OTEX
$42.71
Open Text Cp
($.07)
(.16%)
Earnings Details
1st Quarter September 2019
Thursday, October 31, 2019 4:01:00 PM
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Summary

Open Text Cp (OTEX) Recent Earnings

Open Text Cp (OTEX) reported 1st Quarter September 2019 earnings of $0.27 per share on revenue of $696.9 million. The consensus earnings estimate was $0.28 per share on revenue of $709.2 million. Revenue grew 4.5% 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
$0.27
Earnings Whisper
-
Consensus Estimate
$0.28
Reported Revenue
$696.9 Mil
Revenue Estimate
$709.2 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

OpenText Reports First Quarter Fiscal Year 2020 Financial Results

Strong Performance Driven by 14% Cloud Growth

WATERLOO, Ontario, Oct. 31, 2019 /CNW/ -- 

First Quarter Highlights


Total Revenues

(in millions)


Annual Recurring Revenues

(in millions)


Cloud Revenues

(in millions)



Reported

Constant

Currency


Reported

Constant

Currency


Reported

Constant

 Currency



$696.9

$706.6


$549.6

$556.6


$237.3

$239.3



+4.5%

+5.9%


+5.8%

+7.1%


+14.0%

+15.0%













Annual Recurring Revenues represents 79% of Total Revenues


  • GAAP net income of $74.4 million, up 104.8% Y/Y
  • Adjusted EBITDA of $254.2 million, up 3.2%, margin of 36.5%, down 40 basis points Y/Y
  • GAAP diluted EPS of $0.27, up 107.7% Y/Y
  • Non-GAAP diluted EPS of $0.64, up 6.7%, and $0.65 in constant currency, up 8.3% Y/Y
  • Operating Cash Flows were $842.3 million during the trailing twelve months

Open Text Corporation (NASDAQ: OTEX), (TSX: OTEX), "The Information Company," today announced its financial results for the first quarter ended September 30, 2019.

"I am pleased with our start to Fiscal 2020. In constant currency, total revenues of $706.6 million were up 5.9% year-over-year, and we delivered the highest Q1 revenues in the company's history.  Annual Recurring Revenues (ARR) of $556.6 million were up 7.1% year-over-year, representing 79% of total revenues, driven by Cloud Services and Subscriptions revenues of $239.3 million, which increased significantly by 15% year-over-year," said Mark J. Barrenechea, OpenText CEO & CTO. "The OpenText Cloud creates a modern platform for innovation and our leadership with the strongest Enterprise Information Management (EIM) offering in the industry positions OpenText to gain share in a shifting economic environment. With a durable business and high recurring revenues, we are tracking to our Fiscal 2020 target model."

"With the continued strengthening of our balance sheet, Fiscal 2020 is off to a strong start.  OpenText ended the quarter with approximately $1 billion of cash and a 1.5x consolidated net leverage ratio. We are renewing our base shelf and expanding our revolving credit facility to $750 million, to ensure OpenText has ample capacity to support our Total Growth strategy", said OpenText EVP, CFO, Madhu Ranganathan. "We delivered Adjusted EBITDA of $254 million in the quarter and we continue to invest in product innovation, go-to-market and strategic acquisitions. OpenText remains focused on productivity enhancements within all aspects of our business."

Financial Highlights for Q1 Fiscal 2020 with Year Over Year Comparisons

Summary of Quarterly Results









(in millions except per share data)

Q1 FY20

Q1 FY19

$ Change

% Change
(Y/Y)


Q1 FY20
in CC*

% Change
in CC*


Revenues:









Cloud services and subscriptions

$237.3


$208.1


$29.2


14.0

%


$239.3


15.0

%


Customer support

312.3


311.6


0.7


0.2

%


317.3


1.8

%


Total annual recurring revenues**

$549.6


$519.6


$29.9


5.8

%


$556.6


7.1

%


License

77.9


76.9


1.0


1.3

%


79.1


2.9

%


Professional service and other

69.4


70.6


(1.2)


