OpenText Reports Second Quarter Fiscal Year 2022 Financial Results

   Total Revenues   

  (in millions)  

   Annual Recurring Revenues   

  (in millions)  

   Cloud Revenues   

  (in millions)  

   Reported   

   Constant
Currency   

   Reported   

   Constant
Currency   

   Reported   

   Constant
Currency   

  $876.8  

  $878.8  

  $699.8  

  $700.4  

  $364.9  

  $365.0  

  +2.5%  

  +2.7%  

  +2.2%  

  +2.3%  

  +4.1%  

  +4.2%  

  Annual Recurring Revenues represent 80% of Total Revenues  

    Summary of Quarterly Results    

   (In millions, except per share data)   

   Q2 FY'22   

   Q2 FY'21   

   $ Change   

   % Change   

   Q2 FY'22 in
CC*   

   % Change
in CC*   

   Revenues:   

  Cloud services and subscriptions  

  $364.9  

  $350.5  

  $14.4  

  4.1%  

  $365.0  

  4.2%  

  Customer support  

  334.9  

  334.5  

  0.4  

  0.1%  

  335.4  

  0.3%  

   Total annual recurring revenues**   

   $699.8   

   $684.9   

   $14.8   

   2.2%   

   $700.4   

   2.3%   

  License  

  109.5  

  107.3  

  2.1  

  2.0%  

  110.5  

  3.0%  

  Professional service and other  

  67.5  

  63.4  

  4.2  

  6.6%  

  67.8  

  7.0%  

   Total revenues   

   $876.8   

   $855.6   

   $21.2   

   2.5%   

   $878.8   

   2.7%   

  GAAP-based operating income  

  $192.9  

  $234.5  

  ($41.6)  

  (17.7)%  

  N/A  

  N/A  

  Non-GAAP-based operating income ⁽¹⁾  

  $321.8  

  $340.5  

  ($18.7)  

  (5.5)%  

  $326.1  

  (4.2)%  

  GAAP-based net income (loss) attributable to OpenText  

  $88.3  

  ($65.5)  

  $153.8  

  234.9  %  

  N/A  

  N/A  

  GAAP-based earnings (loss) per share (EPS), diluted  

  $0.32  

  ($0.24)  

  $0.56  

  233.3%  

  N/A  

  N/A  

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

  $0.89  

  $0.95  

  ($0.06)  

  (6.3)%  

  $0.90  

  (5.3)%  

  Adjusted EBITDA ⁽¹⁾  

  $343.5  

  $360.8  

  ($17.2)  

  (4.8)%  

  $347.8  

  (3.6)%  

  Operating cash flows  

  $216.6  

  $282.5  

  ($65.8)  

  (23.3)%  

  N/A  

  N/A  

  Free cash flows ⁽¹⁾  

  $206.0  

  $274.8  

  ($68.8)  

  (25.0)%  

  N/A  

  N/A  

    Summary of YTD Results    

   (In millions, except per share data)   

   FY'22 YTD   

   FY'21 YTD   

   $ Change   

   % Change   

   FY'22 YTD
in CC*   

   % Change
in CC*   

   Revenues:   

  Cloud services and subscriptions  

  $721.5  

  $691.4  

  $30.0  

  4.3%  

  $718.2  

  3.9%  

  Customer support  

  670.1  

  663.9  

  6.2  

  0.9%  

  663.9  

  —%  

   Total annual recurring revenues**   

   $1,391.6   

   $1,355.3   

   $36.3   

   2.7%   

   $1,382.1   

   2.0%   

  License  

  183.0  

  175.9  

  7.2  

  4.1%  

  183.0  

  4.1%  

  Professional service and other  

  134.5  

  128.5  

  6.0  

  4.7%  

  133.4  

  3.9%  

   Total revenues   

   $1,709.1   

   $1,659.7   

   $49.5   

   3.0%   

   $1,698.5   

   2.3%   

  GAAP-based operating income  

  $375.6  

  $416.8  

  ($41.3)  

  (9.9)%  

  N/A  

  N/A  

  Non-GAAP-based operating income ⁽¹⁾  

  $623.8  

  $660.9  

  ($37.1)  

  (5.6)%  

  $625.9  

  (5.3)%  

  GAAP-based net income attributable to OpenText  

  $220.2  

  $37.9  

  $182.3  

  481.1%  

  N/A  

  N/A  

  GAAP-based EPS, diluted  

  $0.81  

  $0.14  

  $0.67  

  478.6%  

  N/A    

  N/A  

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

  $1.72  

  $1.84  

  ($0.12)  

  (6.5)%  

  $1.73  

  (6.0)%  

  Adjusted EBITDA ⁽¹⁾  

  $666.9  

  $703.1  

  ($36.2)  

  (5.2)%  

  $668.8  

  (4.9)%  

  Operating cash flows  

  $406.3  

  $516.4  

  ($110.0)  

  (21.3)%  

  N/A  

  N/A  

  Free cash flows ⁽¹⁾  

  $369.0  

  $493.4  

  ($124.4)  

  (25.2)%  

  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.  

