OpenText Reports Fourth Quarter and Fiscal Year 2019 Financial Results
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OpenText Reports Fourth Quarter and Fiscal Year 2019 Financial Results

WATERLOO, Ontario, Aug. 1, 2019 — (PRNewswire) —

Highlights

Fiscal Year 2019

Fourth Quarter

Open Text Corporation (NASDAQ: OTEX), (TSX: OTEX), "The Information Company," today announced its financial results for the fourth quarter and year ended June 30, 2019. 

"Fiscal 2019 was a momentous year for OpenText as we delivered in constant currency $2.92 billion in total revenues, a record $918.6 million in cloud revenues, up 10.8% year-over-year growth and $2.19 billion in Annual Recurring Revenues, up 6.2% year-over-year growth, representing 75% of total revenues," said Mark J. Barrenechea, OpenText CEO & CTO. "We enter Fiscal 2020 with the strongest EIM offering in the industry, empowering customers to unlock their information advantage and win in Industry 4.0.  Our expanded partnerships with Google and SAP and recently announced next generation product line, OpenText Cloud Edition, will help revolutionize the way businesses capture, govern, exchange and use information in the cloud."

Barrenechea further added, "We delivered a solid fourth quarter with total revenues of $769.3 million, up 2.0% year-over-year, and cloud revenues of $246.5 million, up 13.1% year-over-year, each in constant currency.  Operating Cash Flows were $229.8 million, up 12.6% year-over-year. These solid results were delivered against the back drop of a $22 million foreign currency headwind to revenue during the quarter."

"During Fiscal 2019, we had record Adjusted EBITDA margin of 38.4%, delivered Operating Cash Flows of $876.3 million and deployed $381.4 million of capital to acquire Liaison Technologies & Catalyst Repository Systems," said Madhu Ranganathan, OpenText EVP and CFO.  "We ended the year with $941 million of Cash & Cash Equivalents and 1.5x Consolidated Net Leverage ratio, compared to 1.9x a year ago. As we look into Fiscal 2020 and beyond, we have never been stronger in our operating framework and balance sheet flexibility to continue our investments in product innovation, go-to-market and strategic acquisitions."

Financial Highlights for Fiscal 2019 with Year Over Year Comparisons

Summary of Annual Results

              

(in millions except per share data)

FY19

FY18

$ Change

% Change
(Y/Y)

  

FY19 in
CC*

% Change
in CC*

Revenues:

              

Cloud services and subscriptions

$907.8

  

$829.0

  

$78.8

  

9.5

%

  

$918.6

  

10.8

%

Customer support

1,247.9

  

1,232.5

  

15.4

  

1.3

%

  

1,271.1

  

3.1

%

Total annual recurring revenues**

$2,155.7

  

$2,061.5

  

$94.3

  

4.6

%

  

$2,189.7

  

6.2

%

License

428.1

  

437.5

  

(9.4)

  

(2.2)

%

  

439.3

  

0.4

%

Professional service and other

284.9

  

316.3

  

(31.3)

  

(9.9)

%

  

293.0

  

(7.4)

%

Total revenues

$2,868.8

  

$2,815.2

  

$53.5

  

1.9

%

  

$2,922.0

  

3.8

%

GAAP-based operating income

$567.0

  

$506.7

  

$60.3

  

11.9

%

  

N/A

N/A

Non-GAAP-based operating income (1)

$1,002.7

  

$933.5

  

$69.2

  

7.4

%

  

$1,013.4

  

8.6

%

GAAP-based EPS, diluted

$1.06

  

$0.91

  

$0.15

  

16.5

%

  

N/A

N/A

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

$2.76

  

$2.56

  

$0.20

  

7.8

%

  

$2.79

  

9.0

%

GAAP-based net income attributable to OpenText

$285.5

  

$242.2

  

$43.3

  

17.9

%

  

N/A

N/A

Adjusted EBITDA (1)

$1,100.3

  

$1,020.4

  

$79.9

  

7.8

%

  

$1,111.8

  

9.0

%

Operating cash flows

$876.3

  

$708.1

  

$168.2

  

23.8

%

  

N/A

N/A

 

Summary of Quarterly Results

              

(in millions except per share data)

Q4 FY19

Q4 FY18

$ Change

% Change
(Y/Y)

  

Q4 FY19
in CC*

% Change
in CC*

Revenues:

              

Cloud services and subscriptions

$241.9

  

$217.9

  

$24.0

  

11.0

%

  

$246.5

  

13.1

%

Customer support

315.2

  

316.8

  

(1.5)

  

(0.5)

%

  

325.4

  

2.7

%

Total annual recurring revenues**

$557.1

  

$534.6

  

$22.5

  

4.2

%

  

$572.0

  

7.0

%

License

119.7

  

139.9

  

(20.2)

  

(14.4)

%

  

124.1

  

(11.3)

%

Professional service and other

70.4

  

79.7

  

(9.3)

  

(11.7)

%

  

73.2

  

(8.1)

%

Total revenues

$747.2

  

$754.3

  

($7.0)

  

(0.9)

%

  

$769.3

  

2.0

%

GAAP-based operating income

$158.0

  

$149.4

  

$8.6

  

5.8

%

  

N/A

N/A

Non-GAAP-based operating income (1)

$259.0

  

$259.1

  

($0.1)

  

—

%

  

$266.9

  

3.0

%

GAAP-based EPS, diluted

$0.27

  

$0.23

  

$0.04

  

17.4

%

  

N/A

N/A

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

$0.72

  

$0.72

  

$—

  

—

%

  

$0.74

  

2.8

%

GAAP-based net income attributable to OpenText

$72.0

  

$61.7

  

$10.3

  

16.6

%

  

N/A

N/A

Adjusted EBITDA (1)

$283.9

  

$281.8

  

$2.1

  

0.8

%

  

$292.2

  

3.6

%

Operating cash flows

$229.8

  

$204.1

  

$25.7

  

12.6

%

  

N/A

N/A



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

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

Note: Individual line items in tables may be adjusted by non-material amounts to enable totals to align to published financial statements.
 
 

*CC: Constant currency for this purpose is defined as the current period reported revenues/expenses/earnings represented at the prior comparative period's foreign exchange rate.

**Annual recurring revenue is defined as the sum of Cloud services and subscriptions revenue and Customer support revenue.

