OPEN TEXT CORPORATION - Total Revenue of USD $465.3 Million, Down 1%; Up 6% Y/Y in CC*
- Non-GAAP-based Operating Margin of 37%
- Release 16 on schedule for General Availability
WATERLOO, Ontario, Feb. 9, 2016 /PRNewswire/ -- Open Text Corporation (NASDAQ: OTEX) (TSX: OTC) announced today its financial results for the second quarter ended December 31, 2015.
"The strength of Fiscal 2016 Q2 shows the potential of digital transformation for our customers and the OpenText business model: total revenues of $465.3 million were up 6% in constant currency, year-over-year; 82% of our total revenue was recurring; and adjusted operating income of $172 million was up 12% year-over-year," said OpenText CEO and CTO Mark J. Barrenechea. "Release 16 is the world's first digital platform, and we plan on making strategic investments in the coming quarters to enable our install-base, new customers and partners to fully capture the power of our next generation platform."
Barrenechea further added, "Our business model is guided by the OpenText Intelligent Growth System. We remain strategically focused on customer-driven innovation, leadership in our key markets, profitable organic growth, acquisitions, cash flow expansion, and operating excellence. In these times of economic uncertainty, I see incredible opportunity with our next generation platform Release 16, our business model and EIM platform expansion."
Financial Highlights for Q2 FY16 with Year Over Year Comparisons (1)
-------------------------------------------------------------------
Summary of Quarterly
Results
--------------------
Q2 FY16 Q2 FY15 $Change % Change Q2 FY16 in CC* % Change in CC*
(Y/Y)
Revenues: (in millions)
Cloud services and
subscriptions $149.1 $154.8 ($5.7) (3.7)% $156.1 0.8%
Customer support 184.1 179.5 4.6 2.6% 196.2 9.3%
Professional service and
other 50.3 58.2 (7.9) (13.7)% 54.8 (5.8)%
Total Recurring revenues $383.5 $392.5 ($9.0) (2.3)% $407.1 3.7%
License 81.9 75.4 6.5 8.6% 89.8 19.1%
Total revenues $465.3 $467.8 ($2.5) (0.5)% $496.9 6.2%
Non-GAAP-based operating
margin(2) 37.0% 32.8% n/a 420 bps 36.9%
GAAP-based operating margin 23.6% 23.6% n/a - bps
Non-GAAP-based EPS,
diluted (2) $1.01 $0.97 $0.04 4.1% $1.08 11.3%
GAAP-based EPS, diluted $0.72 $0.60 $0.12 20.0%
Operating cash flows (in
millions) $123.9 $109.6 $14.3 13.1%
------------------------ ------ ------ ----- ----
Note: Individual line items in
tables may be adjusted by
non-material amounts to
enable totals to align to
published financial
statements.
"I am pleased with our adjusted operating income and cash flow performance this quarter. The results reflect strong business execution and our continued focus on the metrics that matter most, margins, cash flow and a strong liquidity position. It is a positive first half to Fiscal 2016 and provides a solid base to deliver on the year's operating plan. As we look to deliver and invest in Release 16, coupled with the current economic uncertainty, we are maintaining our target model" said OpenText CFO John Doolittle.
*CC: Constant currency for this purpose is defined as the current
period reported revenues/expenses/earnings represented at the
prior comparative period's foreign exchange rate.
OpenText Quarterly Business Highlights
-- CEO assumes additional role of Chief Technology Officer
-- Appointment of Steven Murphy as President; executive promotions of Muhi
Majzoub, John Doolittle and Gordon Davies
-- 16 customer transactions over $1 million, 7 cloud contract signings in
the OpenText Cloud and 9 on-premises
-- Financial, services and technology industries saw the most demand
-- Cloud customer successes in the quarter include O.C. Tanner, Schneider
Electric, Elcom, Ayuntamiento de Barcelona (Barcelona City Council),
Engie E&P, Shiseido Europe and The Greater Toronto Airports Authority
-- Creates secure, dedicated European data zone for cloud operations
-- On-premises customer successes in the quarter include Hy Cite
Enterprises, City of San Diego, Elmü, B. Braun, National Commercial
Bank, Mobis Parts Australia Pty (Mobis), Alberta Energy Regulator,
Pirelli Tyre S.P.A., Banque de France, ERGO Insurance AG Austria, Region
Skane and Stadtwerke München
-- Buys Daegis Inc.