  •  Organic revenue growth is calculated by removing the revenue contribution from newly acquired companies for the first year post acquisition.  

    Summary of Quarterly Results    

   Q2 FY'22   

   Q1 FY'22   

   Q2 FY'21   

   % Change   

   (Q2 FY'22 vs Q1
FY'22)   

   % Change   

   (Q2 FY'22 vs Q2
FY'21)   

  Revenue (millions)  

  $876.8  

  $832.3  

  $855.6  

  5.3%  

  2.5%  

  GAAP-based gross margin  

  70.2%  

  69.0%  

  70.5%  

  120  

  bps  

  (30)  

  bps  

  Non-GAAP-based gross margin ⁽¹⁾  

  76.4%  

  75.7%  

  77.1%  

  70  

  bps  

  (70)  

  bps  

  GAAP-based earnings (loss) per share, diluted  

  $0.32  

  $0.48  

  ($0.24)  

  (33.3)%  

  233.3%  

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

  $0.89  

  $0.83  

  $0.95  

  7.2%  

  (6.3)%  

   ⁽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.  

   OPEN TEXT CORPORATION   

   CONDENSED CONSOLIDATED BALANCE SHEETS   

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

   December 31, 2021   

   June 30, 2021   

   ASSETS   

   (unaudited)   

  Cash and cash equivalents  

  $1,511,792  

  $1,607,306  

  Accounts receivable trade, net of allowance for credit losses of $15,849 as of December 31, 2021 and $22,151 as of June 30, 2021  

  427,020  

  438,547  

  Contract assets  

  22,336  

  25,344  

  Income taxes recoverable  

  19,855  

  32,312  

  Prepaid expenses and other current assets  

  118,353  

  98,551  

  Total current assets  

  2,099,356  

  2,202,060  

  Property and equipment  

  243,850  

  233,595  

  Operating lease right of use assets  

  230,973  

  234,532  

  Long-term contract assets  

  22,920  

  19,222  

  Goodwill  

  5,195,078  

  4,691,673  

  Acquired intangible assets  

  1,355,003  

  1,187,260  

  Deferred tax assets  

  747,780  

  796,738  

  Other assets  

  228,142  

  208,894  

  Long-term income taxes recoverable  

  41,428  

  35,362  

   Total assets   

  $10,164,530  

  $9,609,336  

   LIABILITIES AND SHAREHOLDERS' EQUITY   

  Current liabilities:  

  Accounts payable and accrued liabilities  

  $364,739  

  $423,592  

  Current portion of long-term debt  

  10,000  

  10,000  

  Operating lease liabilities  

  62,910  

  58,315  

  Deferred revenues  

  848,977  

  852,629  

  Income taxes payable  

  16,219  

  17,368  

  Total current liabilities  

  1,302,845  

  1,361,904  

  Long-term liabilities:  

  Accrued liabilities  

  16,401  

  28,830  

  Pension liability  

  75,055  

  74,511  

  Long-term debt  

  4,211,488  

  3,578,859  

  Long-term operating lease liabilities  

  214,824  

  224,453  

  Long-term deferred revenues  

  90,669  

  98,989  

  Long-term income taxes payable  

  34,133  

  34,113  

  Deferred tax liabilities  

  89,290  

  108,224  

  Total long-term liabilities  

  4,731,860  

  4,147,979  

  Shareholders' equity:  

  Share capital and additional paid-in capital  

  271,006,308 and 271,540,755 Common Shares issued and outstanding at December 31, 2021 and June 30, 2021, respectively; authorized Common Shares: unlimited  

  1,990,913  

  1,947,764  

  Accumulated other comprehensive income  

  31,349  

  66,238  

  Retained earnings  

  2,174,467  

  2,153,326  

  Treasury stock, at cost (1,476,420 and 1,567,664 shares at December 31, 2021 and June 30, 2021, respectively)  

  (67,966)  

  (69,386)  