Dividend Program

As part of our quarterly, non-cumulative cash dividend program, the Board declared on July 31, 2019 a cash dividend of $0.1746 per common share. The record date for this dividend is August 30, 2019 and the payment date is September 20, 2019. 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.

OpenText Quarterly Business Highlights

Summary of Annual Results

        
 

FY19

FY18

% Change

  

Revenue (million)

$2,868.8

  

$2,815.2

  

1.9

%

  

GAAP-based gross margin

67.6

%

66.2

%

140

  

bps

GAAP-based EPS, diluted

$1.06

  

$0.91

  

16.5

%

  

Non-GAAP-based gross margin (1)

74.1

%

73.0

%

110

  

bps

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

$2.76

  

$2.56

  

7.8

%

  

 

Summary of Quarterly Results

              
 

Q4 FY19

Q3 FY19

Q4 FY18

% Change
(Q4 FY19 vs
Q3 FY19)

 

 

 

  

% Change
(Q4 FY19 vs
Q4 FY18)

  

Revenue (million)

$747.2

  

$719.1

  

$754.3

  

3.9

%

  

(0.9)

%

  

GAAP-based gross margin

68.3

%

66.7

%

67.5

%

160

  

bps

80

  

bps

GAAP-based EPS, diluted

$0.27

  

$0.27

  

$0.23

  

—

%

  

17.4

%

  

Non-GAAP-based gross margin (1)

74.2

%

73.0

%

74.0

%

120

  

bps

20

  

bps

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

$0.72

  

$0.64

  

$0.72

  

12.5

%

  

—

%

  

 

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

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

OpenText Capital Markets Day 2019

Institutional investors and equity research analysts are invited to attend OpenText's 2019 Capital Markets Day on Friday, September 6, 2019 at the Lotte New York Palace hotel in New York, NY. This event will include an annual strategic update with formal presentations by the OpenText executive team. To register, please contact Email Contact.  Presentation material as well as listen-only teleconference and webcast details will be publicly available on the Investor Relations website at: http://investors.opentext.com/investor-events-and-presentations.

Conference Call Information

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

A replay of the call will be available beginning August 1, 2019 at 7:00 p.m. ET through 11:59 p.m. on August 15, 2019 and can be accessed by dialing 1-855-669-9658 (toll-free) or +1-604-674-8052 (international) and using passcode 3382 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.  Additionally, "off-cloud" is a term we use to describe license transactions.

About OpenText

OpenText, The Information Company™, a market leader in Enterprise Information Management software and solutions, enabling companies to manage, leverage, secure and gain insight into their enterprise information, on premises or in the cloud. For more information about OpenText (NASDAQ/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, 2020 (Fiscal 2020) on growth, anticipated benefits of our partnerships and next generation product lines, the strength of our operating framework and balance sheet flexibility, continued investments in product innovation, go-to-market and strategic acquisitions, M&A continuing to be our leading growth contributor, our capital allocation strategy, creating value through investments in broader Enterprise Information Management (EIM) capabilities, the Company's presence in the cloud and in growth markets, expected growth in our revenue lines, total growth from acquisitions, innovation and organic initiatives, the focus on recurring revenues, improving operational efficiency, expanding cash flow and strengthening the business, adjusted operating income and cash flow, its financial condition, the adjusted operating margin target range, results of operations and earnings, announced acquisitions, ongoing tax matters, the integration of the acquired businesses, declaration of quarterly dividends, future tax rates, new platform and product offerings, scaling OpenText to new levels in Fiscal 2020 and beyond, and other matters, may contain words such as "anticipates", "expects", "intends", "plans", "believes", "seeks", "estimates", "may", "could", "would", "might", "will" and variations of these words or similar expressions are considered forward-looking statements or information under applicable securities laws. In addition, any information or statements that refer to expectations, beliefs, plans, projections, objectives, performance or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking, and based on our current expectations, forecasts and projections about the operating environment, economies and markets in which we operate. Forward-looking statements reflect our current estimates, beliefs and assumptions, which are based on management's perception of historic trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances, such as certain assumptions about the economy, as well as market, financial and operational assumptions. Management's estimates, beliefs and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events and, as such, are subject to change. We can give no assurance that such estimates, beliefs and assumptions will prove to be correct. Such forward-looking statements involve known and unknown risks, uncertainties and other factors and assumptions that may cause the actual results, performance or achievements to differ materially. 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) failure to comply with privacy laws and regulations that are extensive, open to various interpretations and complex to implement including General Data Protection Regulation (GDPR) and Country by Country Reporting (CBCR); (vi) fluctuations in currency exchange rates; (vii) delays in the purchasing decisions of the Company's customers; (viii) the competition the Company faces in its industry and/or marketplace; (ix) the final determination of litigation, tax audits (including tax examinations in the United States and elsewhere) and other legal proceedings; (x) potential exposure to greater than anticipated tax liabilities or expenses, including with respect to changes in Canadian, U.S. or international tax regimes including tax reform legislation enacted through the Tax Cuts and Jobs Act in the United States; (xi) the possibility of technical, logistical or planning issues in connection with the deployment of the Company's products or services; (xii) the continuous commitment of the Company's customers; and (xiii) 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.

OTEX-F

 

Copyright ©2019 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, 2019

  

June 30, 2018

ASSETS

      

Cash and cash equivalents

$

941,009

    

$

682,942

  

Accounts receivable trade, net of allowance for doubtful accounts of $17,011 as of June 30, 2019 and $9,741 as of June 30, 2018

463,785

    

487,956

  

Contract assets

20,956

    

—

  

Income taxes recoverable

38,340

    

55,623

  

Prepaid expenses and other current assets

97,238

    

101,059

  

Total current assets

1,561,328

    

1,327,580

  

Property and equipment

249,453

    

264,205

  

Long-term contract assets

15,386

    

—

  

Goodwill

3,769,908

    

3,580,129

  

Acquired intangible assets

1,146,504

    

1,296,637

  

Deferred tax assets

1,004,450

    

1,122,729

  

Other assets

148,977

    

111,267

  

Deferred charges

—

    

38,000

  

Long-term income taxes recoverable

37,969

    

24,482

  

Total assets

$

7,933,975

    

$

7,765,029

  

LIABILITIES AND SHAREHOLDERS' EQUITY

      

Current liabilities:

      

