OpenText Reports Second Quarter Fiscal Year 2020 Financial Results

January 30, 2020 4:01 PM | 171 min read |

Completes Carbonite Acquisition

Strong Results Include Record Cloud and Annual Recurring Revenues (ARR)

WATERLOO, Ontario, Jan. 30, 2020 /PRNewswire/ --

Second Quarter Highlights

Total Revenues

(in millions)



Annual Recurring Revenues

(in millions)



Cloud Revenues

(in millions)

Reported

Constant

Currency



Reported

Constant

Currency



Reported

Constant

Currency

$771.6

$781.8



$563.8

$570.8



$248.3

$250.2

+4.9%

+6.3%



+6.5%

+7.8%



+13.3%

+14.1%

Annual Recurring Revenues represents 73% of Total Revenues

 

  • GAAP net income of $107.5 million, up 2.9% Y/Y
  • Adjusted EBITDA of $317.0 million, up 2.8%, margin of 41.1%, down 80 basis points Y/Y
  • GAAP diluted EPS of $0.40, up 2.6% Y/Y
  • Non-GAAP diluted EPS of $0.84, up 5.0%, and $0.86 in constant currency, up 7.5% Y/Y
  • Operating Cash Flows were $860.5 million during the trailing twelve months
  • Declares cash dividend of $0.1746 per common share

Open Text Corporation OTEX, OTEX, "The Information Company," today announced its financial results for the second quarter ended December 31, 2019.

OpenText logo (PRNewsfoto/Open Text Corporation) (PRNewsfoto/Open Text Corporation)

"With the addition of Carbonite, we have a strategic market-opportunity to bring Information Management (IM) to all sizes of customers, from the largest of enterprises, governments, mid-size companies, small companies, and consumers. We are excited and energized to write the next chapter for OpenText as our vision expands and advances to Information Management, helping customers to migrate into the cloud and reinvent their businesses processes", said Mark J. Barrenechea, OpenText CEO & CTO. "We are a partner-oriented company with the talent and culture to make an SMB channel wildly successful. With Carbonite this partner opportunity gets significantly stronger and deeper as we leverage OpenText's proven expertise and successful track record of building powerful global partner programs."

"Our Q2 results reflect an increasing demand for OpenText products as we delivered strong top-line growth. In constant currency, total revenues grew to $781.8 million, up 6.3% year-over-year, Annual Recurring Revenues (ARR) grew to a record $570.8 million, up 7.8% year-over-year, representing 73% of total revenues, driven by Cloud Services and Subscriptions revenues of $250.2 million, which increased significantly by 14.1% year-over-year," said Barrenechea.

"OpenText demonstrated solid operational performance during the second quarter, delivering to our Total Growth Strategy.  We put our capital to work, while maintaining a strong balance sheet with a net leverage ratio of 2.3x, and generated solid operating cash flows of $207.2 million, supported by equally strong A-EBITDA results", said OpenText EVP, CFO, Madhu Ranganathan.  "The Carbonite transaction closed efficiently, financed by our internal cash and existing revolver. The integration has kicked off with strength and we remain on target to complete the Carbonite integration by the end of Fiscal 2021."

Integration of Carbonite and Restructuring Plan

As OpenText integrates the acquisition, we anticipate a one-time deferred revenue adjustment that will result in a reduction in Carbonite revenue. In addition to this deferred revenue adjustment impact, we expect Carbonite revenue contribution to be down for the next few quarters due to typical integration activities, and then normalize to historical levels thereafter. 

OpenText is also announcing a restructuring plan that will impact our global workforce and consolidate certain real estate facilities to further streamline our operations, inclusive of Carbonite.   The anticipated cost is expected to be approximately $26 million to $34 million. These restructuring activities are anticipated to be completed by the end of Fiscal 2021, and once completed, OpenText anticipates annualized cost savings of approximately $37 million to $41 million. We expect any savings realized during the remainder of Fiscal 2020 to be largely offset by one-time Carbonite integration costs.

Financial Highlights for Q2 Fiscal 2020 with Year Over Year Comparisons

Summary of Quarterly Results

















(in millions except per share data)

Q2 FY20

Q2 FY19

$ Change

% Change

(Y/Y)



Q2 FY20

in CC*

% Change

in CC*



Revenues:

















Cloud services and subscriptions

$248.3



$219.2



$29.1



13.3

%



$250.2



14.1

%



Customer support

315.5



310.4



5.2



1.7

%



320.6



3.3

%



Total annual recurring revenues**

$563.8



$529.6



$34.3



6.5

%



$570.8



7.8

%



License

138.1



132.8



5.3



4.0

%



140.2



5.6

%



Professional service and other

69.6



72.9



(3.3)



(4.5)

%



70.8



(2.9)

%



Total revenues

$771.6



$735.2



$36.3



4.9

%



$781.8



6.3

%



GAAP-based operating income

$184.7



$173.9



$10.8



6.2

%



N/A

N/A



Non-GAAP-based operating income (1)

$296.4



$284.5



$11.9



4.2

%



$303.0



6.5

%



GAAP-based EPS, diluted

$0.40



$0.39



$0.01



2.6

%



N/A

N/A



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

$0.84



$0.80



$0.04



5.0

%



$0.86



7.5

%



GAAP-based net income attributable to OpenText

$107.5



$104.4



$3.0



2.9

%



N/A

N/A



Adjusted EBITDA (1)

$317.0



$308.3



$8.7



2.8

%



$323.4



4.9

%



Operating cash flows

$207.2



$189.1



$18.1



9.6

%



N/A

N/A



 

Summary of YTD Results

















(in millions except per share data)

FY20 YTD

FY19 YTD

$ Change

% Change

(Y/Y)



FY20 YTD

in CC*

% Change

in CC*



Revenues:

















Cloud services and subscriptions

$485.6



$427.3



$58.3



13.6

%



$489.5



14.5

%



Customer support

627.8



621.9



5.9



0.9

%



637.9



2.6

%



Total annual recurring revenues**

$1,113.4



$1,049.2



$64.2



6.1

%



$1,127.4



7.4

%



License

216.0



209.6



6.4



3.0

%



219.4



4.6

%



Professional service and other

139.0



143.5



(4.5)



(3.1)

%



141.6



(1.4)

%



Total revenues

$1,468.4



$1,402.4



$66.1



4.7

%



$1,488.3



6.1

%



GAAP-based operating income

$317.3



$273.2



$44.1



16.1

%



N/A

N/A



Non-GAAP-based operating income (1)

$530.3



$506.9



$23.4



4.6

%



$541.4



6.8

%



GAAP-based EPS, diluted

$0.67



$0.52



$0.15



28.8

%



N/A

N/A



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

$1.48



$1.40



$0.08



5.7

%



$1.51



7.9

%



GAAP-based net income attributable to OpenText

$181.9



$140.8



$41.1



29.2

%



N/A

N/A



Adjusted EBITDA (1)

$571.2



$554.5



$16.7



3.0

%



$582.1



4.9

%



Operating cash flows

$344.7



$360.5



($15.8)



(4.4)

%



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 January 29, 2020 a cash dividend of $0.1746 per common share. The record date for this dividend is February 28, 2020 and the payment date is March 20, 2020. Future declarations of dividends and the establishment of future record and payment dates are subject to the final determination and discretion of the Board of Directors.

