•Total revenues up 5.9% Y/Y or up 8.0% in constant currency
•Cloud revenues up 13.0% Y/Y or up 14.3% in constant currency
•Continued investments in talent, innovation, digital marketing and global sales coverage
•Operating cash flows were $323.6 million and free cash flows(2) were $306.0 million
•GAAP-based net income of $74.7 million, down 18.4% Y/Y, margin of 8.5%, down 250 basis points Y/Y
•Adjusted EBITDA(2) of $284.5 million, margin of 32.2%
•GAAP-based diluted earnings per share (EPS) of $0.28, down 15.2% Y/Y
•Non-GAAP diluted EPS(2) of $0.70, down 6.7% Y/Y
•During the quarter, the Company repurchased and cancelled 1.0 million shares for $45.1 million under our share repurchase plans
Waterloo, ON, May 4, 2022 - Open Text Corporation (NASDAQ: OTEX), (TSX: OTEX), today announced its financial results for the third quarter ended March 31, 2022.
“OpenText delivered record Q3 revenues amidst the ever-changing dynamics of the global macro environment,” said Mark J. Barrenechea, OpenText CEO & CTO. “In Q3, total revenues grew 5.9% year-over-year to $882.3 million, supported by record Cloud revenues of $401.9 million, up 13.0% year-over-year. Annual Recurring Revenues, which represent 83% of total revenues, grew 6.2% year-over-year to a record $734.5 million. We have a unique opportunity to increase our investments and accelerate our cloud business, and we are planning on doing so.”
“Customers are seeking information-led transformations and this is reflective in the strength of our cloud bookings. We are seeing the results of our efforts as we help our customers to digitize, transform and grow. OpenText brings a complete and integrated suite of Information Management solutions to customers of all sizes, while providing the layers of defense needed to help organizations secure their users, end points, and networks in the face of ever-increasing cyber threats and ransomware. As we approach the end of the fiscal year, we remain on track to meet our targets and aspirations,” said Mr. Barrenechea.
“OpenText delivered a solid Q3 with adjusted EBITDA of $284.5 million and strong free cash flows of $306.0 million,” said OpenText EVP, CFO, Madhu Ranganathan. “Integration of the Zix acquisition is on track and our balance sheet remains strong. We continue to invest in talent, innovation, and technology to drive our growth strategy and are making demonstrable progress towards our long-term aspirational goals. With approximately $1.6 billion in cash as of March 31, 2022 and a net leverage ratio of 1.9x, we have the financial flexibility to continue to drive growth through product innovation, talent, go-to-market, and strategic acquisitions.”
(1) Organic revenue growth is calculated by removing the revenue contribution from newly acquired companies for the first year post acquisition.
(2) Please see note 2 “Use of Non-GAAP Financial Measures” to the condensed consolidated financial statements below.
1
Financial Highlights for Q3 Fiscal 2022 with Year Over Year Comparisons
Summary of Quarterly Results
(In millions, except per share data)
Q3 FY'22
Q3 FY'21
$ Change
% Change
Q3 FY'22 in CC*
% Change in CC*
Revenues:
Cloud services and subscriptions
$401.9
$355.8
$46.1
13.0
%
$406.6
14.3
%
Customer support
332.5
335.9
(3.4)
(1.0)
%
341.1
1.5
%
Total annual recurring revenues**
$734.5
$691.8
$42.7
6.2
%
$747.7
8.1
%
License
80.6
76.3
4.3
5.7
%
82.7
8.4
%
Professional service and other
67.2
64.9
2.3
3.6
%
69.0
6.4
%
Total revenues
$882.3
$832.9
$49.4
5.9
%
$899.4
8.0
%
GAAP-based operating income
$131.6
$152.4
($20.8)
(13.6)
%
N/A
N/A
Non-GAAP-based operating income (1)
$262.2
$275.2
($13.0)
(4.7)
%
$270.1
(1.9)
%
GAAP-based net income attributable to OpenText
$74.7
$91.5
($16.8)
(18.4)
%
N/A
N/A
GAAP-based EPS, diluted
$0.28
$0.33
($0.05)
(15.2)
%
N/A
N/A
Non-GAAP-based EPS, diluted (1)(2)
$0.70
$0.75
($0.05)
(6.7)
%
$0.73
(2.7)
%
Adjusted EBITDA (1)
$284.5
$297.1
($12.6)
(4.3)
%
$292.5
(1.5)
%
Operating cash flows
$323.6
$63.6
$260.0
409.0
%
N/A
N/A
Free cash flows (1)
$306.0
$50.3
$255.7
508.8
%
N/A
N/A
Summary of YTD Results
