OPEN TEXT CORPORATION -- Total revenues of $492 million, up 13%; up 14% Y/Y in CC
-- Recurring revenues of $431 million, up 12%; up 14% Y/Y in CC
-- Cloud services and subscription revenue of $170 million, up 15%; both Y/Y and in CC
-- License revenue of $61 million, up 18%; up 19% Y/Y in CC
-- GAAP-based EPS, diluted of $7.46, up 2,094% Y/Y; Recognized a significant tax benefit of $876 million this quarter
-- Non-GAAP-based EPS, diluted of $0.86, up 2% Y/Y; up 4% in CC
WATERLOO, Ontario, Nov. 3, 2016 /PRNewswire/ -- Open Text Corporation (NASDAQ: OTEX) (TSX: OTC) announced today its financial results for the first quarter ended September 30, 2016.
"OpenText delivered nearly half a billion dollars in quarterly revenues, double digit cloud and license performance, our fastest start to a fiscal year in the company's history. We expect Fiscal 2017 to be a transformative year for OpenText as we strengthen our product offerings with innovation and acquisitions," said OpenText CEO and CTO, Mark J. Barrenechea. "Our customers are responding well to our digital transformation products and we expect this to translate into double digit revenue growth for the entire year. Within the quarter, we achieved significant milestones with the closing of multiple acquisitions and expect to complete their integrations and improve operations by the end of the fiscal year."
On September 12, 2016, OpenText entered into a definitive agreement to acquire Dell-EMC's Enterprise Content Division (ECD Business), including Documentum.
"The acquisition of Dell-EMC's ECD Business is progressing according to plan and we expect to close the transaction within an estimated 75 days. Once closed, we expect to strengthen our recurring revenues and correspondingly increase cash flow generation. We are excited about the opportunities which ECD Business brings, and I look forward to welcoming our new customers, employees, and partners to OpenText," said Barrenechea.
Financial Highlights for Q1 FY 2017 with Year Over Year Comparisons
Summary of Quarterly Results
----------------------------
Q1 FY17 Q1 FY16 $ Change % Change Q1 FY17 in % Change
(Y/Y) CC* in CC*
Revenues: (in millions)
Cloud services and subscriptions $169.7 $147.8 $21.9 14.8% $170.7 15.5%
Customer support 210.2 185.7 24.5 13.2% 212.8 14.6%
Professional service and other 51.1 49.7 1.4 2.7% 52.0 4.5%
Total Recurring revenues $431.0 $383.2 $47.8 12.5% $435.4 13.6%
License 60.7 51.3 9.4 18.2% 61.2 19.2%
Total revenues $491.7 $434.5 $57.2 13.1% $496.6 14.3%
GAAP-based operating margin 15.1% 17.6% n/a (250) bps
Non-GAAP-based operating margin (1) 30.8% 34.1% n/a (330) bps 30.6% (350) bps
GAAP-based EPS, diluted(2) $7.46 $0.34 $7.12 2,094.1%
Non-GAAP-based EPS, diluted (1) (3) $0.86 $0.84 $0.02 2.4% $0.87 3.6%
Operating cash flows (in millions) $73.5 $92.7 ($19.2) (20.8)%
--------------------------------- ----- ----- ------ ------
(1) Please see note 2 "Use of Non-
GAAP Financial Measures" below.
(2) Recorded a significant tax
benefit in Q1 FY17 of $876.1
million that is specifically tied
to the Company's internal
reorganization and applied to this
quarter only and, as a result,
will not continue in future
periods.
(3) Please also see note 14 to the
Company's condensed consolidated
financial statements on Form 10-Q.
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.
"In the first quarter of Fiscal 2017, we reported strong year over year results. In constant currency, total revenue grew by 14%, and recurring revenue grew by 14%, supporting an adjusted operating margin of approximately 31% and meeting our target model range," said OpenText CFO, John Doolittle.
