OpenText Reports Fourth Quarter and Fiscal Year 2023 Financial Results
Reports Record Total Revenues of $4.5 Billion with 28% Growth
Fiscal 2023 Annual Highlights Y/Y
Total Revenues
(in millions)
Annual Recurring Revenues
(in millions)
Cloud Revenues
(in millions)
Reported
Constant Currency
Reported
Constant Currency
Reported
Constant Currency
$4,485
$4,617
$3,615
$3,718
$1,700
$1,739
+28.4%
+32.2%
+26.2%
+29.7%
+10.8%
+13.3%
Annual Recurring Revenues represent 81% of Total Revenues
•Total revenues of $4.5 billion up 28.4% Y/Y or up 32.2% Y/Y in constant currency (CC)
•Annual Recurring Revenues (ARR) of $3.6 billion, up 26.2% Y/Y or up 29.7% Y/Y in CC
•Cloud revenues of $1.7 billion up 10.8% Y/Y or up 13.3% Y/Y in CC
•FY'23 enterprise cloud bookings(1) of $528 million, up 9.5% Y/Y
•10 consecutive quarters of cloud and ARR organic growth in constant currency
•Operating cash flows were $779 million and free cash flows(2) were $655 million
•GAAP-based net income of $150 million, down 62.1% Y/Y, margin of 3.4%
•Adjusted EBITDA(2) of $1.5 billion, margin of 32.8% while making key investments in cloud, AI and Security
•Record capital returns of $260 million via dividends
•GAAP-based diluted earnings per share (EPS) of $0.56, Non-GAAP diluted EPS(2) of $3.29
•Increased annualized dividend to $1.00 per share, subject to quarterly Board approval. Declared quarterly dividend of $0.25 per share.
•Includes Micro Focus results from February 1, 2023 to June 30, 2023
Fiscal 2023 Fourth Quarter Highlights
Total Revenues
(in millions)
Annual Recurring Revenues
(in millions)
Cloud Revenues
(in millions)
Reported
Constant Currency
Reported
Constant Currency
Reported
Constant Currency
$1,491
$1,502
$1,157
$1,167
$452
$455
+65.2%
+66.5%
+56.4%
+57.7%
+9.7%
+10.6%
Annual Recurring Revenues represent 78% of Total Revenues
•Total revenues of $1.5 billion, up 65.2% Y/Y or up 66.5% in CC
•Annual recurring revenues of $1.2 billion, up 56.4% Y/Y or up 57.7% in CC
•Cloud revenues of $452 million, up 9.7% Y/Y or up 10.6% Y/Y in CC
•Quarterly enterprise cloud bookings(1) of $164 million, up 12.3%
•Operating cash flows were $115 million and free cash flows(2) were $91 million
•GAAP-based net loss of ($49) million, down (147.7)% Y/Y, margin of (3.3)%, due to acquisition expenses
•Adjusted EBITDA(2) of $463 million, margin of 31.0%
•GAAP-based diluted earnings per share (EPS) of ($0.18), Non-GAAP diluted EPS(2) of $0.91
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Waterloo, ON, August 3, 2023 - Open Text Corporation (NASDAQ: OTEX), (TSX: OTEX), today announced its financial results for the fourth quarter and year ended June 30, 2023.
“OpenText Fiscal 2023 progress and results are exceptional and record setting, with 28% total revenue growth. OpenText delivered record total revenues of $4.5 billion of which 81%, or $3.6 billion, is annually recurring,” said Mark J. Barrenechea, OpenText CEO & CTO. “Our mission to empower individuals and organizations of all sizes to achieve the Information Advantage. Looking ahead, Fiscal 2024 will be another year of outstanding growth for OpenText led by Cloud and our expanded Information Management mission, with Micro Focus products contributing organic growth.”
“OpenText holds a distinctive position as a leader in Information Management. Our comprehensive range of products, effective go-to-market strategies, and talented employees position us favorably for sustained growth and profitability,” added Mr. Barrenechea. “Today we are announcing opentext.ai and OpenText Aviator™, our vision and initial AI products, to be the trusted partner for our customer’s AI journey. I am extremely optimistic about the future of OpenText, and helping our customers unlock the value of their information.”
“OpenText delivered an exceptional operating performance in Fiscal 2023 with adjusted EBITDA of $1.5 billion and free cash flows of $655 million. Our balance sheet and liquidity position remain strong with approximately $1.2 billion in cash as of June 30, 2023, and a net leverage ratio of 3.5x,” said Madhu Ranganathan, OpenText EVP, CFO. “The value we are generating through the OpenText Business System of Total Growth is truly remarkable. We accelerated our initial integration of Micro Focus operations ahead of schedule, we remain on track to meet our near-term and long-term operating goals.”
(1) Enterprise cloud bookings is defined as the total value from cloud services and subscription contracts, entered into in the fiscal year that are new, committed and incremental to our existing contracts, entered into with our enterprise based customers.
(2) Please see Note 2 “Use of Non-GAAP Financial Measures” to the consolidated financial statements below.
Financial Highlights for Fiscal 2023 and Q4 with Year Over Year Comparisons
Summary of Annual Results
(In millions, except per share data)
FY'23
FY'22
$ Change
% Change
FY'23 in CC*
% Change in CC*
Revenues:
Cloud services and subscriptions
$1,700.4
$1,535.0
$165.4
10.8
%
$1,739.1
13.3
%
Customer support
1,915.0
1,331.0
$584.1
43.9
%
1,978.8
48.7
%
Total annual recurring revenues**
$3,615.5
$2,866.0
$749.5
26.2
%
$3,717.9
29.7
%
License
539.0
358.4
$180.7
50.4
%
555.4
55.0
%
Professional service and other
330.5
269.5
$61.0
22.6
%
344.1
27.7
%
Total revenues
$4,485.0
$3,493.8
$991.1
28.4
%
$4,617.4
32.2
%
GAAP-based operating income
$
516.3
$644.8
($128.5)
(19.9)
%
N/A
N/A
Non-GAAP-based operating income (1)
$1,365.3
$1,176.9
$188.4
16.0
%
$1,387.5
17.9
%
GAAP-based net income attributable to OpenText
$150.4
$397.1
($246.7)
(62.1)
%
N/A
N/A
GAAP-based EPS, diluted
$0.56
$1.46
($0.90)
(61.6)
%
N/A
N/A
Non-GAAP-based EPS, diluted (1)(2)
$3.29
$3.22
$0.07
2.2
%
$3.37
4.7
%
Adjusted EBITDA (1)
$1,472.9
$1,265.0
$207.9
16.4
%
$1,495.8
18.2
%
Operating cash flows
$779.2
$981.8
($202.6)
(20.6)
%
N/A
N/A
Free cash flows (1)
$655.4
$888.7
($233.3)
(26.3)
%
N/A
N/A
2
Summary of Quarterly Results
(In millions, except per share data)
Q4 FY'23
Q4 FY'22
$ Change
% Change
Q4 FY'23 in CC*
% Change in CC*
Revenues:
Cloud services and subscriptions
$451.7
$411.6
$40.1
9.7
%
$455.4
10.6
%
Customer support
705.3
328.3
$376.9
114.8
%
711.4
116.7
%
Total annual recurring revenues**
$1,156.9
$739.9
$417.0
56.4
%
$1,166.8
57.7
%
License
228.8
94.7
$134.1
141.6
%
229.2
142.0
%
Professional service and other
105.1
67.8
$37.3
54.9
%
106.3
56.7
%
Total revenues
$1,490.8
$902.5
$588.4
65.2
%
$1,502.3
66.5
%
GAAP-based operating income
$121.3
$137.6
($16.3)
(11.8)
%
N/A
N/A
Non-GAAP-based operating income (1)
$431.7
$291.0
$140.8
48.4
%
$421.5
44.9
%
GAAP-based net income attributable to OpenText
($48.7)
$102.2
($150.9)
(147.7)
%
N/A
N/A
GAAP-based EPS, diluted
($0.18)
$0.38
($0.56)
(147.4)
%
N/A
N/A
Non-GAAP-based EPS, diluted (1)(2)
$0.91
$0.80
$0.11
13.8
%
$0.88
10.0
%
Adjusted EBITDA (1)
$462.8
$313.6
$149.2
47.6
%
$452.7
44.3
%
Operating cash flows
$115.3
$251.9
($136.6)
(54.2)
%
N/A
N/A
Free cash flows (1)
$91.2
$213.8
($122.5)
(57.3)
%
N/A
N/A
(1) Please see Note 2 “Use of Non-GAAP Financial Measures” to the consolidated financial statements below.
