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OpenText Reports Second Quarter Fiscal Year 2021 Financial Results


Record Annual Recurring Revenues (ARR), Record Cloud Revenues

WATERLOO, ON, Feb. 4, 2021 /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

$855.6

$839.4


$684.9

$673.6


$350.5

$346.7

+10.9%

+8.8%


+21.5%

+19.5%


+41.1%

+39.6%

Annual Recurring Revenues represents 80% of Total Revenues

  • Operating Cash Flows of $282.5 million in the quarter, up 36.3% Y/Y
  • Free Cash Flows of $274.8 million in the quarter, up 46.5% Y/Y
  • GAAP-based net income (loss) of ($65.5) million, down 160.9% Y/Y, margin of (7.7)% down 2,160 basis points Y/Y, primarily due to one-time IRS settlement charge of $299 million
  • Adjusted EBITDA of $360.8 million, up 13.8%, margin of 42.2%, up 110 basis points Y/Y
  • GAAP-based diluted earnings (loss) per share of ($0.24), down 160.0% Y/Y
  • Non-GAAP diluted earnings per share of $0.95, up 13.1%, and $0.92 in constant currency, up 9.5% Y/Y

Open Text Corporation (NASDAQ: OTEX), (TSX: OTEX), “The Information Company,” today announced its financial results for the second quarter ended December 31, 2020.

“OpenText delivered another quarter of strong growth, reflecting the power of our business model and exceptional performance in all of our key metrics,” said Mark J. Barrenechea, OpenText CEO & CTO. “Total revenues grew to $855.6 million, up 10.9% year-over-year, and Cloud Services and Subscriptions revenues grew to $350.5 million, up 41.1% year-over-year. Annual Recurring Revenues (ARR) grew to a record $684.9 million, up 21.5% year-over-year, now representing 80% of total revenues.”

“Increasing demand for OpenText’s Information Management cloud offerings strongly positions us to achieve market share gains through continued alignment with our customers’ digital transformation and business needs,” said Mr. Barrenechea.

“OpenText demonstrated strong operational excellence in our second quarter, generating free cash flows of $274.8 million, with a record Adjusted EBITDA of $360.8 million“, said OpenText EVP, CFO, Madhu Ranganathan.  “Our balance sheet and liquidity position of approximately $1.5 billion of cash at the end of the quarter and a 1.6x net leverage ratio, supports our goals to grow, generate cash and pursue our Total Growth strategy.”

Financial Highlights for Q2 Fiscal 2021 with Year Over Year Comparisons

Summary of Quarterly Results

(In millions, except per share data)

Q2 FY’21

Q2 FY’20

$ Change 

% Change 

(Y/Y)


Q2 FY’21
in CC*

% Change
in CC*


Revenues:









Cloud services and subscriptions

$350.5


$248.3


$102.1


41.1

%


$346.7


39.6

%


Customer support

334.5


315.5


19.0


6.0

%


326.9


3.6

%


Total annual recurring revenues**

$684.9


$563.8


$121.1


21.5

%


$673.6


19.5

%


License

107.3


138.1


(30.7)


(22.3)

%


104.1


(24.6)

%


Professional service and other

63.4


69.6


(6.3)


(9.0)

%


61.6


(11.4)

%


Total revenues

$855.6


$771.6


$84.1


10.9

%


$839.4


8.8

%


GAAP-based operating income

$234.5


$184.7


$49.7


26.9

%


N/A


N/A



Non-GAAP-based operating income (1)

$340.5


$296.4


$44.2


14.9

%


$330.9


11.6

%


GAAP-based earnings (loss) per share, diluted

($0.24)


$0.40


($0.64)


(160.0)

%


N/A


N/A



Non-GAAP-based EPS, diluted (1)(2)

$0.95


$0.84


$0.11


13.1

%


$0.92


9.5

%


GAAP-based net income (loss) attributable to OpenText

($65.5)


$107.5


($172.9)


(160.9)

%


N/A


N/A



Adjusted EBITDA (1)

