OPEN TEXT CORPORATION WATERLOO, Ontario, Feb. 2, 2017 /PRNewswire/ --
-- Total revenue of $543 million, up 17% Y/Y
-- Recurring revenues of $445 million, up 16% Y/Y
-- Cloud services and subscription revenue of $175 million, up 17% Y/Y
-- License revenue of $98 million, up 19% Y/Y
-- GAAP-based EPS, diluted of $0.18 on a post share split basis, down 50%
Y/Y (up 634% YTD)
-- Non-GAAP-based EPS, diluted of $0.54 on a post share split basis, up 8%
Y/Y (up 5% YTD)
-- The public offering of common shares in the quarter diluted both
GAAP-based and Non-GAAP-based EPS by approximately $0.01 on a post share
split basis
Open Text Corporation (NASDAQ: OTEX) (TSX: OTC) announced today its financial results for the second quarter ended December 31, 2016.
"OpenText delivered record revenue of $543 million in the second quarter of Fiscal 2017, up 17% year over year, with solid operational performance of 34% adjusted operating margin," said OpenText CEO and CTO Mark J. Barrenechea. "We made significant progress in advancing our vision, products and market reach over the last 12 months, and it is reflected in our financial results."
"Businesses in all industries are transforming into software and analytic companies and Enterprise Information Management ("EIM") is a key platform in enabling that transformation. The very nature of work has changed, and customers are seeking new platforms for content services, customer experience, supply chains, with discovery and analytics," said Barrenechea. "Customers are seeing greater value from Digitalization, and with Release 16 and our recent acquisitions, OpenText is well positioned to enable the next wave of digital transformation."
On January 23, 2017, OpenText completed the acquisition of Dell-EMC's Enterprise Content Division ("ECD Business"), including Documentum.
Mr. Barrenechea added, "OpenText, with great enthusiasm, welcomes our new Documentum and ECD employees, customers, and partners. We are the market leader in Content Services. This acquisition adds a world-class team of Content Management experts and significantly increases our presence in key verticals such as Life Sciences, Pharmaceuticals, Energy, Engineering and Public Sector industries, while expanding our Cloud Services offerings and increasing our geographical reach into new countries."
Reconciliation of Common Shares Outstanding
Pre share-split Post share-split
Common shares
outstanding prior to
equity public
offering 121,595,146 243,190,292
Issuance of Common
Shares from equity
public offering 9,250,000 18,500,000
Exercise of
underwriters over
allotment option 655,302 1,310,604
Total common shares
outstanding as of
December 31, 2016 131,500,448 263,000,896
------------------- ----------- -----------
Financial Highlights for Q2 FY17 with Year Over Year Comparisons
Summary of Quarterly Results
----------------------------
Q2 FY17 Q2 FY16 $ Change % Change Q2 FY17 in % Change in
CC* CC*
(Y/Y)
Revenues: (in millions)
Cloud services and
subscriptions $175.1 $149.1 $26.0 17.4% $175.6 17.8%
Customer support 219.7 184.1 35.5 19.3% 221.1 20.1%
Professional service and
other 50.2 50.3 --- (0.1)% 50.8 1.2%
Total Recurring revenues $444.9 $383.5 $61.5 16.0% $447.5 16.7%
License 97.8 81.9 15.9 19.4% 98.0 19.7%
Total revenues $542.7 $465.3 $77.4 16.6% $545.6 17.2%
GAAP-based operating margin 19.7% 23.6% n/a (390) bps
Non-GAAP-based operating
margin (1) 34.0% 37.0% n/a (300) bps 33.9% (310) bps
GAAP-based EPS, diluted(2) $0.18 $0.36 ($0.18) (50.0)%
Non-GAAP-based EPS,
diluted (1)(2)(3) $0.54 $0.50 $0.04 8.0% $0.54 8.0%
Operating cash flows (in
millions) $107.0 $123.9 ($16.9) (13.6)%
------------------------ ------ ------ ------ ------
Summary of YTD Results
----------------------
FY17 YTD FY16 YTD $ Change % Change FY17 YTD in % Change in
CC* CC*
(Y/Y)
Revenues: (in millions)
Cloud services and
subscriptions $344.7 $296.9 $47.9 16.1% $346.3 16.6%
Customer support 429.9 369.8 60.1 16.2% 433.9 17.3%
Professional service and
other 101.3 100.0 1.3 1.3% 102.8 2.8%
Total Recurring revenues $876.0 $766.7 $109.3 14.3% $883.0 15.2%
License 158.4 133.2 25.2 18.9% 159.2 19.5%
Total revenues $1,034.4 $899.9 $134.5 14.9% $1,042.2 15.8%
GAAP-based operating margin 17.5% 20.7% n/a (320) bps
Non-GAAP-based operating
margin (1) 32.5% 35.6% n/a (310) bps 32.3% (330) bps
GAAP-based EPS, diluted(2) $3.89 $0.53 $3.36 634.0%
Non-GAAP-based EPS,
diluted (1)(2)(3) $0.97 $0.92 $0.05 5.4% $0.98 6.5%
Operating cash flows (in
millions) $180.5 $216.7 ($36.2) (16.7)%
------------------------ ------ ------ ------ ------
(1) Please see note 2 "Use of Non-
GAAP Financial Measures" below
(2) As a result of the two-for-
one share split, effected January
24, 2017 by way of a share sub-
division, all current and
historical period per share data
and number of Common Shares
outstanding in this press release
are presented on a post share
split basis.
(3) 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.