Quarterly Business Highlights

  • Key customer wins in the quarter included PFU Limited, the Ministry of Justice Rhineland-Palatinate, thyssenkrupp AG, the Netherlands Ministry of Economic Affairs and Climate Policy, Lewis Rice, Kodak Alaris, Shinkai Transport Systems, Ltd. and Morneau Shepell
  • OpenText buys Carbonite, Inc., provider of cloud-based subscription data protection, backup, disaster recovery and endpoint security to small and medium-sized businesses and consumers
  • OpenText named a leader in Digital Asset Management for Customer Experience
  • OpenText named a leader in 2019 Gartner Magic Quadrant for Content Services Platforms
  • OpenText expands cloud infrastructure in Japan to support enterprise solutions
  • OpenText delivers a flexible path to the Cloud, enhanced security and compliance visibility into Supply Chain Risk
  • Cybersecurity, Legal, Digital Forensics experts gather at OpenText Enfuse 2019 to discuss security in a zero-trust world
  • OpenText wins excellence in Prevention and Investigation of Cybercrime (EPIC) Innovation Award

 

Summary of Quarterly Results

















Q2 FY20

Q1 FY20

Q2 FY19

% Change

(Q2 FY20 vs

Q1 FY20)



% Change

(Q2 FY20 vs

Q2 FY19)



Revenue (million)

$771.6



$696.9



$735.2



10.7

%



4.9

%



GAAP-based gross margin

69.9

%

67.2

%

69.0

%

270



bps

90



bps

GAAP-based EPS, diluted

$0.40



$0.27



$0.39



48.1

%



2.6

%



Non-GAAP-based gross margin (1)

75.5

%

73.1

%

75.7

%

240



bps

(20)



bps

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

$0.84



$0.64



$0.80



31.3

%



5.0

%





(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 January 30, 2020 at 7:00 p.m. ET through 11:59 p.m. on February 13, 2020 and can be accessed by dialing 1-855-669-9658 (toll-free) or +1-604-674-8052 (international) and using passcode 3949 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™, enables organizations to gain insight through market leading information management solutions, on-premises or in the cloud. For more information about OpenText OTEXOTEX 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, 2020 (Fiscal 2020) on growth, anticipated benefits of our partnerships and next generation product lines, the strength of our operating framework and balance sheet flexibility, continued investments in product innovation, go-to-market and strategic acquisitions, M&A continuing to be our leading growth contributor, our capital allocation strategy, creating value through investments in broader Information Management (IM) capabilities, the Company's presence in the cloud and in growth markets, expected growth in our revenue lines, total growth from acquisitions, innovation and organic initiatives, the focus on recurring revenues, improving operational efficiency, expanding cash flow and strengthening the business, adjusted operating income and cash flow, its financial condition, the adjusted operating margin target range, results of operations and earnings, announced acquisitions, ongoing tax matters, the integration of the acquired businesses, declaration of quarterly dividends, future tax rates, new platform and product offerings, scaling OpenText to new levels in Fiscal 2020 and beyond, and other matters, may contain words such as "anticipates", "expects", "intends", "plans", "believes", "seeks", "estimates", "may", "could", "would", "might", "will" and variations of these words or similar expressions are considered forward-looking statements or information under applicable securities laws. In addition, any information or statements that refer to expectations, beliefs, plans, projections, objectives, performance or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking, and based on our current expectations, forecasts and projections about the operating environment, economies and markets in which we operate. Forward-looking statements reflect our current estimates, beliefs and assumptions, which are based on management's perception of historic trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances, such as certain assumptions about the economy, as well as market, financial and operational assumptions. Management's estimates, beliefs and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events and, as such, are subject to change. We can give no assurance that such estimates, beliefs and assumptions will prove to be correct. Such forward-looking statements involve known and unknown risks, uncertainties and other factors and assumptions that may cause the actual results, performance or achievements to differ materially. Such factors include, but are not limited to: (i) the future performance, financial and otherwise, of OpenText; (ii) the ability of OpenText to bring new products and services to market and to increase sales; (iii) the strength of the Company's product development pipeline; (iv) the Company's growth and profitability prospects; (v) the estimated size and growth prospects of the IM market including expected growth in the Artificial Intelligence market; (vi) the Company's competitive position in the IM 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 IM marketplace; (ix) downward pressure on our share price and dilutive effect of future sales or issuances of equity securities (including in connection with future acquisitions); (x) the Company's financial condition and capital requirements; and (xi) statements about the impact of product releases. The risks and uncertainties that may affect forward-looking statements include, but are not limited to: (i) integration of acquisitions and related restructuring efforts, including the quantum of restructuring charges and the timing thereof; (ii) the potential for the incurrence of or assumption of debt in connection with acquisitions and the impact on the ratings or outlooks of rating agencies on the Company's outstanding debt securities; (iii) the possibility that the Company may be unable to meet its future reporting requirements under the U.S. Securities Exchange Act of 1934, as amended, and the rules promulgated thereunder, or applicable Canadian securities regulation; (iv) the risks associated with bringing new products and services to market; (v) failure to comply with privacy laws and regulations that are extensive, open to various interpretations and complex to implement including General Data Protection Regulation (GDPR) and Country by Country Reporting (CBCR); (vi) fluctuations in currency exchange rates; (vii) delays in the purchasing decisions of the Company's customers; (viii) the competition the Company faces in its industry and/or marketplace; (ix) the final determination of litigation, tax audits (including tax examinations in the United States and elsewhere) and other legal proceedings; (x) potential exposure to greater than anticipated tax liabilities or expenses, including with respect to changes in Canadian, U.S. or international tax regimes including tax reform legislation enacted through the Tax Cuts and Jobs Act in the United States; (xi) the possibility of technical, logistical or planning issues in connection with the deployment of the Company's products or services; (xii) the continuous commitment of the Company's customers; and (xiii) demand for the Company's products and services. For additional information with respect to risks and other factors which could occur, see the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other securities filings with the Securities and Exchange Commission (SEC) and other securities regulators. Readers are cautioned not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. Unless otherwise required by applicable securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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)





