OpenText Reports Second Quarter Fiscal Year 2021 Financial Results

- February 4th, 2021

Record Annual Recurring Revenues Record Cloud Revenues – Second Quarter Highlights Operating Cash Flows of $282.5 million in the quarter, up 36.3% YY Free Cash Flows of $274.8 million in the quarter, up 46.5% YY GAAP-based net income of million down 160.9% YY, margin of % down 2,160 basis points YY, primarily due to one-time IRS settlement charge of $299 million Adjusted EBITDA of $360.8 million up 13.8%, margin of …

Record Annual Recurring Revenues (ARR), Record Cloud Revenues

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
investors@opentext.com

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).

Cision View original content: http://www.prnewswire.com/news-releases/opentext-reports-second-quarter-fiscal-year-2021-financial-results-301222693.html

SOURCE Open Text Corporation

News Provided by PR Newswire via QuoteMedia

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