OTEX
$35.29
Open Text Cp
$.54
1.55%
Earnings Details
2nd Quarter December 2022
Thursday, February 2, 2023 4:01:00 PM
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Summary

Open Text Cp (OTEX) Recent Earnings

Open Text Cp (OTEX) reported 2nd Quarter December 2022 earnings of $0.81 per share on revenue of $897.4 million. The consensus earnings estimate was $0.72 per share on revenue of $884.0 million. Revenue grew 2.4% 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
$0.81
Earnings Whisper
-
Consensus Estimate
$0.72
Reported Revenue
$897.4 Mil
Revenue Estimate
$884.0 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

OpenText Reports Second Quarter Fiscal Year 2023 Financial Results

Record Q2 Revenues Powered by Cloud Revenue Growth and Continued Strong Cloud Bookings

Eight Consecutive Quarters of Cloud Organic Growth

Fiscal 2023 Second Quarter Highlights

Total Revenues

(in millions)


Annual Recurring Revenues

(in millions)


Cloud Revenues

(in millions)


Reported

Constant
Currency


Reported

Constant
Currency


Reported

Constant
Currency

$897

$945


$725

$761


$409

$423

+2.4 %

+7.8 %


+3.6 %

+8.7 %


+12.0 %

+16.0 %


Annual Recurring Revenues represent 81% of Total Revenues

  • Total revenues of $897 million, up 2.4% Y/Y or up 7.8% in constant currency
  • Annual recurring revenues (ARR) of $725 million, up 3.6% Y/Y or up 8.7% in constant currency
  • Cloud revenues of $409 million, up 12.0% Y/Y or up 16.0% in constant currency
  • Eight consecutive quarters of cloud organic and ARR organic growth in constant currency
  • Strong quarterly enterprise cloud bookings(1) of $144.7 million, up 12% Y/Y
  • Operating cash flows of $195 million and free cash flows(3) of $163 million
  • TTM operating cash flows(2) of $903 million and TTM free cash flows(2)(3) of $778 million
  • GAAP-based net income of $258 million, up 192.7% Y/Y, margin of 28.8%, up 1,870 basis points Y/Y, including $172 million of pretax unrealized gains on mark-to-market valuations related to derivative transactions in connection with the Micro Focus acquisition
  • Adjusted EBITDA(3) of $341 million, margin of 38.0% and TTM Adjusted EBITDA(2)(3) of $1,243 million, margin of 35.2%
  • GAAP-based diluted earnings per share (EPS) of $0.96, Non-GAAP diluted EPS(3) of $0.89
  • Completed offering of $1 billion Senior Secured Notes due 2027 and $3.585 billion Acquisition Term Loan Amendment as part of Micro Focus acquisition financing
  • Closed acquisition of Micro Focus on January 31, 2023

WATERLOO, ON, Feb. 2, 2023 /CNW/ -- Open Text Corporation (NASDAQ: OTEX), (TSX: OTEX), today announced its financial results for the second quarter and year ended December 31, 2022.

"OpenText delivered a superb second quarter with strong cloud bookings and revenues, establishing our eighth consecutive quarter of cloud organic and ARR organic growth in constant currency," said Mark J. Barrenechea, OpenText CEO & CTO. "Customers embraced our Cloud Editions as reflected with Cloud revenues of $409 million, growing 12.0% year-over-year or 16.0% in constant currency. Total revenues were $897 million, growing 2.4% year-over-year or 7.8% in constant currency and Annual recurring revenues were $725 million, growing 3.6% year-over-year or 8.7% in constant currency."

"Customers are looking to gain the Information Advantage and we are excited to expand our offerings with Micro Focus products to include Cybersecurity, Application Automation and Modernization, AI & Analytics, and Digital Operations Management," added Mr Barrenechea. "As one of the world's largest software and cloud businesses, OpenText powers and protects information to elevate every person and every organization to be their best. We welcome Micro Focus customers, partners and employees to OpenText. We expect to have Micro Focus on our operating model within six full quarters or sooner."

"We enter 2023 with tremendous momentum and an expanded Information Management market," said Madhu Ranganathan, OpenText EVP, CFO. "OpenText's cash flow profile is strong. We remain committed to successfully executing our $400 million cost savings plan and achieving a consolidated net leverage ratio of less than 3x within eight full quarters or sooner."

(1)

Enterprise cloud bookings is defined as the total value from cloud services and subscription contracts, entered into in the period that are new, committed and incremental to our existing contracts, excluding the impact of Carbonite and Zix.

(2)

TTM  is calculated as Q3FY'22, plus Q4FY'22, plus year-to-date FY'23 included within our current and historical filings on Forms 10-Q and 10-K.

(3)

Please see Note 2 "Use of Non-GAAP Financial Measures" to the consolidated financial statements below.