  Total OpenText shareholders' equity  

  4,128,763  

  4,097,942  

  Non-controlling interests  

  1,062  

  1,511  

  Total shareholders' equity  

  4,129,825  

  4,099,453  

   Total liabilities and shareholders' equity   

  $10,164,530  

  $9,609,336  

   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,   

   2021   

   2020   

   2021   

   2020   

  Revenues:  

  Cloud services and subscriptions  

  $364,886  

  $350,454  

  $721,475  

  $691,440  

  Customer support  

  334,875  

  334,492  

  670,112  

  663,891  

  License  

  109,493  

  107,348  

  183,022  

  175,871  

  Professional service and other  

  67,545  

  63,350  

  134,498  

  128,455  

  Total revenues  

  876,799  

  855,644  

  1,709,107  

  1,659,657  

  Cost of revenues:  

  Cloud services and subscriptions  

  122,129  

  117,882  

  241,908  

  230,506  

  Customer support  

  29,668  

  29,668  

  59,151  

  58,862  

  License  

  3,741  

  4,302  

  7,710  

  6,791  

  Professional service and other  

  53,041  

  46,619  

  104,766  

  93,200  

  Amortization of acquired technology-based intangible assets  

  52,602  

  54,091  

  105,769  

  112,128  

  Total cost of revenues  

  261,181  

  252,562  

  519,304  

  501,487  

  Gross profit  

  615,618  

  603,082  

  1,189,803  

  1,158,170  

  Operating expenses:  

  Research and development  

  103,622  

  100,238  

  203,787  

  194,141  

  Sales and marketing  

  163,938  

  147,897  

  310,178  

  280,297  

  General and administrative  

  71,513  

  62,765  

  142,990  

  118,954  

  Depreciation  

  21,779  

  20,280  

  43,165  

  42,283  

  Amortization of acquired customer-based intangible assets  

  52,665  

  54,926  

  104,549  

  109,919  

  Special charges (recoveries)  

  9,217  

  (17,494)  

  9,561  

  (4,250)  

  Total operating expenses  

  422,734  

  368,612  

  814,230  

  741,344  

  Income from operations  

  192,884  

  234,470  

  375,573  

  416,826  

  Other income (expense), net  

  (25,037)  

  5,251  

  4,745  

  8,134  

  Interest and other related expense, net  

  (40,245)  

  (37,595)  

  (77,300)  

  (76,684)  

  Income before income taxes  

  127,602  

  202,126  

  303,018  

  348,276  

  Provision for (recovery of) income taxes  

  39,266  

  267,559  

  82,716  

  310,303  

  Net income (loss) for the period  

  $88,336  

  $(65,433)  

  $220,302  

  $37,973  

  Net (income) loss attributable to non-controlling interests  

  (38)  

  (44)  

  (89)  

  (74)  

  Net income (loss) attributable to OpenText  

  $88,298  

  $(65,477)  

  $220,213  

  $37,899  

  Earnings (loss) per share—basic attributable to OpenText  

  $0.32  

  $(0.24)  

  $0.81  

  $0.14  

  Earnings (loss) per share—diluted attributable to OpenText  

  $0.32  

  $(0.24)  

  $0.81  

  $0.14  

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

  272,112  

  272,433  

  272,078  

  272,210  

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

  272,931  

  272,433  

  273,074  

  273,019  

   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,   

   2021   

   2020   

   2021   

   2020   

  Net income (loss) for the period  

  $88,336  

  $(65,433)  

  $220,302  

  $37,973  

  Other comprehensive income (loss)—net of tax:  

  Net foreign currency translation adjustments  

  (21,347)  

  26,065  

  (31,439)  

  48,710  

  Unrealized gain (loss) on cash flow hedges:  

  Unrealized gain (loss) - net of tax expense (recovery) effect of $37 and $751 for the three months ended December 31, 2021 and 2020, respectively; ($354) and $1,056 for the six months ended December 31, 2021 and 2020, respectively  

  104  

  2,082  

  (982)  

  2,927  

  (Gain) loss reclassified into net income (loss) - net of tax (expense) recovery effect of ($7) and ($227) for the three months ended December 31, 2021 and 2020, respectively; ($110) and ($283) for the six months ended December 31, 2021 and 2020, respectively  

  (18)  

  (628)  

  (305)  

  (784)  

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

  Actuarial gain (loss) - net of tax expense (recovery) effect of ($104) and ($441) for the three months ended December 31, 2021 and 2020, respectively; ($336) and ($1,357) for the six months ended December 31, 2021 and 2020, respectively  