-- Named a leader in Gartner's Magic Quadrant for Enterprise Content
Management and for Customer Communications Management Software
-- Named one of Canada's Top 100 Employers for the fifth consecutive year
Dividend Program Highlights
Cash Dividend
As part of our quarterly, non cumulative cash dividend program the Board declared on February 8, 2016 a cash dividend of $0.20 per Common Share. The record date for this dividend is March 10, 2016 and the payment date is March 31, 2016. Future declarations of dividends and the establishment of future record and payment dates are subject to the final determination and discretion of our Board of Directors.
Summary of Quarterly Results
----------------------------
Q2 FY16 Q1 FY16 Q2 FY15 % Change % Change
(Q2 FY16 vs (Q2 FY16 vs
Q1 FY16) Q2 FY15)
Revenue
(million) $465.3 $434.5 $467.8 7.1% (0.5)%
GAAP-
based
gross
margin 70.0% 67.8% 68.3% 220 bps 170 bps
GAAP-
based
operating
margin 23.6% 17.6% 23.6% 600 bps - bps
GAAP-
based
EPS,
diluted $0.72 $0.34 $0.60 111.8% 20.0%
Non-GAAP-
based
gross
margin
(2) 74.2% 72.6% 72.3% 160 bps 190 bps
Non-GAAP-
based
operating
margin
(2) 37.0% 34.1% 32.8% 290 bps 420 bps
Non-GAAP-
based
EPS,
diluted
(2) $1.01 $0.84 $0.97 20.2% 4.1%
--------- ----- ----- ----- ---- ---
Summary of
Year to
Date
Results
----------
Q2 FY16 YTD Q2 FY15 YTD $ Change % Change
Revenues:
(in
millions)
Cloud
services
and
subscriptions $296.9 $308.8 ($11.9) (3.9)%
Customer
support 369.8 363.4 6.4 1.8%
Professional
service
and other 100.0 115.9 (15.9) (13.7)%
Total
Recurring
revenues $766.7 $788.1 ($21.4) (2.7)%
License 133.2 133.6 (0.4) (0.3)%
Total
revenues $899.9 $921.6 ($21.7) (2.4)%
Non-GAAP-
based
operating
margin(2) 35.6% 33.5% n/a 210 bps
GAAP-
based
operating
margin 20.7% 23.2% n/a (250) bps
Non-GAAP-
based
EPS,
diluted
(2) $1.85 $1.93 ($0.08) (4.1)%
GAAP-
based
EPS,
diluted $1.06 $1.13 ($0.07) (6.2)%
Operating
cash
flows (in
millions) $216.7 $248.1 ($31.4) (12.7)%
---------- ------ ------ ------ ------
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 9, 2016 at 7:00 p.m. ET through 11:59 p.m. February 23, 2016 and can be accessed by dialing 1-855-669-9658 (toll-free) or +1-604-674-8052 (international) and using passcode 00153 followed by the number sign.
