OpenText Reports First Quarter Fiscal Year 2021 Financial Results
Record Annual Recurring Revenues (ARR) and Cloud Revenue, Announces 15% Dividend Increase
WATERLOO, ON, Nov. 5, 2020 /PRNewswire/ --
First Quarter Highlights
Total Revenues Annual Recurring
Revenues Cloud Revenues
(in millions) (in millions) (in millions)
Reported Constant Currency Reported Constant Currency Reported Constant Currency
$804.0 $798.0 $670.4 $667.3 $341.0 $340.2
+15.4% +14.5% +22.0% +21.4% +43.7% +43.4%
Annual Recurring Revenues represents 83% of Total Revenues
---
-- Operating Cash Flows of $233.9 million in the quarter, up 70.2% Y/Y
-- Free Cash Flows of $218.6 million, up 84.0% Y/Y
-- GAAP net income of $103.4 million, up 38.9% Y/Y
-- Adjusted EBITDA of $342.3 million, up 34.7%, margin of 42.6%, up 610
basis points Y/Y
-- GAAP diluted EPS of $0.38, up 40.7% Y/Y
-- Non-GAAP diluted EPS of $0.89, up 39.1%, and $0.87 in constant currency,
up 35.9% Y/Y
-- Quarterly cash dividend increased by 15%
-- Repayment of $600 million Revolver, no outstanding balances
-- Announces Share Repurchase Plan of up to $350 million
Open Text Corporation (NASDAQ: OTEX), (TSX: OTEX), "The Information Company," today announced its financial results for the first quarter ended September 30, 2020.
"OpenText delivered a great start to Fiscal 2021 with record performance across all of our key metrics," said Mark J. Barrenechea, OpenText CEO & CTO. "We demonstrated outstanding execution in a challenged environment with total revenues of $804.0 million, an increase of 15.4% year-over-year and Cloud Services and Subscription revenues of $341.0 million, an increase of 43.7% year-over-year, being our largest revenue contributor. Our Annual Recurring Revenues grew 22.0% year-over-year to $670.4 million and now represents 83% of total revenues. These record results demonstrate the strength and resiliency of our business, supported by a predictable Annual Recurring Revenue framework, that we believe positions OpenText very well for future cloud growth and market share gains."
"I would like to thank our talented employees for their focus and commitment to our customers during the global pandemic," said Barrenechea. "OpenText is making the largest investments in products and sales in our history. We have the products and partner relationships that matter, in order to help customers accelerate their digital transformation. We continue to grow, generate cash, and remain committed to our proven Total Growth strategy."
"I am proud of the company's performance in the first quarter of Fiscal 2021. OpenText's strong execution amid the global pandemic reflects the underlying discipline and agility of our operating framework," said OpenText EVP and CFO, Madhu Ranganathan. "In Q1 we generated $342.3 million of adjusted EBITDA, up 34.7% year-over-year and $218.6 million of free cash flow, up 84.0% year-over-year. We expanded our margins delivering a record adjusted EBITDA margin of 42.6%. The Carbonite integration remains on track, with their operations already within the OpenText Adjusted EBITDA target model range. Our strong balance sheet also provides ample opportunity to generate substantial long-term value for our shareholders."
Financial Highlights for Q1 Fiscal 2021 with Year Over Year Comparisons
Summary of Quarterly Results
---
(in millions except per
share data) Q1 FY21 Q1 FY20
$ Change % Change Q1 FY21 % Change
(Y/Y) in CC* in CC*
Revenues:
Cloud services and $341.0 $237.3 $103.7 43.7 $340.2 43.4
subscriptions % %
Customer support 329.4 312.3 17.1 5.5 327.1 4.8
% %
Total annual recurring $670.4 $549.6 $120.8 22.0 $667.3 21.4
revenues**
% %
License 68.5 77.9 (9.4) (12.0) 67.1 (13.8)
% %
Professional service and 65.1 69.4 (4.3) (6.2) 63.6 (8.5)
other
% %
Total revenues $804.0 $696.9 $107.1 15.4 $798.0 14.5
% %
GAAP-based operating income $182.4 $132.5 $49.8 37.6
% N/A N/A
Non-GAAP-based operating $320.4 $234.0 $86.4 36.9 $313.9 34.2
income (1) % %
GAAP-based EPS, diluted $0.38 $0.27 $0.11 40.7
% N/A N/A
Non-GAAP-based EPS, $0.89 $0.64 $0.25 39.1 $0.87 35.9
diluted (1)(2) % %
GAAP-based net income $103.4 $74.4 $29.0 38.9
attributable to OpenText % N/A N/A
Adjusted EBITDA (1) $342.3 $254.2 $88.1 34.7 $335.7 32.1
% %
Operating cash flows $233.9 $137.4 $96.5 70.2
% N/A N/A
Free cash flows(1) $218.6 $118.8 $99.8 84.0
% N/A N/A
---
(1) Please see note 2 "Use of Non-GAAP Financial Measures" below
(2) Please also see note 14 to the Company's Fiscal 2018 Consolidated
Financial Statements on Form 10-K. Reflective of the amount of
net tax benefit arising from the internal reorganization assumed
to be allocable to the current period based on the forecasted
utilization period.
Note: Individual line items in tables may be adjusted by non-material
amounts to enable totals to align to published financial
statements.
*CC: Constant currency for this purpose is defined as the current
period reported revenues/expenses/earnings represented at the
prior comparative period's foreign exchange rate.
** Annual recurring revenue is defined as the sum of Cloud services
and subscriptions revenue and Customer support revenue.
Dividend Program
As part of our quarterly, non-cumulative cash dividend program, the Board declared on November 4, 2020 a cash dividend of $0.2008 per common share. The record date for this dividend is December 4, 2020 and the payment date is December 22, 2020. OpenText believes strongly in returning value to its shareholders and intends to maintain its dividend program. Any future declarations of dividends and the establishment of future record and payment dates are all subject to the final determination and discretion of the Board of Directors.