Financial Highlights for Q2 Fiscal 2023 with Year Over Year Comparisons

Summary of Quarterly Results









(In millions, except per share data)

Q2 FY'23

Q2 FY'22

$ Change 

% Change 


Q2 FY'23
in CC*

% Change
in CC*


Revenues:









Cloud services and subscriptions

$408.7

$364.9

$43.8

12.0 %


$423.2

16.0 %


Customer support

316.5

334.9

(18.4)

(5.5) %


337.8

0.9 %


Total annual recurring revenues**

$725.2

$699.8

$25.4

3.6 %


$761.0

8.7 %


License

108.0

109.5

(1.5)

(1.4) %


114.8

4.8 %


Professional service and other

64.3

67.5

(3.2)

(4.8) %


69.2

2.5 %


Total revenues

$897.4

$876.8

$20.6

2.4 %


$945.0

7.8 %


GAAP-based operating income

$184.7

$192.9

($8.2)

(4.3) %


N/A

N/A


Non-GAAP-based operating income (1)

$318.1

$321.8

($3.7)

(1.1) %


$333.2

3.5 %


GAAP-based net income attributable to OpenText

$258.5

$88.3

$170.2

192.7 %


N/A

N/A


GAAP-based EPS, diluted

$0.96

$0.32

$0.64

200.0 %


N/A

N/A


Non-GAAP-based EPS, diluted (1)(2)

$0.89

$0.89

$—

— %


$0.94

5.6 %


Adjusted EBITDA (1)

$340.9

$343.5

($2.6)

(0.8) %


$356.1

3.7 %


Operating cash flows

$195.2

$216.6

($21.5)

(9.9) %


N/A

N/A


Free cash flows (1)

$163.0

$206.0

($43.1)

(20.9) %


N/A

N/A



Summary of YTD Results









(In millions, except per share data)

FY'23 YTD

FY'22 YTD

$ Change 

% Change 


FY'23
YTD in
CC*

% Change
in CC*


Revenues:









Cloud services and subscriptions

$813.3

$721.5

$91.9

12.7 %


$840.0

16.4 %


Customer support

633.9

670.1

(36.3)

(5.4) %


674.6

0.7 %


Total annual recurring revenues**

$1,447.2

$1,391.6

$55.6

4.0 %


$1,514.6

8.8 %


License

170.5

183.0

(12.5)

(6.8) %


181.2

(1.0) %


Professional service and other

131.8

134.5

(2.7)

(2.0) %


141.0

4.8 %


Total revenues

$1,749.5

$1,709.1

$40.4

2.4 %


$1,836.7

7.5 %


GAAP-based operating income

$331.0

$375.6

($44.6)

(11.9) %


N/A

N/A


Non-GAAP-based operating income (1)

$599.0

$623.8

($24.8)

(4.0) %


$629.5

0.9 %


GAAP-based net income attributable to OpenText

$141.6

$220.2

($78.7)

(35.7) %


N/A

N/A


GAAP-based EPS, diluted

$0.52

$0.81

($0.29)

(35.8) %


N/A

N/A


Non-GAAP-based EPS, diluted (1)(2)

$1.66

$1.72

($0.06)

(3.5) %


$1.76

2.3 %


Adjusted EBITDA (1)

$645.0

$666.9

($21.9)

(3.3) %


$675.8

1.3 %


Operating cash flows

$327.1

$406.3

($79.2)

(19.5) %


N/A

N/A


Free cash flows (1)

$258.6

$369.0

($110.4)

(29.9) %


N/A

N/A



(1) Please see Note 2 "Use of Non-GAAP Financial Measures" to the consolidated financial statements 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.

Dividend

As part of our quarterly, non-cumulative cash dividend program, the Board declared on February 1, 2023, a cash dividend of $0.24299 per common share. The record date for this dividend is March 3, 2023 and the payment date is March 23, 2023. 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

  • OpenText buys Micro Focus International plc
  • OpenText completed Notes Offering and Term Loan amendment as part of Micro Focus acquisition financing
  • Key customer wins in the quarter include: AMD, Baltimore City Council, Barnardo's, DataExpert, Lear Corporation, Los Alamos National Laboratory of the U.S. Department of Energy, Marks & Spencer, Matmut, Nebraska Furniture Mart, NIB Holdings Limited, Royal Bank of Canada, RR Donnelley, Transport for London and U.S. Defense Health Agency
  • OpenText to ring the Nasdaq Stock Market opening bell in Ottawa on February 3, 2023
  • OpenText has partnered with Allstate Identity Protection to offer identity protection services to Webroot customers
  • OpenText achieves FedRAMP "In Process" designation for its OpenText Cloud for Government offering
  • OpenText next level Managed Detection and Response offerings recognized in the 2022 MITRE Engenuity ATT&CK Evaluations for Managed Services 

Summary of Quarterly Results









Q2 FY'23

Q1 FY'23

Q2 FY'22

% Change
(Q2 FY'23 vs
Q1 FY'23)


% Change
(Q2 FY'23 vs
Q2 FY'22)


Revenue (millions)

$897.4

$852.0

$876.8

5.3 %


2.4 %


GAAP-based gross margin

70.8 %

69.7 %

70.2 %

110

bps

60

bps

Non-GAAP-based gross margin (1)

76.0 %

75.2 %

76.4 %

80

bps

(40)

bps

GAAP-based earnings (loss) per share, diluted

$0.96

($0.43)

$0.32

(323.3) %


200.0 %


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

$0.89

$0.77

$0.89

15.6 %


— %



(1) Please see Note 2 "Use of Non-GAAP Financial Measures" to the consolidated financial statements 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

OpenText posted an investor presentation on its Investor Relations website at http://investors.opentext.com and invites the public 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 February 2, 2023 at 7:00 p.m. ET through 11:59 p.m. on February 16, 2023 and can be accessed by dialing 1-855-669-9658 (toll-free) or +1-604-674-8052 (international) and using passcode 9718 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-GAAP-based financial measures.