December 31, 2019



June 30, 2019

ASSETS

(unaudited)





Cash and cash equivalents

$

675,403





$

941,009



Accounts receivable trade, net of allowance for doubtful accounts of $17,937 as of December 31, 2019 and $17,011 as of June 30, 2019

526,020





463,785



Contract assets

22,794





20,956



Income taxes recoverable

24,615





38,340



Prepaid expenses and other current assets

104,962





97,238



Total current assets

1,353,794





1,561,328



Property and equipment

273,448





249,453



Operating lease right of use assets

253,387





—



Long-term contract assets

17,975





15,386



Goodwill

4,656,492





3,769,908



Acquired intangible assets

1,808,072





1,146,504



Deferred tax assets

930,856





1,004,450



Other assets

158,058





148,977



Long-term income taxes recoverable

46,151





37,969



Total assets

$

9,498,233





$

7,933,975



LIABILITIES AND SHAREHOLDERS' EQUITY







Current liabilities:







Accounts payable and accrued liabilities

$

417,611





$

329,903



Current portion of long-term debt

913,631





10,000



Operating lease liability

66,579





—



Deferred revenues

718,861





641,656



Income taxes payable

51,298





33,158



Total current liabilities

2,167,980





1,014,717



Long-term liabilities:







Accrued liabilities

14,977





49,441



Pension liability

73,678





75,239



Long-term debt

2,600,386





2,604,878



Long-term operating lease liability

218,681





—



Deferred revenues

77,335





46,974



Long-term income taxes payable

180,507





202,184



Deferred tax liabilities

165,457





55,872



Total long-term liabilities

3,331,021





3,034,588



Shareholders' equity:







Share capital and additional paid-in capital







270,608,627 and 269,834,442 Common Shares issued and outstanding at December 31, 2019 and June 30, 2019, respectively; authorized Common Shares: unlimited

1,803,663





1,774,214



Accumulated other comprehensive income

24,690





24,124



Retained earnings

2,201,653





2,113,883



Treasury stock, at cost (847,369 shares at December 31, 2019 and 802,871 shares at June 30, 2019, respectively)

(32,066)





(28,766)



Total OpenText shareholders' equity

3,997,940





3,883,455



Non-controlling interests

1,292





1,215



Total shareholders' equity

3,999,232





3,884,670



Total liabilities and shareholders' equity

$

9,498,233





$

7,933,975





 

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

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

(unaudited)





Three Months Ended December 31,



Six Months Ended December 31,



2019



2018



2019



2018

Revenues:















License

$

138,095





$

132,756





$

215,993





$

209,643



Cloud services and subscriptions

248,340





219,233





485,605





427,316



Customer support

315,508





310,354





627,806





621,905



Professional service and other

69,614





72,888





139,041





143,524



Total revenues

771,557





735,231





1,468,445





1,402,388



Cost of revenues:















License

3,050





3,655





5,373





7,527



Cloud services and subscriptions

103,644





88,698





205,806





176,401



Customer support

29,788





31,273





59,175





61,738



Professional service and other

53,604





56,030





107,942





112,826



Amortization of acquired technology-based intangible assets

42,299





48,366





82,597





95,843



Total cost of revenues

232,385





228,022





460,893





454,335



Gross profit

539,172





507,209





1,007,552





948,053



Operating expenses:















Research and development

80,283





75,753





161,461





153,223



Sales and marketing

137,310





126,193





265,928





246,375



General and administrative

54,595





52,198





106,130





103,122



Depreciation

20,712





23,834





40,989





47,688



Amortization of acquired customer-based intangible assets

51,460





45,919





100,618





91,795



Special charges

10,072





9,380





15,173





32,691



Total operating expenses

354,432





333,277





690,299





674,894



Income from operations

184,740





173,932





317,253





273,159



Other income (expense), net

1,972





378





(813)





1,900



Interest and other related expense, net

(32,376)





(33,613)





(64,586)





(68,144)



Income before income taxes

154,336





140,697





251,854





206,915



Provision for (recovery of) income taxes

46,818





36,236





69,909





66,086



Net income for the period

$

107,518





$

104,461





$

181,945





$

140,829



Net (income) loss attributable to non-controlling interests

(51)





(29)





(77)





(73)



Net income attributable to OpenText

$

107,467





$

104,432





$

181,868





$

140,756



Earnings per share—basic attributable to OpenText

$

0.40





$

0.39





$

0.67





$

0.52



Earnings per share—diluted attributable to OpenText

$

0.40





$

0.39





$

0.67





$

0.52



Weighted average number of Common Shares outstanding—basic

270,450





268,524





270,232





268,276



Weighted average number of Common Shares outstanding—diluted

271,590





269,400





271,328





269,396



 

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands of U.S. dollars)

(unaudited)





Three Months Ended

December 31,



Six Months Ended

December 31,



2019



2018



2019



2018

Net income for the period

$

107,518





$

104,461





$

181,945





$

140,829



Other comprehensive income (loss)—net of tax:















Net foreign currency translation adjustments

4,875





(3,418)





(736)





(6,938)



Unrealized gain (loss) on cash flow hedges:















Unrealized gain (loss) - net of tax expense (recovery) effect of $301 and ($677) for the three months ended December 31, 2019 and 2018, respectively; $95 and ($496) for the six months ended December 31, 2019 and 2018, respectively

833





(1,877)





261





(1,375)



(Gain) loss reclassified into net income - net of tax (expense) recovery effect of ($26) and $169 for the three months ended December 31, 2019 and 2018, respectively;($23) and $301 for the six months ended December 31, 2019 and 2018, respectively

(72)





467





(64)





833



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















Actuarial gain (loss) - net of tax expense (recovery) effect of $1,308 and ($519) for the three months ended December 31, 2019 and 2018, respectively; $59 and ($213) for the six months ended December 31, 2019 and 2018, respectively

3,698





(1,521)





614





(324)



