May 9, 2018 SOURCE: PR NewsWire
OpenText Reports Third Quarter Fiscal Year 2018 Financial Results
OpenText Reports Third Quarter Fiscal Year 2018 Financial Results
Revenue of $686 million, up 16% Y/Y
Operating Cash Flows of $271 million, up 73% Y/Y
Quarterly Cash Dividend Increased by 15%
WATERLOO, Ontario, May 9, 2018 /PRNewswire/ -- Open Text Corporation (NASDAQ: OTEX, TSX: OTEX), "The Information Company," today announced its financial results for the third quarter ended March 31, 2018.
"We are pleased with our Q3 results, especially our Annual Recurring Revenues (ARR) of $521 million, up 18% y/y and our Operating Cash Flows (OCF) of $271 million, up 73% y/y," said OpenText Vice Chair, CEO and CTO, Mark J. Barrenechea. "We are making key investments in the OpenText Cloud that will drive growth and customer adoption, and these investments will help create even more predictability in our business model."
Barrenechea further added, "Based on the strength and trajectory of our recurring revenues and cash flows, we are setting an annual Operating Cash Flow target of $1 Billion as we exit Fiscal 2021."
"Supported by confidence in our long-term model and cash flow performance, we are announcing a 15% increase to our quarterly cash dividend to $0.1518 per share," said Barrenechea.
"OpenText has built a market leading business and I am excited to join such a highly talented team," said OpenText EVP and CFO, Madhu Ranganathan. "We will focus on recurring revenues, improving efficiency, expanding cash flow and strengthening the business as we to look to scale OpenText to new levels in the coming years."
Financial Highlights for Q3 Fiscal 2018 with Year Over Year Comparisons
Summary of Quarterly
Results
--------------------
(in millions except per
share data) Q3 FY18 Q3 FY17 $ Change % Change Q3 FY18 in % Change
CC* in CC*
(Y/Y)
Revenues:
Cloud services and
subscriptions $209.1 $177.1 $32.0 18.1% $204.0 15.2%
Customer support 312.3 263.4 48.8 18.5% 297.9 13.1%
Total annual recurring
revenues** $521.4 $440.5 $80.8 18.3% $501.8 13.9%
License 84.1 87.2 (3.1) (3.6)% 80.0 (8.3)%
Professional service and
other 80.4 65.4 15.0 23.0% 75.3 15.3%
Total revenues $685.9 $593.1 $92.7 15.6% $657.1 10.8%
GAAP-based operating income $102.3 $65.3 $37.1 56.8%
Non-GAAP-based operating
income (1) $204.1 $172.6 $31.5 18.2% $193.4 12.1%
GAAP-based operating margin 14.9% 11.0% n/a 390 bps
Non-GAAP-based operating
margin (1) 29.8% 29.1% n/a 70 bps 29.4% 30 bps
GAAP-based EPS, diluted $0.22 $0.08 $0.14 175.0%
Non-GAAP-based EPS,
diluted (1)(3) $0.54 $0.45 $0.09 20.0% $0.51 13.3%
GAAP-based net income
attributable to OpenText $58.8 $21.6 $37.2 172.0%
Adjusted EBITDA (1) $227.2 $189.1 $38.1 20.2%
Operating cash flows $270.7 $156.3 $114.4 73.2%
-------------------- ------ ------ ------ ----
Summary of YTD Results
----------------------
(in millions except per
share data) FY18 YTD FY17 YTD $ Change % Change FY18 YTD % Change
in CC* in CC*
(Y/Y)
Revenues:
Cloud services and
subscriptions $611.1 $521.9 $89.2 17.1% $606.1 16.1%
Customer support 915.8 693.3 222.5 32.1% 891.3 28.6%
Total annual recurring
revenues** $1,526.8 $1,215.2 $311.7 25.6% $1,497.4 23.2%
License 297.6 245.6 51.9 21.1% 287.8 17.1%
Professional service and
other 236.6 166.7 69.9 41.9% 227.7 36.6%
Total revenues $2,061.0 $1,627.5 $433.5 26.6% $2,012.9 23.7%
GAAP-based operating income $356.1 $246.5 $109.6 44.5%
Non-GAAP-based operating
income (1) $673.1 $508.5 $164.6 32.4% $654.3 28.7%
GAAP-based operating margin 17.3% 15.1% n/a 220 bps
Non-GAAP-based operating
margin (1) 32.7% 31.2% n/a 150 bps 32.5% 130 bps
GAAP-based EPS, diluted (2) $0.68 $3.88 ($3.20) (82.5)%
Non-GAAP-based EPS,
diluted (1)(3) $1.84 $1.42 $0.42 29.6% $1.78 25.4%
GAAP-based net income
attributable to OpenText
(2) $180.5 $979.5 ($799.0) (81.6)%
Adjusted EBITDA (1) $737.3 $555.5 $181.7 32.7%
Operating cash flows $504.4 $336.8 $167.7 49.8%
-------------------- ------ ------ ------ ----
(1) Please see note 2 "Use of Non-GAAP Financial Measures" below
(2) Recorded a significant tax benefit in Q1 FY17 of $876.1
million. This significant tax benefit is specifically tied to
the Company's internal reorganization and applied to Q1 FY17
only and as a result does not continue in future periods.
(3) Please also see note 14 to the Company's Condensed
Consolidated Financial Statements on Form 10-Q. 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.