Please see below note (2) for a reconciliation of non-U.S. GAAP-based financial measures used in this press release, to 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 Fiscal 2016 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, its financial condition, results of operations and earnings, ongoing tax matters, purchases of common shares by OpenText pursuant to the NCIB, declaration of quarterly dividends, 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; and (ix) the Company's financial condition and capital requirements. 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 possibility that the Company may be unable to meet its future reporting requirements under the Securities Exchange Act of 1934, as amended, and the rules promulgated thereunder; (iii) the risks associated with bringing new products and services to market; (iv) fluctuations in currency exchange rates; (v) delays in the purchasing decisions of the Company's customers; (vi) the competition the Company faces in its industry and/or marketplace; (vii) the final determination of litigation, tax audits and other legal proceedings; (viii) the possibility of technical, logistical or planning issues in connection with the deployment of the Company's products or services; (ix) the continuous commitment of the Company's customers; and (x) demand for the Company's products. 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:
United States:
Greg Secord
Vice President, Investor Relations
Open Text Corporation
San Francisco: 415-963-0825
gsecord@opentext.com
Canada:
Sonya Mehan
Senior Manager, Investor Relations
Open Text Corporation
Waterloo: 519-888-7111 ext. 2446
smehan@opentext.com
Copyright ©2016 Open Text Corporation. OpenText is a trademark or registered trademark of Open Text SA and/or Open Text ULC. 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 SA or other respective owners. 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, 2015 June 30, 2015
----------------- -------------
(unaudited)
ASSETS
Cash and cash equivalents $725,963 $699,999
Short-term investments 16,271 11,166
Accounts receivable trade, net of
allowance for doubtful accounts
of $7,467 as of December 31, 2015
and $5,987 as of June 30, 2015 278,635 284,131
Income taxes recoverable 15,380 21,151
Prepaid expenses and other current
assets 53,020 53,191
Deferred tax assets 33,394 30,711
------ ------
Total current assets 1,122,663 1,100,349
Property and equipment 161,675 160,419
Goodwill 2,169,637 2,161,592
Acquired intangible assets 604,167 679,479
Deferred tax assets 149,561 155,411
Other assets 74,178 85,576
Deferred charges 30,374 37,265
Long-term income taxes recoverable 8,518 8,404
Total assets $4,320,773 $4,388,495
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities $227,148 $241,370
Current portion of long-term debt 8,000 8,000
Deferred revenues 306,159 358,066
Income taxes payable 17,800 17,001
Deferred tax liabilities 734 997
--- ---
Total current liabilities 559,841 625,434
Long-term liabilities:
Accrued liabilities 31,514 34,682
Deferred credits 10,650 12,943
Pension liability 54,842 56,737
Long-term debt 1,576,000 1,580,000
Deferred revenues 33,115 28,223
Long-term income taxes payable 141,205 151,484
Deferred tax liabilities 59,753 69,185
------ ------
Total long-term liabilities 1,907,079 1,933,254
Shareholders' equity:
Share capital
121,094,990 and 122,293,986 Common
Shares issued and outstanding at
December 31, 2015 and June 30,
2015, respectively; Authorized
Common Shares: unlimited 806,143 808,010
Additional paid-in capital 134,470 126,417
Accumulated other comprehensive
income 49,376 51,828
Retained earnings 888,775 863,015
Treasury stock, at cost (643,647
shares at December 31, 2015 and
625,725 at June 30, 2015,
respectively) (25,515) (19,986)
------- -------
Total OpenText shareholders'
equity 1,853,249 1,829,284
Non-controlling interests 604 523
--- ---
Total shareholders' equity 1,853,853 1,829,807
Total liabilities and
shareholders' equity $4,320,773 $4,388,495
========== ==========
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,
------------------------------- -----------------------------
2015 2014 2015 2014
---- ---- ---- ----
Revenues:
License $81,856 $75,381 $133,187 $133,576
Cloud services and
subscriptions 149,099 154,776 296,889 308,829
Customer support 184,137 179,466 369,804 363,372
Professional service and other 50,255 58,222 100,002 115,855
------ ------ ------- -------
Total revenues 465,347 467,845 899,882 921,632
------- ------- ------- -------
Cost of revenues:
License 2,029 3,411 4,710 6,408
Cloud services and
subscriptions 58,918 58,533 117,834 118,110
Customer support 21,689 23,831 42,197 46,794
Professional service and other 38,375 44,406 76,439 87,603
Amortization of acquired
technology-based intangible
assets 18,731 18,206 38,614 36,412
------ ------ ------ ------
Total cost of revenues 139,742 148,387 279,794 295,327
------- ------- ------- -------
Gross profit 325,605 319,458 620,088 626,305
------- ------- ------- -------
Operating expenses:
Research and development 45,710 46,170 92,150 90,912
Sales and marketing 85,875 90,980 163,820 172,021
General and administrative 33,767 39,667 69,336 75,410
Depreciation 13,330 12,465 26,244 24,707
Amortization of acquired
customer-based intangible
assets 27,793 25,364 55,598 51,248
Special charges (recoveries) 9,088 (5,759) 26,425 (1,590)
----- ------ ------ ------
Total operating expenses 215,563 208,887 433,573 412,708
------- ------- ------- -------
Income from operations 110,042 110,571 186,515 213,597
------- ------- ------- -------
Other income (expense), net 961 (9,314) (3,952) (19,187)
Interest and other related
expense, net (19,187) (8,455) (38,233) (19,554)
------- ------ ------- -------
Income before income taxes 91,816 92,802 144,330 174,856
Provision for income taxes 4,074 18,308 15,276 35,710
----- ------ ------ ------
Net income for the period $87,742 $74,494 $129,054 $139,146
------- ------- -------- --------
Net income attributable to
non-controlling interests (56) (207) (82) (233)
Net income attributable to
OpenText $87,686 $74,287 $128,972 $138,913
======= ======= ======== ========
Earnings per share-basic
attributable to OpenText $0.72 $0.61 $1.06 $1.14
===== ===== ===== =====
Earnings per share-diluted
attributable to OpenText $0.72 $0.60 $1.06 $1.13
===== ===== ===== =====
Weighted average number of
Common Shares outstanding-
basic 121,246 122,051 121,699 121,984
======= ======= ======= =======
Weighted average number of
Common Shares outstanding-
diluted 121,792 122,985 122,216 122,934
======= ======= ======= =======
Dividends declared per Common
Share $0.2000 $0.1725 $0.4000 $0.3450
======= ======= ======= =======
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,
------------------------------- -----------------------------
2015 2014 2015 2014
---- ---- ---- ----
Net income for the period $87,742 $74,494 $129,054 $139,146
Other comprehensive income-net of tax:
Net foreign currency translation
adjustments (2,751) 5,241 (1,028) 8,346
Unrealized gain (loss) on cash flow
hedges:
Unrealized loss (1,429) (1,316) (4,819) (4,216)
Loss reclassified into net income 814 944 1,326 997
Actuarial gain (loss) relating to defined
benefit pension plans:
Actuarial gain (loss) 648 (3,937) 1,761 (7,055)
Amortization of actuarial loss into net
income 90 84 173 205
Unrealized net gain on short-term
investments 120 - 135 -
Unrealized gain on marketable securities
(Actuate) - 2,400 - 1,906
Total other comprehensive income (loss),
net, for the period (2,508) 3,416 (2,452) 183
------ ---
Total comprehensive income 85,234 77,910 126,602 139,329
Comprehensive income attributable to non-
controlling interests (56) (207) (82) (233)
--- ---- --- ----
Total comprehensive income attributable
to OpenText $85,178 $77,703 $126,520 $139,096
======= ======= ======== ========
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,
------------------------------- -----------------------------
2015 2014 2015 2014
---- ---- ---- ----
Cash flows from operating activities:
Net income for the period $87,742 $74,494 $129,054 $139,146
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and
amortization of intangible
assets 59,854 56,035 120,456 112,367
Share-based compensation
expense 6,581 4,929 13,114 9,378
Excess tax benefits on
share-based compensation
expense (256) (1,232) (40) (1,627)
Pension expense 1,158 1,202 2,325 2,422
Amortization of debt
issuance costs 1,156 1,132 2,312 2,275
Amortization of deferred
charges and credits 1,981 2,632 4,598 5,263
Loss on sale and write down
of property and equipment 890 - 890 -
Deferred taxes (3,685) 2,764 (7,869) 1,219
Changes in operating assets and liabilities:
Accounts receivable (41,226) (15,294) 10,880 40,249
Prepaid expenses and other
current assets (5,221) (548) 613 (697)
Income taxes (3,503) (6,207) 294 11,599
Accounts payable and
accrued liabilities 33,503 (3,187) (14,819) (37,326)
Deferred revenue (16,280) (5,990) (48,673) (32,745)
Other assets 1,242 (1,158) 3,523 (3,420)
----- ------ ----- ------
Net cash provided by
