Company's product development pipeline; (iv) the Company's growth and profitability prospects; (v) the estimated size and growth prospects of the IM market including expected growth in the Artificial Intelligence market; (vi) the Company's competitive position in the IM market and its ability to take advantage of future opportunities in this market; (vii) the benefits of the Company's products and services to be realized by customers; (viii) the demand for the Company's products and services and the extent of deployment of the Company's products and services in the IM marketplace; (ix) downward pressure on our share price and dilutive effect of future sales or issuances of equity securities (including in connection with future acquisitions); (x) the Company's financial condition and capital requirements; and (xi) statements about the impact of product releases. The risks and uncertainties that may affect forward-looking statements include, but are not limited to: (i) integration of acquisitions and related restructuring efforts, including the quantum of restructuring charges and the timing thereof; (ii) the potential for the incurrence of or assumption of debt in connection with acquisitions and the impact on the ratings or outlooks of rating agencies on the Company's outstanding debt securities; (iii) the possibility that the Company may be unable to meet its future reporting requirements under the U.S. Securities Exchange Act of 1934, as amended, and the rules promulgated thereunder, or applicable Canadian securities regulation; (iv) the risks associated with bringing new products and services to market; (v) failure to comply with privacy laws and regulations that are extensive, open to various interpretations and complex to implement including General Data Protection Regulation (GDPR) and Country by Country Reporting (CBCR); (vi) fluctuations in currency exchange rates; (vii) delays in the purchasing decisions of the Company's customers; (viii) the competition the Company faces in its industry and/or marketplace; (ix) the final determination of litigation, tax audits (including tax examinations in the United States and elsewhere) and other legal proceedings; (x) potential exposure to greater than anticipated tax liabilities or expenses, including with respect to changes in Canadian, U.S. or international tax regimes including tax reform legislation enacted through the Tax Cuts and Jobs Act in the United States; (xi) the possibility of technical, logistical or planning issues in connection with the deployment of the Company's products or services; (xii) the continuous commitment of the Company's customers; and (xiii) demand for the Company's products and services. For additional information with respect to risks and other factors which could occur, see the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other securities filings with the Securities and Exchange Commission (SEC) and other securities regulators. Readers are cautioned not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. Unless otherwise required by applicable securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

OTEX-F

For more information, please contact:

Harry E. Blount
Senior Vice President, Global Head of Investor Relations
Open Text Corporation
415-963-0825
investors@opentext.com

Copyright ©2020 Open Text. OpenText is a trademark or registered trademark of Open Text. The list of trademarks is not exhaustive of other trademarks. Registered trademarks, product names, company names, brands and service names mentioned herein are property of Open Text. All rights reserved. For more information, visit: http://www.opentext.com/who-we-are/copyright-information.

OPEN TEXT CORPORATION


CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands of U.S. dollars, except share data)



March 31, 2020


June 30, 2019

ASSETS

(unaudited)



Cash and cash equivalents

$

1,452,570



$

941,009


Accounts receivable trade, net of allowance for doubtful accounts of $18,301 as of March 31, 2020 and $17,011 as of June 30, 2019

459,348



463,785


Contract assets

27,057



20,956


Income taxes recoverable

59,930



38,340


Prepaid expenses and other current assets

112,073



97,238


Total current assets

2,110,978



1,561,328


Property and equipment

258,892



249,453


Operating lease right of use assets

243,611




Long-term contract assets

14,225



15,386


Goodwill

4,678,686



3,769,908


Acquired intangible assets

1,731,781



1,146,504


Deferred tax assets

921,643



1,004,450


Other assets

171,107



148,977


Long-term income taxes recoverable

31,149



37,969


Total assets

$

10,162,072



$

7,933,975


LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable and accrued liabilities

$

324,890



$

329,903


Current portion of long-term debt

610,000



10,000


Operating lease liability

68,871




Deferred revenues

819,273



641,656


Income taxes payable

31,711



33,158


Total current liabilities

1,854,745



1,014,717


Long-term liabilities:




Accrued liabilities

14,634



49,441


Pension liability

67,438



75,239


Long-term debt

3,585,684



2,604,878


Long-term operating lease liability

205,789




Deferred revenues

92,341



46,974


Long-term income taxes payable

184,459



202,184


Deferred tax liabilities

158,805



55,872


Total long-term liabilities

4,309,150



3,034,588


Shareholders' equity:




Share capital and additional paid-in capital




271,634,149 and 269,834,442 Common Shares issued and outstanding at March 31, 2020 and June 30, 2019, respectively; authorized Common Shares: unlimited

1,839,150



1,774,214


Accumulated other comprehensive income

9,466



24,124


Retained earnings

2,180,339



2,113,883


Treasury stock, at cost (847,369 shares at March 31, 2020 and 802,871 shares at June 30, 2019, respectively)

(32,066)



(28,766)


Total OpenText shareholders' equity

3,996,889



3,883,455


Non-controlling interests

1,288



1,215


Total shareholders' equity

3,998,177



3,884,670


Total liabilities and shareholders' equity

$

10,162,072



$

7,933,975


 

OPEN TEXT CORPORATION


CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands of U.S. dollars, except share and per share data)

(unaudited)



Three Months Ended March 31,


Nine Months Ended March 31,


2020


2019


2020


2019

Revenues:








License

$

81,055



$

98,721



$

297,048



$

308,364


Cloud services and subscriptions

339,463



238,607



825,068



665,923


Customer support

322,865



310,762



950,671



932,667


Professional service and other

71,296



71,056



210,337



214,580


Total revenues

814,679



719,146



2,283,124



2,121,534


Cost of revenues:








License

2,544



2,692



7,917



10,219


Cloud services and subscriptions

127,565



103,873



333,371



280,274


Customer support

32,151



31,844



91,326



93,582


Professional service and other

56,526



56,626



164,468



169,452


Amortization of acquired technology-based intangible assets

63,401



44,596



145,998



140,439


Total cost of revenues

282,187



239,631



743,080



693,966


Gross profit

532,492



479,515



1,540,044



1,427,568


Operating expenses:








Research and development

108,184



84,905



269,645



238,128


Sales and marketing

166,234



132,244



432,162



378,619


General and administrative

68,828



51,833



174,958



154,955


Depreciation

24,820



25,028



65,809



72,716


Amortization of acquired customer-based intangible assets

59,943



48,832



160,561



140,627


Special charges (recoveries)

9,406



796



24,579



33,487


Total operating expenses

437,415



343,638



1,127,714



1,018,532


Income from operations

95,077



135,877



412,330



409,036


Other income (expense), net

(18,923)



5,065



(19,736)



6,965


Interest and other related expense, net

(41,263)



(35,607)



(105,849)



(103,751)


Income before income taxes

34,891



105,335



286,745



312,250


Provision for (recovery of) income taxes

8,891



32,542



78,800



98,628


Net income for the period

$

26,000



$

72,793



$

207,945



$

213,622


Net (income) loss attributable to non-controlling interests

(35)



(31)



(112)



(104)


Net income attributable to OpenText

$

25,965



$

72,762



$

207,833



$

213,518


Earnings per share—basic attributable to OpenText

$

0.10



$

0.27



$

0.77



$

0.80


Earnings per share—diluted attributable to OpenText

$

0.10



$

0.27



$

0.77



$

0.79


Weighted average number of Common Shares outstanding—basic

271,221



268,991



270,559



268,511


Weighted average number of Common Shares outstanding—diluted

272,202



270,030



271,643



269,606


 

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands of U.S. dollars)

(unaudited)



Three Months Ended

March 31,


Nine Months Ended

March 31,


2020


2019


2020


2019

Net income for the period

$

26,000



$

72,793



$

207,945



$

213,622


Other comprehensive income (loss)—net of tax:








Net foreign currency translation adjustments

(15,484)



3,189



(16,220)



(3,749)


Unrealized gain (loss) on cash flow hedges:








Unrealized gain (loss) - net of tax expense (recovery) effect of ($1,276) and $222 for the three months ended March 31, 2020 and 2019, respectively; ($1,181) and ($274) for the nine months ended March 31, 2020 and 2019, respectively

(3,539)



615



(3,278)



(760)


(Gain) loss reclassified into net income - net of tax (expense) recovery effect of $121 and $124 for the three months ended March 31, 2020 and 2019, respectively; $98 and $425 for the nine months ended March 31, 2020 and 2019, respectively

337



346



273



1,179


Actuarial gain (loss) relating to defined benefit pension plans:








Actuarial gain (loss) - net of tax expense (recovery) effect of $1,495 and ($1,177) for the three months ended March 31, 2020 and 2019, respectively; $1,554 and ($1,390) for the nine months ended March 31, 2020 and 2019, respectively

3,309



(4,785)



3,923



(5,109)


Amortization of actuarial (gain) loss into net income - net of tax (expense) recovery effect of $203 and $78 for the three months ended March 31, 2020 and 2019, respectively; $446 and $223 for the nine months ended March 31, 2020 and 2019, respectively

153



82



644



212


Total other comprehensive income (loss) net, for the period

(15,224)



(553)



(14,658)



(8,227)


Total comprehensive income

10,776



72,240



193,287



205,395


Comprehensive (income) loss attributable to non-controlling interests

(35)



(31)



(112)



(104)


Total comprehensive income attributable to OpenText

$

10,741



$

72,209



$

193,175



$

205,291


 

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands of U.S. dollars and shares)

(unaudited)



Three Months Ended March 31, 2020


Common Shares and
Additional Paid in Capital


Treasury Stock


Retained

Earnings


Accumulated 

Other

Comprehensive

Income


Non-
Controlling
Interests


Total


Shares


Amount


Shares


Amount


Balance as of December 31, 2019

270,609



$

1,803,663



(847)



$

(32,066)



$

2,201,653



$

24,690



$

1,292



$

3,999,232


Issuance of Common Shares
















Under employee stock option plans

886



23,414













23,414


Under employee stock purchase plans

139



5,217













5,217


Share-based compensation



6,856













6,856


Dividends declared

($0.1746 per Common Share)









(47,279)







(47,279)


Other comprehensive income (loss) - net











(15,224)





(15,224)


Non-controlling interest













(39)



(39)


Net income for the period









25,965





35



26,000


Balance as of March 31, 2020

271,634



$

1,839,150



(847)



$

(32,066)



$

2,180,339



$

9,466



$

1,288



$

3,998,177





Three Months Ended March 31, 2019


Common Shares and
Additional Paid in Capital


Treasury Stock


Retained

Earnings


Accumulated

 Other

Comprehensive

Income


Non-
Controlling
Interests


Total


Shares


Amount


Shares


Amount


Balance as of December 31, 2018

268,569



$

1,731,299



(817)



