Aug 2, 2018 SOURCE: PR NewsWire
OpenText Reports Fourth Quarter and Fiscal Year 2018 Financial Results
Q4 Revenue of $754 million, up 14% Y/Y
Annual Revenue of $2.82 billion, up 23% Y/Y
Annual Operating Cash Flows of $710 million, up 62% Y/Y
WATERLOO, Ontario, Aug. 2, 2018 /PRNewswire/ -- Open Text Corporation (NASDAQ: OTEX, TSX: OTEX), "The Information Company," today announced its financial results for the fourth quarter and fiscal year ended June 30, 2018.
"Our fourth quarter was a strong close to a record year, with $2.8 billion in total annual revenues and 23% year over year growth," said Mark J. Barrenechea, OpenText Vice Chair, CEO & CTO. "Fiscal 2018 demonstrates the strength of our Total Growth strategy that combines both acquisition and organic growth. Further, we completed 3 acquisitions in Fiscal 2018 (Covisint, Guidance Software and Hightail) and we enter Fiscal 2019 with a strong balance sheet."
Barrenechea added, "OpenText's Annual Recurring Revenue business grew 22% year over year to over $2 billion as we continued to expand our support, cloud, business networks and security product lines. We recently announced a new public SaaS platform, OpenText OT2, and Release 16 EP5, offering customers the next evolution of our products. OpenText is increasingly becoming a strategic technology partner to Global 10,000 companies as we scale and expand our value proposition, which positions us well for Fiscal 2019 and beyond."
"In Fiscal 2018, we generated over $1 billion of adjusted EBITDA and $710 million in Operating Cash Flows, which was up 62% over the prior fiscal year," said OpenText EVP and CFO, Madhu Ranganathan. "As we start Fiscal 2019, we are taking steps to further improve our operational efficiency and expand margins, which reinforces our ability to execute our M&A strategy and advance the Company toward our Fiscal 2021 objectives."
Ms. Ranganathan added, "Looking at Fiscal 2019 and beyond, today we are also announcing a restructuring plan to further streamline our operations and increase our agility as we look to execute on our Total Growth strategy. We will undertake the restructuring initiatives during Fiscal 2019 and the expected size of the plan will be approximately $29 million. Savings are anticipated to ramp over the course of the year, with full benefits realized in Fiscal 2020 and beyond."
Financial Highlights for Fiscal 2018 with Year Over Year Comparisons
Summary of Annual Results
-------------------------
(in millions except per
share data) FY18 FY17 $ Change % Change FY18 in % Change
CC* in CC*
(Y/Y)
Revenues:
Cloud services and
subscriptions $829.0 $705.5 $123.5 17.5% $818.6 16.0%
Customer support 1,232.5 981.1 251.4 25.6% 1,195.4 21.8%
Total annual recurring
revenues** $2,061.5 $1,686.6 $374.9 22.2% $2,013.9 19.4%
License 437.5 369.1 68.4 18.5% 423.6 14.8%
Professional service and
other 316.3 235.3 80.9 34.4% 305.1 29.6%
Total revenues $2,815.2 $2,291.1 $524.2 22.9% $2,742.7 19.7%
GAAP-based operating income $505.4 $352.9 $152.5 43.2%
Non-GAAP-based operating
income (1) $932.2 $728.5 $203.7 28.0% $901.7 23.8%
GAAP-based operating margin 18.0% 15.4% n/a 260 bps
Non-GAAP-based operating
margin (1) 33.1% 31.8% n/a 130 bps 32.9% 110 bps
GAAP-based EPS, diluted (2) $0.91 $4.01 ($3.10) (77.3)%
Non-GAAP-based EPS,
diluted (1)(3) $2.56 $2.02 $0.54 26.7% $2.46 21.8%
GAAP-based net income
attributable to OpenText
(2) $242.2 $1,025.7 ($783.4) (76.4)%
Adjusted EBITDA (1) $1,019.1 $792.5 $226.5 28.6%
Operating cash flows $709.9 $439.3 $270.6 61.6%
-------------------- ------ ------ ------ ----
Summary of Quarterly
Results
--------------------
(in millions except per
share data) Q4 FY18 Q4 FY17 $ Change % Change Q4 FY18 in % Change
CC* in CC*
(Y/Y)
Revenues:
Cloud services and
subscriptions $217.9 $183.6 $34.3 18.7% $212.5 15.7%
Customer support 316.8 287.8 28.9 10.1% 304.1 5.7%
Total annual recurring
revenues** $534.6 $471.4 $63.2 13.4% $516.5 9.6%
License 139.9 123.5 16.4 13.3% 135.9 10.0%
Professional service and
other 79.7 68.6 11.1 16.2% 77.4 12.8%
Total revenues $754.3 $663.6 $90.7 13.7% $729.8 10.0%
GAAP-based operating income $149.3 $106.5 $42.9 40.3%
Non-GAAP-based operating
income (1) $259.1 $219.9 $39.1 17.8% $247.4 12.5%
GAAP-based operating margin 19.8% 16.0% n/a 380 bps
Non-GAAP-based operating
margin (1) 34.3% 33.1% n/a 120 bps 33.9% 80 bps
GAAP-based EPS, diluted $0.23 $0.17 $0.06 35.3%
Non-GAAP-based EPS,
diluted (1)(3) $0.72 $0.60 $0.12 20.0% $0.68 13.3%
GAAP-based net income
attributable to OpenText $61.7 $46.1 $15.6 33.8%
Adjusted EBITDA (1) $281.8 $237.0 $44.8 18.9%
Operating cash flows $205.5 $102.5 $103.0 100.5%
-------------------- ------ ------ ------ -----
(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 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.
