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OpenText Reports Fourth Quarter and Fiscal Year 2017 Financial Results

Q4 Fiscal 2017 - Total revenue of $664 million, up 37% Y/Y; $675 million in CC

Fiscal 2017 - Total revenue of $2.29 billion, up 26% Y/Y; $2.32 billion in CC

WATERLOO, Ontario, Aug. 3, 2017 /PRNewswire/ -- Open Text Corporation (NASDAQ: OTEX, TSX: OTEX) today announced its financial results for the fourth quarter and fiscal year ended June 30, 2017.

"Fiscal 2017 was a transformational year for OpenText as we strengthened our product offerings with OpenText Release 16 and acquisitions.  OpenText delivered a record $2.29 billion in revenues and $728 million in Adjusted Operating Income, representing 26% and 18% in year-over-year growth, respectively," said Mark J. Barrenechea, OpenText CEO & CTO. "Our Annual Recurring Revenues (Cloud Services & Subscriptions and Customer Support) grew 25% to $1.69 billion."

"Strategic acquisitions and positive organic growth continue to be our leading growth drivers. Fiscal 2018 will be the first full year of benefit from acquisitions completed over the last 12 months and we expect growth in total revenue, annual recurring revenues, margin, and cash flow. As well, we will remain focused on operational excellence and disciplined capital allocation," said Barrenechea.

Barrenechea concluded, "Our new corporate brand, "OpenText: The Information Company", has been well received by our customers, partners and employees.  OpenText Enterprise Information Management (EIM) enables customers to digitize their processes and supply chains, incorporate more information through machines and unlock the value of that information with our new Artificial Intelligence (AI) platform, Magellan.  We support our customers operating in a hybrid world, deploying on-premises, in the OpenText Cloud, or in a cloud of their choice."

Financial Highlights for Fiscal 2017 with Year Over Year Comparisons

Summary of Annual Results









(in millions except per share data)

FY17

FY16

$ Change

% Change

(Y/Y)


FY17 in CC*

% Change in
CC*


Revenues:









Cloud services and subscriptions

$705.5


$601.0


$104.5


17.4

%


$711.8


18.4

%


Customer support

981.1


746.4


234.7


31.4

%


993.5


33.1

%


Total annual recurring revenues

$1,686.6


$1,347.4


$339.2


25.2

%


$1,705.3


26.6

%


License

369.1


283.7


85.4


30.1

%


372.8


31.4

%


Professional service and other

235.3


193.1


42.2


21.9

%


239.5


24.0

%


Total revenues

$2,291.1


$1,824.2


$466.8


25.6

%


$2,317.5


27.0

%


GAAP-based operating income

$352.9


$368.6


($15.6 )


(4.2)

%







Non-GAAP-based operating income (1)

$728.5


$616.8


$111.6


18.1

%


$736.0


19.3

%


GAAP-based operating margin

15.4

%

20.2

%

n/a


(480)


bps




Non-GAAP-based operating margin (1)

31.8

%

33.8

%

n/a


(200)


bps

31.8

%

(200)


bps

GAAP-based EPS, diluted(2)(3)

$4.01


$1.17


$2.84


242.7

%





Non-GAAP-based EPS, diluted (1)(2)(4)

$2.02


$1.77


$0.25


14.1

%


$2.05


15.8

%


Net income, attributable to OpenText(3)

$1,025.7


$284.5


$741.2


260.5

%





Adjusted EBITDA(1)

$792.5


$671.7


$120.8


18.0

%





Operating cash flows

$439.3


$525.7


($86.5)


(16.4)

%





 

Summary of Quarterly Results









(in millions except per share data)

Q4 FY17

Q4 FY16

$ Change

% Change

(Y/Y)


Q4 FY17 in
CC*

% Change in
CC*


Revenues:









Cloud services and subscriptions

$183.6


$156.6


$27.0


17.2

%


$186.3


18.9

%


Customer support

287.8


193.0


94.8


49.1

%


293.0


51.8

%


Total annual recurring revenues

$471.4


$349.6


$121.8


34.9

%


$479.3


37.1

%


License

123.5


86.1


37.4


43.4

%


125.6


45.8

%


Professional service and other

68.6


48.1


20.5


42.7

%


70.5


46.6

%


Total revenues

$663.6


$483.8


$179.8


37.2

%


$675.4


39.6

%


GAAP-based operating income

$106.5


$93.5


$13.0


13.9

%







Non-GAAP-based operating income (1)

$219.9


$158.1


$61.8


39.1



$222.7


40.9

%


GAAP-based operating margin

16.0

%

19.3

%

n/a


(330)


bps




Non-GAAP-based operating margin (1)

33.1

%

32.7

%

n/a


40


bps

33.0

%

30


bps

GAAP-based EPS, diluted(2)

$0.17


$0.35


($0.18)


(51.4)

%





Non-GAAP-based EPS, diluted (1)(2)(4)

$0.60


$0.45


$0.15


33.3

%


$0.61


35.6

%


Net income attributable to OpenText

$46.1


$86.4


($40.3)


(46.6)

%





Adjusted EBITDA(1)  

$237.0


$173.1


$63.9


36.9

%





Operating cash flows

$102.5


$119.1


($16.6)


(14.0)

%







(1)

Please see note 2 "Use of Non-GAAP Financial Measures" below

(2)

As a result of the two-for-one share split, effected January 24, 2017 by way of a share sub-division, all current and historical period per share data and number of Common Shares outstanding in this press release are presented on a post share split basis.

(3)

Recorded a significant tax benefit in Q1 FY17 of $876.1 million. This significant tax benefit is specifically tied to the Company's internal reorganization and applied to Q1 FY17 only and as a result does not continue in future periods.