(In millions, except per share data)
FY'22 YTD
FY'21 YTD
$ Change
% Change
FY'22 YTD in CC*
% Change in CC*
Revenues:
Cloud services and subscriptions
$1,123.4
$1,047.3
$76.1
7.3
%
$1,124.8
7.4
%
Customer support
1,002.6
999.8
2.8
0.3
%
1,005.0
0.5
%
Total annual recurring revenues**
$2,126.0
$2,047.1
$79.0
3.9
%
$2,129.8
4.0
%
License
263.7
252.2
11.5
4.6
%
265.8
5.4
%
Professional service and other
201.7
193.3
8.4
4.3
%
202.5
4.7
%
Total revenues
$2,591.4
$2,492.6
$98.8
4.0
%
$2,598.0
4.2
%
GAAP-based operating income
$507.2
$569.2
($62.0)
(10.9)
%
N/A
N/A
Non-GAAP-based operating income (1)
$886.0
$936.1
($50.1)
(5.4)
%
$896.0
(4.3)
%
GAAP-based net income attributable to OpenText
$294.9
$129.4
$165.5
127.9
%
N/A
N/A
GAAP-based EPS, diluted
$1.08
$0.47
$0.61
129.8
%
N/A
N/A
Non-GAAP-based EPS, diluted (1)(2)
$2.43
$2.59
($0.16)
(6.2)
%
$2.46
(5.0)
%
Adjusted EBITDA (1)
$951.4
$1,000.2
($48.9)
(4.9)
%
$961.4
(3.9)
%
Operating cash flows
$729.9
$579.9
$149.9
25.9
%
N/A
N/A
Free cash flows (1)
$674.9
$543.7
$131.3
24.1
%
N/A
N/A
(1) Please see note 2 “Use of Non-GAAP Financial Measures” to the condensed 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.
2
Dividend Program
As part of our quarterly, non-cumulative cash dividend program, the Board declared on May 3, 2022, a cash dividend of $0.2209 per common share. The record date for this dividend is June 3, 2022 and the payment date is June 24, 2022. OpenText believes strongly in returning value to its shareholders and intends to maintain its dividend program. 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: Bank of France, Booz Allen Hamilton, Singapore Customs, Societe Generale, Ecopetrol, Philippine National Service of Investigation, Enedis, Lids Sports Group and Scale Computing
•OpenText announced Cloud Editions 22.1 featuring new and enhanced innovations
•OpenText held its 2022 Investor Day
•OpenText announced the 2022 BrightCloud® Threat Report
•OpenText recipient of 2022 SAP Pinnacle Award in Partner Solutions Success category
•OpenText showcased the latest eDiscovery innovations at Legalweek New York 2022
•OpenText showcased the latest Content Cloud innovations at AIIM2022
•OpenText hosted Supply Chain Summit 2022
•OpenText to host OpenText World Europe in-person on June 21-22
Summary of Quarterly Results
Q3 FY'22
Q2 FY'22
Q3 FY'21
% Change
(Q3 FY'22 vs Q2 FY'22)
% Change
(Q3 FY'22 vs Q3 FY'21)
Revenue (millions)
$882.3
$876.8
$832.9
0.6
%
5.9
%
GAAP-based gross margin
68.9
%
70.2
%
68.6
%
(130)
bps
30
bps
Non-GAAP-based gross margin (1)
74.5
%
76.4
%
75.2
%
(190)
bps
(70)
bps
GAAP-based EPS, diluted
$0.28
$0.32
$0.33
(12.5)
%
(15.2)
%
Non-GAAP-based EPS, diluted (1)(2)
$0.70
$0.89
$0.75
(21.3)
%
(6.7)
%
(1) Please see note 2 “Use of Non-GAAP Financial Measures” to the condensed 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 a quarterly shareholder letter and 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 May 4, 2022 at 7:00 p.m. ET through 11:59 p.m. on May 18, 2022 and can be accessed by dialing 1-855-669-9658 (toll-free) or +1-604-674-8052 (international) and using passcode 8697 followed by the number sign.
Please see below note (2) for a reconciliation of U.S. GAAP-based financial measures used in this press release to Non-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”) in our fiscal year ending June 30, 2022 (Fiscal 2022) on growth, future cloud growth and market share gains, future organic growth initiatives and deployment of capital, intention to maintain a dividend program, potential share repurchases pursuant to its share repurchase plans, future tax rates, new platform and product offerings, scaling OpenText to new levels in Fiscal 2022 and beyond, 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 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 and uncertainties such as those relating to the duration and severity of the COVID-19 pandemic, including any new strains or resurgences, as well as 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 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.