OpenText Quarterly Business Highlights
-- 38 customer transactions over $1 million, 15 OpenText Cloud and 23
on-premise
-- Financial, Services, Consumer Goods, Technology and Healthcare
industries saw the most demand in cloud and license
-- Key customer wins in the quarter included The United States Department
of Energy, Ness A. T., US Navy SPAWAR Atlantic, Hydro Quebec, Salt River
Project, GEMA, SecureWorks, Southern Company, US Defense Health Agency,
Roy Hill, Netherlands Ministry of Education, BMW Group and Auto Club
Group
-- OpenText Defines the Future of Enterprise Information Management with
Next-Generation OpenText OT2 Platform
-- OpenText Announces Successful Repricing and Amendment of Credit
Facilities
-- The OpenText Business Network Powers 23 of Gartner's Top 25 Supply
Chains
-- OpenText Receives 2018 SAP® Pinnacle Award SAP Solution Extension
Partner of the Year
-- OpenText Announces Availability of Two New Cloud Offerings for SAP®
Solutions
-- Independent Research Firm Cites OpenText as a Leader in Digital Asset
Management for Customer Experience
Dividend Program Highlights
As part of our quarterly, non-cumulative cash dividend program, the Board declared on August 1, 2018 a cash dividend of $0.1518 per common share. The record date for this dividend is August 31, 2018 and the payment date is September 21, 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 Annual Results
-------------------------
FY18 FY17 % Change
Revenue (million) $2,815.2 $2,291.1 22.9%
GAAP-based gross margin 66.2% 66.7% (50) bps
GAAP-based operating margin 18.0% 15.4% 260 bps
GAAP-based EPS, diluted(2) $0.91 $4.01 (77.3)%
Non-GAAP-based gross
margin (1) 73.0% 72.6% 40 bps
Non-GAAP-based operating
margin (1) 33.1% 31.8% 130 bps
Non-GAAP-based EPS,
diluted (1)(3) $2.56 $2.02 26.7%
------------------- ----- ----- ----
Summary of
Quarterly
Results
----------
Q4 FY18 Q3 FY18 Q4 FY17 % Change % Change
(Q4 FY18 vs (Q4 FY18 vs
Q3 FY18) Q4 FY17)
Revenue
(million) $754.3 $685.9 $663.6 10.0% 13.7%
GAAP-based
gross
margin 67.5% 64.6% 66.9% 290 bps 60 bps
GAAP-based
operating
margin 19.8% 14.9% 16.0% 490 bps 380 bps
GAAP-based
EPS,
diluted $0.23 $0.22 $0.17 4.5% 35.3%
Non-GAAP-
based gross
margin (1) 74.0% 71.6% 73.6% 240 bps 40 bps
Non-GAAP-
based
operating
margin (1) 34.3% 29.8% 33.1% 450 bps 120 bps
Non-GAAP-
based EPS,
diluted
(1)(3) $0.72 $0.54 $0.60 33.3% 20.0%
----------- ----- ----- ----- ---- ----
(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 Consolidated Financial
Statements on Form 10-K.
Reflective of the amount of net
tax benefit arising from the
internal reorganization assumed to
be allocable to the current period
based on the forecasted
utilization period.
Conference Call Information
The public is invited to listen to the earnings conference call today at 5:00 p.m. ET (2:00 p.m. PT) by dialing 1-800-319-4610 (toll-free) or +1-604-638-5340 (international). Please dial-in 10 minutes ahead of time to ensure proper connection. Alternatively, a live webcast of the earnings conference call will be available on the Investor Relations section of the Company's website at http://investors.opentext.com/investor-events-and-presentations.