(4)

Please also see note 14 to the Company's 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.

"We finished a transformative fiscal year with strong fourth quarter results and delivered on our margin targets including margin expansion for each of the acquisitions," said OpenText CFO John Doolittle. "Our focus in Fiscal 2018 will be on continued margin expansion, particularly related to ECD, and operating cash flow growth."

*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.

OpenText Quarterly Business Highlights

  • 37 customer transactions over $1 million, 18 OpenText Cloud and 19 on-premise
  • Financial, Services, Consumer Goods and Technology industries saw the most demand in cloud and license
  • New customers in the quarter included Deutsche Bundesbank, Hatch, Maxim Lighting, Menarini Group, Companhia de Electricidade de Macau, The County of Los Angeles, Department of Human Resources, NASA Langley Research Center, State of Tennessee Comptroller of the Treasury, Lincolnshire County Council, Qumu, Panasonic, Modec, Singapore's Ministry of National Development, UEM, LähiTapiola, the Natori Company, Volkswagen Financial Services, SecureWorks, Covenant Health, Illovo Sugar Africa, Constellation Brands, VITAL Shared Services, Ooredoo, Anthem, Southern California Edison, Tecnimont, Scotiabank Inverlat S.A., Alberta Blue Cross Benefits Corp. 
  • OpenText Enhances Release 16 to Digitize Business Processes and Manage Information from Engagement to Insight
  • OpenText buys Covisint Corporation
  • OpenText Launches Magellan, New Analytics and Artificial Intelligence (AI) Platform
  • OpenText to Acquire Guidance Software Inc.
  • OpenText Announces Accenture Interactive, Deloitte, SAP and Tata Consultancy Services as Diamond Sponsors at OpenText Enterprise World 2017
  • OpenText Announces OpenText People Center
  • OpenText Announces New Global Cloud Reseller Agreement with SAP to Provide End-to-End HR Document Management
  • OpenText Named SAP Solution Extension Partner of the Year in 2017 SAP® Pinnacle Awards

Dividend Program Highlights

Cash Dividend
As part of our quarterly, non-cumulative cash dividend program, the Board declared on August 2, 2017 a cash dividend to $0.132 per common share. The record date for this dividend is September 1, 2017 and the payment date is September 22, 2017. Future declarations of dividends and the establishment of future record and payment dates are subject to the final determination and discretion of the Board of Directors.

Summary of Annual Results






FY17

FY16

% Change


Revenue (million)

$2,291.1


$1,824.2


25.6

%


GAAP-based gross margin

66.7

%

68.5

%

(180)


bps

GAAP-based operating margin

15.4

%

20.2

%

(480)


bps

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

$4.01


$1.17


242.7

%


Non-GAAP-based gross margin (3)

72.6

%

72.8

%

(20)


bps

Non-GAAP-based operating margin (3)

31.8

%

33.8

%

(200)


bps

Non-GAAP-based EPS, diluted (2)(3)(4)

$2.02


$1.77


14.1

%


 

Summary of Quarterly Results









Q4 FY17

Q3 FY17

Q4 FY16

% Change

(Q4 FY17 vs
Q3 FY17)


% Change

(Q4 FY17 vs
Q4 FY16)


Revenue (million)

$663.6


$593.1


$483.8


11.9

%


37.2

%


GAAP-based gross margin

66.9

%

64.5

%

68.4

%

240


bps

(150)


bps

GAAP-based operating margin

16.0

%

11.0

%

19.3

%

500


bps

(330)


bps

GAAP-based EPS, diluted(2)

$0.17


$0.08


$0.35


112.5

%


(51.4)%



Non-GAAP-based gross margin (3)

73.6

%

71.2

%

72.4

%

240


bps

120


bps

Non-GAAP-based operating margin (3)

33.1

%

29.1

%

32.7

%

400


bps

40


bps

Non-GAAP-based EPS, diluted (2)(3)(4)

$0.60


$0.45


$0.45


33.3

%


33.3

%




(1)

Recorded a significant tax benefit in Q1 FY17 of $876.1 million. This significant tax benefit is specifically tied to the Company's internal reorganization and applied to Q1 FY17 only and as a result does not continue in future periods.

(2)

As a result of the two-for-one share split, effected January 24, 2017 by way of a share sub-division, all current and historical period per share data and number of Common Shares outstanding in this press release are presented on a post share split basis.

(3)

Please see note 2 "Use of Non-GAAP Financial Measures" below

(4)

Please also see note 14 to the Company's 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.

Shelf Renewal

The Company also announced today that it is filing a renewed preliminary short form base shelf prospectus with the securities regulatory authorities in each of the provinces of Canada. A final shelf prospectus, once a receipt has been issued by the Canadian securities regulatory authorities, will allow OpenText or any selling security holders, as applicable, to offer and issue or sell, as applicable, from time to time, an aggregate of up to US$1 billion of equity and debt securities, or any combination thereof, during the 25-month period that the shelf prospectus remains effective. The Company expects to file a corresponding automatic shelf registration statement on Form S-3 with the U.S. Securities and Exchange Commission (the "SEC") concurrently with the filing of the final shelf prospectus in Canada. The specific terms of any future offering will be established in a prospectus supplement to the shelf prospectus, which supplement will be filed with the applicable Canadian securities regulatory authorities and the SEC.

Conference Call Information

The public is invited to listen to the earnings conference call today at 5:00 p.m. ET (2:00 p.m. PT) by dialing 1-800-319-4610 (toll-free) or +1-604-638-5340 (international). Please dial-in 15 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/events.cfm.

A replay of the call will be available beginning August 3, 2017 at 7:00 p.m. ET through 11:59 p.m. on August 17, 2017 and can be accessed by dialing 1-855-669-9658 (toll-free) or +1-604-674-8052 (international) and using passcode 1541 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-U.S. GAAP-based financial measures.