"The Company achieved excellent results for the second quarter of Fiscal 2017, with strong revenue growth in all regions and a continued focus on delivering solid bottom line results. Factoring integration of the ECD Business, we expect our adjusted operating margin for Fiscal 2017 to be at the mid-point of our published 30% to 34% target margin range," said OpenText CFO, John Doolittle. "Our 2020 aspirations for the business remain unchanged, including the anticipated adjusted operating margin range of 34% to 38%."
Doolittle added, "OpenText generated significant operating cash flow in our second quarter, up approximately 46% from the first quarter of this Fiscal year and down 14% compared to the same period last year. With the acquisition of the ECD Business, OpenText will onboard a significant cash flow generating business. The Company's financial position remains strong and we expect to benefit from synergies as we integrate our recently acquired assets into our business model."
*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.
Integration of the ECD Business
As OpenText integrates the acquisition, we anticipate a one-time deferred revenue adjustment that will result in a reduction in revenue over the next four quarters of approximately $50 million. The impact on revenues for Q3 and Q4 of Fiscal 2017 is approximately half of this adjustment. In addition to this deferred revenue adjustment, we expect revenues from the ECD Business to be down 5% to 10% for the next few quarters due to typical integration activities, and then normalize to historical levels thereafter. Further, we expect the ECD Business to be on the OpenText operating model within 12 months.
In connection with the acquisition, OpenText is implementing restructuring activities to streamline our operations. These restructuring charges are expected to be incurred during the remainder of Fiscal 2017 and into Fiscal 2018. The anticipated cost is expected to be approximately $50 million, and primarily relates to workforce and facility consolidations. Once these restructuring activities are completed, OpenText anticipates annualized cost savings of approximately $60 million. We expect any savings realized during the remainder of Fiscal 2017 to be largely offset by one-time ECD integration costs.
OpenText Quarterly Business Highlights
-- 25 customer transactions over $1 million, 8 OpenText Cloud contract
signings and 17 on-premises
-- Financial, services, consumer goods, technology, and public sector
industries saw the most demand in cloud and license
-- New customers in the quarter included U.S. Defense Logistics Agency,
Philips, Trimfoot, Bruce Power, CenturyLink, Premier Medical Group, SMA
Solar Technology AG, Shiseido Europe, Subway, Tata Steel, and Siemens AG
-- OpenText Buys Documentum(TM)
-- OpenText Announces 2-For-1 Share Split
-- Successfully raised approximately $840 million in net proceeds from the
public offering of common shares and reopening of senior unsecured fixed
rate notes
-- OpenText Receives Highest Score for Digital Transformation/
Modernization Use Case in Gartner's 2016 Critical Capabilities for
Enterprise Content Management
-- OpenText Named a Leader in Gartner's 2016 Magic Quadrant for Enterprise
Content Management
-- OpenText Honored in Computerworld Readers Choice Awards 2016 in Both
Singapore and Malaysia
Toronto Stock Exchange Listing Ticker Symbol Change
Effective on Monday, February 6, 2017, OpenText common shares listed on the Toronto Stock Exchange ("TSX") as OTC will begin trading under the new ticker symbol OTEX. The change will align the Company's TSX ticker symbol with its NASDAQ ticker symbol, which remains "OTEX". No action is required to be taken by current shareholders in connection with the change, and no change has been made to the Company's share capital.
Dividend Program Highlights
Cash Dividend
As part of our quarterly, non-cumulative cash dividend program, the Board declared on February 1, 2017 a cash dividend of $0.115 per common share, on a post share split basis. The record date for this dividend is March 3, 2017 and the payment date is March 23, 2017. 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
----------------------------
Q2 FY17 Q1 FY17 Q2 FY16 % Change % Change
(Q2 FY17 vs Q1 FY17) (Q2 FY17 vs Q2 FY16)
Revenue
(million) $542.7 $491.7 $465.3 10.4% 16.6%
GAAP-
based
gross
margin 69.0% 66.6% 70.0% 240 bps (100) bps
GAAP-
based
operating
margin 19.7% 15.1% 23.6% 460 bps (390) bps
GAAP-
based
EPS,
diluted(1)(2) $0.18 $3.73 $0.36 (95.2)% (50.0)% (2)
Non-GAAP-
based
gross
margin
(3) 73.8% 71.5% 74.2% 230 bps (40) bps
Non-GAAP-
based
operating
margin
(3) 34.0% 30.8% 37.0% 320 bps (300) bps
Non-GAAP-
based
EPS,
diluted
(2)(3)(4) $0.54 $0.43 $0.50 25.6% 8.0%
---------- ----- ----- ----- ---- ---
Summary of Year to
Date Results
------------------
Q2 FY17 YTD Q2 FY16 YTD % Change
Revenue (million) $1,034.4 $899.9 14.9%
GAAP-based gross
margin 67.9% 68.9% (100) bps
GAAP-based operating
margin 17.5% 20.7% (320) bps
GAAP-based EPS,
diluted(1)(2) $3.89 $0.53 634.0%
Non-GAAP-based gross
margin (3) 72.7% 73.4% (70) bps
Non-GAAP-based
operating margin (3) 32.5% 35.6% (310) bps
Non-GAAP-based EPS,
diluted (2)(3)(4) $0.97 $0.92 5.4%
------------------- ----- ----- ---
(1) Recorded a significant tax
benefit in Q1 FY17 of $876.1
million. This significant tax
benefit is specifically tied to
the Company's internal
reorganization and applied to Q1
FY17 only and as a result does not
continue in future periods.
