OPEN TEXT CORPORATION Total revenue of $641 million, up 30% Y/Y
Named as a Leader in Gartner Magic Quadrant for Content Services Platforms
WATERLOO, Ontario, Nov. 2, 2017 /PRNewswire/ -- Open Text Corporation (NASDAQ: OTEX, TSX: OTEX), "The Information Company," today announced its financial results for the first quarter ended September 30, 2017.
"OpenText delivered strong first quarter results growing total revenue to $641 million, representing 30% year-over-year growth while delivering $220 million of Adjusted EBITDA, representing 32% year-over-year growth." said Mark J. Barrenechea, OpenText Vice Chairman, CEO & CTO. "Our Annual Recurring Revenues grew to $489 million, representing 29% year-over-year growth. We are off to a very strong start to the new fiscal year."
"During the quarter, we completed the acquisition of Covisint Corporation and Guidance Software Inc, transitioned to the new SAP HANA S4 ERP platform, delivered Release 16 EP2 and Magellan, and named a leader in Content Services Platforms. M&A remains our leading growth contributor, complemented by organic growth," said Barrenechea.
Barrenechea concluded, "We start with a customer's business needs, and work backwards on a strategy to meet those needs. OpenText has evolved into "The Information Company" enabling customers to manage and unlock the value of their information. Customers are responding well to our expanded Enterprise Information Management (EIM) offerings which now include advance capabilities for Artificial Intelligence (AI), Internet-of-Things (IoT), and Information Forensics and Security. OpenText is well positioned to be the leading Digital platform for the world's leading companies, both on-premise and in the Cloud."
Financial Highlights for Q1 2018 with Year Over Year Comparisons
Summary of Quarterly Results
----------------------------
(in millions except per share data) Q1 FY18 Q1 FY17 $ Change % Change Q1 FY18 in % Change in
(Y/Y) CC* CC*
Revenues:
Cloud services and subscriptions $193.9 $169.7 $24.2 14.2% $194.8 14.8%
Customer support 295.4 210.2 85.2 40.5% 292.3 39.0%
Total annual recurring revenues** $489.3 $379.9 $109.4 28.8% $487.0 28.2%
License 78.2 60.7 17.6 29.0% 77.2 27.3%
Professional service and other 73.2 51.1 22.1 43.2% 71.6 40.1%
Total revenues $640.7 $491.7 $149.0 30.3% $635.9 29.3%
GAAP-based operating income $87.1 $74.1 $13.1 17.6%
Non-GAAP-based operating income (1) $201.1 $151.4 $49.7 32.9% $198.9 31.4%
GAAP-based operating margin 13.6% 15.1% n/a (150) bps
Non-GAAP-based operating margin (1) 31.4% 30.8% n/a 60 bps 31.3% 50 bps
GAAP-based EPS, diluted (2)(3) $0.14 $3.73 ($3.59) (96.2)%
Non-GAAP-based EPS, diluted (1)(2)(4) $0.54 $0.43 $0.11 25.6% $0.53 23.3%
GAAP-based net income attributable to OpenText (3) $36.6 $912.9 ($876.3) (96.0)%
Adjusted EBITDA (1) $219.9 $166.6 $53.3 32.0%
Operating cash flows $67.1 $73.5 ($6.3) (8.6)%
-------------------- ----- ----- ----- -----
(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
comparative period per share data and number of Common Shares
outstanding in this press release are presented on a post share
split basis.
(3) Recorded a significant tax benefit in Q1 FY17 of $876.1
million. This significant tax benefit is specifically tied to
the Company's internal reorganization and applied to Q1 FY17
only and as a result does not continue in future periods.
(4) Please also see note 14 to the Company's 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.
*CC: Constant currency for this purpose is defined as the current
period reported revenues/expenses/earnings represented at the
prior comparative period's foreign exchange rate.
**Annual recurring revenue is defined as the sum of Cloud
services and subscriptions revenue and Customer support revenue.