(2) Please also see Note 14 to the Company's Fiscal 2018 Consolidated Financial Statements on Form 10-K. Reflective of the amount of net tax benefit arising from the internal reorganization assumed to be allocable to the current period based on the forecasted utilization period.
Note: Individual line items in tables may be adjusted by non-material amounts to enable totals to align to published financial statements.
*CC: Constant currency for this purpose is defined as the current period reported revenues/expenses/earnings represented at the prior comparative period's foreign exchange rate.
**Annual recurring revenue is defined as the sum of Cloud services and subscriptions revenue and Customer support revenue.
Dividend Program
As part of our quarterly, non-cumulative cash dividend program, the Board declared on August 2, 2023, a quarterly cash dividend of $0.25 per common share. The record date for this dividend is September 1, 2023, and the payment date is September 22, 2023. Any future declarations of dividends and the establishment of future record and payment dates are all subject to the final determination and discretion of the Board of Directors.
Quarterly Business Highlights
•Key customer wins in the quarter include: BNP Paribas, Carl Zeiss AG, CNA Insurance, Daiken, DHL eCommerce Benelux, Elevance Health, Engie Italia, FEMA (US Department of Homeland Security), ID Logistics, Investors Heritage Life Insurance Company, Renesas, RS Component, Swedbank, TechMahindra, Warta
•OpenText and Anritsu Service Assurance signed a new deal for 5G network capabilities and next-generation architecture
•Today we are announcing opentext.ai, our AI strategy and initial AI products including OpenText Aviator™ and IDOL, to be the trusted partner for our customers’ AI journey
•OpenText powers organizations to achieve digital success in a multi-cloud world with Cloud Editions 23.3
•OpenText has been recognized as a Leader in the 2023 Gartner Magic Quadrant review for Application Security Testing (AST) for the 10th consecutive year
•OpenText received a 2023 SAP® Pinnacle Award in the Partner Solution Success category, which recognizes its outstanding contributions as an SAP partner
3
Summary of Annual Results
FY'23
FY'22
% Change
Revenue (millions)
$4,485.0
$3,493.8
28.4
%
GAAP-based gross margin
70.6
%
69.6
%
105
bps
Non-GAAP-based gross margin (1)
76.1
%
75.6
%
49
bps
GAAP-based EPS, diluted
$0.56
$1.46
(61.6)
%
Non-GAAP-based EPS, diluted (1)(2)
$3.29
$3.22
2.2
%
Summary of Quarterly Results
Q4 FY'23
Q3 FY'23
Q4 FY'22
% Change
(Q4 FY'23 vs Q3 FY'23)
% Change
(Q4 FY'23 vs Q4 FY'22)
Revenue (millions)
$1,490.8
$1,244.7
$902.5
19.8
%
65.2
%
GAAP-based gross margin
71.4
%
70.3
%
70.2
%
110
bps
120
bps
Non-GAAP-based gross margin (1)
76.9
%
75.8
%
75.9
%
110
bps
100
bps
GAAP-based EPS, diluted
($0.18)
$0.21
$0.38
(185.7)
%
(147.4)
%
Non-GAAP-based EPS, diluted (1)(2)
$0.91
$0.73
$0.80
24.7
%
13.8
%
(1) Please see Note 2 “Use of Non-GAAP Financial Measures” to the consolidated financial statements below.
(2) Please also see Note 14 to the Company's Fiscal 2018 Consolidated Financial Statements on Form 10-K. Reflective of the amount of net tax benefit arising from the internal reorganization assumed to be allocable to the current period based on the forecasted utilization period.
Conference Call Information
OpenText posted an investor presentation on its Investor Relations website at http://investors.opentext.com and invites the public to listen to the earnings conference call today at 5:00 p.m. ET (2:00 p.m. PT) by dialing 1-800-319-4610 (toll-free) or +1-604-638-5340 (international). Please dial-in 10 minutes ahead of time to ensure proper connection. Alternatively, a live webcast of the earnings conference call will be available on the Investor Relations section of the Company's website at http://investors.opentext.com/investor-events-and-presentations.
A replay of the call will be available beginning August 3, 2023, at 7:00 p.m. ET through 11:59 p.m. on August 17, 2023, and can be accessed by dialing 1-855-669-9658 (toll-free) or +1-604-674-8052 (international) and using passcode 0296 followed by the number sign.
Please see Note 2 “Use of Non-GAAP Financial Measures” to the consolidated financial statements below for a reconciliation of U.S. GAAP-based financial measures used in this press release to Non-GAAP-based financial measures.
About OpenText
OpenText, The Information Company™, enables organizations to gain insight through market leading information management solutions, powered by OpenText Cloud Editions. For more information about OpenText (NASDAQ: OTEX, TSX: OTEX) visit opentext.com.
Certain statements in this press release, including statements about the focus of Open Text Corporation (“OpenText” or “the Company”) on growth, future cloud growth and market share gains, future organic growth initiatives and deployment of capital, intention to maintain a dividend program, including any targeted annualized dividend, the associated benefits of the Micro Focus acquisition, future tax rates, new platform and product offerings and associated benefits to customers, our announcement of opentext.ai and OpenText Aviator™, including our AI strategy, vision and initial AI products, scaling OpenText, and other matters, which 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 intended to identify forward-looking statements or information under applicable securities laws (forward-looking statements). In addition, any statements or information that refer to expectations, beliefs, plans, projections, objectives, performance or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements, and based on our current
4
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. Future declarations of dividends are also subject to the final determination and discretion of the Board of Directors, and an annualized dividend has not been approved or declared by the Board. Forward-looking statements involve known and unknown risks and uncertainties such as those relating to: all statements regarding the expected future financial position, results of operations, cash flows, dividends, financing plans, business strategy, budgets, capital expenditures, competitive positions, growth opportunities, plans and objectives of management, including any anticipated synergy benefits; our ability to integrate successfully Micro Focus’ operations and programs, including incurring unanticipated costs, delays or difficulties; and our ability to develop, protect and maintain our intellectual property and proprietary technology and to operate without infringing on the proprietary rights of others. For additional information with respect to risks and other factors which could occur, see the Company's Annual Report on Form 10-K, Quarterly Report 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. Further, readers should note that we may announce information using our website, press releases, securities law filings, public conference calls, webcasts and the social media channels identified on the Investors section of our website (https://investors.opentext.com). Such social media channels may include the Company's or our CEO's blog, Twitter account or LinkedIn account. The information posted through such channels may be material. Accordingly, readers should monitor such channels in addition to our other forms of communication.