(2) As a result of the two-for-
one share split, effected January
24, 2017 by way of a share sub-
division, all current and
historical period per share data
and number of Common Shares
outstanding in this press release
are presented on a post share
split basis.
(3) Please see note 2 "Use of Non-
GAAP Financial Measures" below
(4) Please also see note 14 to the
Company's 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 February 2, 2017 at 7:00 p.m. ET through 11:59 p.m. February 16, 2017 and can be accessed by dialing 1-855-669-9658 (toll-free) or +1-604-674-8052 (international) and using passcode 1085 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 and revenue expectations regarding the ECD Business, adjusted operating income and cash flow, its financial condition, results of operations and earnings, announced acquisitions, ongoing tax matters, the integration of the ECD Business, expected timing, charges and savings related to restructuring activities, declaration of quarterly dividends, future tax rates, new platform and product offerings and other matters, may contain words such as "anticipates", "expects", "intends", "plans", "believes", "seeks", "estimates", "may", "could", "would", "might", "will" and variations of these words or similar expressions are considered forward-looking statements or information under applicable securities laws. In addition, any information or statements that refer to expectations, beliefs, plans, projections, objectives, performance or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking, and based on our current expectations, forecasts and projections about the operating environment, economies and markets in which we operate. Forward-looking statements reflect our current estimates, beliefs and assumptions, which are based on management's perception of historic trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances, such as certain assumptions about the economy, as well as market, financial and operational assumptions. Management's estimates, beliefs and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events and, as such, are subject to change. We can give no assurance that such estimates, beliefs and assumptions will prove to be correct. Such forward-looking statements involve known and unknown risks, uncertainties and other factors and assumptions that may cause the actual results, performance or achievements to differ materially. Such factors include, but are not limited to: (i) the future performance, financial and otherwise, of OpenText; (ii) the ability of OpenText to bring new products and services to market and to increase sales; (iii) the strength of the Company's product development pipeline; (iv) the Company's growth and profitability prospects; (v) the estimated size and growth prospects of the EIM market; (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 "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, or applicable Canadian securities regulation; (iv) the risks associated with bringing new products and services to market; (v) fluctuations in currency exchange rates; (vi) delays in the purchasing decisions of the Company's customers; (vii) the competition the Company faces in its industry and/or marketplace; (viii) the final determination of litigation, tax audits (including tax examinations in the United States and elsewhere) and other legal proceedings; (ix) potential exposure to greater than anticipated tax liabilities or expenses, including with respect to changes in Canadian, U.S. or international tax regimes; (x) the possibility of technical, logistical or planning issues in connection with the deployment of the Company's products or services; (xi) the continuous commitment of the Company's customers; and (xii) demand for the Company's products and services. For additional information with respect to risks and other factors which could occur, see the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other securities filings with the Securities and Exchange Commission (SEC) and other securities regulators. Readers are cautioned not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. Unless otherwise required by applicable securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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 ©2017 Open Text. OpenText is a trademark or registered trademark of Open Text. The list of trademarks is not exhaustive of other trademarks. Registered trademarks, product names, company names, brands and service names mentioned herein are property of Open Text. All rights reserved. For more information, visit: http://www.opentext.com/2/global/site-copyright.html_SKU.
OPEN TEXT CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars, except share data)
December 31, 2016 June 30, 2016
----------------- -------------
ASSETS (unaudited)
Cash and cash equivalents $1,722,491 $1,283,757
Short-term investments 3,238 11,839
Accounts receivable trade, net of
allowance for doubtful accounts
of $7,903 as of December 31, 2016
and $6,740 as of June 30, 2016 315,562 285,904
Income taxes recoverable 19,232 31,752
Prepaid expenses and other current
assets 58,129 59,021
Total current assets 2,118,652 1,672,273
Property and equipment 179,044 183,660
Goodwill 2,597,685 2,325,586
Acquired intangible assets 772,534 646,240
Deferred tax assets 1,078,548 241,161
Other assets 66,905 53,697
Deferred charges 59,598 22,776
Long-term income taxes recoverable 9,225 8,751
Total assets $6,882,191 $5,154,144
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities $245,506 $257,450
Current portion of long-term debt 8,000 8,000
Deferred revenues 364,872 373,549
Income taxes payable 24,770 32,030
Total current liabilities 643,148 671,029
Long-term liabilities:
Accrued liabilities 30,309 29,848
Deferred credits 6,820 8,357
Pension liability 55,827 61,993
Long-term debt 2,389,826 2,137,987
Deferred revenues 47,119 37,461
Long-term income taxes payable 146,845 149,041
Deferred tax liabilities 72,121 79,231
------ ------
Total long-term liabilities 2,748,867 2,503,918
Shareholders' equity:
Share capital
263,000,896 and 242,809,354 Common
Shares issued and outstanding at
December 31, 2016 and June 30,
2016, respectively; authorized
Common Shares: unlimited 1,416,644 817,788
Additional paid-in capital 158,975 147,280
Accumulated other comprehensive
income 39,884 46,310
Retained earnings 1,894,802 992,546
Treasury stock, at cost (917,372
shares at December 31, 2016 and
1,267,294 at June 30, 2016,
respectively) (20,709) (25,268)
------- -------
Total OpenText shareholders'
equity 3,489,596 1,978,656
Non-controlling interests 580 541
--- ---
Total shareholders' equity 3,490,176 1,979,197
Total liabilities and
shareholders' equity $6,882,191 $5,154,144
========== ==========
As a result of the two-for-one
share split, effected January
24, 2017 by way of a share sub-
division, all current and
historical period per share
data and number of Common
Shares outstanding in these
Condensed Consolidated
Financial Statements are
presented on a post share split
basis.