About OpenText

OpenText, The Information Company™, enables organizations to gain insight through market leading information management solutions, powered by OpenText Cloud Editions. 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, 2023 (Fiscal 2023) on growth, future cloud growth and market share gains, future organic growth initiatives and deployment of capital, intention to maintain a dividend program, the associated benefits of the Micro Focus acquisition, future tax rates, new platform and product offerings and associated benefits to customers, scaling OpenText, and other matters, which 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 and uncertainties such as those relating to: all statements regarding the expected future financial position, results of operations, cash flows, dividends, financing plans, business strategy, budgets, capital expenditures, competitive positions, growth opportunities, plans and objectives of management, including any anticipated synergy benefits; our ability to integrate successfully Micro Focus' operations and programs, including incurring unanticipated costs, delays or difficulties;  duration and severity of the COVID-19 pandemic, including any new strains or resurgence; and our ability to develop, protect and maintain our intellectual property and proprietary technology and to operate without infringing on the proprietary rights of others. For additional information with respect to risks and other factors which could occur, see the Company's Annual Report on Form 10-K, Quarterly Report 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 ©2023 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

CONSOLIDATED BALANCE SHEETS 

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



December 31, 2022


June 30, 2022

ASSETS

(unaudited)



Cash and cash equivalents

$             2,820,927


$             1,693,741

Accounts receivable trade, net of allowance for credit losses of $17,089 as of December 31, 2022 and $16,473 as of June 30, 2022

470,794


426,652

Contract assets

25,613


26,167

Income taxes recoverable

10,300


18,255

Prepaid expenses and other current assets

131,172


120,552

Total current assets

3,458,806


2,285,367

Property and equipment

250,706


244,709

Operating lease right of use assets

194,415


198,132

Long-term contract assets

18,603


19,719

Goodwill

5,250,136


5,244,653

Acquired intangible assets

883,748


1,075,208

Deferred tax assets

811,142


810,154

Other assets

303,559


256,987

Long-term income taxes recoverable

47,091


44,044

Total assets

$          11,218,206


$          10,178,973

LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable and accrued liabilities

$                459,360


$                448,607

Current portion of long-term debt

10,000


10,000

Operating lease liabilities

58,299


56,380

Deferred revenues

879,226


902,202

Income taxes payable

87,549


51,069

Total current liabilities

1,494,434


1,468,258

Long-term liabilities:




Accrued liabilities

18,705


18,208

Pension liability

57,349


60,951

Long-term debt

5,193,158


4,209,567

Long-term operating lease liabilities

188,809


198,695

Long-term deferred revenues

84,681


91,144

Long-term income taxes payable

40,878


34,003

Deferred tax liabilities

18,808


65,887

Total long-term liabilities

5,602,388


4,678,455

Shareholders' equity:




Share capital and additional paid-in capital




270,235,234 and 269,522,639 Common Shares issued and outstanding at December 31, 2022 and June 30, 2022, respectively; authorized Common Shares: unlimited

2,092,079


2,038,674

Accumulated other comprehensive income (loss)

(1,028)


(7,659)

Retained earnings

2,171,236


2,160,069

Treasury stock, at cost (3,295,043 and 3,706,420 shares at December 31, 2022 and June 30, 2022, respectively)

(142,126)


(159,966)

Total OpenText shareholders' equity

4,120,161


4,031,118

Non-controlling interests

1,223


1,142

Total shareholders' equity

4,121,384


4,032,260

Total liabilities and shareholders' equity

$          11,218,206


$          10,178,973




OPEN TEXT CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

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

(unaudited)



Three Months Ended

December 31,


Six Months Ended

December 31,


2022


2021


2022


2021

Revenues:








Cloud services and subscriptions

$       408,674


$       364,886


$       813,325


$       721,475

Customer support

316,508


334,875


633,859


670,112

License

107,960


109,493


170,508


183,022

Professional service and other

64,298


67,545


131,784


134,498

Total revenues

897,440


876,799


1,749,476


1,709,107

Cost of revenues:








Cloud services and subscriptions

134,314


122,129


266,113


241,908

Customer support

28,589


29,668


55,943


59,151

License

3,863


3,741


6,621


7,710

Professional service and other

54,064


53,041


107,864


104,766

Amortization of acquired technology-based intangible assets

40,863


52,602


83,500


105,769

Total cost of revenues

261,693


261,181


520,041


519,304

Gross profit

635,747


615,618


1,229,435


1,189,803

Operating expenses:








Research and development

109,700


103,622


219,898


203,787

Sales and marketing

177,171


163,938


344,341


310,178

General and administrative

77,603


71,513


155,677


142,990

Depreciation

22,858


21,779


46,032


43,165

Amortization of acquired customer-based intangible assets

53,446


52,665


107,884


104,549

Special charges (recoveries)