Revolver Repayment
In October 2020, following the end of the quarter, OpenText repaid $600 million drawn under its Revolving Credit Facility (Revolver) using cash on hand. There are currently no amounts outstanding under the Revolver.
Share Repurchase Plan/Normal Course Issuer Bid
The Company also announced today the authorization of a share repurchase plan and that it intends to purchase in open market transactions, from time to time over the next 12 months, if considered advisable, up to an aggregate of US$350,000,000 of its common shares on the NASDAQ Global Select Market, the Toronto Stock Exchange (the "TSX") and/or other exchanges and alternative trading systems in Canada and/or the United States, if eligible, subject to applicable law and stock exchange rules (the "Repurchase Plan"). The price that OpenText will pay for common shares in open market transactions will be the market price at the time of purchase or such other price as may be permitted by applicable law or stock exchange rules.
The Company's determination to adopt the Repurchase Plan reflects its confidence in its operational execution and expanding cash flows, with the Repurchase Plan being additive to the Company's overall strategic capital allocation, complementing its ongoing M&A activity and dividend program. The Repurchase Plan will be effected in accordance with Rule 10b-18 under the U.S. Securities Exchange Act of 1934. Purchases made under the Repurchase Plan may commence on November 12, 2020 and will expire on November 11, 2021, and will be subject to a limit of 13,618,774 shares (representing 5% of the Company's issued and outstanding common shares as of November 4, 2020). All common shares purchased by OpenText pursuant to the Repurchase Plan will be cancelled.
Normal Course Issuer Bid
The Company has established a Normal Course Issuer Bid (the "NCIB") in order to provide it with a means to execute purchases over the TSX as part of the overall Repurchase Plan.
The TSX has approved the Company's notice of intention to commence the NCIB pursuant to which the Company may purchase common shares over the TSX for the period commencing November 12, 2020 until November 11, 2021 in accordance with the TSX's normal course issuer bid rules, including that such purchases are to be made at prevailing market prices or as otherwise permitted. Under the rules of the TSX, the maximum number of shares that may be purchased in this period is 13,618,774 (representing 5% of the Company's issued and outstanding common shares as of November 4, 2020), and the maximum number of shares that may be purchased on a single day is 143,424 common shares, which is 25% of 573,699 (the average daily trading volume for the common shares on the TSX for the six months ended October 31, 2020), subject to certain exceptions for block purchases, subject in any case to the volume and other limitations under Rule 10b-18.
Quarterly Business Highlights
-- Key customer wins in the quarter included: California Department of
Managed Health Care, European Centre for Medium-Range Weather Forecasts,
Fresh Direct, Heritage Lab Express, Hydro Quebec, ON Semiconductor,
Pacific Gas and Electric Company, Plex Systems, Inc., Securex, Sephora,
South Carolina Educational Television, Southern California Edison, Texas
A&M University, UK Department of Work & Pensions, University of Central
Lancashire, Wm Morrison
-- OpenText launches new SaaS applications, new cloud resources for
developers, and major enhancements across the OpenText portfolio
-- OpenText Announces flexible cloud platform for developers
-- OpenText makes electronic signature accessible to organizations of every
size
-- OpenText announces support for Alfresco
-- OpenText World 2020 opens with record registrations of 7,000, and a
focus on the future of work
Summary of
Quarterly
Results
---
Q1 FY21 Q4 FY20 Q1 FY20 % Change % Change
(Q1 FY21 vs (Q1 FY21 vs
Q4 FY20) Q1 FY20)
Revenue $804.0 $826.6 $696.9 (2.7) 15.4
(millions)
% %
GAAP-based
gross % % %
margin 69.0 68.5 67.2 50
bps 180
bps
GAAP-based $0.38 $0.10 $0.27 280.0 40.7
EPS,
diluted % %
Non-GAAP-
based gross % % %
margin (1) 76.5 75.8 73.1 70
bps 340
bps
Non-GAAP-
based EPS, %
diluted %
(1)(2) $0.89 $0.80 $0.64 11.3 39.1
---
(1) Please see note 2 "Use of Non-GAAP
Financial Measures" below
(2) Please also see note 14 to the
Company's Fiscal 2018 Consolidated
Financial Statements on Form 10-K.
Reflective of the amount of net
tax benefit arising from the
internal reorganization assumed to
be allocable to the current period
based on the forecasted
utilization period.
Conference Call Information
The public is invited to listen to the earnings conference call today at 5:00 p.m. ET (2:00 p.m. PT) by dialing 1-800-319-4610 (toll-free) or +1-604-638-5340 (international). Please dial-in 10 minutes ahead of time to ensure proper connection. Alternatively, a live webcast of the earnings conference call will be available on the Investor Relations section of the Company's website at http://investors.opentext.com/investor-events-and-presentations.
A replay of the call will be available beginning November 5, 2020 at 7:00 p.m. ET through 11:59 p.m. on November 19, 2020 and can be accessed by dialing 1-855-669-9658 (toll-free) or +1-604-674-8052 (international) and using passcode 5342 followed by the number sign.
Please see below note (2) for a reconciliation of U.S. GAAP-based financial measures used in this press release, to non-U.S. GAAP-based financial measures. Additionally, "off-cloud" is a term we use to describe license transactions.
About OpenText
OpenText, The Information Company(TM), enables organizations to gain insight through market leading information management solutions, on-premises or in the cloud. For more information about OpenText (NASDAQ: OTEX, TSX: OTEX) visit opentext.com.