$

(29,241)



$

2,056,831



$

25,971



$

1,152



$

3,786,012


Issuance of Common Shares
















Under employee stock option plans

544



11,661













11,661


Under employee stock purchase plans

161



4,447













4,447


Share-based compensation



6,712













6,712


Purchase of treasury stock





(52)



(1,965)









(1,965)


Issuance of treasury stock



(2,308)



62



2,308










Dividends declared

($0.1518 per Common Share)









(40,735)







(40,735)


Other comprehensive income - net











(553)





(553)


Net income for the period









72,762





31



72,793


Balance as of March 31, 2019

269,274



$

1,751,811



(807)



$

(28,898)



$

2,088,858



$

25,418



$

1,183



$

3,838,372





Nine Months Ended March 31, 2020


Common Shares and
Additional Paid in Capital


Treasury Stock


Retained

Earnings


Accumulated
Other

Comprehensive

Income


Non-
Controlling
Interests


Total


Shares


Amount


Shares


Amount


Balance as of June 30, 2019

269,834



$

1,774,214



(803)



$

(28,766)



$

2,113,883



$

24,124



$

1,215



$

3,884,670


Issuance of Common Shares
















Under employee stock option plans

1,301



34,773













34,773


Under employee stock purchase plans

499



17,757













17,757


Share-based compensation



21,530













21,530


Purchase of treasury stock





(300)



(12,424)









(12,424)


Issuance of treasury stock



(9,124)



256



9,124










Dividends declared

($0.5238 per Common Share)









(141,377)







(141,377)


Other comprehensive income (loss) - net











(14,658)





(14,658)


Non-controlling interest













(39)



(39)


Net income for the period









207,833





112



207,945


Balance as of March 31, 2020

271,634



$

1,839,150



(847)



$

(32,066)



$

2,180,339



$

9,466



$

1,288



$

3,998,177





Nine Months Ended March 31, 2019


Common Shares and
Additional Paid in Capital


Treasury Stock


Retained

Earnings


Accumulated
Other

Comprehensive

Income


Non-
Controlling
Interests


Total


Shares


Amount


Shares


Amount


Balance as of June 30, 2018

267,651



$

1,707,073



(691)



$

(18,732)



$

1,994,235



$

33,645



$

1,037



$

3,717,258


Adoption of ASU 2016-16 - cumulative effect









(26,780)







(26,780)


Adoption of Topic 606 - cumulative effect









29,786







29,786


Issuance of Common Shares
















Under employee stock option plans

1,100



25,832













25,832


Under employee stock purchase plans

523



15,712













15,712


Share-based compensation



20,152













20,152


Purchase of treasury stock





(726)



(26,499)









(26,499)


Issuance of treasury stock



(16,333)



610



16,333










Dividends declared

($0.4554 per Common Share)









(121,901)







(121,901)


Other comprehensive income - net











(8,227)





(8,227)


Non-controlling interest



(625)











42



(583)


Net income for the period









213,518





104



213,622


Balance as of March 31, 2019

269,274



$

1,751,811



(807)



$

(28,898)



$

2,088,858



$

25,418



$

1,183



$

3,838,372


 

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars)

(unaudited)



Three Months Ended

March 31,


Nine Months Ended

March 31,


2020


2019


2020


2019

Cash flows from operating activities:








Net income for the period

$

26,000



$

72,793



$

207,945



$

213,622


Adjustments to reconcile net income to net cash provided by operating activities:








Depreciation and amortization of intangible assets

148,164



118,456



372,368



353,782


Share-based compensation expense

6,856



6,712



21,530



20,152


Pension expense

1,428



1,158



4,323



3,412


Amortization of debt issuance costs

1,227



1,077



3,503



3,234


Loss on extinguishment of debt

17,854





17,854




Loss on sale and write down of property and equipment



10





9,438


Deferred taxes

2,543



2,398



36,711



11,307


Share in net (income) loss of equity investees

(4,527)



(2,789)



(6,475)



(10,652)


Changes in operating assets and liabilities:








Accounts receivable

83,590



19,229



86,188



52,777


Contract assets

(9,006)



(15,472)



(26,665)



(28,872)


Prepaid expenses and other current assets

(6,854)



(13,027)



(7,355)



(495)


Income taxes

(33,717)



3,682



(34,608)



21,006


Accounts payable and accrued liabilities

(9,028)



(896)



(42,263)



(30,644)


Deferred revenue

102,373



93,285



38,280



24,134


Other assets

5,079



(619)



7,436



4,300


Operating lease assets and liabilities, net

(2,381)





(4,486)




Net cash provided by operating activities

329,601



285,997



674,286



646,501


Cash flows from investing activities:








Additions of property and equipment

(16,793)



(16,968)



(55,005)



(50,432)


Purchase of XMedius

(73,335)





(73,335)




Purchase of Carbonite, Inc., net of cash and restricted cash acquired

(88,458)





(1,305,097)




Purchase of Dynamic Solutions Group Inc.





(4,149)




Purchase of Catalyst Repository Systems Inc.



(70,800)





(70,800)


Purchase of Liaison Technologies, Inc.