operating activities 123,936 109,572 216,658 248,103
------- ------- ------- -------
Cash flows from investing activities:
Additions of property and
equipment (12,702) (18,026) (29,899) (48,261)
Proceeds from maturity of
short-term investments 3,069 - 5,324 -
Purchase of Daegis Inc.,
net of cash acquired (22,146) - (22,146) -
Purchase of Actuate
Corporation, net of cash
acquired (43) - (7,744) -
Purchase of a division of
Spicer Corporation - (222) - (222)
Purchase of Informative
Graphics Corporation, net
of cash acquired - - (88) -
Purchase of ICCM
Professional Services
Limited, net of cash
acquired - - (2,027) -
Purchase consideration for
prior period acquisitions - (221) - (443)
Other investing activities (2,754) (1,059) (3,680) (8,433)
Net cash used in investing
activities (34,576) (19,528) (60,260) (57,359)
------- ------- ------- -------
Cash flows from financing activities:
Excess tax benefits on
share-based compensation
expense 256 1,232 40 1,627
Proceeds from issuance of
Common Shares 2,736 2,039 7,988 9,138
Purchase of Treasury Stock (10,627) - (10,627) -
Common Shares repurchased (15,483) - (65,509) -
Repayment of long-term debt (2,000) (13,413) (4,000) (26,830)
Debt issuance costs - (1,220) - (1,403)
Payments of dividends to
shareholders (24,216) (21,054) (47,528) (42,099)
Net cash used in financing
activities (49,334) (32,416) (119,636) (59,567)
------- ------- -------- -------
Foreign exchange loss on
cash held in foreign
currencies (4,848) (7,304) (10,798) (16,257)
Increase in cash and cash
equivalents during the
period 35,178 50,324 25,964 114,920
Cash and cash equivalents
at beginning of the period 690,785 492,486 699,999 427,890
Cash and cash equivalents
at end of the period $725,963 $542,810 $725,963 $542,810
======== ======== ======== ========
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 net income per share
on a diluted basis, excluding, the
amortization of acquired intangible
assets, other income (expense),
share-based compensation, and
special charges, all net of tax.
Non-GAAP-based gross profit is
the arithmetical sum of GAAP-based
gross profit and the amortization
of acquired technology-based
intangible assets. Non-GAAP-based
gross margin is calculated as non-
GAAP-based gross profit expressed
as a percentage of 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. Non-GAAP-based
operating margin is calculated as
non-GAAP-based income from
operations expressed as a
percentage of 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 in this press
release.
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, 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
Measures % of Revenue Measures % of 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 (%) /Non-
GAAP-based gross
profit and gross
margin (%) 325,605 70.0% 19,533 (3) 345,138 74.2%
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 $0.72 $0.29 (8) $1.01
(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
revenue.
(4) Adjustment relates to the exclusion of
Special charges (recoveries) from our
Non-GAAP-based operating expenses as
Special charges are generally incurred
in the periods following the relevant
acquisitions and 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 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 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 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, tax arising on internal
reorganizations, and "book to return"
adjustments for tax return filings and
tax assessments (in total "adjusted
expenses"). 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 Non-GAAP-based
adjusted net income to GAAP-based net
income:
Three Months Ended December 31,
2015
--------------------------------
Per share
diluted
----------
Non-GAAP-based net income,
attributable to OpenText $122,438 $1.01
Less:
Amortization 46,524 0.38
Share-based compensation 6,581 0.05
Special charges (recoveries) 9,088 0.07
Other (income) expense, net (961) (0.01)
GAAP-based provision for
(recovery of) income taxes 4,074 0.03
Non-GAAP based provision for
income taxes (30,554) (0.23)
GAAP-based net income,
attributable to OpenText $87,686 $0.72
======= =====
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
Measures % of Revenue Measures % of 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 (%) /Non-
GAAP-based gross
profit and gross
margin (%) 620,088 68.9% 40,308 (3) 660,396 73.4%
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 $1.06 $0.79 (8) $1.85
(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
revenue.