10,306


9,217


24,587


9,561

Total operating expenses

451,084


422,734


898,419


814,230

Income from operations

184,663


192,884


331,016


375,573

Other income (expense), net

163,349


(25,037)


(25,882)


4,745

Interest and other related expense, net

(38,715)


(40,245)


(79,097)


(77,300)

Income before income taxes

309,297


127,602


226,037


303,018

Provision for income taxes

50,774


39,266


84,399


82,716

Net income for the period

$       258,523


$         88,336


$       141,638


$       220,302

Net (income) loss attributable to non-controlling interests

(37)


(38)


(81)


(89)

Net income attributable to OpenText

$       258,486


$         88,298


$       141,557


$       220,213

Earnings per share—basic attributable to OpenText

$              0.96


$              0.32


$              0.52


$              0.81

Earnings per share—diluted attributable to OpenText

$              0.96


$              0.32


$              0.52


$              0.81

Weighted average number of Common Shares outstanding—basic (in '000's)

270,189


272,112


269,997


272,078

Weighted average number of Common Shares outstanding—diluted (in '000's)

270,189


272,931


270,009


273,074




OPEN TEXT CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands of U.S. dollars)

(unaudited)



Three Months Ended

December 31,


Six Months Ended
December 31,


2022


2021


2022


2021

Net income

$       258,523


$         88,336


$       141,638


$       220,302

Other comprehensive income (loss)—net of tax:








Net foreign currency translation adjustments

39,419


(21,347)


3,053


(31,439)

Unrealized gain (loss) on cash flow hedges:








Unrealized gain (loss) - net of tax expense (recovery) effect of $347 and $37 for the three months ended December 31, 2022 and 2021, respectively; ($859) and $(354) for the six months ended December 31, 2022 and 2021, respectively

959


104


(2,381)


(982)

(Gain) loss reclassified into net income - net of tax (expense) recovery effect of $397 and $(7) for the three months ended December 31, 2022 and 2021, respectively; $609 and $(110) for the six months ended December 31, 2022 and 2021, respectively

1,101


(18)


1,689


(305)

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








Actuarial gain (loss) - net of tax expense (recovery) effect of $106 and $(104) for the three months ended December 31, 2022 and 2021, respectively; $1,210 and $(336) for the six months ended December 31, 2022 and 2021, respectively

32


(1,435)


4,196


(2,484)

Amortization of actuarial (gain) loss into net income - net of tax (expense) recovery effect of $25 and $67 for the three months ended December 31, 2022 and 2021, respectively; $51 and $135 for the six months ended December 31, 2022 and 2021, respectively

37


159


74


321

Total other comprehensive income (loss) net

41,548


(22,537)


6,631


(34,889)

Total comprehensive income

300,071


65,799


148,269


185,413

Comprehensive (income) loss attributable to non-controlling interests

(37)


(38)


(81)


(89)

Total comprehensive income attributable to OpenText

$       300,034


$         65,761


$       148,188


$       185,324




OPEN TEXT CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

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

(unaudited)



Three Months Ended December 31, 2022


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 September 30, 2022

269,881


$  2,067,881


(3,586)


$ (154,792)


$  1,978,442


$        (42,576)


$      1,186


$  3,850,141

Issuance of Common Shares
















Under employee stock purchase plans

354


8,042







8,042

Share-based compensation


28,822







28,822

Issuance of treasury stock


(12,666)


291


12,666





Dividends declared

($0.24299 per Common Share)





(65,692)




(65,692)

Other comprehensive income (loss) - net






41,548



41,548

Net income for the period





258,486



37


258,523

Balance as of December 31, 2022

270,235


$  2,092,079


(3,295)


$ (142,126)


$  2,171,236


$         (1,028)


$     1,223


$ 4,121,384




Three Months Ended December 31, 2021


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 September 30, 2021

272,534


$  1,991,719


(1,426)


$ (63,477)


$  2,225,363


$          53,886


$      1,024


$  4,208,515

Issuance of Common Shares
















Under employee stock option plans

56


1,966







1,966

Under employee stock purchase plans

226


9,421







9,421

Share-based compensation


14,409







14,409

Purchase of treasury stock



(400)


(19,593)





(19,593)

Issuance of treasury stock


(15,104)


350


15,104





Repurchase of Common Shares

(1,810)


(11,498)




(79,536)




(91,034)

Dividends declared

($0.2209 per Common Share)





(59,658)




(59,658)

Other comprehensive income (loss) - net






(22,537)



(22,537)

Net income for the period





88,298



38


88,336

Balance as of December 31, 2021

271,006


$  1,990,913


(1,476)


$ (67,966)


$  2,174,467


$         31,349


$     1,062


$  4,129,825




OPEN TEXT CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

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

(unaudited)



Six Months Ended December 31, 2022


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, 2022

269,523


$  2,038,674


(3,706)


$  (159,966)


$  2,160,069


$          (7,659)