641





(310,644)


Purchase of Guidance Software, Inc., net of cash acquired







(2,279)


Other investing activities

(5,803)



(1,831)



(11,344)



(8,204)


Net cash used in investing activities

(184,389)



(88,958)



(1,448,930)



(442,359)


Cash flows from financing activities:








Proceeds from issuance of Common Shares from exercise of stock options and ESPP

29,990



17,811



53,107



42,097


Proceeds from long-term debt and Revolver

2,400,000





3,150,000




Repayment of long-term debt and revolver

(1,706,131)



(2,500)



(1,711,131)



(7,500)


    Debt extinguishment costs

(11,248)





(11,248)




Debt issuance costs

(17,191)





(18,170)



(322)


Purchase of Treasury Stock



(1,965)



(12,424)



(26,499)


Purchase of non-controlling interest







(583)


Payments of dividends to shareholders

(47,279)



(40,735)



(141,377)



(121,901)


Net cash provided by (used in) financing activities

648,141



(27,389)



1,308,757



(114,708)


Foreign exchange gain (loss) on cash held in foreign currencies

(15,989)



1,992



(20,060)



(3,909)


Increase (decrease) in cash, cash equivalents and restricted cash during the period

777,364



171,642



514,053



85,525


Cash, cash equivalents and restricted cash at beginning of the period

680,232



597,874



943,543



683,991


Cash, cash equivalents and restricted cash at end of the period

$

1,457,596



$

769,516



$

1,457,596



$

769,516


 

Reconciliation of cash, cash equivalents and restricted cash:

March 31, 2020


March 31, 2019

Cash and cash equivalents

1,452,570



765,224


Restricted cash included in Other assets

5,026



4,292


Total Cash, cash equivalents and restricted cash

$

1,457,596



$

769,516










Notes

(1)

All dollar amounts in this press release are in U.S. Dollars unless otherwise indicated.



(2)

Use of Non-GAAP Financial Measures: In addition to reporting financial results in accordance with U.S. GAAP, the Company provides certain financial measures that are not in accordance with U.S. GAAP (Non-GAAP). These Non-GAAP financial measures have certain limitations in that they do not have a standardized meaning and thus the Company's definition may be different from similar Non-GAAP financial measures used by other companies and/or analysts and may differ from period to period. Thus it may be more difficult to compare the Company's financial performance to that of other companies. However, the Company's management compensates for these limitations by providing the relevant disclosure of the items excluded in the calculation of these Non-GAAP financial measures both in its reconciliation to the U.S. GAAP financial measures and its consolidated financial statements, all of which should be considered when evaluating the Company's results.




The Company uses these Non-GAAP financial measures to supplement the information provided in its consolidated financial statements, which are presented in accordance with U.S. GAAP. The presentation of Non-GAAP financial measures are not meant to be a substitute for financial measures presented in accordance with U.S. GAAP, but rather should be evaluated in conjunction with and as a supplement to such U.S. GAAP measures. OpenText strongly encourages investors to review its financial information in its entirety and not to rely on a single financial measure. The Company therefore believes that despite these limitations, it is appropriate to supplement the disclosure of the U.S. GAAP measures with certain Non-GAAP measures defined below.




Non-GAAP-based net income and Non-GAAP-based EPS, attributable to OpenText, are consistently calculated as GAAP-based net income or earnings per share, attributable to OpenText, on a diluted basis, excluding the effects of the amortization of acquired intangible assets, other income (expense), share-based compensation, and Special charges (recoveries), all net of tax and any tax benefits/expense items unrelated to current period income, as further described in the tables below. Non-GAAP-based gross profit is the arithmetical sum of GAAP-based gross profit and the amortization of acquired technology-based intangible assets and share-based compensation within cost of sales. Non-GAAP-based gross margin is calculated as Non-GAAP-based gross profit expressed as a percentage of total revenue. Non-GAAP-based income from operations is calculated as income from operations, excluding the amortization of acquired intangible assets, Special charges (recoveries), and share-based compensation expense.




Adjusted earnings (loss) before interest, taxes, depreciation and amortization (Adjusted EBITDA) is consistently calculated as GAAP-based net income, attributable to OpenText, excluding interest income (expense), provision for income taxes, depreciation and amortization of acquired intangible assets, other income (expense), share-based compensation and Special charges (recoveries).




The Company's management believes that the presentation of the above defined Non-GAAP financial measures provides useful information to investors because they portray the financial results of the Company before the impact of certain non-operational charges. The use of the term "non-operational charge" is defined for this purpose as an expense that does not impact the ongoing operating decisions taken by the Company's management. These items are excluded based upon the way the Company's management evaluates the performance of the Company's business for use in the Company's internal reports and are not excluded in the sense that they may be used under U.S. GAAP.




The Company does not acquire businesses on a predictable cycle, and therefore believes that the presentation of non-GAAP measures, which in certain cases adjust for the impact of amortization of intangible assets and the related tax effects that are primarily related to acquisitions, will provide readers of financial statements with a more consistent basis for comparison across accounting periods and be more useful in helping readers understand the Company's operating results and underlying operational trends. Additionally, the Company has engaged in various restructuring activities over the past several years, primarily due to acquisitions, that have resulted in costs associated with reductions in headcount, consolidation of leased facilities and related costs, all which are recorded under the Company's "Special Charges (recoveries)" caption on the Consolidated Statements of Income. Each restructuring activity is a discrete event based on a unique set of business objectives or circumstances, and each differs in terms of its operational implementation, business impact and scope, and the size of each restructuring plan can vary significantly from period to period. Therefore, the Company believes that the exclusion of these special charges (recoveries) will also better aid readers of financial statements in the understanding and comparability of the Company's operating results and underlying operational trends.