$360.8


$317.0


$43.7


13.8

%


$351.0


10.7

%


Operating cash flows

$282.5


$207.2


$75.2


36.3

%


N/A


N/A



Free cash flows (1)

$274.8


$187.6


$87.2


46.5

%


N/A


N/A



Summary of YTD Results

(In millions, except per share data)

FY’21 YTD

FY’20 YTD

$ Change 

% Change 

(Y/Y)


FY’21 YTD
in CC*

% Change
in CC*


Revenues:









Cloud services and subscriptions

$691.4


$485.6


$205.8


42.4

%


$686.9


41.5

%


Customer support

663.9


627.8


36.1


5.7

%


654.0


4.2

%


Total annual recurring revenues**

$1,355.3


$1,113.4


$241.9


21.7

%


$1,341.0


20.4

%


License

175.9


216.0


(40.1)


(18.6)

%


171.3


(20.7)

%


Professional service and other

128.5


139.0


(10.6)


(7.6)

%


125.2


(10.0)

%


Total revenues

$1,659.7


$1,468.4


$191.2


13.0

%


$1,637.4


11.5

%


GAAP-based operating income

$416.8


$317.3


$99.6


31.4

%


N/A


N/A



Non-GAAP-based operating income (1)

$660.9


$530.3


$130.6


24.6

%


$644.8


21.6

%


GAAP-based EPS, diluted

$0.14


$0.67


($0.53)


(79.1)

%


N/A


N/A



Non-GAAP-based EPS, diluted (1)(2)

$1.84


$1.48


$0.36


24.3

%


$1.79


20.9

%


GAAP-based net income attributable to OpenText

$37.9


$181.9


($144.0)


(79.2)

%


N/A


N/A



Adjusted EBITDA (1)

$703.1


$571.2


$131.9


23.1

%


$686.7


20.2

%


Operating cash flows

$516.4


$344.7


$171.7


49.8

%


N/A


N/A



Free cash flows (1)

$493.4


$306.5


$186.9


61.0

%


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 February 3, 2021 a cash dividend of $0.2008 per common share. The record date for this dividend is March 5, 2021 and the payment date is March 26, 2021. 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.

Quarterly Business Highlights

  • Key customer wins in the quarter included Auto Club Group, Autoriteit Persoonsgegevens, City of San Diego, UK Department for Work and Pensions, Evonik Industries AG, Froneri, Heraeus, McCain Foods, MedPro Group, Nestlé, Norwegian Labour and Welfare Administration, Region Skane, Revo Health, SaskPower
  • OpenText Launches BrightCloud® Cloud Service Intelligence
  • OpenText named a leader in 2020 Gartner Magic Quadrant for Content Services Platforms
  • Launched OpenText™ Cloud Editions 20.4, designed to help customers get to the cloud, accelerate digital transformation, and rethink the future of work
  • OpenText brings Digital Investigation to the Cloud with Microsoft Azure
  • OpenText announced $1M USD donation to support food security

Summary of Quarterly Results









Q2 FY’21

Q1 FY’21

Q2 FY’20

% Change 

(Q2 FY’21 vs
Q1 FY’21)


% Change

(Q2 FY’21 vs
Q2 FY’20)


Revenue (millions)

$855.6


$804.0


$771.6


6.4

%


10.9

%


GAAP-based gross margin

70.5

%

69.0

%

69.9

%

150


bps

60


bps

GAAP-based earnings (loss) per share, diluted

($0.24)


$0.38


$0.40


(163.2)

%


(160.0)

%


Non-GAAP-based gross margin (1)

77.1

%

76.5

%

75.5

%

60


bps

160


bps

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

$0.95


$0.89


$0.84


6.7

%


13.1

%


(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 February 4, 2021 at 7:00 p.m. ET through 11:59 p.m. on February 18, 2021 and can be accessed by dialing 1-855-669-9658 (toll-free) or +1-604-674-8052 (international) and using passcode 5838 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-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 (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
[email protected]