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 $16,439 as of March 31, 2022 and $22,151 as of June 30, 2021
429,877
438,547
Contract assets
25,481
25,344
Income taxes recoverable
20,781
32,312
Prepaid expenses and other current assets
122,616
98,551
Total current assets
2,232,457
2,202,060
Property and equipment
227,830
233,595
Operating lease right of use assets
217,684
234,532
Long-term contract assets
20,049
19,222
Goodwill
5,265,189
4,691,673
Acquired intangible assets
1,181,266
1,187,260
Deferred tax assets
717,345
796,738
Other assets
257,301
208,894
Long-term income taxes recoverable
43,518
35,362
Total assets
$
10,162,639
$
9,609,336
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities
$
404,545
$
423,592
Current portion of long-term debt
10,000
10,000
Operating lease liabilities
59,182
58,315
Deferred revenues
936,750
852,629
Income taxes payable
7,483
17,368
Total current liabilities
1,417,960
1,361,904
Long-term liabilities:
Accrued liabilities
16,631
28,830
Pension liability
76,364
74,511
Long-term debt
4,210,582
3,578,859
Long-term operating lease liabilities
203,101
224,453
Long-term deferred revenues
90,736
98,989
Long-term income taxes payable
35,206
34,113
Deferred tax liabilities
56,208
108,224
Total long-term liabilities
4,688,828
4,147,979
Shareholders' equity:
Share capital and additional paid-in capital
270,231,166 and 271,540,755 Common Shares issued and outstanding at March 31, 2022 and June 30, 2021, respectively; authorized Common Shares: unlimited
2,010,146
1,947,764
Accumulated other comprehensive income
17,266
66,238
Retained earnings
2,151,369
2,153,326
Treasury stock, at cost (2,776,420 and 1,567,664 shares at March 31, 2022 and June 30, 2021, respectively)
(124,033)
(69,386)
Total OpenText shareholders' equity
4,054,748
4,097,942
Non-controlling interests
1,103
1,511
Total shareholders' equity
4,055,851
4,099,453
Total liabilities and shareholders' equity
$
10,162,639
$
9,609,336
5
OPEN TEXT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands of U.S. dollars, except share and per share data)
(unaudited)
Three Months Ended March 31,
Nine Months Ended March 31,
2022
2021
2022
2021
Revenues:
Cloud services and subscriptions
$
401,947
$
355,845
$
1,123,422
$
1,047,285
Customer support
332,514
335,915
1,002,626
999,806
License
80,641
76,299
263,663
252,170
Professional service and other
67,181
64,872
201,679
193,327
Total revenues
882,283
832,931
2,591,390
2,492,588
Cost of revenues:
Cloud services and subscriptions
136,020
123,729
377,928
354,235
Customer support
31,763
30,953
90,914
89,815
License
3,196
2,810
10,906
9,601
Professional service and other
56,693
50,321
161,459
143,521
Amortization of acquired technology-based intangible assets
46,564
53,453
152,333
165,581
Total cost of revenues
274,236
261,266
793,540
762,753
Gross profit
608,047
571,665
1,797,850
1,729,835
Operating expenses:
Research and development
117,730
110,071
321,517
304,212
Sales and marketing
180,955
158,687
491,133
438,984
General and administrative
88,137
71,548
231,127
190,502
Depreciation
22,370
21,961
65,535
64,244
Amortization of acquired customer-based intangible assets
56,215
54,156
160,764
164,075
Special charges (recoveries)
11,031
2,846
20,592
(1,404)
Total operating expenses
476,438
419,269
1,290,668
1,160,613
Income from operations
131,609
152,396
507,182
569,222
Other income (expense), net
24,392
8,283
29,137
16,417
Interest and other related expense, net
(40,238)
(37,333)
(117,538)
(114,017)
Income before income taxes
115,763
123,346
418,781
471,622
Provision for income taxes
41,041
31,818
123,757
342,121
Net income for the period
$
74,722
$
91,528
$
295,024
$
129,501
Net (income) loss attributable to non-controlling interests
(41)
(38)
(130)
(112)
Net income attributable to OpenText
$
74,681
$
91,490
$
294,894
$
129,389
Earnings per share—basic attributable to OpenText
$
0.28
$
0.34
$
1.09
$
0.47
Earnings per share—diluted attributable to OpenText
$
0.28
$
0.33
$
1.08
$
0.47
Weighted average number of Common Shares outstanding—basic (in '000's)
270,693
272,832
271,623
272,414
Weighted average number of Common Shares outstanding—diluted (in '000's)
271,211
273,924
272,439
273,312
6
OPEN TEXT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands of U.S. dollars)
(unaudited)
Three Months Ended March 31,
Nine Months Ended March 31,
2022
2021
2022
2021
Net income for the period
$
74,722
$
91,528
$
295,024
$
129,501
Other comprehensive income (loss)—net of tax:
Net foreign currency translation adjustments