About OpenText
OpenText enables the digital world, creating a better way for organizations to work with information, on premises or in the cloud. For more information about OpenText (NASDAQ: OTEX, TSX: OTEX) visit www.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, 2018 (Fiscal 2018) on growth in earnings and cash flows, creating value through investments in broader Enterprise Information Management (EIM) capabilities, distribution, the Company's presence in the cloud and in growth markets, expected growth in our revenue lines, expected ECD Business revenue contributions, adjusted operating income and cash flow, its financial condition, results of operations and earnings, announced acquisitions, ongoing tax matters, the integration of the acquired businesses, expected timing, charges and savings related to restructuring activities, declaration of quarterly dividends, future tax rates, new platform and product offerings and other matters, may contain words such as "anticipates", "expects", "intends", "plans", "believes", "seeks", "estimates", "may", "could", "would", "might", "will" and variations of these words or similar expressions are considered forward-looking statements or information under applicable securities laws. In addition, any information or statements that refer to expectations, beliefs, plans, projections, objectives, performance or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking, and based on our current expectations, forecasts and projections about the operating environment, economies and markets in which we operate. Forward-looking statements reflect our current estimates, beliefs and assumptions, which are based on management's perception of historic trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances, such as certain assumptions about the economy, as well as market, financial and operational assumptions. Management's estimates, beliefs and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events and, as such, are subject to change. We can give no assurance that such estimates, beliefs and assumptions will prove to be correct. Such forward-looking statements involve known and unknown risks, uncertainties and other factors and assumptions that may cause the actual results, performance or achievements to differ materially. Such factors include, but are not limited to: (i) the future performance, financial and otherwise, of OpenText; (ii) the ability of OpenText to bring new products and services to market and to increase sales; (iii) the strength of the Company's product development pipeline; (iv) the Company's growth and profitability prospects; (v) the estimated size and growth prospects of the EIM market including expected growth in the Artificial Intelligence market; (vi) the Company's competitive position in the EIM market and its ability to take advantage of future opportunities in this market; (vii) the benefits of the Company's products and services to be realized by customers; (viii) the demand for the Company's products and services and the extent of deployment of the Company's products and services in the EIM marketplace; (ix) downward pressure on our share price and dilutive effect of future sales or issuances of equity securities (including in connection with future acquisitions); (x) the Company's financial condition and capital requirements; and (xi) statements about the impact of product releases. The risks and uncertainties that may affect forward-looking statements include, but are not limited to: (i) integration of acquisitions and related restructuring efforts, including the quantum of restructuring charges and the timing thereof; (ii) the potential for the incurrence of or assumption of debt in connection with acquisitions and the impact on the ratings or outlooks of rating agencies on the Company's outstanding debt securities; (iii) the possibility that the Company may be unable to meet its future reporting requirements under the U.S. Securities Exchange Act of 1934, as amended, and the rules promulgated thereunder, or applicable Canadian securities regulation; (iv) the risks associated with bringing new products and services to market; (v) fluctuations in currency exchange rates; (vi) delays in the purchasing decisions of the Company's customers; (vii) the competition the Company faces in its industry and/or marketplace; (viii) the final determination of litigation, tax audits (including tax examinations in the United States and elsewhere) and other legal proceedings; (ix) potential exposure to greater than anticipated tax liabilities or expenses, including with respect to changes in Canadian, U.S. or international tax regimes; (x) the possibility of technical, logistical or planning issues in connection with the deployment of the Company's products or services; (xi) the continuous commitment of the Company's customers; and (xii) demand for the Company's products and services. 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.

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

OTEX-F

For more information, please contact:

Greg Secord
Vice President, Investor Relations
Open Text Corporation
415-963-0825
[email protected]

Copyright ©2017 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

CONSOLIDATED BALANCE SHEETS

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



June 30, 2017


June 30, 2016

ASSETS




Cash and cash equivalents

$

443,357



$

1,283,757


Short-term investments



11,839


Accounts receivable trade, net of allowance for doubtful accounts of $6,319 as of June 30, 2017 and $6,740 as of June 30, 2016

445,812



285,904


Income taxes recoverable

32,683



31,752


Prepaid expenses and other current assets

81,625



59,021


Total current assets

1,003,477



1,672,273


Property and equipment

227,418



183,660


Goodwill

3,416,749



2,325,586


Acquired intangible assets

1,472,542



646,240


Deferred tax assets

1,215,712



241,161


Other assets

93,763



53,697


Deferred charges

42,344



22,776


Long-term income taxes recoverable

8,557



8,751


Total assets

$

7,480,562



$

5,154,144


LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable and accrued liabilities

$

342,120



$

257,450


Current portion of long-term debt

182,760



8,000


Deferred revenues

570,328



373,549


Income taxes payable

31,835



32,030


Total current liabilities

1,127,043



671,029


Long-term liabilities:




Accrued liabilities

50,338



29,848


Deferred credits

5,283



8,357


Pension liability

58,627



61,993


Long-term debt

2,387,057



2,137,987


Deferred revenues

61,678



37,461


Long-term income taxes payable

162,493



149,041


Deferred tax liabilities

94,724



79,231


Total long-term liabilities

2,820,200



2,503,918


Shareholders' equity:




Share capital




264,059,567 and 242,809,354 Common Shares issued and outstanding at June 30, 2017 and June 30, 2016, respectively; authorized Common Shares: unlimited

1,439,850



817,788


Additional paid-in capital

173,604



147,280


Accumulated other comprehensive income

48,800



46,310


Retained earnings

1,897,624



992,546


Treasury stock, at cost (1,101,612 shares at June 30, 2017 and 1,267,294 at June 30, 2016, respectively)