Copyright ©2021 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, 2020


June 30, 2020

ASSETS

(unaudited)



Cash and cash equivalents

$

1,500,561



$

1,692,850


Accounts receivable trade, net of allowance for credit losses of $22,845 as of December 31, 2020 and $20,906 as of June 30, 2020

445,841



466,357


Contract assets

27,460



29,570


Income taxes recoverable

24,517



61,186


Prepaid expenses and other current assets

130,177



136,436


Total current assets

2,128,556



2,386,399


Property and equipment

227,434



244,555


Operating lease right of use assets

235,142



207,869


Long-term contract assets

18,175



15,427


Goodwill

4,696,349



4,672,356


Acquired intangible assets

1,402,928



1,612,564


Deferred tax assets

866,788



911,565


Other assets

164,238



154,467


Long-term income taxes recoverable

29,488



29,620


Total assets

$

9,769,098



$

10,234,822


LIABILITIES AND SHAREHOLDERS’ EQUITY




Current liabilities:




Accounts payable and accrued liabilities

$

348,080



$

373,314


Current portion of long-term debt

10,000



610,000


Operating lease liabilities

59,874



64,071


Deferred revenues

798,340



812,218


Income taxes payable

320,084



44,630


Total current liabilities

1,536,378



1,904,233


Long-term liabilities:




Accrued liabilities

28,334



34,955


Pension liability

83,271



73,129


Long-term debt

3,581,565



3,584,311


Long-term operating lease liabilities

227,265



217,165


Long-term deferred revenues

97,083



94,382


Long-term income taxes payable

32,794



171,200


Deferred tax liabilities

179,161



148,738


Total long-term liabilities

4,229,473



4,323,880


Shareholders’ equity:




Share capital and additional paid-in capital




272,588,542 and 271,863,354 Common Shares issued and outstanding at December 31, 2020 and June 30, 2020, respectively; authorized Common Shares: unlimited

1,889,857



1,851,777


Accumulated other comprehensive income

66,476



17,825


Retained earnings

2,093,076



2,159,396


Treasury stock, at cost (1,101,370 and 622,297 shares at December 31, 2020 and June 30, 2020, respectively)

(47,555)



(23,608)


Total OpenText shareholders’ equity

4,001,854



4,005,390


Non-controlling interests

1,393



1,319


Total shareholders’ equity

4,003,247



4,006,709


Total liabilities and shareholders’ equity

$

9,769,098



$

10,234,822


OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

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

(unaudited)



Three Months Ended December 31,


Six Months Ended December 31,


2020


2019


2020


2019

Revenues:








Cloud services and subscriptions

$

350,454



$

248,340



$

691,440



$

485,605


Customer support

334,492



315,508



663,891



627,806


License

107,348



138,095



175,871



215,993


Professional service and other

63,350



69,614



128,455



139,041


Total revenues

855,644



771,557



1,659,657



1,468,445


Cost of revenues:








Cloud services and subscriptions

117,882



103,644



230,506



205,806


Customer support

29,668



29,788



58,862



59,175


License

4,302



3,050



6,791



5,373


Professional service and other

46,619



53,604



93,200



107,942


Amortization of acquired technology-based intangible assets

54,091



42,299



112,128



82,597


Total cost of revenues

252,562



232,385



501,487



460,893


Gross profit

603,082



539,172



1,158,170



1,007,552


Operating expenses:








Research and development

100,238



80,283



194,141



161,461


Sales and marketing

147,897



137,310



280,297



265,928


General and administrative

62,765



54,595



118,954



106,130


Depreciation

20,280



20,712



42,283



40,989


Amortization of acquired customer-based intangible assets

54,926



51,460



109,919



100,618


Special charges (recoveries)

(17,494)



10,072



(4,250)



15,173


Total operating expenses

368,612



354,432



741,344



690,299


Income from operations

234,470



184,740



416,826



317,253


Other income (expense), net

5,251



1,972



8,134



(813)