In summary the Company believes the provision of supplemental Non-GAAP measures allow investors to evaluate the operational and financial performance of the Company's core business using the same evaluation measures that management uses, and is therefore a useful indication of OpenText's performance or expected performance of future operations and facilitates period-to-period comparison of operating performance (although prior performance is not necessarily indicative of future performance). As a result, the Company considers it appropriate and reasonable to provide, in addition to U.S. GAAP measures, supplementary Non-GAAP financial measures that exclude certain items from the presentation of its financial results.




The following charts provide (unaudited) reconciliations of U.S. GAAP-based financial measures to Non-U.S. GAAP-based financial measures for the following periods presented.

 

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures

for the three months ended March 31, 2020.

(In thousands except for per share amounts)


Three Months Ended March 31, 2020


GAAP-based

Measures

GAAP-based
Measures

% of Total
Revenue

Adjustments

Note

Non-GAAP-
based

Measures

Non-GAAP-
based
Measures

% of Total
Revenue

Cost of revenues







Cloud services and subscriptions

$

127,565



$

(398)


(1)

$

127,167



Customer support

32,151



(284)


(1)

31,867



Professional service and other

56,526



(328)


(1)

56,198



Amortization of acquired technology-based intangible assets

63,401



(63,401)


(2)



GAAP-based gross profit and gross margin (%) /

Non-GAAP-based gross profit and gross margin (%)

532,492


65.4

%

64,411


(3)

596,903


73.3

%

Operating expenses







Research and development

108,184



(1,243)


(1)

106,941



Sales and marketing

166,234



(2,261)


(1)

163,973



General and administrative

68,828



(2,342)


(1)

66,486



Amortization of acquired customer-based intangible assets

59,943



(59,943)


(2)



Special charges (recoveries)

9,406



(9,406)


(4)



GAAP-based income from operations / Non-GAAP-based income from operations

95,077



139,606


(5)

234,683



Other income (expense), net

(18,923)



18,923


(6)



Provision for (recovery of) income taxes

8,891



18,188


(7)

27,079



GAAP-based net income / Non-GAAP-based net income, attributable to OpenText

25,965



140,341


(8)

166,306



GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText

$

0.10



$

0.51


(8)

$

0.61


















(1)

Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.

(2)

Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.

(3)

GAAP-based and Non-GAAP-based gross profit stated in dollars, and gross margin stated as a percentage of total revenue.

(4)

Adjustment relates to the exclusion of Special charges (recoveries) from our Non-GAAP-based operating expenses as Special charges (recoveries) are generally incurred in the periods relevant to an acquisition and include certain charges or recoveries that are not indicative or related to continuing operations, and are therefore excluded from our internal analysis of operating results.

(5)

GAAP-based and Non-GAAP-based income from operations stated in dollars.

(6)

Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) generally relates to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results. Other income (expense) also includes our share of income (losses) from our holdings in non-marketable securities investments as a limited partner. We do not actively trade equity securities in these privately held companies nor do we plan our ongoing operations based around any anticipated fundings or distributions from these investments. We exclude gains and losses on these investments as we do not believe they are reflective of our ongoing business and operating results.

(7)

Adjustment relates to differences between the GAAP-based tax provision rate of approximately 25% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded items include amortization, share-based compensation, Special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves, and "book to return" adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately 14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.

(8)

Reconciliation of GAAP-based net income to Non-GAAP-based net income:

 


Three Months Ended March 31, 2020



Per share diluted

GAAP-based net income, attributable to OpenText

$

25,965


$

0.10


Add:



Amortization

123,344


0.45


Share-based compensation

6,856


0.03


Special charges (recoveries)

9,406


0.03


Other (income) expense, net

18,923


0.07


GAAP-based provision for (recovery of) income taxes

8,891


0.03


Non-GAAP-based provision for income taxes

(27,079)


(0.10)


Non-GAAP-based net income, attributable to OpenText

$

166,306


$

0.61


 

Reconciliation of Adjusted EBITDA




Three Months Ended March 31, 2020

GAAP-based net income, attributable to OpenText

$

25,965


Add:


Provision for (recovery of) income taxes

8,891


Interest and other related expense, net

41,263


Amortization of acquired technology-based intangible assets

63,401


Amortization of acquired customer-based intangible assets

59,943


Depreciation

24,820


Share-based compensation

6,856


Special charges (recoveries)

9,406


Other (income) expense, net

18,923


Adjusted EBITDA

$

259,468


 

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures

for the nine months ended March 31, 2020

(In thousands except for per share amounts)


Nine Months Ended March 31, 2020


GAAP-based

Measures

GAAP-based
Measures

% of Total
Revenue

Adjustments

Note

Non-GAAP-
based

Measures

Non-GAAP-
based
Measures

% of Total
Revenue

Cost of revenues







Cloud services and subscriptions

$

333,371



$

(1,152)


(1)

$

332,219



Customer support

91,326



(897)


(1)

90,429



Professional service and other

164,468



(917)


(1)