"We entered Fiscal 2018 with a solid performance in Q1 and are tracking to our annual targets. We have a strong balance sheet giving us the flexibility to support future growth initiatives," said OpenText CFO John Doolittle. "The ECD business is on plan and anticipated to be on the OpenText operating model by the end of this calendar year. As we previously communicated, we expect both Covisint and Guidance to be on OpenText's operating model within the first twelve months of operations."
OpenText Quarterly Business Highlights
-- 14 customer transactions over $1 million, 7 OpenText Cloud and 7
on-premise
-- Financial, Services, and Technology industries saw the most demand in
cloud and license
-- Customers wins in the quarter included Nestlé, BNY Mellon, SBI Card,
Tata Power, Intuit, At Home, SOFINEL, First National Bank of Omaha,
Grupo Sancor Seguros, Health and Human Services Agency of San Diego
County, City of Phoenix, Public Works Authority of Qatar, Spire
Healthcare, Interplex Holdings, and Qatar Foundation
-- OpenText Named as a Leader in Gartner Magic Quadrant for Content
Services Platform
-- OpenText Buys Guidance Software
-- OpenText Buys Covisint Corporation
-- OpenText releases new AI Magellan platform, and announces first
customer, E. & J. Gallo Winery
Dividend Program Highlights
Cash Dividend
As part of our quarterly, non-cumulative cash dividend program, the Board declared on November 1, 2017 a cash dividend to $0.132 per common share. The record date for this dividend is December 1, 2017 and the payment date is December 20, 2017. Future declarations of dividends and the establishment of future record and payment dates are subject to the final determination and discretion of the Board of Directors.
Summary of Quarterly Results
----------------------------
Q1 FY18 Q4 FY17 Q1 FY17 % Change % Change
(Q1 FY18 vs (Q1 FY18 vs
Q4 FY17) Q1 FY17)
Revenue (million) $640.7 $663.6 $491.7 (3.4)% 30.3%
GAAP-based gross margin 65.1% 66.9% 66.6% (180) bps (150) bps
GAAP-based operating margin 13.6% 16.0% 15.1% (240) bps (150) bps
GAAP-based EPS, diluted(1)(2) $0.14 $0.17 $3.73 (17.6)% (96.2)%
Non-GAAP-based gross margin (3) 72.2% 73.6% 71.5% (140) bps 70 bps
Non-GAAP-based operating margin (3) 31.4% 33.1% 30.8% (170) bps 60 bps
Non-GAAP-based EPS, diluted (2)(3)(4) $0.54 $0.60 $0.43 (10.0)% 25.6%
------------------------------------ ----- ----- ----- ------ ----
(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 comparative 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 10 minutes ahead of time to ensure proper connection. Alternatively, a live webcast of the earnings conference call will be available on the Investor Relations section of the Company's website at http://investors.opentext.com/events.cfm.
A replay of the call will be available beginning November 2, 2017 at 7:00 p.m. ET through 11:59 p.m. on November 16, 2017 and can be accessed by dialing 1-855-669-9658 (toll-free) or +1-604-674-8052 (international) and using passcode 1727 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, The Information Company(TM), enables organizations to gain insight through market leading information systems, on premises or in the cloud. For more information about OpenText (NASDAQ: OTEX, TSX: OTEX) visit www.opentext.com.