Interest and other related expense, net

(37,595)



(32,376)



(76,684)



(64,586)


Income before income taxes

202,126



154,336



348,276



251,854


Provision for (recovery of) income taxes

267,559



46,818



310,303



69,909


Net income (loss) for the period

$

(65,433)



$

107,518



$

37,973



$

181,945


Net (income) loss attributable to non-controlling interests

(44)



(51)



(74)



(77)


Net income (loss) attributable to OpenText

$

(65,477)



$

107,467



$

37,899



$

181,868


Earnings (loss) per share—basic attributable to OpenText

$

(0.24)



$

0.40



$

0.14



$

0.67


Earnings (loss) per share—diluted attributable to OpenText

$

(0.24)



$

0.40



$

0.14



$

0.67


Weighted average number of Common Shares outstanding—basic (in ‘000’s)

272,433



270,450



272,210



270,232


Weighted average number of Common Shares outstanding—diluted (in ‘000’s)

272,433



271,590



273,019



271,328


OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands of U.S. dollars)

(unaudited)



Three Months Ended December 31,


Six Months Ended December 31,


2020


2019


2020


2019

Net income (loss) for the period

$

(65,433)



$

107,518



$

37,973



$

181,945


Other comprehensive income (loss)—net of tax:








Net foreign currency translation adjustments

26,065



4,875



48,710



(736)


Unrealized gain (loss) on cash flow hedges:








Unrealized gain (loss) – net of tax expense (recovery) effect of $751 and $301 for the three months ended December 31, 2020 and 2019, respectively; $1,056 and $95 for the six months ended December 31, 2020 and 2019, respectively

2,082



833



2,927



261


(Gain) loss reclassified into net income (loss) – net of tax (expense) recovery effect of ($227) and ($26) for the three months ended December 31, 2020 and 2019, respectively; ($283) and ($23) for the six months ended December 31, 2020 and 2019, respectively

(628)



(72)



(784)



(64)


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








Actuarial gain (loss) – net of tax expense (recovery) effect of ($441) and $1,308 for the three months ended December 31, 2020 and 2019, respectively; ($1,357) and $59 for the six months ended December 31, 2020 and 2019, respectively

(981)



3,698



(2,686)



614


Amortization of actuarial (gain) loss into net income (loss) – net of tax (expense) recovery effect of $93 and $97 for the three months ended December 31, 2020 and 2019, respectively; $180 and $243 for the six months ended December 31, 2020 and 2019, respectively

243



260



484



491


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

26,781



9,594



48,651



566


Total comprehensive income (loss)

(38,652)



117,112



86,624



182,511


Comprehensive (income) loss attributable to non-controlling interests

(44)



(51)



(74)



(77)


Total comprehensive income (loss) attributable to OpenText

$

(38,696)



$

117,061



$

86,550



$

182,434


OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

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

(unaudited)



Three Months Ended December 31, 2020


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, 2020

272,174



$

1,872,411



(1,394)



$

(58,788)



$

2,213,053



$

39,695



$

1,349



$

4,067,720


Issuance of Common Shares
















Under employee stock option plans

213



6,893













6,893


Under employee stock purchase plans

202



7,260













7,260


Share-based compensation



14,526













14,526


Issuance of treasury stock



(11,233)



293



11,233










Dividends declared

($0.2008 per Common Share)









(54,500)







(54,500)


Other comprehensive income – net











26,781





26,781


Net income (loss) for the quarter









(65,477)





44



(65,433)


Balance as of December 31, 2020

272,589



$

1,889,857



(1,101)



$

(47,555)



$

2,093,076



$

66,476



$

1,393



$

4,003,247







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 – 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







Six Months Ended December 31, 2020


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, 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

524



15,498













15,498


Under employee stock purchase plans

202



7,553



193



6,690









14,243


Share-based compensation



26,262













26,262


Purchase of treasury stock





(965)



(41,870)









(41,870)


Issuance of treasury stock



(11,233)