(13,073)
(12,568)
(44,512)
36,142
Unrealized gain (loss) on cash flow hedges:
Unrealized gain (loss) - net of tax expense (recovery) effect of $233 and $246 for the three months ended March 31, 2022 and 2021, respectively; ($158) and $1,302 for the nine months ended March 31, 2022 and 2021, respectively
648
681
(334)
3,608
(Gain) loss reclassified into net income - net of tax (expense) recovery effect of $79 and ($399) for the three months ended March 31, 2022 and 2021, respectively; ($24) and ($682) for the nine months ended March 31, 2022 and 2021, respectively
219
(1,108)
(86)
(1,892)
Actuarial gain (loss) relating to defined benefit pension plans:
Actuarial gain (loss) - net of tax expense (recovery) effect of ($579) and $944 for the three months ended March 31, 2022 and 2021, respectively; ($811) and ($413) for the nine months ended March 31, 2022 and 2021, respectively
(2,033)
344
(4,517)
(2,342)
Amortization of actuarial (gain) loss into net income - net of tax (expense) recovery effect of $66 and $95 for the three months ended March 31, 2022 and 2021, respectively; $134 and $275 for the nine months ended March 31, 2022 and 2021, respectively
156
249
477
733
Total other comprehensive income (loss) net, for the period
(14,083)
(12,402)
(48,972)
36,249
Total comprehensive income
60,639
79,126
246,052
165,750
Comprehensive (income) loss attributable to non-controlling interests
(41)
(38)
(130)
(112)
Total comprehensive income attributable to OpenText
$
60,598
$
79,088
$
245,922
$
165,638
7
OPEN TEXT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands of U.S. dollars and shares)
(unaudited)
Three Months Ended March 31, 2022
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 December 31, 2021
271,006
$
1,990,913
(1,476)
$
(67,966)
$
2,174,467
$
31,349
$
1,062
$
4,129,825
Issuance of Common Shares
Under employee stock option plans
53
1,863
—
—
—
—
—
1,863
Under employee stock purchase plans
172
7,003
—
—
—
—
—
7,003
Share-based compensation
—
16,748
—
—
—
—
—
16,748
Purchase of treasury stock
—
—
(1,300)
(56,067)
—
—
—
(56,067)
Repurchase of Common Shares
(1,000)
(6,381)
—
—
(38,702)
—
—
(45,083)
Dividends declared
($0.2209 per Common Share)
—
—
—
—
(59,077)
—
—
(59,077)
Other comprehensive income (loss) - net
—
—
—
—
—
(14,083)
—
(14,083)
Net income for the period
—
—
—
—
74,681
—
41
74,722
Balance as of March 31, 2022
270,231
$
2,010,146
(2,776)
$
(124,033)
$
2,151,369
$
17,266
$
1,103
$
4,055,851
Three Months Ended March 31, 2021
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 December 31, 2020
272,589
$
1,889,857
(1,101)
$
(47,555)
$
2,093,076
$
66,476
$
1,393
$
4,003,247
Issuance of Common Shares
Under employee stock option plans
219
8,270
—
—
—
—
—
8,270
Under employee stock purchase plans
165
6,421
—
—
—
—
—
6,421
Share-based compensation
—
12,357
—
—
—
—
—
12,357
Purchase of treasury stock
—
—
(490)
(22,977)
—
—
—
(22,977)
Issuance of treasury stock
—
(1,146)
23
1,146
—
—
—
—
Dividends declared ($0.2008 per Common Share)
—
—
—
—
(54,519)
—
—
(54,519)
Other comprehensive income (loss) - net
—
—
—
—
—
(12,402)
—
(12,402)
Net income for the period
—
—
—
—
91,490
—
38
91,528
Balance as of March 31, 2021
272,973
$
1,915,759
(1,568)
$
(69,386)
$
2,130,047
$
54,074
$
1,431
$
4,031,925
8
OPEN TEXT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands of U.S. dollars and shares)
(unaudited)
Nine Months Ended March 31, 2022
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, 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
905
31,128
—
—
—
—
—
31,128
Under employee stock purchase plans
595
24,913
—
—
—
—
—
24,913
Share-based compensation
—
45,091
—
—
—
—
—
45,091
Purchase of treasury stock
—
—
(1,700)
(75,660)
—
—
—
(75,660)
Issuance of treasury stock
—
(21,013)
492
21,013
—
—
—
—
Repurchase of Common Shares
(2,810)
(17,879)
—
—
(118,238)
—
—
(136,117)
Dividends declared
($0.6627 per Common Share)
—
—
—
—
(178,613)
—
—
(178,613)
Other comprehensive income (loss) - net
—
—
—
—
—
(48,972)
—
(48,972)
Distribution to non-controlling interest
—
142
—
—
—
—
(538)
(396)
Net income for the period
—
—
—
—
294,894
—
130
295,024
Balance as of March 31, 2022
270,231
$
2,010,146
(2,776)
$
(124,033)
$
2,151,369
$
17,266
$
1,103
$
4,055,851
Nine Months Ended March 31, 2021
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, net
—
—
—
—
(2,450)
—
—
(2,450)
Issuance of Common Shares
Under employee stock option plans
743
23,768
—
—
—
—
—
23,768
Under employee stock purchase plans
367
13,974
193
6,690
—
—
—
20,664