Cautionary Statement Regarding Forward-Looking Statements
Certain statements in this press release, including statements about the focus of Open Text Corporation ("OpenText" or "the Company") in our fiscal year ending June 30, 2018 (Fiscal 2018) on growth in earnings and cash flows, creating value through investments in broader Enterprise Information Management (EIM) capabilities, distribution, the Company's presence in the cloud and in growth markets, expected growth in our revenue lines, expected ECD Business revenue contributions, adjusted operating income and cash flow, its financial condition, results of operations and earnings, announced acquisitions, ongoing tax matters, the integration of the acquired businesses, expected timing, charges and savings related to restructuring activities, declaration of quarterly dividends, future tax rates, new platform and product offerings and other matters, may contain words such as "anticipates", "expects", "intends", "plans", "believes", "seeks", "estimates", "may", "could", "would", "might", "will" and variations of these words or similar expressions are considered forward-looking statements or information under applicable securities laws. In addition, any information or statements that refer to expectations, beliefs, plans, projections, objectives, performance or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking, and based on our current expectations, forecasts and projections about the operating environment, economies and markets in which we operate. Forward-looking statements reflect our current estimates, beliefs and assumptions, which are based on management's perception of historic trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances, such as certain assumptions about the economy, as well as market, financial and operational assumptions. Management's estimates, beliefs and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events and, as such, are subject to change. We can give no assurance that such estimates, beliefs and assumptions will prove to be correct. Such forward-looking statements involve known and unknown risks, uncertainties and other factors and assumptions that may cause the actual results, performance or achievements to differ materially. Such factors include, but are not limited to: (i) the future performance, financial and otherwise, of OpenText; (ii) the ability of OpenText to bring new products and services to market and to increase sales; (iii) the strength of the Company's product development pipeline; (iv) the Company's growth and profitability prospects; (v) the estimated size and growth prospects of the EIM market including expected growth in the Artificial Intelligence market; (vi) the Company's competitive position in the EIM market and its ability to take advantage of future opportunities in this market; (vii) the benefits of the Company's products and services to be realized by customers; (viii) the demand for the Company's products and services and the extent of deployment of the Company's products and services in the EIM marketplace; (ix) downward pressure on our share price and dilutive effect of future sales or issuances of equity securities (including in connection with future acquisitions); (x) the Company's financial condition and capital requirements; and (xi) statements about the impact of product releases. The risks and uncertainties that may affect forward-looking statements include, but are not limited to: (i) integration of acquisitions and related restructuring efforts, including the quantum of restructuring charges and the timing thereof; (ii) the potential for the incurrence of or assumption of debt in connection with acquisitions and the impact on the ratings or outlooks of rating agencies on the Company's outstanding debt securities; (iii) the possibility that the Company may be unable to meet its future reporting requirements under the U.S. Securities Exchange Act of 1934, as amended, and the rules promulgated thereunder, or applicable Canadian securities regulation; (iv) the risks associated with bringing new products and services to market; (v) fluctuations in currency exchange rates; (vi) delays in the purchasing decisions of the Company's customers; (vii) the competition the Company faces in its industry and/or marketplace; (viii) the final determination of litigation, tax audits (including tax examinations in the United States and elsewhere) and other legal proceedings; (ix) potential exposure to greater than anticipated tax liabilities or expenses, including with respect to changes in Canadian, U.S. or international tax regimes; (x) the possibility of technical, logistical or planning issues in connection with the deployment of the Company's products or services; (xi) the continuous commitment of the Company's customers; and (xii) demand for the Company's products and services. For additional information with respect to risks and other factors which could occur, see the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other securities filings with the Securities and Exchange Commission (SEC) and other securities regulators. Readers are cautioned not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. Unless otherwise required by applicable securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.
OTEX-F
Copyright ©2017 Open Text. OpenText is a trademark or registered trademark of Open Text. The list of trademarks is not exhaustive of other trademarks. Registered trademarks, product names, company names, brands and service names mentioned herein are property of Open Text. All rights reserved. For more information, visit: http://www.opentext.com/who-we-are/copyright-information.