293



11,233










Dividends declared

($0.3754 per Common Share)









(101,769)







(101,769)


Other comprehensive income – net











48,651





48,651


Net income for the period









37,899





74



37,973


Balance as of December 31, 2020

272,589



$

1,889,857



(1,101)



$

(47,555)



$

2,093,076



$

66,476



$

1,393



$

4,003,247







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 – net











566





566


Net income for the period









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


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,


2020


2019


2020


2019

Cash flows from operating activities:








Net income (loss) for the period

$

(65,433)



$

107,518



$

37,973



$

181,945


Adjustments to reconcile net income (loss) to net cash provided by operating activities:








Depreciation and amortization of intangible assets

129,297



114,471



264,330



224,204


Share-based compensation expense

14,526



7,783



26,262



14,674


Pension expense

1,615



1,459



3,120



2,895


Amortization of debt issuance costs

1,142



1,149



2,254



2,276


Loss on sale and write down of property and equipment

380





953




Deferred taxes

81,577



27,924



80,397



34,168


Share in net (income) loss of equity investees

(2,034)



(1,266)



(8,255)



(1,948)


Changes in operating assets and liabilities:








Accounts receivable

(42,115)



(55,833)



32,727



2,598


Contract assets

(10,355)



(10,458)



(20,193)



(17,659)


Prepaid expenses and other current assets

11,457



1,111



7,966



(501)


Income taxes

147,809



(7,944)



168,841



(891)


Accounts payable and accrued liabilities

14,891



29,744



(36,538)



(33,235)


Deferred revenue

22,621



(2,924)



(18,647)



(64,093)


Other assets

(2,016)



(3,327)



(1,467)



2,357


Operating lease assets and liabilities, net

(20,907)



(2,169)



(23,364)



(2,105)


Net cash provided by operating activities

282,455



207,238



516,359



344,685


Cash flows from investing activities:








Additions of property and equipment

(7,651)



(19,598)



(22,956)



(38,212)


Purchase of XMedius

444





444




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



(1,216,639)





(1,216,639)


Purchase of Dynamic Solutions Group Inc.

(371)



(4,149)



(371)



(4,149)


Other investing activities

867



(3,505)



(1,370)



(5,541)


Net cash used in investing activities

(6,711)



(1,243,891)



(24,253)



(1,264,541)


Cash flows from financing activities:








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

13,338



12,000



29,177



23,117


Proceeds from long-term debt and Revolver



750,000





750,000


Repayment of long-term debt and Revolver

(602,500)



(2,500)



(605,000)



(5,000)


Debt issuance costs



(979)





(979)


Purchase of treasury stock





(41,870)



(12,424)


Payments of dividends to shareholders

(54,500)



(47,092)



(101,769)



(94,098)


Net cash provided by (used in) financing activities

(643,662)



711,429



(719,462)



660,616


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

22,979



3,640



33,771



(4,071)


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

(344,939)



(321,584)



(193,585)



(263,311)


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

1,848,617



1,001,816



1,697,263



943,543


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

$

1,503,678



$

680,232



$

1,503,678



$

680,232


Reconciliation of cash, cash equivalents and restricted cash:

December 31, 2020


December 31, 2019

Cash and cash equivalents

$

1,500,561



$

675,403


Restricted cash (1)

3,117



4,829


Total cash, cash equivalents and restricted cash

$

1,503,678



$

680,232


(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 (loss) or earnings (loss) 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 GAAP-based 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 (loss), 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 (Loss). 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-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, 2020.