(1.7)

%


70.8


0.2

%


Total revenues

$696.9


$667.2


$29.7


4.5

%


$706.6


5.9

%


GAAP-based operating income

$132.5


$99.2


$33.3


33.5

%


N/A


N/A



Non-GAAP-based operating income (1)

$234.0


$222.4


$11.5


5.2

%


$238.4


7.2

%


GAAP-based EPS, diluted

$0.27


$0.13


$0.14


107.7

%


N/A


N/A



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

$0.64


$0.60


$0.04


6.7

%


$0.65


8.3

%


GAAP-based net income attributable to OpenText

$74.4


$36.3


$38.1


104.8

%


N/A


N/A



Adjusted EBITDA (1)

$254.2


$246.3


$8.0


3.2

%


$258.6


5.0

%


Operating cash flows

$137.4


$171.4


($34.0)


(19.8)

%


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.

Dividend Program

As part of our quarterly, non-cumulative cash dividend program, the Board declared on October 30, 2019 a cash dividend of $0.1746 per common share. The record date for this dividend is November 29, 2019 and the payment date is December 19, 2019. Future declarations of dividends and the establishment of future record and payment dates are subject to the final determination and discretion of the Board of Directors.

Quarterly Business Highlights

  • Key customer wins in the quarter included Deutsche Bank AG, Daiichi Jitsugyo Co Ltd., International Committee of the Red Cross, Samsung R&D Institute, Auto Club Group, The UK Department for Work and Pensions, The Public Utilities Board Singapore, Electricity Generating Authority of Thailand, Baltimore County Public Schools, and CUHK Medical Centre
  • OpenText Core Experience Insights delivers end-to-end customer journey mapping for data-driven marketers
  • OpenText Core Share and Core Signature streamline secure document collaboration
  • OpenText announces Cloud Summit, a global 24-city tour to help customers transform with Enterprise Information Management
  • OpenText hosts 2019 Investor Day in New York City
  • OpenText elects directors at its Annual General Meeting of Shareholders
  • OpenText Enfuse 2019 to showcase the future of Secure Information Management

 

Summary of Quarterly Results









Q1 FY20

Q4 FY19

Q1 FY19

% Change
(Q1 FY20 vs
Q4 FY19)


% Change
(Q1 FY20 vs
Q1 FY19)


Revenue (million)

$696.9


$747.2


$667.2


(6.7)

%


4.5

%


GAAP-based gross margin

67.2

%

68.3

%

66.1

%

(110)


bps

110


bps

GAAP-based EPS, diluted

$0.27


$0.27


$0.13


%


107.7

%


Non-GAAP-based gross margin (1)

73.1

%

74.2

%

73.4

%

(110)


bps

(30)


bps

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

$0.64


$0.72


$0.60


(11.1)

%


6.7

%




(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.

Shelf Renewal

The Company also announced today that it is filing a renewed preliminary short form base shelf prospectus with the securities regulatory authorities in each of the provinces of Canada. A final shelf prospectus, once a receipt has been issued by the Canadian securities regulatory authorities, will allow offers and sales, from time to time, of an aggregate of up to $1.5 billion of equity and debt securities, or any combination thereof, during the 25-month period that the shelf prospectus remains effective. The Company expects to file a corresponding automatic shelf registration statement on Form S-3 with the U.S. Securities and Exchange Commission (the "SEC") concurrently with the filing of the final shelf prospectus in Canada. The specific terms of any future offering will be established in a prospectus supplement to the shelf prospectus, which supplement will be filed with the applicable Canadian securities regulatory authorities and the SEC.

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 October 31, 2019 at 7:00 p.m. ET through 11:59 p.m. on November 14, 2019 and can be accessed by dialing 1-855-669-9658 (toll-free) or +1-604-674-8052 (international) and using passcode 3664 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™, a market leader in Enterprise Information Management software and solutions, enabling companies to manage, leverage, secure and gain insight into their enterprise information, on premises or in the cloud. For more information about OpenText (NASDAQ/TSX: OTEX) visit www.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, 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 Enterprise Information Management (EIM) 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 EIM market including expected growth in the Artificial Intelligence market; (vi) the Company's competitive position in the EIM 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 EIM 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.