OpenText Quarterly Business Highlights
-- 22 customer transactions over $1 million, 10 OpenText Cloud and 12
on-premise
-- Financial, Consumer Goods, Services, Technology and Public Sector
industries saw the most demand in cloud and license
-- Key customer wins in the quarter included All InBox, City of
Philadelphia, Corsair, PFU Limited, Central Provident Fund Board,
Airports of Thailand, Progressive Insurance, ADP, Massachusetts Bay
Transportation Authority, Nidec Automotive, Blue Shield of California,
MUFG Union Bank, Bank Mandiri, West Bend Mutual Insurance Company,
National Grid UK, SwissLife, Tieto, McGill University, and United States
Census Bureau
-- Madhu Ranganathan Joins OpenText as Chief Financial Officer
-- OpenText acquires Hightail, a leading cloud service for file sharing and
creative collaboration
-- OpenText Release 16 EP4 extends security, artificial intelligence (AI),
the internet of things (IoT), and cloud support into the market-leading
OpenText EIM platform
-- OpenText Enfuse 2018 to showcase the future of cybersecurity and digital
investigations
-- OpenText Enterprise World 2018 to Showcase the Intelligent and Connected
Enterprise
Dividend Program Highlights
As part of our quarterly, non-cumulative cash dividend program, the Board declared on May 8, 2018 a cash dividend of $0.1518 per common share. The record date for this dividend is June 8, 2018 and the payment date is June 29, 2018. 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.
Summary of Quarterly Results
----------------------------
Q3 FY18 Q2 FY18 Q3 FY17 % Change % Change
(Q3 FY18 vs (Q3 FY18 vs
Q2 FY18) Q3 FY17)
Revenue (million) $685.9 $734.4 $593.1 (6.6)% 15.6%
GAAP-based gross margin 64.6% 67.3% 64.5% (270) bps 10 bps
GAAP-based operating margin 14.9% 22.7% 11.0% (780) bps 390 bps
GAAP-based EPS, diluted $0.22 $0.32 $0.08 (31.3)% 175.0%
Non-GAAP-based gross margin (1) 71.6% 73.9% 71.2% (230) bps 40 bps
Non-GAAP-based operating margin (1) 29.8% 36.5% 29.1% (670) bps 70 bps
Non-GAAP-based EPS, diluted (1)(3) $0.54 $0.76 $0.45 (28.9)% 20.0%
--------------------------------- ----- ----- ----- ------ ----
Summary of Year to Date Results
-------------------------------
Q3 FY18 YTD Q3 FY17 YTD % Change
Revenue (million) $2,061.0 $1,627.5 26.6%
GAAP-based gross margin 65.7% 66.6% (90) bps
GAAP-based operating margin 17.3% 15.1% 220 bps
GAAP-based EPS, diluted(2) $0.68 $3.88 (82.5)%
Non-GAAP-based gross margin (1) 72.6% 72.2% 40 bps
Non-GAAP-based operating margin (1) 32.7% 31.2% 150 bps
Non-GAAP-based EPS, diluted (1)(3) $1.84 $1.42 29.6%
--------------------------------- ----- ----- ----
(1) Please see note 2 "Use of Non-
GAAP Financial Measures" below
(2) Recorded a significant tax
benefit in Q1 FY17 of $876.1
million. This significant tax
benefit is specifically tied to
the Company's internal
reorganization and applied to Q1
FY17 only and as a result does not
continue in future periods.
(3) Please also see note 14 to the
Company's Condensed Consolidated
Financial Statements on Form 10-Q.
Reflective of the amount of net
tax benefit arising from the
internal reorganization assumed to
be allocable to the current period
based on the forecasted
utilization period.
Conference Call Information
The public is invited to listen to the earnings conference call today at 5:00 p.m. ET (2:00 p.m. PT) by dialing 1-800-319-4610 (toll-free) or +1-604-638-5340 (international). Please dial-in 10 minutes ahead of time to ensure proper connection. Alternatively, a live webcast of the earnings conference call will be available on the Investor Relations section of the Company's website at http://investors.opentext.com/investor-events-and-presentations.
A replay of the call will be available beginning May 9, 2018 at 7:00 p.m. ET through 11:59 p.m. on May 23, 2018 and can be accessed by dialing 1-855-669-9658 (toll-free) or +1-604-674-8052 (international) and using passcode 2119 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.
About OpenText
OpenText, The Information Company(TM), 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, 2018 (Fiscal 2018) on growth in earnings and cash flows, creating value through investments in broader Enterprise Information Management (EIM) capabilities, distribution, 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, and distribution expansion, the focus on recurring revenues, improving 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, expected timing, charges and savings related to restructuring activities, declaration of quarterly dividends, future tax rates, new platform and product offerings, scaling OpenText to new levels, 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); (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 the new 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.
For more information, please contact:
Greg Secord
Vice President, Investor Relations
Open Text Corporation
415-963-0825
investors@opentext.com
OTEX-F
Copyright ©2018 Open Text. OpenText is a trademark or registered trademark of Open Text. The list of trademarks is not exhaustive of other trademarks. Registered trademarks, product names, company names, brands and service names mentioned herein are property of Open Text. All rights reserved. For more information, visit: http://www.opentext.com/who-we-are/copyright-information.