(In thousands, except for per share data)


Three Months Ended December 31, 2020


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

$

117,882



$

(1,143)


(1)

$

116,739



Customer support

29,668



(499)


(1)

29,169



Professional service and other

46,619



(666)


(1)

45,953



Amortization of acquired technology-based intangible assets

54,091



(54,091)


(2)



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

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

603,082


70.5%

56,399


(3)

659,481


77.1%

Operating expenses







Research and development

100,238



(2,707)


(1)

97,531



Sales and marketing

147,897



(4,957)


(1)

142,940



General and administrative

62,765



(4,554)


(1)

58,211



Amortization of acquired customer-based intangible assets

54,926



(54,926)


(2)



Special charges (recoveries)

(17,494)



17,494


(4)



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

234,470



106,049


(5)

340,519



Other income (expense), net

5,251



(5,251)


(6)



Provision for (recovery of) income taxes

267,559



(225,150)


(7)

42,409



GAAP-based net income (loss) / Non-GAAP-based net income, attributable to OpenText

(65,477)



325,948


(8)

260,471



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

$

(0.24)



$

1.19


(8)

$

0.95



(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 132% 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. The GAAP-based tax provision rate for the three months ended December 31, 2020 includes an income tax provision charge from the IRS Settlement partially offset by a tax benefit from the release of unrecognized tax benefits due to the conclusion of relevant tax audits.

(8)

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


Three Months Ended December 31, 2020



Per share diluted*

GAAP-based net loss, attributable to OpenText

$

(65,477)


$

(0.24)


Add:



Amortization

109,017


0.40


Share-based compensation

14,526


0.05


Special charges (recoveries)

(17,494)


(0.06)


Other (income) expense, net

(5,251)


(0.02)


GAAP-based provision for (recovery of) income taxes

267,559


0.98


Non-GAAP-based provision for income taxes

(42,409)


(0.16)


Non-GAAP-based net income, attributable to OpenText

$

260,471


$

0.95


 *Weighted average number of Common Shares – diluted (in thousands) used in the calculation of Non-GAAP-based earnings per share for the three months ended December 31, 2020 were 273,183.

Reconciliation of Adjusted EBITDA




Three Months Ended December 31, 2020

GAAP-based net loss, attributable to OpenText

$

(65,477)


Add:


Provision for (recovery of) income taxes

267,559


Interest and other related expense, net

37,595


Amortization of acquired technology-based intangible assets

54,091


Amortization of acquired customer-based intangible assets

54,926


Depreciation

20,280


Share-based compensation

14,526


Special charges (recoveries)

(17,494)


Other (income) expense, net

(5,251)


Adjusted EBITDA

$

360,755




GAAP-based net loss margin

(7.7)

%

Adjusted EBITDA margin

42.2

%

Reconciliation of Free cash flows




Three Months Ended December 31, 2020

GAAP-based cash flows provided by operating activities

$

282,455


Add:


Capital expenditures (1)


(7,651)


Free cash flows

$

274,804




(1) Defined as “Additions of property and equipment” in the Condensed Consolidated Statements of Cash Flows.

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

for the six months ended December 31, 2020.

(In thousands, except for per share data)


Six Months Ended December 31, 2020


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

$

230,506



$

(1,979)


(1)

$

228,527



Customer support

58,862



(941)


(1)

57,921



Professional service and other

93,200



(1,183)


(1)

92,017



Amortization of acquired technology-based intangible assets

112,128



(112,128)


(2)



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

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

1,158,170


69.8%

116,231


(3)

1,274,401


76.8%

Operating expenses







Research and development

194,141



(5,049)


(1)

189,092



Sales and marketing

280,297



(9,014)


(1)

271,283



General and administrative

118,954



(8,096)


(1)

110,858



Amortization of acquired customer-based intangible assets

109,919



(109,919)


(2)



Special charges (recoveries)

(4,250)



4,250


(4)



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

416,826



244,059


(5)

660,885



Other income (expense), net

8,134



(8,134)


(6)



Provision for (recovery of) income taxes

310,303



(228,515)


(7)

81,788



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

37,899



464,440


(8)

502,339



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

$

0.14



$

1.70


(8)

$

1.84



(1)

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

(2)

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

(3)

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

(4)

Adjustment relates to the exclusion of special charges (recoveries) from our Non-GAAP-based operating expenses as special charges (recoveries) are generally incurred in the periods relevant to an acquisition and include 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 89% 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. The GAAP-based tax provision rate for the six months ended December 31, 2020 includes an income tax provision charge from the IRS Settlement partially offset by a tax benefit from the release of unrecognized tax benefits due to the conclusion of relevant tax audits.