OPEN TEXT CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars, except share data)
September 30, 2017 June 30, 2017
------------------ -------------
ASSETS (unaudited)
Cash and cash equivalents $376,390 $443,357
Accounts receivable trade, net of
allowance for doubtful accounts
of $6,861 as of September 30,
2017 and $6,319 as of June 30,
2017 457,758 445,812
Income taxes recoverable 25,972 32,683
Prepaid expenses and other
current assets 98,526 81,625
Total current assets 958,646 1,003,477
Property and equipment 245,378 227,418
Goodwill 3,576,224 3,416,749
Acquired intangible assets 1,560,370 1,472,542
Deferred tax assets 1,214,631 1,215,712
Other assets 94,718 93,763
Deferred charges 40,588 42,344
Long-term income taxes
recoverable 5,865 8,557
Total assets $7,696,420 $7,480,562
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities $323,261 $342,120
Current portion of long-term debt 382,760 182,760
Deferred revenues 567,475 570,328
Income taxes payable 30,524 31,835
Total current liabilities 1,304,020 1,127,043
Long-term liabilities:
Accrued liabilities 46,689 50,338
Deferred credits 4,644 5,283
Pension liability 61,235 58,627
Long-term debt 2,386,415 2,387,057
Deferred revenues 68,963 61,678
Long-term income taxes payable 167,484 162,493
Deferred tax liabilities 92,034 94,724
------ ------
Total long-term liabilities 2,827,464 2,820,200
Shareholders' equity:
Share capital and additional paid-in capital
265,288,304 and 264,059,567
Common Shares issued and
outstanding at September 30,
2017 and June 30, 2017,
respectively; authorized Common
Shares: unlimited 1,642,502 1,613,454
Accumulated other comprehensive
income 49,518 48,800
Retained earnings 1,899,203 1,897,624
Treasury stock, at cost
(1,093,280 shares at September
30, 2017 and 1,101,612 at June
30, 2017, respectively) (27,342) (27,520)
------- -------
Total OpenText shareholders'
equity 3,563,881 3,532,358
Non-controlling interests 1,055 961
----- ---
Total shareholders' equity 3,564,936 3,533,319
Total liabilities and
shareholders' equity $7,696,420 $7,480,562
========== ==========
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,
2017 2016
---- ----
Revenues:
License $78,231 $60,656
Cloud
services
and
subscriptions 193,853 169,687
Customer
support 295,404 210,206
Professional
service
and other 73,199 51,115
------ ------
Total
revenues 640,687 491,664
------- -------
Cost of revenues:
License 2,960 3,845
Cloud
services
and
subscriptions 84,330 70,292
Customer
support 32,791 25,738
Professional
service
and other 59,459 41,343
Amortization
of
acquired
technology-
based
intangible
assets 43,960 23,135
------ ------
Total cost
of
revenues 223,500 164,353
------- -------
Gross
profit 417,187 327,311
------- -------
Operating expenses:
Research
and
development 77,629 58,572
Sales and
marketing 122,822 95,148
General
and
administrative 48,915 38,197
Depreciation 18,878 15,270
Amortization
of
acquired
customer-
based
intangible
assets 43,789 33,608
Special
charges 18,031 12,454
------ ------
Total
operating
expenses 330,064 253,249
------- -------
Income
from
operations 87,123 74,062
------ ------
Other
income
(expense),
net 10,224 6,699
Interest
and other
related
expense,
net (33,288) (27,275)
------- -------
Income
before
income
taxes 64,059 53,486
Provision
for
(recovery
of)
income
taxes 27,369 (859,425)
------ --------
Net income
for the
period $36,690 $912,911
------- --------
Net
(income)
loss
attributable
to non-
controlling
interests (94) (27)
Net income
attributable
to
OpenText $36,596 $912,884
======= ========
Earnings
per
share-
basic
attributable
to
OpenText $0.14 $3.76
===== =====
Earnings
per
share-
diluted
attributable
to
OpenText $0.14 $3.73
===== =====
Weighted
average
number of
Common
Shares
outstanding-
basic 264,802 242,910
======= =======
Weighted
average
number of
Common
Shares
outstanding-
diluted 266,235 244,742
======= =======
Dividends
declared
per
Common
Share $0.1320 $0.1150
======= =======
As a result of the two-for-one
share split, effected January
24, 2017 by way of a share sub-
division, all comparative 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 September 30,
2017 2016
---- ----
Net income for the period $36,690 $912,911
Other comprehensive income-net of tax:
Net foreign currency translation
adjustments 906 1,219
Unrealized gain (loss) on cash flow
hedges:
Unrealized gain (loss) -net of tax
expense (recovery) effect of $463 and
($128) for the three months ended