Share-based compensation
—
38,619
—
—
—
—
—
38,619
Purchase of treasury stock
—
—
(1,455)
(64,847)
—
—
—
(64,847)
Issuance of treasury stock
—
(12,379)
316
12,379
—
—
—
—
Dividends declared
($0.5762 per Common Share)
—
—
—
—
(156,288)
—
—
(156,288)
Other comprehensive income (loss) - net
—
—
—
—
—
36,249
—
36,249
Net income for the period
—
—
—
—
129,389
—
112
129,501
Balance as of March 31, 2021
272,973
$
1,915,759
(1,568)
$
(69,386)
$
2,130,047
$
54,074
$
1,431
$
4,031,925
9
OPEN TEXT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
(unaudited)
Three Months Ended March 31,
Nine Months Ended March 31,
2022
2021
2022
2021
Cash flows from operating activities:
Net income for the period
$
74,722
$
91,528
$
295,024
$
129,501
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of intangible assets
125,149
129,570
378,632
393,900
Share-based compensation expense
16,748
12,357
45,091
38,619
Pension expense
1,868
1,550
4,883
4,670
Amortization of debt issuance costs
1,482
1,141
3,936
3,395
Loss on extinguishment of debt
—
—
27,413
—
Loss on sale and write down of property and equipment
58
1,026
96
1,979
Deferred taxes
22,440
447
43,332
80,844
Share in net (income) loss of equity investees
(27,746)
(11,765)
(59,103)
(20,020)
Changes in operating assets and liabilities:
Accounts receivable
17,241
54,345
68,428
87,072
Contract assets
(8,463)
(8,842)
(27,208)
(29,035)
Prepaid expenses and other current assets
(4,501)
(10,494)
(15,722)
(2,528)
Income taxes
(14,011)
(286,435)
(11,235)
(117,594)
Accounts payable and accrued liabilities
42,891
9,211
(65,738)
(27,327)
Deferred revenue
76,335
81,247
25,642
62,600
Other assets
(386)
2,232
16,527
765
Operating lease assets and liabilities, net
(270)
(3,546)
(128)
(26,910)
Net cash provided by operating activities
323,557
63,572
729,870
579,931
Cash flows from investing activities:
Additions of property and equipment
(17,590)
(13,311)
(54,937)
(36,267)
Purchase of Zix Corporation, net of cash acquired
(18,602)
—
(856,175)
—
Purchase of Bricata Inc.
—
—
(17,927)
—
Purchase of XMedius
—
—
—
444
Purchase of Dynamic Solutions Group Inc.
—
—
—
(371)
Other investing activities
(651)
(648)
(3,922)
(2,018)
Net cash used in investing activities
(36,843)
(13,959)
(932,961)
(38,212)
Cash flows from financing activities:
Proceeds from issuance of Common Shares from exercise of stock options and ESPP
10,788
16,603
56,476
45,780
Proceeds from long-term debt and Revolver
—
—
1,500,000
—
Repayment of long-term debt and Revolver
(2,500)
(2,500)
(857,500)
(607,500)
Debt extinguishment costs
—
—
(24,969)
—
Debt issuance costs
(1,812)
—
(17,159)
—
Repurchase of Common Shares
(45,083)
—
(136,117)
—
Purchase of treasury stock
(56,067)
(22,977)
(75,660)
(64,847)
Distribution to non-controlling interest
—
—
(396)
—
Payments of dividends to shareholders
(59,077)
(54,519)
(178,613)
(156,288)
Net cash provided by (used in) financing activities
(153,751)
(63,393)
266,062
(782,855)
Foreign exchange gain (loss) on cash held in foreign currencies
(11,207)
(11,218)
(36,920)
22,553
Increase (decrease) in cash, cash equivalents and restricted cash during the period
121,756
(24,998)
26,051
(218,583)
Cash, cash equivalents and restricted cash at beginning of the period
1,514,095
1,503,678
1,609,800
1,697,263
Cash, cash equivalents and restricted cash at end of the period
$
1,635,851
$
1,478,680
$
1,635,851
$
1,478,680
10
OPEN TEXT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
(unaudited)
Reconciliation of cash, cash equivalents and restricted cash:
March 31, 2022
March 31, 2021
Cash and cash equivalents
$
1,633,702
$
1,475,626
Restricted cash (1)
2,149
3,054
Total cash, cash equivalents and restricted cash
$
1,635,851
$
1,478,680
(1) Restricted cash is classified under the Prepaid expenses and other current assets and Other assets line items on the Condensed Consolidated Balance Sheets.
11
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 or earnings 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, attributable to OpenText, excluding interest income (expense), provision for income taxes, depreciation and amortization of acquired intangible assets, other income (expense), share-based compensation and special charges (recoveries). 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 most recently 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.
The following charts provide unaudited reconciliations of U.S. GAAP-based financial measures to Non-GAAP-based financial measures for the following periods presented.