163,551



Amortization of acquired technology-based intangible assets

145,998



(145,998)


(2)



GAAP-based gross profit and gross margin (%) /

Non-GAAP-based gross profit and gross margin (%)

1,540,044


67.5

%

148,964


(3)

1,689,008


74.0

%

Operating expenses







Research and development

269,645



(3,719)


(1)

265,926



Sales and marketing

432,162



(6,760)


(1)

425,402



General and administrative

174,958



(8,085)


(1)

166,873



Amortization of acquired customer-based intangible assets

160,561



(160,561)


(2)



Special charges (recoveries)

24,579



(24,579)


(4)



GAAP-based income from operations / Non-GAAP-based income from operations

412,330



352,668


(5)

764,998



Other income (expense), net

(19,736)



19,736


(6)



Provision for (recovery of) income taxes

78,800



13,481


(7)

92,281



GAAP-based net income / Non-GAAP-based net income, attributable to OpenText

207,833



358,923


(8)

566,756



GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText

$

0.77



$

1.32


(8)

$

2.09



















(1)

Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.

(2)

Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.

(3)

GAAP-based and Non-GAAP-based gross profit stated in dollars, and gross margin stated as a percentage of total revenue.

(4)

Adjustment relates to the exclusion of Special charges (recoveries) from our Non-GAAP-based operating expenses as Special charges (recoveries) are generally incurred in the periods relevant to an acquisition and include certain charges or recoveries that are not indicative or related to continuing operations, and are therefore excluded from our internal analysis of operating results.

(5)

GAAP-based and Non-GAAP-based income from operations stated in dollars.

(6)

Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) generally relates to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results. Other income (expense) also includes our share of income (losses) from our holdings in non-marketable securities investments as a limited partner. We do not actively trade equity securities in these privately held companies nor do we plan our ongoing operations based around any anticipated fundings or distributions from these investments. We exclude gains and losses on these investments as we do not believe they are reflective of our ongoing business and operating results.

(7)

Adjustment relates to differences between the GAAP-based tax provision rate of approximately 27% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded items include amortization, share-based compensation, Special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves, and "book to return" adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately 14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.

(8)

Reconciliation of GAAP-based net income to Non-GAAP-based net income:

 


Nine Months Ended March 31, 2020



Per share diluted

GAAP-based net income, attributable to OpenText

$

207,833


$

0.77


Add:



Amortization

306,559


1.13


Share-based compensation

21,530


0.08


Special charges (recoveries)

24,579


0.09


Other (income) expense, net

19,736


0.07


GAAP-based provision for (recovery of) income taxes

78,800


0.29


Non-GAAP-based provision for income taxes

(92,281)


(0.34)


Non-GAAP-based net income attributable to OpenText

$

566,756


$

2.09


 

Reconciliation of Adjusted EBITDA




Nine Months Ended March 31, 2020

GAAP-based net income, attributable to OpenText

$

207,833


Add:


Provision for (recovery of) income taxes

78,800


Interest and other related expense, net

105,849


Amortization of acquired technology-based intangible assets

145,998


Amortization of acquired customer-based intangible assets

160,561


Depreciation

65,809


Share-based compensation

21,530


Special charges (recoveries)

24,579


Other (income) expense, net

19,736


Adjusted EBITDA

$

830,695


 

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures

for the three months ended December 31, 2019.

(In thousands except for per share amounts)


Three Months Ended December 31, 2019


GAAP-based

Measures

GAAP-based
Measures

% of Total
Revenue

Adjustments

Note

Non-GAAP-
based

Measures

Non-GAAP-
based
Measures

% of Total
Revenue

Cost of revenues







Cloud services and subscriptions

$

103,644



$

(371)


(1)

$

103,273



Customer support

29,788



(297)


(1)

29,491



Professional service and other

53,604



(346)


(1)

53,258



Amortization of acquired technology-based intangible assets

42,299



(42,299)


(2)



GAAP-based gross profit and gross margin (%) /

Non-GAAP-based gross profit and gross margin (%)

539,172


69.9

%

43,313


(3)

582,485


75.5

%

Operating expenses







Research and development

80,283



(1,255)


(1)

79,028



Sales and marketing

137,310



(2,383)


(1)

134,927



General and administrative

54,595



(3,131)


(1)

51,464



Amortization of acquired customer-based intangible assets

51,460



(51,460)


(2)



Special charges (recoveries)

10,072



(10,072)


(4)



GAAP-based income from operations / Non-GAAP-based income from operations

184,740



111,614


(5)

296,354



Other income (expense), net

1,972



(1,972)


(6)



Provision for (recovery of) income taxes

46,818



(9,861)


(7)

36,957



GAAP-based net income / Non-GAAP-based net income, attributable to OpenText

107,467



119,503


(8)

226,970



GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText

$

0.40



$

0.44


(8)

$

0.84



















(1)

Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.

(2)

Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.

(3)

GAAP-based and Non-GAAP-based gross profit stated in dollars, and gross margin stated as a percentage of total revenue.

(4)

Adjustment relates to the exclusion of Special charges (recoveries) from our Non-GAAP-based operating expenses as Special charges (recoveries) are generally incurred in the periods relevant to an acquisition and include certain charges or recoveries that are not indicative or related to continuing operations, and are therefore excluded from our internal analysis of operating results.