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

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 ©2019 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)



September 30, 2019


June 30,
2019

ASSETS

(unaudited)



Cash and cash equivalents

$

999,298



$

941,009


Accounts receivable trade, net of allowance for doubtful accounts of $16,290 as of September 30, 2019 and $17,011 as of June 30, 2019

410,981



463,785


Contract assets

20,204



20,956


Income taxes recoverable

21,054



38,340


Prepaid expenses and other current assets

91,753



97,238


Total current assets

1,543,290



1,561,328


Property and equipment

248,613



249,453


Operating lease right of use assets

203,329




Long-term contract assets

18,920



15,386


Goodwill

3,765,898



3,769,908


Acquired intangible assets

1,057,151



1,146,504


Deferred tax assets

995,262



1,004,450


Other assets

146,105



148,977


Long-term income taxes recoverable

40,939



37,969


Total assets

$

8,019,507



$

7,933,975


LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable and accrued liabilities

$

260,869



$

329,903


Current portion of long-term debt

10,000



10,000


Operating lease liability

60,687




Deferred revenues

584,193



641,656


Income taxes payable

36,104



33,158


Total current liabilities

951,853



1,014,717


Long-term liabilities:




Accrued liabilities

15,384



49,441


Pension liability

77,470



75,239


Long-term debt

2,603,506



2,604,878


Long-term operating lease liability

177,596




Deferred revenues

41,588



46,974


Long-term income taxes payable

191,268



202,184


Deferred tax liabilities

52,728



55,872


Total long-term liabilities

3,159,540



3,034,588


Shareholders' equity:




Share capital and additional paid-in capital




270,189,544 and 269,834,442 Common Shares issued and outstanding at September 30, 2019 and June 30, 2019, respectively; authorized Common Shares: unlimited

1,791,689



1,774,214


Accumulated other comprehensive income

15,096



24,124


Retained earnings

2,141,278



2,113,883


Treasury stock, at cost (1,102,871 shares at September 30, 2019 and 802,871 shares at June 30, 2019, respectively)

(41,190)



(28,766)


Total OpenText shareholders' equity

3,906,873



3,883,455


Non-controlling interests

1,241



1,215


Total shareholders' equity

3,908,114



3,884,670


Total liabilities and shareholders' equity

$

8,019,507



$

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 September 30,


2019


2018

Revenues:




License

$

77,898



$

76,887


Cloud services and subscriptions

237,265



208,083


Customer support

312,298



311,551


Professional service and other

69,427



70,636


Total revenues

696,888



667,157


Cost of revenues:




License

2,323



3,872


Cloud services and subscriptions

102,162



87,703


Customer support

29,387



30,465


Professional service and other

54,338



56,796


Amortization of acquired technology-based intangible assets

40,298



47,477


Total cost of revenues

228,508



226,313


Gross profit

468,380



440,844


Operating expenses:




Research and development

81,178



77,470


Sales and marketing

128,618



120,182


General and administrative

51,535



50,924


Depreciation

20,277



23,854


Amortization of acquired customer-based intangible assets

49,158



45,876


Special charges

5,101



23,311


Total operating expenses

335,867



341,617


Income from operations

132,513



99,227


Other income (expense), net

(2,785)



1,522


Interest and other related expense, net

(32,210)



(34,531)


Income before income taxes

97,518



66,218


Provision for (recovery of) income taxes

23,091



29,850


Net income for the period

$

74,427



$

36,368


Net (income) loss attributable to non-controlling interests

(26)



(44)


Net income attributable to OpenText

$

74,401



$

36,324


Earnings per share—basic attributable to OpenText

$

0.28



$

0.14


Earnings per share—diluted attributable to OpenText

$

0.27



$

0.13


Weighted average number of Common Shares outstanding—basic

270,013



268,028


Weighted average number of Common Shares outstanding—diluted

271,251



269,387


 

