OpenText Reports Third Quarter Fiscal Year 2021 Financial Results

- May 6th, 2021

Record Annual Recurring Revenues Record Cloud Revenues – Third Quarter Highlights Operating cash flows were $63.6 million and free cash flows were $50.3 million which include an IRS settlement payment of $290.0 million GAAP-based net income of $91.5 million up 252.4% YY, margin of 11.0%, up 780 basis points YY Adjusted EBITDA of $297.1 million up 14.5%, margin of 35.7%, up 390 basis points YY GAAP-based diluted EPS …

Record Annual Recurring Revenues (ARR), Record Cloud Revenues

Third Quarter Highlights

Total Revenues

(in millions)

Annual Recurring Revenues

(in millions)

Cloud Revenues

(in millions)

Reported

Constant Currency

Reported

Constant Currency

Reported

Constant Currency

$832.9

$807.9

$691.8

$673.8

$355.8

$350.0

+2.2%

(0.8)%

+4.4%

+1.7%

+4.8%

+3.1%

Annual Recurring Revenues represent 83% of Total Revenues

  • Operating cash flows were $63.6 million and free cash flows were $50.3 million , which include an IRS settlement payment of $290.0 million
  • GAAP-based net income of $91.5 million , up 252.4% Y/Y, margin of 11.0%, up 780 basis points Y/Y
  • Adjusted EBITDA of $297.1 million , up 14.5%, margin of 35.7%, up 390 basis points Y/Y
  • GAAP-based diluted EPS of $0.33 , up 230.0% Y/Y
  • Non-GAAP diluted EPS of $0.75 , up 23.0%, and $0.71 in constant currency, up 16.4% Y/Y

Open Text Corporation (NASDAQ: OTEX), (TSX: OTEX), “The Information Company,” today announced its financial results for the third quarter ended March 31, 2021.

“The shift to modern work, digital customer experiences, supply chain retooling and continued economic stimulus are creating positive demand for OpenText Cloud Editions ™ and other services,” said Mark J. Barrenechea , OpenText CEO & CTO. “OpenText delivered a robust quarter with organic revenue growth in Annual Recurring Revenues (ARR) and Cloud services and subscriptions, driving Total Growth and profitability across the organization. Total revenues in the quarter grew 2.2% year-over-year to $832.9 million , Cloud services and subscriptions revenues grew 4.8% year-over-year to a record $355.8 million .  Annual Recurring Revenues grew to a record $691.8 million , up 4.4% year-over-year, representing 83% of total revenues.  We are well positioned to grow and extend our leadership in Information Management as we focus on expanding our global sales initiatives and capturing market share.”

“OpenText Cloud Editions – The Ultimate Cloud™ brings together everything a company needs to accelerate their digital transformation, grow, engage with their customers, and stay ahead of the competition,” said Mr. Barrenechea. “With flexible deployment options and secure, purpose-built solutions to support modern work, OpenText’s complete Information Management suite continues to be vital for companies of all sizes. Through our GROW with OpenText program, we will continue to successfully deliver compelling innovations that provide our customers with a competitive digital advantage.”

“In Q3 we continued on our proven path, achieving excellence in operational performance while investing in initiatives to drive organic growth,” said OpenText EVP, CFO, Madhu Ranganathan .  “We delivered $297.1 million of Adjusted EBITDA and $63.6 million of free cash flows, which include the IRS settlement payment of $290.0 million , and we continue to focus on generating consistent free cash flows. Our balance sheet and liquidity position remain strong with approximately $1.5 billion of cash after the IRS settlement payment and a 1.6x net leverage ratio, giving us the financial strength and flexibility to invest in future growth and deploy capital for the right acquisitions.”