"Our balance sheet and liquidity position remain strong with approximately $835 million of cash at the end of the quarter," said Doolittle. "We also completed our internal reorganization of our intellectual property into Canada, which resulted in a significant tax benefit applied to this quarter."
*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
-- 20 customer transactions over $1 million, 13 OpenText Cloud contract
signings and 7 on-premises.
-- Financial, services, technology, and consumer goods industries saw the
most demand in cloud and license.
-- New customers in the quarter included IntelliTek Systems, Paychex, Qatar
Foundation, Knorr Bremse, House Foods, BGL Group, Gruppo Davide
Campari-Milano, Transport for London, Self Regional Healthcare, and BMW
Group.
-- OpenText Release 16 EP1 enables digital transformation for Engagement to
Insight.
-- OpenText signs definitive agreement to acquire Dell-EMC's Enterprise
Content Division, including Documentum.
-- Independent Research Firm Cites OpenText as a Strong Performer in
Workforce Optimization Suites.
-- New report names OpenText as a Leader in Digital Asset Management for
Customer Experience.
-- OpenText substantially completes acquisition of Customer Communications
Management and other assets of HP Inc.
-- OpenText buys Recommind, Inc.
-- OpenText announces voting results for Election of Directors.
Dividend Program Highlights
Cash Dividend
As part of our quarterly, non-cumulative cash dividend program the Board declared on November 3, 2016 a cash dividend of $0.23 per Common Share. The record date for this dividend is December 2, 2016 and the payment date is December 22, 2016. Future declarations of dividends and the establishment of future record and payment dates are subject to the final determination and discretion of our Board of Directors.
Summary of Quarterly Results
----------------------------
Q1 FY17 Q4 FY16 Q1 FY16 % Change % Change
(Q1 FY17 vs (Q1 FY17 vs
Q4 FY16) Q1 FY16)
Revenue (million) $491.7 $483.8 $434.5 1.6% 13.1%
GAAP-based gross margin 66.6% 68.4% 67.8% (180) bps (120) bps
GAAP-based operating margin 15.1% 19.3% 17.6% (420) bps (250) bps
GAAP-based EPS, diluted(2) $7.46 $0.71 $0.34 950.7% 2,094.1%
Non-GAAP-based gross margin (1) 71.5% 72.4% 72.6% (90) bps (110) bps
Non-GAAP-based operating margin (1) 30.8% 32.7% 34.1% (190) bps (330) bps
Non-GAAP-based EPS, diluted (1) (3) $0.86 $0.89 $0.84 (3.4)% 2.4%
---------------------------------- ----- ----- ----- ----- ---
(1) Please see note 2 "Use of Non-
GAAP Financial Measures" below.
(2) Recorded a significant tax
benefit in Q1 FY17 of $876.1
million that is specifically tied
to the Company's internal
reorganization and applied to this
quarter only and, as a result,
will not continue in future
periods.
(3) Please also see note 14 to the
Company's condensed consolidated
financial statements on Form 10-Q.
Reflective of the amount of net
tax benefit arising from the
internal reorganization assumed to
be allocable to the current period
based on the forecasted
utilization period.
Conference Call Information
The public is invited to listen to the earnings conference call today at 5:00 p.m. ET (2:00 p.m. PT) by dialing 1-800-319-4610 (toll-free) or +1-604-638-5340 (international). Please dial-in 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 November 3, 2016 at 7:00 p.m. ET through 11:59 p.m. November 17, 2016 and can be accessed by dialing 1-855-669-9658 (toll-free) or +1-604-674-8052 (international) and using passcode 0846 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 is the largest independent software provider of Enterprise Information Management (EIM). For more information please 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, 2017 (Fiscal 2017) 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, adjusted operating income and cash flow, its financial condition, results of operations and earnings, announced acquisitions, ongoing tax matters, the anticipated timing and benefits regarding the acquisition of the ECD Business, declaration of quarterly dividends, future tax rates, 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; (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 the acquisition of the ECD Business and/or other future acquisitions); (x) the Company's financial condition and capital requirements; and (xi) statements about the impact of "OpenText Release 16" and other 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; (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.