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands of U.S. dollars)

(unaudited)



Three Months Ended September 30,


2019


2018

Net income for the period

$

74,427



$

36,368


Other comprehensive income (loss)—net of tax:




Net foreign currency translation adjustments

(5,611)



(3,520)


Unrealized gain (loss) on cash flow hedges:




Unrealized gain (loss) - net of tax expense (recovery) effect of $(206) and $181 for the three months ended September 30, 2019 and 2018, respectively

(572)



502


(Gain) loss reclassified into net income - net of tax (expense) recovery effect of $3 and $132 for the three months ended September 30, 2019 and 2018, respectively

8



366


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




Actuarial gain (loss) - net of tax expense (recovery) effect of $(1,249) and $306 for the three months ended September 30, 2019 and 2018, respectively

(3,084)



1,197


Amortization of actuarial (gain) loss into net income - net of tax (expense) recovery effect of $146 and $73 for the three months ended September 30, 2019 and 2018, respectively

231



66


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

(9,028)



(1,389)


Total comprehensive income

65,399



34,979


Comprehensive (income) loss attributable to non-controlling interests

(26)



(44)


Total comprehensive income attributable to OpenText

$

65,373



$

34,935


 

OPEN TEXT CORPORATION

 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

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

(unaudited)



Three Months Ended September 30, 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, 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

184



4,576













4,576


Under employee stock purchase plans

172



6,008













6,008


Share-based compensation



6,891













6,891


Purchase of treasury stock





(300)



(12,424)









(12,424)


Dividends declared

($0.1746 per Common Share)









(47,006)







(47,006)


Other comprehensive income - net











(9,028)





(9,028)


Net income for the quarter









74,401





26



74,427


Balance as of September 30, 2019

270,190



$

1,791,689



(1,103)



$

(41,190)



$

2,141,278



$

15,096



$

1,241



$

3,908,114





Three Months Ended September 30, 2018


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

494



12,431













12,431


Under employee stock purchase plans

187



5,569













5,569


Share-based compensation



6,555













6,555


Purchase of treasury stock





(304)



(11,719)









(11,719)


Issuance of treasury stock



(70)



3



70










Dividends declared

($0.1518 per Common Share)









(40,466)







(40,466)


Other comprehensive income - net











(1,389)





(1,389)


Non-controlling interest



(625)











42



(583)


Net income for the quarter









36,324





44



36,368


Balance as of September 30, 2018

268,332



$

1,730,933



(992)



$

(30,381)



$

1,993,099



$

32,256



$

1,123



$

3,727,030


 

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars)

(unaudited)



Three Months Ended September 30,


2019


2018

Cash flows from operating activities:




Net income for the period

$

74,427



$

36,368


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




Depreciation and amortization of intangible assets

109,733



117,207


Share-based compensation expense

6,891



6,555


Pension expense

1,436



1,145


Amortization of debt issuance costs

1,127



1,078


Loss on sale and write down of property and equipment



7,789


Deferred taxes

6,244



7,769


Share in net (income) loss of equity investees

(682)



(2,372)


Changes in operating assets and liabilities:




Accounts receivable

58,431



73,875


Contract assets

(7,201)



(5,346)


Prepaid expenses and other current assets

(1,612)



9,732


Income taxes and deferred charges and credits

7,053



12,561


Accounts payable and accrued liabilities

(62,979)



(40,001)


Deferred revenue

(61,169)



(57,403)


Other assets

5,684



2,444


Operating lease assets and liabilities, net

64




Net cash provided by operating activities

137,447



171,401


Cash flows from investing activities:




Additions of property and equipment

(18,614)



(24,495)


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



(2,279)


Other investing activities

(2,036)



(1,004)


Net cash used in investing activities

(20,650)



(27,778)


Cash flows from financing activities:




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

11,117



18,127


Repayment of long-term debt and revolver

(2,500)



(2,500)


Debt issuance costs



(322)


Purchase of Treasury Stock

(12,424)



(11,719)


Purchase of non-controlling interest



(583)


Payments of dividends to shareholders

(47,006)



(40,466)


Net cash provided by (used in) financing activities

(50,813)



(37,463)


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

(7,711)



428


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

58,273



106,588


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

943,543



683,991


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

$

1,001,816



$

790,579










Reconciliation of cash, cash equivalents and restricted cash:

September 30, 2019


September 30, 2018

Cash and cash equivalents

999,298



787,919


Restricted cash included in Other assets

2,518



2,660


Total Cash, cash equivalents and restricted cash

$

1,001,816



$

790,579










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 September 30, 2019.

(In thousands except for per share amounts)



Three Months Ended September 30, 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

$

102,162



$

(383)


(1)

$

101,779



Customer support

29,387



(316)


(1)

29,071



Professional service and other

54,338



(243)


(1)

54,095



Amortization of acquired technology-based intangible assets

40,298



(40,298)


(2)



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

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

468,380


67.2

%

41,240


(3)

509,620


73.1

%

Operating expenses







Research and development

81,178



(1,221)


(1)

79,957



Sales and marketing

128,618



(2,116)


(1)

126,502



General and administrative

51,535



(2,612)


(1)

48,923



Amortization of acquired customer-based intangible assets

49,158



(49,158)


(2)



Special charges (recoveries)

5,101



(5,101)


(4)



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

132,513



101,448


(5)

233,961



Other income (expense), net

(2,785)



2,785


(6)



Provision for (recovery of) income taxes

23,091



5,154


(7)

28,245



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

74,401



99,079


(8)

173,480



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 24% 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,
2019



Per share diluted

GAAP-based net income, attributable to OpenText

$

74,401


$

0.27

Add:



Amortization

89,456


0.33

Share-based compensation

6,891


0.03

Special charges (recoveries)

5,101


0.02

Other (income) expense, net

2,785


0.01

GAAP-based provision for (recovery of) income taxes

23,091


0.09

Non-GAAP-based provision for income taxes

(28,245)


(0.11)

Non-GAAP-based net income, attributable to OpenText

$

173,480


$

0.64

 

Reconciliation of Adjusted EBITDA



Three Months Ended September 30,
2019

GAAP-based net income, attributable to OpenText

$

74,401

Add:


Provision for (recovery of) income taxes

23,091

Interest and other related expense, net

32,210

Amortization of acquired technology-based intangible assets

40,298

Amortization of acquired customer-based intangible assets

49,158

Depreciation

20,277

Share-based compensation

6,891

Special charges (recoveries)

5,101

Other (income) expense, net

2,785

Adjusted EBITDA

$

254,212

 

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the three months ended June 30, 2019.

(In thousands except for per share amounts)



Three Months Ended June 30, 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

$

103,719



$

(75)


(1)

$

103,644



Customer support

30,761



(361)


(1)

30,400



Professional service and other

55,183



(434)


(1)

54,749



Amortization of acquired technology-based intangible assets

42,946



(42,946)


(2)



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

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

510,484


68.3

%

43,816


(3)

554,300


74.2

%

Operating expenses







Research and development

83,708



(1,323)


(1)

82,385



Sales and marketing

139,416



(2,006)


(1)

137,410



General and administrative

52,954



(2,419)


(1)

50,535



Amortization of acquired customer-based intangible assets

49,200



(49,200)


(2)



Special charges (recoveries)

2,232



(2,232)


(4)



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

157,974



100,996


(5)

258,970



Other income (expense), net

3,191



(3,191)


(6)



Provision for (recovery of) income taxes

56,309



(24,651)


(7)

31,658



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

71,983



122,456


(8)

194,439



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

$

0.27



$

0.45


(8)

$

0.72


















(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 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 44% 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 June 30, 2019