(4) Adjustment relates to the exclusion of
Special charges (recoveries) from our
Non-GAAP-based operating expenses as
Special charges are generally incurred
in the periods following the relevant
acquisitions and 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 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 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, tax arising on internal
reorganizations, and "book to return"
adjustments for tax return filings and
tax assessments (in total "adjusted
expenses"). 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 Non-GAAP-based
adjusted net income to GAAP-based net
income:
Six Months Ended December 31,
2015
------------------------------
Per share
diluted
----------
Non-GAAP-based net income,
attributable to OpenText $225,626 $1.85
Less:
Amortization 94,212 0.77
Share-based compensation 13,114 0.11
Special charges (recoveries) 26,425 0.22
Other (income) expense, net 3,952 0.03
GAAP-based provision for
(recovery of) income taxes 15,276 0.12
Non-GAAP based provision for
income taxes (56,325) (0.46)
------- -----
GAAP-based net income,
attributable to OpenText $128,972 $1.06
======== =====
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the three months ended September 30, 2015.
(In thousands except for per share amounts)
------------------------------------------
Three Months Ended September 30, 2015
-------------------------------------
GAAP-based GAAP-based Adjustments Note Non-GAAP-based Non-GAAP-
Measures based
Measures
Measures % of Revenue Measures % of Revenue
-------- ------------ -------- ------------
Cost of revenues
Cloud services and
subscriptions $58,916 $(281) (1) $58,635
Customer support 20,508 (158) (1) 20,350
Professional
service and other 38,064 (453) (1) 37,611
Amortization of
acquired
technology-based
intangible assets 19,883 (19,883) (2) -
GAAP-based gross
profit and gross
margin (%) /Non-
GAAP-based gross
profit and gross
margin (%) 294,483 67.8% 20,775 (3) 315,258 72.6%
Operating expenses
Research and
development 46,440 (752) (1) 45,688
Sales and marketing 77,945 (3,115) (1) 74,830
General and
administrative 35,569 (1,774) (1) 33,795
Amortization of
acquired customer-
based intangible
assets 27,805 (27,805) (2) -
Special charges
(recoveries) 17,337 (17,337) (4) -
GAAP-based income
from operations
and operating
margin (%) /Non-
GAAP-based income
from operations
and operating
margin (%) 76,473 17.6% 71,558 (5) 148,031 34.1%
Other income
(expense), net (4,913) 4,913 (6) -
Provision for
(recovery of)
income taxes 11,202 14,569 (7) 25,771
GAAP-based net
income /Non-
GAAP-based net
income,
attributable to
OpenText 41,286 61,902 (8) 103,188
GAAP-based
earnings per share
/Non GAAP-based
earnings per
share-diluted,
attributable to
OpenText $0.34 $0.50 (8) $0.84
(1) Adjustment relates to the exclusion of
share-based compensation expense from
our Non-GAAP-based operating
expenses as this expense is excluded
from our internal analysis of
operating results.
(2) Adjustment relates to the exclusion of
amortization expense from our Non-
GAAP-based operating expenses as the
timing and frequency of amortization
expense is dependent on our
acquisitions and is hence excluded
from our internal analysis of
operating results.
(3) GAAP-based and Non-GAAP-based gross
profit stated in dollars, and gross
margin stated as a percentage of
revenue.
(4) Adjustment relates to the exclusion of
Special charges (recoveries) from our
Non-GAAP-based operating expenses as
Special charges are generally incurred
in the periods following the relevant
acquisitions and 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 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 21% 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 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, tax arising on internal
reorganizations, and "book to return"
adjustments for tax return filings and
tax assessments (in total "adjusted
expenses"). 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 Non-GAAP-based
adjusted net income to GAAP-based net
income:
Three Months Ended September 30,
2015
--------------------------------
Per share
diluted
----------
Non-GAAP-based net income,
attributable to OpenText $103,188 $0.84
Less:
Amortization 47,688 0.39
Share-based compensation 6,533 0.05
Special charges (recoveries) 17,337 0.14
Other (income) expense, net 4,913 0.04
GAAP-based provision for
(recovery of) income taxes 11,202 0.09
Non-GAAP based provision for
income taxes (25,771) (0.21)
------- -----
GAAP-based net income,
attributable to OpenText $41,286 $0.34
======= =====
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the three months ended December 31, 2014.