OTEX-F
For more information, please contact:
Greg Secord
Vice President, Investor Relations
Open Text Corporation
San Francisco: 415-963-0825
gsecord@opentext.com
Copyright ©2016 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/2/global/site-copyright.html_SKU.
OPEN TEXT CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars, except share data)
September 30, 2016
June 30, 2016
-------------
ASSETS (unaudited)
Cash and cash equivalents $834,944 $1,283,757
Short-term investments 2,726 11,839
Accounts receivable trade, net of
allowance for doubtful accounts
of $7,270 as of September 30,
2016 and $6,740 as of June 30,
2016 297,537 285,904
Income taxes recoverable 19,954 31,752
Prepaid expenses and other current
assets 70,643 59,021
Total current assets 1,225,804 1,672,273
Property and equipment 181,728 183,660
Goodwill 2,595,614 2,325,586
Acquired intangible assets 831,197 646,240
Deferred tax assets 1,100,897 241,161
Other assets 65,533 53,697
Deferred charges 62,512 22,776
Long-term income taxes recoverable 9,025 8,751
Total assets $6,072,310 $5,154,144
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities $233,536 $257,450
Current portion of long-term debt 8,000 8,000
Deferred revenues 389,890 373,549
Income taxes payable 39,203 32,030
Total current liabilities 670,629 671,029
Long-term liabilities:
Accrued liabilities 31,481 29,848
Deferred credits 7,589 8,357
Pension liability 63,691 61,993
Long-term debt 2,137,276 2,137,987
Deferred revenues 46,247 37,461
Long-term income taxes payable 145,787 149,041
Deferred tax liabilities 90,381 79,231
------ ------
Total long-term liabilities 2,522,452 2,503,918
Shareholders' equity:
Share capital
121,492,067 and 121,404,677 Common
Shares issued and outstanding at
September 30, 2016 and June 30,
2016, respectively; Authorized
Common Shares: unlimited 822,135 817,788
Additional paid-in capital 155,323 147,280
Accumulated other comprehensive
income 48,730 46,310
Retained earnings 1,877,639 992,546
Treasury stock, at cost (629,480
shares at September 30, 2016 and
633,647 at June 30, 2016,
respectively) (25,166) (25,268)
------- -------
Total OpenText shareholders'
equity 2,878,661 1,978,656
Non-controlling interests 568 541
--- ---
Total shareholders' equity 2,879,229 1,979,197
Total liabilities and
shareholders' equity $6,072,310 $5,154,144
========== ==========
OPEN TEXT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands of U.S. dollars, except share and per share data)
(unaudited)
Three Months Ended September 30,
--------------------------------
2016 2015
---- ----
Revenues:
License $60,656 $51,331
Cloud services and
subscriptions 169,687 147,790
Customer support 210,206 185,667
Professional
service and other 51,115 49,747
------ ------
Total revenues 491,664 434,535
------- -------
Cost of revenues:
License 3,845 2,681
Cloud services and
subscriptions 70,292 58,916
Customer support 25,738 20,508
Professional
service and other 41,343 38,064
Amortization of
acquired
technology-based
intangible assets 23,135 19,883
------ ------
Total cost of
revenues 164,353 140,052
------- -------
Gross profit 327,311 294,483
------- -------
Operating expenses:
Research and
development 58,572 46,440
Sales and
marketing 95,148 77,945
General and
administrative 38,197 35,569
Depreciation 15,270 12,914
Amortization of
acquired
customer-based
intangible assets 33,608 27,805
Special charges 12,454 17,337
------ ------
Total operating
expenses 253,249 218,010
------- -------
Income from
operations 74,062 76,473
------ ------
Other income
(expense), net 6,699 (4,913)
Interest and other
related expense,
net (27,275) (19,046)
------- -------
Income before
income taxes 53,486 52,514
Provision for
(recovery of)
income taxes (859,425) 11,202
-------- ------
Net income for the
period $912,911 $41,312
-------- -------
Net (income)
attributable to
non-controlling
interests (27) (26)
Net income
attributable to
OpenText $912,884 $41,286
======== =======
Earnings per
share-basic
attributable to
OpenText $7.52 $0.34
===== =====
Earnings per
share-diluted
attributable to
OpenText $7.46 $0.34
===== =====
Weighted average