  (1,435)  

  (981)  

  (2,484)  

  (2,686)  

  Amortization of actuarial (gain) loss into net income (loss) - net of tax (expense) recovery effect of $67 and $93 for the three months ended December 31, 2021 and 2020, respectively; $135 and $180 for the six months ended December 31, 2021 and 2020, respectively  

  159  

  243  

  321  

  484  

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

  (22,537)  

  26,781  

  (34,889)  

  48,651  

  Total comprehensive income (loss)  

  65,799  

  (38,652)  

  185,413  

  86,624  

  Comprehensive (income) loss attributable to non-controlling interests  

  (38)  

  (44)  

  (89)  

  (74)  

  Total comprehensive income (loss) attributable to OpenText  

  $65,761  

  $(38,696)  

  $185,324  

  $86,550  

   OPEN TEXT CORPORATION   

   CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY   

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

   (unaudited)   

   Three Months Ended December 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 September 30, 2021   

   272,534   

   $1,991,719   

   (1,426)   

   $(63,477)   

   $2,225,363   

   $53,886   

   $1,024   

   $4,208,515   

  Issuance of Common Shares  

  Under employee stock option plans  

  56  

  1,966  

  —  

  —  

  —  

  —  

  —  

  1,966  

  Under employee stock purchase plans  

  226  

  9,421  

  —  

  —  

  —  

  —  

  —  

  9,421  

  Share-based compensation  

  —  

  14,409  

  —  

  —  

  —  

  —  

  —  

  14,409  

  Purchase of treasury stock  

  —  

  —  

  (400)  

  (19,593)  

  —  

  —  

  —  

  (19,593)  

  Issuance of treasury stock  

  —  

  (15,104)  

  350  

  15,104  

  —  

  —  

  —  

  —  

  Repurchase of Common Shares  

  (1,810)  

  (11,498)  

  —  

  —  

  (79,536)  

  —  

  —  

  (91,034)  

  Dividends declared  

  ($0.2209 per Common Share)  

  —  

  —  

  —  

  —  

  (59,658)  

  —  

  —  

  (59,658)  

  Other comprehensive income (loss) - net  

  —  

  —  

  —  

  —  

  —  

  (22,537)  

  —  

  (22,537)  

  Net income for the period  

  —  

  —  

  —  

  —  

  88,298  

  —  

  38  

  88,336  

   Balance as of December 31, 2021   

   271,006   

   $1,990,913   

   (1,476)   

   $(67,966)   

   $2,174,467   

   $31,349   

   $1,062   

   $4,129,825   

   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 (loss) - net  

  —  

  —  

  —  

  —  

  —  

  26,781  

  —  

  26,781  

  Net income (loss) for the period  

  —  

  —  

  —  

  —  

  (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   

   OPEN TEXT CORPORATION   

   CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY   

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

   (unaudited)   

   Six Months Ended December 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, 2021   

   271,541   

   $1,947,764   

   (1,568)   

   $(69,386)   

   $2,153,326   

   $66,238   

   $1,511   

   $4,099,453   

  Issuance of Common Shares  

  Under employee stock option plans  

  852  

  29,265  

  —  

  —  

  —  

  —  

  —  

  29,265  

  Under employee stock purchase plans  

  423  

  17,910  

  —  

  —  

  —  

  —  

  —  

  17,910  

  Share-based compensation  

  —  

  28,343  

  —  

  —  

  —  

  —  

  —  

  28,343  

  Purchase of treasury stock  

  —  

  —  

  (400)  

  (19,593)  

  —  

  —  

  —  

  (19,593)  

  Issuance of treasury stock  

  —  

  (21,013)  

  492  

  21,013  

  —  

  —  

  —  

  —  

  Repurchase of Common Shares  

  (1,810)  

  (11,498)  

  —  

  —  

  (79,536)  

  —  

  —  

  (91,034)  

  Dividends declared  

  ($0.4418 per Common Share)  

  —  

  —  

  —  

  —  

  (119,536)  

  —  

  —  

  (119,536)  

  Other comprehensive income (loss) - net  

  —  

  —  

  —  

  —  

  —  

  (34,889)  

  —  

  (34,889)  

  Distribution to non-controlling interest  

  —  

  142  

  —  

  —  

  —  

  —  

  (538)  

  (396)  

  Net income for the period  

  —  

  —  

  —  

  —  

  220,213  

  —  

  89  

  220,302  

   Balance as of December 31, 2021   

   271,006   

   $1,990,913   

   (1,476)   

   $(67,966)   