For more information, please contact:
Harry E. Blount
Senior Vice President, Global Head of Investor Relations
Accounts receivable trade, net of allowance for credit losses of $13,828 as of June 30, 2023 and $16,473 as of June 30, 2022
682,517
426,652
Contract assets
71,196
26,167
Income taxes recoverable
68,161
18,255
Prepaid expenses and other current assets
221,732
120,552
Total current assets
2,275,231
2,285,367
Property and equipment
356,904
244,709
Operating lease right of use assets
285,723
198,132
Long-term contract assets
64,553
19,719
Goodwill
8,662,603
5,244,653
Acquired intangible assets
4,080,879
1,075,208
Deferred tax assets
926,719
810,154
Other assets
342,318
256,987
Long-term income taxes recoverable
94,270
44,044
Total assets
$
17,089,200
$
10,178,973
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities
$
996,261
$
448,607
Current portion of long-term debt
320,850
10,000
Operating lease liabilities
91,425
56,380
Deferred revenues
1,721,781
902,202
Income taxes payable
89,297
51,069
Total current liabilities
3,219,614
1,468,258
Long-term liabilities:
Accrued liabilities
51,961
18,208
Pension liability
126,312
60,951
Long-term debt
8,562,096
4,209,567
Long-term operating lease liabilities
271,579
198,695
Long-term deferred revenues
217,771
91,144
Long-term income taxes payable
193,808
34,003
Deferred tax liabilities
423,955
65,887
Total long-term liabilities
9,847,482
4,678,455
Shareholders' equity:
Share capital and additional paid-in capital
270,902,571 and 269,522,639 Common Shares issued and outstanding at June 30, 2023 and June 30, 2022, respectively; authorized Common Shares: unlimited
2,176,947
2,038,674
Accumulated other comprehensive income (loss)
(53,559)
(7,659)
Retained earnings
2,048,984
2,160,069
Treasury stock, at cost (3,536,375 and 3,706,420 shares at June 30, 2023 and June 30, 2022, respectively)
(151,597)
(159,966)
Total OpenText shareholders' equity
4,020,775
4,031,118
Non-controlling interests
1,329
1,142
Total shareholders' equity
4,022,104
4,032,260
Total liabilities and shareholders' equity
$
17,089,200
$
10,178,973
6
OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands of U.S. dollars, except share and per share data)
(unaudited)
Three Months Ended June 30,
2023
2022
Revenues:
Cloud services and subscriptions
$
451,659
$
411,595
Customer support
705,277
328,339
License
228,796
94,688
Professional service and other
105,098
67,832
Total revenues
1,490,830
902,454
Cost of revenues:
Cloud services and subscriptions
166,394
133,785
Customer support
86,695
30,571
License
6,184
2,595
Professional service and other
90,498
55,436
Amortization of acquired technology-based intangible assets
77,045
46,274
Total cost of revenues
426,816
268,661
Gross profit
1,064,014
633,793
Operating expenses:
Research and development
249,958
118,931
Sales and marketing
333,244
185,985
General and administrative
136,866
85,958
Depreciation
31,152
22,706
Amortization of acquired customer-based intangible assets
121,285
56,341
Special charges (recoveries)
70,222
26,281
Total operating expenses
942,727
496,202
Income from operations
121,287
137,591
Other income (expense), net
(25,355)
(19)
Interest and other related expense, net
(145,829)
(40,342)
Income (loss) before income taxes
(49,897)
97,230
Provision for (recovery of) income taxes
(1,212)
(5,005)
Net income (loss) for the period
$
(48,685)
$
102,235
Net (income) attributable to non-controlling interests
(49)
(39)
Net income (loss) attributable to OpenText
$
(48,734)
$
102,196
Earnings per share—basic attributable to OpenText
$
(0.18)
$
0.38
Earnings per share—diluted attributable to OpenText
$
(0.18)
$
0.38
Weighted average number of Common Shares outstanding—basic (in '000's)
270,772
270,152
Weighted average number of Common Shares outstanding—diluted (in '000's)
270,772
270,394
7
OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands of U.S. dollars, except share and per share data)
Year Ended June 30,
2023
2022
2021
Revenues:
Cloud services and subscriptions
$
1,700,433
$
1,535,017
$
1,407,445
Customer support
1,915,020
1,330,965
1,334,062
License
539,026
358,351
384,711
Professional service and other
330,501
269,511
259,897
Total revenues
4,484,980
3,493,844
3,386,115
Cost of revenues:
Cloud services and subscriptions
590,165
511,713
481,818
Customer support
209,705
121,485
122,753
License
16,645
13,501
13,916
Professional service and other
276,888
216,895
197,183
Amortization of acquired technology-based intangible assets
223,184
198,607
218,796
Total cost of revenues
1,316,587
1,062,201
1,034,466
Gross profit
3,168,393
2,431,643
2,351,649
Operating expenses:
Research and development
680,587
440,448
421,447
Sales and marketing
948,598
677,118
622,221
General and administrative
419,590
317,085
263,521
Depreciation
107,761
88,241
85,265
Amortization of acquired customer-based intangible assets
326,406
217,105
216,544
Special charges (recoveries)
169,159
46,873
1,748
Total operating expenses
2,652,101
1,786,870
1,610,746
Income from operations
516,292
644,773
740,903
Other income (expense), net
34,469
29,118
61,434
Interest and other related expense, net
(329,428)
(157,880)
(151,567)
Income before income taxes
221,333
516,011
650,770
Provision for (recovery of) income taxes
70,767
118,752
339,906
Net income
$
150,566
$
397,259
$
310,864
Net (income) attributable to non-controlling interests
(187)
(169)
(192)
Net income attributable to OpenText
$
150,379
$
397,090
$
310,672
Earnings per share—basic attributable to OpenText
$
0.56
$
1.46
$
1.14
Earnings per share—diluted attributable to OpenText
$
0.56
$
1.46
$
1.14
Weighted average number of Common Shares outstanding—basic
(in '000's)
270,299
271,271
272,533
Weighted average number of Common Shares outstanding—diluted
(in '000's)
270,451
271,909
273,479
8
OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands of U.S. dollars)
Year Ended June 30,
2023
2022
2021
Net income
$
150,566
$
397,259
$
310,864
Other comprehensive income (loss)—net of tax:
Net foreign currency translation adjustments
(40,798)
(78,724)
42,440
Unrealized gain (loss) on cash flow hedges:
Unrealized gain (loss) - net of tax (1)
(941)
(1,859)
4,246
(Gain) loss reclassified into net income - net of tax (2)
2,721
373
(3,280)
Unrealized gain (loss) on available-for-sale financial assets:
Unrealized gain (loss) - net of tax (3)
(602)
—
—
Actuarial gain (loss) relating to defined benefit pension plans:
Actuarial gain (loss) - net of tax (4)
(6,605)
5,595
3,987
Amortization of actuarial (gain) loss into net income - net of tax (5)
325
718
1,020
Total other comprehensive income (loss) net
(45,900)
(73,897)
48,413
Total comprehensive income
104,666
323,362
359,277
Comprehensive income attributable to non-controlling interests
(187)
(169)
(192)
Total comprehensive income attributable to OpenText
$
104,479
$
323,193
$
359,085
______________________________
(1)Net of tax expense (recovery) of ($339), ($671), and $1,532 for the year ended June 30, 2023, 2022 and 2021, respectively.