Per share diluted

GAAP-based net income, attributable to OpenText

$

71,983


$

0.27

Add:



Amortization

92,146


0.34

Share-based compensation

6,618


0.02

Special charges (recoveries)

2,232


0.01

Other (income) expense, net

(3,191)


(0.01)

GAAP-based provision for (recovery of) income taxes

56,309


0.21

Non-GAAP-based provision for income taxes

(31,658)


(0.12)

Non-GAAP-based net income, attributable to OpenText

$

194,439


$

0.72

 

Reconciliation of Adjusted EBITDA



Three Months Ended June 30, 2019

GAAP-based net income, attributable to OpenText

$

71,983

Add:


Provision for (recovery of) income taxes

56,309

Interest and other related expense, net

32,841

Amortization of acquired technology-based intangible assets

42,946

Amortization of acquired customer-based intangible assets

49,200

Depreciation

25,000

Share-based compensation

6,618

Special charges (recoveries)

2,232

Other (income) expense, net

(3,191)

Adjusted EBITDA

$

283,938

 

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the three months ended September 30, 2018.

(In thousands except for per share amounts)



Three Months Ended September 30, 2018


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

$

87,703



$

(317)


(1)

$

87,386



Customer support

30,465



(300)


(1)

30,165



Professional service and other

56,796



(524)


(1)

56,272



Amortization of acquired technology-based intangible assets

47,477



(47,477)


(2)



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

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

440,844


66.1

%

48,618


(3)

489,462


73.4

%

Operating expenses







Research and development

77,470



(1,359)


(1)

76,111



Sales and marketing

120,182



(1,801)


(1)

118,381



General and administrative

50,924



(2,254)


(1)

48,670



Amortization of acquired customer-based intangible assets

45,876



(45,876)


(2)



Special charges (recoveries)

23,311



(23,311)


(4)



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

99,227



123,219


(5)

222,446



Other income (expense), net

1,522



(1,522)


(6)



Provision for (recovery of) income taxes

29,850



(3,542)


(7)

26,308



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

36,324



125,239


(8)

161,563



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

$

0.13



$

0.47


(8)

$

0.60


















(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 45% 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,
2018



Per share diluted

GAAP-based net income, attributable to OpenText

$

36,324


$

0.13

Add:



Amortization

93,353


0.35

Share-based compensation

6,555


0.02

Special charges (recoveries)

23,311


0.09

Other (income) expense, net

(1,522)


(0.01)

GAAP-based provision for (recovery of) income taxes

29,850


0.11

Non-GAAP-based provision for income taxes

(26,308)


(0.09)

Non-GAAP-based net income, attributable to OpenText

$

161,563


$

0.60

 

Reconciliation of Adjusted EBITDA



Three Months Ended September 30,
2018

GAAP-based net income, attributable to OpenText

$

36,324

Add:


Provision for (recovery of) income taxes

29,850

Interest and other related expense, net

34,531

Amortization of acquired technology-based intangible assets

47,477

Amortization of acquired customer-based intangible assets

45,876

Depreciation

23,854

Share-based compensation

6,555

Special charges (recoveries)

23,311

Other (income) expense, net

(1,522)

Adjusted EBITDA

$

246,256



(3)

The following tables provide a composition of our major currencies for revenue and expenses, expressed as a percentage, for the three months and year ended September 30, 2019 and 2018:

 


Three Months Ended September 30,
2019


Three Months Ended September 30,
2018

Currencies

% of Revenue 

% of Expenses* 


% of Revenue 

% of Expenses* 

EURO

22

%

14

%


23

%

14

%

GBP

5

%

5

%


6

%

6

%

CAD

3

%

10

%


4

%

11

%

USD

60

%

53

%


58

%

50

%

Other

10

%

18

%


9

%

19

%

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).

 

 

Cision View original content:http://www.prnewswire.com/news-releases/opentext-reports-first-quarter-fiscal-year-2020-financial-results-300949426.html

SOURCE Open Text Corporation