   $2,174,467   

   $31,349   

   $1,062   

   $4,129,825   

   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 (loss) - 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   

   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,   

   2021   

   2020   

   2021   

   2020   

  Cash flows from operating activities:  

  Net income (loss) for the period  

  $88,336  

  $(65,433)  

  $220,302  

  $37,973  

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

  Depreciation and amortization of intangible assets  

  127,046  

  129,297  

  253,483  

  264,330  

  Share-based compensation expense  

  14,409  

  14,526  

  28,343  

  26,262  

  Pension expense  

  1,529  

  1,615  

  3,015  

  3,120  

  Amortization of debt issuance costs  

  1,293  

  1,142  

  2,454  

  2,254  

  Loss on extinguishment of debt  

  27,413  

  —  

  27,413  

  —  

  Loss on sale and write down of property and equipment  

  11  

  380  

  38  

  953  

  Deferred taxes  

  6,210  

  81,577  

  20,892  

  80,397  

  Share in net (income) loss of equity investees  

  (2,042)  

  (2,034)  

  (31,357)  

  (8,255)  

  Changes in operating assets and liabilities:  

  Accounts receivable  

  (25,339)  

  (42,115)  

  51,187  

  32,727  

  Contract assets  

  (11,497)  

  (10,355)  

  (18,745)  

  (20,193)  

  Prepaid expenses and other current assets  

  (1,410)  

  11,457  

  (11,221)  

  7,966  

  Income taxes  

  (13,985)  

  147,809  

  2,776  

  168,841  

  Accounts payable and accrued liabilities  

  5,705  

  14,891  

  (108,629)  

  (36,538)  

  Deferred revenue  

  (12,177)  

  22,621  

  (50,693)  

  (18,647)  

  Other assets  

  9,371  

  (2,016)  

  16,913  

  (1,467)  

  Operating lease assets and liabilities, net  

  1,771  

  (20,907)  

  142  

  (23,364)  

  Net cash provided by operating activities  

  216,644  

  282,455  

  406,313  

  516,359  

  Cash flows from investing activities:  

  Additions of property and equipment  

  (10,635)  

  (7,651)  

  (37,347)  

  (22,956)  

  Purchase of Zix Corporation, net of cash acquired  

  (837,573)  

  —  

  (837,573)  

  —  

  Purchase of Bricata Inc.  

  (17,927)  

  —  

  (17,927)  

  —  

  Purchase of XMedius  

  —  

  444  

  —  

  444  

  Purchase of Dynamic Solutions Group Inc.  

  —  

  (371)  

  —  

  (371)  

  Other investing activities  

  (3,567)  

  867  

  (3,271)  

  (1,370)  

  Net cash used in investing activities  

  (869,702)  

  (6,711)  

  (896,118)  

  (24,253)  

  Cash flows from financing activities:  

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

  8,968  

  13,338  

  45,688  

  29,177  

  Proceeds from long-term debt and Revolver  

  1,500,000  

  —  

  1,500,000  

  —  

  Repayment of long-term debt and Revolver  

  (852,500)  

  (602,500)  

  (855,000)  

  (605,000)  

  Debt extinguishment costs  

  (24,969)  

  —  

  (24,969)  

  —  

  Debt issuance costs  

  (15,347)  

  —  

  (15,347)  

  —  

  Repurchase of Common Shares  

  (91,034)  

  —  

  (91,034)  

  —  

  Purchase of treasury stock  

  (19,593)  

  —  

  (19,593)  

  (41,870)  

  Distribution to non-controlling interest  

  —  

  —  

  (396)  

  —  

  Payments of dividends to shareholders  

  (59,658)  

  (54,500)  

  (119,536)  

  (101,769)  

  Net cash provided by (used in) financing activities  

  445,867  

  (643,662)  

  419,813  

  (719,462)  

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

  (16,436)  

  22,979  

  (25,713)  

  33,771  

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

  (223,627)  

  (344,939)  

  (95,705)  

  (193,585)  

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

  1,737,722  

  1,848,617  

  1,609,800  

  1,697,263  

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

  $1,514,095  

  $1,503,678  

  $1,514,095  

  $1,503,678  

   OPEN TEXT CORPORATION   

   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS   

   (In thousands of U.S. dollars)   

   (unaudited)   

   Reconciliation of cash, cash equivalents and restricted cash:   