(2)Net of tax expense (recovery) of $981, $134 and ($1,182) for the year ended June 30, 2023, 2022 and 2021, respectively.
(3)Net of tax expense (recovery) of $159, nil, and nil for the year ended June 30, 2023, 2022 and 2021, respectively.
(4)Net of tax expense (recovery) of ($1,961), $1,866 and $990 for the year ended June 30, 2023, 2022 and 2021, respectively.
(5)Net of tax expense (recovery) of $143, $290 and $379 for the year ended June 30, 2023, 2022 and 2021, respectively.
9
OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands of U.S. dollars and shares)
Common Shares and Additional Paid in Capital
Treasury Stock
Retained Earnings
Accumulated Other Comprehensive Income
Non-Controlling Interests
Total
Shares
Amount
Shares
Amount
Balance as of June 30, 2020
271,863
$
1,851,777
(622)
$
(23,608)
$
2,159,396
$
17,825
$
1,319
$
4,006,709
Adoption of ASU 2016-13 - cumulative effect
—
—
—
—
(2,450)
—
—
(2,450)
Issuance of Common Shares
Under employee stock option plans
1,605
49,565
—
—
—
—
—
49,565
Under employee stock purchase plans
573
22,307
193
6,690
—
—
—
28,997
Share-based compensation
—
51,969
—
—
—
—
—
51,969
Purchase of treasury stock
—
—
(1,455)
(64,847)
—
—
—
(64,847)
Issuance of treasury stock
—
(12,379)
316
12,379
—
—
—
—
Common Shares repurchased
(2,500)
(15,475)
—
—
(103,630)
—
—
(119,105)
Dividends declared
($0.777 per Common Share)
—
—
—
—
(210,662)
—
—
(210,662)
Non-controlling interest
—
—
—
—
—
—
—
—
Other comprehensive income - net
—
—
—
—
—
48,413
—
48,413
Net income
—
—
—
—
310,672
—
192
310,864
Balance as of June 30, 2021
271,541
$
1,947,764
(1,568)
$
(69,386)
$
2,153,326
$
66,238
$
1,511
$
4,099,453
Issuance of Common Shares
Under employee stock option plans
950
32,714
—
—
—
—
—
32,714
Under employee stock purchase plans
842
33,806
—
—
—
—
—
33,806
Share-based compensation
—
69,556
—
—
—
—
—
69,556
Purchase of treasury stock
—
—
(2,630)
(111,593)
—
—
—
(111,593)
Issuance of treasury stock
—
(21,013)
492
21,013
—
—
—
—
Common Shares repurchased
(3,810)
(24,295)
—
—
(152,692)
—
—
(176,987)
Dividends declared
($0.8836 per Common Share)
—
—
—
—
(237,655)
—
—
(237,655)
Non-controlling interest
—
—
—
—
—
—
—
—
Other comprehensive loss - net
—
—
—
—
—
(73,897)
—
(73,897)
Distribution to non-controlling interest
—
142
—
—
—
—
(538)
(396)
Net income
—
—
—
—
397,090
—
169
397,259
Balance as of June 30, 2022
269,523
$
2,038,674
(3,706)
$
(159,966)
$
2,160,069
$
(7,659)
$
1,142
$
4,032,260
Issuance of Common Shares
Under employee stock option plans
245
7,830
—
—
—
—
—
7,830
Under employee stock purchase plans
1,135
31,679
—
—
—
—
—
31,679
Share-based compensation
—
130,119
—
—
—
—
—
130,119
Purchase of treasury stock
—
—
(521)
(21,919)
—
—
—
(21,919)
Issuance of treasury stock
—
(31,355)
691
30,288
—
—
—
(1,067)
Common Shares repurchased
—
—
—
—
—
—
—
—
Dividends declared ($0.9720 per Common Share)
—
—
—
—
(261,464)
—
—
(261,464)
Non-controlling interest
—
—
—
—
—
—
—
—
Other comprehensive loss - net
—
—
—
—
—
(45,900)
—
(45,900)
Net income
—
—
—
—
150,379
—
187
150,566
Balance as of June 30, 2023
270,903
$
2,176,947
(3,536)
$
(151,597)
$
2,048,984
$
(53,559)
$
1,329
$
4,022,104
10
OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
(unaudited)
Three Months Ended June 30,
2023
2022
Cash flows from operating activities:
Net income (loss) for the period
$
(48,685)
$
102,235
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization of intangible assets
229,482
125,321
Share-based compensation expense
41,904
24,464
Pension expense
3,401
1,723
Amortization of debt discount and issuance costs
8,257
1,486
Write-off of right of use assets
2,507
17,707
Loss on extinguishment of debt
—
—
Loss on sale and write down of property and equipment
903
198
Deferred taxes
29,140
(79,420)
Share in net (income) loss of equity investees
11,530
401
Changes in financial instruments
16,274
—
Changes in operating assets and liabilities:
Accounts receivable
27,335
13,413
Contract assets
(43,643)
(10,758)
Prepaid expenses and other current assets
42,151
1,768
Income taxes
(116,569)
45,824
Accounts payable and accrued liabilities
10,582
41,561
Deferred revenue
(85,764)
(30,878)
Other assets
(5,299)
771
Operating lease assets and liabilities, net
(8,205)
(3,876)
Net cash provided by operating activities
115,301
251,940
Cash flows from investing activities:
Additions of property and equipment
(24,060)
(38,172)
Purchase of Micro Focus International PLC, net of cash acquired
(2,357)
—
Purchase of Bricata Inc.
—
174
Net cash used in investing activities
(26,417)
(37,998)
Cash flows from financing activities:
Proceeds from issuance of Common Shares from exercise of stock options and ESPP
14,159
10,738
Repayment of long-term debt and Revolver
(186,463)
(2,500)
Debt issuance costs
(690)
—
Repurchase of Common Shares
—
(40,869)
Purchase of treasury stock
(21,919)
(35,933)
Payments of dividends to shareholders
(65,068)
(59,042)
Other financing activities
758
—
Net cash used in financing activities
(259,223)
(127,606)
Foreign exchange gain (loss) on cash held in foreign currencies
4,571
(26,276)
Increase (decrease) in cash, cash equivalents and restricted cash during the period
(165,768)
60,060
Cash, cash equivalents and restricted cash at beginning of the period
1,399,720
1,635,851
Cash, cash equivalents and restricted cash at end of the period
$
1,233,952
$
1,695,911
11
OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
Reconciliation of cash, cash equivalents and restricted cash:
June 30, 2023
June 30, 2022
Cash and cash equivalents
$
1,231,625
$
1,693,741
Restricted cash (1)
2,327
2,170
Total cash, cash equivalents and restricted cash
$
1,233,952
$
1,695,911
(1) Restricted cash is classified under the Prepaid expenses and other current assets and Other assets line items on the Consolidated Balance Sheets.
