Emerging Technology

Strong Results Include Record Cloud and Annual Recurring 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

$882.3

$899.4


$734.5

$747.7


$401.9

$406.6

+5.9%

+8.0%


+6.2%

+8.1%


+13.0%

+14.3%

Annual Recurring Revenues represent 83% of Total Revenues

  • Record Q3 revenues reflect strengthening market share and cloud driven organic growth (1)
  • Total revenues up 5.9% Y/Y or up 8.0% in constant currency
  • Cloud revenues up 13.0% Y/Y or up 14.3% in constant currency
  • Continued investments in talent, innovation, digital marketing and global sales coverage
  • Operating cash flows were $323.6 million and free cash flows (2) were $306.0 million
  • GAAP-based net income of $74.7 million , down 18.4% Y/Y, margin of 8.5%, down 250 basis points Y/Y
  • Adjusted EBITDA (2) of $284.5 million , margin of 32.2%
  • GAAP-based diluted earnings per share (EPS) of $0.28 , down 15.2% Y/Y
  • Non-GAAP diluted EPS (2) of $0.70 , down 6.7% Y/Y
  • During the quarter, the Company repurchased and cancelled 1.0 million shares for $45.1 million under our share repurchase plans

Open Text Corporation (NASDAQ: OTEX), (TSX: OTEX), today announced its financial results for the third quarter ended March 31, 2022.

"OpenText delivered record Q3 revenues amidst the ever-changing dynamics of the global macro environment," said Mark J. Barrenechea , OpenText CEO & CTO. "In Q3, total revenues grew 5.9% year-over-year to $882.3 million , supported by record Cloud revenues of $401.9 million , up 13.0% year-over-year. Annual Recurring Revenues, which represent 83% of total revenues, grew 6.2% year-over-year to a record $734.5 million . We have a unique opportunity to increase our investments and accelerate our cloud business, and we are planning on doing so."

"Customers are seeking information-led transformations and this is reflective in the strength of our cloud bookings. We are seeing the results of our efforts as we help our customers to digitize, transform and grow. OpenText brings a complete and integrated suite of Information Management solutions to customers of all sizes, while providing the layers of defense needed to help organizations secure their users, end points, and networks in the face of ever-increasing cyber threats and ransomware. As we approach the end of the fiscal year, we remain on track to meet our targets and aspirations," said Mr. Barrenechea.

"OpenText delivered a solid Q3 with adjusted EBITDA of $284.5 million and strong free cash flows of $306.0 million ," said OpenText EVP, CFO, Madhu Ranganathan . "Integration of the Zix acquisition is on track and our balance sheet remains strong. We continue to invest in talent, innovation, and technology to drive our growth strategy and are making demonstrable progress towards our long-term aspirational goals. With approximately $1.6 billion in cash as of March 31, 2022 and a net leverage ratio of 1.9x, we have the financial flexibility to continue to drive growth through product innovation, talent, go-to-market, and strategic acquisitions."

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

(2) Please see note 2 "Use of Non-GAAP Financial Measures" to the condensed consolidated financial statements below.

Financial Highlights for Q3 Fiscal 2022 with Year Over Year Comparisons

Summary of Quarterly Results









(In millions, except per share data)

Q3 FY'22

Q3 FY'21

$ Change

% Change


Q3 FY'22
in CC*

% Change
in CC*


Revenues:









Cloud services and subscriptions

$401.9

$355.8

$46.1

13.0%


$406.6

14.3%


Customer support

332.5

335.9

(3.4)

(1.0)%


341.1

1.5%


Total annual recurring revenues**

$734.5

$691.8

$42.7

6.2%


$747.7

8.1%


License

80.6

76.3

4.3

5.7%


82.7

8.4%


Professional service and other

67.2

64.9

2.3

3.6%


69.0

6.4%


Total revenues

$882.3

$832.9

$49.4

5.9%


$899.4

8.0%


GAAP-based operating income

$131.6

$152.4

($20.8)

(13.6)%


N/A

N/A


Non-GAAP-based operating income (1)

$262.2

$275.2

($13.0)

(4.7)%


$270.1

(1.9)%


GAAP-based net income attributable to OpenText

$74.7

$91.5

($16.8)

(18.4)%


N/A

N/A


GAAP-based EPS, diluted

$0.28

$0.33

($0.05)

(15.2)%


N/A

N/A


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

$0.70

$0.75

($0.05)

(6.7)%


$0.73

(2.7)%


Adjusted EBITDA (1)

$284.5

$297.1

($12.6)