number of Common
Shares
outstanding-
basic 121,455 122,160
======= =======
Weighted average
number of Common
Shares
outstanding-
diluted 122,371 122,640
======= =======
Dividends declared
per Common Share $0.2300 $0.2000
======= =======
OPEN TEXT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands of U.S. dollars)
(unaudited)
Three Months Ended September 30,
--------------------------------
2016 2015
---- ----
Net income for the
period $912,911 $41,312
Other comprehensive income-net of
tax:
Net foreign
currency
translation
adjustments 1,219 1,723
Unrealized gain (loss) on cash flow
hedges:
Unrealized (loss)
-net of tax
expense
(recovery) effect
of ($128) and
($1,222),
respectively (355) (3,390)
(Gain) loss
reclassified into
net income -net
of tax (expense)
recovery effect
of ($5) and $184,
respectively (17) 512
Actuarial gain (loss) relating to
defined benefit pension plans:
Actuarial gain -
net of tax
expense
(recovery) effect
of ($593) and
$302,
respectively 1,538 1,113
Amortization of
actuarial loss
into net income -
net of tax
(expense)
recovery effect
of $62 and $32,
respectively 147 83
Unrealized net
gain (loss) on
short-term
investments -
net of tax effect
of nil,
respectively (112) 15
Total other
comprehensive
income (loss),
net, for the
period 2,420 56
----- ---
Total
comprehensive
income 915,331 41,368
Comprehensive
(income)
attributable to
non-controlling
interests (27) (26)
--- ---
Total
comprehensive
income
attributable to
OpenText $915,304 $41,342
======== =======
OPEN TEXT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
(unaudited)
Three Months Ended September 30,
--------------------------------
2016 2015
---- ----
Cash flows from operating activities:
Net income for
the period $912,911 $41,312
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and
amortization of
intangible
assets 72,013 60,602
Share-based
compensation
expense 8,140 6,533
Excess tax
expense
(benefits) on
share-based
compensation
expense (5) 216
Pension expense 1,190 1,167
Amortization of
debt issuance
costs 1,323 1,156
Amortization of
deferred charges
and credits 2,146 2,617
Deferred taxes (875,824) (4,184)
Share in net
(income) loss of
equity investees (5,529) -
Other non-cash
charges 1,033 -
Changes in operating assets and
liabilities:
Accounts
receivable 16,169 52,106
Prepaid expenses
and other
current assets (1,189) 5,834
Income taxes and
deferred charges
and credits 3,221 3,797
Accounts payable
and accrued
liabilities (30,599) (48,322)
Deferred revenue (26,109) (32,393)
Other assets (5,440) 2,281
------ -----
Net cash provided
by operating
activities 73,451 92,722
------ ------
Cash flows from investing activities:
Additions of
property and
equipment (20,665) (17,197)
Proceeds from
maturity of
short-term
investments 9,212 2,255
Purchase of HP
Inc. CCM
Business (312,198) -
Purchase of
Recommind, Inc. (170,107) -
Purchase of HP
Inc. CEM
Business (7,289) -
Purchase of
Actuate
Corporation, net
of cash acquired - (7,701)
Purchase of
Informative
Graphics
Corporation, net
of cash acquired - (88)
Purchase of ICCM
Professional
Services
Limited, net of
cash acquired - (2,027)
Other investing
activities (123) (926)
Net cash used in
investing
activities (501,170) (25,684)
-------- -------
Cash flows from financing activities:
Excess tax
(expense)
benefits on
share-based
compensation
expense 5 (216)
Proceeds from
issuance of
Common Shares 5,310 5,252
Repayment of
long-term debt
and revolver (2,000) (2,000)
Debt issuance
costs (1,330) -
Common Shares
repurchased - (50,026)
Payments of
dividends to
shareholders (27,791) (23,312)
------- -------
Net cash used in
financing
activities (25,806) (70,302)
------- -------
Foreign exchange
gain (loss) on
cash held in
foreign
currencies 4,712 (5,950)
Decrease in cash
and cash
equivalents
during the
period (448,813) (9,214)
Cash and cash
equivalents at
beginning of the
period 1,283,757 699,999
Cash and cash
equivalents at
end of the
period $834,944 $690,785
======== ========
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 are calculated as net
income or earnings per share 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.