OPEN TEXT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands of U.S. dollars, except share and per share data)
(unaudited)
Three Months Ended December 31, Six Months Ended December 31,
2016 2015 2016 2015
---- ---- ---- ----
Revenues:
License $97,764 $81,856 $158,420 $133,187
Cloud services and
subscriptions 175,061 149,099 344,748 296,889
Customer support 219,656 184,137 429,862 369,804
Professional service and other 50,228 50,255 101,343 100,002
------ ------ ------- -------
Total revenues 542,709 465,347 1,034,373 899,882
------- ------- --------- -------
Cost of revenues:
License 2,391 2,029 6,236 4,710
Cloud services and
subscriptions 73,150 58,918 143,442 117,834
Customer support 27,349 21,689 53,087 42,197
Professional service and other 40,295 38,375 81,638 76,439
Amortization of acquired
technology-based intangible
assets 24,848 18,731 47,983 38,614
------ ------ ------ ------
Total cost of revenues 168,033 139,742 332,386 279,794
------- ------- ------- -------
Gross profit 374,676 325,605 701,987 620,088
------- ------- ------- -------
Operating expenses:
Research and development 64,721 45,710 123,293 92,150
Sales and marketing 102,651 85,875 197,799 163,820
General and administrative 39,914 33,767 78,111 69,336
Depreciation 15,301 13,330 30,571 26,244
Amortization of acquired
customer-based intangible
assets 33,815 27,793 67,423 55,598
Special charges 11,117 9,088 23,571 26,425
------ ----- ------ ------
Total operating expenses 267,519 215,563 520,768 433,573
------- ------- ------- -------
Income from operations 107,157 110,042 181,219 186,515
------- ------- ------- -------
Other income (expense), net (3,558) 961 3,141 (3,952)
Interest and other related
expense, net (27,743) (19,187) (55,018) (38,233)
------- ------- ------- -------
Income before income taxes 75,856 91,816 129,342 144,330
Provision for (recovery of)
income taxes 30,822 4,074 (828,603) 15,276
------ ----- -------- ------
Net income for the period $45,034 $87,742 $957,945 $129,054
------- ------- -------- --------
Net (income) attributable to
non-controlling interests (12) (56) (39) (82)
Net income attributable to
OpenText $45,022 $87,686 $957,906 $128,972
======= ======= ======== ========
Earnings per share-basic
attributable to OpenText $0.18 $0.36 $3.92 $0.53
===== ===== ===== =====
Earnings per share-diluted
attributable to OpenText $0.18 $0.36 $3.89 $0.53
===== ===== ===== =====
Weighted average number of
Common Shares outstanding-
basic 245,653 242,492 244,282 243,398
======= ======= ======= =======
Weighted average number of
Common Shares outstanding-
diluted 247,501 243,584 246,123 244,432
======= ======= ======= =======
Dividends declared per Common
Share $0.1150 $0.1000 $0.2300 $0.2000
======= ======= ======= =======
As a result of the two-for-one
share split, effected January
24, 2017 by way of a share sub-
division, all current and
historical period per share
data and number of Common
Shares outstanding in these
Condensed Consolidated
Financial Statements are
presented on a post share split
basis.
OPEN TEXT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands of U.S. dollars)
(unaudited)
Three Months Ended December 31, Six Months Ended December 31,
2016 2015 2016 2015
---- ---- ---- ----
Net income for the period $45,034 $87,742 $957,945 $129,054
Other comprehensive income-net of tax:
Net foreign currency translation
adjustments (11,526) (2,751) (10,307) (1,028)
Unrealized gain (loss) on cash flow hedges:
Unrealized (loss) -net of tax
(recovery) effect of ($252) and
($515) for the three months
ended December 31, 2016 and
2015, respectively; ($380) and
($1,737) for the six months
ended December, 31 2016 and
2015, respectively (698) (1,429) (1,053) (4,819)
(Gain) loss reclassified into net
income -net of tax (expense)
recovery effect of ($33) and
$294 for the three months ended
December 31, 2016 and 2015,
respectively; ($38) and $478 for
the six months ended December
31, 2016 and 2015, respectively (91) 814 (108) 1,326
Actuarial gain (loss) relating to defined benefit
pension plans:
Actuarial gain -net of tax
expense (recovery) effect of
$1,077 and ($92) for the three
months ended December 31, 2016
and 2015, respectively; $484 and
$210 for the six months ended
December 31, 2016 and 2015,
respectively 2,823 648 4,361 1,761
Amortization of actuarial loss
into net income -net of tax
recovery effect of $57 and $34
for the three months ended
December 31, 2016 and 2015,
respectively; $119 and $66 for
the six months ended December
31, 2016 and 2015, respectively 134 90 281 173
Unrealized net gain on short-
term investments - net of tax
effect of nil for the three and
six months ended December 31,
2016 and 2015, respectively 512 120 400 135
--- --- --- ---
Total other comprehensive income
(loss), net, for the period (8,846) (2,508) (6,426) (2,452)
------ ------ ------ ------
Total comprehensive income 36,188 85,234 951,519 126,602
Comprehensive (income)
attributable to non-controlling
interests (12) (56) (39) (82)
--- --- --- ---
Total comprehensive income
attributable to OpenText $36,176 $85,178 $951,480 $126,520
======= ======= ======== ========