$      1,142


$  4,032,260

Issuance of Common Shares
















Under employee stock option plans

72


1,994







1,994

Under employee stock purchase plans

640


17,221







17,221

Share-based compensation


52,030







52,030

Issuance of treasury stock


(17,840)


411


17,840





Dividends declared

($0.48598 per Common Share)





(130,390)




(130,390)

Other comprehensive income (loss) - net






6,631



6,631

Net income for the period





141,557



81


141,638

Balance as of December 31, 2022

270,235


$  2,092,079


(3,295)


$  (142,126)


$  2,171,236


$         (1,028)


$     1,223


$  4,121,384




Six Months Ended December 31, 2021


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, 2021

271,541


$  1,947,764


(1,568)


$ (69,386)


$  2,153,326


$          66,238


$      1,511


$  4,099,453

Issuance of Common Shares
















Under employee stock option plans

852


29,265







29,265

Under employee stock purchase plans

423


17,910







17,910

Share-based compensation


28,343







28,343

Purchase of treasury stock



(400)


(19,593)





(19,593)

Issuance of treasury stock


(21,013)


492


21,013





Repurchase of Common Shares

(1,810)


(11,498)




(79,536)




(91,034)

Dividends declared

($0.4418 per Common Share)





(119,536)




(119,536)

Other comprehensive income (loss) - net






(34,889)



(34,889)

Distribution to non-controlling interest


142






(538)


(396)

Net income for the period





220,213



89


220,302

Balance as of December 31, 2021

271,006


$  1,990,913


(1,476)


$ (67,966)


$  2,174,467


$         31,349


$     1,062


$  4,129,825




OPEN TEXT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS 

(In thousands of U.S. dollars)

(unaudited)



Three Months Ended

December 31,


Six Months Ended

December 31,


2022


2021


2022


2021

Cash flows from operating activities:








Net income for the period

$         258,523


$           88,336


$         141,638


$         220,302

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








Depreciation and amortization of intangible assets

117,167


127,046


237,416


253,483

Share-based compensation expense

28,822


14,409


52,030


28,343

Pension expense

2,057


1,529


3,444


3,015

Amortization of debt issuance costs

1,686


1,293


3,166


2,454

Write off of right of use assets

948



3,775


Loss on extinguishment of debt

8,131


27,413


8,131


27,413

Loss on sale and write down of property and equipment

121


11


121


38

Deferred taxes

(26,135)


6,210


(46,802)


20,892

Share in net (income) loss of equity investees

289


(2,042)


6,823


(31,357)

Unrealized (gain) loss on financial instruments

(171,607)



9,854


Changes in operating assets and liabilities:








Accounts receivable

(86,091)


(25,339)


(26,597)


51,187

Contract assets

(9,400)


(11,497)


(18,454)


(18,745)

Prepaid expenses and other current assets

(131)


(1,410)


(3,065)


(11,221)

Income taxes

28,406


(13,985)


44,240


2,776

Accounts payable and accrued liabilities

36,143


5,705


8,964


(108,629)

Deferred revenue

24,646


(12,177)


(29,133)


(50,693)

Other assets

(12,957)


9,371


(60,706)


16,913

Operating lease assets and liabilities, net

(5,448)


1,771


(7,716)


142

Net cash provided by operating activities

195,170


216,644


327,129


406,313

Cash flows from investing activities:








Additions of property and equipment

(32,215)


(10,635)


(68,539)


(37,347)

Purchase of Zix Corporation, net of cash acquired


(837,573)



(837,573)

Purchase of Bricata Inc.


(17,927)



(17,927)

Other investing activities

(873)


(3,567)


(873)


(3,271)

Net cash used in investing activities

(33,088)


(869,702)


(69,412)


(896,118)

Cash flows from financing activities:








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

5,736


8,968


15,773


45,688

Proceeds from long-term debt and Revolver

1,000,000


1,500,000


1,000,000


1,500,000

Repayment of long-term debt and Revolver

(2,500)


(852,500)


(5,000)


(855,000)

Debt extinguishment costs


(24,969)



(24,969)

Debt issuance costs

(11,650)


(15,347)


(11,650)


(15,347)

Repurchase of Common Shares


(91,034)



(91,034)

Purchase of treasury stock


(19,593)



(19,593)

Distribution to non-controlling interest




(396)

Payments of dividends to shareholders

(64,864)


(59,658)


(129,562)


(119,536)

Net cash provided by financing activities

926,722


445,867


869,561


419,813

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

27,831


(16,436)


(271)


(25,713)

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

1,116,635


(223,627)


1,127,007


(95,705)

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

1,706,283


1,737,722


1,695,911


1,609,800

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

$      2,822,918


$      1,514,095


$      2,822,918


$      1,514,095




OPEN TEXT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS 

(In thousands of U.S. dollars)

(unaudited)


Reconciliation of cash, cash equivalents and restricted cash:

December 31, 2022


December 31, 2021

Cash and cash equivalents

$               2,820,927


$               1,511,792

Restricted cash (1)

1,991


2,303

Total cash, cash equivalents and restricted cash

$               2,822,918


$               1,514,095





(1) Restricted cash is classified under the Prepaid expenses and other current assets and Other assets line items on the Consolidated Balance Sheets.