A replay of the call will be available beginning August 2, 2018 at 7:00 p.m. ET through 11:59 p.m. on August 16, 2018 and can be accessed by dialing 1-855-669-9658 (toll-free) or +1-604-674-8052 (international) and using passcode 2420 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 in Fiscal 2019 and beyond, the anticipated size, benefits and timing related to our restructuring plan, 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 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
CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars, except share data)
June 30, 2018 June 30, 2017
------------- -------------
ASSETS
Cash and cash equivalents $682,942 $443,357
Accounts receivable trade, net of
allowance for doubtful accounts
of $9,741 as of June 30, 2018
and $6,319 as of June 30, 2017 487,956 445,812
Income taxes recoverable 55,623 32,683
Prepaid expenses and other
current assets 101,059 81,625
Total current assets 1,327,580 1,003,477
Property and equipment 264,205 227,418
Goodwill 3,580,129 3,416,749
Acquired intangible assets 1,296,637 1,472,542
Deferred tax assets 1,122,729 1,215,712
Other assets 111,267 93,763
Deferred charges 38,000 42,344
Long-term income taxes
recoverable 24,482 8,557
Total assets $7,765,029 $7,480,562
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities $302,154 $342,120
Current portion of long-term debt 10,000 182,760
Deferred revenues 644,211 570,328
Income taxes payable 38,234 31,835
Total current liabilities 994,599 1,127,043
Long-term liabilities:
Accrued liabilities 52,827 50,338
Deferred credits 2,727 5,283
Pension liability 65,719 58,627
Long-term debt 2,610,523 2,387,057
Deferred revenues 69,197 61,678
Long-term income taxes payable 172,241 162,493
Deferred tax liabilities 79,938 94,724
------ ------
Total long-term liabilities 3,053,172 2,820,200
Shareholders' equity:
Share capital and additional paid-in capital
267,651,084 and 264,059,567
Common Shares issued and
outstanding at June 30, 2018 and
June 30, 2017, respectively;
authorized Common Shares:
unlimited 1,707,073 1,613,454
Accumulated other comprehensive
income 33,645 48,800
Retained earnings 1,994,235 1,897,624
Treasury stock, at cost (690,336
shares at June 30, 2018 and
1,101,612 at June 30, 2017,
respectively) (18,732) (27,520)
------- -------
Total OpenText shareholders'
equity 3,716,221 3,532,358
Non-controlling interests 1,037 961
----- ---
Total shareholders' equity 3,717,258 3,533,319
Total liabilities and
shareholders' equity $7,765,029 $7,480,562
========== ==========
OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands of U.S. dollars, except share and per share data)
Year Ended June 30,
2018 2017 2016
---- ---- ----
Revenues:
License $437,512 $369,144 $283,710
Cloud services and subscriptions 828,968 705,495 601,018
Customer support 1,232,504 981,102 746,409
Professional service and other 316,257 235,316 193,091
------- ------- -------
Total revenues 2,815,241 2,291,057 1,824,228
--------- --------- ---------
Cost of revenues:
License 13,693 13,632 10,296
Cloud services and subscriptions 364,091 300,255 244,021
Customer support 134,089 122,753 89,861
Professional service and other 253,670 195,195 155,584
Amortization of acquired technology-
based intangible assets 185,868 130,556 74,238
------- ------- ------
Total cost of revenues 951,411 762,391 574,000
------- ------- -------
Gross profit 1,863,830 1,528,666 1,250,228
--------- --------- ---------
Operating expenses:
Research and development 323,461 281,680 194,057
Sales and marketing 529,381 444,838 344,235
General and administrative 205,313 170,438 140,397
Depreciation 86,943 64,318 54,929
Amortization of acquired customer-
based intangible assets 184,118 150,842 113,201
Special charges 29,211 63,618 34,846
------ ------ ------
Total operating expenses 1,358,427 1,175,734 881,665
--------- --------- -------
Income from operations 505,403 352,932 368,563
------- ------- -------
Other income (expense), net 17,973 15,743 (1,423)
Interest and other related expense,
net (137,250) (119,124) (76,363)
-------- -------- -------
Income before income taxes 386,126 249,551 290,777
Provision for (recovery of) income
taxes 143,826 (776,364) 6,282
------- -------- -----
Net income for the period $242,300 $1,025,915 $284,495
-------- ---------- --------
Net (income) loss attributable to
non-controlling interests (76) (256) (18)
Net income attributable to OpenText $242,224 $1,025,659 $284,477
======== ========== ========
Earnings per share-basic
attributable to OpenText $0.91 $4.04 $1.17
===== ===== =====
Earnings per share-diluted
attributable to OpenText $0.91 $4.01 $1.17
===== ===== =====
Weighted average number of Common
Shares outstanding-basic 266,085 253,879 242,926
======= ======= =======
Weighted average number of Common
Shares outstanding-diluted 267,492 255,805 244,076