(8)

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


Six Months Ended December 31, 2020



Per share diluted

GAAP-based net income, attributable to OpenText

$

37,899


$

0.14


Add:



Amortization

222,047


0.81


Share-based compensation

26,262


0.10


Special charges (recoveries)

(4,250)


(0.02)


Other (income) expense, net

(8,134)


(0.03)


GAAP-based provision for (recovery of) income taxes

310,303


1.14


Non-GAAP-based provision for income taxes

(81,788)


(0.30)


Non-GAAP-based net income, attributable to OpenText

$

502,339


$

1.84


Reconciliation of Adjusted EBITDA



Six Months Ended December 31, 2020

GAAP-based net income, attributable to OpenText

$

37,899


Add:


Provision for (recovery of) income taxes

310,303


Interest and other related expense, net

76,684


Amortization of acquired technology-based intangible assets

112,128


Amortization of acquired customer-based intangible assets

109,919


Depreciation

42,283


Share-based compensation

26,262


Special charges (recoveries)

(4,250)


Other (income) expense, net

(8,134)


Adjusted EBITDA

$

703,094




GAAP-based net income margin

2.3

%

Adjusted EBITDA margin

42.4

%

Reconciliation of Free cash flows



Six Months Ended December 31, 2020

GAAP-based cash flows provided by operating activities

$

516,359


Add:


Capital expenditures (1)

(22,956)


Free cash flows

$

493,403


(1) Defined as “Additions of property and 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, 2020.

(In thousands, except for per share data)


Three Months Ended September 30, 2020


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

$

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 (%) /

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

555,088


69.0%

59,832


(3)

614,920


76.5%

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




GAAP-based net income margin

12.9

%

Adjusted EBITDA margin

42.6

%

Reconciliation of Free cash flows



Three Months Ended September 30, 2020

GAAP-based 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 and 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 December 31, 2019.

(In thousands, except for per share data)


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 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




GAAP-based net income margin

13.9

%

Adjusted EBITDA margin

41.1

%

Reconciliation of Free cash flows



Three Months Ended December 31, 2019

GAAP-based cash flows provided by operating activities

$

207,238


Add:


Capital expenditures (1)


(19,598)


Free cash flows

$

187,640


(1) Defined as “Additions of property and equipment” in the Condensed Consolidated Statements of Cash Flows.

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 data)


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 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




GAAP-based net income margin

12.4

%

Adjusted EBITDA margin

38.9

%

Reconciliation of Free cash flows



Six Months Ended December 31, 2019

GAAP-based cash flows provided by operating activities

$

344,685


Add:


Capital expenditures (1)

(38,212)


Free cash flows

$

306,473


(1) Defined as “Additions of property and 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 and six months ended December 31, 2020 and 2019:



Three Months Ended December 31, 2020


Three Months Ended December 31, 2019

Currencies

% of Revenue

% of Expenses* 


% of Revenue

% of Expenses* 

EURO

24

%

14

%


25

%

15

%

GBP

5

%

5

%


5

%

6

%

CAD

3

%

10

%


3

%

10

%

USD

60

%

54

%


58

%

51

%

Other

8

%

17

%


9

%

18

%

Total

100

%

100

%


100

%

100

%










Six Months Ended December 31, 2020


Six Months Ended December 31, 2019

Currencies

% of Revenue

% of Expenses* 


% of Revenue

% of Expenses* 

EURO

23

%

14

%


23

%

14

%

GBP

5

%

5

%


5

%

6

%

CAD

3

%

10

%


3

%

10

%

USD

61

%

55

%


59

%

52

%

Other

8

%

16

%


10

%

18

%

Total

100

%

100

%


100

%

100

%

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

SOURCE Open Text Corporation

Related Links

https://www.opentext.com/



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