Cautionary Statement Regarding Forward-Looking Statements
Certain statements in this press release, including statements about the focus of Open Text Corporation ("OpenText" or "the Company") in our fiscal year ending June 30, 2021 (Fiscal 2021) on growth, future cloud growth and market share gains, generating substantial long-term value for shareholders, the financial and operational impact of the COVID-19 pandemic, anticipated benefits of our partnerships and next generation product lines, the strength of our operating framework and balance sheet flexibility, continued investments in product innovation, go-to-market and strategic acquisitions, M&A continuing to be our leading growth contributor, our capital allocation strategy, creating value through investments in broader Information Management capabilities, the Company's presence in the cloud and in growth markets, expected growth in our revenue lines, total growth from acquisitions, innovation and organic initiatives, the focus on recurring revenues, improving operational efficiency, expanding cash flow and strengthening the business, adjusted operating income and cash flow, its financial condition, the adjusted operating margin target range, results of operations and earnings, announced acquisitions, ongoing tax matters, the integration of the acquired businesses, declaration of quarterly dividends, potential share repurchases pursuant to its Repurchase Plan, future tax rates, new platform and product offerings, scaling OpenText to new levels in Fiscal 2021 and beyond, and other matters, may contain words such as "anticipates", "expects", "intends", "plans", "believes", "seeks", "estimates", "may", "could", "would", "might", "will" and variations of these words or similar expressions are considered forward-looking statements or information under applicable securities laws. In addition, any information or statements that refer to expectations, beliefs, plans, projections, objectives, performance or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking, and based on our current expectations, forecasts and projections about the operating environment, economies and markets in which we operate. Forward-looking statements reflect our current estimates, beliefs and assumptions, which are based on management's perception of historic trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances, such as certain assumptions about the economy, as well as market, financial and operational assumptions. Management's estimates, beliefs and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events and, as such, are subject to change. We can give no assurance that such estimates, beliefs and assumptions will prove to be correct. Such forward-looking statements involve known and unknown risks, uncertainties and other factors and assumptions that may cause the actual results, performance or achievements to differ materially which include, but are not limited to, actual and potential risks and uncertainties relating to the ultimate spread of COVID-19, the severity of the disease and the duration of the COVID-19 pandemic. For additional information with respect to risks and other factors which could occur, see the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other securities filings with the Securities and Exchange Commission (SEC) and other securities regulators. Readers are cautioned not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. Unless otherwise required by applicable securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
OTEX-F
For more information, please contact:
Harry E. Blount
Senior Vice President, Global Head of Investor Relations
Open Text Corporation
415-963-0825
investors@opentext.com
Copyright ©2020 Open Text. OpenText is a trademark or registered trademark of Open Text. The list of trademarks is not exhaustive of other trademarks. Registered trademarks, product names, company names, brands and service names mentioned herein are property of Open Text. All rights reserved. For more information, visit: http://www.opentext.com/who-we-are/copyright-information.
OPEN TEXT CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(
In thousands of U.S. dollars, except share data)
September 30, 2020 June 30, 2020
---
ASSETS (unaudited)
Cash and cash equivalents $
1,845,582 $
1,692,850
Accounts receivable trade, net of
allowance for credit losses of
$22,366 as of September 30, 2020
and $20,906 as of June 30, 2020 396,897 466,357
Contract assets 26,236 29,570
Income taxes recoverable 26,869 61,186
Prepaid expenses and other current
assets 140,474 136,436
Total current assets 2,436,058 2,386,399
Property and equipment 235,498 244,555
Operating lease right of use assets 196,884 207,869
Long-term contract assets 19,066 15,427
Goodwill 4,682,784 4,672,356
Acquired intangible assets 1,506,407 1,612,564
Deferred tax assets 893,256 911,565
Other assets 161,142 154,467
Long-term income taxes recoverable 30,719 29,620
Total assets $
10,161,814 $
10,234,822
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities $
313,468 $
373,314
Current portion of long-term debt 610,000 610,000
Operating lease liabilities 60,447 64,071
Deferred revenues 770,919 812,218
Income taxes payable 29,666 44,630
Total current liabilities 1,784,500 1,904,233
Long-term liabilities:
Accrued liabilities 42,081 34,955
Pension liability 78,536 73,129
Long-term debt 3,582,923 3,584,311
Long-term operating lease
liabilities 207,723 217,165
Long-term deferred revenues 96,180 94,382
Long-term income taxes payable 176,396 171,200
Deferred tax liabilities 125,755 148,738
Total long-term liabilities 4,309,594 4,323,880
Shareholders' equity:
Share capital and additional paid-in capital
272,173,923 and 271,863,354 Common
Shares issued and outstanding at
September 30, 2020 and June 30,
2020, respectively; authorized
Common Shares: unlimited 1,872,411 1,851,777
Accumulated other comprehensive
income 39,695 17,825
Retained earnings 2,213,053 2,159,396
Treasury stock, at cost (1,393,771
and 622,297 shares at September
30, 2020 and June 30, 2020,
respectively) (58,788) (23,608)
Total OpenText shareholders' equity 4,066,371 4,005,390
Non-controlling interests 1,349 1,319
Total shareholders' equity 4,067,720 4,006,709
Total liabilities and shareholders'
equity $
10,161,814 $
10,234,822
OPEN TEXT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands of U.S. dollars, except share and per share data)
(unaudited)
Three Months Ended September 30,
2020 2019
---
Revenues:
Cloud services and
subscriptions $
340,986 $
237,265
Customer support 329,399 312,298
License 68,523 77,898
Professional service and other 65,105 69,427
Total revenues 804,013 696,888
Cost of revenues:
Cloud services and
subscriptions 112,624 102,162
Customer support 29,194 29,387
License 2,489 2,323