======= ======= =======
Dividends declared per Common Share $0.5478 $0.4770 $0.4150
======= ======= =======
OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands of U.S. dollars, except share and per share data)
(unaudited)
Three Months Ended June 30,
2018 2017
---- ----
Revenues:
License $139,924 $123,497
Cloud
services
and
subscriptions 217,892 183,638
Customer
support 316,751 287,804
Professional
service
and other 79,703 68,615
------ ------
Total
revenues 754,270 663,554
------- -------
Cost of revenues:
License 3,048 3,388
Cloud
services
and
subscriptions 95,079 79,588
Customer
support 34,284 35,224
Professional
service
and other 64,980 58,028
Amortization
of
acquired
technology-
based
intangible
assets 47,477 43,288
------ ------
Total cost
of
revenues 244,868 219,516
------- -------
Gross
profit 509,402 444,038
------- -------
Operating expenses:
Research
and
development 82,006 81,301
Sales and
marketing 147,430 129,541
General
and
administrative 52,596 47,499
Depreciation 22,901 17,190
Amortization
of
acquired
customer-
based
intangible
assets 47,299 42,594
Special
charges 7,821 19,461
----- ------
Total
operating
expenses 360,053 337,586
------- -------
Income
from
operations 149,349 106,452
------- -------
Other
income
(expense),
net (8,938) 11,178
Interest
and other
related
expense,
net (35,336) (32,372)
------- -------
Income
before
income
taxes 105,075 85,258
Provision
for
(recovery
of)
income
taxes 43,182 39,000
------ ------
Net income
for the
period $61,893 $46,258
------- -------
Net
(income)
loss
attributable
to non-
controlling
interests (170) (121)
Net income
attributable
to
OpenText $61,723 $46,137
======= =======
Earnings
per
share-
basic
attributable
to
OpenText $0.23 $0.17
===== =====
Earnings
per
share-
diluted
attributable
to
OpenText $0.23 $0.17
===== =====
Weighted
average
number of
Common
Shares
outstanding-
basic 267,489 263,938
======= =======
Weighted
average
number of
Common
Shares
outstanding-
diluted 268,628 265,818
======= =======
Dividends
declared
per
Common
Share $0.1518 $0.1320
======= =======
OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands of U.S. dollars)
Year Ended June 30,
2018 2017 2016
---- ---- ----
Net income for the period $242,300 $1,025,915 $284,495
Other comprehensive income (loss) -net
of tax:
Net foreign currency translation
adjustments (9,582) (4,756) (3,318)
Unrealized gain (loss) on cash flow
hedges:
Unrealized gain (loss) -net of tax
expense (recovery) effect of ($171),
$34 and ($928) for the year ended June
30, 2018, 2017 and 2016, respectively (476) 95 (2,574)
(Gain) loss reclassified into net income
-net of tax (expense) recovery effect
of ($489), $67 and $1,065 for the year
ended June 30, 2018, 2017 and 2016,
respectively (1,357) 186 2,956
Actuarial gain (loss) relating to
defined benefit pension plans:
Actuarial gain (loss) -net of tax
expense (recovery) effect of ($1,846),
$840 and ($1,612) for the year ended
June 30, 2018, 2017 and 2016,
respectively (3,383) 6,216 (3,374)
Amortization of actuarial (gain) loss
into net income -net of tax (expense)
recovery effect of $183, $241 and $132
for the year ended June 30, 2018, 2017
and 2016, respectively 260 565 347
Unrealized net gain (loss) on marketable
securities -net of tax effect of nil
for the year ended June 30, 2018, 2017
and 2016, respectively - 184 445
Release of unrealized gain on marketable
securities -net of tax effect of nil
for the year ended June 30, 2018, 2017
and 2016, respectively (617) - -
---- --- ---
Total other comprehensive income (loss)
net, for the period (15,155) 2,490 (5,518)
------- ----- ------
Total comprehensive income 227,145 1,028,405 278,977
Comprehensive (income) loss attributable
to non-controlling interests (76) (256) (18)
--- ---- ---
Total comprehensive income attributable
to OpenText $227,069 $1,028,149 $278,959
======== ========== ========
OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
Year Ended June 30,
2018 2017 2016
---- ---- ----
Cash flows from operating
activities:
Net income for the period $242,300 $1,025,915 $284,495
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization of
intangible assets 456,929 345,715 242,368
Share-based compensation expense 27,594 30,507 25,978
Excess tax expense (benefits) on
share-based compensation
expense - (1,534) (230)
Pension expense 3,738 3,893 4,577
Amortization of debt issuance
costs 4,646 5,014 4,678
Amortization of deferred charges
and credits 4,242 6,298 9,903
Loss on sale and write down of
property and equipment 2,234 784 1,108
Release of unrealized gain on
marketable securities to income (841) - -
Deferred taxes 89,736 (871,195) (54,461)
Share in net (income) loss of
equity investees (5,965) (5,952) -
Write off of unamortized debt
issuance costs 155 833 -
Other non-cash charges - 1,033 -