(In thousands except for per share amounts)
------------------------------------------
Three Months Ended December 31, 2014
------------------------------------
GAAP-based GAAP-based Adjustments Note Non-GAAP-based Non-GAAP-
Measures based
Measures
Measures % of Revenue Measures % of Revenue
-------- ------------ -------- ------------
Cost of revenues
Cloud services and
subscriptions $58,533 $(186) (1) $58,347
Customer support 23,831 (234) (1) 23,597
Professional
service and other 44,406 (335) (1) 44,071
Amortization of
acquired
technology-based
intangible assets 18,206 (18,206) (2) -
GAAP-based gross
profit and gross
margin (%) /Non-
GAAP-based gross
profit and gross
margin (%) 319,458 68.3% 18,961 (3) 338,419 72.3%
Operating expenses
Research and
development 46,170 (614) (1) 45,556
Sales and marketing 90,980 (2,594) (1) 88,386
General and
administrative 39,667 (966) (1) 38,701
Amortization of
acquired customer-
based intangible
assets 25,364 (25,364) (2) -
Special charges
(recoveries) (5,759) 5,759 (4) -
GAAP-based income
from operations
and operating
margin (%) /Non-
GAAP-based income
from operations
and operating
margin (%) 110,571 23.6% 42,740 (5) 153,311 32.8%
Other income
(expense), net (9,314) 9,314 (6) -
Provision for
(recovery of)
income taxes 18,308 7,559 (7) 25,867
GAAP-based net
income /Non-
GAAP-based net
income,
attributable to
OpenText 74,287 44,495 (8) 118,782
GAAP-based
earnings per share
/Non GAAP-based
earnings per
share-diluted,
attributable to
OpenText $0.60 $0.37 (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
revenue.
(4) Adjustment relates to the exclusion of
Special charges (recoveries) from our
Non-GAAP-based operating expenses as
Special charges are generally incurred
in the periods following the relevant
acquisitions and 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 revenue.
(6) Adjustment relates to the exclusion of
Other income (expense) from our Non-
GAAP-based operating expenses as
Other income (expense) relates
primarily to the transactional impact
of foreign exchange and is generally
not indicative or related to
continuing operations and is therefore
excluded from our internal analysis of
operating results.
(7) Adjustment relates to differences
between the GAAP-based tax provision
rate of approximately 20% and a non-
GAAP-based tax rate of 18%; 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 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, tax arising on internal
reorganizations, and "book to return"
adjustments for tax return filings and
tax assessments (in total "adjusted
expenses"). In arriving at our non-
GAAP-based tax rate of 18%, 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 Non-GAAP-based
adjusted net income to GAAP-based net
income:
Three Months Ended December 31,
2014
--------------------------------
Per share
diluted
----------
Non-GAAP-based net income,
attributable to OpenText $118,782 $0.97
Less:
Amortization 43,570 0.35
Share-based compensation 4,929 0.04
Special charges (recoveries) (5,759) (0.05)
Other (income) expense, net 9,314 0.08
GAAP-based provision for
(recovery of) income taxes 18,308 0.15
Non-GAAP based provision for
income taxes (25,867) (0.20)
------- -----
GAAP-based net income,
attributable to OpenText $74,287 $0.60
======= =====
Reconciliation of selected GAAP-based measures to Non GAAP-based measures for the six months ended December 31, 2014.