September 30, 2017 and 2016, respectively 1,285 (355)
(Gain) loss reclassified into net income -
net of tax (expense) recovery effect of
($287) and ($5) for the three months
ended September 30, 2017 and 2016,
respectively (797) (17)
Actuarial gain (loss) relating to defined
benefit pension plans:
Actuarial gain (loss) -net of tax expense
(recovery) effect of ($83) and ($593) for
the three months ended September 30, 2017
and 2016, respectively (115) 1,538
Amortization of actuarial (gain) loss into
net income -net of tax (expense)
recovery effect of $42 and $62 for the
three months ended September 30, 2017 and
2016, respectively 56 147
Unrealized net gain (loss) on marketable
securities -net of tax effect of nil for
the three months ended September 30, 2017
and 2016, respectively - (112)
Release of unrealized gain on marketable
securities -net of tax effect of nil for
the three months ended September 30, 2017
and 2016, respectively (617) -
---- ---
Total other comprehensive income (loss),
net, for the period 718 2,420
--- -----
Total comprehensive income 37,408 915,331
Comprehensive (income) loss attributable
to non-controlling interests (94) (27)
--- ---
Total comprehensive income attributable to
OpenText $37,314 $915,304
======= ========
OPEN TEXT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
(Unaudited)
Three Months Ended September 30,
2017 2016
---- ----
Cash flows from operating
activities:
Net
income
for the
period $36,690 $912,911
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation
and
amortization
of
intangible
assets 106,627 72,013
Share-
based
compensation
expense 8,235 8,140
Excess
tax
expense
(benefits)
on
share-
based
compensation
expense - (5)
Pension
expense 1,035 1,190
Amortization
of debt
issuance
costs 1,298 1,323
Amortization
of
deferred
charges
and
credits 1,117 2,146
Loss on
sale and
write
down of
property
and
equipment 163 -
Release
of
unrealized
gain on
marketable
securities
to
income (841) -
Deferred
taxes 5,947 (875,824)
Share in
net
(income)
loss of
equity
investees 512 (5,529)
Other
non-
cash
charges - 1,033
Changes in operating assets
and liabilities:
Accounts
receivable 5,162 16,169
Prepaid
expenses
and
other
current
assets (2,808) (1,189)
Income
taxes
and
deferred
charges
and
credits 9,148 3,221
Accounts
payable
and
accrued
liabilities (64,476) (30,599)
Deferred
revenue (38,480) (26,109)
Other
assets (2,227) (5,440)
------ ------
Net cash
provided
by
operating
activities 67,102 73,451
------ ------
Cash flows from investing
activities:
Additions
of
property
and
equipment (30,449) (20,665)
Proceeds
from
maturity
of
short-
term
investments - 9,212
Purchase
of
Guidance
Software,
net of
cash
acquired (220,765) -
Purchase
of
Covisint
Corporation,
net of
cash
acquired (71,279) -
Purchase
of HP
Inc. CCM
Business - (312,198)
Purchase
of
Recommind,
Inc. - (170,107)
Purchase
of HP
Inc. CEM
Business - (7,289)
Other
investing
activities (4,206) (123)
Net cash
used in
investing
activities (326,699) (501,170)
-------- --------
Cash flows from financing
activities:
Excess
tax
(expense)
benefits
on
share-
based
compensation
expense - 5
Proceeds
from
Revolver 200,000 -
Proceeds
from
issuance
of
Common
Shares
from
exercise
of stock
options
and ESPP 21,825 5,310
Repayment
of long-
term debt
and
revolver (1,940) (2,000)
Debt
issuance
costs - (1,330)
Payments
of
dividends
to
shareholders (35,017) (27,791)
------- -------
Net cash
provided
by (used
in)
financing
activities 184,868 (25,806)
------- -------
Foreign
exchange
gain
(loss)
on cash
held in
foreign
currencies 7,762 4,712
Increase
(decrease)
in cash
and cash
equivalents
during
the
period (66,967) (448,813)
Cash and
cash
equivalents
at
beginning
of the
period 443,357 1,283,757
Cash and
cash
equivalents
at end
of the
period $376,390 $834,944
======== ========
Notes
(1) All dollar amounts in this press release
are in U.S. Dollars unless otherwise
indicated.
(2) Use of Non-GAAP Financial Measures: In
addition to reporting financial results
in accordance with U.S. GAAP, the
Company provides certain financial
measures that are not in accordance with
U.S. GAAP (Non-GAAP).These Non-GAAP
financial measures have certain
limitations in that they do not have a
standardized meaning and thus the
Company's definition may be different
from similar Non-GAAP financial
measures used by other companies and/or
analysts and may differ from period to
period. Thus it may be more difficult to
compare the Company's financial
performance to that of other companies.