12
OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
Year Ended June 30,
2023
2022
2021
Cash flows from operating activities:
Net income for the period
$
150,566
$
397,259
$
310,864
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of intangible assets
657,351
503,953
520,605
Share-based compensation expense
130,302
69,556
51,969
Pension expense
9,207
6,606
6,616
Amortization of debt discount and issuance costs
16,753
5,422
4,548
Write-off of right of use assets
9,626
17,707
—
Loss on extinguishment of debt
8,152
27,413
—
Loss on sale and write down of property and equipment
2,331
294
2,771
Deferred taxes
(149,560)
(36,088)
73,039
Share in net (income) loss of equity investees
23,077
(58,702)
(62,897)
Changes in financial instruments
128,841
—
—
Changes in operating assets and liabilities:
Accounts receivable
168,604
81,841
60,954
Contract assets
(73,539)
(37,966)
(39,333)
Prepaid expenses and other current assets
(23,035)
(13,954)
37,733
Income taxes
14,948
34,589
(140,763)
Accounts payable and accrued liabilities
(127,092)
(24,177)
26,088
Deferred revenue
(128,395)
(5,236)
39,295
Other assets
(11,297)
17,297
11,914
Operating lease assets and liabilities, net
(27,635)
(4,004)
(27,283)
Net cash provided by operating activities
779,205
981,810
876,120
Cash flows from investing activities:
Additions of property and equipment
(123,832)
(93,109)
(63,675)
Purchase of Micro Focus International PLC, net of cash acquired
(5,657,963)
—
—
Purchase of Zix Corporation, net of cash acquired
—
(856,175)
—
Purchase of Bricata Inc.
—
(17,753)
—
Purchase of XMedius
—
—
444
Purchase of Dynamic Solutions Group Inc.
—
—
(971)
Realized gain (loss) on financial instruments
131,248
—
—
Other investing activities
(873)
(3,922)
(4,568)
Net cash used in investing activities
(5,651,420)
(970,959)
(68,770)
Cash flows from financing activities:
Proceeds from issuance of Common Shares from exercise of stock options and ESPP
39,331
67,215
80,067
Proceeds from long-term debt and Revolver
4,927,450
1,500,000
—
Repayment of long-term debt and Revolver
(202,926)
(860,000)
(610,000)
Debt extinguishment costs
—
(24,969)
—
Debt issuance costs
(77,899)
(17,159)
—
Repurchase of Common Shares
—
(176,987)
(119,105)
Purchase of treasury stock
(21,919)
(111,593)
(64,847)
Distribution to non-controlling interest
—
(396)
—
Payments of dividends to shareholders
(259,549)
(237,655)
(210,662)
Other financing activities
(1,435)
—
—
Net cash provided by (used in) financing activities
4,403,053
138,456
(924,547)
Foreign exchange gain (loss) on cash held in foreign currencies
7,203
(63,196)
29,734
Increase (decrease) in cash, cash equivalents and restricted cash during the period
(461,959)
86,111
(87,463)
Cash, cash equivalents and restricted cash at beginning of the period
1,695,911
1,609,800
1,697,263
Cash, cash equivalents and restricted cash at end of the period
$
1,233,952
$
1,695,911
$
1,609,800
13
OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
(unaudited)
Reconciliation of cash, cash equivalents and restricted cash:
June 30, 2023
June 30, 2022
June 30, 2021
Cash and cash equivalents
$
1,231,625
$
1,693,741
$
1,607,306
Restricted cash (1)
2,327
2,170
2,494
Total cash, cash equivalents and restricted cash
$
1,233,952
$
1,695,911
$
1,609,800
(1) Restricted cash is classified under the Prepaid expenses and other current assets and Other assets line items on the Consolidated Balance Sheets.
14
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 is not meant to be a substitute for financial measures presented in accordance with U.S. GAAP, but rather should be evaluated in conjunction with and as a supplement to such U.S. GAAP measures. OpenText strongly encourages investors to review its financial information in its entirety and not to rely on a single financial measure. The Company therefore believes that despite these limitations, it is appropriate to supplement the disclosure of the U.S. GAAP measures with certain Non-GAAP measures defined below.
Non-GAAP-based net income and Non-GAAP-based EPS, attributable to OpenText, are consistently calculated as GAAP-based net income (loss) or earnings (loss) per share, attributable to OpenText, on a diluted basis, excluding the effects of 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 GAAP-based income from operations, excluding the amortization of acquired intangible assets, special charges (recoveries), and share-based compensation expense.
Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) is consistently calculated as GAAP-based net income (loss), attributable to OpenText, excluding interest income (expense), provision for (recovery of) income taxes, depreciation and amortization of acquired intangible assets, other income (expense), share-based compensation and special charges (recoveries). Adjusted EBITDA margin is calculated as adjusted EBITDA expressed as a percentage of total revenue.
The Company's management believes that the presentation of the above defined Non-GAAP financial measures provides useful information to investors because they portray the financial results of the Company before the impact of certain non-operational charges. The use of the term “non-operational charge” is defined for this purpose as an expense that does not impact the ongoing operating decisions taken by the Company's management. These items are excluded based upon the way the Company's management evaluates the performance of the Company's business for use in the Company's internal reports and are not excluded in the sense that they may be used under U.S. GAAP.
The Company does not acquire businesses on a predictable cycle, and therefore believes that the presentation of Non-GAAP measures, which in certain cases adjust for the impact of amortization of intangible assets and the related tax effects that are primarily related to acquisitions, will provide readers of financial statements with a more consistent basis for comparison across accounting periods and be more useful in helping readers understand the Company’s operating results and underlying operational trends. Additionally, the Company has engaged in various restructuring activities over the past several years, primarily due to acquisitions and in response to our return to office planning, that have resulted in costs associated with reductions in headcount, consolidation of leased facilities and related costs, all which are recorded under the Company’s “Special charges (recoveries)” caption on the Consolidated Statements of Income. Each restructuring activity is a discrete event based on a unique set of business objectives or circumstances, and each differs in terms of its operational implementation, business impact and scope, and the size of each restructuring plan can vary significantly from period to period. Therefore, the Company believes that the exclusion of these special charges (recoveries) will also better aid readers of financial statements in the understanding and comparability of the Company's operating results and underlying operational trends.
In summary, the Company believes the provision of supplemental Non-GAAP measures allow investors to evaluate the operational and financial performance of the Company's core business using the same evaluation measures that management uses, and is therefore a useful indication of OpenText's performance or expected performance of future operations and facilitates period-to-period comparison of operating performance (although prior performance is not necessarily indicative of future performance). As a result, the Company considers it appropriate and reasonable to provide, in addition to U.S. GAAP measures, supplementary Non-GAAP financial measures that exclude certain items from the presentation of its financial results. Information reconciling certain forward-looking GAAP measures to non-GAAP measures related to F'24 targets and F’26 aspirations, including A-EBITDA is not available without unreasonable effort due to high variability, complexity and uncertainty with respect to forecasting and quantifying certain amounts that are necessary for such reconciliations.