(In thousands except for per share amounts)
------------------------------------------
Six Months Ended December 31, 2014
----------------------------------
GAAP-based GAAP-based Adjustments Note Non-GAAP-based Non-GAAP-
Measures based
Measures
Measures % of Revenue Measures % of Revenue
-------- ------------ -------- ------------
Cost of revenues:
Cloud services and
subscriptions $118,110 $(399) (1) $117,711
Customer support 46,794 (408) (1) 46,386
Professional
service and other 87,603 (598) (1) 87,005
Amortization of
acquired
technology-based
intangible assets 36,412 (36,412) (2) -
GAAP-based gross
profit and gross
margin (%) /Non-
GAAP-based gross
profit and gross
margin (%) 626,305 68.0% 37,817 (3) 664,122 72.1%
Operating expenses
Research and
development 90,912 (1,177) (1) 89,735
Sales and marketing 172,021 (4,668) (1) 167,353
General and
administrative 75,410 (2,128) (1) 73,282
Amortization of
acquired customer-
based intangible
assets 51,248 (51,248) (2) -
Special charges
(recoveries) (1,590) 1,590 (4) -
GAAP-based income
from operations
and operating
margin (%) /Non-
GAAP-based income
from operations
and operating
margin (%) 213,597 23.2% 95,448 (5) 309,045 33.5%
Other income
(expense), net (19,187) 19,187 (6) -
Provision for
(recovery of)
income taxes 35,710 16,165 (7) 51,875
GAAP-based net
income /Non-
GAAP-based net
income,
attributable to
OpenText 138,913 98,470 (8) 237,383
GAAP-based
earnings per share
/Non GAAP-based
earnings per
share-diluted,
attributable to
OpenText $1.13 $0.80 (8) $1.93
(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
revenue.
(4) Adjustment relates to the exclusion of
Special charges (recoveries) from our
Non-GAAP-based operating expenses as
Special charges are generally incurred
in the periods following the relevant
acquisitions and 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 revenue.
(6) Adjustment relates to the exclusion of
Other income (expense) from our Non-
GAAP-based operating expenses as
Other income (expense) relates
primarily to the transactional impact
of foreign exchange and is generally
not indicative or related to
continuing operations and is therefore
excluded from our internal analysis of
operating results.
(7) Adjustment relates to differences
between the GAAP-based tax provision
rate of approximately 20% and a non-
GAAP-based tax rate of 18%; 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 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, tax arising on internal
reorganizations, and "book to return"
adjustments for tax return filings and
tax assessments (in total "adjusted
expenses"). In arriving at our non-
GAAP-based tax rate of 18%, 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 Non-GAAP-based
adjusted net income to GAAP-based net
income:
Six Months Ended December 31,
2014
------------------------------
Per share
diluted
----------
Non-GAAP-based net income,
attributable to OpenText $237,383 $1.93
Less:
Amortization 87,660 0.71
Share-based compensation 9,378 0.08
Special charges (recoveries) (1,590) (0.01)
Other (income) expense, net 19,187 0.16
GAAP-based provision for
(recovery of) income taxes 35,710 0.29
Non-GAAP based provision for
income taxes (51,875) (0.43)
------- -----
GAAP-based net income,
attributable to OpenText $138,913 $1.13
======== =====
(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, 2015
and 2014:
Three Months Ended Three Months Ended
December 31, 2015 December 31, 2014
----------------- -----------------
Currencies % of Revenue % of Expenses* % of Revenue % of Expenses*
------------ ------------- ------------ -------------
EURO 25% 14% 24% 16%
GBP 8% 8% 9% 8%
CAD 5% 11% 5% 12%
USD 52% 50% 50% 48%
Other 10% 17% 12% 16%
--- --- --- ---
Total 100% 100% 100% 100%
=== === === ===
Six Months Ended Six Months Ended
December 31, 2015 December 31, 2014
----------------- -----------------
Currencies % of Revenue % of Expenses* % of Revenue % of Expenses*
------------ ------------- ------------ -------------
EURO 24% 14% 25% 15%
GBP 9% 8% 8% 9%
CAD 4% 12% 5% 12%
USD 53% 50% 50% 46%
Other 10% 16% 12% 18%
--- --- --- ---
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
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/opentext-reports-second-quarter-fiscal-year-2016-financial-results-300217646.html
SOURCE Open Text Corporation