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 is 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 (loss) or earnings (loss) 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 GAAP-based income from operations, excluding the amortization of acquired intangible assets, special charges (recoveries), and share-based compensation expense.

Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) is consistently calculated as GAAP-based net income (loss), 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). Adjusted EBITDA margin is calculated as adjusted EBITDA expressed as a percentage of total revenue.

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 and most recently in response to our return to office planning, 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-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 December 31, 2022

(In thousands, except for per share data)


Three Months Ended December 31, 2022


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

$  134,314


$     (2,812)

(1)

$   131,502


Customer support

28,589


(690)

(1)

27,899


Professional service and other

54,064


(1,763)

(1)

52,301


Amortization of acquired technology-based intangible assets

40,863


(40,863)

(2)


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

635,747

70.8 %

46,128

(3)

681,875

76.0 %

Operating expenses







Research and development

109,700


(7,826)

(1)

101,874


Sales and marketing

177,171


(9,437)

(1)

167,734


General and administrative

77,603


(6,294)

(1)

71,309


Amortization of acquired customer-based intangible assets

53,446


(53,446)

(2)


Special charges (recoveries)

10,306


(10,306)

(4)


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

184,663


133,437

(5)

318,100


Other income (expense), net

163,349


(163,349)

(6)


Provision for income taxes

50,774


(11,660)

(7)

39,114


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

258,486


(18,252)

(8)

240,234


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

$         0.96


$        (0.07)

(8)

$          0.89




(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 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. Other income (expense) also includes unrealized gains (losses) on our derivatives which are not designated as hedges, that are related to the financing of the Micro Focus Acquisition. We exclude gains and losses on these derivatives as we do not believe they are reflective on our ongoing business and operating results.

(7)

Adjustment relates to differences between the GAAP-based tax provision rate of approximately 16% 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 (loss) to Non-GAAP-based net income:




Three Months Ended December 31, 2022



Per share diluted

GAAP-based net income, attributable to OpenText

$                   258,486

$                          0.96

Add:



Amortization

94,309

0.35

Share-based compensation

28,822

0.10

Special charges (recoveries)

10,306

0.04

Other (income) expense, net

(163,349)

(0.60)

GAAP-based provision for income taxes

50,774

0.19

Non-GAAP-based provision for income taxes

(39,114)

(0.15)

Non-GAAP-based net income, attributable to OpenText

$                   240,234

$                          0.89



Reconciliation of Adjusted EBITDA



Three Months Ended December 31, 2022

GAAP-based net income, attributable to OpenText

$                                                     258,486

Add:


Provision for income taxes

50,774

Interest and other related expense, net

38,715

Amortization of acquired technology-based intangible assets

40,863

Amortization of acquired customer-based intangible assets

53,446

Depreciation

22,858

Share-based compensation

28,822

Special charges (recoveries)

10,306

Other (income) expense, net

(163,349)

Adjusted EBITDA

$                                                     340,921



GAAP-based net income margin

28.8 %

Adjusted EBITDA margin

38.0 %



Reconciliation of Free cash flows



Three Months Ended December 31, 2022

GAAP-based cash flows provided by operating activities

$                                                         195,170

Add:


Capital expenditures (1)

(32,215)

Free cash flows

$                                                         162,955



(1) Defined as "Additions of property and equipment" in the Consolidated Statements of Cash Flows.




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

for the six months ended December 31, 2022

(In thousands, except for per share data)


Six Months Ended December 31, 2022


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

$   266,113


$     (4,845)

(1)

$   261,268


Customer support

55,943


(1,257)

(1)

54,686


Professional service and other

107,864


(3,288)

(1)

104,576


Amortization of acquired technology-based intangible assets

83,500


(83,500)

(2)


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

1,229,435

70.3 %

92,890

(3)

1,322,325

75.6 %

Operating expenses







Research and development

219,898


(14,680)

(1)

205,218


Sales and marketing

344,341


(16,296)

(1)

328,045


General and administrative

155,677


(11,664)

(1)

144,013


Amortization of acquired customer-based intangible assets

107,884


(107,884)

(2)


Special charges (recoveries)

24,587


(24,587)

(4)


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

331,016


268,001

(5)

599,017


Other income (expense), net

(25,882)


25,882

(6)


Provision for income taxes

84,399


(11,610)

(7)

72,789


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

141,557


305,493

(8)

447,050


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

$          0.52


$          1.14

(8)

$          1.66




(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 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. Other income (expense) also includes unrealized gains (losses) on our derivatives which are not designated as hedges, that are related to the financing of the Micro Focus Acquisition. We exclude gains and losses on these derivatives as we do not believe they are reflective on our ongoing business and operating results.