However, the Company's management
compensates for these limitations by
providing the relevant disclosure of the
items excluded in the calculation of
these Non-GAAP financial measures both
in its reconciliation to the U.S. GAAP
financial measures and its consolidated
financial statements, all of which
should be considered when evaluating the
Company's results.
The Company uses these Non-GAAP
financial measures to supplement the
information provided in its consolidated
financial statements, which are
presented in accordance with U.S. GAAP.
The presentation of Non-GAAP financial
measures are not meant to be a
substitute for financial measures
presented in accordance with U.S. GAAP,
but rather should be evaluated in
conjunction with and as a supplement to
such U.S. GAAP measures. OpenText
strongly encourages investors to review
its financial information in its
entirety and not to rely on a single
financial measure. The Company therefore
believes that despite these limitations,
it is appropriate to supplement the
disclosure of the U.S. GAAP measures
with certain Non-GAAP measures defined
below.
Non-GAAP-based net income and Non-
GAAP-based EPS, attributable to
OpenText, are calculated as GAAP-based
net income or earnings per share,
attributable to OpenText, on a diluted
basis, after giving effect to the
amortization of acquired intangible
assets, other income (expense), share-
based compensation, and Special charges
(recoveries), all net of tax and any tax
benefits/expense items unrelated to
current period income, as further
described in the tables below. Non-
GAAP-based gross profit is the
arithmetical sum of GAAP-based gross
profit and the amortization of acquired
technology-based intangible assets and
share-based compensation within cost of
sales. Non-GAAP-based gross margin is
calculated as Non-GAAP-based gross
profit expressed as a percentage of
total revenue. Non-GAAP-based income
from operations is calculated as income
from operations, excluding the
amortization of acquired intangible
assets, Special charges (recoveries),
and share-based compensation expense.
Non-GAAP-based operating margin is
calculated as Non-GAAP-based income
from operations expressed as a
percentage of total revenue.
Adjusted earnings (loss) before interest,
taxes, depreciation and amortization
(Adjusted EBITDA) is calculated as GAAP-
based net income, attributable to
OpenText, excluding interest income
(expense), provision for income taxes,
depreciation and amortization of
acquired intangible assets, other income
(expense), share-based compensation and
Special charges (recoveries).
The Company's management believes that
the presentation of the above defined
Non-GAAP financial measures provides
useful information to investors because
they portray the financial results of
the Company before the impact of certain
non-operational charges. The use of the
term "non-operational charge" is
defined for this purpose as an expense
that does not impact the ongoing
operating decisions taken by the
Company's management 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, 2017.
(In thousands except for per share amounts)
------------------------------------------
Three Months Ended September 30, 2017
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 $84,330 $(522) (1) $83,808
Customer support 32,791 (329) (1) 32,462
Professional
service and other 59,459 (597) (1) 58,862
Amortization of
acquired
technology-based
intangible assets 43,960 (43,960) (2) -
GAAP-based gross
profit and gross
margin (%) / 417,187 65.1% 45,408 (3) 462,595 72.2%
Non-GAAP-based gross profit
and gross margin (%)
Operating expenses
Research and
development 77,629 (1,626) (1) 76,003
Sales and marketing 122,822 (3,088) (1) 119,734
General and
administrative 48,915 (2,073) (1) 46,842
Amortization of
acquired customer-
based intangible
assets 43,789 (43,789) (2) -
Special charges
(recoveries) 18,031 (18,031) (4) -
GAAP-based income
from operations
and operating
margin (%) /Non-
GAAP-based income
from operations
and operating
margin (%) 87,123 13.6% 114,015 (5) 201,138 31.4%
Other income
(expense), net 10,224 (10,224) (6) -
Provision for
(recovery of)
income taxes 27,369 (2,191) (7) 25,178
GAAP-based net
income /Non-
GAAP-based net
income,
attributable to
OpenText 36,596 105,982 (8) 142,578
GAAP-based
earnings per share
/Non-GAAP-based
earnings per
share-diluted,
attributable to
OpenText $0.14 $0.40 (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 43% 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, 2017