Financial Highlights for Q3 Fiscal 2021 with Year Over Year Comparisons

Summary of Quarterly Results

(In millions, except per share data)

Q3 FY’21

Q3 FY’20

$ Change

% Change

(Y/Y)

Q3 FY’21
in CC*

% Change
in CC*

Revenues:

Cloud services and subscriptions

$355.8

$339.5

$16.4

4.8

%

$350.0

3.1

%

Customer support

335.9

322.9

13.1

4.0

%

323.8

0.3

%

Total annual recurring revenues**

$691.8

$662.3

$29.4

4.4

%

$673.8

1.7

%

License

76.3

81.1

(4.8)

(5.9)

%

72.2

(10.9)

%

Professional service and other

64.9

71.3

(6.4)

(9.0)

%

61.8

(13.3)

%

Total revenues

$832.9

$814.7

$18.3

2.2

%

$807.9

(0.8)

%

GAAP-based operating income

$152.4

$95.1

$57.3

60.3

%

N/A

N/A

Non-GAAP-based operating income (1)

$275.2

$234.7

$40.5

17.3

%

$263.4

12.2

%

GAAP-based net income attributable to OpenText

$91.5

$26.0

$65.5

252.4

%

N/A

N/A

GAAP-based EPS, diluted

$0.33

$0.10

$0.23

230.0

%

N/A

N/A

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

$0.75

$0.61

$0.14

23.0

%

$0.71

16.4

%

Adjusted EBITDA (1)

$297.1

$259.5

$37.7

14.5

%

$285.2

9.9

%

Operating cash flows

$63.6

$329.6

($266.0)

(80.7)

%

N/A

N/A

Free cash flows (1)

$50.3

$312.8

($262.5)

(83.9)

%

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

$1,047.3

$825.1

$222.2

26.9

%

$1,036.9

25.7

%

Customer support

999.8

950.7

49.1

5.2

%

977.9

2.9

%

Total annual recurring revenues**

$2,047.1

$1,775.7

$271.4

15.3

%

$2,014.8

13.5

%

License

252.2

297.0

(44.9)

(15.1)

%

243.5

(18.0)

%

Professional service and other

193.3

210.3

(17.0)

(8.1)

%

187.0

(11.1)

%

Total revenues

$2,492.6

$2,283.1

$209.5

9.2

%

$2,445.4

7.1

%

GAAP-based operating income

$569.2

$412.3

$156.9

38.1

%

N/A

N/A

Non-GAAP-based operating income (1)

$936.1

$765.0

$171.1

22.4

%

$908.2

18.7

%

GAAP-based net income attributable to OpenText

$129.4

$207.8

($78.4)

(37.7)

%

N/A

N/A

GAAP-based EPS, diluted

$0.47

$0.77

($0.30)

(39.0)

%

N/A

N/A

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

$2.59

$2.09

$0.50

23.9

%

$2.50

19.6

%

Adjusted EBITDA (1)

$1,000.2

$830.7

$169.5

20.4

%

$971.9

17.0

%

Operating cash flows

$579.9

$674.3

($94.4)

(14.0)

%

N/A

N/A

Free cash flows (1)

$543.7

$619.3

($75.6)

(12.2)

%

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 May 5, 2021 a cash dividend of $0.2008 per common share. The record date for this dividend is June 4, 2021 and the payment date is June 25, 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 AccessDx, Achievers, AIA Philam Life, Central 1, Impulse Dynamics, Johnson & Johnson, Maersk, New Balance Athletic Shoe, Inc., Royal Bank of Canada , State of Qatar Ministry of Interior, Uniper and Vitesco Technologies
  • Launched OpenText World Europe and Asia Pacific
  • Announced the release of Cloud Editions 21.2, enabling organizations to GROW with OpenText
  • Announced new Content Services platform to power modern work in the Cloud
  • OpenText Migrate achieved AWS Outposts Ready designation
  • Announced OpenText™ EnCase Endpoint Security is now certified on Microsoft Azure
  • Launched Webroot Business Management Console 6.0
  • Appointed Kristina Lengyel as Executive Vice President, Customer Solutions
  • Appointed Renee McKenzie as Senior Vice President, Chief Information Officer

Summary of Quarterly Results

Q3 FY’21

Q2 FY’21

Q3 FY’20

% Change

(Q3 FY’21 vs Q2 FY’21)

% Change

(Q3 FY’21 vs Q3 FY’20)

Revenue (millions)

$832.9

$855.6

$814.7

(2.7)

%

2.2

%

GAAP-based gross margin

68.6

%

70.5

%

65.4

%

(190)

bps

320

bps

GAAP-based earnings (loss) per share, diluted

$0.33

($0.24)

$0.10

(237.5)

%

230.0

%

Non-GAAP-based gross margin (1)

75.2

%

77.1

%

73.3

%

(190)

bps

190

bps

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

$0.75

$0.95

$0.61

(21.1)

%

23.0

%

(1)

Please see note 2 “Use of Non-GAAP Financial Measures” below.