(4.3)%


$292.5

(1.5)%


Operating cash flows

$323.6

$63.6

$260.0

409.0%


N/A

N/A


Free cash flows (1)

$306.0

$50.3

$255.7

508.8%


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

$1,123.4

$1,047.3

$76.1

7.3%


$1,124.8

7.4%


Customer support

1,002.6

999.8

2.8

0.3%


1,005.0

0.5%


Total annual recurring revenues**

$2,126.0

$2,047.1

$79.0

3.9%


$2,129.8

4.0%


License

263.7

252.2

11.5

4.6%


265.8

5.4%


Professional service and other

201.7

193.3

8.4

4.3%


202.5

4.7%


Total revenues

$2,591.4

$2,492.6

$98.8

4.0%


$2,598.0

4.2%


GAAP-based operating income

$507.2

$569.2

($62.0)

(10.9)%


N/A

N/A


Non-GAAP-based operating income (1)

$886.0

$936.1

($50.1)

(5.4)%


$896.0

(4.3)%


GAAP-based net income attributable to OpenText

$294.9

$129.4

$165.5

127.9%


N/A

N/A


GAAP-based EPS, diluted

$1.08

$0.47

$0.61

129.8%


N/A

N/A


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

$2.43

$2.59

($0.16)

(6.2)%


$2.46

(5.0)%


Adjusted EBITDA (1)

$951.4

$1,000.2

($48.9)

(4.9)%


$961.4

(3.9)%


Operating cash flows

$729.9

$579.9

$149.9

25.9%


N/A

N/A


Free cash flows (1)

$674.9

$543.7

$131.3

24.1%


N/A

N/A


(1) Please see note 2 "Use of Non-GAAP Financial Measures" to the condensed consolidated financial statements 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 3, 2022 , a cash dividend of $0.2209 per common share. The record date for this dividend is June 3, 2022 and the payment date is June 24, 2022 . 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 include: Bank of France , Booz Allen Hamilton , Singapore Customs, Societe Generale, Ecopetrol, Philippine National Service of Investigation, Enedis, Lids Sports Group and Scale Computing
  • OpenText announced Cloud Editions 22.1 featuring new and enhanced innovations
  • OpenText held its 2022 Investor Day
  • OpenText announced the 2022 BrightCloud® Threat Report
  • OpenText recipient of 2022 SAP Pinnacle Award in Partner Solutions Success category
  • OpenText showcased the latest eDiscovery innovations at Legalweek New York 2022
  • OpenText showcased the latest Content Cloud innovations at AIIM2022
  • OpenText hosted Supply Chain Summit 2022
  • OpenText to host OpenText World Europe in-person on June 21-22

Summary of Quarterly Results









Q3 FY'22

Q2 FY'22

Q3 FY'21

% Change

(Q3 FY'22 vs
Q2 FY'22)


% Change

(Q3 FY'22 vs
Q3 FY'21)


Revenue (millions)

$882.3

$876.8

$832.9

0.6%


5.9%


GAAP-based gross margin

68.9%

70.2%

68.6%

(130)

bps

30

bps

Non-GAAP-based gross margin (1)

74.5%

76.4%

75.2%

(190)

bps

(70)

bps

GAAP-based EPS, diluted

$0.28

$0.32

$0.33

(12.5)%


(15.2)%


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

$0.70

$0.89

$0.75

(21.3)%


(6.7)%


(1) Please see note 2 "Use of Non-GAAP Financial Measures" to the condensed consolidated financial statements 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

OpenText posted a quarterly shareholder letter and investor presentation on its Investor Relations website at http://investors.opentext.com and invites the public 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 4, 2022 at 7:00 p.m. ET through 11:59 p.m. on May 18, 2022 and can be accessed by dialing 1-855-669-9658 (toll-free) or +1-604-674-8052 (international) and using passcode 8697 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.