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 September 30, 2016.
(In thousands except for per share amounts)
------------------------------------------
Three Months Ended September 30, 2016
-------------------------------------
GAAP-based GAAP-based Adjustments Note Non-GAAP- Non-GAAP-
Measures based based
Measures % of Total Measures
Revenue Measures
% of Total
Revenue
--- -------
Cost of revenues
Cloud services and
subscriptions $70,292 $(360) (1) $69,932
Customer support 25,738 (235) (1) 25,503
Professional
service and other 41,343 (445) (1) 40,898
Amortization of
acquired
technology-based
intangible assets 23,135 (23,135) (2) -
GAAP-based gross
profit and gross
margin (%) /Non-
GAAP-based gross
profit and gross
margin (%) 327,311 66.6% 24,175 (3) 351,486 71.5%
Operating expenses
Research and
development 58,572 (1,743) (1) 56,829
Sales and marketing 95,148 (2,820) (1) 92,328
General and
administrative 38,197 (2,537) (1) 35,660
Amortization of
acquired customer-
based intangible
assets 33,608 (33,608) (2) -
Special charges
(recoveries) 12,454 (12,454) (4) -
GAAP-based income
from operations
and operating
margin (%) /Non-
GAAP-based income
from operations
and operating
margin (%) 74,062 15.1% 77,337 (5) 151,399 30.8%
Other income
(expense), net 6,699 (6,699) (6) -
Provision for
(recovery of)
income taxes (859,425) 878,017 (7) 18,592
GAAP-based net
income /Non-
GAAP-based net
income,
attributable to
OpenText 912,884 (807,379) (8) 105,505
GAAP-based
earnings per share
/Non-GAAP-based
earnings per
share-diluted,
attributable to
OpenText $7.46 $(6.60) (8) $0.86
(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
following the relevant acquisitions 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 1,607% 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 September 30,
2016
Per share
diluted
----------
GAAP-based net income,
attributable to OpenText $912,884 $7.46
Add:
Amortization 56,743 0.46
Share-based compensation 8,140 0.07
Special charges (recoveries) 12,454 0.10
Other (income) expense, net (6,699) (0.05)
GAAP-based provision for
(recovery of ) income taxes (859,425) (7.02)
Non-GAAP-based provision for
income taxes (18,592) (0.16)
Non-GAAP-based net income,
attributable to OpenText $105,505 $0.86
======== =====
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 GAAP-based Adjustments Note Non-GAAP- Non-GAAP-
Measures based based
Measures % of Total Measures Measures
Revenue % 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 $0.71 $0.18 (8) $0.89
(1) Adjustment relates to the exclusion of
share-based compensation expense from
our Non-GAAP-based operating
expenses as this expense is excluded
from our internal analysis of
operating results.
(2) Adjustment relates to the exclusion of
amortization expense from our Non-
GAAP-based operating expenses as the
timing and frequency of amortization
expense is dependent on our
acquisitions and is hence excluded
from our internal analysis of
operating results.