Amortization of actuarial (gain) loss into net income - net of tax (expense) recovery effect of $97 and $72 for the three months ended December 31, 2019 and 2018, respectively; $243 and $145 for the six months ended December 31, 2019 and 2018, respectively

260





64





491





130



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

9,594





(6,285)





566





(7,674)



Total comprehensive income

117,112





98,176





182,511





133,155



Comprehensive (income) loss attributable to non-controlling interests

(51)





(29)





(77)





(73)



Total comprehensive income attributable to OpenText

$

117,061





$

98,147





$

182,434





$

133,082



 

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

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

(unaudited)





Three Months Ended December 31, 2019



Common Shares and

Additional Paid in Capital



Treasury Stock



Retained

Earnings



Accumulated

Other

Comprehensive

Income



Non-

Controlling

Interests



Total



Shares



Amount



Shares



Amount



Balance as of September 30, 2019

270,190





$

1,791,689





(1,103)





$

(41,190)





$

2,141,278





$

15,096





$

1,241





$

3,908,114



Issuance of Common Shares































Under employee stock option plans

231





6,783





—





—





—





—





—





6,783



Under employee stock purchase plans

188





6,532





—





—





—





—





—





6,532



Share-based compensation

—





7,783





—





—





—





—





—





7,783



Issuance of treasury stock

—





(9,124)





256





9,124





—





—





—





—



Dividends declared

($0.1746 per Common Share)

—





—





—





—





(47,092)





—





—





(47,092)



Other comprehensive income (loss) - net

—





—





—





—





—





9,594





—





9,594



Net income for the quarter

—





—





—





—





107,467





—





51





107,518



Balance as of December 31, 2019

270,609





$

1,803,663





(847)





$

(32,066)





$

2,201,653





$

24,690





$

1,292





$

3,999,232







Three Months Ended December 31, 2018



Common Shares and

Additional Paid in Capital



Treasury Stock



Retained

Earnings



Accumulated

Other

Comprehensive

Income



Non-

Controlling

Interests



Total



Shares



Amount



Shares



Amount



Balance as of September 30, 2018

268,332





$

1,730,933





(992)





$

(30,381)





$

1,993,099





$

32,256





$

1,123





$

3,727,030



Issuance of Common Shares































Under employee stock option plans

62





1,740





—





—





—





—





—





1,740



Under employee stock purchase plans

175





5,696





—





—





—





—





—





5,696



Share-based compensation

—





6,885





—





—





—





—





—





6,885



Purchase of treasury stock

—





—





(370)





(12,815)





—





—





—





(12,815)



Issuance of treasury stock

—





(13,955)





545





13,955





—





—





—





—



Dividends

($0.1518 per Common Share)

—





—





—





—





(40,700)





—





—





(40,700)



Other comprehensive income (loss) - net

—





—





—





—





—





(6,285)





—





(6,285)



Net income for the quarter

—





—





—





—





104,432





—





29





104,461



Balance as of December 31, 2018

268,569





$

1,731,299





(817)





$

(29,241)





$

2,056,831





$

25,971





$

1,152





$

3,786,012







Six Months Ended December 31, 2019



Common Shares and

Additional Paid in Capital



Treasury Stock



Retained

Earnings



Accumulated Other

Comprehensive Income



Non-Controlling Interests



Total



Shares



Amount



Shares



Amount



Balance as of June 30, 2019

269,834





$

1,774,214





(803)





$

(28,766)





$

2,113,883





$

24,124





$

1,215





$

3,884,670



Issuance of Common Shares































Under employee stock option plans

415





11,359





—





—





—





—





—





11,359



Under employee stock purchase plans

360





12,540





—





—





—





—





—





12,540



Share-based compensation

—





14,674





—





—





—





—





—





14,674



Purchase of treasury stock

—





—





(300)





(12,424)





—





—





—





(12,424)



Issuance of treasury stock

—





(9,124)





256





9,124





—





—





—





—



Dividends declared  ($0.3492 per Common Share)

—





—





—





—





(94,098)





—





—





(94,098)



Other comprehensive income (loss) - net

—





—





—





—





—





566





—





566



Net income for the quarter

—





—





—





—





181,868





—





77





181,945



Balance as of December 31, 2019

270,609





$

1,803,663





(847)





$

(32,066)





$

2,201,653





$

24,690





$

1,292





$

3,999,232







Six Months Ended December 31, 2018



Common Shares and

Additional Paid in Capital



Treasury Stock



Retained

Earnings



Accumulated

Other

Comprehensive

Income



Non-

Controlling

Interests



Total



Shares



Amount



Shares



Amount



Balance as of June 30, 2018

267,651





$

1,707,073





(691)





$

(18,732)





$

1,994,235





$

33,645





$

1,037





$

3,717,258



Adoption of ASU 2016-16 - cumulative effect

—





—





—





—





(26,780)





—





—





(26,780)



Adoption of Topic 606 - cumulative effect

—





—





—





—





29,786





—





—





29,786



Issuance of Common Shares































Under employee stock option plans

556





14,171





—





—





—





—





—





14,171



Under employee stock purchase plans

362





11,265





—





—





—





—





—





11,265



Share-based compensation

—





13,440





—





—





—





—





—





13,440



Purchase of treasury stock

—





—





(674)





(24,534)





—





—





—





(24,534)



Issuance of treasury stock

—





(14,025)





548





14,025





—





—





—





—



Dividends declared

($0.3036 per Common Share)

—





—





—





—





(81,166)





—





—





(81,166)



Other comprehensive income - net

—





—





—





—





—





(7,674)





—





(7,674)



Non-controlling interest

—





(625)





—





—





—





—





42





(583)



Net income for the year

—





—





—





—





140,756





—





73





140,829



Balance as of December 31, 2018

268,569





$

1,731,299





(817)





$

(29,241)





$

2,056,831





$

25,971





$

1,152





$

3,786,012



 

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars)

(unaudited)





Three Months Ended

December 31,



Six Months Ended

December 31,



2019



2018



2019



2018

Cash flows from operating activities:















Net income for the period

$

107,518





$

104,461





$

181,945





$

140,829



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















Depreciation and amortization of intangible assets

114,471





118,119





224,204





235,326



Share-based compensation expense

7,783





6,885





14,674





13,440



Pension expense

1,459





1,109





2,895





2,254



Amortization of debt issuance costs

1,149





1,079





2,276





2,157



Loss on sale and write down of property and equipment

—





1,639





—





9,428



Deferred taxes

27,924





1,140





34,168





8,909



Share in net (income) loss of equity investees

(1,266)