OPEN TEXT CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars, except share data)
March 31, 2018 June 30, 2017
-------------- -------------
ASSETS (unaudited)
Cash and cash equivalents $605,497 $443,357
Accounts receivable trade, net of
allowance for doubtful accounts
of $9,007 as of March 31, 2018
and $6,319 as of June 30, 2017 515,012 445,812
Income taxes recoverable 42,880 32,683
Prepaid expenses and other current
assets 105,657 81,625
Total current assets 1,269,046 1,003,477
Property and equipment 264,859 227,418
Goodwill 3,592,598 3,416,749
Acquired intangible assets 1,391,413 1,472,542
Deferred tax assets 1,142,385 1,215,712
Other assets 99,732 93,763
Deferred charges 39,148 42,344
Long-term income taxes recoverable 21,696 8,557
Total assets $7,820,877 $7,480,562
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities $295,165 $342,120
Current portion of long-term debt 282,760 182,760
Deferred revenues 689,189 570,328
Income taxes payable 33,685 31,835
Total current liabilities 1,300,799 1,127,043
Long-term liabilities:
Accrued liabilities 52,688 50,338
Deferred credits 3,366 5,283
Pension liability 62,996 58,627
Long-term debt 2,385,322 2,387,057
Deferred revenues 72,176 61,678
Long-term income taxes payable 171,174 162,493
Deferred tax liabilities 75,376 94,724
------ ------
Total long-term liabilities 2,823,098 2,820,200
Shareholders' equity:
Share capital and additional paid-in capital
267,266,442 and 264,059,567 Common
Shares issued and outstanding at
March 31, 2018 and June 30, 2017,
respectively; authorized Common
Shares: unlimited 1,689,997 1,613,454
Accumulated other comprehensive
income 51,810 48,800
Retained earnings 1,973,129 1,897,624
Treasury stock, at cost (694,169
shares at March 31, 2018 and
1,101,612 at June 30, 2017,
respectively) (18,823) (27,520)
------- -------
Total OpenText shareholders'
equity 3,696,113 3,532,358
Non-controlling interests 867 961
--- ---
Total shareholders' equity 3,696,980 3,533,319
Total liabilities and
shareholders' equity $7,820,877 $7,480,562
========== ==========
OPEN TEXT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands of U.S. dollars, except share and per share data)
(unaudited)
Three Months Ended March 31, Nine Months Ended March 31,
2018 2017 2018 2017
---- ---- ---- ----
Revenues:
License $84,113 $87,227 $297,588 $245,647
Cloud services and
subscriptions 209,102 177,109 611,076 521,857
Customer support 312,279 263,436 915,753 693,298
Professional service and
other 80,385 65,358 236,554 166,701
------ ------ ------- -------
Total revenues 685,879 593,130 2,060,971 1,627,503
------- ------- --------- ---------
Cost of revenues:
License 3,098 4,008 10,645 10,244
Cloud services and
subscriptions 94,264 77,225 269,012 220,667
Customer support 33,820 34,442 99,805 87,529
Professional service and
other 64,246 55,529 188,690 137,167
Amortization of acquired
technology-based intangible
assets 47,303 39,285 138,391 87,268
------ ------ ------- ------
Total cost of revenues 242,731 210,489 706,543 542,875
------- ------- ------- -------
Gross profit 443,148 382,641 1,354,428 1,084,628
------- ------- --------- ---------
Operating expenses:
Research and development 83,522 77,086 241,455 200,379
Sales and marketing 129,987 117,498 381,951 315,297
General and administrative 54,817 44,828 152,717 122,939
Depreciation 23,093 16,557 64,042 47,128
Amortization of acquired
customer-based intangible
assets 46,762 40,825 136,819 108,248
Special charges 2,644 20,586 21,390 44,157
----- ------ ------ ------
Total operating expenses 340,825 317,380 998,374 838,148
------- ------- ------- -------
Income from operations 102,323 65,261 356,054 246,480
------- ------ ------- -------
Other income (expense), net 11,140 1,424 26,911 4,565
Interest and other related
expense, net (34,534) (31,734) (101,914) (86,752)
------- ------- -------- -------
Income before income taxes 78,929 34,951 281,051 164,293
Provision for (recovery of)
income taxes 20,129 13,239 100,644 (815,364)
------ ------ ------- --------
Net income for the period $58,800 $21,712 $180,407 $979,657
------- ------- -------- --------
Net (income) loss
attributable to non-
controlling interests (6) (96) 94 (135)
Net income attributable to
OpenText $58,794 $21,616 $180,501 $979,522
======= ======= ======== ========
Earnings per share-basic
attributable to OpenText $0.22 $0.08 $0.68 $3.91
===== ===== ===== =====
Earnings per share-diluted
attributable to OpenText $0.22 $0.08 $0.68 $3.88
===== ===== ===== =====
Weighted average number of
Common Shares outstanding-
basic 266,572 263,329 265,619 250,538
======= ======= ======= =======
Weighted average number of
Common Shares outstanding-
diluted 267,764 265,440 266,954 252,469
======= ======= ======= =======
Dividends declared per Common
Share $0.1320 $0.1150 $0.3960 $0.3450
======= ======= ======= =======
OPEN TEXT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands of U.S. dollars)
(unaudited)
Three Months Ended March 31, Nine Months Ended March 31,
2018 2017 2018 2017
---- ---- ---- ----
Net income for the period $58,800 $21,712 $180,407 $979,657
Other comprehensive income (loss) -net
of tax:
Net foreign currency translation
adjustments 3,823 2,725 3,283 (7,582)
Unrealized gain (loss) on cash flow
hedges:
Unrealized gain (loss) -net of tax
expense (recovery) effect of ($338) and
$125 for the three months ended March
31, 2018 and 2017, respectively; $65
and ($254) for the nine months ended