Accounts payable and accrued liabilities

$

329,903

    

$

302,154

  

Current portion of long-term debt

10,000

    

10,000

  

Deferred revenues

641,656

    

644,211

  

Income taxes payable

33,158

    

38,234

  

Total current liabilities

1,014,717

    

994,599

  

Long-term liabilities:

      

Accrued liabilities

49,441

    

52,827

  

Deferred credits

—

    

2,727

  

Pension liability

75,239

    

65,719

  

Long-term debt

2,604,878

    

2,610,523

  

Deferred revenues

46,974

    

69,197

  

Long-term income taxes payable

202,184

    

172,241

  

Deferred tax liabilities

55,872

    

79,938

  

Total long-term liabilities

3,034,588

    

3,053,172

  

Shareholders' equity:

      

Share capital and additional paid-in capital

      

269,834,442 and 267,651,084 Common Shares issued and outstanding at June 30, 2019 and June 30, 2018, respectively; authorized Common Shares: unlimited

1,774,214

    

1,707,073

  

Accumulated other comprehensive income

24,124

    

33,645

  

Retained earnings

2,113,883

    

1,994,235

  

Treasury stock, at cost (802,871 shares at June 30, 2019 and 690,336 shares at June 30, 2018, respectively)

(28,766)

    

(18,732)

  

Total OpenText shareholders' equity

3,883,455

    

3,716,221

  

Non-controlling interests

1,215

    

1,037

  

Total shareholders' equity

3,884,670

    

3,717,258

  

Total liabilities and shareholders' equity

$

7,933,975

    

$

7,765,029

  

 

OPEN TEXT CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

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

Year Ended June 30,
   

2019

  

2018

  

2017

Revenues:

            

License

  

$

428,092

    

$

437,512

    

$

369,144

  

Cloud services and subscriptions

  

907,812

    

828,968

    

705,495

  

Customer support

  

1,247,915

    

1,232,504

    

981,102

  

Professional service and other

  

284,936

    

316,257

    

235,316

  

Total revenues

  

2,868,755

    

2,815,241

    

2,291,057

  

Cost of revenues:

            

License

  

14,347

    

13,693

    

13,632

  

Cloud services and subscriptions

  

383,993

    

364,160

    

299,850

  

Customer support

  

124,343

    

133,889

    

122,565

  

Professional service and other

  

224,635

    

253,389

    

194,954

  

Amortization of acquired technology-based intangible assets

  

183,385

    

185,868

    

130,556

  

Total cost of revenues

  

930,703

    

950,999

    

761,557

  

Gross profit

  

1,938,052

    

1,864,242

    

1,529,500

  

Operating expenses:

            

Research and development

  

321,836

    

322,909

    

281,215

  

Sales and marketing

  

518,035

    

529,141

    

444,454

  

General and administrative

  

207,909

    

205,227

    

170,353

  

Depreciation

  

97,716

    

86,943

    

64,318

  

Amortization of acquired customer-based intangible assets

  

189,827

    

184,118

    

150,842

  

Special charges

  

35,719

    

29,211

    

63,618

  

Total operating expenses

  

1,371,042

    

1,357,549

    

1,174,800

  

Income from operations

  

567,010

    

506,693

    

354,700

  

Other income (expense), net

  

10,156

    

17,973

    

15,743

  

Interest and other related expense, net

  

(136,592)

    

(138,540)

    

(120,892)

  

Income before income taxes

  

440,574

    

386,126

    

249,551

  

Provision for (recovery of) income taxes

  

154,937

    

143,826

    

(776,364)

  

Net income for the period

  

$

285,637

    

$

242,300

    

$

1,025,915

  

Net (income) loss attributable to non-controlling interests

  

(136)

    

(76)

    

(256)

  

Net income attributable to OpenText

  

$

285,501

    

$

242,224

    

$

1,025,659

  

Earnings per share—basic attributable to OpenText

  

$

1.06

    

$

0.91

    

$

4.04

  

Earnings per share—diluted attributable to OpenText

  

$

1.06

    

$

0.91

    

$

4.01

  

Weighted average number of Common Shares outstanding—basic

  

268,784

    

266,085

    

253,879

  

Weighted average number of Common Shares outstanding—diluted

  

269,908

    

267,492

    

255,805

  

 

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,
 

2019

  

2018

Revenues:

      

License

$

119,728

    

$

139,924

  

Cloud services and subscriptions

241,889

    

217,892

  

Customer support

315,248

    

316,751

  

Professional service and other

70,356

    

79,703

  

Total revenues

747,221

    

754,270

  

Cost of revenues:

      

License

4,128

    

3,048

  

Cloud services and subscriptions

103,719

    

95,346

  

Customer support

30,761

    

34,232

  

Professional service and other

55,183

    

64,896

  

Amortization of acquired technology-based intangible assets

42,946

    

47,477

  

Total cost of revenues

236,737

    

244,999

  

Gross profit

510,484

    

509,271

  

Operating expenses:

      

Research and development

83,708

    

81,816

  

Sales and marketing

139,416

    

147,499

  

General and administrative

52,954

    

52,577

  

Depreciation

25,000

    

22,901

  

Amortization of acquired customer-based intangible assets

49,200

    

47,299

  

Special charges

2,232

    

7,821

  

Total operating expenses

352,510

    

359,913

  

Income from operations

157,974

    

149,358

  

Other income (expense), net

3,191

    

(8,938)

  

Interest and other related expense, net

(32,841)

    

(35,345)

  

Income before income taxes

128,324

    

105,075

  

Provision for (recovery of) income taxes

56,309

    

43,182

  

Net income for the period

$

72,015

    

$

61,893

  

Net (income) loss attributable to non-controlling interests

(32)

    

(170)

  

Net income attributable to OpenText

$

71,983

    

$

61,723

  

Earnings per share—basic attributable to OpenText

$

0.27

    

$

0.23

  

Earnings per share—diluted attributable to OpenText

$

0.27

    

$

0.23

  

Weighted average number of Common Shares outstanding—basic

269,446

    

267,489

  

Weighted average number of Common Shares outstanding—diluted

270,652

    

268,628

  

 

OPEN TEXT CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands of U.S. dollars)
 
 

Year Ended June 30,
 

2019

  

2018

    

Net income for the period

$

285,637

    

$

242,300

    

$

1,025,915

  