(27,520)



(25,268)


Total OpenText shareholders' equity

3,532,358



1,978,656


Non-controlling interests

961



541


Total shareholders' equity

3,533,319



1,979,197


Total liabilities and shareholders' equity

$

7,480,562



$

5,154,144


 

OPEN TEXT CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

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




Year Ended June 30,



2017


2016


2015

Revenues:







License


$

369,144



$

283,710



$

294,266


Cloud services and subscriptions


705,495



601,018



605,309


Customer support


981,102



746,409



731,797


Professional service and other


235,316



193,091



220,545


Total revenues


2,291,057



1,824,228



1,851,917


Cost of revenues:







License


13,632



10,296



12,899


Cloud services and subscriptions


300,255



244,021



237,310


Customer support


122,753



89,861



94,456


Professional service and other


195,195



155,584



172,742


Amortization of acquired technology-based intangible assets


130,556



74,238



81,002


Total cost of revenues


762,391



574,000



598,409


Gross profit


1,528,666



1,250,228



1,253,508


Operating expenses:







Research and development


281,680



194,057



196,491


Sales and marketing


444,838



344,235



373,610


General and administrative


170,438



140,397



162,728


Depreciation


64,318



54,929



50,906


Amortization of acquired customer-based intangible assets


150,842



113,201



108,239


Special charges


63,618



34,846



12,823


Total operating expenses


1,175,734



881,665



904,797


Income from operations


352,932



368,563



348,711


Other income (expense), net


15,743



(1,423)



(28,047)


Interest and other related expense, net


(119,124)



(76,363)



(54,620)


Income before income taxes


249,551



290,777



266,044


Provision for income taxes


(776,364)



6,282



31,638


Net income for the period


$

1,025,915



$

284,495



$

234,406


Net (income) loss attributable to non-controlling interests


(256)



(18)



(79)


Net income attributable to OpenText


$

1,025,659



$

284,477



$

234,327


Earnings per share—basic attributable to OpenText


$

4.04



$

1.17



$

0.96


Earnings per share—diluted attributable to OpenText


$

4.01



$

1.17



$

0.95


Weighted average number of Common Shares outstanding—basic


253,879



242,926



244,184


Weighted average number of Common Shares outstanding—diluted


255,805



244,076



245,914


Dividends declared per Common Share


$

0.4770



$

0.4150



$

0.3588



As a result of the two-for-one share split, effected January 24, 2017 by way of a share sub-division, all current and historical period per share data and number of Common Shares outstanding in these Consolidated Financial Statements are presented on a post share split basis.

 

OPEN TEXT CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

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

(Unaudited)



Three Months Ended June 30


2017


2016

Revenues:




License

$

123,497



$

86,126


Cloud services and subscriptions

183,638



156,624


Customer support

287,804



192,969


Professional service and other

68,615



48,084


Total revenues

663,554



483,803


Cost of revenues:




License

3,388



3,106


Cloud services and subscriptions

79,588



64,889


Customer support

35,224



25,237


Professional service and other

58,028



41,546


Amortization of acquired technology-based intangible assets

43,288



17,994


Total cost of revenues

219,516



152,772


Gross profit

444,038



331,031


Operating expenses:




Research and development

81,301



53,747


Sales and marketing

129,541



95,815


General and administrative

47,499



33,330


Depreciation

17,190



14,931


Amortization of acquired customer-based intangible assets

42,594



29,637


Special charges

19,461



10,092


Total operating expenses

337,586



237,552


Income from operations

106,452



93,479


Other income (expense), net

11,178



409


Interest and other related expense, net

(32,372)



(21,902)


Income before income taxes

85,258



71,986


Provision for (recovery of) income taxes

39,000



(14,347)


Net income for the period

$

46,258



$

86,333


Net (income) loss attributable to non-controlling interests

(121)



57


Net income attributable to OpenText

$

46,137



$

86,390


Earnings per share—basic attributable to OpenText

$

0.17



$

0.36


Earnings per share—diluted attributable to OpenText

$

0.17



$

0.35


Weighted average number of Common Shares outstanding—basic

263,938



242,648


Weighted average number of Common Shares outstanding—diluted

265,818



244,040


Dividends declared per Common Share

$

0.1320



$

0.1150



As a result of the two-for-one share split, effected January 24, 2017 by way of a share sub-division, all current and historical period per share data and number of Common Shares outstanding in these Condensed Consolidated Financial Statements are presented on a post share split basis.

 

OPEN TEXT CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands of U.S. dollars)




Year Ended June 30,



2017


2016


2015

Net income for the period


$

1,025,915



$

284,495



$

234,406


Other comprehensive income—net of tax:







Net foreign currency translation adjustments


(4,756)



(3,318)



15,690


Unrealized gain (loss) on cash flow hedges:







Unrealized gain (loss) - net of tax expense (recovery) effect of $34, ($928) and ($2,188) for the year ended June 30, 2017, 2016 and 2015, respectively


95



(2,574)



(6,064)


(Gain) loss reclassified into net income - net of tax recovery effect of $67, $1,065 and $2,059 for the year ended June 30, 2017, 2016 and 2015, respectively


186



2,956



5,710


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







Actuarial gain (loss) - net of tax expense (recovery) effect of $840, ($1,612) and ($1,422) for the year ended June 30, 2017, 2016 and 2015, respectively


6,216



(3,374)



(3,302)


Amortization of actuarial loss into net income - net of tax recovery effect of $241, $132 and $89 for the year ended June 30, 2017, 2016 and 2015, respectively


565



347



357


Unrealized net gain (loss) on marketable securities - net of tax effect of nil for the year ended June 30, 2017, 2016 and 2015, respectively