(2)

Please also see note 14 to the Company’s Fiscal 2018 Consolidated Financial Statements on Form 10-K. Reflective of the amount of net tax benefit arising from the internal reorganization assumed to be allocable to the current period based on the forecasted utilization period.

Conference Call Information

The public is invited to listen to the earnings conference call today at 5:00 p.m. ET ( 2:00 p.m. PT ) by dialing 1-800-319-4610 (toll-free) or +1-604-638-5340 (international). Please dial-in 10 minutes ahead of time to ensure proper connection. Alternatively, a live webcast of the earnings conference call will be available on the Investor Relations section of the Company’s website at http://investors.opentext.com/investor-events-and-presentations .

A replay of the call will be available beginning May 6, 2021 at 7:00 p.m. ET through 11:59 p.m. on May 20, 2021 and can be accessed by dialing 1-855-669-9658 (toll-free) or +1-604-674-8052 (international) and using passcode 6557 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, powered by OpenText Cloud Editions. 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)

March 31, 2021

June 30, 2020

ASSETS

(unaudited)

Cash and cash equivalents

$

1,475,626

$

1,692,850

Accounts receivable trade, net of allowance for credit losses of $22,931 as of March 31, 2021 and $20,906 as of June 30, 2020

402,672

466,357

Contract assets

26,276

29,570

Income taxes recoverable

17,026

61,186

Prepaid expenses and other current assets

140,576

136,436

Total current assets

2,062,176

2,386,399

Property and equipment

230,517

244,555

Operating lease right of use assets

226,021

207,869

Long-term contract assets

18,594

15,427

Goodwill

4,688,449

4,672,356

Acquired intangible assets

1,291,796

1,612,564

Deferred tax assets

833,369

911,565

Other assets

174,965

154,467

Long-term income taxes recoverable

30,734

29,620

Total assets

$

9,556,621

$

10,234,822

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Accounts payable and accrued liabilities

$

372,819

$

373,314

Current portion of long-term debt

10,000

610,000

Operating lease liabilities

56,143

64,071

Deferred revenues

873,581

812,218

Income taxes payable

26,481

44,630

Total current liabilities

1,339,024

1,904,233

Long-term liabilities:

Accrued liabilities

27,849

34,955

Pension liability

80,649

73,129

Long-term debt

3,580,206

3,584,311

Long-term operating lease liabilities

217,584

217,165

Long-term deferred revenues

99,679

94,382

Long-term income taxes payable

31,974

171,200

Deferred tax liabilities

147,731

148,738

Total long-term liabilities

4,185,672

4,323,880

Shareholders’ equity:

Share capital and additional paid-in capital

272,973,445 and 271,863,354 Common Shares issued and outstanding at March 31, 2021 and June 30, 2020, respectively; authorized Common Shares: unlimited

1,915,759

1,851,777

Accumulated other comprehensive income

54,074

17,825

Retained earnings

2,130,047

2,159,396

Treasury stock, at cost (1,567,664 and 622,297 shares at March 31, 2021 and June 30, 2020, respectively)

(69,386)

(23,608)

Total OpenText shareholders’ equity

4,030,494

4,005,390

Non-controlling interests

1,431

1,319

Total shareholders’ equity

4,031,925

4,006,709

Total liabilities and shareholders’ equity

$

9,556,621

$

10,234,822

OPEN TEXT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands of U.S. dollars, except share and per share data)
(unaudited)

Three Months Ended March 31,

Nine Months Ended March 31,

2021

2020

2021

2020

Revenues:

Cloud services and subscriptions

$

355,845

$

339,463

$

1,047,285

$

825,068

Customer support

335,915

322,865

999,806

950,671

License

76,299

81,055

252,170

297,048

Professional service and other

64,872

71,296

193,327

210,337

Total revenues

832,931

814,679

2,492,588

2,283,124

Cost of revenues:

Cloud services and subscriptions

123,729

127,565

354,235

333,371

Customer support

30,953

32,151

89,815

91,326

License

2,810

2,544

9,601

7,917

Professional service and other

50,321

56,526

143,521

164,468

Amortization of acquired technology-based intangible assets

53,453

63,401

165,581

145,998

Total cost of revenues

261,266

282,187

762,753

743,080

Gross profit

571,665

532,492

1,729,835

1,540,044

Operating expenses:

Research and development

110,071

108,184

304,212

269,645

Sales and marketing

158,687

166,234

438,984

432,162

General and administrative

71,548

68,828

190,502

174,958

Depreciation

21,961

24,820

64,244

65,809

Amortization of acquired customer-based intangible assets

54,156

59,943

164,075

160,561

Special charges (recoveries)

2,846

9,406

(1,404)

24,579

Total operating expenses

419,269

437,415

1,160,613

1,127,714

Income from operations

152,396

95,077

569,222

412,330

Other income (expense), net

8,283

(18,923)

16,417

(19,736)

Interest and other related expense, net

(37,333)

(41,263)

(114,017)

(105,849)

Income before income taxes

123,346

34,891

471,622

286,745

Provision for (recovery of) income taxes

31,818

8,891

342,121

78,800

Net income for the period

$

91,528

$

26,000

$

129,501

$

207,945

Net (income) loss attributable to non-controlling interests

(38)

(35)

(112)

(112)

Net income attributable to OpenText

$

91,490

$

25,965

$

129,389

$

207,833

Earnings per share—basic attributable to OpenText

$

0.34

$

0.10

$

0.47

$

0.77

Earnings per share—diluted attributable to OpenText

$

0.33

$

0.10

$

0.47

$

0.77

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

272,832

271,221

272,414

270,559

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

273,924

272,202

273,312

271,643

OPEN TEXT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands of U.S. dollars)
(unaudited)

Three Months Ended March 31,

Nine Months Ended March 31,

2021

2020

2021

2020

Net income for the period

$

91,528

$

26,000

$

129,501

$

207,945

Other comprehensive income (loss)—net of tax:

Net foreign currency translation adjustments

(12,568)

(15,484)

36,142

(16,220)

Unrealized gain (loss) on cash flow hedges:

Unrealized gain (loss) – net of tax expense (recovery) effect of $246 and ($1,276) for the three months ended March 31, 2021 and 2020, respectively; $1,302 and ($1,181) for the nine months ended March 31, 2021 and 2020, respectively

681

(3,539)

3,608

(3,278)

(Gain) loss reclassified into net income – net of tax (expense) recovery effect of ($399) and $121 for the three months ended March 31, 2021 and 2020, respectively; ($682) and $98 for the nine months ended March 31, 2021 and 2020, respectively

(1,108)

337

(1,892)

273

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

Actuarial gain (loss) – net of tax expense (recovery) effect of $944 and $1,495 for the three months ended March 31, 2021 and 2020, respectively; ($413) and $1,554 for the nine months ended March 31, 2021 and 2020, respectively

344

3,309

(2,342)

3,923

Amortization of actuarial (gain) loss into net income – net of tax (expense) recovery effect of $95 and $203 for the three months ended March 31, 2021 and 2020, respectively; $275 and $446 for the nine months ended March 31, 2021 and 2020, respectively

249

153

733

644

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

(12,402)

(15,224)

36,249

(14,658)

Total comprehensive income

79,126

10,776

165,750

193,287

Comprehensive (income) loss attributable to non-controlling interests

(38)

(35)

(112)

(112)

Total comprehensive income attributable to OpenText

$

79,088

$

10,741

$

165,638

$

193,175

OPEN TEXT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands of U.S. dollars and shares)
|
(unaudited)

Three Months Ended March 31, 2021

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 December 31, 2020

272,589

$

1,889,857

(1,101)

$

(47,555)

$

2,093,076

$

66,476

$

1,393

$

4,003,247

Issuance of Common Shares

Under employee stock option plans

219

8,270

8,270

Under employee stock purchase plans

165

6,421

6,421

Share-based compensation

12,357

12,357

Purchase of treasury stock

(490)

(22,977)

(22,977)