The following charts provide unaudited reconciliations of U.S. GAAP-based financial measures to Non-GAAP-based financial measures for the following periods presented. The Micro Focus Acquisition significantly impacts period-over-period comparability.
15
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures
for the three months ended June 30, 2023
(In thousands, except for per share data)
Three Months Ended June 30, 2023
GAAP-based Measures
GAAP-based Measures % of Total Revenue
Adjustments
Note
Non-GAAP-based Measures
Non-GAAP-based Measures % of Total Revenue
Cost of revenues
Cloud services and subscriptions
$
166,394
$
(2,876)
(1)
$
163,518
Customer support
86,695
(1,213)
(1)
85,482
Professional service and other
90,498
(1,826)
(1)
88,672
Amortization of acquired technology-based intangible assets
77,045
(77,045)
(2)
—
GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%)
1,064,014
71.4%
82,960
(3)
1,146,974
76.9%
Operating expenses
Research and development
249,958
(13,584)
(1)
236,374
Sales and marketing
333,244
(13,467)
(1)
319,777
General and administrative
136,866
(8,938)
(1)
127,928
Amortization of acquired customer-based intangible assets
121,285
(121,285)
(2)
—
Special charges (recoveries)
70,222
(70,222)
(4)
—
GAAP-based income from operations / Non-GAAP-based income from operations
121,287
310,456
(5)
431,743
Other income (expense), net
(25,355)
25,355
(6)
—
Provision for (recovery of) income taxes
(1,212)
41,240
(7)
40,028
GAAP-based net loss / Non-GAAP-based net income, attributable to OpenText
(48,734)
294,571
(8)
245,837
GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText
$
(0.18)
$
1.09
(8)
$
0.91
(1) Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.
(2) Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.
(3) GAAP-based and Non-GAAP-based gross profit stated in dollars and gross margin stated as a percentage of total revenue.
(4) Adjustment relates to the exclusion of special charges (recoveries) from our Non-GAAP-based operating expenses as special charges (recoveries) are generally incurred in the periods relevant to an acquisition and include certain charges or recoveries that are not indicative or related to continuing operations and are therefore excluded from our internal analysis of operating results.
(5) GAAP-based and Non-GAAP-based income from operations stated in dollars.
(6)Adjustment relates to the exclusion of other income (expense) from our Non-GAAP-based operating expenses as other income (expense) generally relates to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results. Other income (expense) also includes our share of income (losses) from our holdings in 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. Other income (expense) also includes unrealized and realized gains (losses) on our derivatives which are not designated as hedges. We exclude gains and losses on these derivatives as we do not believe they are reflective of our ongoing business and operating results.
16
(7)Adjustment relates to differences between the GAAP-based tax provision rate of approximately 2% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based net income. Such excluded items include amortization, share-based compensation, special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves and “book to return” adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately 14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.
(8)Reconciliation of GAAP-based loss to Non-GAAP-based net income:
Three Months Ended June 30, 2023
Per share diluted
GAAP-based net loss, attributable to OpenText
$
(48,734)
$
(0.18)
Add:
Amortization
198,330
0.73
Share-based compensation
41,904
0.15
Special charges (recoveries)
70,222
0.26
Other (income) expense, net
25,355
0.10
GAAP-based recovery of income taxes
(1,212)
—
Non-GAAP-based recovery of income taxes
(40,028)
(0.15)
Non-GAAP-based net income, attributable to OpenText
$
245,837
$
0.91
Reconciliation of Adjusted EBITDA
Three Months Ended June 30, 2023
GAAP-based net loss, attributable to OpenText
$
(48,734)
Add:
Recovery of income taxes
(1,212)
Interest and other related expense, net
145,829
Amortization of acquired technology-based intangible assets
77,045
Amortization of acquired customer-based intangible assets
121,285
Depreciation
31,152
Share-based compensation
41,904
Special charges (recoveries)
70,222
Other (income) expense, net
25,355
Adjusted EBITDA
$
462,846
GAAP-based net loss margin
(3.3)
%
Adjusted EBITDA margin
31.0
%
Reconciliation of Free cash flows
Three Months Ended June 30, 2023
GAAP-based cash flows provided by operating activities
$
115,301
Add:
Capital expenditures (1)
(24,060)
Free cash flows
$
91,241
(1) Defined as “Additions of property and equipment” in the Consolidated Statements of Cash Flows.
17
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures
for the year ended June 30, 2023
(In thousands, except for per share data)
Year Ended June 30, 2023
GAAP-based
Measures
GAAP-based Measures % of Total Revenue
Adjustments
Note
Non-GAAP-based
Measures
Non-GAAP-based Measures % of Total Revenue
Cost of revenues
Cloud services and subscriptions
$
590,165
$
(10,664)
(1)
$
579,501
Customer support
209,705
(3,627)
(1)
206,078
Professional service and other
276,888
(6,998)
(1)
269,890
Amortization of acquired technology-based intangible assets
223,184
(223,184)
(2)
—
GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%)
3,168,393
70.6%
244,473
(3)
3,412,866
76.1%
Operating expenses
Research and development
680,587
(39,065)
(1)
641,522
Sales and marketing
948,598
(41,710)
(1)
906,888
General and administrative
419,590
(28,238)
(1)
391,352
Amortization of acquired customer-based intangible assets
326,406
(326,406)
(2)
—
Special charges (recoveries)
169,159
(169,159)
(4)
—
GAAP-based income from operations / Non-GAAP-based income from operations
516,292
849,051
(5)
1,365,343
Other income (expense), net
34,469
(34,469)
(6)
—
Provision for income taxes
70,767
74,261
(7)
145,028
GAAP-based net income / Non-GAAP-based net income, attributable to OpenText
150,379
740,321
(8)
890,700
GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText
$
0.56
$
2.73
(8)
$
3.29
(1)Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.
(2)Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.
(3)GAAP-based and Non-GAAP-based gross profit stated in dollars and gross margin stated as a percentage of total revenue.
(4)Adjustment relates to the exclusion of special charges (recoveries) from our Non-GAAP-based operating expenses as special charges (recoveries) are generally incurred in the periods relevant to an acquisition and include certain charges or recoveries that are not indicative or related to continuing operations and are therefore excluded from our internal analysis of operating results.
(5)GAAP-based and Non-GAAP-based income from operations stated in dollars.
(6)Adjustment relates to the exclusion of other income (expense) from our Non-GAAP-based operating expenses as other income (expense) generally relates to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results. Other income (expense) also includes our share of income (losses) from our holdings in 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. Other income (expense) also includes unrealized and realized gains (losses) on our derivatives which are not designated as hedges. We exclude gains and losses on these derivatives as we do not believe they are reflective of our ongoing business and operating results.
18
(7)Adjustment relates to differences between the GAAP-based tax provision rate of approximately 32% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based net income. Such excluded items include amortization, share-based compensation, special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves and “book to return” adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately 14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.