March 31, 2018 and 2017, respectively (935) 348 182 (705)
(Gain) loss reclassified into net income
-net of tax (expense) recovery effect
of ($112) and $14 for the three months
ended March 31, 2018 and 2017,
respectively; ($540) and ($24) for the
nine months ended March 31, 2018 and
2017, respectively (311) 40 (1,499) (68)
Actuarial gain (loss) relating to
defined benefit pension plans:
Actuarial gain (loss) -net of tax
expense (recovery) effect of $413 and
($64) for the three months ended March
31, 2018 and 2017, respectively; $177
and $420 for the nine months ended
March 31, 2018 and 2017, respectively 1,648 686 1,485 5,047
Amortization of actuarial (gain) loss
into net income -net of tax (expense)
recovery effect of $45 and $59 for the
three months ended March 31, 2018 and
2017, respectively; $130 and $178 for
the nine months ended March 31, 2018
and 2017, respectively 64 139 176 420
Unrealized net gain (loss) on marketable
securities -net of tax effect of nil
for the three and nine months ended
March 31, 2018 and 2017, respectively - (541) - (141)
Release of unrealized gain on marketable
securities -net of tax effect of nil
for the three and nine months ended
March 31, 2018 and 2017, respectively - - (617) -
--- --- ---- ---
Total other comprehensive income (loss)
net, for the period 4,289 3,397 3,010 (3,029)
----- ----- ----- ------
Total comprehensive income 63,089 25,109 183,417 976,628
Comprehensive (income) loss attributable
to non-controlling interests (6) (96) 94 (135)
--- --- --- ----
Total comprehensive income attributable
to OpenText $63,083 $25,013 $183,511 $976,493
======= ======= ======== ========
OPEN TEXT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
(unaudited)
Three Months Ended March 31, Nine Months Ended March 31,
2018 2017 2018 2017
---- ---- ---- ----
Cash flows from operating activities:
Net income for the period $58,800 $21,712 $180,407 $979,657
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and
amortization of
intangible assets 117,158 96,667 339,252 242,644
Share-based compensation
expense 5,080 6,661 20,473 22,373
Excess tax expense
(benefits) on share-
based compensation
expense - (1,044) - (1,586)
Pension expense 965 892 2,834 2,953
Amortization of debt
issuance costs 1,303 1,127 3,835 3,781
Amortization of deferred
charges and credits 941 2,146 3,175 6,438
Loss on sale and write
down of property and
equipment 326 - 489 -
Release of unrealized
gain on marketable
securities to income - - (841) -
Deferred taxes 18,266 (22,011) 62,640 (890,244)
Share in net (income)
loss of equity investees 307 (160) 503 (6,153)
Write off of unamortized
debt issuance costs - 833 - 833
Other non-cash charges - - - 1,033
Changes in operating assets and
liabilities:
Accounts receivable (6,240) (37,551) (55,698) (37,095)
Prepaid expenses and
other current assets (5,152) (18,119) (10,535) (6,234)
Income taxes and deferred
charges and credits (23,651) 11,190 (22,068) 1,570
Accounts payable and
accrued liabilities (19,779) 40,516 (92,278) 16,521
Deferred revenue 123,550 54,659 74,704 6,917
Other assets (1,197) (1,215) (2,466) (6,635)
------ ------ ------ ------
Net cash provided by
operating activities 270,677 156,303 504,426 336,773
------- ------- ------- -------
Cash flows from investing activities:
Additions of property and
equipment (27,101) (17,797) (83,038) (50,071)
Proceeds from maturity of
short-term investments - - - 9,212
Purchase of Hightail Inc. (20,466) - (20,466) -
Purchase of Guidance
Software, net of cash
acquired - - (229,275) -
Purchase of Covisint
Corporation, net of cash
acquired - - (71,279) -
Purchase of ECD Business - (1,622,394) - (1,622,394)
Purchase of HP Inc. CCM
Business - - - (315,000)
Purchase of Recommind,
Inc. - - - (170,107)
Purchase consideration
for acquisitions
completed prior to
Fiscal 2017 - - - (7,146)
Other investing
activities (3,118) (2,450) (11,179) (3,013)
Net cash used in
investing activities (50,685) (1,642,641) (415,237) (2,158,519)
------- ---------- -------- ----------
Cash flows from financing activities:
Excess tax (expense)
benefits on share-based
compensation expense - 1,044 - 1,586
Proceeds from issuance of
long-term debt and
revolver - 225,000 200,000 481,875
Proceeds from issuance of
Common Shares from
exercise of stock
options and ESPP 36,442 15,967 66,064 26,668
Proceeds from issuance of
Common shares under
public Equity Offering - - - 604,223
Repayment of long-term
debt and revolver (101,940) (1,940) (105,820) (5,940)
Debt issuance costs - (2,045) - (6,200)
Equity issuance costs - (1,345) - (19,472)
Purchase of treasury
stock - (4,245) - (4,245)
Payments of dividends to
shareholders (35,168) (30,303) (104,996) (85,953)
------- ------- -------- -------
Net cash provided by
(used in) financing
activities (100,666) 202,133 55,248 992,542
-------- ------- ------ -------
Foreign exchange gain
(loss) on cash held in
foreign currencies 10,157 10,714 17,703 (5,553)
Increase (decrease) in
cash and cash
equivalents during the
period 129,483 (1,273,491) 162,140 (834,757)
Cash and cash equivalents
at beginning of the
period 476,014 1,722,491 443,357 1,283,757
Cash and cash equivalents
at end of the period $605,497 $449,000 $605,497 $449,000
======== ======== ======== ========
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 calculated as GAAP-based
net income or earnings per share,
attributable to OpenText, on a diluted
basis, after giving effect to 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.