184



445



(12)


Unrealized gain on marketable securities - net of tax effect of nil for the year ended June 30, 2017, 2016 and 2015, respectively






1,906


Release of unrealized gain on marketable securities - net of tax effect of nil for the year ended June 30, 2017, 2016 and 2015, respectively






(1,906)


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


2,490



(5,518)



12,379


Total comprehensive income


1,028,405



278,977



246,785


Comprehensive (income) loss attributable to non-controlling interests


(256)



(18)



(79)


Total comprehensive income attributable to OpenText


$

1,028,149



$

278,959



$

246,706


 

OPEN TEXT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars)



Year Ended June 30,


2017


2016


2015

Cash flows from operating activities:






Net income for the period

$

1,025,915



$

284,495



$

234,406


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






Depreciation and amortization of intangible assets

345,715



242,368



240,147


Share-based compensation expense

30,507



25,978



22,047


Excess tax (benefits) on share-based compensation expense

(1,534)



(230)



(1,675)


Pension expense

3,893



4,577



4,796


Amortization of debt issuance costs

5,014



4,678



4,556


Amortization of deferred charges and credits

6,298



9,903



10,525


Loss on sale and write down of property and equipment

784



1,108



1,368


Release of unrealized gain on marketable securities to income





(3,098)


Deferred taxes

(871,195)



(54,461)



(14,578)


Share in net (income) of equity investees

(5,952)






Write off of unamortized debt issuance costs

833





2,919


Other non-cash charges

1,033






Changes in operating assets and liabilities:






Accounts receivable

(126,784)



8,985



43,189


Prepaid expenses and other current assets

(7,766)



316



(3,534)


Income taxes and deferred charges and credits

(1,683)



6,294



2,933


Accounts payable and accrued liabilities

53,490



(5,671)



(22,714)


Deferred revenue

3,484



(4,781)



6,775


Other assets

(22,799)



2,163



(5,031)


Net cash provided by operating activities

439,253



525,722



523,031


Cash flows from investing activities:






Additions of property and equipment

(79,592)



(70,009)



(77,046)


Proceeds from maturity of short-term investments

9,212



11,297



17,017


Purchase of ECD Business

(1,622,394)






Purchase of HP Inc. CCM Business

(315,000)






Purchase of Recommind, Inc.

(170,107)






Purchase of HP Inc. CEM Business

(7,289)



(152,711)




Purchase of ANXe Business Corporation

143



(104,570)




Purchase of Daegis Inc., net of cash acquired



(22,146)




Purchase consideration for prior period acquisitions



(13,644)



(327,792)


Other investing activities

(5,937)



(9,393)



(10,574)


Net cash used in investing activities

(2,190,964)



(361,176)



(398,395)


Cash flows from financing activities:






Excess tax benefits on share-based compensation expense

1,534



230



1,675


Proceeds from issuance of long-term debt

256,875



600,000



800,000


Proceeds from revolver

225,000






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

35,593



20,097



15,240


Proceeds from issuance of Common Shares under the public Equity Offering

604,223






Repayment of long-term debt and revolver

(57,880)



(8,000)



(530,284)


Debt issuance costs

(7,240)



(6,765)



(18,271)


Equity issuance costs

(19,574)






Common Shares repurchased



(65,509)




Purchase of treasury stock

(8,198)



(10,627)



(10,126)


Repurchase of non-controlling interest

(208)






Payments of dividends to shareholders

(120,581)



(99,262)



(87,629)


Net cash provided by financing activities

909,544



430,164



170,605


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

1,767



(10,952)



(23,132)


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

(840,400)



583,758



272,109


Cash and cash equivalents at beginning of the period

1,283,757



699,999



427,890


Cash and cash equivalents at end of the period

$

443,357



$

1,283,757



$

699,999


 

OPEN TEXT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars)

(Unaudited)



Three Months Ended June 30,


2017


2016

Cash flows from operating activities:




Net income for the period

$

46,258



$

86,333


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




Depreciation and amortization of intangible assets

103,071



62,562


Share-based compensation expense

8,134



6,898


Excess tax expense (benefits) on share-based compensation expense

52



27


Pension expense

940



1,118


Amortization of debt issuance costs

1,233



1,208


Amortization of deferred charges and credits

(140)



2,653


Loss on sale and write down of property and equipment

784




Deferred taxes

19,049



(38,769)


Share in net (income) loss of equity investees

201




Changes in operating assets and liabilities:




Accounts receivable

(89,689)



(13,167)


Prepaid expenses and other current assets

(1,532)



2,905


Income taxes and deferred charges and credits

(3,253)



3,004


Accounts payable and accrued liabilities

36,969



21,763


Deferred revenue

(3,433)



(17,345)


Other assets

(16,164)



(70)


Net cash provided by operating activities

102,480



119,120


Cash flows from investing activities:




Additions of property and equipment

(29,521)



(21,112)


Proceeds from maturity of short-term investments



2,058


Purchase of HP Inc. CEM Business



(152,711)


Purchase of ANXe Business Corporation



(104,570)


Other investing activities

(2,924)



(3,269)


Net cash used in investing activities

(32,445)



(279,604)


Cash flows from financing activities:




Excess tax benefits on share-based compensation expense

(52)



(27)


Proceeds from issuance of long-term debt



600,000


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

8,925



8,269


Repayment of long-term debt and revolver

(51,940)



(2,000)


Debt issuance costs

(1,040)



(6,765)


Equity issuance costs

(102)




Purchase of treasury stock

(3,953)




Repurchase of non-controlling interest

(208)




Payments of dividends to shareholders

(34,628)



(27,635)


Net cash provided by (used in) financing activities

(82,998)



571,842


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

7,320



(5,006)


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

(5,643)



406,352


Cash and cash equivalents at beginning of the period

449,000



877,405


Cash and cash equivalents at end of the period

$

443,357



$

1,283,757


Notes

(1)

All dollar amounts in this press release are in U.S. Dollars unless otherwise indicated.