12
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures
for the three months ended March 31, 2022
(In thousands, except for per share data)
Three Months Ended March 31, 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
$
136,020
$
(1,268)
(1)
$
134,752
Customer support
31,763
(501)
(1)
31,262
Professional service and other
56,693
(907)
(1)
55,786
Amortization of acquired technology-based intangible assets
46,564
(46,564)
(2)
—
GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%)
608,047
68.9%
49,240
(3)
657,287
74.5%
Operating expenses
Research and development
117,730
(4,350)
(1)
113,380
Sales and marketing
180,955
(5,761)
(1)
175,194
General and administrative
88,137
(3,961)
(1)
84,176
Amortization of acquired customer-based intangible assets
56,215
(56,215)
(2)
—
Special charges (recoveries)
11,031
(11,031)
(4)
—
GAAP-based income from operations / Non-GAAP-based income from operations
131,609
130,558
(5)
262,167
Other income (expense), net
24,392
(24,392)
(6)
—
Provision for income taxes
41,041
(9,971)
(7)
31,070
GAAP-based net income / Non-GAAP-based net income, attributable to OpenText
74,681
116,137
(8)
190,818
GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText
$
0.28
$
0.42
(8)
$
0.70
(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 35% 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-
13
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, 2022
Per share diluted
GAAP-based net income, attributable to OpenText
$
74,681
$
0.28
Add:
Amortization
102,779
0.38
Share-based compensation
16,748
0.06
Special charges (recoveries)
11,031
0.04
Other (income) expense, net
(24,392)
(0.09)
GAAP-based provision for income taxes
41,041
0.15
Non-GAAP-based provision for income taxes
(31,070)
(0.12)
Non-GAAP-based net income, attributable to OpenText
$
190,818
$
0.70
Reconciliation of Adjusted EBITDA
Three Months Ended March 31, 2022
GAAP-based net income, attributable to OpenText
$
74,681
Add:
Provision for income taxes
41,041
Interest and other related expense, net
40,238
Amortization of acquired technology-based intangible assets
46,564
Amortization of acquired customer-based intangible assets
56,215
Depreciation
22,370
Share-based compensation
16,748
Special charges (recoveries)
11,031
Other (income) expense, net
(24,392)
Adjusted EBITDA
$
284,496
GAAP-based net income margin
8.5
%
Adjusted EBITDA margin
32.2
%
Reconciliation of Free cash flows
Three Months Ended March 31, 2022
GAAP-based cash flows provided by operating activities
$
323,557
Add:
Capital expenditures (1)
(17,590)
Free cash flows
$
305,967
(1) Defined as “Additions of property and equipment” in the Condensed Consolidated Statements of Cash Flows.
14
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures
for the nine months ended March 31, 2022
(In thousands, except for per share data)
Nine Months Ended March 31, 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
$
377,928
$
(3,072)
(1)
$
374,856
Customer support
90,914
(1,631)
(1)
89,283
Professional service and other
161,459
(2,275)
(1)
159,184
Amortization of acquired technology-based intangible assets
152,333
(152,333)
(2)
—
GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%)
1,797,850
69.4%
159,311
(3)
1,957,161
75.5%
Operating expenses
Research and development
321,517
(9,936)
(1)
311,581
Sales and marketing
491,133
(15,377)
(1)
475,756
General and administrative
231,127
(12,800)
(1)
218,327
Amortization of acquired customer-based intangible assets
160,764
(160,764)
(2)
—
Special charges (recoveries)
20,592
(20,592)
(4)
—
GAAP-based income from operations / Non-GAAP-based income from operations
507,182
378,780
(5)
885,962
Other income (expense), net
29,137
(29,137)
(6)
—
Provision for income taxes
123,757
(16,178)
(7)
107,579
GAAP-based net income / Non-GAAP-based net income, attributable to OpenText
294,894
365,821
(8)
660,715
GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText
$
1.08
$
1.35
(8)
$
2.43
(1) Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.
(2) Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.
(3) GAAP-based and Non-GAAP-based gross profit stated in dollars and gross margin stated as a percentage of total revenue.
(4) Adjustment relates to the exclusion of special charges (recoveries) from our Non-GAAP-based operating expenses as special charges (recoveries) are generally incurred in the periods relevant to an acquisition and include 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 30% 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-
15
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:
Nine Months Ended March 31, 2022
Per share diluted
GAAP-based net income, attributable to OpenText
$
294,894
$
1.08
Add:
Amortization
313,097
1.15
Share-based compensation
45,091
0.17
Special charges (recoveries)
20,592
0.08
Other (income) expense, net
(29,137)
(0.11)
GAAP-based provision for income taxes
123,757
0.45
Non-GAAP-based provision for income taxes
(107,579)
(0.39)
Non-GAAP-based net income, attributable to OpenText
$
660,715
$
2.43
Reconciliation of Adjusted EBITDA
Nine Months Ended March 31, 2022
GAAP-based net income, attributable to OpenText
$
294,894
Add:
Provision for income taxes
123,757
Interest and other related expense, net
117,538
Amortization of acquired technology-based intangible assets
152,333
Amortization of acquired customer-based intangible assets
160,764
Depreciation
65,535
Share-based compensation
45,091
Special charges (recoveries)
20,592
Other (income) expense, net
(29,137)
Adjusted EBITDA
$
951,367
GAAP-based net income margin
11.4
%
Adjusted EBITDA margin
36.7
%
Reconciliation of Free cash flows
Nine Months Ended March 31, 2022
GAAP-based cash flows provided by operating activities
$
729,870
Add:
Capital expenditures (1)
(54,937)
Free cash flows
$
674,933
(1) Defined as “Additions of property and equipment” in the Condensed Consolidated Statements of Cash Flows.