Non-GAAP-based operating margin is
calculated as Non-GAAP-based income
from operations expressed as a
percentage of total revenue.
Adjusted earnings (loss) before interest,
taxes, depreciation and amortization
(Adjusted EBITDA) is 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 and is based upon
the way the Company's management
evaluates the performance of the
Company's business for use in the
Company's internal reports. In the
course of such evaluation and for the
purpose of making operating decisions,
the Company's management excludes
certain items from its analysis,
including amortization of acquired
intangible assets, Special charges
(recoveries), share-based compensation,
other income (expense), and the taxation
impact of these items. These items are
excluded based upon the manner in which
management evaluates the business of the
Company and are not excluded in the
sense that they may be used under U.S.
GAAP.
The Company believes the provision of
supplemental Non-GAAP measures allow
investors to evaluate the operational
and financial performance of the
Company's core business using the same
evaluation measures that management
uses, and is therefore a useful
indication of OpenText's performance or
expected performance of future
operations and facilitates period-to-
period comparison of operating
performance (although prior performance
is not necessarily indicative of future
performance). As a result, the Company
considers it appropriate and reasonable
to provide, in addition to U.S. GAAP
measures, supplementary Non-GAAP
financial measures that exclude certain
items from the presentation of its
financial results.
The following charts provide (unaudited)
reconciliations of U.S. GAAP-based
financial measures to Non-U.S. GAAP-
based financial measures for the
following periods presented:
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the three months ended March 31, 2018.
(In thousands except for per share amounts)
------------------------------------------
Three Months Ended March 31, 2018
GAAP-based GAAP-based Adjustments Note Non-GAAP- Non-GAAP-
Measures based based
Measures Measures
% of Total Measures
Revenue % of Total
Revenue
--- -------
Cost of revenues
Cloud services and
subscriptions $94,264 $(135) (1) $94,129
Customer support 33,820 (277) (1) 33,543
Professional service
and other 64,246 (122) (1) 64,124
Amortization of
acquired
technology-based
intangible assets 47,303 (47,303) (2) -
GAAP-based gross
profit and gross
margin (%) / 443,148 64.6% 47,837 (3) 490,985 71.6%
Non-GAAP-based gross profit and
gross margin (%)
Operating expenses
Research and
development 83,522 (993) (1) 82,529
Sales and marketing 129,987 (1,496) (1) 128,491
General and
administrative 54,817 (2,057) (1) 52,760
Amortization of
acquired customer-
based intangible
assets 46,762 (46,762) (2) -
Special charges
(recoveries) 2,644 (2,644) (4) -
GAAP-based income
from operations and
operating margin
(%) /Non-GAAP-
based income from
operations and
operating margin
(%) 102,323 14.9% 101,789 (5) 204,112 29.8%
Other income
(expense), net 11,140 (11,140) (6) -
Provision for
(recovery of)
income taxes 20,129 3,612 (7) 23,741
GAAP-based net
income /Non-GAAP-
based net income,
attributable to
OpenText 58,794 87,037 (8) 145,831
GAAP-based earnings
per share /Non-
GAAP-based
earnings per share-
diluted,
attributable to
OpenText $0.22 $0.32 (8) $0.54
(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
one-time, non-recurring 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, and
operating margin stated as a percentage
of total revenue.
(6) Adjustment relates to the exclusion of
Other income (expense) from our Non-
GAAP-based operating expenses as Other
income (expense) relates primarily 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 26% and a Non-GAAP-based
tax rate of approximately 14%; these
rate differences are due to the income
tax effects of expenses that are
excluded for the purpose of calculating
Non-GAAP-based adjusted net income.
Such excluded expenses 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 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. We
also took into consideration changes in
US tax reform legislation that was
enacted on December 22, 2017 through the
Tax Cuts and Jobs Act.
(8) Reconciliation of GAAP-based net income
to Non-GAAP-based net income:
Three Months Ended March 31, 2018
Per share diluted
-----------------
GAAP-based net
income, attributable
to OpenText $58,794 $0.22
Add:
Amortization 94,065 0.35
Share-based
compensation 5,080 0.02
Special charges
(recoveries) 2,644 0.01
Other (income)
expense, net (11,140) (0.04)
GAAP-based provision
for (recovery of)
income taxes 20,129 0.07
Non-GAAP-based
provision for income
taxes (23,741) (0.09)
Non-GAAP-based net
income, attributable
to OpenText $145,831 $0.54
======== =====
Reconciliation of Adjusted EBITDA
Three Months Ended March 31, 2018
---------------------------------
GAAP-based net income,
attributable to OpenText $58,794
Add:
Provision for (recovery
of) income taxes 20,129
Interest and other related
expense, net 34,534
Amortization of acquired
technology-based
intangible assets 47,303
Amortization of acquired
customer-based
intangible assets 46,762
Depreciation 23,093
Share-based compensation 5,080
Special charges
(recoveries) 2,644
Other (income) expense,
net (11,140)
-------
Adjusted EBITDA $227,199
========
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the nine months ended March 31, 2018.