OPEN TEXT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
(unaudited)
Three Months Ended December 31, Six Months Ended December 31,
2016 2015 2016 2015
---- ---- ---- ----
Cash flows from operating activities:
Net income for the period $45,034 $87,742 $957,945 $129,054
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and
amortization of intangible
assets 73,964 59,854 145,977 120,456
Share-based compensation
expense 7,572 6,581 15,712 13,114
Excess tax (benefits) on
share-based compensation
expense (537) (256) (542) (40)
Pension expense 871 1,158 2,061 2,325
Amortization of debt
issuance costs 1,331 1,156 2,654 2,312
Amortization of deferred
charges and credits 2,146 1,981 4,292 4,598
Loss on sale and write down
of property and equipment - 890 - 890
Deferred taxes 7,591 (3,685) (868,233) (7,869)
Share in net (income) of
equity investees (464) - (5,993) -
Other non-cash charges - - 1,033 -
Changes in operating assets and liabilities:
Accounts receivable (15,713) (41,226) 456 10,880
Prepaid expenses and other
current assets 13,074 (5,221) 11,885 613
Income taxes and deferred
charges and credits (12,841) (3,503) (9,620) 294
Accounts payable and
accrued liabilities 6,604 33,503 (23,995) (14,819)
Deferred revenue (21,633) (16,280) (47,742) (48,673)
Other assets 20 1,242 (5,420) 3,523
--- ----- ------ -----
Net cash provided by
operating activities 107,019 123,936 180,470 216,658
------- ------- ------- -------
Cash flows from investing activities:
Additions of property and
equipment (11,609) (12,702) (32,274) (29,899)
Proceeds from maturity of
short-term investments - 3,069 9,212 5,324
Purchase of HP Inc. CCM
Business (2,802) - (315,000) -
Purchase of Recommind, Inc. - - (170,107) -
Purchase of HP Inc. CEM
Business - - (7,289) -
Purchase of ANXe Business
Corporation 143 - 143 -
Purchase of Daegis Inc.,
net of cash acquired - (22,146) - (22,146)
Purchase consideration for
acquisitions prior to
Fiscal 2016 - (43) - (9,859)
Other investing activities (440) (2,754) (563) (3,680)
Net cash used in investing
activities (14,708) (34,576) (515,878) (60,260)
------- ------- -------- -------
Cash flows from financing activities:
Excess tax benefits on
share-based compensation
expense 537 256 542 40
Proceeds from issuance of
long-term debt 256,875 - 256,875 -
Proceeds from issuance of
Common Shares from
exercise of stock options
and ESPP 5,391 2,736 10,701 7,988
Proceeds from issuance of
Common Shares under public
Equity Offering 604,223 - 604,223 -
Repayment of long-term
debt and revolver (2,000) (2,000) (4,000) (4,000)
Debt issuance costs (2,825) - (4,155) -
Equity issuance costs (18,127) - (18,127) -
Common Shares repurchased - (15,483) - (65,509)
Purchase of treasury stock - (10,627) - (10,627)
Payments of dividends to
shareholders (27,859) (24,216) (55,650) (47,528)
------- ------- ------- -------
Net cash provided by (used
in) financing activities 816,215 (49,334) 790,409 (119,636)
------- ------- ------- --------
Foreign exchange gain
(loss) on cash held in
foreign currencies (20,979) (4,848) (16,267) (10,798)
Increase in cash and cash
equivalents during the
period 887,547 35,178 438,734 25,964
Cash and cash equivalents
at beginning of the period 834,944 690,785 1,283,757 699,999
Cash and cash equivalents
at end of the period $1,722,491 $725,963 $1,722,491 $725,963
========== ======== ========== ========
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 December 31, 2016.
(In thousands except for per share amounts)
------------------------------------------
Three Months Ended December 31, 2016
GAAP-based GAAP-based Adjustments Note Non-GAAP-based Non-GAAP-
Measures based
Measures % of Total Revenue Measures Measures
% of Total
Revenue
--- -------
Cost of revenues
Cloud services and
subscriptions $73,150 $(211) (1) $72,939
Customer support 27,349 (270) (1) 27,079
Professional
service and other 40,295 (468) (1) 39,827
Amortization of
acquired
technology-based
intangible assets 24,848 (24,848) (2) -
GAAP-based gross
profit and gross
margin (%) / 374,676 69.0% 25,797 (3) 400,473 73.8%
Non-GAAP-based gross profit
and gross margin (%)
Operating expenses
Research and
development 64,721 (1,995) (1) 62,726
Sales and marketing 102,651 (2,329) (1) 100,322
General and
administrative 39,914 (2,299) (1) 37,615
Amortization of
acquired customer-
based intangible
assets 33,815 (33,815) (2) -
Special charges
(recoveries) 11,117 (11,117) (4) -
GAAP-based income
from operations
and operating
margin (%) /Non-
GAAP-based income
from operations
and operating
margin (%) 107,157 19.7% 77,352 (5) 184,509 34.0%
Other income
(expense), net (3,558) 3,558 (6) -
Provision for
(recovery of)
income taxes 30,822 (7,319) (7) 23,503
GAAP-based net
income /Non-
GAAP-based net
income,
attributable to
OpenText 45,022 88,229 (8) 133,251
GAAP-based
earnings per share
/Non-GAAP-based
earnings per
share-diluted,
attributable to
OpenText $0.18 $0.36 (8) $0.54
(1) Adjustment relates to the exclusion of
share-based compensation expense from
our Non-GAAP-based operating expenses
as this expense is excluded from our
internal analysis of operating results.