Other comprehensive income (loss)—net of tax:

          

Net foreign currency translation adjustments

(3,882)

    

(9,582)

    

(4,756)

  

Unrealized gain (loss) on cash flow hedges:

          

Unrealized gain (loss) - net of tax expense (recovery) effect of $6, ($171) and $34 for the year ended June 30, 2019, 2018 and 2017, respectively

16

    

(476)

    

95

  

(Gain) loss reclassified into net income - net of tax (expense) recovery effect of $539, ($489) and $67 for the year ended June 30, 2019, 2018 and 2017, respectively

1,494

    

(1,357)

    

186

  

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

          

Actuarial gain (loss) - net of tax expense (recovery) effect of ($2,004), ($1,846) and $840 for the year ended June 30, 2019, 2018 and 2017, respectively

(7,421)

    

(3,383)

    

6,216

  

Amortization of actuarial (gain) loss into net income - net of tax (expense) recovery effect of $292, $183 and $241 for the year ended June 30, 2019, 2018 and 2017, respectively

272

    

260

    

565

  

Unrealized net gain (loss) on marketable securities - net of tax effect of nil for the year ended June 30, 2019, 2018 and 2017 respectively

—

    

—

    

184

  

Release of unrealized gain on marketable securities - net of tax effect of nil for the year ended June 30, 2019, 2018 and 2017 respectively

—

    

(617)

    

—

  

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

(9,521)

    

(15,155)

    

2,490

  

Total comprehensive income

276,116

    

227,145

    

1,028,405

  

Comprehensive (income) loss attributable to non-controlling interests

(136)

    

(76)

    

(256)

  

Total comprehensive income attributable to OpenText

$

275,980

    

$

227,069

    

$

1,028,149

  

 

OPEN TEXT CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

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

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, 2016

242,810

    

$

965,068

    

(1,268)

    

$

(25,268)

    

$

992,546

    

$

46,310

    

$

541

    

$

1,979,197

  

Issuance of Common Shares

                              

Under employee stock option plans

1,012

    

20,732

    

—

    

—

    

—

    

—

    

—

    

20,732

  

Under employee stock purchase plans

427

    

11,604

    

—

    

—

    

—

    

—

    

—

    

11,604

  

Under the public Equity Offering

19,811

    

604,223

    

—

    

—

    

—

    

—

    

—

    

604,223

  

Income tax effect related to public Equity offering

—

    

5,077

    

—

    

—

    

—

    

—

    

—

    

5,077

  

Equity issuance costs

—

    

(19,574)

    

—

    

—

    

—

    

—

    

—

    

(19,574)

  

Share-based compensation

—

    

30,507

    

—

    

—

    

—

    

—

    

—

    

30,507

  

Income tax effect related to share-based compensation

—

    

1,534

    

—

    

—

    

—

    

—

    

—

    

1,534

  

Purchase of treasury stock

—

    

—

    

(244)

    

(8,198)

    

—

    

—

    

—

    

(8,198)

  

Issuance of treasury stock

—

    

(5,946)

    

410

    

5,946

    

—

    

—

    

—

    

—

  

Dividends declared

($0.4770 per Common Share)

—

    

—

    

—

    

—

    

(120,581)

    

—

    

—

    

(120,581)

  

Other comprehensive income - net

—

    

—

    

—

    

—

    

—

    

2,490

    

—

    

2,490

  

Non-controlling interest

—

    

229

    

—

    

—

    

—

    

—

    

164

    

393

  

Net income for the year

—

    

—

    

—

    

—

    

1,025,659

    

—

    

256

    

1,025,915

  

Balance as of June 30, 2017

264,060

    

$

1,613,454

    

(1,102)

    

$

(27,520)

    

$

1,897,624

    

$

48,800

    

$

961

    

$

3,533,319

  

Issuance of Common Shares

                              

Under employee stock option plans

2,870

    

54,355

    

—

    

—

    

—

    

—

    

—

    

54,355

  

Under employee stock purchase plans

721

    

20,458

    

—

    

—

    

—

    

—

    

—

    

20,458

  

Share-based compensation

—

    

27,594

    

—

    

—

    

—

    

—

    

—

    

27,594

  

Issuance of treasury stock

—

    

(8,788)

    

411

    

8,788

    

—

    

—

    

—

    

—

  

Dividends declared

($0.5478 per Common Share)

—

    

—

    

—

    

—

    

(145,613)

    

—

    

—

    

(145,613)

  

Other comprehensive income - net

—

    

—

    

—

    

—

    

—

    

(15,155)

    

—

    

(15,155)

  

Net income for the year

—

    

—

    

—

    

—

    

242,224

    

—

    

76

    

242,300

  

Balance as of June 30, 2018

267,651

    

$

1,707,073

    

(691)

    

$

(18,732)

    

$

1,994,235

    

$

33,645

    

$

1,037

    

$

3,717,258

  

Issuance of Common Shares

                              

Under employee stock option plans

1,472

    

35,626

    

—

    

—

    

—

    

—

    

—

    

35,626

  

Under employee stock purchase plans

711

    

21,835

    

—

    

—

    

—

    

—

    

—

    

21,835

  

Share-based compensation

—

    

26,770

    

—

    

—

    

—

    

—

    

—

    

26,770

  

Purchase of treasury stock

—

    

—

    

(726)

    

(26,499)

    

—

    

—

    

—

    

(26,499)

  

Issuance of treasury stock

—

    

(16,465)

    

614

    

16,465

    

—

    

—

    

—

    

—

  

Dividends declared

($0.6300 per Common Share)

—

    

—

    

—

    

—

    

(168,859)

    

—

    

—

    

(168,859)

  

Cumulative effect of ASU 2016-16

—

    

—

    

—

    

—

    

(26,780)

    

—

    

—

    

(26,780)

  

Cumulative effect of Topic 606

—

    

—

    

—

    

—

    

29,786

    

—

    

—

    

29,786

  

Other comprehensive income - net

—

    

—

    

—

    

—

    

—

    

(9,521)

    

—

    

(9,521)

  

Non-controlling interest

—

    

(625)

    

—

    

—

    

—

    

—

    

42

    

(583)

  

Net income for the year

—

    

—

    

—

    

—

    

285,501

    

—

    

136

    

285,637

  

Balance as of June 30, 2019

269,834

    

$

1,774,214

    