(In thousands except for per share amounts)
------------------------------------------
Nine Months Ended March 31, 2018
GAAP-based GAAP-based Adjustments Note Non-GAAP- Non-GAAP-
Measures based based
Measures Measures
% of Total Measures
Revenue % of Total
Revenue
--- -------
Cost of revenues
Cloud services and
subscriptions $269,012 $(1,119) (1) $267,893
Customer support 99,805 (933) (1) 98,872
Professional service
and other 188,690 (1,322) (1) 187,368
Amortization of
acquired
technology-based
intangible assets 138,391 (138,391) (2) -
GAAP-based gross
profit and gross
margin (%) / 1,354,428 65.7% 141,765 (3) 1,496,193 72.6%
Non-GAAP-based gross profit and
gross margin (%)
Operating expenses
Research and
development 241,455 (4,206) (1) 237,249
Sales and marketing 381,951 (6,679) (1) 375,272
General and
administrative 152,717 (6,214) (1) 146,503
Amortization of
acquired customer-
based intangible
assets 136,819 (136,819) (2) -
Special charges
(recoveries) 21,390 (21,390) (4) -
GAAP-based income
from operations and
operating margin
(%) /Non-GAAP-
based income from
operations and
operating margin
(%) 356,054 17.3% 317,073 (5) 673,127 32.7%
Other income
(expense), net 26,911 (26,911) (6) -
Provision for
(recovery of)
income taxes 100,644 (20,674) (7) 79,970
GAAP-based net
income /Non-GAAP-
based net income,
attributable to
OpenText 180,501 310,836 (8) 491,337
GAAP-based earnings
per share /Non-
GAAP-based
earnings per share-
diluted,
attributable to
OpenText $0.68 $1.16 (8) $1.84
(1) Adjustment relates to the exclusion of
share-based compensation expense from
our Non-GAAP-based operating expenses
as this expense is excluded from our
internal analysis of operating results.
(2) Adjustment relates to the exclusion of
amortization expense from our Non-GAAP-
based operating expenses as the timing
and frequency of amortization expense is
dependent on our acquisitions and is
hence excluded from our internal
analysis of operating results.
(3) GAAP-based and Non-GAAP-based gross
profit stated in dollars, and gross
margin stated as a percentage of total
revenue.
(4) Adjustment relates to the exclusion of
Special charges (recoveries) from our
Non-GAAP-based operating expenses as
Special charges (recoveries) are
generally incurred in the periods
relevant to an acquisition and include
one-time, non-recurring 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, and
operating margin stated as a percentage
of total revenue.
(6) Adjustment relates to the exclusion of
Other income (expense) from our Non-
GAAP-based operating expenses as Other
income (expense) relates primarily 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 36% and a Non-GAAP-based
tax rate of approximately 14%; these
rate differences are due to the income
tax effects of expenses that are
excluded for the purpose of calculating
Non-GAAP-based adjusted net income.
Such excluded expenses 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 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. We
also took into consideration changes in
US tax reform legislation that was
enacted on December 22, 2017 through the
Tax Cuts and Jobs Act.
(8) Reconciliation of GAAP-based net income
to Non-GAAP-based net income:
Nine Months Ended March 31, 2018
Per share diluted
-----------------
GAAP-based net
income, attributable
to OpenText $180,501 $0.68
Add:
Amortization 275,210 1.03
Share-based
compensation 20,473 0.08
Special charges
(recoveries) 21,390 0.08
Other (income)
expense, net (26,911) (0.10)
GAAP-based provision
for (recovery of)
income taxes 100,644 0.37
Non-GAAP based
provision for income
taxes (79,970) (0.30)
------- -----
Non-GAAP-based net
income, attributable
to OpenText $491,337 $1.84
======== =====
Reconciliation of Adjusted EBITDA
Nine Months Ended March 31, 2018
--------------------------------
GAAP-based net income,
attributable to OpenText $180,501
Add:
Provision for (recovery of)
income taxes 100,644
Interest and other related
expense, net 101,914
Amortization of acquired
technology-based
intangible assets 138,391
Amortization of acquired
customer-based intangible
assets 136,819
Depreciation 64,042
Share-based compensation 20,473
Special charges
(recoveries) 21,390
Other (income) expense, net (26,911)
-------
Adjusted EBITDA $737,263
========
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the three months ended December 31, 2017.
(In thousands except for per share amounts)
------------------------------------------
Three Months Ended December 31, 2017
GAAP-based GAAP-based Adjustments Note Non-GAAP- Non-GAAP-
Measures based based
Measures Measures
% of Total Measures
Revenue % of Total
Revenue
--- -------
Cost of revenues
Cloud services and
subscriptions $90,418 $(462) (1) $89,956
Customer support 33,194 (327) (1) 32,867
Professional service
and other 64,985 (603) (1) 64,382
Amortization of
acquired
technology-based
intangible assets 47,128 (47,128) (2) -
GAAP-based gross
profit and gross
margin (%) / 494,093 67.3% 48,520 (3) 542,613 73.9%
Non-GAAP-based gross profit and
gross margin (%)
Operating expenses
Research and
development 80,304 (1,587) (1) 78,717
Sales and marketing 129,142 (2,095) (1) 127,047
General and
administrative 48,985 (2,084) (1) 46,901
Amortization of
acquired customer-
based intangible
assets 46,268 (46,268) (2) -
Special charges
(recoveries) 715 (715) (4) -
GAAP-based income
from operations and
operating margin
(%) /Non-GAAP-
based income from
operations and
operating margin
(%) 166,608 22.7% 101,269 (5) 267,877 36.5%
Other income
(expense), net 5,547 (5,547) (6) -
Provision for
(recovery of)
income taxes 53,146 (22,095) (7) 31,051
GAAP-based net
income /Non-GAAP-
based net income,
attributable to
OpenText 85,111 117,817 (8) 202,928
GAAP-based earnings
per share /Non-
GAAP-based
earnings per share-
diluted,
attributable to
OpenText $0.32 $0.44 (8) $0.76
(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
one-time, non-recurring 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, and
operating margin stated as a percentage
of total revenue.