Changes in operating assets and
liabilities:
Accounts receivable (22,566) (126,784) 8,985
Prepaid expenses and other
current assets (7,274) (7,766) 316
Income taxes and deferred
charges and credits (31,323) (1,683) 6,294
Accounts payable and accrued
liabilities (91,650) 53,490 (5,671)
Deferred revenue 35,629 3,484 (4,781)
Other assets 2,301 (22,799) 2,163
----- ------- -----
Net cash provided by operating
activities 709,885 439,253 525,722
------- ------- -------
Cash flows from investing
activities:
Additions of property and
equipment (105,318) (79,592) (70,009)
Proceeds from maturity of short-
term investments - 9,212 11,297
Purchase of Hightail Inc. (20,535) - -
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) -
Purchase of HP Inc. CCM Business - (315,000) -
Purchase of Recommind, Inc. - (170,107) -
Purchase consideration for prior
period acquisitions - (7,146) (293,071)
Other investing activities (18,034) (5,937) (9,393)
------- ------ ------
Net cash used in investing
activities (444,441) (2,190,964) (361,176)
-------- ---------- --------
Cash flows from financing
activities:
Excess tax (expense) benefits on
share-based compensation
expense - 1,534 230
Proceeds from issuance of long-
term debt and revolver 1,200,000 481,875 600,000
Proceeds from issuance of Common
Shares from exercise of stock
options and ESPP 75,935 35,593 20,097
Proceeds from issuance of Common
shares under public Equity
Offering - 604,223 -
Repayment of long-term debt and
revolver (1,149,620) (57,880) (8,000)
Debt issuance costs (4,375) (7,240) (6,765)
Equity issuance costs - (19,574) -
Common Shares repurchased - - (65,509)
Purchase of treasury stock - (8,198) (10,627)
Purchase of non-controlling
interest - (208) -
Payments of dividends to
shareholders (145,613) (120,581) (99,262)
-------- -------- -------
Net cash provided by (used in)
financing activities (23,673) 909,544 430,164
------- ------- -------
Foreign exchange gain (loss) on
cash held in foreign currencies (2,186) 1,767 (10,952)
Increase (decrease) in cash and
cash equivalents during the
period 239,585 (840,400) 583,758
Cash and cash equivalents at
beginning of the period 443,357 1,283,757 699,999
------- --------- -------
Cash and cash equivalents at end
of the period $682,942 $443,357 $1,283,757
======== ======== ==========
OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
(unaudited)
Three Months Ended June 30,
2018 2017
---- ----
Cash flows from operating
activities:
Net income
for the
period $61,893 $46,258
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation
and
amortization
of
intangible
assets 117,677 103,071
Share-
based
compensation
expense 7,121 8,134
Excess tax
expense
(benefits)
on share-
based
compensation
expense - 52
Pension
expense 904 940
Amortization
of debt
issuance
costs 811 1,233
Amortization
of
deferred
charges
and
credits 1,067 (140)
Loss on
sale and
write down
of
property
and
equipment 1,745 784
Deferred
taxes 27,096 19,049
Share in
net
(income)
loss of
equity
investees (6,468) 201
Write off
of
unamortized
debt
issuance
costs 155 -
Changes in operating assets
and liabilities:
Accounts
receivable 33,132 (89,689)
Prepaid
expenses
and other
current
assets 3,261 (1,532)
Income
taxes and
deferred
charges
and
credits (9,255) (3,253)
Accounts
payable
and
accrued
liabilities 628 36,969
Deferred
revenue (39,075) (3,433)
Other
assets 4,767 (16,164)
----- -------
Net cash
provided
by
operating
activities 205,459 102,480
------- -------
Cash flows from investing
activities:
Additions
of
property
and
equipment (22,280) (29,521)
Purchase of
Hightail
Inc. (69) -
Other
investing
activities (6,855) (2,924)
Net cash
used in
investing
activities (29,204) (32,445)
------- -------
Cash flows from financing
activities:
Excess tax
(expense)
benefits
on share-
based
compensation
expense - (52)
Proceeds
from
issuance
of long-
term debt
and
revolver 1,000,000 -
Proceeds
from
issuance
of Common
Shares
from
exercise
of stock
options
and ESPP 9,871 8,925
Repayment
of long-
term debt
and
revolver (1,043,800) (51,940)
Debt
issuance
costs (4,375) (1,040)
Equity
issuance
costs - (102)
Purchase of
treasury
stock - (3,953)
Repurchase
of non-
controlling
interest - (208)
Payments of
dividends
to
shareholders (40,617) (34,628)
------- -------
Net cash
provided
by (used
in)
financing
activities (78,921) (82,998)
------- -------
Foreign
exchange
gain
(loss) on
cash held
in foreign
currencies (19,889) 7,320
Increase
(decrease)
in cash
and cash
equivalents
during the
period 77,445 (5,643)
Cash and
cash
equivalents
at
beginning
of the
period 605,497 449,000
Cash and
cash
equivalents
at end of
the period $682,942 $443,357
======== ========
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. 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 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 June 30, 2018.