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, 2022 (Fiscal 2022) on growth, future cloud growth and market share gains, future organic growth initiatives and deployment of capital, intention to maintain a dividend program, potential share repurchases pursuant to its share repurchase plans, future tax rates, new platform and product offerings, scaling OpenText to new levels in Fiscal 2022 and beyond, and other matters, which 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 and uncertainties such as those relating to the duration and severity of the COVID-19 pandemic, including any new strains or resurgences, as well as our ability to develop, protect and maintain our intellectual property and proprietary technology and to operate without infringing on the proprietary rights of others. 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 ©2022 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, 2022


June 30, 2021

ASSETS

(unaudited)



Cash and cash equivalents

$             1,633,702


$             1,607,306

Accounts receivable trade, net of allowance for credit losses of $16,439 as of
March 31, 2022 and $22,151 as of June 30, 2021

429,877


438,547

Contract assets

25,481


25,344

Income taxes recoverable

20,781


32,312

Prepaid expenses and other current assets

122,616


98,551

Total current assets

2,232,457


2,202,060

Property and equipment

227,830


233,595

Operating lease right of use assets

217,684


234,532

Long-term contract assets

20,049


19,222

Goodwill

5,265,189


4,691,673

Acquired intangible assets

1,181,266


1,187,260

Deferred tax assets

717,345


796,738

Other assets

257,301


208,894

Long-term income taxes recoverable

43,518


35,362

Total assets

$          10,162,639


$             9,609,336

LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable and accrued liabilities

$                404,545


$                423,592

Current portion of long-term debt

10,000


10,000

Operating lease liabilities

59,182


58,315

Deferred revenues

936,750


852,629

Income taxes payable

7,483


17,368

Total current liabilities

1,417,960


1,361,904

Long-term liabilities:




Accrued liabilities

16,631


28,830

Pension liability

76,364


74,511

Long-term debt

4,210,582


3,578,859

Long-term operating lease liabilities

203,101


224,453

Long-term deferred revenues

90,736


98,989

Long-term income taxes payable

35,206


34,113

Deferred tax liabilities

56,208


108,224

Total long-term liabilities

4,688,828


4,147,979

Shareholders' equity:




Share capital and additional paid-in capital




270,231,166 and 271,540,755 Common Shares issued and outstanding at
March 31, 2022 and June 30, 2021, respectively; authorized Common
Shares: unlimited

2,010,146


1,947,764

Accumulated other comprehensive income

17,266


66,238

Retained earnings

2,151,369


2,153,326

Treasury stock, at cost (2,776,420 and 1,567,664 shares at March 31, 2022 and
June 30, 2021, respectively)

(124,033)


(69,386)

Total OpenText shareholders' equity

4,054,748


4,097,942

Non-controlling interests

1,103


1,511

Total shareholders' equity

4,055,851


4,099,453

Total liabilities and shareholders' equity

$          10,162,639


$             9,609,336

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,


2022


2021


2022


2021

Revenues:








Cloud services and subscriptions

$           401,947


$           355,845


$        1,123,422


$        1,047,285

Customer support

332,514


335,915


1,002,626


999,806

License

80,641


76,299


263,663


252,170

Professional service and other

67,181


64,872


201,679


193,327

Total revenues

882,283


832,931


2,591,390


2,492,588

Cost of revenues:








Cloud services and subscriptions

136,020


123,729


377,928


354,235

Customer support

31,763


30,953


90,914


89,815

License

3,196


2,810


10,906


9,601

Professional service and other

56,693


50,321


161,459


143,521

Amortization of acquired technology-based
intangible assets

46,564


53,453


152,333


165,581

Total cost of revenues

274,236


261,266


793,540


762,753

Gross profit

608,047


571,665


1,797,850


1,729,835

Operating expenses:








Research and development

117,730


110,071


321,517


304,212

Sales and marketing

180,955


158,687


491,133


438,984

General and administrative

88,137


71,548


231,127


190,502

Depreciation

22,370


21,961


65,535


64,244

Amortization of acquired customer-based
intangible assets

56,215


54,156


160,764


164,075

Special charges (recoveries)

11,031


2,846


20,592


(1,404)

Total operating expenses

476,438


419,269


1,290,668


1,160,613

Income from operations

131,609


152,396


507,182


569,222

Other income (expense), net

24,392


8,283


29,137


16,417

Interest and other related expense, net

(40,238)


(37,333)


(117,538)


(114,017)

Income before income taxes

115,763


123,346


418,781


471,622

Provision for income taxes

41,041


31,818


123,757


342,121

Net income for the period

$             74,722


$             91,528


$           295,024


$           129,501

Net (income) loss attributable to non-controlling
interests

(41)


(38)


(130)


(112)

Net income attributable to OpenText

$             74,681


$             91,490


$           294,894


$           129,389

Earnings per share—basic attributable to OpenText

$                  0.28


$                  0.34


$                  1.09


$                  0.47

Earnings per share—diluted attributable to OpenText

$                  0.28


$                  0.33


$                  1.08


$                  0.47

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

270,693


272,832


271,623


272,414

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

271,211


273,924


272,439


273,312

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,


2022


2021


2022


2021

Net income for the period

$             74,722


$             91,528


$           295,024


$           129,501

Other comprehensive income (loss)—net of tax:








Net foreign currency translation adjustments

(13,073)


(12,568)


(44,512)


36,142

Unrealized gain (loss) on cash flow hedges:








Unrealized gain (loss) - net of tax expense
(recovery) effect of $233 and $246 for the three
months ended March 31, 2022 and 2021,
respectively; ($158) and $1,302 for the nine
months ended March 31, 2022 and 2021,
respectively

648


681


(334)


3,608

(Gain) loss reclassified into net income - net of
tax (expense) recovery effect of $79 and ($399)
for the three months ended March 31, 2022 and
2021, respectively; ($24) and ($682) for the
nine months ended March 31, 2022 and 2021,
respectively

219


(1,108)


(86)


(1,892)

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








Actuarial gain (loss) - net of tax expense
(recovery) effect of ($579) and $944 for the
three months ended March 31, 2022 and 2021,
respectively; ($811) and ($413) for the nine
months ended March 31, 2022 and 2021,
respectively

(2,033)


344


(4,517)


(2,342)

Amortization of actuarial (gain) loss into net
income - net of tax (expense) recovery effect of
$66 and $95 for the three months ended March
31, 2022 and 2021, respectively; $134 and
$275 for the nine months ended March 31,
2022 and 2021, respectively

156


249


477


733

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

(14,083)


(12,402)


(48,972)


36,249

Total comprehensive income

60,639


79,126


246,052


165,750

Comprehensive (income) loss attributable to non-
controlling interests

(41)


(38)


(130)


(112)

Total comprehensive income attributable to OpenText

$             60,598


$             79,088


$           245,922


$           165,638

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

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

(unaudited)




Three Months Ended March 31, 2022


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, 2021

271,006


$ 1,990,913


(1,476)


$ (67,966)


$ 2,174,467


$          31,349


$      1,062


$ 4,129,825

Issuance of Common Shares
















Under employee stock option plans

53


1,863







1,863

Under employee stock purchase plans

172


7,003







7,003

Share-based compensation


16,748







16,748

Purchase of treasury stock



(1,300)


(56,067)





(56,067)

Repurchase of Common Shares

(1,000)


(6,381)




(38,702)




(45,083)

Dividends declared

($0.2209 per Common Share)





(59,077)




(59,077)

Other comprehensive income (loss) - net






(14,083)



(14,083)

Net income for the period





74,681



41


74,722

Balance as of March 31, 2022

270,231


$ 2,010,146


(2,776)


$ (124,033)


$ 2,151,369


$          17,266


$      1,103


$ 4,055,851


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 period





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

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

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

(unaudited)




Nine Months Ended March 31, 2022


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

905


31,128







31,128

Under employee stock purchase plans

595


24,913







24,913

Share-based compensation


45,091







45,091

Purchase of treasury stock



(1,700)


(75,660)





(75,660)

Issuance of treasury stock


(21,013)


492


21,013





Repurchase of Common Shares

(2,810)


(17,879)




(118,238)




(136,117)

Dividends declared

($0.6627 per Common Share)





(178,613)




(178,613)

Other comprehensive income (loss) - net






(48,972)



(48,972)

Distribution to non-controlling interest


142






(538)


(396)

Net income for the period





294,894



130


295,024

Balance as of March 31, 2022

270,231


$ 2,010,146


(2,776)


$ (124,033)


$ 2,151,369


$          17,266


$      1,103


$ 4,055,851


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

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,


2022


2021


2022


2021

Cash flows from operating activities:








Net income for the period

$             74,722


$             91,528


$           295,024


$           129,501

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








Depreciation and amortization of intangible assets

125,149


129,570


378,632


393,900

Share-based compensation expense

16,748


12,357


45,091


38,619

Pension expense

1,868


1,550


4,883


4,670

Amortization of debt issuance costs

1,482


1,141


3,936


3,395

Loss on extinguishment of debt



27,413


Loss on sale and write down of property and equipment

58


1,026


96


1,979

Deferred taxes

22,440


447


43,332


80,844

Share in net (income) loss of equity investees

(27,746)


(11,765)


(59,103)


(20,020)

Changes in operating assets and liabilities:








Accounts receivable

17,241


54,345


68,428


87,072

Contract assets

(8,463)


(8,842)


(27,208)


(29,035)

Prepaid expenses and other current assets

(4,501)


(10,494)


(15,722)


(2,528)

Income taxes

(14,011)


(286,435)


(11,235)


(117,594)

Accounts payable and accrued liabilities

42,891


9,211


(65,738)


(27,327)

Deferred revenue

76,335


81,247


25,642


62,600

Other assets

(386)


2,232


16,527


765

Operating lease assets and liabilities, net

(270)


(3,546)


(128)


(26,910)

Net cash provided by operating activities

323,557


63,572


729,870


579,931

Cash flows from investing activities:








Additions of property and equipment

(17,590)


(13,311)


(54,937)


(36,267)

Purchase of Zix Corporation, net of cash acquired

(18,602)



(856,175)


Purchase of Bricata Inc.