(803)

    

$

(28,766)

    

$

2,113,883

    

$

24,124

    

$

1,215

    

$

3,884,670

  

 

OPEN TEXT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars)
 
 

Year Ended June 30,
 

2019

  

2018

  

2017

Cash flows from operating activities:

          

Net income for the period

$

285,637

    

$

242,300

    

$

1,025,915

  

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

          

Depreciation and amortization of intangible assets

470,928

    

456,929

    

345,715

  

Share-based compensation expense

26,770

    

27,594

    

30,507

  

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

—

    

—

    

(1,534)

  

Pension expense

4,624

    

3,738

    

3,893

  

Amortization of debt issuance costs

4,330

    

4,646

    

5,014

  

Amortization of deferred charges and credits

—

    

4,242

    

6,298

  

Loss on sale and write down of property and equipment

9,438

    

2,234

    

784

  

Release of unrealized gain on marketable securities to income

—

    

(841)

    

—

  

Deferred taxes

47,425

    

89,736

    

(871,195)

  

Share in net (income) loss of equity investees

(13,668)

    

(5,965)

    

(5,952)

  

Write off of unamortized debt issuance costs

—

    

155

    

833

  

Other non-cash charges

—

    

—

    

1,033

  

Changes in operating assets and liabilities:

          

Accounts receivable

75,508

    

(22,566)

    

(126,784)

  

Contract assets

(37,623)

    

—

    

—

  

Prepaid expenses and other current assets

(819)

    

(7,274)

    

(7,766)

  

Income taxes and deferred charges and credits

27,291

    

(31,323)

    

(1,683)

  

Accounts payable and accrued liabilities

(21,732)

    

(91,650)

    

53,490

  

Deferred revenue

(1,827)

    

35,629

    

3,484

  

Other assets

(4)

    

497

    

(21,699)

  

Net cash provided by operating activities

876,278

    

708,081

    

440,353

  

Cash flows from investing activities:

          

Additions of property and equipment

(63,837)

    

(105,318)

    

(79,592)

  

Proceeds from maturity of short-term investments

—

    

—

    

9,212

  

Purchase of Catalyst Repository Systems Inc.

(70,800)

    

—

    

—

  

Purchase of Liaison Technologies

(310,644)

    

—

    

—

  

Purchase of Hightail Inc.

—

    

(20,535)

    

—

  

Purchase of Guidance Software,  net of cash acquired

(2,279)

    

(229,275)

    

—

  

Purchase of Covisint Corporation, net of cash acquired

—

    

(71,279)

    

—

  

Purchase of ECD Business

—

    

—

    

(1,622,394)

  

Purchase of HP Inc. CCM Business

—

    

—

    

(315,000)

  

Purchase of Recommind, Inc.

—

    

—

    

(170,107)

  

Purchase consideration for prior period acquisitions

—

    

—

    

(7,146)

  

Other investing activities

(16,966)

    

(18,034)

    

(5,937)

  

Net cash used in investing activities

(464,526)

    

(444,441)

    

(2,190,964)

  

Cash flows from financing activities:

          

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

—

    

—

    

1,534

  

Proceeds from issuance of long-term debt and revolver

—

    

1,200,000

    

481,875

  

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

57,889

    

75,935

    

35,593

  

Proceeds from issuance of Common shares under public Equity Offering

—

    

—

    

604,223

  

Repayment of long-term debt and revolver

(10,000)

    

(1,149,620)

    

(57,880)

  

Debt issuance costs

(322)

    

(4,375)

    

(7,240)

  

Equity issuance costs

—

    

—

    

(19,574)

  

Purchase of treasury stock

(26,499)

    

—

    

(8,198)

  

Purchase of non-controlling interest

(583)

    

—

    

(208)

  

Payments of dividends to shareholders

(168,859)

    

(145,613)

    

(120,581)

  

Net cash provided by (used in) financing activities

(148,374)

    

(23,673)

    

909,544

  

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

(3,826)

    

(2,186)

    

1,767

  

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

259,552

    

237,781

    

(839,300)

  

Cash and cash equivalents at beginning of the period

683,991

    

446,210

    

1,285,510

  

Cash and cash equivalents at end of the period

$

943,543

    

$

683,991

    

$

446,210

  
           

Reconciliation of cash, cash equivalents and restricted cash:

June 30, 2019

  

June 30, 2018

  

June 30, 2017

Cash and cash equivalents

$

941,009

    

$

682,942

    

$

443,357

  

Restricted cash included in Other assets

2,534

    

1,049

    

2,853

  

Total cash, cash equivalents and restricted cash

$

943,543

    

$

683,991

    

$

446,210

  

 

OPEN TEXT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars)

(unaudited)
 
 

Three Months Ended June 30,
 

2019

  

2018

Cash flows from operating activities:

      

Net income for the period

$

72,015

    

$

61,893

  

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

      

Depreciation and amortization of intangible assets

117,146

    

117,677

  

Share-based compensation expense

6,618

    

7,121

  

Pension expense

1,212

    

904

  

Amortization of debt issuance costs

1,096

    

811

  

Amortization of deferred charges and credits

—

    

1,067

  

Write off of unamortized debt issuance costs

—

    

155

  

Loss on sale and write down of property and equipment

—

    

1,745

  

Deferred taxes

36,118

    

27,096

  

Share in net (income) loss of equity investees

(3,016)

    

(6,468)

  

Changes in operating assets and liabilities:

      

Accounts receivable

22,731

    

33,132

  

Contract assets

(8,751)

    

—

  

Prepaid expenses and other current assets

(324)

    

3,261

  

Income taxes and deferred charges and credits

6,285

    

(9,255)

  

Accounts payable and accrued liabilities

8,912

    

628

  

Deferred revenue

(25,961)

    

(39,075)

  

Other assets

(4,304)

    

3,368

  

Net cash provided by operating activities

229,777

    

204,060

  

Cash flows from investing activities:

      

Additions of property and equipment

(13,405)

    

(22,280)

  

Purchase of Hightail Inc.