(6) Adjustment relates to the exclusion of
Other income (expense) from our Non-
GAAP-based operating expenses as Other
income (expense) relates primarily 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 38% and a Non-GAAP-based
tax rate of approximately 13%; these
rate differences are due to the income
tax effects of expenses that are
excluded for the purpose of calculating
Non-GAAP-based adjusted net income.
Such excluded expenses 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 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 13%, we
analyzed the individual adjusted
expenses and took into consideration the
impact of statutory tax rates from local
jurisdictions incurring the expense. In
addition, as a result of the changes in
US tax reform legislation that was
enacted on December 22, 2017 through the
Tax Cuts and Jobs Act, the Company has
reassessed its Non-GAAP-based tax rate
to be approximately 14% for the six
months ended December 31, 2017, down
from 15%. Pursuant to this, the Non-
GAAP-based tax rate of approximately
13% for the three months ended December
31, 2017 includes a one-time cumulative
catch up of recoveries and charges, as
though the Company's Non-GAAP-based
tax rate was 14% as of July 1, 2017.
(8) Reconciliation of GAAP-based net income
to Non-GAAP-based net income:
Three Months Ended December 31, 2017
Per share diluted
-----------------
GAAP-based net
income,
attributable to
OpenText $85,111 $0.32
Add:
Amortization 93,396 0.35
Share-based
compensation 7,158 0.03
Special charges
(recoveries) 715 -
Other (income)
expense, net (5,547) (0.02)
GAAP-based
provision for
(recovery of)
income taxes 53,146 0.20
Non-GAAP-based
provision for
income taxes (31,051) (0.12)
------- -----
Non-GAAP-based net
income,
attributable to
OpenText $202,928 $0.76
======== =====
Reconciliation of Adjusted EBITDA
Three Months Ended December 31, 2017
------------------------------------
GAAP-based net income,
attributable to
OpenText $85,111
Add:
Provision for (recovery
of) income taxes 53,146
Interest and other
related expense, net 34,092
Amortization of
acquired technology-
based intangible
assets 47,128
Amortization of
acquired customer-
based intangible
assets 46,268
Depreciation 22,071
Share-based
compensation 7,158
Special charges
(recoveries) 715
Other (income) expense,
net (5,547)
------
Adjusted EBITDA $290,142
========
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the three months ended March 31, 2017.
(In thousands except for per share amounts)
------------------------------------------
Three Months Ended March 31, 2017
GAAP-based GAAP-based Adjustments Note Non-GAAP- Non-GAAP-
Measures based based
Measures Measures
% of Total Measures
Revenue % of Total
Revenue
--- -------
Cost of revenues
Cloud services and
subscriptions $77,225 $(268) (1) $76,957
Customer support 34,442 (261) (1) 34,181
Professional service
and other 55,529 (89) (1) 55,440
Amortization of
acquired
technology-based
intangible assets 39,285 (39,285) (2) -
GAAP-based gross
profit and gross
margin (%) / 382,641 64.5% 39,903 (3) 422,544 71.2%
Non-GAAP-based gross profit and
gross margin (%)
Operating expenses
Research and
development 77,086 (1,634) (1) 75,452
Sales and marketing 117,498 (2,081) (1) 115,417
General and
administrative 44,828 (2,328) (1) 42,500
Amortization of
acquired customer-
based intangible
assets 40,825 (40,825) (2) -
Special charges
(recoveries) 20,586 (20,586) (4) -
GAAP-based income
from operations and
operating margin
(%) /Non-GAAP-
based income from
operations and
operating margin
(%) 65,261 11.0% 107,357 (5) 172,618 29.1%
Other income
(expense), net 1,424 (1,424) (6) -
Provision for
(recovery of)
income taxes 13,239 7,798 (7) 21,037
GAAP-based net
income /Non-GAAP-
based net income,
attributable to
OpenText 21,616 98,135 (8) 119,751
GAAP-based earnings
per share /Non-
GAAP-based
earnings per share-
diluted,
attributable to
OpenText $0.08 $0.37 (8) $0.45
(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
one-time, non-recurring 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, and
operating margin stated as a percentage
of total revenue.
(6) Adjustment relates to the exclusion of
Other income (expense) from our Non-
GAAP-based operating expenses as Other
income (expense) relates primarily 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 38% and a Non-GAAP-based
tax rate of approximately 15%; these
rate differences are due to the income
tax effects of expenses that are
excluded for the purpose of calculating
Non-GAAP-based adjusted net income.
Such excluded expenses 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 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 15%, we
analyzed the individual adjusted
expenses and took into consideration the
impact of statutory tax rates from local
jurisdictions incurring the expense.
(8) Reconciliation of GAAP-based net income
to Non-GAAP-based net income:
Three Months Ended March 31, 2017
Per share diluted
-----------------
GAAP-based net
income, attributable
to OpenText $21,616 $0.08
Add:
Amortization 80,110 0.30
Share-based
compensation 6,661 0.03
Special charges
(recoveries) 20,586 0.08
Other (income)
expense, net (1,424) (0.01)
GAAP-based provision
for (recovery of)
income taxes 13,239 0.05
Non-GAAP-based
provision for income
taxes (21,037) (0.08)
------- -----
Non-GAAP-based net
income, attributable
to OpenText $119,751 $0.45
======== =====
Reconciliation of Adjusted EBITDA
Three months ended March 31, 2017
---------------------------------
GAAP-based net income,
attributable to OpenText $21,616
Add:
Provision for (recovery
of) income taxes 13,239
Interest and other related
expense, net 31,734
Amortization of acquired
technology-based
intangible assets 39,285
Amortization of acquired
customer-based
intangible assets 40,825
Depreciation 16,557
Share-based compensation 6,661
Special charges
(recoveries) 20,586
Other (income) expense,
net (1,424)
------
Adjusted EBITDA $189,079
========
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the nine months ended March 31, 2017.