Professional service and other 46,581 54,338
Amortization of acquired
technology-based intangible
assets 58,037 40,298
Total cost of revenues 248,925 228,508
Gross profit 555,088 468,380
Operating expenses:
Research and development 93,903 81,178
Sales and marketing 132,400 128,618
General and administrative 56,189 51,535
Depreciation 22,003 20,277
Amortization of acquired
customer-based intangible
assets 54,993 49,158
Special charges (recoveries) 13,244 5,101
Total operating expenses 372,732 335,867
Income from operations 182,356 132,513
Other income (expense), net 2,883 (2,785)
Interest and other related
expense, net (39,089) (32,210)
Income before income taxes 146,150 97,518
Provision for (recovery of)
income taxes 42,744 23,091
Net income for the period $
103,406 $
74,427
Net (income) loss attributable
to non-controlling interests (30) (26)
Net income attributable to
OpenText $
103,376 $
74,401
Earnings per share-basic
attributable to OpenText $
0.38 $
0.28
Earnings per share-diluted
attributable to OpenText $
0.38 $
0.27
Weighted average number of
Common Shares outstanding-
basic 271,986 270,013
(in '000's)
Weighted average number of
Common Shares outstanding-
diluted 272,847 271,251
(in '000's)
OPEN TEXT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands of U.S. dollars)
(unaudited)
Three Months Ended September 30,
2020 2019
---
Net income for the period $
103,406 $
74,427
Other comprehensive income (loss)-net of tax:
Net foreign currency translation
adjustments 22,645 (5,611)
Unrealized gain (loss) on cash flow hedges:
Unrealized gain (loss) -net of
tax expense (recovery) effect of
$305 and $(206) for the three
months ended September 30, 2020
and 2019, respectively 845 (572)
(Gain) loss reclassified into net
income -net of tax (expense)
recovery effect of $(56) and $3
for the three months ended
September 30, 2020 and 2019,
respectively (156) 8
Actuarial gain (loss) relating to defined benefit
pension plans:
Actuarial gain (loss) -net of tax
expense (recovery) effect of
$(916) and $(1,249) for the three
months ended September 30, 2020
and 2019, respectively (1,705) (3,084)
Amortization of actuarial (gain)
loss into net income -net of tax
(expense) recovery effect of $87
and $146 for the three months
ended September 30, 2020 and
2019, respectively 241 231
Total other comprehensive income
(loss) net, for the period 21,870 (9,028)
Total comprehensive income 125,276 65,399
Comprehensive (income) loss
attributable to non-controlling
interests (30) (26)
Total comprehensive income
attributable to OpenText $
125,246 $
65,373
OPEN TEXT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands of U.S. dollars and shares)
(unaudited)
Three Months Ended September 30, 2020
Common Shares and Treasury Stock Retained Accumulated Non-
Other Controlling
Interests Total
Additional Paid in Capital Earnings Comprehensive
Income
---
Shares Amount Shares Amount
Balance as of June 30,
2020 271,863 $
1,851,777 (622) $
(23,608) $
2,159,396 $
17,825 $
1,319 $
4,006,709
Adoption of ASU
2016-13 -cumulative
effect, net - (2,450) (2,450)
Issuance of Common Shares
Under employee stock
option plans 311 8,605 8,605
Under employee stock
purchase plans - 293 193 6,690 6,983
Share-based
compensation - 11,736 11,736
Purchase of treasury
stock - (965) (41,870) (41,870)
Dividends declared - (47,269) (47,269)
($0.1746 per Common Share)
Other comprehensive
income -net - 21,870 21,870
Net income for the
quarter - 103,376 30 103,406
Balance as of
September 30, 2020 272,174 $
1,872,411 (1,394) $
(58,788) $
2,213,053 $
39,695 $
1,349 $
4,067,720
Three Months Ended September 30, 2019
Common Shares and Treasury Stock Retained Accumulated Non-
Other Controlling
Interests Total
Additional Paid in Capital Earnings Comprehensive
Income
---
Shares Amount Shares Amount
Balance as of June 30,
2019 269,834 $
1,774,214 (803) $
(28,766) $
2,113,883 $
24,124 $
1,215 $
3,884,670
Issuance of Common Shares
Under employee stock
option plans 184 4,576 4,576
Under employee stock
purchase plans 172 6,008 6,008
Share-based
compensation - 6,891 6,891
Purchase of treasury
stock - (300) (12,424) (12,424)
Dividends declared - (47,006) (47,006)
($0.1746 per Common Share)
Other comprehensive
income -net - (9,028) (9,028)
Net income for the
quarter - 74,401 26 74,427
Balance as of
September 30, 2019 270,190 $
1,791,689 (1,103) $
(41,190) $
2,141,278 $
15,096 $
1,241 $
3,908,114
OPEN TEXT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
(u
naudited)
Three Months Ended September 30,
2020 2019
---
Cash flows from operating activities:
Net income for the period $
103,406 $
74,427
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and
amortization of
intangible assets 135,033 109,733
Share-based compensation
expense 11,736 6,891
Pension expense 1,505 1,436
Amortization of debt
issuance costs 1,112 1,127
Loss on sale and write
down of property and
equipment 573
Deferred taxes (1,180) 6,244
Share in net (income)
loss of equity investees (6,221) (682)
Changes in operating assets and liabilities:
Accounts receivable 74,842 58,431
Contract assets (9,838) (7,201)
Prepaid expenses and
other current assets (3,491) (1,612)
Income taxes 21,032 7,053
Accounts payable and
accrued liabilities (51,429) (62,979)
Deferred revenue (41,268) (61,169)
Other assets 549 5,684
Operating lease assets
and liabilities, net (2,457) 64
Net cash provided by
operating activities 233,904 137,447
Cash flows from investing activities:
Additions of property and
equipment (15,305) (18,614)
Other investing
activities (2,237) (2,036)
Net cash used in
investing activities (17,542) (20,650)
Cash flows from financing activities:
Proceeds from issuance of
Common Shares from
exercise of stock
options and ESPP 15,839 11,117
Repayment of long-term
debt and Revolver (2,500) (2,500)
Purchase of treasury
stock (41,870) (12,424)
Payments of dividends to
shareholders (47,269) (47,006)
Net cash provided by
(used in) financing
activities (75,800) (50,813)
Foreign exchange gain
(loss) on cash held in
foreign currencies 10,792 (7,711)
Increase (decrease) in
cash, cash equivalents
and restricted cash
during the period 151,354 58,273
Cash, cash equivalents
and restricted cash at
beginning of the period 1,697,263 943,543
Cash, cash equivalents
and restricted cash at
end of the period $
1,848,617 $
1,001,816
Reconciliation of cash,
cash equivalents and
restricted cash: September 30, 2020 September 30, 2019
---
Cash and cash equivalents $
1,845,582 $
999,298
Restricted cash (1) 3,035 2,518
Total cash, cash
equivalents and
restricted cash $
1,848,617 $
1,001,816
(1) Restricted cash is classified under the Prepaid expenses and other current assets and Other assets line items on the Condensed
Consolidated Balance Sheets
Notes
---
(1) All dollar amounts in this press release
are in U.S. Dollars unless otherwise
indicated.