(5,491)





(1,948)





(7,863)



Changes in operating assets and liabilities:















Accounts receivable

(55,833)





(40,327)





2,598





33,548



Contract assets

(10,458)





(8,054)





(17,659)





(13,400)



Prepaid expenses and other current assets

1,111





2,800





(501)





12,532



Income taxes and deferred charges and credits

(7,944)





4,763





(891)





17,324



Accounts payable and accrued liabilities

29,744





10,253





(33,235)





(29,748)



Deferred revenue

(2,924)





(11,748)





(64,093)





(69,151)



Other assets

(3,327)





2,475





2,357





4,919



Operating lease assets and liabilities, net

(2,169)





—





(2,105)





—



Net cash provided by operating activities

207,238





189,103





344,685





360,504



Cash flows from investing activities:















Additions of property and equipment

(19,598)





(8,969)





(38,212)





(33,464)



Purchase of Carbonite, Inc., net of cash and restricted cash acquired

(1,216,639)





—





(1,216,639)





—



Purchase of Dynamic Solutions Group Inc.

(4,149)





—





(4,149)





—



Purchase of Liaison Technologies, Inc.

—





(311,285)





—





(311,285)



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

—





—





—





(2,279)



Other investing activities

(3,505)





(5,369)





(5,541)





(6,373)



Net cash used in investing activities

(1,243,891)





(325,623)





(1,264,541)





(353,401)



Cash flows from financing activities:















Proceeds from long-term debt and Revolver

750,000





—





750,000





—



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

12,000





6,159





23,117





24,286



Repayment of long-term debt and revolver

(2,500)





(2,500)





(5,000)





(5,000)



Debt issuance costs

(979)





—





(979)





(322)



Purchase of Treasury Stock

—





(12,815)





(12,424)





(24,534)



Purchase of non-controlling interest

—





—





—





(583)



Payments of dividends to shareholders

(47,092)





(40,700)





(94,098)





(81,166)



Net cash provided by (used in) financing activities

711,429





(49,856)





660,616





(87,319)



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

3,640





(6,329)





(4,071)





(5,901)



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

(321,584)





(192,705)





(263,311)





(86,117)



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

1,001,816





790,579





943,543





683,991



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

$

680,232





$

597,874





$

680,232





$

597,874



 

Reconciliation of cash, cash equivalents and restricted cash:

December 31, 2019



December 31, 2018

Cash and cash equivalents

675,403





595,069



Restricted cash included in Other assets

4,829





2,805



Total Cash, cash equivalents and restricted cash

$

680,232





$

597,874





















Notes

(1)

All dollar amounts in this press release are in U.S. Dollars unless otherwise indicated.





(2)

Use of Non-GAAP Financial Measures: In addition to reporting financial results in accordance with U.S. GAAP, the Company provides certain financial measures that are not in accordance with U.S. GAAP (Non-GAAP). These Non-GAAP financial measures have certain limitations in that they do not have a standardized meaning and thus the Company's definition may be different from similar Non-GAAP financial measures used by other companies and/or analysts and may differ from period to period. Thus it may be more difficult to compare the Company's financial performance to that of other companies. However, the Company's management compensates for these limitations by providing the relevant disclosure of the items excluded in the calculation of these Non-GAAP financial measures both in its reconciliation to the U.S. GAAP financial measures and its consolidated financial statements, all of which should be considered when evaluating the Company's results.







The Company uses these Non-GAAP financial measures to supplement the information provided in its consolidated financial statements, which are presented in accordance with U.S. GAAP. The presentation of Non-GAAP financial measures are not meant to be a substitute for financial measures presented in accordance with U.S. GAAP, but rather should be evaluated in conjunction with and as a supplement to such U.S. GAAP measures. OpenText strongly encourages investors to review its financial information in its entirety and not to rely on a single financial measure. The Company therefore believes that despite these limitations, it is appropriate to supplement the disclosure of the U.S. GAAP measures with certain Non-GAAP measures defined below.







Non-GAAP-based net income and Non-GAAP-based EPS, attributable to OpenText, are consistently calculated as GAAP-based net income or earnings per share, attributable to OpenText, on a diluted basis, excluding the effects of the amortization of acquired intangible assets, other income (expense), share-based compensation, and Special charges (recoveries), all net of tax and any tax benefits/expense items unrelated to current period income, as further described in the tables below. Non-GAAP-based gross profit is the arithmetical sum of GAAP-based gross profit and the amortization of acquired technology-based intangible assets and share-based compensation within cost of sales. Non-GAAP-based gross margin is calculated as Non-GAAP-based gross profit expressed as a percentage of total revenue. Non-GAAP-based income from operations is calculated as income from operations, excluding the amortization of acquired intangible assets, Special charges (recoveries), and share-based compensation expense.







Adjusted earnings (loss) before interest, taxes, depreciation and amortization (Adjusted EBITDA) is consistently calculated as GAAP-based net income, attributable to OpenText, excluding interest income (expense), provision for income taxes, depreciation and amortization of acquired intangible assets, other income (expense), share-based compensation and Special charges (recoveries).







The Company's management believes that the presentation of the above defined Non-GAAP financial measures provides useful information to investors because they portray the financial results of the Company before the impact of certain non-operational charges. The use of the term "non-operational charge" is defined for this purpose as an expense that does not impact the ongoing operating decisions taken by the Company's management. These items are excluded based upon the way the Company's management evaluates the performance of the Company's business for use in the Company's internal reports and are not excluded in the sense that they may be used under U.S. GAAP.







The Company does not acquire businesses on a predictable cycle, and therefore believes that the presentation of non-GAAP measures, which in certain cases adjust for the impact of amortization of intangible assets and the related tax effects that are primarily related to acquisitions, will provide readers of financial statements with a more consistent basis for comparison across accounting periods and be more useful in helping readers understand the Company's operating results and underlying operational trends. Additionally, the Company has engaged in various restructuring activities over the past several years, primarily due to acquisitions, that have resulted in costs associated with reductions in headcount, consolidation of leased facilities and related costs, all which are recorded under the Company's "Special Charges (recoveries)" caption on the Consolidated Statements of Income. Each restructuring activity is a discrete event based on a unique set of business objectives or circumstances, and each differs in terms of its operational implementation, business impact and scope, and the size of each restructuring plan can vary significantly from period to period. Therefore, the Company believes that the exclusion of these special charges (recoveries) will also better aid readers of financial statements in the understanding and comparability of the Company's operating results and underlying operational trends.