   December 31, 2021   

   December 31, 2020   

  Cash and cash equivalents  

  $1,511,792  

  $1,500,561  

  Restricted cash ⁽¹⁾  

  2,303  

  3,117  

  Total cash, cash equivalents and restricted cash  

  $1,514,095  

  $1,503,678  

   ⁽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 and most recently in response to the COVID-19 pandemic, 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, 2021    

    (In thousands, except for per share data)    

   Three Months Ended December 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  

  $122,129  

  $(897)  

  (1)  

  $121,232  

  Customer support  

  29,668  

  (409)  

  (1)  

  29,259  

  Professional service and other  

  53,041  

  (647)  

  (1)  

  52,394  

  Amortization of acquired technology-based intangible assets  

  52,602  

  (52,602)  

  (2)  

  —  

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

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

  615,618  

  70.2%  

  54,555  

  (3)  

  670,173  

  76.4%  

   Operating expenses   

  Research and development  

  103,622  

  (2,652)  

  (1)  

  100,970  

  Sales and marketing  

  163,938  

  (5,006)  

  (1)  

  158,932  

  General and administrative  

  71,513  

  (4,798)  

  (1)  

  66,715  

  Amortization of acquired customer-based intangible assets  

  52,665  

  (52,665)  

  (2)  

  —  

  Special charges (recoveries)  

  9,217  

  (9,217)  

  (4)  

  —  

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

  192,884  

  128,893  

  (5)  

  321,777  

  Other income (expense), net  

  (25,037)  

  25,037  

  (6)  

  —  

  Provision for (recovery of) income taxes  

  39,266  

  148  

  (7)  

  39,414  

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

  88,298  

  153,782  

  (8)  

  242,080  

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

  $0.32  

  $0.57  

  (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 31% 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, 2021   

   Per share diluted   

  GAAP-based net income, attributable to OpenText  

  $88,298  

  $0.32  

  Add:  

  Amortization  

  105,267  

  0.39  

  Share-based compensation  

  14,409  

  0.05  

  Special charges (recoveries)  

  9,217  

  0.03  

  Other (income) expense, net  

  25,037  

  0.09  

  GAAP-based provision for (recovery of) income taxes  

  39,266  

  0.15  

  Non-GAAP-based provision for income taxes  

  (39,414)  

  (0.14)  

  Non-GAAP-based net income, attributable to OpenText  

  $242,080  

  $0.89  

   Reconciliation of Adjusted EBITDA   

   Three Months Ended December 31, 2021   

  GAAP-based net income, attributable to OpenText  

  $88,298  

  Add:  

  Provision for (recovery of) income taxes  

  39,266  

  Interest and other related expense, net  

  40,245  

  Amortization of acquired technology-based intangible assets  

  52,602  

  Amortization of acquired customer-based intangible assets  

  52,665  

  Depreciation  

  21,779  

  Share-based compensation  

  14,409  

  Special charges (recoveries)  

  9,217  

  Other (income) expense, net  

  25,037  

  Adjusted EBITDA  

  $343,518  

  GAAP-based net income margin  

  10.1%  

  Adjusted EBITDA margin  

  39.2%  

   Reconciliation of Free cash flows   

   Three Months Ended December 31, 2021   

  GAAP-based cash flows provided by operating activities  

  $216,644  

  Add:  

  Capital expenditures ⁽¹⁾  

  (10,635)  

  Free cash flows  

  $206,009  

   ⁽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, 2021    

    (In thousands, except for per share data)    

   Six Months Ended December 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  

  $241,908  

  $(1,804)  

  (1)  

  $240,104  

  Customer support  

  59,151  

  (1,130)  

  (1)  

  58,021  

  Professional service and other  

  104,766  

  (1,368)  

  (1)  

  103,398  

  Amortization of acquired technology-based intangible assets  

  105,769  

  (105,769)  

  (2)  

  —  

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

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

  1,189,803  

  69.6%  

  110,071  

  (3)  

  1,299,874  

  76.1%  

   Operating expenses   

  Research and development  

  203,787  

  (5,586)  

  (1)  

  198,201  

  Sales and marketing  

  310,178  

  (9,616)  

  (1)  

  300,562  

  General and administrative  

  142,990  

  (8,839)  

  (1)  

  134,151  

  Amortization of acquired customer-based intangible assets  

  104,549  

  (104,549)  

  (2)  

  —  

  Special charges (recoveries)  

  9,561  

  (9,561)  

  (4)  

  —  

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

  375,573  

  248,222  

  (5)  

  623,795  

  Other income (expense), net  

  4,745  

  (4,745)  

  (6)  

  —  

  Provision for (recovery of) income taxes  

  82,716