(8)Reconciliation of GAAP-based net income to Non-GAAP-based net income:
Year Ended June 30, 2023
Per share diluted
GAAP-based net income, attributable to OpenText
$
150,379
$
0.56
Add:
Amortization
549,590
2.03
Share-based compensation
130,302
0.48
Special charges (recoveries)
169,159
0.63
Other (income) expense, net
(34,469)
(0.13)
GAAP-based provision for income taxes
70,767
0.26
Non-GAAP-based recovery of income taxes
(145,028)
(0.54)
Non-GAAP-based net income, attributable to OpenText
$
890,700
$
3.29
Reconciliation of Adjusted EBITDA
Year Ended June 30, 2023
GAAP-based net income, attributable to OpenText
$
150,379
Add:
Provision for income taxes
70,767
Interest and other related expense, net
329,428
Amortization of acquired technology-based intangible assets
223,184
Amortization of acquired customer-based intangible assets
326,406
Depreciation
107,761
Share-based compensation
130,302
Special charges (recoveries)
169,159
Other (income) expense, net
(34,469)
Adjusted EBITDA
$
1,472,917
GAAP-based net income margin
3.4
%
Adjusted EBITDA margin
32.8
%
Reconciliation of Free cash flows
Year Ended June 30, 2023
GAAP-based cash flows provided by operating activities
$
779,205
Add:
Capital expenditures (1)
(123,832)
Free cash flows
$
655,373
(1) Defined as “Additions of property and equipment” in the Consolidated Statements of Cash Flows.
19
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures
for the three months ended March 31, 2023
(In thousands, except for per share data)
Three Months Ended March 31, 2023
GAAP-based
Measures
GAAP-based Measures % of Total Revenue
Adjustments
Note
Non-GAAP-based
Measures
Non-GAAP-based Measures % of Total Revenue
Cost of revenues
Cloud services and subscriptions
$
157,658
$
(2,943)
(1)
$
154,715
Customer support
67,067
(1,157)
(1)
65,910
Professional service and other
78,526
(1,884)
(1)
76,642
Amortization of acquired technology-based intangible assets
62,639
(62,639)
(2)
—
GAAP-based gross profit and gross margin (%) /Non-GAAP-based gross profit and gross margin (%)
874,944
70.3%
68,623
(3)
943,567
75.8%
Operating expenses
Research and development
210,731
(10,801)
(1)
199,930
Sales and marketing
271,013
(11,947)
(1)
259,066
General and administrative
127,047
(7,636)
(1)
119,411
Amortization of acquired customer-based intangible assets
97,237
(97,237)
(2)
—
Special charges (recoveries)
74,350
(74,350)
(4)
—
GAAP-based income from operations / Non-GAAP-based income from operations
63,989
270,594
(5)
334,583
Other income (expense), net
85,706
(85,706)
(6)
—
Provision for (recovery of) income taxes
(12,420)
44,631
(7)
32,211
GAAP-based net income / Non-GAAP-based net income, attributable to OpenText
57,556
140,257
(8)
197,813
GAAP-based earnings (loss) per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText
$
0.21
$
0.52
(8)
$
0.73
(1) Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.
(2) Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.
(3) GAAP-based and Non-GAAP-based gross profit stated in dollars and gross margin stated as a percentage of total revenue.
(4) Adjustment relates to the exclusion of special charges (recoveries) from our Non-GAAP-based operating expenses as special charges (recoveries) are generally incurred in the periods relevant to an acquisition and include certain charges or recoveries that are not indicative or related to continuing operations, and are therefore excluded from our internal analysis of operating results.
(5) GAAP-based and Non-GAAP-based income from operations stated in dollars.
(6) Adjustment relates to the exclusion of other income (expense) from our Non-GAAP-based operating expenses as other income (expense) generally relates to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results. Other income (expense) also includes our share of income (losses) from our holdings in 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. Other income (expense) also includes unrealized gains (losses) on our derivatives which are not designated as hedges. We exclude gains and losses on these derivatives as we do not believe they are reflective on our ongoing business and operating results.
20
(7) Adjustment relates to differences between the GAAP-based tax provision rate of approximately 27% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded items include amortization, share-based compensation, special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves, and “book to return” adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately 14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.
(8) Reconciliation of GAAP-based net income to Non-GAAP-based net income:
Three Months Ended March 31, 2023
Per share diluted
GAAP-based net income, attributable to OpenText
$
57,556
$
0.21
Add:
Amortization
159,876
0.59
Share-based compensation
36,368
0.13
Special charges (recoveries)
74,350
0.28
Other (income) expense, net
(85,706)
(0.32)
GAAP-based recovery of income taxes
(12,420)
(0.04)
Non-GAAP-based recovery of income taxes
(32,211)
(0.12)
Non-GAAP-based net income, attributable to OpenText
$
197,813
$
0.73
Reconciliation of Adjusted EBITDA
Three Months Ended March 31, 2023
GAAP-based net income, attributable to OpenText
$
57,556
Add:
Recovery of income taxes
(12,420)
Interest and other related expense, net
104,502
Amortization of acquired technology-based intangible assets
62,639
Amortization of acquired customer-based intangible assets
97,237
Depreciation
30,577
Share-based compensation
36,368
Special charges (recoveries)
74,350
Other (income) expense, net
(85,706)
Adjusted EBITDA
$
365,103
GAAP-based net income margin
4.6
%
Adjusted EBITDA margin
29.3
%
Reconciliation of Free cash flows
Three Months Ended March 31, 2023
GAAP-based cash flows provided by operating activities
$
336,775
Add:
Capital expenditures (1)
(31,233)
Free cash flows
$
305,542
(1) Defined as “Additions of property and equipment” in the Consolidated Statements of Cash Flows.
21
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures
for the three months ended June 30, 2022
(In thousands, except for per share data)
Three Months Ended June 30, 2022
GAAP-based
Measures
GAAP-based Measures % of Total Revenue
Adjustments
Note
Non-GAAP-based
Measures
Non-GAAP-based Measures % of Total Revenue
Cost of revenues
Cloud services and subscriptions
$
133,785
$
(2,213)
(1)
$
131,572
Customer support
30,571
(768)
(1)
29,803
Professional service and other
55,436
(1,465)
(1)
53,971
Amortization of acquired technology-based intangible assets
46,274
(46,274)
(2)
—
GAAP-based gross profit and gross margin (%) /Non-GAAP-based gross profit and gross margin (%)
633,793
70.2
%
50,720
(3)
684,513
75.9
%
Operating expenses
Research and development
118,931
(7,186)
(1)
111,745
Sales and marketing
185,985
(7,251)
(1)
178,734
General and administrative
85,958
(5,582)
(1)
80,376
Amortization of acquired customer-based intangible assets
56,341
(56,341)
(2)
—
Special charges (recoveries)
26,281
(26,281)
(4)
—
GAAP-based income from operations / Non-GAAP-based income from operations
137,591
153,361
(5)
290,952
Other income (expense), net
(19)
19
(6)
—
Provision for (recovery of) income taxes
(5,005)
40,090
(7)
35,085
GAAP-based net income / Non-GAAP-based net income, attributable to OpenText
102,196
113,290
(8)
215,486
GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText
$
0.38
$
0.42
(8)
$
0.80
(1) Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.
(2) Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.