Per share diluted
-----------------
GAAP-based net income, attributable to OpenText $36,596 $0.14
Add:
Amortization 87,749 0.33
Share-based compensation 8,235 0.03
Special charges (recoveries) 18,031 0.07
Other (income) expense, net (10,224) (0.04)
GAAP-based provision for (recovery of ) income taxes 27,369 0.10
Non-GAAP-based provision for income taxes (25,178) (0.09)
Non-GAAP-based net income, attributable to OpenText $142,578 $0.54
======== =====
Reconciliation of Adjusted EBITDA
Three Months Ended September 30, 2017
-------------------------------------
GAAP-based net
income, attributable
to OpenText $36,596
Add:
Provision for
(recovery of) income
taxes 27,369
Interest and other
related expense, net 33,288
Amortization of
acquired technology-
based intangible
assets 43,960
Amortization of
acquired customer-
based intangible
assets 43,789
Depreciation 18,878
Share-based
compensation 8,235
Special charges
(recoveries) 18,031
Other (income)
expense, net (10,224)
-------
Adjusted EBITDA $219,922
========
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the three months ended June 30, 2017.
(In thousands except for per share amounts)
------------------------------------------
Three Months Ended June 30, 2017
GAAP-based 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 $79,588 $(390) (1) $79,198
Customer support 35,224 (313) (1) 34,911
Professional
service and other 58,028 (449) (1) 57,579
Amortization of
acquired
technology-based
intangible assets 43,288 (43,288) (2) -
GAAP-based gross
profit and gross
margin (%) / 444,038 66.9% 44,440 (3) 488,478 73.6%
Non-GAAP-based gross profit
and gross margin (%)
Operating expenses
Research and
development 81,301 (1,777) (1) 79,524
Sales and marketing 129,541 (2,450) (1) 127,091
General and
administrative 47,499 (2,755) (1) 44,744
Amortization of
acquired customer-
based intangible
assets 42,594 (42,594) (2) -
Special charges
(recoveries) 19,461 (19,461) (4) -
GAAP-based income
from operations
and operating
margin (%) /Non-
GAAP-based income
from operations
and operating
margin (%) 106,452 16.0% 113,477 (5) 219,929 33.1%
Other income
(expense), net 11,178 (11,178) (6) -
Provision for
(recovery of)
income taxes 39,000 (10,731) (7) 28,269
GAAP-based net
income /Non-
GAAP-based net
income,
attributable to
OpenText 46,137 113,030 (8) 159,167
GAAP-based
earnings per share
/Non-GAAP-based
earnings per
share-diluted,
attributable to
OpenText $0.17 $0.43 (8) $0.60
(1) Adjustment relates to the exclusion of
share-based compensation expense from
our Non-GAAP-based operating expenses
as this expense is excluded from our
internal analysis of operating results.
(2) Adjustment relates to the exclusion of
amortization expense from our Non-GAAP-
based operating expenses as the timing
and frequency of amortization expense is
dependent on our acquisitions and is
hence excluded from our internal
analysis of operating results.
(3) GAAP-based and Non-GAAP-based gross
profit stated in dollars, and gross
margin stated as a percentage of total
revenue.
(4) Adjustment relates to the exclusion of
Special charges (recoveries) from our
Non-GAAP-based operating expenses as
Special charges (recoveries) are
generally incurred in the periods
relevant to an acquisition and include
one-time, non-recurring charges or
recoveries that are not indicative or
related to continuing operations, and
are therefore excluded from our internal
analysis of operating results.
(5) GAAP-based and Non-GAAP-based income
from operations stated in dollars, and
operating margin stated as a percentage
of total revenue.
(6) Adjustment relates to the exclusion of
Other income (expense) from our Non-
GAAP-based operating expenses as Other
income (expense) relates primarily to
the transactional impact of foreign
exchange and is generally not indicative
or related to continuing operations and
is therefore excluded from our internal
analysis of operating results. Other
income (expense) also includes our share
of income (losses) from our holdings in
non-marketable securities investments
as a limited partner. We do not actively
trade equity securities in these
privately held companies nor do we plan
our ongoing operations based around any
anticipated fundings or distributions
from these investments. We exclude gains
and losses on these investments as we do
not believe they are reflective of our
ongoing business and operating results.