Issuance of treasury stock

(1,146)

23

1,146

Dividends declared

($0.2008 per Common Share)

(54,519)

(54,519)

Other comprehensive income (loss) – net

(12,402)

(12,402)

Net income for the quarter

91,490

38

91,528

Balance as of March 31, 2021

272,973

$

1,915,759

(1,568)

$

(69,386)

$

2,130,047

$

54,074

$

1,431

$

4,031,925

Three Months Ended March 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 December 31, 2019

270,609

$

1,803,663

(847)

$

(32,066)

$

2,201,653

$

24,690

$

1,292

$

3,999,232

Issuance of Common Shares

Under employee stock option plans

886

23,414

23,414

Under employee stock purchase plans

139

5,217

5,217

Share-based compensation

6,856

6,856

Dividends declared

($0.1746 per Common Share)

(47,279)

(47,279)

Other comprehensive income (loss) – net

(15,224)

(15,224)

Non-controlling interest

(39)

(39)

Net income for the quarter

25,965

35

26,000

Balance as of March 31, 2020

271,634

$

1,839,150

(847)

$

(32,066)

$

2,180,339

$

9,466

$

1,288

$

3,998,177

Nine Months Ended March 31, 2021

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

743

23,768

23,768

Under employee stock purchase plans

367

13,974

193

6,690

20,664

Share-based compensation

38,619

38,619

Purchase of treasury stock

(1,455)

(64,847)

(64,847)

Issuance of treasury stock

(12,379)

316

12,379

Dividends declared

($0.5762 per Common Share)

(156,288)

(156,288)

Other comprehensive income (loss) – net

36,249

36,249

Net income for the period

129,389

112

129,501

Balance as of March 31, 2021

272,973

$

1,915,759

(1,568)

$

(69,386)

$

2,130,047

$

54,074

$

1,431

$

4,031,925

Nine Months Ended March 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, 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

1,301

34,773

34,773

Under employee stock purchase plans

499

17,757

17,757

Share-based compensation

21,530

21,530

Purchase of treasury stock

(300)

(12,424)

(12,424)

Issuance of treasury stock

(9,124)

256

9,124

Dividends declared

($0.5238 per Common Share)

(141,377)

(141,377)

Other comprehensive income (loss) – net

(14,658)

(14,658)

Non-controlling interest

(39)

(39)

Net income for the period

207,833

112

207,945

Balance as of March 31, 2020

271,634

$

1,839,150

(847)

$

(32,066)

$

2,180,339

$

9,466

$

1,288

$

3,998,177

OPEN TEXT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
(unaudited)

Three Months Ended March 31,

Nine Months Ended March 31,

2021

2020

2021

2020

Cash flows from operating activities:

Net income for the period

$

91,528

$

26,000

$

129,501

$

207,945

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

Depreciation and amortization of intangible assets

129,570

148,164

393,900

372,368

Share-based compensation expense

12,357

6,856

38,619

21,530

Pension expense

1,550

1,428

4,670

4,323

Amortization of debt issuance costs

1,141

1,227

3,395

3,503

Loss on extinguishment of debt

17,854

17,854

Loss on sale and write down of property and equipment

1,026

1,979

Deferred taxes

447

2,543

80,844

36,711

Share in net (income) loss of equity investees

(11,765)

(4,527)

(20,020)

(6,475)

Changes in operating assets and liabilities:

Accounts receivable

54,345

83,590

87,072

86,188

Contract assets

(8,842)

(9,006)

(29,035)

(26,665)

Prepaid expenses and other current assets

(10,494)

(6,854)

(2,528)

(7,355)

Income taxes

(286,435)

(33,717)

(117,594)

(34,608)

Accounts payable and accrued liabilities

9,211

(9,028)

(27,327)

(42,263)

Deferred revenue

81,247

102,373

62,600

38,280

Other assets

2,232

5,079

765

7,436

Operating lease assets and liabilities, net

(3,546)

(2,381)

(26,910)

(4,486)

Net cash provided by operating activities

63,572

329,601

579,931

674,286

Cash flows from investing activities:

Additions of property and equipment

(13,311)

(16,793)

(36,267)

(55,005)

Purchase of XMedius

(73,335)

444

(73,335)

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

(88,458)

(1,305,097)

Purchase of Dynamic Solutions Group Inc.