(2) Use of Non-GAAP Financial Measures: In
addition to reporting financial results
in accordance with U.S. GAAP, the
Company provides certain financial
measures that are not in accordance with
U.S. GAAP (Non-GAAP). These Non-GAAP
financial measures have certain
limitations in that they do not have a
standardized meaning and thus the
Company's definition may be different
from similar Non-GAAP financial
measures used by other companies and/or
analysts and may differ from period to
period. Thus it may be more difficult to
compare the Company's financial
performance to that of other companies.
However, the Company's management
compensates for these limitations by
providing the relevant disclosure of the
items excluded in the calculation of
these Non-GAAP financial measures both
in its reconciliation to the U.S. GAAP
financial measures and its consolidated
financial statements, all of which
should be considered when evaluating the
Company's results.
The Company uses these Non-GAAP
financial measures to supplement the
information provided in its consolidated
financial statements, which are
presented in accordance with U.S. GAAP.
The presentation of Non-GAAP financial
measures are not meant to be a
substitute for financial measures
presented in accordance with U.S. GAAP,
but rather should be evaluated in
conjunction with and as a supplement to
such U.S. GAAP measures. OpenText
strongly encourages investors to review
its financial information in its
entirety and not to rely on a single
financial measure. The Company therefore
believes that despite these limitations,
it is appropriate to supplement the
disclosure of the U.S. GAAP measures
with certain Non-GAAP measures defined
below.
Non-GAAP-based net income and Non-
GAAP-based EPS, attributable to
OpenText, are consistently calculated as
GAAP-based net income or earnings per
share, attributable to OpenText, on a
diluted basis, excluding the effects of
the amortization of acquired intangible
assets, other income (expense), share-
based compensation, and special charges
(recoveries), all net of tax and any tax
benefits/expense items unrelated to
current period income, as further
described in the tables below. Non-
GAAP-based gross profit is the
arithmetical sum of GAAP-based gross
profit and the amortization of acquired
technology-based intangible assets and
share-based compensation within cost of
sales. Non-GAAP-based gross margin is
calculated as Non-GAAP-based gross
profit expressed as a percentage of
total revenue. Non-GAAP-based income
from operations is calculated as income
from operations, excluding the
amortization of acquired intangible
assets, Special charges (recoveries),
and share-based compensation expense.
Adjusted earnings (loss) before interest,
taxes, depreciation and amortization
(Adjusted EBITDA) is consistently
calculated as GAAP-based net income,
attributable to OpenText, excluding
interest income (expense), provision for
income taxes, depreciation and
amortization of acquired intangible
assets, other income (expense), share-
based compensation and special charges
(recoveries). Adjusted EBITDA margin is
calculated as adjusted EBITDA expressed
as a percentage of total revenue.
The Company's management believes that
the presentation of the above defined
Non-GAAP financial measures provides
useful information to investors because
they portray the financial results of
the Company before the impact of certain
non-operational charges. The use of the
term "non-operational charge" is
defined for this purpose as an expense
that does not impact the ongoing
operating decisions taken by the
Company's management. These items are
excluded based upon the way the
Company's management evaluates the
performance of the Company's business
for use in the Company's internal
reports and are not excluded in the
sense that they may be used under U.S.
GAAP.
The Company does not acquire businesses
on a predictable cycle, and therefore
believes that the presentation of Non-
GAAP measures, which in certain cases
adjust for the impact of amortization of
intangible assets and the related tax
effects that are primarily related to
acquisitions, will provide readers of
financial statements with a more
consistent basis for comparison across
accounting periods and be more useful in
helping readers understand the Company's
operating results and underlying
operational trends. Additionally, the
Company has engaged in various
restructuring activities over the past
several years, primarily due to
acquisitions, that have resulted in
costs associated with reductions in
headcount, consolidation of leased
facilities and related costs, all which
are recorded under the Company's
"Special charges (recoveries)" caption
on the Consolidated Statements of
Income. Each restructuring activity is a
discrete event based on a unique set of
business objectives or circumstances,
and each differs in terms of its
operational implementation, business
impact and scope, and the size of each
restructuring plan can vary
significantly from period to period.
Therefore, the Company believes that the
exclusion of these special charges
(recoveries) will also better aid
readers of financial statements in the
understanding and comparability of the
Company's operating results and
underlying operational trends.
In summary the Company believes the
provision of supplemental Non-GAAP
measures allow investors to evaluate the
operational and financial performance of
the Company's core business using the
same evaluation measures that management
uses, and is therefore a useful
indication of OpenText's performance or
expected performance of future
operations and facilitates period-to-
period comparison of operating
performance (although prior performance
is not necessarily indicative of future
performance). As a result, the Company
considers it appropriate and reasonable
to provide, in addition to U.S. GAAP
measures, supplementary Non-GAAP
financial measures that exclude certain
items from the presentation of its
financial results.
The following charts provide (unaudited)
reconciliations of U.S. GAAP-based
financial measures to Non-U.S. GAAP-
based financial measures for the
following periods presented.
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures
for the three months ended September 30, 2020.