(3) GAAP-based and Non-GAAP-based gross
profit stated in dollars, and gross
margin stated as a percentage of total
revenue.
(4) Adjustment relates to the exclusion of
Special charges (recoveries) from our
Non-GAAP-based operating expenses as
Special charges (recoveries) are
generally incurred in the periods
following the relevant acquisitions
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 recovery
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 $0.71
Add:
Amortization 47,631 0.39
Share-based compensation 6,898 0.06
Special charges (recoveries) 10,092 0.08
Other (income) expense, net (409) -
GAAP-based provision for
(recovery of ) income taxes (14,347) (0.12)
Non-GAAP-based provision for
income taxes (27,297) (0.23)
------- -----
Non-GAAP-based net income,
attributable to OpenText $108,958 $0.89
======== =====
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the three months ended September 30, 2015.
(In thousands except for per share amounts)
------------------------------------------
Three Months Ended September 30, 2015
-------------------------------------
GAAP-based GAAP-based Adjustments Note Non-GAAP- Non-GAAP-
Measures based based
Measures % of Total Measures
Revenue Measures
% of Total
Revenue
--- -------
Cost of revenues
Cloud services and
subscriptions $58,916 $(281) (1) $58,635
Customer support 20,508 (158) (1) 20,350
Professional
service and other 38,064 (453) (1) 37,611
Amortization of
acquired
technology-based
intangible assets 19,883 (19,883) (2) -
GAAP-based gross
profit and gross
margin (%) /Non-
GAAP-based gross
profit and gross
margin (%) 294,483 67.8% 20,775 (3) 315,258 72.6%
Operating expenses
Research and
development 46,440 (752) (1) 45,688
Sales and marketing 77,945 (3,115) (1) 74,830
General and
administrative 35,569 (1,774) (1) 33,795
Amortization of
acquired customer-
based intangible
assets 27,805 (27,805) (2) -
Special charges
(recoveries) 17,337 (17,337) (4) -
GAAP-based income
from operations
and operating
margin (%) /Non-
GAAP-based income
from operations
and operating
margin (%) 76,473 17.6% 71,558 (5) 148,031 34.1%
Other income
(expense), net (4,913) 4,913 (6) -
Provision for
(recovery of)
income taxes 11,202 14,569 (7) 25,771
GAAP-based net
income /Non-
GAAP-based net
income,
attributable to
OpenText 41,286 61,902 (8) 103,188
GAAP-based
earnings per share
/Non-GAAP-based
earnings per
share-diluted,
attributable to
OpenText $0.34 $0.50 (8) $0.84
(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
following the relevant acquisitions
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 rate of
approximately 21% 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 September 30, 2015
-------------------------------------
Per share
diluted
----------
GAAP-based net income,
attributable to
OpenText $41,286 $0.34
Add:
Amortization 47,688 0.39
Share-based
compensation 6,533 0.05
Special charges
(recoveries) 17,337 0.14
Other (income) expense,
net 4,913 0.04
GAAP-based provision
for (recovery of )
income taxes 11,202 0.09
Non-GAAP-based
provision for income
taxes (25,771) (0.21)
------- -----
Non-GAAP-based net
income, attributable
to OpenText $103,188 $0.84
======== =====
(3) The following tables provide a
composition of our major
currencies for revenue and
expenses, expressed as a
percentage, for the three months
ended September 30, 2016 and 2015:
Three Months Ended Three Months Ended
September 30, 2016 September 30, 2015
------------------ ------------------
Currencies % of Revenue % of Expenses* % of Revenue % of Expenses*
EURO 22% 14% 23% 14%
GBP 7% 7% 9% 8%
CAD 4% 12% 4% 13%
USD 58% 53% 54% 49%
Other 9% 14% 10% 16%
--- --- --- ---
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).
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SOURCE Open Text Corporation