(5)

GAAP-based and Non-GAAP-based income from operations stated in dollars.

(6)

Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) generally relates to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results. Other income (expense) also includes our share of income (losses) from our holdings in non-marketable securities investments as a limited partner. We do not actively trade equity securities in these privately held companies nor do we plan our ongoing operations based around any anticipated fundings or distributions from these investments. We exclude gains and losses on these investments as we do not believe they are reflective of our ongoing business and operating results.

(7)

Adjustment relates to differences between the GAAP-based tax provision rate of approximately 30% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded items include amortization, share-based compensation, Special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves, and "book to return" adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately 14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.

(8)

Reconciliation of GAAP-based net income to Non-GAAP-based net income:

 


Three Months Ended December 31, 2019



Per share diluted

GAAP-based net income, attributable to OpenText

$

107,467


$

0.40


Add:



Amortization

93,759


0.35


Share-based compensation

7,783


0.03


Special charges (recoveries)

10,072


0.04


Other (income) expense, net

(1,972)


(0.01)


GAAP-based provision for (recovery of) income taxes

46,818


0.17


Non-GAAP-based provision for income taxes

(36,957)


(0.14)


Non-GAAP-based net income, attributable to OpenText

$

226,970


$

0.84


 

Reconciliation of Adjusted EBITDA




Three Months Ended December 31, 2019

GAAP-based net income, attributable to OpenText

$

107,467


Add:


Provision for (recovery of) income taxes

46,818


Interest and other related expense, net

32,376


Amortization of acquired technology-based intangible assets

42,299


Amortization of acquired customer-based intangible assets

51,460


Depreciation

20,712


Share-based compensation

7,783


Special charges (recoveries)

10,072


Other (income) expense, net

(1,972)


Adjusted EBITDA

$

317,015


 

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures

for the three months ended March 31, 2019.

(In thousands except for per share amounts)


Three Months Ended March 31, 2019


GAAP-based

Measures

GAAP-based
Measures

% of Total
Revenue

Adjustments

Note

Non-GAAP-
based

Measures

Non-GAAP-
based
Measures

% of Total
Revenue

Cost of revenues







Cloud services and subscriptions

$

103,873



$

(291)


(1)

$

103,582



Customer support

31,844



(310)


(1)

31,534



Professional service and other

56,626



(448)


(1)

56,178



Amortization of acquired technology-based intangible assets

44,596



(44,596)


(2)



GAAP-based gross profit and gross margin (%) /

Non-GAAP-based gross profit and gross margin (%)

479,515


66.7

%

45,645


(3)

525,160


73.0

%

Operating expenses







Research and development

84,905



(1,315)


(1)

83,590



Sales and marketing

132,244



(2,458)


(1)

129,786



General and administrative

51,833



(1,890)


(1)

49,943



Amortization of acquired customer-based intangible assets

48,832



(48,832)


(2)



Special charges (recoveries)

796



(796)


(4)



GAAP-based income from operations / Non-GAAP-based income from operations

135,877



100,936


(5)

236,813



Other income (expense), net

5,065



(5,065)


(6)



Provision for (recovery of) income taxes

32,542



(4,373)


(7)

28,169



GAAP-based net income / Non-GAAP-based net income, attributable to OpenText

72,762



100,244


(8)

173,006



GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText

$

0.27



$

0.37


(8)

$

0.64



















(1)

Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.

(2)

Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.

(3)

GAAP-based and Non-GAAP-based gross profit stated in dollars, and gross margin stated as a percentage of total revenue.

(4)

Adjustment relates to the exclusion of Special charges (recoveries) from our Non-GAAP-based operating expenses as Special charges (recoveries) are generally incurred in the periods relevant to an acquisition and include certain charges or recoveries that are not indicative or related to continuing operations, and are therefore excluded from our internal analysis of operating results.

(5)

GAAP-based and Non-GAAP-based income from operations stated in dollars.

(6)

Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) generally relates to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results. Other income (expense) also includes our share of income (losses) from our holdings in non-marketable securities investments as a limited partner. We do not actively trade equity securities in these privately held companies nor do we plan our ongoing operations based around any anticipated fundings or distributions from these investments. We exclude gains and losses on these investments as we do not believe they are reflective of our ongoing business and operating results.

(7)

Adjustment relates to differences between the GAAP-based tax provision rate of approximately 31% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded items include amortization, share-based compensation, Special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves, and "book to return" adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately 14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.

(8)

Reconciliation of GAAP-based net income to Non-GAAP-based net income:

 


Three Months Ended March 31, 2019



Per share diluted

GAAP-based net income, attributable to OpenText

$

72,762


$

0.27


Add:



Amortization

93,428


0.35


Share-based compensation

6,712


0.02


Special charges (recoveries)

796



Other (income) expense, net

(5,065)


(0.02)


GAAP-based provision for (recovery of) income taxes

32,542


0.12


Non-GAAP-based provision for income taxes

(28,169)


(0.10)


Non-GAAP-based net income, attributable to OpenText

$

173,006


$

0.64


 

Reconciliation of Adjusted EBITDA




Three Months Ended March 31, 2019

GAAP-based net income, attributable to OpenText

$

72,762


Add:


Provision for (recovery of) income taxes

32,542


Interest and other related expense, net

35,607


Amortization of acquired technology-based intangible assets

44,596


Amortization of acquired customer-based intangible assets

48,832


Depreciation

25,028


Share-based compensation

6,712


Special charges (recoveries)