(In thousands except for per share amounts)
---
Three Months Ended September 30, 2020
GAAP-based GAAP-based Measures Adjustments Note Non-GAAP- Non-GAAP-
% of Total Revenue based based Measures
Measures % of Total Revenue
Measures
---
Cost of revenues
Cloud services and
subscriptions $
112,624 $
(836) (1) $
111,788
Customer support 29,194 (442) (1) 28,752
Professional service
and other 46,581 (517) (1) 46,064
Amortization of
acquired
technology-based
intangible assets 58,037 (58,037) (2)
GAAP-based gross
profit and gross
margin (%) / 555,088 69.0% 59,832 (3) 614,920 76.5%
Non-GAAP-based gross profit and
gross margin (%)
Operating expenses
Research and
development 93,903 (2,342) (1) 91,561
Sales and marketing 132,400 (4,057) (1) 128,343
General and
administrative 56,189 (3,542) (1) 52,647
Amortization of
acquired customer-
based intangible
assets 54,993 (54,993) (2)
Special charges
(recoveries) 13,244 (13,244) (4)
GAAP-based income
from operations /
Non-GAAP-based
income from
operations 182,356 138,010 (5) 320,366
Other income
(expense), net 2,883 (2,883) (6)
Provision for
(recovery of)
income taxes 42,744 (3,365) (7) 39,379
GAAP-based net
income /Non-GAAP-
based net income,
attributable to
OpenText 103,376 138,492 (8) 241,868
GAAP-based earnings
per share /Non-
GAAP-based
earnings per share-
diluted,
attributable to
OpenText $0.38 $0.51 (8) $0.89
(1) Adjustment relates to the exclusion of
share-based compensation expense from
our Non-GAAP-based operating expenses
as this expense is excluded from our
internal analysis of operating results.
(2) Adjustment relates to the exclusion of
amortization expense from our Non-GAAP-
based operating expenses as the timing
and frequency of amortization expense is
dependent on our acquisitions and is
hence excluded from our internal
analysis of operating results.
(3) GAAP-based and Non-GAAP-based gross
profit stated in dollars, and gross
margin stated as a percentage of total
revenue.
(4) Adjustment relates to the exclusion of
special charges (recoveries) from our
Non-GAAP-based operating expenses as
special charges (recoveries) are
generally incurred in the periods
relevant to an acquisition and include
certain charges or recoveries that are
not indicative or related to continuing
operations, and are therefore excluded
from our internal analysis of operating
results.
(5) GAAP-based and Non-GAAP-based income
from operations stated in dollars.
(6) Adjustment relates to the exclusion of
Other income (expense) from our Non-
GAAP-based operating expenses as Other
income (expense) generally relates to
the transactional impact of foreign
exchange and is generally not indicative
or related to continuing operations and
is therefore excluded from our internal
analysis of operating results. Other
income (expense) also includes our share
of income (losses) from our holdings in
investments as a limited partner. We do
not actively trade equity securities in
these privately held companies nor do we
plan our ongoing operations based around
any anticipated fundings or
distributions from these investments. We
exclude gains and losses on these
investments as we do not believe they
are reflective of our ongoing business
and operating results.
(7) Adjustment relates to differences between
the GAAP-based tax provision rate of
approximately 29% and a Non-GAAP-based
tax rate of approximately 14%; these
rate differences are due to the income
tax effects of items that are excluded
for the purpose of calculating Non-
GAAP-based adjusted net income. Such
excluded items include amortization,
share-based compensation, special
charges (recoveries) and Other income
(expense), net. Also excluded are tax
benefits/expense items unrelated to
current period income such as changes in
reserves for tax uncertainties and
valuation allowance reserves, and "book
to return" adjustments for tax return
filings and tax assessments. Included is
the amount of net tax benefits arising
from the internal reorganization that
occurred in Fiscal 2017 assumed to be
allocable to the current period based on
the forecasted utilization period. In
arriving at our Non-GAAP-based tax
rate of approximately 14%, we analyzed
the individual adjusted expenses and
took into consideration the impact of
statutory tax rates from local
jurisdictions incurring the expense.
(8) Reconciliation of GAAP-based net income
to Non-GAAP-based net income:
Three Months Ended September 30,
2020
Per share
diluted
GAAP-based net
income,
attributable
to OpenText $
103,376 $
0.38
Add:
Amortization 113,030 0.41
Share-based
compensation 11,736 0.04
Special charges
(recoveries) 13,244 0.05
Other (income)
expense, net (2,883) (0.01)
GAAP-based
provision for
(recovery of)
income taxes 42,744 0.16
Non-GAAP-
based
provision for
income taxes (39,379) (0.14)
Non-GAAP-
based net
income,
attributable
to OpenText $
241,868 $
0.89
Reconciliation of Adjusted EBITDA
Three Months
Ended September
30, 2020
GAAP-based net income,
attributable to OpenText $
103,376
Add:
Provision for (recovery of)
income taxes 42,744
Interest and other related
expense, net 39,089
Amortization of acquired
technology-based
intangible assets 58,037
Amortization of acquired
customer-based intangible
assets 54,993
Depreciation 22,003
Share-based compensation 11,736
Special charges (recoveries) 13,244
Other (income) expense, net (2,883)
Adjusted EBITDA $
342,339
Reconciliation of Free cash flows
Three Months
Ended September
30, 2020
GAAP cash
flows
provided
by
operating
activities $
233,904
Add:
Capital
expenditures
(1) (15,305)
Free cash
flows $
218,599
(1) Defined as "Additions of property & equipment" in
the Condensed Consolidated Statements of Cash Flows
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures
for the three months ended June 30, 2020.