(17,927)


Purchase of XMedius




444

Purchase of Dynamic Solutions Group Inc.




(371)

Other investing activities

(651)


(648)


(3,922)


(2,018)

Net cash used in investing activities

(36,843)


(13,959)


(932,961)


(38,212)

Cash flows from financing activities:








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

10,788


16,603


56,476


45,780

Proceeds from long-term debt and Revolver



1,500,000


Repayment of long-term debt and Revolver

(2,500)


(2,500)


(857,500)


(607,500)

Debt extinguishment costs



(24,969)


Debt issuance costs

(1,812)



(17,159)


Repurchase of Common Shares

(45,083)



(136,117)


Purchase of treasury stock

(56,067)


(22,977)


(75,660)


(64,847)

Distribution to non-controlling interest



(396)


Payments of dividends to shareholders

(59,077)


(54,519)


(178,613)


(156,288)

Net cash provided by (used in) financing activities

(153,751)


(63,393)


266,062


(782,855)

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

(11,207)


(11,218)


(36,920)


22,553

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

121,756


(24,998)


26,051


(218,583)

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

1,514,095


1,503,678


1,609,800


1,697,263

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

$        1,635,851


$        1,478,680


$        1,635,851


$        1,478,680

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars)

(unaudited)





Reconciliation of cash, cash equivalents and restricted cash:

March 31, 2022


March 31, 2021

Cash and cash equivalents

$             1,633,702


$             1,475,626

Restricted cash (1)

2,149


3,054

Total cash, cash equivalents and restricted cash

$             1,635,851


$             1,478,680





(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 or earnings per share, attributable to OpenText, on a diluted basis, excluding the effects of the amortization of acquired intangible assets, other income (expense), share-based compensation, and special charges (recoveries), all net of tax and any tax benefits/expense items unrelated to current period income, as further described in the tables below. Non-GAAP-based gross profit is the arithmetical sum of GAAP-based gross profit and the amortization of acquired technology-based intangible assets and share-based compensation within cost of sales. Non-GAAP-based gross margin is calculated as Non-GAAP-based gross profit expressed as a percentage of total revenue. Non-GAAP-based income from operations is calculated as 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, 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 our return to office planning, 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, 2022

(In thousands, except for per share data)


Three Months Ended March 31, 2022


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

$  136,020


$      (1,268)

(1)

$   134,752


Customer support

31,763


(501)

(1)

31,262


Professional service and other

56,693


(907)

(1)

55,786


Amortization of acquired technology-based intangible assets

46,564


(46,564)

(2)


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

608,047

68.9%

49,240

(3)

657,287

74.5%

Operating expenses







Research and development

117,730


(4,350)

(1)

113,380


Sales and marketing

180,955


(5,761)

(1)

175,194


General and administrative

88,137


(3,961)

(1)

84,176


Amortization of acquired customer-based intangible
assets

56,215


(56,215)

(2)


Special charges (recoveries)

11,031


(11,031)

(4)


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

131,609


130,558

(5)

262,167


Other income (expense), net

24,392


(24,392)

(6)


Provision for income taxes

41,041


(9,971)

(7)

31,070


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

74,681


116,137

(8)

190,818


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

$         0.28


$          0.42

(8)

$          0.70


(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 35% 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, 2022



Per share diluted

GAAP-based net income, attributable to OpenText

$                     74,681

$                          0.28

Add:



Amortization

102,779

0.38

Share-based compensation

16,748

0.06

Special charges (recoveries)

11,031

0.04

Other (income) expense, net

(24,392)

(0.09)

GAAP-based provision for income taxes

41,041

0.15

Non-GAAP-based provision for income taxes

(31,070)

(0.12)

Non-GAAP-based net income, attributable to OpenText

$                   190,818

$                          0.70

Reconciliation of Adjusted EBITDA




Three Months Ended March 31, 2022

GAAP-based net income, attributable to OpenText

$                                                       74,681

Add:


Provision for income taxes

41,041

Interest and other related expense, net

40,238

Amortization of acquired technology-based intangible assets

46,564

Amortization of acquired customer-based intangible assets

56,215

Depreciation

22,370

Share-based compensation

16,748

Special charges (recoveries)

11,031

Other (income) expense, net

(24,392)

Adjusted EBITDA

$                                                     284,496



GAAP-based net income margin

8.5%

Adjusted EBITDA margin

32.2%

Reconciliation of Free cash flows




Three Months Ended March 31, 2022

GAAP-based cash flows provided by operating activities

$                                                         323,557

Add:


Capital expenditures (1)

(17,590)

Free cash flows

$                                                         305,967



(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, 2022

(In thousands, except for per share data)


Nine Months Ended March 31, 2022


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

$   377,928


$      (3,072)

(1)

$   374,856


Customer support

90,914


(1,631)

(1)

89,283


Professional service and other

161,459


(2,275)

(1)

159,184


Amortization of acquired technology-based intangible
assets

152,333


(152,333)

(2)


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

1,797,850

69.4%

159,311

(3)

1,957,161

75.5%

Operating expenses







Research and development

321,517


(9,936)

(1)

311,581


Sales and marketing

491,133


(15,377)

(1)

475,756


General and administrative

231,127


(12,800)

(1)

218,327


Amortization of acquired customer-based intangible assets

160,764


(160,764)

(2)


Special charges (recoveries)

20,592


(20,592)

(4)


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

507,182


378,780

(5)

885,962


Other income (expense), net

29,137


(29,137)

(6)


Provision for income taxes

123,757


(16,178)

(7)

107,579


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

294,894


365,821

(8)

660,715


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

$          1.08


$          1.35

(8)

$          2.43


(1)

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

(2)

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

(3)

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

(4)

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

(5)

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

(6)

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

(7)

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





(8)

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


Nine Months Ended March 31, 2022



Per share diluted

GAAP-based net income, attributable to OpenText

$                   294,894

$                          1.08

Add:



Amortization

313,097

1.15

Share-based compensation

45,091

0.17

Special charges (recoveries)

20,592

0.08

Other (income) expense, net

(29,137)

(0.11)

GAAP-based provision for income taxes

123,757

0.45

Non-GAAP-based provision for income taxes

(107,579)

(0.39)

Non-GAAP-based net income, attributable to OpenText

$                   660,715

$                          2.43

Reconciliation of Adjusted EBITDA




Nine Months Ended March 31, 2022

GAAP-based net income, attributable to OpenText

$                                                     294,894

Add:


Provision for income taxes

123,757

Interest and other related expense, net

117,538

Amortization of acquired technology-based intangible assets

152,333

Amortization of acquired customer-based intangible assets

160,764

Depreciation

65,535

Share-based compensation

45,091

Special charges (recoveries)

20,592

Other (income) expense, net

(29,137)

Adjusted EBITDA

$                                                     951,367



GAAP-based net income margin

11.4%

Adjusted EBITDA margin

36.7%

Reconciliation of Free cash flows




Nine Months Ended March 31, 2022

GAAP-based cash flows provided by operating activities

$                                                         729,870

Add:


Capital expenditures (1)

(54,937)

Free cash flows

$                                                         674,933



(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, 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 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 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 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 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 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 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 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 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 an income tax provision charge from IRS settlements 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 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 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.

(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, 2022 and 2021:


Three Months Ended March 31, 2022


Three Months Ended March 31, 2021

Currencies

% of Revenue

% of Expenses (1)


% of Revenue

% of Expenses (1)

EURO

21%

12%


24%

14%

GBP

5%

5%


5%

6%

CAD

3%

14%


3%

11%

USD

63%

53%


60%

53%

Other

8%

16%


8%

16%

Total

100%

100%


100%

100%


Nine Months Ended March 31, 2022


Nine Months Ended March 31, 2021

Currencies

% of Revenue

% of Expenses (1)


% of Revenue

% of Expenses (1)

EURO

23%

13%


23%

14%

GBP

5%

6%


5%

5%

CAD

3%

14%


3%

10%

USD

61%

52%


61%

55%

Other

8%

15%


8%

16%

Total

100%

100%


100%

100%

(1) 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: https://www.prnewswire.com/news-releases/opentext-reports-third-quarter-fiscal-year-2022-financial-results-301539969.html

SOURCE Open Text Corporation

News Provided by PR Newswire via QuoteMedia

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