(371)

(4,149)

Other investing activities

(648)

(5,803)

(2,018)

(11,344)

Net cash used in investing activities

(13,959)

(184,389)

(38,212)

(1,448,930)

Cash flows from financing activities:

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

16,603

29,990

45,780

53,107

Proceeds from long-term debt and Revolver

2,400,000

3,150,000

Repayment of long-term debt and Revolver

(2,500)

(1,706,131)

(607,500)

(1,711,131)

Debt extinguishment costs

(11,248)

(11,248)

Debt issuance costs

(17,191)

(18,170)

Purchase of treasury stock

(22,977)

(64,847)

(12,424)

Payments of dividends to shareholders

(54,519)

(47,279)

(156,288)

(141,377)

Net cash provided by (used in) financing activities

(63,393)

648,141

(782,855)

1,308,757

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

(11,218)

(15,989)

22,553

(20,060)

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

(24,998)

777,364

(218,583)

514,053

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

1,503,678

680,232

1,697,263

943,543

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

$

1,478,680

$

1,457,596

$

1,478,680

$

1,457,596

Reconciliation of cash, cash equivalents and restricted cash:

March 31, 2021

March 31, 2020

Cash and cash equivalents

$

1,475,626

$

1,452,570

Restricted cash (1)

3,054

5,026

Total cash, cash equivalents and restricted cash

$

1,478,680

$

1,457,596

(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 is 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 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. 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 March 31, 2021

(In thousands, except for per share data)

Three Months Ended March 31, 2021

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

$

123,729

$

(505)

(1)

$

123,224

Customer support

30,953

(464)

(1)

30,489

Professional service and other

50,321

(684)

(1)

49,637

Amortization of acquired technology-based intangible assets

53,453

(53,453)

(2)

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

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

571,665

68.6%

55,106

(3)

626,771

75.2%

Operating expenses

Research and development

110,071

(2,146)

(1)

107,925

Sales and marketing

158,687

(4,580)

(1)

154,107

General and administrative

71,548

(3,978)

(1)

67,570

Amortization of acquired customer-based intangible assets

54,156

(54,156)

(2)

Special charges (recoveries)

2,846

(2,846)

(4)

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

152,396

122,812

(5)

275,208

Other income (expense), net

8,283

(8,283)

(6)

Provision for (recovery of) income taxes

31,818

1,485

(7)

33,303

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

91,490

113,044

(8)

204,534

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

$

0.33

$

0.42

(8)

$

0.75

(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 26% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded items include amortization, share-based compensation, special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves, and “book to return” adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately 14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.

(8)

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

Three Months Ended March 31, 2021

Per share diluted

GAAP-based net income, attributable to OpenText

$

91,490

$

0.33

Add:

Amortization

107,609

0.39

Share-based compensation

12,357

0.05

Special charges (recoveries)

2,846

0.01

Other (income) expense, net

(8,283)

(0.03)

GAAP-based provision for (recovery of) income taxes

31,818

0.12

Non-GAAP-based provision for income taxes

(33,303)

(0.12)

Non-GAAP-based net income, attributable to OpenText

$

204,534

$

0.75

Reconciliation of Adjusted EBITDA

Three Months Ended March 31, 2021

GAAP-based net income, attributable to OpenText

$

91,490

Add:

Provision for (recovery of) income taxes

31,818

Interest and other related expense, net

37,333

Amortization of acquired technology-based intangible assets

53,453

Amortization of acquired customer-based intangible assets

54,156

Depreciation

21,961

Share-based compensation

12,357

Special charges (recoveries)

2,846

Other (income) expense, net

(8,283)

Adjusted EBITDA

$

297,131

GAAP-based net income margin

11.0

%

Adjusted EBITDA margin

35.7

%

Reconciliation of Free cash flows

Three Months Ended March 31, 2021

GAAP-based cash flows provided by operating activities

$

63,572

Add:

Capital expenditures (1)

(13,311)

Free cash flows

$

50,261

(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 nine months ended March 31, 2021

(In thousands, except for per share data)

Nine Months Ended March 31, 2021

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

$

354,235

$

(2,484)