(2)

Use of Non-GAAP Financial Measures: In addition to reporting financial results in accordance with U.S. GAAP, the Company provides certain financial measures that are not in accordance with U.S. GAAP (Non-GAAP).These Non-GAAP financial measures have certain limitations in that they do not have a standardized meaning and thus the Company's definition may be different from similar Non-GAAP financial measures used by other companies and/or analysts and may differ from period to period. Thus it may be more difficult to compare the Company's financial performance to that of other companies. However, the Company's management compensates for these limitations by providing the relevant disclosure of the items excluded in the calculation of these Non-GAAP financial measures both in its reconciliation to the U.S. GAAP financial measures and its consolidated financial statements, all of which should be considered when evaluating the Company's results.




The Company uses these Non-GAAP financial measures to supplement the information provided in its consolidated financial statements, which are presented in accordance with U.S. GAAP. The presentation of Non-GAAP financial measures are not meant to be a substitute for financial measures presented in accordance with U.S. GAAP, but rather should be evaluated in conjunction with and as a supplement to such U.S. GAAP measures. OpenText strongly encourages investors to review its financial information in its entirety and not to rely on a single financial measure. The Company therefore believes that despite these limitations, it is appropriate to supplement the disclosure of the U.S. GAAP measures with certain Non-GAAP measures defined below.




Non-GAAP-based net income and Non-GAAP-based EPS, attributable to OpenText, are calculated as net income or earnings per share, attributable to OpenText, on a diluted basis, after giving effect to 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 income from operations, excluding the amortization of acquired intangible assets, Special charges (recoveries), and share-based compensation expense. Non-GAAP-based operating margin is calculated as Non-GAAP-based income from operations expressed as a percentage of total revenue.




Adjusted earnings (loss) before interest, taxes, depreciation and amortization (Adjusted EBITDA) is calculated as 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).  




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 and is based upon the way the Company's management evaluates the performance of the Company's business for use in the Company's internal reports. In the course of such evaluation and for the purpose of making operating decisions, the Company's management excludes certain items from its analysis, including amortization of acquired intangible assets, Special charges (recoveries), share-based compensation, other income (expense), and the taxation impact of these items. These items are excluded based upon the manner in which management evaluates the business of the Company and are not excluded in the sense that they may be used under U.S. GAAP.




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-U.S. 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 June 30, 2017.

(In thousands except for per share amounts)


Three Months Ended June 30, 2017


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

$

79,588



$

(390)


(1)

$

79,198



Customer support

35,224



(313)


(1)

34,911



Professional service and other

58,028



(449)


(1)

57,579



Amortization of acquired technology-based intangible assets

43,288



(43,288)


(2)



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

444,038


66.9

%

44,440


(3)

488,478


73.6

%

Operating expenses







Research and development

81,301



(1,777)


(1)

79,524



Sales and marketing

129,541



(2,450)


(1)

127,091



General and administrative

47,499



(2,755)


(1)

44,744



Amortization of acquired customer-based intangible assets

42,594



(42,594)


(2)



Special charges (recoveries)

19,461



(19,461)


(4)



GAAP-based income from operations and operating margin (%) / Non-GAAP-based income from operations and operating margin (%)

106,452


16.0

%

113,477


(5)

219,929


33.1

%

Other income (expense), net

11,178



(11,178)


(6)



Provision for (recovery of) income taxes

39,000



(10,731)


(7)

28,269



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

46,137



113,030


(8)

159,167



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

$

0.17



$

0.43


(8)

$

0.60





(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 one-time, non-recurring 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, and operating margin stated as a percentage of total revenue.

(6)

Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) relates primarily 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 non-marketable securities 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 46% and a Non-GAAP-based tax rate of approximately 15%; these rate differences are due to the income tax effects of expenses that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded expenses 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 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 15%, 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 June 30, 2017



Per share diluted

GAAP-based net income, attributable to OpenText

$

46,137


$

0.17


Add:



Amortization

85,882


0.32


Share-based compensation

8,134


0.03


Special charges (recoveries)

19,461


0.07


Other (income) expense, net

(11,178)


(0.04)


GAAP-based provision for (recovery of ) income taxes

39,000


0.15


Non-GAAP-based provision for income taxes

(28,269)


(0.10)


Non-GAAP-based net income, attributable to OpenText

$

159,167


$

0.60


 

Reconciliation of Adjusted EBITDA



Three Months Ended June 30, 2017

GAAP-based net income, attributable to OpenText

$

46,137


Add:


Provision for (recovery of) income taxes

39,000


Interest and other related expense, net

32,372


Amortization of acquired technology-based intangible assets

43,288


Amortization of acquired customer-based intangible assets

42,594


Depreciation

17,190


Share-based compensation

8,134


Special charges (recoveries)

19,461


Other (income) expense, net

(11,178)


Adjusted EBITDA

$

236,998


 

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the year ended June 30, 2017.