16
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures
for the three months ended December 31, 2021
(In thousands, except for per share data)
Three Months Ended December 31, 2021
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
$
122,129
$
(897)
(1)
$
121,232
Customer support
29,668
(409)
(1)
29,259
Professional service and other
53,041
(647)
(1)
52,394
Amortization of acquired technology-based intangible assets
52,602
(52,602)
(2)
—
GAAP-based gross profit and gross margin (%) /Non-GAAP-based gross profit and gross margin (%)
615,618
70.2%
54,555
(3)
670,173
76.4%
Operating expenses
Research and development
103,622
(2,652)
(1)
100,970
Sales and marketing
163,938
(5,006)
(1)
158,932
General and administrative
71,513
(4,798)
(1)
66,715
Amortization of acquired customer-based intangible assets
52,665
(52,665)
(2)
—
Special charges (recoveries)
9,217
(9,217)
(4)
—
GAAP-based income from operations / Non-GAAP-based income from operations
192,884
128,893
(5)
321,777
Other income (expense), net
(25,037)
25,037
(6)
—
Provision for income taxes
39,266
148
(7)
39,414
GAAP-based net income / Non-GAAP-based net income, attributable to OpenText
88,298
153,782
(8)
242,080
GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText
$
0.32
$
0.57
(8)
$
0.89
(1) Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.
(2) Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.
(3) GAAP-based and Non-GAAP-based gross profit stated in dollars and gross margin stated as a percentage of total revenue.
(4) Adjustment relates to the exclusion of special charges (recoveries) from our Non-GAAP-based operating expenses as special charges (recoveries) are generally incurred in the periods 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 31% 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-
17
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 December 31, 2021
Per share diluted
GAAP-based net income, attributable to OpenText
$
88,298
$
0.32
Add:
Amortization
105,267
0.39
Share-based compensation
14,409
0.05
Special charges (recoveries)
9,217
0.03
Other (income) expense, net
25,037
0.09
GAAP-based provision for income taxes
39,266
0.15
Non-GAAP-based provision for income taxes
(39,414)
(0.14)
Non-GAAP-based net income, attributable to OpenText
$
242,080
$
0.89
Reconciliation of Adjusted EBITDA
Three Months Ended December 31, 2021
GAAP-based net income, attributable to OpenText
$
88,298
Add:
Provision for income taxes
39,266
Interest and other related expense, net
40,245
Amortization of acquired technology-based intangible assets
52,602
Amortization of acquired customer-based intangible assets
52,665
Depreciation
21,779
Share-based compensation
14,409
Special charges (recoveries)
9,217
Other (income) expense, net
25,037
Adjusted EBITDA
$
343,518
GAAP-based net income margin
10.1
%
Adjusted EBITDA margin
39.2
%
Reconciliation of Free cash flows
Three Months Ended December 31, 2021
GAAP-based cash flows provided by operating activities
$
216,644
Add:
Capital expenditures (1)
(10,635)
Free cash flows
$
206,009
(1) Defined as “Additions of property and equipment” in the Condensed Consolidated Statements of Cash Flows.