(7) Adjustment relates to differences between
the GAAP-based tax provision rate of
approximately 46% and a Non-GAAP-based
tax rate of approximately 15%; these
rate differences are due to the income
tax effects of expenses that are
excluded for the purpose of calculating
Non-GAAP-based adjusted net income.
Such excluded expenses include
amortization, share-based compensation,
Special charges (recoveries) and other
income (expense), net. Also excluded are
tax benefits/expense items unrelated to
current period income such as changes in
reserves for tax uncertainties and
valuation allowance reserves, and "book
to return" adjustments for tax return
filings and tax assessments. Included is
the amount of net tax benefits arising
from the internal reorganization assumed
to be allocable to the current period
based on the forecasted utilization
period. In arriving at our Non-GAAP-
based tax rate of approximately 15%, we
analyzed the individual adjusted
expenses and took into consideration the
impact of statutory tax rates from local
jurisdictions incurring the expense.
(8) Reconciliation of GAAP-based net income
to Non-GAAP-based net income:
Three Months Ended June 30, 2017
Per share diluted
-----------------
GAAP-based net income, attributable to OpenText $46,137 $0.17
Add:
Amortization 85,882 0.32
Share-based compensation 8,134 0.03
Special charges (recoveries) 19,461 0.07
Other (income) expense, net (11,178) (0.04)
GAAP-based provision for (recovery of ) income taxes 39,000 0.15
Non-GAAP-based provision for income taxes (28,269) (0.10)
------- -----
Non-GAAP-based net income, attributable to OpenText $159,167 $0.60
======== =====
Reconciliation of Adjusted EBITDA
Three months ended June 30, 2017
--------------------------------
GAAP-based net income, attributable to OpenText $46,137
Add:
Provision for (recovery of) income taxes 39,000
Interest and other related expense, net 32,372
Amortization of acquired technology-based intangible assets 43,288
Amortization of acquired customer-based intangible assets 42,594
Depreciation 17,190
Share-based compensation 8,134
Special charges (recoveries) 19,461
Other (income) expense, net (11,178)
-------
Adjusted EBITDA $236,998
========
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the 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 (%) / 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. 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 $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) (0.02)
GAAP-based
provision for
(recovery of )
income taxes (859,425) (3.51)
Non-GAAP-based
provision for
income taxes (18,592) (0.08)
------- -----
Non-GAAP-based
net income,
attributable to
OpenText $105,505 $0.43
======== =====
Reconciliation of Adjusted EBITDA
Three months ended September 30, 2016
-------------------------------------
GAAP-based net
income, attributable
to OpenText $912,884
Add:
Provision for
(recovery of) income
taxes (859,425)
Interest and other
related expense, net 27,275
Amortization of
acquired technology-
based intangible
assets 23,135
Amortization of
acquired customer-
based intangible
assets 33,608
Depreciation 15,270
Share-based
compensation 8,140
Special charges
(recoveries) 12,454
Other (income)
expense, net (6,699)
------
Adjusted EBITDA $166,642
========
(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, 2017 and
2016:
Three Months Ended September 30, Three Months Ended September 30,
2017 2016
Currencies % of Revenue % of Expenses* % of Revenue % of Expenses*
------------ ------------- ------------ -------------
EURO 21% 14% 22% 14%
GBP 6% 6% 7% 7%
CAD 4% 11% 4% 12%
USD 60% 52% 58% 53%
Other 9% 17% 9% 14%
--- --- --- ---
Total 100% 100% 100% 100%
=== === === ===
*Expenses include all cost of
revenues and operating expenses
included within the Condensed
Consolidated Statements of Income,
except for amortization of
intangible assets, share-based
compensation and Special charges
(recoveries).
View original content:http://www.prnewswire.com/news-releases/opentext-reports-first-quarter-fiscal-year-2018-financial-results-300548807.html
SOURCE Open Text Corporation