—

    

(69)

  

Other investing activities

(8,762)

    

(6,855)

  

Net cash used in investing activities

(22,167)

    

(29,204)

  

Cash flows from financing activities:

      

Proceeds from issuance of long-term debt and revolver

—

    

1,000,000

  

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

15,792

    

9,871

  

Repayment of long-term debt and revolver

(2,500)

    

(1,043,800)

  

Debt issuance costs

—

    

(4,375)

  

Payments of dividends to shareholders

(46,958)

    

(40,617)

  

Net cash provided by (used in) financing activities

(33,666)

    

(78,921)

  

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

83

    

(19,889)

  

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

174,027

    

76,046

  

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

769,516

    

607,945

  

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

$

943,543

    

$

683,991

  
       

Reconciliation of cash, cash equivalents and restricted cash:

June 30, 2019

  

June 30, 2018

Cash and cash equivalents

941,009

    

682,942

  

Restricted cash included in Other assets

2,534

    

1,049

  

Total Cash, cash equivalents and restricted cash

$

943,543

    

$

683,991

  

Notes

(1)

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

(2)

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

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

Non-GAAP-based net income and Non-GAAP-based EPS, attributable to OpenText, are consistently calculated as GAAP-based net income 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.
   
 

Adjusted earnings (loss) 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).
   
 

The Company's management believes that the presentation of the above defined Non-GAAP financial measures provides useful information to investors because they portray the financial results of the Company before the impact of certain non-operational charges. The use of the term "non-operational charge" is defined for this purpose as an expense that does not impact the ongoing operating decisions taken by the Company's management. These items are excluded based upon the way the Company's management evaluates the performance of the Company's business for use in the Company's internal reports and are not excluded in the sense that they may be used under U.S. GAAP.
   
 

The Company does not acquire businesses on a predictable cycle, and therefore believes that the presentation of non-GAAP measures, which in certain cases adjust for the impact of amortization of intangible assets and the related tax effects that are primarily related to acquisitions, will provide readers of financial statements with a more consistent basis for comparison across accounting periods and be more useful in helping readers understand the Company's operating results and underlying operational trends. Additionally, the Company has engaged in various restructuring activities over the past several years, primarily due to acquisitions, that have resulted in costs associated with reductions in headcount, consolidation of leased facilities and related costs, all which are recorded under the Company's "Special Charges (recoveries)" caption on the Consolidated Statements of Income. Each restructuring activity is a discrete event based on a unique set of business objectives or circumstances, and each differs in terms of its operational implementation, business impact and scope, and the size of each restructuring plan can vary significantly from period to period. Therefore, the Company believes that the exclusion of these special charges (recoveries) will also better aid readers of financial statements in the understanding and comparability of the Company's operating results and underlying operational trends.
   
 

In summary the Company believes the provision of supplemental Non-GAAP measures allow investors to evaluate the operational and financial performance of the Company's core business using the same evaluation measures that management uses, and is therefore a useful indication of OpenText's performance or expected performance of future operations and facilitates period-to-period comparison of operating performance (although prior performance is not necessarily indicative of future performance). As a result, the Company considers it appropriate and reasonable to provide, in addition to U.S. GAAP measures, supplementary Non-GAAP financial measures that exclude certain items from the presentation of its financial results.
   
 

The following charts provide (unaudited) reconciliations of U.S. GAAP-based financial measures to Non-U.S. GAAP-based financial measures for the following periods presented. Results for reporting periods commencing July 1, 2018 are presented under the new Topic 606 revenue standard, while prior period results continue to be reported under the previous standard. For more details relating to our adoption of Topic 606 please see Note 1 "Basis of Presentation" and Note 3 "Revenues" to our Consolidated Financial Statements on Form 10-K.

 

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures
for the three months ended June 30, 2019.
(In thousands except for per share amounts)
 

Three Months Ended June 30, 2019
 

GAAP-based
Measures

GAAP-based
Measures
% of Total Revenue

 

 

 

Adjustments

Note

Non-GAAP-
based
Measures

Non-GAAP-
based
Measures
% of Total
Revenue

Cost of revenues

            

Cloud services and subscriptions

$

103,719

    

$

(75)

  

(1)

$

103,644

    

Customer support

30,761

    

(361)

  

(1)

30,400

    

Professional service and other

55,183

    

(434)

  

(1)

54,749

    

Amortization of acquired technology-based intangible assets

42,946

    

(42,946)

  

(2)

—

    

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

 

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

 

510,484

  

68.3

%

43,816

  

(3)

554,300

  

74.2

%

Operating expenses

            

Research and development

83,708

    

(1,323)

  

(1)

82,385

    

Sales and marketing

139,416

    

(2,006)

  

(1)

137,410

    

General and administrative

52,954

    

(2,419)

  

(1)

50,535

    

Amortization of acquired customer-based intangible assets

49,200

    

(49,200)

  

(2)

—

    

Special charges (recoveries)

2,232

    

(2,232)

  

(4)

—

    

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

157,974

    

100,996

  

(5)

258,970

    

Other income (expense), net

3,191

    

(3,191)

  

(6)

—

    

Provision for (recovery of) income taxes

56,309

    

(24,651)

  

(7)

31,658

    

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

71,983

    

122,456

  

(8)

194,439

    

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

$

0.27

    

$

0.45

  

(8)

$

0.72

    

 

(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 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 44% 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 June 30, 2019
   

Per share diluted

GAAP-based net income, attributable to OpenText

$

71,983

  

$

0.27

  

Add:

    

Amortization

92,146

  

0.34

  

Share-based compensation

6,618

  

0.02

  

Special charges (recoveries)

2,232

  

0.01

  

Other (income) expense, net

(3,191)

  

(0.01)

  

GAAP-based provision for (recovery of) income taxes

56,309

  

0.21

  

Non-GAAP-based provision for income taxes

(31,658)

  

(0.12)

  

Non-GAAP-based net income, attributable to OpenText

$

194,439

  

$

0.72

  

 

Reconciliation of Adjusted EBITDA
 
 

Three Months Ended June 30, 2019

GAAP-based net income, attributable to OpenText

$

71,983

  

Add:

  

Provision for (recovery of) income taxes

56,309

  

Interest and other related expense, net

32,841

  

Amortization of acquired technology-based intangible assets

42,946

  

Amortization of acquired customer-based intangible assets

49,200

  

Depreciation

25,000

  

Share-based compensation

6,618

  

Special charges (recoveries)

2,232

  

Other (income) expense, net

(3,191)

  

Adjusted EBITDA

$

283,938

  

 

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures
for the year ended June 30, 2019.
(In thousands except for per share amounts)
 