(2) Adjustment relates to the exclusion of
amortization expense from our Non-GAAP-
based operating expenses as the timing
and frequency of amortization expense is
dependent on our acquisitions and is
hence excluded from our internal
analysis of operating results.
(3) GAAP-based and Non-GAAP-based gross
profit stated in dollars, and gross
margin stated as a percentage of total
revenue.
(4) Adjustment relates to the exclusion of
Special charges (recoveries) from our
Non-GAAP-based operating expenses as
Special charges (recoveries) are
generally incurred in the periods
relevant to an acquisition and include
one-time, non-recurring charges or
recoveries that are not indicative or
related to continuing operations, and
are therefore excluded from our internal
analysis of operating results.
(5) GAAP-based and Non-GAAP-based income
from operations stated in dollars, and
operating margin stated as a percentage
of total revenue.
(6) Adjustment relates to the exclusion of
Other income (expense) from our Non-
GAAP-based operating expenses as Other
income (expense) relates primarily to
the transactional impact of foreign
exchange and is generally not indicative
or related to continuing operations and
is therefore excluded from our internal
analysis of operating results. Other
income (expense) also includes our share
of income (losses) from our holdings in
non-marketable securities investments
as a limited partner. We do not actively
trade equity securities in these
privately held companies nor do we plan
our ongoing operations based around any
anticipated fundings or distributions
from these investments. We exclude gains
and losses on these investments as we do
not believe they are reflective of our
ongoing business and operating results.
(7) Adjustment relates to differences between
the GAAP-based tax provision rate of
approximately 41% 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 December 31,
2016
Per share
diluted
----------
GAAP-based net income,
attributable to OpenText $45,022 $0.18
Add:
Amortization 58,663 0.24
Share-based compensation 7,572 0.03
Special charges (recoveries) 11,117 0.04
Other (income) expense, net 3,558 0.01
GAAP-based provision for
(recovery of ) income taxes 30,822 0.12
Non-GAAP-based provision for
income taxes (23,503) (0.08)
Non-GAAP-based net income,
attributable to OpenText $133,251 $0.54
======== =====
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the six months ended December 31, 2016.
---------------------------------------------------------------------------------------------------------------------
(In thousands except for per share amounts)
Six Months Ended December 31, 2016
GAAP-based GAAP-based Adjustments Note Non-GAAP-based Non-GAAP-
Measures based
Measures % of Total Measures Measures
Revenue % of Total
Revenue
--- -------
Cost of revenues
Cloud services and
subscriptions $143,442 $(571) (1) $142,871
Customer support 53,087 (505) (1) 52,582
Professional
service and other 81,638 (913) (1) 80,725
Amortization of
acquired
technology-based
intangible assets 47,983 (47,983) (2) -
GAAP-based gross
profit and gross
margin (%) / 701,987 67.9% 49,972 (3) 751,959 72.7%
Non-GAAP-based gross profit and
gross margin (%)
Operating expenses
Research and
development 123,293 (3,738) (1) 119,555
Sales and marketing 197,799 (5,149) (1) 192,650
General and
administrative 78,111 (4,836) (1) 73,275
Amortization of
acquired customer-
based intangible
assets 67,423 (67,423) (2) -
Special charges
(recoveries) 23,571 (23,571) (4) -
GAAP-based income
from operations
and operating
margin (%) /Non-
GAAP-based income
from operations
and operating
margin (%) 181,219 17.5% 154,689 (5) 335,908 32.5%
Other income
(expense), net 3,141 (3,141) (6) -
Provision for
(recovery of)
income taxes (828,603) 870,698 (7) 42,095
GAAP-based net
income /Non-
GAAP-based net
income,
attributable to
OpenText 957,906 (719,150) (8) 238,756
GAAP-based
earnings per share
/Non GAAP-based
earnings per
share-diluted,
attributable to
OpenText $3.89 $(2.92) (8) $0.97
(1) Adjustment relates to the exclusion of
share-based compensation expense from
our Non-GAAP-based operating expenses
as this expense is excluded from our
internal analysis of operating results.
(2) Adjustment relates to the exclusion of
amortization expense from our Non-GAAP-
based operating expenses as the timing
and frequency of amortization expense is
dependent on our acquisitions and is
hence excluded from our internal
analysis of operating results.
(3) GAAP-based and Non-GAAP-based gross
profit stated in dollars, and gross
margin stated as a percentage of total
revenue.
(4) Adjustment relates to the exclusion of
Special charges (recoveries) from our
Non-GAAP-based operating expenses as
Special charges (recoveries) are
generally incurred in the periods
relevant to an acquisition and include
one-time, non-recurring charges or
recoveries that are not indicative or
related to continuing operations, and
are therefore excluded from our internal
analysis of operating results.
(5) GAAP-based and Non-GAAP-based income
from operations stated in dollars, and
operating margin stated as a percentage
of total revenue.
(6) Adjustment relates to the exclusion of
Other income (expense) from our Non-
GAAP-based operating expenses as Other
income (expense) relates primarily to
the transactional impact of foreign
exchange and is generally not indicative
or related to continuing operations and
is therefore excluded from our internal
analysis of operating results.