In summary the Company believes the provision of supplemental Non-GAAP measures allow investors to evaluate the operational and financial performance of the Company's core business using the same evaluation measures that management uses, and is therefore a useful indication of OpenText's performance or expected performance of future operations and facilitates period-to-period comparison of operating performance (although prior performance is not necessarily indicative of future performance). As a result, the Company considers it appropriate and reasonable to provide, in addition to U.S. GAAP measures, supplementary Non-GAAP financial measures that exclude certain items from the presentation of its financial results.







The following charts provide (unaudited) reconciliations of U.S. GAAP-based financial measures to Non-U.S. GAAP-based financial measures for the following periods presented.

 



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

for the three months ended December 31, 2019.

(In thousands except for per share amounts)



Three Months Ended December 31, 2019



GAAP-based

Measures

GAAP-based

Measures

% of Total

Revenue

Adjustments

Note

Non-GAAP-

based

Measures

Non-GAAP-

based

Measures

% of Total

Revenue

Cost of revenues













Cloud services and subscriptions

$

103,644





$

(371)



(1)

$

103,273





Customer support

29,788





(297)



(1)

29,491





Professional service and other

53,604





(346)



(1)

53,258





Amortization of acquired technology-based intangible assets

42,299





(42,299)



(2)

—





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

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

539,172



69.9

%

43,313



(3)

582,485



75.5

%

Operating expenses













Research and development

80,283





(1,255)



(1)

79,028





Sales and marketing

137,310





(2,383)



(1)

134,927





General and administrative

54,595





(3,131)



(1)

51,464





Amortization of acquired customer-based intangible assets

51,460





(51,460)



(2)

—





Special charges (recoveries)

10,072





(10,072)



(4)

—





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

184,740





111,614



(5)

296,354





Other income (expense), net

1,972





(1,972)



(6)

—





Provision for (recovery of) income taxes

46,818





(9,861)



(7)

36,957





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

107,467





119,503



(8)

226,970





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

$

0.40





$

0.44



(8)

$

0.84



































(1)

Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.

(2)

Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.

(3)

GAAP-based and Non-GAAP-based gross profit stated in dollars, and gross margin stated as a percentage of total revenue.

(4)

Adjustment relates to the exclusion of Special charges (recoveries) from our Non-GAAP-based operating expenses as Special charges (recoveries) are generally incurred in the periods relevant to an acquisition and include certain charges or recoveries that are not indicative or related to continuing operations, and are therefore excluded from our internal analysis of operating results.

(5)

GAAP-based and Non-GAAP-based income from operations stated in dollars.

(6)

Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) generally relates to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results. Other income (expense) also includes our share of income (losses) from our holdings in non-marketable securities investments as a limited partner. We do not actively trade equity securities in these privately held companies nor do we plan our ongoing operations based around any anticipated fundings or distributions from these investments. We exclude gains and losses on these investments as we do not believe they are reflective of our ongoing business and operating results.

(7)

Adjustment relates to differences between the GAAP-based tax provision rate of approximately 30% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded items include amortization, share-based compensation, Special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves, and "book to return" adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately 14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.

(8)

Reconciliation of GAAP-based net income to Non-GAAP-based net income:

 



Three Months Ended December 31, 2019





Per share diluted

GAAP-based net income, attributable to OpenText

$

107,467



$

0.40

Add:





Amortization

93,759



0.35

Share-based compensation

7,783



0.03

Special charges (recoveries)

10,072



0.04

Other (income) expense, net

(1,972)



(0.01)

GAAP-based provision for (recovery of) income taxes

46,818



0.17

Non-GAAP-based provision for income taxes

(36,957)



(0.14)

Non-GAAP-based net income, attributable to OpenText

$

226,970



$

0.84

 

Reconciliation of Adjusted EBITDA





Three Months Ended December 31, 2019

GAAP-based net income, attributable to OpenText

$

107,467

Add:



Provision for (recovery of) income taxes

46,818

Interest and other related expense, net

32,376

Amortization of acquired technology-based intangible assets

42,299

Amortization of acquired customer-based intangible assets

51,460

Depreciation

20,712

Share-based compensation

7,783

Special charges (recoveries)

10,072

Other (income) expense, net

(1,972)

Adjusted EBITDA

$

317,015

 



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

for the six months ended December 31, 2019. 

(In thousands except for per share amounts)



Six Months Ended December 31, 2019



GAAP-based

Measures

GAAP-based

Measures

% of Total

Revenue

Adjustments

Note

Non-GAAP-

based

Measures

Non-GAAP-

based

Measures

% of Total

Revenue

Cost of revenues













Cloud services and subscriptions

$

205,806





$

(754)



(1)

$

205,052





Customer support

59,175





(613)



(1)

58,562





Professional service and other

107,942





(589)



(1)

107,353





Amortization of acquired technology-based intangible assets

82,597





(82,597)



(2)

—





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

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

1,007,552



68.6

%

84,553



(3)

1,092,105



74.4

%

Operating expenses













Research and development

161,461





(2,476)



(1)

158,985





Sales and marketing

265,928





(4,499)



(1)

261,429





General and administrative

106,130





(5,743)



(1)

100,387





Amortization of acquired customer-based intangible assets

100,618





(100,618)



(2)

—





Special charges (recoveries)

15,173





(15,173)



(4)

—





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

317,253





213,062



(5)

530,315





Other income (expense), net

(813)





813



(6)

—





Provision for (recovery of) income taxes

69,909





(4,707)



(7)

65,202





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

181,868





218,582



(8)

400,450





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

$

0.67





$

0.81



(8)

$

1.48



































(1)

Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.

(2)

Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.

(3)

GAAP-based and Non-GAAP-based gross profit stated in dollars, and gross margin stated as a percentage of total revenue.

(4)

Adjustment relates to the exclusion of Special charges (recoveries) from our Non-GAAP-based operating expenses as Special charges (recoveries) are generally incurred in the periods relevant to an acquisition and include certain charges or recoveries that are not indicative or related to continuing operations, and are therefore excluded from our internal analysis of operating results.

(5)

GAAP-based and Non-GAAP-based income from operations stated in dollars.