(7)

Adjustment relates to differences between the GAAP-based tax provision rate of approximately 37% 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:




Six Months Ended December 31, 2022



Per share diluted

GAAP-based net income, attributable to OpenText

$                   141,557

$                          0.52

Add:



Amortization

191,384

0.71

Share-based compensation

52,030

0.19

Special charges (recoveries)

24,587

0.09

Other (income) expense, net

25,882

0.10

GAAP-based provision for income taxes

84,399

0.31

Non-GAAP-based provision for income taxes

(72,789)

(0.26)

Non-GAAP-based net income, attributable to OpenText

$                   447,050

$                          1.66



Reconciliation of Adjusted EBITDA



Six Months Ended December 31, 2022

GAAP-based net income, attributable to OpenText

$                                                     141,557

Add:


Provision for income taxes

84,399

Interest and other related expense, net

79,097

Amortization of acquired technology-based intangible assets

83,500

Amortization of acquired customer-based intangible assets

107,884

Depreciation

46,032

Share-based compensation

52,030

Special charges (recoveries)

24,587

Other (income) expense, net

25,882

Adjusted EBITDA

$                                                     644,968



GAAP-based net income margin

8.1 %

Adjusted EBITDA margin

36.9 %



Reconciliation of Free cash flows



Six Months Ended December 31, 2022

GAAP-based cash flows provided by operating activities

$                                                         327,129

Add:


Capital expenditures (1)

(68,539)

Free cash flows

$                                                         258,590



(1) Defined as "Additions of property and equipment" in the Consolidated Statements of Cash Flows.




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

for the three months ended September 30, 2022

(In thousands, except for per share data)


Three Months Ended September 30, 2022


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

$   131,799


$     (2,033)

(1)

$   129,766


Customer support

27,354


(567)

(1)

26,787


Professional service and other

53,800


(1,525)

(1)

52,275


Amortization of acquired technology-based intangible assets

42,637


(42,637)

(2)


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

593,688

69.7 %

46,762

(3)

640,450

75.2 %

Operating expenses







Research and development

110,198


(6,854)

(1)

103,344


Sales and marketing

167,170


(6,859)

(1)

160,311


General and administrative

78,074


(5,370)

(1)

72,704


Amortization of acquired customer-based intangible assets

54,438


(54,438)

(2)


Special charges (recoveries)

14,281


(14,281)

(4)


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

146,353


134,564

(5)

280,917


Other income (expense), net

(189,231)


189,231

(6)


Provision for income taxes

33,625


50

(7)

33,675


GAAP-based net income (loss) / Non-GAAP-based net income, attributable to OpenText

(116,929)


323,745

(8)

206,816


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

$        (0.43)


$          1.20

(8)

$          0.77




(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 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. Other income (expense) also includes unrealized gains (losses) on our derivatives which are not designated as hedges, that are related to the financing of the Micro Focus Acquisition. We exclude gains and losses on these derivatives as we do not believe they are reflective on our ongoing business and operating results.

(7)

Adjustment relates to differences between the GAAP-based tax provision rate of approximately 40% 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 September 30, 2022



Per share diluted

GAAP-based net income (loss), attributable to OpenText

$                 (116,929)

$                        (0.43)

Add:



Amortization

97,075

0.36

Share-based compensation

23,208

0.09

Special charges (recoveries)

14,281

0.05

Other (income) expense, net

189,231

0.70

GAAP-based provision for income taxes

33,625

0.12

Non-GAAP-based provision for income taxes

(33,675)

(0.12)

Non-GAAP-based net income, attributable to OpenText

$                   206,816

$                          0.77



Reconciliation of Adjusted EBITDA



Three Months Ended September 30, 2022

GAAP-based net income (loss), attributable to OpenText

$                                                    (116,929)

Add:


Provision for income taxes

33,625

Interest and other related expense, net

40,382

Amortization of acquired technology-based intangible assets

42,637

Amortization of acquired customer-based intangible assets

54,438

Depreciation

23,174

Share-based compensation

23,208

Special charges (recoveries)

14,281

Other (income) expense, net

189,231

Adjusted EBITDA

$                                                      304,047



GAAP-based net income (loss) margin

(13.7) %

Adjusted EBITDA margin

35.7 %



Reconciliation of Free cash flows



Three Months Ended September 30, 2022

GAAP-based cash flows provided by operating activities

$                                                         131,959

Add:


Capital expenditures (1)

(36,324)

Free cash flows

$                                                           95,635



(1) Defined as "Additions of property and equipment" in the Consolidated Statements of Cash Flows.




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

for the three months ended December 31, 2021

(In thousands, except for per share data)


Three Months Ended December 31, 2021


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

$   122,129


$         (897)

(1)

$   121,232


Customer support

29,668


(409)

(1)

29,259


Professional service and other

53,041


(647)

(1)

52,394


Amortization of acquired technology-based intangible assets

52,602


(52,602)

(2)


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

615,618

70.2 %

54,555

(3)

670,173

76.4 %

Operating expenses







Research and development

103,622


(2,652)

(1)

100,970


Sales and marketing

163,938


(5,006)

(1)

158,932


General and administrative

71,513


(4,798)

(1)

66,715


Amortization of acquired customer-based intangible assets

52,665


(52,665)

(2)


Special charges (recoveries)

9,217


(9,217)

(4)


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

192,884


128,893

(5)

321,777


Other income (expense), net

(25,037)


25,037

(6)


Provision for income taxes

39,266


148

(7)

39,414


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

88,298


153,782

(8)

242,080


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

$          0.32


$          0.57

(8)

$          0.89




(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 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 December 31, 2021