(In thousands except for per share amounts)


Year Ended June 30, 2017


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

$

300,255



$

(1,229)


(1)

$

299,026



Customer support

122,753



(1,079)


(1)

121,674



Professional service and other

195,195



(1,451)


(1)

193,744



Amortization of acquired technology-based intangible assets

130,556



(130,556)


(2)



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

1,528,666


66.7

%

134,315


(3)

1,662,981


72.6

%

Operating expenses







Research and development

281,680



(7,149)


(1)

274,531



Sales and marketing

444,838



(9,680)


(1)

435,158



General and administrative

170,438



(9,919)


(1)

160,519



Amortization of acquired customer-based intangible assets

150,842



(150,842)


(2)



Special charges (recoveries)

63,618



(63,618)


(4)



GAAP-based income from operations and operating margin (%) / Non-GAAP-based income from operations and operating margin (%)

352,932


15.4

%

375,523


(5)

728,455


31.8

%

Other income (expense), net

15,743



(15,743)


(6)



Provision for (recovery of) income taxes

(776,364)



867,764


(7)

91,400



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

1,025,659



(507,984)


(8)

517,675



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

$

4.01



$

(1.99)


(8)

$

2.02





(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 one-time, non-recurring 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, and operating margin stated as a percentage of total revenue.

(6)

Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) relates primarily 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 non-marketable securities 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 recovery rate of approximately 311% and a Non-GAAP-based tax rate of approximately 15%; these rate differences are due to the income tax effects of expenses that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded expenses 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 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 15%, 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:

 


Year Ended June 30, 2017



Per share diluted

GAAP-based net income, attributable to OpenText

$

1,025,659


$

4.01


Add:



Amortization

281,398


1.10


Share-based compensation

30,507


0.12


Special charges (recoveries)

63,618


0.25


Other (income) expense, net

(15,743)


(0.06)


GAAP-based provision for (recovery of) income taxes

(776,364)


(3.03)


Non-GAAP based provision for income taxes

(91,400)


(0.37)


Non-GAAP-based net income, attributable to OpenText

$

517,675


$

2.02


 

Reconciliation of Adjusted EBITDA



Year Ended June 30, 2017

GAAP-based net income, attributable to OpenText

$

1,025,659


Add:


Provision for (recovery of) income taxes

(776,364)


Interest and other related expense, net

119,124


Amortization of acquired technology-based intangible assets

130,556


Amortization of acquired customer-based intangible assets

150,842


Depreciation

64,318


Share-based compensation

30,507


Special charges (recoveries)

63,618


Other (income) expense, net

(15,743)


Adjusted EBITDA

$

792,517


 

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the three months ended March 31, 2017.

(In thousands except for per share amounts)


Three Months Ended March 31, 2017


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

$

77,225



$

(268)


(1)

$

76,957



Customer support

34,442



(261)


(1)

34,181



Professional service and other

55,529



(89)


(1)

55,440



Amortization of acquired technology-based intangible assets

39,285



(39,285)


(2)



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

382,641


64.5

%

39,903


(3)

422,544


71.2

%

Operating expenses







Research and development

77,086



(1,634)


(1)

75,452



Sales and marketing

117,498



(2,081)


(1)

115,417



General and administrative

44,828



(2,328)


(1)

42,500



Amortization of acquired customer-based intangible assets

40,825



(40,825)


(2)



Special charges (recoveries)

20,586



(20,586)


(4)



GAAP-based income from operations and operating margin (%) / Non-GAAP-based income from operations and operating margin (%)

65,261


11.0

%

107,357


(5)

172,618


29.1

%

Other income (expense), net

1,424



(1,424)


(6)



Provision for (recovery of) income taxes

13,239



7,798


(7)

21,037



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

21,616



98,135


(8)

119,751



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

$

0.08



$

0.37


(8)

$

0.45





(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 one-time, non-recurring 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, and operating margin stated as a percentage of total revenue.

(6)

Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) relates primarily 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 non-marketable securities 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 38% and a Non-GAAP-based tax rate of approximately 15%; these rate differences are due to the income tax effects of expenses that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded expenses 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 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 15%, 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, 2017



Per share diluted

GAAP-based net income, attributable to OpenText

$

21,616


$

0.08


Add:



Amortization

80,110


0.30


Share-based compensation

6,661


0.03


Special charges (recoveries)

20,586


0.08


Other (income) expense, net

(1,424)


(0.01)


GAAP-based provision for (recovery of ) income taxes

13,239


0.05


Non-GAAP-based provision for income taxes

(21,037)


(0.08)


Non-GAAP-based net income, attributable to OpenText

$

119,751


$

0.45


 

Reconciliation of Adjusted EBITDA



Three months ended March 31, 2017

GAAP-based net income, attributable to OpenText

$

21,616


Add:


Provision for (recovery of) income taxes

13,239


Interest and other related expense, net

31,734


Amortization of acquired technology-based intangible assets

39,285


Amortization of acquired customer-based intangible assets

40,825


Depreciation

16,557


Share-based compensation

6,661


Special charges (recoveries)

20,586


Other (income) expense, net

(1,424)


Adjusted EBITDA

$

189,079


 

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the three months ended June 30, 2016.

(In thousands except for per share amounts)


Three Months Ended June 30, 2016


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

$

64,889



$

(312)


(1)

$

64,577



Customer support

25,237



(269)


(1)

24,968



Professional service and other

41,546



(540)


(1)

41,006



Amortization of acquired technology-based intangible assets

17,994



(17,994)


(2)



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

331,031


68.4

%

19,115


(3)

350,146


72.4

%

Operating expenses







Research and development

53,747



(836)


(1)

52,911



Sales and marketing

95,815



(3,026)


(1)

92,789



General and administrative

33,330



(1,915)


(1)

31,415



Amortization of acquired customer-based intangible assets

29,637



(29,637)


(2)



Special charges (recoveries)

10,092



(10,092)


(4)



GAAP-based income from operations and operating margin (%) / Non-GAAP-based income from operations and operating margin (%)

93,479


19.3

%

64,621


(5)

158,100


32.7

%

Other income (expense), net

409



(409)


(6)



Provision for (recovery of) income taxes

(14,347)



41,644


(7)

27,297



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

86,390



22,568


(8)

108,958



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

$

0.35



$

0.10


(8)

$

0.45





(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 one-time, non-recurring 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, and operating margin stated as a percentage of total revenue.