(6)

Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) generally relates to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results. Other income (expense) also includes our share of income (losses) from our holdings in non-marketable securities investments as a limited partner. We do not actively trade equity securities in these privately held companies nor do we plan our ongoing operations based around any anticipated fundings or distributions from these investments. We exclude gains and losses on these investments as we do not believe they are reflective of our ongoing business and operating results.

(7)

Adjustment relates to differences between the GAAP-based tax provision rate of approximately 28% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded items include amortization, share-based compensation, Special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves, and "book to return" adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately 14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.

(8)

Reconciliation of GAAP-based net income to Non-GAAP-based net income:

 



Six Months Ended December 31, 2019





Per share diluted

GAAP-based net income, attributable to OpenText

$

181,868



$

0.67

Add:





Amortization

183,215



0.68

Share-based compensation

14,674



0.05

Special charges (recoveries)

15,173



0.06

Other (income) expense, net

813



—

GAAP-based provision for (recovery of) income taxes

69,909



0.26

Non-GAAP-based provision for income taxes

(65,202)



(0.24)

Non-GAAP-based net income, attributable to OpenText

$

400,450



$

1.48

 

Reconciliation of Adjusted EBITDA





Six Months Ended December 31, 2019

GAAP-based net income, attributable to OpenText

$

181,868

Add:



Provision for (recovery of) income taxes

69,909

Interest and other related expense, net

64,586

Amortization of acquired technology-based intangible assets

82,597

Amortization of acquired customer-based intangible assets

100,618

Depreciation

40,989

Share-based compensation

14,674

Special charges (recoveries)

15,173

Other (income) expense, net

813

Adjusted EBITDA

$

571,227

 



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

for the three months ended September 30, 2019.

(In thousands except for per share amounts)



Three Months Ended September 30, 2019



GAAP-based

Measures

GAAP-based

Measures

% of Total

Revenue

Adjustments

Note

Non-GAAP-

based

Measures

Non-GAAP-

based

Measures

% of Total

Revenue

Cost of revenues













Cloud services and subscriptions

$

102,162





$

(383)



(1)

$

101,779





Customer support

29,387





(316)



(1)

29,071





Professional service and other

54,338





(243)



(1)

54,095





Amortization of acquired technology-based intangible assets

40,298





(40,298)



(2)

—





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

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

468,380



67.2

%

41,240



(3)

509,620



73.1

%

Operating expenses













Research and development

81,178





(1,221)



(1)

79,957





Sales and marketing

128,618





(2,116)



(1)

126,502





General and administrative

51,535





(2,612)



(1)

48,923





Amortization of acquired customer-based intangible assets

49,158





(49,158)



(2)

—





Special charges (recoveries)

5,101





(5,101)



(4)

—





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

132,513





101,448



(5)

233,961





Other income (expense), net

(2,785)





2,785



(6)

—





Provision for (recovery of) income taxes

23,091





5,154



(7)

28,245





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

74,401





99,079



(8)

173,480





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

$

0.27





$

0.37



(8)

$

0.64



































(1)

Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.

(2)

Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.

(3)

GAAP-based and Non-GAAP-based gross profit stated in dollars, and gross margin stated as a percentage of total revenue.

(4)

Adjustment relates to the exclusion of Special charges (recoveries) from our Non-GAAP-based operating expenses as Special charges (recoveries) are generally incurred in the periods relevant to an acquisition and include certain charges or recoveries that are not indicative or related to continuing operations, and are therefore excluded from our internal analysis of operating results.

(5)

GAAP-based and Non-GAAP-based income from operations stated in dollars.

(6)

Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) generally relates to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results. Other income (expense) also includes our share of income (losses) from our holdings in non-marketable securities investments as a limited partner. We do not actively trade equity securities in these privately held companies nor do we plan our ongoing operations based around any anticipated fundings or distributions from these investments. We exclude gains and losses on these investments as we do not believe they are reflective of our ongoing business and operating results.

(7)

Adjustment relates to differences between the GAAP-based tax provision rate of approximately 24% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded items include amortization, share-based compensation, Special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves, and "book to return" adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately 14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.

(8)

Reconciliation of GAAP-based net income to Non-GAAP-based net income:

 



Three Months Ended September 30, 2019





Per share diluted

GAAP-based net income, attributable to OpenText

$

74,401



$

0.27

Add:





Amortization

89,456



0.33

Share-based compensation

6,891



0.03

Special charges (recoveries)

5,101



0.02

Other (income) expense, net

2,785



0.01

GAAP-based provision for (recovery of) income taxes

23,091



0.09

Non-GAAP-based provision for income taxes

(28,245)



(0.11)

Non-GAAP-based net income, attributable to OpenText

$

173,480



$

0.64

 

Reconciliation of Adjusted EBITDA





Three Months Ended September 30, 2019

GAAP-based net income, attributable to OpenText

$

74,401

Add:



Provision for (recovery of) income taxes

23,091

Interest and other related expense, net

32,210

Amortization of acquired technology-based intangible assets

40,298

Amortization of acquired customer-based intangible assets

49,158

Depreciation

20,277

Share-based compensation

6,891

Special charges (recoveries)

5,101

Other (income) expense, net

2,785

Adjusted EBITDA

$

254,212

 

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

for the three months ended December 31, 2018.

(In thousands except for per share amounts)



Three Months Ended December 31, 2018



GAAP-based

Measures

GAAP-based

Measures

% of Total

Revenue

Adjustments

Note

Non-GAAP-

based

Measures

Non-GAAP-

based

Measures

% of Total

Revenue

Cost of revenues













Cloud services and subscriptions

$

88,698





$

(265)



(1)

$

88,433





Customer support

31,273





(271)



(1)

31,002





Professional service and other

56,030





(358)



(1)

55,672





Amortization of acquired technology-based intangible assets

48,366





(48,366)



(2)

—





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

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

507,209



69.0

%

49,260



(3)

556,469



75.7

%

Operating expenses













Research and development

75,753





(994)



(1)

74,759





Sales and marketing

126,193





(1,615)



(1)

124,578





General and administrative

52,198





(3,382)



(1)

48,816





Amortization of acquired customer-based intangible assets

45,919





(45,919)



(2)

—





Special charges (recoveries)

9,380





(9,380)



(4)

—





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

173,932





110,550



(5)

284,482





Other income (expense), net

378





(378)



(6)

—





Provision for (recovery of) income taxes

36,236





(1,114)



(7)

35,122





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

104,432





111,286



(8)

215,718





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

$

0.39





$

0.41



(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 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 that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately 14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.