(In thousands except for per share amounts)
------------------------------------------
Nine Months Ended March 31, 2017
GAAP-based GAAP-based Adjustments Note Non-GAAP- Non-GAAP-
Measures based based
Measures Measures
% of Total Measures
Revenue % of Total
Revenue
--- -------
Cost of revenues:
Cloud services and
subscriptions $220,667 $(839) (1) $219,828
Customer support 87,529 (766) (1) 86,763
Professional service
and other 137,167 (1,002) (1) 136,165
Amortization of
acquired
technology-based
intangible assets 87,268 (87,268) (2) -
GAAP-based gross
profit and gross
margin (%) / 1,084,628 66.6% 89,875 (3) 1,174,503 72.2%
Non-GAAP-based gross profit and
gross margin (%)
Operating expenses
Research and
development 200,379 (5,372) (1) 195,007
Sales and marketing 315,297 (7,230) (1) 308,067
General and
administrative 122,939 (7,164) (1) 115,775
Amortization of
acquired customer-
based intangible
assets 108,248 (108,248) (2) -
Special charges
(recoveries) 44,157 (44,157) (4) -
GAAP-based income
from operations and
operating margin
(%) /Non-GAAP-
based income from
operations and
operating margin
(%) 246,480 15.1% 262,046 (5) 508,526 31.2%
Other income
(expense), net 4,565 (4,565) (6) -
Provision for
(recovery of)
income taxes (815,364) 878,495 (7) 63,131
GAAP-based net
income /Non-GAAP-
based net income,
attributable to
OpenText 979,522 (621,014) (8) 358,508
GAAP-based earnings
per share /Non-
GAAP-based
earnings per share-
diluted,
attributable to
OpenText $3.88 $(2.46) (8) $1.42
(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 one-time, non-recurring
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, and operating margin
stated as a percentage of total revenue.
(6) Adjustment relates to the exclusion of Other income
(expense) from our Non-GAAP-based operating
expenses as Other income (expense) relates primarily
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 recovery rate of approximately 496% and a
Non-GAAP-based tax rate of approximately 15%;
these rate differences are due to the income tax
effects of expenses that are excluded for the
purpose of calculating Non-GAAP-based adjusted net
income. Such excluded expenses 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 assumed to be allocable to the
current period based on the forecasted utilization
period. In arriving at our Non-GAAP-based tax rate
of 15%, we analyzed the individual adjusted expenses
and took into consideration the impact of statutory
tax rates from local jurisdictions incurring the
expense.
(8) Reconciliation of GAAP-based net income to Non-
GAAP-based net income:
Nine Months Ended March 31, 2017
Per share diluted
-----------------
GAAP-based net
income, attributable
to OpenText $979,522 $3.88
Add:
Amortization 195,516 0.77
Share-based
compensation 22,373 0.09
Special charges
(recoveries) 44,157 0.17
Other (income)
expense, net (4,565) (0.02)
GAAP-based provision
for (recovery of)
income taxes (815,364) (3.23)
Non-GAAP based
provision for income
taxes (63,131) (0.24)
------- -----
Non-GAAP-based net
income, attributable
to OpenText $358,508 $1.42
======== =====
Reconciliation of Adjusted EBITDA
Nine Months Ended March 31, 2017
--------------------------------
GAAP-based net income,
attributable to OpenText $979,522
Add:
Provision for (recovery of)
income taxes (815,364)
Interest and other related
expense, net 86,752
Amortization of acquired
technology-based
intangible assets 87,268
Amortization of acquired
customer-based intangible
assets 108,248
Depreciation 47,128
Share-based compensation 22,373
Special charges
(recoveries) 44,157
Other (income) expense, net (4,565)
------
Adjusted EBITDA $555,519
========
(3) The following tables provide a
composition of our major
currencies for revenue and
expenses, expressed as a
percentage, for the three and
nine months ended March 31,
2018 and 2017:
Three Months Ended March 31, 2018 Three Months Ended March 31, 2017
Currencies % of Revenue % of Expenses* % of Revenue % of Expenses*
------------ ------------- ------------ -------------
EURO 22% 15% 19% 15%
GBP 6% 6% 6% 7%
CAD 4% 11% 4% 11%
USD 58% 50% 62% 52%
Other 10% 18% 9% 15%
--- --- --- ---
Total 100% 100% 100% 100%
=== === === ===
Nine Months Ended March 31, 2018 Nine Months Ended March 31, 2017
Currencies % of Revenue % of Expenses* % of Revenue % of Expenses*
------------ ------------- ------------ -------------
EURO 22% 15% 22% 15%
GBP 6% 6% 7% 7%
CAD 4% 11% 4% 11%
USD 58% 51% 58% 52%
Other 10% 17% 9% 15%
--- --- --- ---
Total 100% 100% 100% 100%
=== === === ===
* Expenses include all cost of
revenues and operating expenses
included within the Condensed
Consolidated Statements of Income,
except for amortization of
intangible assets, share-based
compensation and Special charges
(recoveries).
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SOURCE Open Text Corporation