(In thousands except for per share amounts)
------------------------------------------
Three Months Ended June 30, 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 $95,079 $(310) (1) $94,769
Customer support 34,284 (300) (1) 33,984
Professional
service and other 64,980 (516) (1) 64,464
Amortization of
acquired
technology-based
intangible assets 47,477 (47,477) (2) -
GAAP-based gross
profit and gross
margin (%) / 509,402 67.5% 48,603 (3) 558,005 74.0%
Non-GAAP-based gross profit
and gross margin (%)
Operating expenses
Research and
development 82,006 (1,453) (1) 80,553
Sales and marketing 147,430 (2,552) (1) 144,878
General and
administrative 52,596 (1,990) (1) 50,606
Amortization of
acquired customer-
based intangible
assets 47,299 (47,299) (2) -
Special charges
(recoveries) 7,821 (7,821) (4) -
GAAP-based income
from operations
and operating
margin (%) /Non-
GAAP-based income
from operations
and operating
margin (%) 149,349 19.8% 109,718 (5) 259,067 34.3%
Other income
(expense), net (8,938) 8,938 (6) -
Provision for
(recovery of)
income taxes 43,182 (11,860) (7) 31,322
GAAP-based net
income /Non-
GAAP-based net
income,
attributable to
OpenText 61,723 130,516 (8) 192,239
GAAP-based
earnings per share
/Non-GAAP-based
earnings per
share-diluted,
attributable to
OpenText $0.23 $0.49 (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, 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) 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 41% 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 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 June 30, 2018
Per share diluted
-----------------
GAAP-based net
income, attributable
to OpenText $61,723 $0.23
Add:
Amortization 94,776 0.35
Share-based
compensation 7,121 0.03
Special charges
(recoveries) 7,821 0.03
Other (income)
expense, net 8,938 0.03
GAAP-based provision
for (recovery of)
income taxes 43,182 0.16
Non-GAAP-based
provision for income
taxes (31,322) (0.11)
Non-GAAP-based net
income, attributable
to OpenText $192,239 $0.72
======== =====
Reconciliation of Adjusted EBITDA
Three Months
Ended June 30,
2018
---------------
GAAP-based net income,
attributable to OpenText $61,723
Add:
Provision for (recovery of) income
taxes 43,182
Interest and other related expense,
net 35,336
Amortization of acquired
technology-based intangible
assets 47,477
Amortization of acquired customer-
based intangible assets 47,299
Depreciation 22,901
Share-based compensation 7,121
Special charges (recoveries) 7,821
Other (income) expense, net 8,938
-----
Adjusted EBITDA $281,798
========
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the year ended June 30, 2018.