(8)

Reconciliation of GAAP-based net income to Non-GAAP-based net income:

 



Three Months Ended December 31, 2018





Per share diluted

GAAP-based net income, attributable to OpenText

$

104,432



$

0.39

Add:





Amortization

94,285



0.35

Share-based compensation

6,885



0.03

Special charges (recoveries)

9,380



0.03

Other (income) expense, net

(378)



—

GAAP-based provision for (recovery of) income taxes

36,236



0.13

Non-GAAP-based provision for income taxes

(35,122)



(0.13)

Non-GAAP-based net income, attributable to OpenText

$

215,718



$

0.80

 

Reconciliation of Adjusted EBITDA





Three Months Ended December 31, 2018

GAAP-based net income, attributable to OpenText

$

104,432

Add:



Provision for (recovery of) income taxes

36,236

Interest and other related expense, net

33,613

Amortization of acquired technology-based intangible assets

48,366

Amortization of acquired customer-based intangible assets

45,919

Depreciation

23,834

Share-based compensation

6,885

Special charges (recoveries)

9,380

Other (income) expense, net

(378)

Adjusted EBITDA

$

308,287

 

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

for the six months ended December 31, 2018. 

(In thousands except for per share amounts)



Six Months Ended December 31, 2018



GAAP-based

Measures

GAAP-based

Measures

% of Total

Revenue

Adjustments

Note

Non-GAAP-

based

Measures

Non-GAAP-

based

Measures

% of Total

Revenue

Cost of revenues













Cloud services and subscriptions

$

176,401





$

(582)



(1)

$

175,819





Customer support

61,738





(571)



(1)

61,167





Professional service and other

112,826





(882)



(1)

111,944





Amortization of acquired technology-based intangible assets

95,843





(95,843)



(2)

—





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

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

948,053



67.6

%

97,878



(3)

1,045,931



74.6

%

Operating expenses













Research and development

153,223





(2,353)



(1)

150,870





Sales and marketing

246,375





(3,416)



(1)

242,959





General and administrative

103,122





(5,636)



(1)

97,486





Amortization of acquired customer-based intangible assets

91,795





(91,795)



(2)

—





Special charges (recoveries)

32,691





(32,691)



(4)

—





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

273,159





233,769



(5)

506,928





Other income (expense), net

1,900





(1,900)



(6)

—





Provision for (recovery of) income taxes

66,086





(4,656)



(7)

61,430





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

140,756





236,525



(8)

377,281





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

$

0.52





$

0.88



(8)

$

1.40



































(1)

Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.

(2)

Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.

(3)

GAAP-based and Non-GAAP-based gross profit stated in dollars, and gross margin stated as a percentage of total revenue.

(4)

Adjustment relates to the exclusion of Special charges (recoveries) from our Non-GAAP-based operating expenses as Special charges (recoveries) are generally incurred in the periods relevant to an acquisition and include certain charges or recoveries that are not indicative or related to continuing operations, and are therefore excluded from our internal analysis of operating results.

(5)

GAAP-based and Non-GAAP-based income from operations stated in dollars.

(6)

Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) generally relates to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results. Other income (expense) also includes our share of income (losses) from our holdings in non-marketable securities investments as a limited partner. We do not actively trade equity securities in these privately held companies nor do we plan our ongoing operations based around any anticipated fundings or distributions from these investments. We exclude gains and losses on these investments as we do not believe they are reflective of our ongoing business and operating results.

(7)

Adjustment relates to differences between the GAAP-based tax provision rate of approximately 32% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded items include amortization, share-based compensation, Special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves, and "book to return" adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately 14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.

(8)

Reconciliation of GAAP-based net income to Non-GAAP-based net income:

 



Six Months Ended December 31, 2018





Per share diluted

GAAP-based net income, attributable to OpenText

$

140,756



$

0.52

Add:





Amortization

187,638



0.70

Share-based compensation

13,440



0.05

Special charges (recoveries)

32,691



0.12

Other (income) expense, net

(1,900)



(0.01)

GAAP-based provision for (recovery of) income taxes

66,086



0.25

Non-GAAP-based provision for income taxes

(61,430)



(0.23)

Non-GAAP-based net income, attributable to OpenText

$

377,281



$

1.40

 

Reconciliation of Adjusted EBITDA





Six Months Ended December 31, 2018

GAAP-based net income, attributable to OpenText

$

140,756

Add:



Provision for (recovery of) income taxes

66,086

Interest and other related expense, net

68,144

Amortization of acquired technology-based intangible assets

95,843

Amortization of acquired customer-based intangible assets

91,795

Depreciation

47,688

Share-based compensation

13,440

Special charges (recoveries)

32,691

Other (income) expense, net

(1,900)

Adjusted EBITDA

$

554,543





(3)

The following tables provide a composition of our major currencies for revenue and expenses, expressed as a percentage, for the three and six months ended December 31, 2019 and 2018:

 



Three Months Ended December 31, 2019



Three Months Ended December 31, 2018

Currencies

% of Revenue 

% of Expenses* 



% of Revenue 

% of Expenses* 

EURO

25

%

15

%



25

%

15

%

GBP

5

%

6

%



6

%

6

%

CAD

3

%

10

%



4

%

10

%

USD

58

%

51

%



57

%

51

%

Other

9

%

18

%



8

%

18

%

Total

100

%

100

%



100

%

100

%





Six Months Ended December 31, 2019



Six Months Ended December 31, 2018

Currencies

% of Revenue

% of Expenses*



% of Revenue

% of Expenses*

EURO

23

%

14

%



24

%

15

%

GBP

5

%

6

%



6

%

6

%

CAD

3

%

10

%



4

%

11

%

USD

59

%

52

%



57

%

51

%

Other

10

%

18

%



9

%

17

%

Total

100

%

100

%



100

%

100

%



*Expenses include all cost of revenues and operating expenses included within the Condensed Consolidated Statements of Income, except for amortization of intangible assets, share-based compensation and Special charges (recoveries).

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/opentext-reports-second-quarter-fiscal-year-2020-financial-results-300996409.html

SOURCE Open Text Corporation

Market News and Data brought to you by Benzinga APIs

© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

Comments
Date
▲▼
ticker
▲▼
name
▲▼
Actual EPS
▲▼
EPS Surprise
▲▼
Actual Rev
▲▼
Rev Surprise
▲▼
Click to see more Earnings updates
Posted In: EarningsDividendsPress ReleasesConference Call Announcements
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!