(6)

Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) relates primarily 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.

(7)

Adjustment relates to differences between the GAAP-based tax provision rate of approximately 20% and a Non-GAAP-based tax rate of approximately 20%; these rate differences are due to the income tax effects of expenses that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded expenses include amortization, share-based compensation, Special charges (recoveries) and other income (expense), net. Also excluded are tax 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. In arriving at our Non-GAAP-based tax rate of approximately 20%, 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 June 30, 2016



Per share diluted

GAAP-based net income, attributable to OpenText

$

86,390


$

0.35


Add:



Amortization

47,631


0.20


Share-based compensation

6,898


0.03


Special charges (recoveries)

10,092


0.04


Other (income) expense, net

(409)



GAAP-based provision for (recovery of ) income taxes

(14,347)


(0.06)


Non-GAAP-based provision for income taxes

(27,297)


(0.11)


Non-GAAP-based net income, attributable to OpenText

$

108,958


$

0.45


 

Reconciliation of Adjusted EBITDA



Three months ended June 30, 2016

GAAP-based net income, attributable to OpenText

$

86,390


Add:


Provision for (recovery of) income taxes

(14,347)


Interest and other related expense, net

21,902


Amortization of acquired technology-based intangible assets

17,994


Amortization of acquired customer-based intangible assets

29,637


Depreciation

14,931


Share-based compensation

6,898


Special charges (recoveries)

10,092


Other (income) expense, net

(409)


Adjusted EBITDA

$

173,088


 

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the year ended June 30, 2016.

(In thousands except for per share amounts)


Year Ended June 30, 2016


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

$

244,021



$

(953)


(1)

$

243,068



Customer support

89,861



(900)


(1)

88,961



Professional service and other

155,584



(1,626)


(1)

153,958



Amortization of acquired technology-based intangible assets

74,238



(74,238)


(2)



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

1,250,228


68.5

%

77,717


(3)

1,327,945


72.8

%

Operating expenses







Research and development

194,057



(2,824)


(1)

191,233



Sales and marketing

344,235



(12,069)


(1)

332,166



General and administrative

140,397



(7,606)


(1)

132,791



Amortization of acquired customer-based intangible assets

113,201



(113,201)


(2)



Special charges (recoveries)

34,846



(34,846)


(4)



GAAP-based income from operations and operating margin (%) / Non-GAAP-based income from operations and operating margin (%)

368,563


20.2

%

248,263


(5)

616,826


33.8

%

Other income (expense), net

(1,423)



1,423


(6)



Provision for (recovery of) income taxes

6,282



101,793


(7)

108,075



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

284,477



147,893


(8)

432,370



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

$

1.17



$

0.60


(8)

$

1.77





(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 one-time, non-recurring 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, and operating margin stated as a percentage of total revenue.

(6)

Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) relates primarily 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.

(7)

Adjustment relates to differences between the GAAP-based tax provision rate of approximately 2% and a Non-GAAP-based tax rate of 20%; these rate differences are due to the income tax effects of expenses that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded expenses include amortization, share-based compensation, Special charges (recoveries) and other income (expense), net. Also excluded are tax 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. In arriving at our Non-GAAP-based tax rate of 20%, 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:

 


Year Ended June 30, 2016



Per share diluted

GAAP-based net income, attributable to OpenText

$

284,477


$

1.17


Add:



Amortization

187,439


0.77


Share-based compensation

25,978


0.10


Special charges (recoveries)

34,846


0.14


Other (income) expense, net

1,423


0.01


GAAP-based provision for (recovery of) income taxes

6,282


0.03


Non-GAAP based provision for income taxes

(108,075)


(0.45)


Non-GAAP-based net income, attributable to OpenText

$

432,370


$

1.77



 

Reconciliation of Adjusted EBITDA



Year Ended June 30, 2016

GAAP-based net income, attributable to OpenText

$

284,477


Add:


Provision for (recovery of) income taxes

6,282


Interest and other related expense, net

76,363


Amortization of acquired technology-based intangible assets

74,238


Amortization of acquired customer-based intangible assets

113,201


Depreciation

54,929


Share-based compensation

25,978


Special charges (recoveries)

34,846


Other (income) expense, net

1,423


Adjusted EBITDA

$

671,737


(3)

The following tables provide a composition of our major currencies for revenue and expenses, expressed as a percentage, for the three months and years ended June 30, 2017 and 2016:

 


Three Months Ended
June 30, 2017


Three Months Ended
June 30, 2016

Currencies

% of Revenue 

% of Expenses* 


% of Revenue 

% of Expenses* 

EURO

22

%

16

%


25

%

15

%

GBP

6

%

6

%


7

%

7

%

CAD

4

%

10

%


5

%

12

%

USD

58

%

52

%


54

%

49

%

Other

10

%

16

%


9

%

17

%

Total

100

%

100

%


100

%

100

%






Year Ended June 30, 2017


Year Ended June 30, 2016

Currencies

% of Revenue 

% of Expenses* 


% of Revenue 

% of Expenses* 

EURO

22

%

15

%


24

%

15

%

GBP

6

%

7

%


8

%

7

%

CAD

4

%

11

%


4

%

12

%

USD

58

%

52

%


54

%

49

%

Other

10

%

15

%


10

%

17

%

Total

100

%

100

%


100

%

100

%


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

 

View original content:http://www.prnewswire.com/news-releases/opentext-reports-fourth-quarter-and-fiscal-year-2017-financial-results-300499454.html

SOURCE Open Text Corporation

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