(1)

$

351,751

Customer support

89,815

(1,405)

(1)

88,410

Professional service and other

143,521

(1,867)

(1)

141,654

Amortization of acquired technology-based intangible assets

165,581

(165,581)

(2)

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

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

1,729,835

69.4%

171,337

(3)

1,901,172

76.3%

Operating expenses

Research and development

304,212

(7,195)

(1)

297,017

Sales and marketing

438,984

(13,594)

(1)

425,390

General and administrative

190,502

(12,074)

(1)

178,428

Amortization of acquired customer-based intangible assets

164,075

(164,075)

(2)

Special charges (recoveries)

(1,404)

1,404

(4)

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

569,222

366,871

(5)

936,093

Other income (expense), net

16,417

(16,417)

(6)

Provision for (recovery of) income taxes

342,121

(227,030)

(7)

115,091

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

129,389

577,484

(8)

706,873

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

$

0.47

$

2.12

(8)

$

2.59

(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 73% 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 nine months ended March 31, 2021 includes the 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 that was recognized during the three months ended December 31, 2020.

(8)

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

Nine Months Ended March 31, 2021

Per share diluted

GAAP-based net income, attributable to OpenText

$

129,389

$

0.47

Add:

Amortization

329,656

1.21

Share-based compensation

38,619

0.14

Special charges (recoveries)

(1,404)

(0.01)

Other (income) expense, net

(16,417)

(0.06)

GAAP-based provision for (recovery of) income taxes

342,121

1.26

Non-GAAP-based provision for income taxes

(115,091)

(0.42)

Non-GAAP-based net income, attributable to OpenText

$

706,873

$

2.59

Reconciliation of Adjusted EBITDA

Nine Months Ended March 31, 2021

GAAP-based net income, attributable to OpenText

$

129,389

Add:

Provision for (recovery of) income taxes

342,121

Interest and other related expense, net

114,017

Amortization of acquired technology-based intangible assets

165,581

Amortization of acquired customer-based intangible assets

164,075

Depreciation

64,244

Share-based compensation

38,619

Special charges (recoveries)

(1,404)

Other (income) expense, net

(16,417)

Adjusted EBITDA

$

1,000,225

GAAP-based net income margin

5.2

%

Adjusted EBITDA margin

40.1

%

Reconciliation of Free cash flows

Nine Months Ended March 31, 2021

GAAP-based cash flows provided by operating activities

$

579,931

Add:

Capital expenditures (1)

(36,267)

Free cash flows

$

543,664

(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, 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 three months ended March 31, 2020

(In thousands, except for per share data)

Three Months Ended March 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

$

127,565

$

(398)

(1)

$

127,167

Customer support

32,151

(284)

(1)

31,867

Professional service and other

56,526

(328)

(1)

56,198

Amortization of acquired technology-based intangible assets

63,401

(63,401)

(2)

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

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

532,492

65.4

%

64,411

(3)

596,903

73.3

%

Operating expenses

Research and development

108,184

(1,243)

(1)

106,941

Sales and marketing

166,234

(2,261)

(1)

163,973

General and administrative

68,828

(2,342)

(1)

66,486

Amortization of acquired customer-based intangible assets

59,943

(59,943)

(2)

Special charges (recoveries)

9,406

(9,406)

(4)

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

95,077

139,606

(5)

234,683

Other income (expense), net

(18,923)

18,923

(6)

Provision for (recovery of) income taxes

8,891

18,188

(7)

27,079

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

25,965

140,341

(8)

166,306

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

$

0.10

$

0.51

(8)

$

0.61

(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 25% 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 March 31, 2020

Per share diluted

GAAP-based net income, attributable to OpenText

$

25,965

$

0.10

Add:

Amortization

123,344

0.45

Share-based compensation

6,856

0.03

Special charges (recoveries)

9,406

0.03

Other (income) expense, net

18,923

0.07

GAAP-based provision for (recovery of) income taxes

8,891

0.03

Non-GAAP-based provision for income taxes

(27,079)

(0.10)

Non-GAAP-based net income, attributable to OpenText

$

166,306

$

0.61

Reconciliation of Adjusted EBITDA

Three Months Ended March 31, 2020

GAAP-based net income, attributable to OpenText

$

25,965

Add:

Provision for (recovery of) income taxes

8,891

Interest and other related expense, net

41,263

Amortization of acquired technology-based intangible assets

63,401

Amortization of acquired customer-based intangible assets

59,943

Depreciation

24,820

Share-based compensation

6,856

Special charges (recoveries)

9,406

Other (income) expense, net

18,923

Adjusted EBITDA

$

259,468

GAAP-based net income margin

3.2

%

Adjusted EBITDA margin

31.8

%

Reconciliation of Free cash flows

Three Months Ended March 31, 2020

GAAP-based cash flows provided by operating activities

$

329,601

Add:

Capital expenditures (1)

(16,793)

Free cash flows

$

312,808

(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 nine months ended March 31, 2020

(In thousands, except for per share data)

Nine Months Ended March 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

$

333,371

$

(1,152)

(1)

$

332,219

Customer support

91,326

(897)

(1)

90,429

Professional service and other

164,468

(917)

(1)

163,551

Amortization of acquired technology-based intangible assets

145,998

(145,998)

(2)

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

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

1,540,044

67.5

%

148,964

(3)

1,689,008

74.0

%

Operating expenses

Research and development

269,645

(3,719)

(1)

265,926

Sales and marketing

432,162

(6,760)

(1)

425,402

General and administrative

174,958

(8,085)

(1)

166,873

Amortization of acquired customer-based intangible assets

160,561

(160,561)

(2)

Special charges (recoveries)

24,579

(24,579)

(4)

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

412,330

352,668

(5)

764,998

Other income (expense), net

(19,736)

19,736

(6)

Provision for (recovery of) income taxes

78,800

13,481

(7)

92,281

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

207,833

358,923

(8)

566,756

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

$

0.77

$

1.32

(8)

$

2.09

(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 27% 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:

Nine Months Ended March 31, 2020

Per share diluted

GAAP-based net income, attributable to OpenText

$

207,833

$

0.77

Add:

Amortization

306,559

1.13

Share-based compensation

21,530

0.08

Special charges (recoveries)

24,579

0.09

Other (income) expense, net

19,736

0.07

GAAP-based provision for (recovery of) income taxes

78,800

0.29

Non-GAAP-based provision for income taxes

(92,281)

(0.34)

Non-GAAP-based net income, attributable to OpenText

$

566,756

$

2.09

Reconciliation of Adjusted EBITDA

Nine Months Ended March 31, 2020

GAAP-based net income, attributable to OpenText

$

207,833

Add:

Provision for (recovery of) income taxes

78,800

Interest and other related expense, net

105,849

Amortization of acquired technology-based intangible assets

145,998

Amortization of acquired customer-based intangible assets

160,561

Depreciation

65,809

Share-based compensation

21,530

Special charges (recoveries)

24,579

Other (income) expense, net

19,736

Adjusted EBITDA

$

830,695

GAAP-based net income margin

9.1

%

Adjusted EBITDA margin

36.4

%

Reconciliation of Free cash flows

Nine Months Ended March 31, 2020

GAAP-based cash flows provided by operating activities

$

674,286

Add:

Capital expenditures (1)

(55,005)

Free cash flows

$

619,281

(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 nine months ended March 31, 2021 and 2020:

Three Months Ended March 31, 2021

Three Months Ended March 31, 2020

Currencies

% of Revenue

% of Expenses*

% of Revenue

% of Expenses*

EURO

24

%

14

%

22

%

13

%

GBP

5

%

6

%

5

%

6

%

CAD

3

%

11

%

3

%

10

%

USD

60

%

53

%

63

%

56

%

Other

8

%

16

%

7

%

15

%

Total

100

%

100

%

100

%

100

%

Nine Months Ended March 31, 2021

Nine Months Ended March 31, 2020

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

%

60

%

54

%

Other

8

%

16

%

9

%

16

%

Total

100

%

100

%

100

%

100

%

*

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

Cision View original content: http://www.prnewswire.com/news-releases/opentext-reports-third-quarter-fiscal-year-2021-financial-results-301286076.html

SOURCE Open Text Corporation

News Provided by PR Newswire via QuoteMedia

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