(In thousands except for per share amounts)
------------------------------------------
Year Ended June 30, 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 $364,091 $(1,429) (1) $362,662
Customer support 134,089 (1,233) (1) 132,856
Professional
service and other 253,670 (1,838) (1) 251,832
Amortization of
acquired
technology-based
intangible assets 185,868 (185,868) (2) -
GAAP-based gross
profit and gross
margin (%) / 1,863,830 66.2% 190,368 (3) 2,054,198 73.0%
Non-GAAP-based gross profit and
gross margin (%)
Operating expenses
Research and
development 323,461 (5,659) (1) 317,802
Sales and marketing 529,381 (9,231) (1) 520,150
General and
administrative 205,313 (8,204) (1) 197,109
Amortization of
acquired customer-
based intangible
assets 184,118 (184,118) (2) -
Special charges
(recoveries) 29,211 (29,211) (4) -
GAAP-based income
from operations
and operating
margin (%) /Non-
GAAP-based income
from operations
and operating
margin (%) 505,403 18.0% 426,791 (5) 932,194 33.1%
Other income
(expense), net 17,973 (17,973) (6) -
Provision for
(recovery of)
income taxes 143,826 (32,534) (7) 111,292
GAAP-based net
income /Non-
GAAP-based net
income,
attributable to
OpenText 242,224 441,352 (8) 683,576
GAAP-based
earnings per share
/Non GAAP-based
earnings per
share-diluted,
attributable to
OpenText $0.91 $1.65 (8) $2.56
(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, 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) 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 37% and a Non-GAAP-based
tax rate of approximately 14%; these
rate differences are due to the income
tax effects of items that are excluded
for the purpose of calculating Non-
GAAP-based adjusted net income. Such
excluded items include amortization,
share-based compensation, Special
charges (recoveries) and other income
(expense), net. Also excluded are tax
benefits/expense items unrelated to
current period income such as changes in
reserves for tax uncertainties and
valuation allowance reserves, and "book
to return" adjustments for tax return
filings and tax assessments. Included is
the amount of net tax benefits arising
from the internal reorganization 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:
Year Ended June 30, 2018
Per share diluted
-----------------
GAAP-based net income,
attributable to OpenText $242,224 $0.91
Add:
Amortization 369,986 1.38
Share-based compensation 27,594 0.10
Special charges
(recoveries) 29,211 0.11
Other (income) expense,
net (17,973) (0.07)
GAAP-based provision for
(recovery of) income
taxes 143,826 0.54
Non-GAAP based provision
for income taxes (111,292) (0.41)
-------- -----
Non-GAAP-based net
income, attributable to
OpenText $683,576 $2.56
======== =====
Reconciliation of Adjusted EBITDA
Year Ended June 30,
2018
-------------------
GAAP-based net income,
attributable to OpenText $242,224
Add:
Provision for (recovery of) income
taxes 143,826
Interest and other related expense,
net 137,250
Amortization of acquired
technology-based intangible
assets 185,868
Amortization of acquired customer-
based intangible assets 184,118
Depreciation 86,943
Share-based compensation 27,594
Special charges (recoveries) 29,211
Other (income) expense, net (17,973)
-------
Adjusted EBITDA $1,019,061
==========
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
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, 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) 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 26% 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 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 three months ended June 30, 2017.
(In thousands except for per share amounts)
------------------------------------------
Three Months Ended June 30, 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 $79,588 $(390) (1) $79,198
Customer support 35,224 (313) (1) 34,911
Professional
service and other 58,028 (449) (1) 57,579
Amortization of
acquired
technology-based
intangible assets 43,288 (43,288) (2) -
GAAP-based gross
profit and gross
margin (%) / 444,038 66.9% 44,440 (3) 488,478 73.6%
Non-GAAP-based gross profit
and gross margin (%)
Operating expenses
Research and
development 81,301 (1,777) (1) 79,524
Sales and marketing 129,541 (2,450) (1) 127,091
General and
administrative 47,499 (2,755) (1) 44,744
Amortization of
acquired customer-
based intangible
assets 42,594 (42,594) (2) -
Special charges
(recoveries) 19,461 (19,461) (4) -
GAAP-based income
from operations
and operating
margin (%) /Non-
GAAP-based income
from operations
and operating
margin (%) 106,452 16.0% 113,477 (5) 219,929 33.1%
Other income
(expense), net 11,178 (11,178) (6) -
Provision for
(recovery of)
income taxes 39,000 (10,731) (7) 28,269
GAAP-based net
income /Non-
GAAP-based net
income,
attributable to
OpenText 46,137 113,030 (8) 159,167
GAAP-based
earnings per share
/Non-GAAP-based
earnings per
share-diluted,
attributable to
OpenText $0.17 $0.43 (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, 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) 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 46% and a Non-GAAP-based
tax rate of approximately 15%; 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 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 June 30, 2017
Per share diluted
-----------------
GAAP-based net
income, attributable
to OpenText $46,137 $0.17
Add:
Amortization 85,882 0.32
Share-based
compensation 8,134 0.03
Special charges
(recoveries) 19,461 0.07
Other (income)
expense, net (11,178) (0.04)
GAAP-based provision
for (recovery of)
income taxes 39,000 0.15
Non-GAAP-based
provision for income
taxes (28,269) (0.10)
------- -----
Non-GAAP-based net
income, attributable
to OpenText $159,167 $0.60
======== =====
Reconciliation of Adjusted EBITDA
Three months
ended June 30,
2017
---------------
GAAP-based net income,
attributable to OpenText $46,137
Add:
Provision for (recovery of) income
taxes 39,000
Interest and other related expense,
net 32,372
Amortization of acquired
technology-based intangible
assets 43,288
Amortization of acquired customer-
based intangible assets 42,594
Depreciation 17,190
Share-based compensation 8,134
Special charges (recoveries) 19,461
Other (income) expense, net (11,178)
-------
Adjusted EBITDA $236,998
========
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the year ended June 30, 2017.