(7) Adjustment relates to differences between
the GAAP-based tax recovery rate of
approximately 641% 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:
Six Months Ended December 31,
2016
Per share
diluted
----------
GAAP-based net income,
attributable to OpenText $957,906 $3.89
Add:
Amortization 115,406 0.47
Share-based compensation 15,712 0.06
Special charges (recoveries) 23,571 0.10
Other (income) expense, net (3,141) (0.01)
GAAP-based provision for
(recovery of) income taxes (828,603) (3.37)
Non-GAAP based provision for
income taxes (42,095) (0.17)
------- -----
Non-GAAP-based net income,
attributable to OpenText $238,756 $0.97
======== =====
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-based Non-GAAP-
Measures based
Measures % of Total Measures Measures
Revenue % 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 (%) / 327,311 66.6% 24,175 (3) 351,486 71.5%
Non-GAAP-based gross profit
and gross margin (%)
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 $3.73 $(3.30) (8) $0.43
(1) Adjustment relates to the exclusion of
share-based compensation expense from
our Non-GAAP-based operating expenses
as this expense is excluded from our
internal analysis of operating results.
(2) Adjustment relates to the exclusion of
amortization expense from our Non-GAAP-
based operating expenses as the timing
and frequency of amortization expense is
dependent on our acquisitions and is
hence excluded from our internal
analysis of operating results.
(3) GAAP-based and Non-GAAP-based gross
profit stated in dollars, and gross
margin stated as a percentage of total
revenue.
(4) Adjustment relates to the exclusion of
Special charges (recoveries) from our
Non-GAAP-based operating expenses as
Special charges (recoveries) are
generally incurred in the periods
relevant to an acquisition and include
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 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 $3.73
Add:
Amortization 56,743 0.23
Share-based compensation 8,140 0.03
Special charges (recoveries) 12,454 0.05
Other (income) expense, net (6,699) (0.03)
GAAP-based provision for
(recovery of ) income taxes (859,425) (3.51)
Non-GAAP-based provision for
income taxes (18,592) (0.07)
------- -----
Non-GAAP-based net income,
attributable to OpenText $105,505 $0.43
======== =====
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the three months ended December 31, 2015.
(In thousands except for per share amounts)
------------------------------------------
Three Months Ended December 31, 2015
GAAP-based GAAP-based Adjustments Note Non-GAAP-based Non-GAAP-
Measures based
Measures % of Total Measures Measures
Revenue % of Total
Revenue
--- -------
Cost of revenues
Cloud services and
subscriptions $58,918 $(158) (1) $58,760
Customer support 21,689 (258) (1) 21,431
Professional
service and other 38,375 (386) (1) 37,989
Amortization of
acquired
technology-based
intangible assets 18,731 (18,731) (2) -
GAAP-based gross
profit and gross
margin (%) / 325,605 70.0% 19,533 (3) 345,138 74.2%
Non-GAAP-based gross profit
and gross margin (%)
Operating expenses
Research and
development 45,710 (736) (1) 44,974
Sales and marketing 85,875 (2,715) (1) 83,160
General and
administrative 33,767 (2,328) (1) 31,439
Amortization of
acquired customer-
based intangible
assets 27,793 (27,793) (2) -
Special charges
(recoveries) 9,088 (9,088) (4) -
GAAP-based income
from operations
and operating
margin (%) /Non-
GAAP-based income
from operations
and operating
margin (%) 110,042 23.6% 62,193 (5) 172,235 37.0%
Other income
(expense), net 961 (961) (6) -
Provision for
(recovery of)
income taxes 4,074 26,480 (7) 30,554
GAAP-based net
income /Non-
GAAP-based net
income,
attributable to
OpenText 87,686 34,752 (8) 122,438
GAAP-based
earnings per share
/Non-GAAP-based
earnings per
share-diluted,
attributable to
OpenText $0.36 $0.14 (8) $0.50
(1) Adjustment relates to the exclusion of
share-based compensation expense from
our Non-GAAP-based operating
expenses as this expense is excluded
from our internal analysis of
operating results.
(2) Adjustment relates to the exclusion of
amortization expense from our Non-
GAAP-based operating expenses as the
timing and frequency of amortization
expense is dependent on our
acquisitions and is hence excluded
from our internal analysis of
operating results.
(3) GAAP-based and Non-GAAP-based gross
profit stated in dollars, and gross
margin stated as a percentage of total
revenue.
(4) Adjustment relates to the exclusion of
Special charges (recoveries) from our
Non-GAAP-based operating expenses as
Special charges (recoveries) are
generally incurred in the periods
relevant to an acquisition and include
one-time, non-recurring charges or
recoveries that are not indicative or
related to continuing operations, and
are therefore excluded from our
internal analysis of operating
results.
(5) GAAP-based and Non-GAAP-based income
from operations stated in dollars, and
operating margin stated as a
percentage of total revenue.
(6) Adjustment relates to the exclusion of
Other income (expense) from our Non-
GAAP-based operating expenses as
Other income (expense) relates
primarily to the transactional impact
of foreign exchange and is generally
not indicative or related to
continuing operations and is therefore
excluded from our internal analysis of
operating results.
(7) Adjustment relates to differences
between the GAAP-based tax provision
rate of approximately 4% 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 December 31,
2015
Per share
diluted
----------
GAAP-based net income,
attributable to OpenText $87,686 $0.36
Add:
Amortization 46,524 0.19
Share-based compensation 6,581 0.03
Special charges (recoveries) 9,088 0.04
Other (income) expense, net (961) -
GAAP-based provision for
(recovery of ) income taxes 4,074 0.02
Non-GAAP-based provision for
income taxes (30,554) (0.14)
------- -----
Non-GAAP-based net income,
attributable to OpenText $122,438 $0.50
======== =====
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the six months ended December 31, 2015.