796


Other (income) expense, net

(5,065)


Adjusted EBITDA

$

261,810


 

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures

for the nine months ended March 31, 2019

(In thousands except for per share amounts)


Nine Months Ended March 31, 2019


GAAP-based

Measures

GAAP-based
Measures

% of Total
Revenue

Adjustments

Note

Non-GAAP-
based

Measures

Non-GAAP-
based
Measures

% of Total
Revenue

Cost of revenues







Cloud services and subscriptions

$

280,274



$

(873)


(1)

$

279,401



Customer support

93,582



(881)


(1)

92,701



Professional service and other

169,452



(1,330)


(1)

168,122



Amortization of acquired technology-based intangible assets

140,439



(140,439)


(2)



GAAP-based gross profit and gross margin (%) /

Non-GAAP-based gross profit and gross margin (%)

1,427,568


67.3

%

143,523


(3)

1,571,091


74.1

%

Operating expenses







Research and development

238,128



(3,668)


(1)

234,460



Sales and marketing

378,619



(5,874)


(1)

372,745



General and administrative

154,955



(7,526)


(1)

147,429



Amortization of acquired customer-based intangible assets

140,627



(140,627)


(2)



Special charges (recoveries)

33,487



(33,487)


(4)



GAAP-based income from operations / Non-GAAP-based income from operations

409,036



334,705


(5)

743,741



Other income (expense), net

6,965



(6,965)


(6)



Provision for (recovery of) income taxes

98,628



(9,029)


(7)

89,599



GAAP-based net income / Non-GAAP-based net income, attributable to OpenText

213,518



336,769


(8)

550,287



GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText

$

0.79



$

1.25


(8)

$

2.04



















(1)

Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.

(2)

Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.

(3)

GAAP-based and Non-GAAP-based gross profit stated in dollars, and gross margin stated as a percentage of total revenue.

(4)

Adjustment relates to the exclusion of Special charges (recoveries) from our Non-GAAP-based operating expenses as Special charges (recoveries) are generally incurred in the periods relevant to an acquisition and include certain charges or recoveries that are not indicative or related to continuing operations, and are therefore excluded from our internal analysis of operating results.

(5)

GAAP-based and Non-GAAP-based income from operations stated in dollars.

(6)

Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) generally relates to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results. Other income (expense) also includes our share of income (losses) from our holdings in non-marketable securities investments as a limited partner. We do not actively trade equity securities in these privately held companies nor do we plan our ongoing operations based around any anticipated fundings or distributions from these investments. We exclude gains and losses on these investments as we do not believe they are reflective of our ongoing business and operating results.

(7)

Adjustment relates to differences between the GAAP-based tax provision rate of approximately 32% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded items include amortization, share-based compensation, Special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves, and "book to return" adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately 14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.

(8)

Reconciliation of GAAP-based net income to Non-GAAP-based net income:

 


Nine Months Ended March 31, 2019



Per share diluted

GAAP-based net income, attributable to OpenText

$

213,518


$

0.79


Add:



Amortization

281,066


1.04


Share-based compensation

20,152


0.07


Special charges (recoveries)

33,487


0.12


Other (income) expense, net

(6,965)


(0.03)


GAAP-based provision for (recovery of) income taxes

98,628


0.37


Non-GAAP-based provision for income taxes

(89,599)


(0.32)


Non-GAAP-based net income, attributable to OpenText

$

550,287


$

2.04


 

Reconciliation of Adjusted EBITDA




Nine Months Ended March 31, 2019

GAAP-based net income, attributable to OpenText

$

213,518


Add:


Provision for (recovery of) income taxes

98,628


Interest and other related expense, net

103,751


Amortization of acquired technology-based intangible assets

140,439


Amortization of acquired customer-based intangible assets

140,627


Depreciation

72,716


Share-based compensation

20,152


Special charges (recoveries)

33,487


Other (income) expense, net

(6,965)


Adjusted EBITDA

$

816,353



(3)

The following tables provide a composition of our major currencies for revenue and expenses, expressed as a percentage, for the three and nine months ended March 31, 2020 and 2019:

 


Three Months Ended March 31, 2020


Three Months Ended March 31, 2019

Currencies

% of Revenue 

% of Expenses* 


% of Revenue 

% of Expenses* 

EURO

22

%

13

%


22

%

15

%

GBP

5

%

6

%


6

%

6

%

CAD

3

%

10

%


5

%

10

%

USD

63

%

56

%


58

%

51

%

Other

7

%

15

%


9

%

18

%

Total

100

%

100

%


100

%

100

%






Nine Months Ended March 31, 2020


Nine Months Ended March 31, 2019

Currencies

% of Revenue 

% of Expenses* 


% of Revenue 

% of Expenses* 

EURO

23

%

14

%


23

%

15

%

GBP

5

%

6

%


6

%

6

%

CAD

3

%

10

%


4

%

10

%

USD

60

%

54

%


58

%

51

%

Other

9

%

16

%


9

%

18

%

Total

100

%

100

%


100

%

100

%



*Expenses include all cost of revenues and operating expenses included within the Condensed Consolidated Statements of Income, except for amortization of intangible assets, share-based compensation and Special charges (recoveries).

 

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SOURCE Open Text Corporation