(In thousands except for per share amounts)
------------------------------------------
Year Ended June 30, 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 $300,255 $(1,229) (1) $299,026
Customer support 122,753 (1,079) (1) 121,674
Professional
service and other 195,195 (1,451) (1) 193,744
Amortization of
acquired
technology-based
intangible assets 130,556 (130,556) (2) -
GAAP-based gross
profit and gross
margin (%) / 1,528,666 66.7% 134,315 (3) 1,662,981 72.6%
Non-GAAP-based gross profit and
gross margin (%)
Operating expenses
Research and
development 281,680 (7,149) (1) 274,531
Sales and marketing 444,838 (9,680) (1) 435,158
General and
administrative 170,438 (9,919) (1) 160,519
Amortization of
acquired customer-
based intangible
assets 150,842 (150,842) (2) -
Special charges
(recoveries) 63,618 (63,618) (4) -
GAAP-based income
from operations
and operating
margin (%) /Non-
GAAP-based income
from operations
and operating
margin (%) 352,932 15.4% 375,523 (5) 728,455 31.8%
Other income
(expense), net 15,743 (15,743) (6) -
Provision for
(recovery of)
income taxes (776,364) 867,764 (7) 91,400
GAAP-based net
income /Non-
GAAP-based net
income,
attributable to
OpenText 1,025,659 (507,984) (8) 517,675
GAAP-based
earnings per share
/Non GAAP-based
earnings per
share-diluted,
attributable to
OpenText $4.01 $(1.99) (8) $2.02
(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, 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) 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 recovery rate of approximately 311% and a
Non-GAAP-based tax rate of approximately 15%;
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 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:
Year Ended June 30, 2017
Per share diluted
-----------------
GAAP-based net income,
attributable to OpenText $1,025,659 $4.01
Add:
Amortization 281,398 1.10
Share-based compensation 30,507 0.12
Special charges
(recoveries) 63,618 0.25
Other (income) expense,
net (15,743) (0.06)
GAAP-based provision for
(recovery of) income
taxes (776,364) (3.03)
Non-GAAP based provision
for income taxes (91,400) (0.37)
------- -----
Non-GAAP-based net
income, attributable to
OpenText $517,675 $2.02
======== =====
Reconciliation of Adjusted EBITDA
Year Ended June 30,
2017
-------------------
GAAP-based net income,
attributable to OpenText $1,025,659
Add:
Provision for (recovery of) income
taxes (776,364)
Interest and other related expense,
net 119,124
Amortization of acquired
technology-based intangible
assets 130,556
Amortization of acquired customer-
based intangible assets 150,842
Depreciation 64,318
Share-based compensation 30,507
Special charges (recoveries) 63,618
Other (income) expense, net (15,743)
-------
Adjusted EBITDA $792,517
========
(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 June 30,
2018 and 2017:
Three Months Ended June 30, 2018 Three Months Ended June 30, 2017
Currencies % of Revenue % of Expenses* % of Revenue % of Expenses*
------------ ------------- ------------ -------------
EURO 23% 15% 22% 16%
GBP 6% 6% 6% 6%
CAD 4% 10% 4% 10%
USD 58% 52% 58% 52%
Other 9% 17% 10% 16%
--- --- --- ---
Total 100% 100% 100% 100%
=== === === ===
Year Ended June 30, 2018 Year Ended June 30, 2017
Currencies % of Revenue % of Expenses* % of Revenue % of Expenses*
------------ ------------- ------------ -------------
EURO 22% 15% 22% 15%
GBP 6% 6% 6% 7%
CAD 4% 11% 4% 11%
USD 58% 51% 58% 52%
Other 10% 17% 10% 15%
--- --- --- ---
Total 100% 100% 100% 100%
=== === === ===
* Expenses include all cost of
revenues and operating expenses
included within the Consolidated
Statements of Income, except for
amortization of intangible assets,
share-based compensation and
Special charges (recoveries).
View original content:http://www.prnewswire.com/news-releases/opentext-reports-fourth-quarter-and-fiscal-year-2018-financial-results-300691373.html
SOURCE Open Text Corporation