Year Ended June 30, 2019
 

GAAP-based
Measures

GAAP-based
Measures
% of Total
Revenue

Adjustments

Note

Non-GAAP-
based
Measures

Non-GAAP-
based
Measures
% of Total
Revenue

Cost of revenues

            

Cloud services and subscriptions

$

383,993

    

$

(948)

  

(1)

$

383,045

    

Customer support

124,343

    

(1,242)

  

(1)

123,101

    

Professional service and other

224,635

    

(1,764)

  

(1)

222,871

    

Amortization of acquired technology-based intangible assets

183,385

    

(183,385)

  

(2)

—

    

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

 

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

 

1,938,052

  

67.6

%

187,339

  

(3)

2,125,391

  

74.1

%

Operating expenses

            

Research and development

321,836

    

(4,991)

  

(1)

316,845

    

Sales and marketing

518,035

    

(7,880)

  

(1)

510,155

    

General and administrative

207,909

    

(9,945)

  

(1)

197,964

    

Amortization of acquired customer-based intangible assets

189,827

    

(189,827)

  

(2)

—

    

Special charges (recoveries)

35,719

    

(35,719)

  

(4)

—

    

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

567,010

    

435,701

  

(5)

1,002,711

    

Other income (expense), net

10,156

    

(10,156)

  

(6)

—

    

Provision for (recovery of) income taxes

154,937

    

(33,680)

  

(7)

121,257

    

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

285,501

    

459,225

  

(8)

744,726

    

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

$

1.06

    

$

1.70

  

(8)

$

2.76

    

 

(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 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 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:

 

 

Year Ended June 30, 2019
   

Per share diluted 

GAAP-based net income, attributable to OpenText

$

285,501

  

$

1.06

  

Add:

    

Amortization

373,212

  

1.38

  

Share-based compensation

26,770

  

0.10

  

Special charges (recoveries)

35,719

  

0.13

  

Other (income) expense, net

(10,156)

  

(0.04)

  

GAAP-based provision for (recovery of) income taxes

154,937

  

0.57

  

Non-GAAP based provision for income taxes

(121,257)

  

(0.44)

  

Non-GAAP-based net income, attributable to OpenText

$

744,726

  

$

2.76

  

 

Reconciliation of Adjusted EBITDA
 
 

Year Ended June 30, 2019

GAAP-based net income, attributable to OpenText

$

285,501

  

Add:

  

Provision for (recovery of) income taxes

154,937

  

Interest and other related expense, net

136,592

  

Amortization of acquired technology-based intangible assets

183,385

  

Amortization of acquired customer-based intangible assets

189,827

  

Depreciation

97,716

  

Share-based compensation

26,770

  

Special charges (recoveries)

35,719

  

Other (income) expense, net

(10,156)

  

Adjusted EBITDA

$

1,100,291

  

 

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures
for the three months ended March 31, 2019.
(In thousands except for per share amounts)
 

Three Months Ended March 31, 2019
 

GAAP-based
Measures

GAAP-based
Measures
% of Total
Revenue

Adjustments

Note

Non-GAAP-
based
Measures

Non-GAAP-
based
Measures
% of Total
Revenue

Cost of revenues

            

Cloud services and subscriptions

$

103,873

    

$

(291)

  

(1)

$

103,582

    

Customer support

31,844

    

(310)

  

(1)

31,534

    

Professional service and other

56,626

    

(448)

  

(1)

56,178

    

Amortization of acquired technology-based intangible assets

44,596

    

(44,596)

  

(2)

—

    

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

 

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

 

479,515

  

66.7

%

45,645

  

(3)

525,160

  

73.0

%

Operating expenses

            

Research and development

84,905

    

(1,315)

  

(1)

83,590

    

Sales and marketing

132,244

    

(2,458)

  

(1)

129,786

    

General and administrative

51,833

    

(1,890)

  

(1)

49,943

    

Amortization of acquired customer-based intangible assets

48,832

    

(48,832)

  

(2)

—

    

Special charges (recoveries)

796

    

(796)

  

(4)

—

    

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

135,877

    

100,936

  

(5)

236,813

    

Other income (expense), net

5,065

    

(5,065)

  

(6)

—

    

Provision for (recovery of) income taxes

32,542

    

(4,373)

  

(7)

28,169

    

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

72,762

    

100,244

  

(8)

173,006

    

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

$

0.27

    

$

0.37

  

(8)

$

0.64

    

 

(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 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 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 March 31, 2019
   

Per share diluted

GAAP-based net income, attributable to OpenText

$

72,762

  

$

0.27

  

Add:

    

Amortization

93,428

  

0.35

  

Share-based compensation

6,712

  

0.02

  

Special charges (recoveries)

796

  

—

  

Other (income) expense, net

(5,065)

  

(0.02)

  

GAAP-based provision for (recovery of) income taxes

32,542

  

0.12

  

Non-GAAP-based provision for income taxes

(28,169)

  

(0.10)

  

Non-GAAP-based net income, attributable to OpenText

$

173,006

  

$

0.64

  

 

Reconciliation of Adjusted EBITDA
 
 

Three Months Ended March 31, 2019

GAAP-based net income, attributable to OpenText

$

72,762

  

Add:

  

Provision for (recovery of) income taxes

32,542

  

Interest and other related expense, net

35,607

  

Amortization of acquired technology-based intangible assets

44,596

  

Amortization of acquired customer-based intangible assets

48,832

  

Depreciation

25,028

  

Share-based compensation

6,712

  

Special charges (recoveries)

796

  

Other (income) expense, net

(5,065)

  

Adjusted EBITDA

$

261,810

  

 

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures
for the three months ended June 30, 2018.
(In thousands except for per share amounts)
 

Three Months Ended June 30, 2018
 

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

$

95,346

    

$

(310)

  

(1)

$

95,036

    

Customer support

34,232

    

(300)

  

(1)

33,932

    

Professional service and other

64,896

    

(516)

  

(1)

64,380

    

Amortization of acquired technology-based intangible assets

47,477

    

(47,477)

  

(2)

—

    

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

 

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

 

509,271

  

67.5

%

48,603

  

(3)

557,874

  

74.0

%

Operating expenses

            

Research and development

81,816

    

(1,453)

  

(1)

80,363

    

Sales and marketing

147,499

    

(2,552)

  

(1)

144,947

    

General and administrative

52,577

    

(1,990)

  

(1)

50,587

    

Amortization of acquired customer-based intangible assets

47,299

    

(47,299)

  

(2)

—

    

Special charges (recoveries)

7,821

    

(7,821)

  

(4)

—

    

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

149,358

    

109,718

  

(5)

259,076

    

Other income (expense), net

(8,938)

    

8,938

  

(6)

—

    

Provision for (recovery of) income taxes

43,182

    

(11,860)

  

(7)

31,322

    

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

61,723

    

130,516

  

(8)

192,239

    

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

$

0.23

    

$

0.49

  

(8)

$

0.72

    

 

(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 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 41% 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. We also took into consideration changes in U.S. tax reform legislation that was enacted on December 22, 2017 through the Tax Cuts and Jobs Act.