(In thousands except for per share amounts)
---
Three Months Ended June 30, 2020
GAAP-based GAAP-based
Measures Adjustments Note Non-GAAP-based Non-GAAP-
% of Total based
Revenue Measures
Measures Measures % of Total
Revenue
Cost of revenues
Cloud services and
subscriptions $
116,569 $
(490) (1) $
116,079
Customer support 32,568 (310) (1) 32,258
Professional service
and other 48,435 (377) (1) 48,058
Amortization of
acquired
technology-based
intangible assets 59,719 (59,719) (2)
GAAP-based gross 565,917 68.5 60,896 (3) 626,813 75.8
profit and gross
margin (%) / % %
Non-GAAP-based gross profit and
gross margin (%)
Operating expenses
Research and
development 100,766 (1,590) (1) 99,176
Sales and marketing 152,882 (2,575) (1) 150,307
General and
administrative 62,574 (2,660) (1) 59,914
Amortization of
acquired customer-
based intangible
assets 58,998 (58,998) (2)
Special charges
(recoveries) 75,849 (75,849) (4)
GAAP-based income
from operations /
Non-GAAP-based
income from
operations 91,199 202,568 (5) 293,767
Other income
(expense), net 7,790 (7,790) (6)
Provision for
(recovery of)
income taxes 32,037 3,416 (7) 35,453
GAAP-based net
income /Non-GAAP-
based net income,
attributable to
OpenText 26,392 191,362 (8) 217,754
GAAP-based earnings
per share /Non-
GAAP-based
earnings per share-
diluted,
attributable to
OpenText $
0.10 $
0.70 (8) $
0.80
(1) Adjustment relates to the exclusion of
share-based compensation expense from
our Non-GAAP-based operating expenses
as this expense is excluded from our
internal analysis of operating results.
(2) Adjustment relates to the exclusion of
amortization expense from our Non-GAAP-
based operating expenses as the timing
and frequency of amortization expense is
dependent on our acquisitions and is
hence excluded from our internal
analysis of operating results.
(3) GAAP-based and Non-GAAP-based gross
profit stated in dollars, and gross
margin stated as a percentage of total
revenue.
(4) Adjustment relates to the exclusion of
special charges (recoveries) from our
Non-GAAP-based operating expenses as
special charges (recoveries) are
generally incurred in the periods
relevant to an acquisition and include
certain charges or recoveries that are
not indicative or related to continuing
operations, and are therefore excluded
from our internal analysis of operating
results.
(5) GAAP-based and Non-GAAP-based income
from operations stated in dollars.
(6) Adjustment relates to the exclusion of
Other income (expense) from our Non-
GAAP-based operating expenses as Other
income (expense) generally relates to
the transactional impact of foreign
exchange and is generally not indicative
or related to continuing operations and
is therefore excluded from our internal
analysis of operating results. Other
income (expense) also includes our share
of income (losses) from our holdings in
investments as a limited partner. We do
not actively trade equity securities in
these privately held companies nor do we
plan our ongoing operations based around
any anticipated fundings or
distributions from these investments. We
exclude gains and losses on these
investments as we do not believe they
are reflective of our ongoing business
and operating results.
(7) Adjustment relates to differences between
the GAAP-based tax provision rate of
approximately 55% and a Non-GAAP-based
tax rate of approximately 14%; these
rate differences are due to the income
tax effects of items that are excluded
for the purpose of calculating Non-
GAAP-based adjusted net income. Such
excluded items include amortization,
share-based compensation, special
charges (recoveries) and other income
(expense), net. Also excluded are tax
benefits/expense items unrelated to
current period income such as changes in
reserves for tax uncertainties and
valuation allowance reserves, and "book
to return" adjustments for tax return
filings and tax assessments. Included is
the amount of net tax benefits arising
from the internal reorganization that
occurred in Fiscal 2017 assumed to be
allocable to the current period based on
the forecasted utilization period. In
arriving at our Non-GAAP-based tax
rate of approximately 14%, we analyzed
the individual adjusted expenses and
took into consideration the impact of
statutory tax rates from local
jurisdictions incurring the expense.
(8) Reconciliation of GAAP-based net income
to Non-GAAP-based net income:
Three Months Ended June 30, 2020
Per share
diluted
GAAP-based net
income,
attributable
to OpenText $
26,392 $
0.10
Add:
Amortization 118,717 0.44
Share-based
compensation 8,002 0.03
Special charges
(recoveries) 75,849 0.28
Other (income)
expense, net (7,790) (0.03)
GAAP-based
provision for
(recovery of)
income taxes 32,037 0.12
Non-GAAP-
based
provision for
income taxes (35,453) (0.14)
Non-GAAP-
based net
income,
attributable
to OpenText $
217,754 $
0.80
Reconciliation of Adjusted EBITDA
Three Months
Ended June 30,
2020
GAAP-based net income,
attributable to OpenText $
26,392
Add:
Provision for (recovery of)
income taxes 32,037
Interest and other related
expense, net 40,529
Amortization of acquired
technology-based
intangible assets 59,719
Amortization of acquired
customer-based intangible
assets 58,998
Depreciation 23,649
Share-based compensation 8,002
Special charges (recoveries) 75,849
Other (income) expense, net (7,790)
Adjusted EBITDA $
317,385
Reconciliation of Free cash flows
Three Months
Ended June 30,
2020
GAAP cash
flows
provided
by
operating
activities $
280,250
Add:
Capital
expenditures
(1) (17,704)
Free cash
flows $
262,546
(1) Defined as "Additions of property & equipment" in
the Condensed Consolidated Statements of Cash Flows
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures
for the three months ended September 30, 2019.