(In thousands except for per share amounts)
------------------------------------------
Six Months Ended December 31, 2015
GAAP-based GAAP-based Adjustments Note Non-GAAP-based Non-GAAP-
Measures based
Measures % of Total Measures Measures
Revenue % of Total
Revenue
--- -------
Cost of revenues:
Cloud services and
subscriptions $117,834 $(439) (1) $117,395
Customer support 42,197 (416) (1) 41,781
Professional
service and other 76,439 (839) (1) 75,600
Amortization of
acquired
technology-based
intangible assets 38,614 (38,614) (2) -
GAAP-based gross
profit and gross
margin (%) / 620,088 68.9% 40,308 (3) 660,396 73.4%
Non-GAAP-based gross profit and
gross margin (%)
Operating expenses
Research and
development 92,150 (1,488) (1) 90,662
Sales and marketing 163,820 (5,830) (1) 157,990
General and
administrative 69,336 (4,102) (1) 65,234
Amortization of
acquired customer-
based intangible
assets 55,598 (55,598) (2) -
Special charges
(recoveries) 26,425 (26,425) (4) -
GAAP-based income
from operations
and operating
margin (%) /Non-
GAAP-based income
from operations
and operating
margin (%) 186,515 20.7% 133,751 (5) 320,266 35.6%
Other income
(expense), net (3,952) 3,952 (6) -
Provision for
(recovery of)
income taxes 15,276 41,049 (7) 56,325
GAAP-based net
income /Non-
GAAP-based net
income,
attributable to
OpenText 128,972 96,654 (8) 225,626
GAAP-based
earnings per share
/Non GAAP-based
earnings per
share-diluted,
attributable to
OpenText $0.53 $0.39 (8) $0.92
(1) Adjustment relates to the exclusion
of share-based compensation
expense from our Non-GAAP-based
operating expenses as this expense
is excluded from our internal
analysis of operating results.
(2) Adjustment relates to the exclusion
of amortization expense from our
Non-GAAP-based operating
expenses as the timing and
frequency of amortization expense
is dependent on our acquisitions
and is hence excluded from our
internal analysis of operating
results.
(3) GAAP-based and Non-GAAP-based
gross profit stated in dollars,
and gross margin stated as a
percentage of total revenue.
(4) Adjustment relates to the exclusion
of Special charges (recoveries)
from our Non-GAAP-based
operating expenses as Special
charges (recoveries) are generally
incurred in the periods relevant
to an acquisition and include one-
time, non-recurring charges or
recoveries that are not indicative
or related to continuing
operations, and are therefore
excluded from our internal
analysis of operating results.
(5) GAAP-based and Non-GAAP-based
income from operations stated in
dollars, and operating margin
stated as a percentage of total
revenue.
(6) Adjustment relates to the exclusion
of Other income (expense) from our
Non-GAAP-based operating
expenses as Other income (expense)
relates primarily to the
transactional impact of foreign
exchange and is generally not
indicative or related to
continuing operations and is
therefore excluded from our
internal analysis of operating
results.
(7) Adjustment relates to differences
between the GAAP-based tax
provision rate of approximately
11% and a Non-GAAP-based tax
rate of 20%; these rate
differences are due to the income
tax effects of expenses that are
excluded for the purpose of
calculating Non-GAAP-based
adjusted net income. Such excluded
expenses include amortization,
share-based compensation, Special
charges (recoveries) and other
income (expense), net. Also
excluded are tax expense items
unrelated to current period income
such as changes in reserves for
tax uncertainties and valuation
allowance reserves, and "book to
return" adjustments for tax return
filings and tax assessments. In
arriving at our Non-GAAP-based
tax rate of 20%, we analyzed the
individual adjusted expenses and
took into consideration the impact
of statutory tax rates from local
jurisdictions incurring the
expense.
(8) Reconciliation of GAAP-based net
income to Non-GAAP-based net
income:
Six Months Ended December 31,
2015
Per share
diluted
----------
GAAP-based net income,
attributable to OpenText $128,972 $0.53
Add:
Amortization 94,212 0.39
Share-based compensation 13,114 0.05
Special charges (recoveries) 26,425 0.11
Other (income) expense, net 3,952 0.02
GAAP-based provision for
(recovery of) income taxes 15,276 0.06
Non-GAAP based provision for
income taxes (56,325) (0.24)
------- -----
Non-GAAP-based net income,
attributable to OpenText $225,626 $0.92
======== =====
(3) The following tables provide a
composition of our major
currencies for revenue and
expenses, expressed as a
percentage, for the three and six
months ended December 31, 2016
and 2015:
Three Months Ended Three Months Ended
December 31, 2016 December 31, 2015
Currencies % of Revenue % of Expenses* % of Revenue % of Expenses*
------------ ------------- ------------ -------------
EURO 25% 16% 25% 14%
GBP 7% 7% 8% 8%
CAD 4% 11% 5% 11%
USD 55% 50% 52% 50%
Other 9% 16% 10% 17%
--- --- --- ---
Total 100% 100% 100% 100%
=== === === ===
Six Months Ended December 31, 2016 Six Months Ended December 31, 2015
Currencies % of Revenue % of Expenses* % of Revenue % of Expenses*
------------ ------------- ------------ -------------
EURO 24% 15% 24% 14%
GBP 7% 7% 9% 8%
CAD 4% 11% 4% 12%
USD 56% 51% 53% 50%
Other 9% 16% 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).
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/opentext-reports-second-quarter-fiscal-year-2017-financial-results-300401567.html
SOURCE Open Text Corporation