Per share diluted

GAAP-based net income, attributable to OpenText

$                     88,298

$                          0.32

Add:



Amortization

105,267

0.39

Share-based compensation

14,409

0.05

Special charges (recoveries)

9,217

0.03

Other (income) expense, net

25,037

0.09

GAAP-based provision for income taxes

39,266

0.15

Non-GAAP-based provision for income taxes

(39,414)

(0.14)

Non-GAAP-based net income, attributable to OpenText

$                   242,080

$                          0.89



Reconciliation of Adjusted EBITDA



Three Months Ended December 31, 2021

GAAP-based net income, attributable to OpenText

$                                                        88,298

Add:


Provision for income taxes

39,266

Interest and other related expense, net

40,245

Amortization of acquired technology-based intangible assets

52,602

Amortization of acquired customer-based intangible assets

52,665

Depreciation

21,779

Share-based compensation

14,409

Special charges (recoveries)

9,217

Other (income) expense, net

25,037

Adjusted EBITDA

$                                                      343,518



GAAP-based net income margin

10.1 %

Adjusted EBITDA margin

39.2 %



Reconciliation of Free cash flows



Three Months Ended December 31, 2021

GAAP-based cash flows provided by operating activities

$                                                         216,644

Add:


Capital expenditures (1)

(10,635)

Free cash flows

$                                                         206,009



(1) Defined as "Additions of property and equipment" in the Consolidated Statements of Cash Flows.




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

for the six months ended December 31, 2021

(In thousands, except for per share data)


Six Months Ended December 31, 2021


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

$   241,908


$     (1,804)

(1)

$   240,104


Customer support

59,151


(1,130)

(1)

58,021


Professional service and other

104,766


(1,368)

(1)

103,398


Amortization of acquired technology-based intangible assets

105,769


(105,769)

(2)


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

1,189,803

69.6 %

110,071

(3)

1,299,874

76.1 %

Operating expenses







Research and development

203,787


(5,586)

(1)

198,201


Sales and marketing

310,178


(9,616)

(1)

300,562


General and administrative

142,990


(8,839)

(1)

134,151


Amortization of acquired customer-based intangible assets

104,549


(104,549)

(2)


Special charges (recoveries)

9,561


(9,561)

(4)


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

375,573


248,222

(5)

623,795


Other income (expense), net

4,745


(4,745)

(6)


Provision for income taxes

82,716


(6,207)

(7)

76,509


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

220,213


249,684

(8)

469,897


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

$          0.81


$          0.91

(8)

$          1.72




(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 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:




Six Months Ended December 31, 2021



Per share diluted

GAAP-based net income, attributable to OpenText

$                   220,213

$                          0.81

Add:



Amortization

210,318

0.77

Share-based compensation

28,343

0.10

Special charges (recoveries)

9,561

0.04

Other (income) expense, net

(4,745)

(0.02)

GAAP-based provision for income taxes

82,716

0.30

Non-GAAP-based provision for income taxes

(76,509)

(0.28)

Non-GAAP-based net income, attributable to OpenText

$                   469,897

$                          1.72



Reconciliation of Adjusted EBITDA



Six Months Ended December 31, 2021

GAAP-based net income, attributable to OpenText

$                                                      220,213

Add:


Provision for income taxes

82,716

Interest and other related expense, net

77,300

Amortization of acquired technology-based intangible assets

105,769

Amortization of acquired customer-based intangible assets

104,549

Depreciation

43,165

Share-based compensation

28,343

Special charges (recoveries)

9,561

Other (income) expense, net

(4,745)

Adjusted EBITDA

$                                                      666,871



GAAP-based net income margin

12.9 %

Adjusted EBITDA margin

39.0 %



Reconciliation of Free cash flows



Six Months Ended December 31, 2021

GAAP-based cash flows provided by operating activities

$                                                         406,313

Add:


Capital expenditures (1)

(37,347)

Free cash flows

$                                                         368,966



(1) Defined as "Additions of property and equipment" in the Consolidated Statements of Cash Flows.

(3)           The following tables provide a composition of our major currencies for revenue and expenses, expressed as a percentage, for the three and six months ended December 31, 2022 and 2021:


Three Months Ended December 31, 2022


Three Months Ended December 31, 2021

Currencies

% of Revenue

% of Expenses(1)


% of Revenue

% of Expenses(1)

EURO

19 %

12 %


25 %

13 %

GBP

4 %

5 %


4 %

6 %

CAD

3 %

13 %


3 %

13 %

USD

65 %

55 %


60 %

52 %

Other

9 %

15 %


8 %

16 %

Total

100 %

100 %


100 %

100 %



Six Months Ended December 31, 2022


Six Months Ended December 31, 2021

Currencies

% of Revenue

% of Expenses(1)


% of Revenue

% of Expenses(1)

EURO

20 %

11 %


24 %

13 %

GBP

4 %

5 %


5 %

6 %

CAD

3 %

14 %


3 %

14 %

USD

65 %

55 %


60 %

52 %

Other

8 %

15 %


8 %

15 %

Total

100 %

100 %


100 %

100 %



(1)

Expenses include all cost of revenues and operating expenses included within the 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