(3) GAAP-based and Non-GAAP-based gross profit stated in dollars and gross margin stated as a percentage of total revenue.
(4) Adjustment relates to the exclusion of special charges (recoveries) from our Non-GAAP-based operating expenses as special charges (recoveries) are generally incurred in the periods relevant to an acquisition and include certain charges or recoveries that are not indicative or related to continuing operations, and are therefore excluded from our internal analysis of operating results.
(5) GAAP-based and Non-GAAP-based income from operations stated in dollars.
(6) Adjustment relates to the exclusion of other income (expense) from our Non-GAAP-based operating expenses as other income (expense) generally relates to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results. Other income (expense) also includes our share of income (losses) from our holdings in 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 5% and a Non-GAAP-based tax rate of approximately 26%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded items include amortization, share-
22
based compensation, special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves, and “book to return” adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately 26%, 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, 2022
Per share diluted
GAAP-based net income, attributable to OpenText
$
102,196
$
0.38
Add:
Amortization
102,615
0.38
Share-based compensation
24,465
0.09
Special charges (recoveries)
26,281
0.10
Other (income) expense, net
19
—
GAAP-based recovery of income taxes
(5,005)
(0.02)
Non-GAAP-based recovery of income taxes
(35,085)
(0.13)
Non-GAAP-based net income, attributable to OpenText
$
215,486
$
0.80
Reconciliation of Adjusted EBITDA
Three Months Ended June 30, 2022
GAAP-based net income, attributable to OpenText
$
102,196
Add:
Recovery of income taxes
(5,005)
Interest and other related expense, net
40,342
Amortization of acquired technology-based intangible assets
46,274
Amortization of acquired customer-based intangible assets
56,341
Depreciation
22,706
Share-based compensation
24,464
Special charges (recoveries)
26,281
Other (income) expense, net
19
Adjusted EBITDA
$
313,618
GAAP-based net income margin
11.3
%
Adjusted EBITDA margin
34.8
%
Reconciliation of Free cash flows
Three Months Ended June 30, 2022
GAAP-based cash flows provided by operating activities
$
251,940
Add:
Capital expenditures (1)
(38,172)
Free cash flows
$
213,768
(1) Defined as “Additions of property and equipment” in the Consolidated Statements of Cash Flows.
23
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures
for the year ended June 30, 2022
(In thousands, except for per share data)
Year Ended June 30, 2022
GAAP-based
Measures
GAAP-based Measures % of Total Revenue
Adjustments
Note
Non-GAAP-based
Measures
Non-GAAP-based Measures % of Total Revenue
Cost of revenues
Cloud services and subscriptions
$
511,713
$
(5,285)
(1)
$
506,428
Customer support
121,485
(2,399)
(1)
119,086
Professional service and other
216,895
(3,740)
(1)
213,155
Amortization of acquired technology-based intangible assets
198,607
(198,607)
(2)
—
GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%)
2,431,643
69.6
%
210,031
(3)
2,641,674
75.6
%
Operating expenses
Research and development
440,448
(17,122)
(1)
423,326
Sales and marketing
677,118
(22,628)
(1)
654,490
General and administrative
317,085
(18,382)
(1)
298,703
Amortization of acquired customer-based intangible assets
217,105
(217,105)
(2)
—
Special charges (recoveries)
46,873
(46,873)
(4)
—
GAAP-based income from operations / Non-GAAP-based income from operations
644,773
532,141
(5)
1,176,914
Other income (expense), net
29,118
(29,118)
(6)
—
Provision for income taxes
118,752
23,913
(7)
142,665
GAAP-based net income / Non-GAAP-based net income, attributable to OpenText
397,090
479,110
(8)
876,200
GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText
$
1.46
$
1.76
(8)
$
3.22
(1) Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.
(2) Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.
(3) GAAP-based and Non-GAAP-based gross profit stated in dollars and gross margin stated as a percentage of total revenue.
(4) Adjustment relates to the exclusion of special charges (recoveries) from our Non-GAAP-based operating expenses as special charges (recoveries) are generally incurred in the periods relevant to an acquisition and include certain charges or recoveries that are not indicative or related to continuing operations, and are therefore excluded from our internal analysis of operating results.
(5) GAAP-based and Non-GAAP-based income from operations stated in dollars.
(6) Adjustment relates to the exclusion of other income (expense) from our Non-GAAP-based operating expenses as other income (expense) generally relates to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results. Other income (expense) also includes our share of income (losses) from our holdings in 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 23% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded items include amortization, share-
24
based compensation, special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves, and “book to return” adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately 14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.
(8) Reconciliation of GAAP-based net income to Non-GAAP-based net income:
Year Ended June 30, 2022
Per share diluted
GAAP-based net income, attributable to OpenText
$
397,090
$
1.46
Add:
Amortization
415,712
1.52
Share-based compensation
69,556
0.26
Special charges (recoveries)
46,873
0.17
Other (income) expense, net
(29,118)
(0.11)
GAAP-based provision for income taxes
118,752
0.44
Non-GAAP-based recovery of income taxes
(142,665)
(0.52)
Non-GAAP-based net income, attributable to OpenText
$
876,200
$
3.22
Reconciliation of Adjusted EBITDA
Year Ended June 30, 2022
GAAP-based net income, attributable to OpenText
$
397,090
Add:
Provision for income taxes
118,752
Interest and other related expense, net
157,880
Amortization of acquired technology-based intangible assets
198,607
Amortization of acquired customer-based intangible assets
217,105
Depreciation
88,241
Share-based compensation
69,556
Special charges (recoveries)
46,873
Other (income) expense, net
(29,118)
Adjusted EBITDA
$
1,264,986
GAAP-based net income margin
11.4
%
Adjusted EBITDA margin
36.2
%
Reconciliation of Free cash flows
Year Ended June 30, 2022
GAAP-based cash flows provided by operating activities
$
981,810
Add:
Capital expenditures (1)
(93,109)
Free cash flows
$
888,701
(1) Defined as “Additions of property and equipment” in the Consolidated Statements of Cash Flows.
25
(3) The following tables provide a composition of our major currencies for revenue and expenses, expressed as a percentage, for the year ended June 30, 2023 and 2022:
Three Months Ended June 30, 2023
Three Months Ended June 30, 2022
Currencies
% of Revenue
% of Expenses(1)
% of Revenue
% of Expenses(1)
EURO
21
%
12
%
22
%
12
%
GBP
5
%
9
%
3
%
5
%
CAD
3
%
10
%
3
%
14
%
USD
60
%
48
%
63
%
54
%
Other
11
%
21
%
9
%
15
%
Total
100
%
100
%
100
%
100
%
Year Ended June 30, 2023
Year Ended June 30, 2022
Currencies
% of Revenue
% of Expenses(1)
% of Revenue
% of Expenses(1)
EURO
20
%
12
%
23
%
13
%
GBP
5
%
7
%
4
%
6
%
CAD
3
%
11
%
3
%
14
%
USD
62
%
51
%
62
%
53
%
Other
10
%
19
%
8
%
14
%
Total
100
%
100
%
100
%
100
%
(1) Expenses include all cost of revenues and operating expenses included within the Consolidated Statements of Income, except for amortization of intangible assets, share-based compensation and special charges (recoveries).