(8)

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

 

 

Three Months Ended June 30, 2018
   

Per share diluted

GAAP-based net income, attributable to OpenText

$

61,723

  

$

0.23

  

Add:

    

Amortization

94,776

  

0.35

  

Share-based compensation

7,121

  

0.03

  

Special charges (recoveries)

7,821

  

0.03

  

Other (income) expense, net

8,938

  

0.03

  

GAAP-based provision for (recovery of) income taxes

43,182

  

0.16

  

Non-GAAP-based provision for income taxes

(31,322)

  

(0.11)

  

Non-GAAP-based net income, attributable to OpenText

$

192,239

  

$

0.72

  

 

Reconciliation of Adjusted EBITDA
 
 

Three Months Ended June 30, 2018

GAAP-based net income, attributable to OpenText

$

61,723

  

Add:

  

Provision for (recovery of) income taxes

43,182

  

Interest and other related expense, net

35,345

  

Amortization of acquired technology-based intangible assets

47,477

  

Amortization of acquired customer-based intangible assets

47,299

  

Depreciation

22,901

  

Share-based compensation

7,121

  

Special charges (recoveries)

7,821

  

Other (income) expense, net

8,938

  

Adjusted EBITDA

$

281,807

  

 

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures
for the year ended June 30, 2018. 
(In thousands except for per share amounts)
 

Year Ended June 30, 2018
 

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

$

364,160

    

$

(1,429)

  

(1)

$

362,731

    

Customer support

133,889

    

(1,233)

  

(1)

132,656

    

Professional service and other

253,389

    

(1,838)

  

(1)

251,551

    

Amortization of acquired technology-based intangible assets

185,868

    

(185,868)

  

(2)

—

    

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

 

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

 

1,864,242

  

66.2

%

190,368

  

(3)

2,054,610

  

73.0

%

Operating expenses

            

Research and development

322,909

    

(5,659)

  

(1)

317,250

    

Sales and marketing

529,141

    

(9,231)

  

(1)

519,910

    

General and administrative

205,227

    

(8,204)

  

(1)

197,023

    

Amortization of acquired customer-based intangible assets

184,118

    

(184,118)

  

(2)

—

    

Special charges (recoveries)

29,211

    

(29,211)

  

(4)

—

    

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

506,693

    

426,791

  

(5)

933,484

    

Other income (expense), net

17,973

    

(17,973)

  

(6)

—

    

Provision for (recovery of) income taxes

143,826

    

(32,534)

  

(7)

111,292

    

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

242,224

    

441,352

  

(8)

683,576

    

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

$

0.91

    

$

1.65

  

(8)

$

2.56

    

 

(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, 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) 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 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 37% 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. We also took into consideration changes in US tax reform legislation that was enacted on December 22, 2017 through the Tax Cuts and Jobs Act.

(8)

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

 

 

Year Ended June 30, 2018
   

Per share diluted 

GAAP-based net income, attributable to OpenText

$

242,224

  

$

0.91

  

Add:

    

Amortization

369,986

  

1.38

  

Share-based compensation

27,594

  

0.10

  

Special charges (recoveries)

29,211

  

0.11

  

Other (income) expense, net

(17,973)

  

(0.07)

  

GAAP-based provision for (recovery of) income taxes

143,826

  

0.54

  

Non-GAAP based provision for income taxes

(111,292)

  

(0.41)

  

Non-GAAP-based net income, attributable to OpenText

$

683,576

  

$

2.56

  

 

Reconciliation of Adjusted EBITDA
 
 

Year Ended June 30, 2018

GAAP-based net income, attributable to OpenText

$

242,224

  

Add:

  

Provision for (recovery of) income taxes

143,826

  

Interest and other related expense, net

138,540

  

Amortization of acquired technology-based intangible assets

185,868

  

Amortization of acquired customer-based intangible assets

184,118

  

Depreciation

86,943

  

Share-based compensation

27,594

  

Special charges (recoveries)

29,211

  

Other (income) expense, net

(17,973)

  

Adjusted EBITDA

$

1,020,351

  

 

(3)

The following tables provide a composition of our major currencies for revenue and expenses, expressed as a percentage, for the three months and year ended June 30, 2019 and 2018:

 

 

Three Months Ended June 30, 2019

  

Three Months Ended June 30, 2018

Currencies

% of Revenue 

% of Expenses* 

 

% of Revenue 

% of Expenses* 

EURO

24

%

15

%

  

23

%

15

%

GBP

6

%

6

%

  

6

%

6

%

CAD

3

%

9

%

  

4

%

10

%

USD

58

%

53

%

  

58

%

52

%

Other

9

%

17

%

  

9

%

17

%

Total

100

%

100

%

  

100

%

100

%
       
 

Year Ended June 30, 2019

  

Year Ended June 30, 2018

Currencies

% of Revenue 

% of Expenses* 

 

% of Revenue 

% of Expenses* 

EURO

24

%

15

%

  

22

%

15

%

GBP

6

%

6

%

  

6

%

6

%

CAD

4

%

10

%

  

4

%

11

%

USD

58

%

51

%

  

58

%

51

%

Other

8

%

18

%

  

10

%

17

%

Total

100

%

100

%

  

100

%

100

%

 

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

 

Cision View original content: http://www.prnewswire.com/news-releases/opentext-reports-fourth-quarter-and-fiscal-year-2019-financial-results-300895233.html

SOURCE Open Text Corporation

Contact:
Company Name: Open Text Corporation
Web: http://www.opentext.com
Financial data for Open Text Corporation