(In thousands except for per share amounts)
---
Three Months Ended September 30, 2019
GAAP-based GAAP-based
Measures Adjustments Note Non-GAAP-based Non-GAAP-
% of Total based
Revenue Measures
Measures Measures % of Total
Revenue
Cost of revenues
Cloud services and
subscriptions $
102,162 $
(383) (1) $
101,779
Customer support 29,387 (316) (1) 29,071
Professional service
and other 54,338 (243) (1) 54,095
Amortization of
acquired
technology-based
intangible assets 40,298 (40,298) (2)
GAAP-based gross 468,380 67.2 41,240 (3) 509,620 73.1
profit and gross
margin (%) / % %
Non-GAAP-based gross profit and
gross margin (%)
Operating expenses
Research and
development 81,178 (1,221) (1) 79,957
Sales and marketing 128,618 (2,116) (1) 126,502
General and
administrative 51,535 (2,612) (1) 48,923
Amortization of
acquired customer-
based intangible
assets 49,158 (49,158) (2)
Special charges
(recoveries) 5,101 (5,101) (4)
GAAP-based income
from operations /
Non-GAAP-based
income from
operations 132,513 101,448 (5) 233,961
Other income
(expense), net (2,785) 2,785 (6)
Provision for
(recovery of)
income taxes 23,091 5,154 (7) 28,245
GAAP-based net
income /Non-GAAP-
based net income,
attributable to
OpenText 74,401 99,079 (8) 173,480
GAAP-based earnings
per share /Non-
GAAP-based
earnings per share-
diluted,
attributable to
OpenText $
0.27 $
0.37 (8) $
0.64
(1) Adjustment relates to the exclusion of
share-based compensation expense from
our Non-GAAP-based operating expenses
as this expense is excluded from our
internal analysis of operating results.
(2) Adjustment relates to the exclusion of
amortization expense from our Non-GAAP-
based operating expenses as the timing
and frequency of amortization expense is
dependent on our acquisitions and is
hence excluded from our internal
analysis of operating results.
(3) GAAP-based and Non-GAAP-based gross
profit stated in dollars, and gross
margin stated as a percentage of total
revenue.
(4) Adjustment relates to the exclusion of
special charges (recoveries) from our
Non-GAAP-based operating expenses as
special charges (recoveries) are
generally incurred in the periods
relevant to an acquisition and include
certain charges or recoveries that are
not indicative or related to continuing
operations, and are therefore excluded
from our internal analysis of operating
results.
(5) GAAP-based and Non-GAAP-based income
from operations stated in dollars.
(6) Adjustment relates to the exclusion of
Other income (expense) from our Non-
GAAP-based operating expenses as Other
income (expense) generally relates to
the transactional impact of foreign
exchange and is generally not indicative
or related to continuing operations and
is therefore excluded from our internal
analysis of operating results. Other
income (expense) also includes our share
of income (losses) from our holdings in
investments as a limited partner. We do
not actively trade equity securities in
these privately held companies nor do we
plan our ongoing operations based around
any anticipated fundings or
distributions from these investments. We
exclude gains and losses on these
investments as we do not believe they
are reflective of our ongoing business
and operating results.
(7) Adjustment relates to differences between
the GAAP-based tax provision rate of
approximately 24% and a Non-GAAP-based
tax rate of approximately 14%; these
rate differences are due to the income
tax effects of items that are excluded
for the purpose of calculating Non-
GAAP-based adjusted net income. Such
excluded items include amortization,
share-based compensation, special
charges (recoveries) and other income
(expense), net. Also excluded are tax
benefits/expense items unrelated to
current period income such as changes in
reserves for tax uncertainties and
valuation allowance reserves, and "book
to return" adjustments for tax return
filings and tax assessments. Included is
the amount of net tax benefits arising
from the internal reorganization that
occurred in Fiscal 2017 assumed to be
allocable to the current period based on
the forecasted utilization period. In
arriving at our Non-GAAP-based tax
rate of approximately 14%, we analyzed
the individual adjusted expenses and
took into consideration the impact of
statutory tax rates from local
jurisdictions incurring the expense.
(8) Reconciliation of GAAP-based net income
to Non-GAAP-based net income:
Three Months Ended September 30,
2019
Per share
diluted
GAAP-based net
income,
attributable
to OpenText $
74,401 $
0.27
Add:
Amortization 89,456 0.33
Share-based
compensation 6,891 0.03
Special charges
(recoveries) 5,101 0.02
Other (income)
expense, net 2,785 0.01
GAAP-based
provision for
(recovery of)
income taxes 23,091 0.09
Non-GAAP-
based
provision for
income taxes (28,245) (0.11)
Non-GAAP-
based net
income,
attributable
to OpenText $
173,480 $
0.64
Reconciliation of Adjusted EBITDA
Three Months
Ended September
30, 2019
GAAP-based net income,
attributable to OpenText $
74,401
Add:
Provision for (recovery of)
income taxes 23,091
Interest and other related
expense, net 32,210
Amortization of acquired
technology-based
intangible assets 40,298
Amortization of acquired
customer-based intangible
assets 49,158
Depreciation 20,277
Share-based compensation 6,891
Special charges
(recoveries) 5,101
Other (income) expense, net 2,785
Adjusted EBITDA $
254,212
Reconciliation of Free cash flows
Three Months
Ended September
30, 2019
GAAP cash
flows
provided
by
operating
activities $
137,447
Add:
Capital
expenditures
(1) (18,614)
Free cash
flows $
118,833
(1) Defined as "Additions of property & equipment" in
the Condensed Consolidated Statements of Cash Flows
(3) The following tables provide a
composition of our major currencies
for revenue and expenses, expressed
as a percentage, for the three
months ended September 30, 2020 and
2019:
Three Months Ended September Three Months Ended September
30, 2020 30, 2019
Currencies % of Revenue % of Expenses* % of Revenue % of Expenses*
EURO 22 13 22 14
% % % %
GBP 5 5 5 5
% % % %
CAD 3 9 3 10
% % % %
USD 63 56 60 53
% % % %
Other 7 17 10 18
% % % %
Total 100 100 100 100
% % % %
* Expenses include all cost of
revenues and operating expenses
included within the Condensed
Consolidated Statements of Income,
except for amortization of
intangible assets, share-based
compensation and Special charges
(recoveries).
View original content:http://www.prnewswire.com/news-releases/opentext-reports-first-quarter-fiscal-year-2021-financial-results-301167474.html
SOURCE Open Text Corporation