18
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures
for the three months ended March 31, 2021
(In thousands, except for per share data)
Three Months Ended March 31, 2021
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
$
123,729
$
(505)
(1)
$
123,224
Customer support
30,953
(464)
(1)
30,489
Professional service and other
50,321
(684)
(1)
49,637
Amortization of acquired technology-based intangible assets
53,453
(53,453)
(2)
—
GAAP-based gross profit and gross margin (%) /Non-GAAP-based gross profit and gross margin (%)
571,665
68.6
%
55,106
(3)
626,771
75.2
%
Operating expenses
Research and development
110,071
(2,146)
(1)
107,925
Sales and marketing
158,687
(4,580)
(1)
154,107
General and administrative
71,548
(3,978)
(1)
67,570
Amortization of acquired customer-based intangible assets
54,156
(54,156)
(2)
—
Special charges (recoveries)
2,846
(2,846)
(4)
—
GAAP-based income from operations / Non-GAAP-based income from operations
152,396
122,812
(5)
275,208
Other income (expense), net
8,283
(8,283)
(6)
—
Provision for income taxes
31,818
1,485
(7)
33,303
GAAP-based net income / Non-GAAP-based net income, attributable to OpenText
91,490
113,044
(8)
204,534
GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText
$
0.33
$
0.42
(8)
$
0.75
(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 26% 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-
19
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, 2021
Per share diluted
GAAP-based net income, attributable to OpenText
$
91,490
$
0.33
Add:
Amortization
107,609
0.39
Share-based compensation
12,357
0.05
Special charges (recoveries)
2,846
0.01
Other (income) expense, net
(8,283)
(0.03)
GAAP-based provision for income taxes
31,818
0.12
Non-GAAP-based provision for income taxes
(33,303)
(0.12)
Non-GAAP-based net income, attributable to OpenText
$
204,534
$
0.75
Reconciliation of Adjusted EBITDA
Three Months Ended March 31, 2021
GAAP-based net income, attributable to OpenText
$
91,490
Add:
Provision for income taxes
31,818
Interest and other related expense, net
37,333
Amortization of acquired technology-based intangible assets
53,453
Amortization of acquired customer-based intangible assets
54,156
Depreciation
21,961
Share-based compensation
12,357
Special charges (recoveries)
2,846
Other (income) expense, net
(8,283)
Adjusted EBITDA
$
297,131
GAAP-based net income margin
11.0
%
Adjusted EBITDA margin
35.7
%
Reconciliation of Free cash flows
Three Months Ended March 31, 2021
GAAP-based cash flows provided by operating activities
$
63,572
Add:
Capital expenditures (1)
(13,311)
Free cash flows
$
50,261
(1) Defined as “Additions of property and equipment” in the Condensed Consolidated Statements of Cash Flows.
20
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures
for the nine months ended March 31, 2021
(In thousands, except for per share data)
Nine Months Ended March 31, 2021
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
$
354,235
$
(2,484)
(1)
$
351,751
Customer support
89,815
(1,405)
(1)
88,410
Professional service and other
143,521
(1,867)
(1)
141,654
Amortization of acquired technology-based intangible assets
165,581
(165,581)
(2)
—
GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%)
1,729,835
69.4
%
171,337
(3)
1,901,172
76.3
%
Operating expenses
Research and development
304,212
(7,195)
(1)
297,017
Sales and marketing
438,984
(13,594)
(1)
425,390
General and administrative
190,502
(12,074)
(1)
178,428
Amortization of acquired customer-based intangible assets
164,075
(164,075)
(2)
—
Special charges (recoveries)
(1,404)
1,404
(4)
—
GAAP-based income from operations / Non-GAAP-based income from operations
569,222
366,871
(5)
936,093
Other income (expense), net
16,417
(16,417)
(6)
—
Provision for income taxes
342,121
(227,030)
(7)
115,091
GAAP-based net income / Non-GAAP-based net income, attributable to OpenText
129,389
577,484
(8)
706,873
GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText
$
0.47
$
2.12
(8)
$
2.59
(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 73% 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-
21
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. The GAAP-based tax provision rate for the nine months ended March 31, 2021 includes an income tax provision charge from IRS settlements partially offset by a tax benefit from the release of unrecognized tax benefits due to the conclusion of relevant tax audits that was recognized during the three months ended December 31, 2020.
(8) Reconciliation of GAAP-based net income to Non-GAAP-based net income:
Nine Months Ended March 31, 2021
Per share diluted
GAAP-based net income, attributable to OpenText
$
129,389
$
0.47
Add:
Amortization
329,656
1.21
Share-based compensation
38,619
0.14
Special charges (recoveries)
(1,404)
(0.01)
Other (income) expense, net
(16,417)
(0.06)
GAAP-based provision for income taxes
342,121
1.26
Non-GAAP-based provision for income taxes
(115,091)
(0.42)
Non-GAAP-based net income, attributable to OpenText
$
706,873
$
2.59
Reconciliation of Adjusted EBITDA
Nine Months Ended March 31, 2021
GAAP-based net income, attributable to OpenText
$
129,389
Add:
Provision for income taxes
342,121
Interest and other related expense, net
114,017
Amortization of acquired technology-based intangible assets
165,581
Amortization of acquired customer-based intangible assets
164,075
Depreciation
64,244
Share-based compensation
38,619
Special charges (recoveries)
(1,404)
Other (income) expense, net
(16,417)
Adjusted EBITDA
$
1,000,225
GAAP-based net income margin
5.2
%
Adjusted EBITDA margin
40.1
%
Reconciliation of Free cash flows
Nine Months Ended March 31, 2021
GAAP-based cash flows provided by operating activities
$
579,931
Add:
Capital expenditures (1)
(36,267)
Free cash flows
$
543,664
(1) Defined as “Additions of property and equipment” in the Condensed Consolidated Statements of Cash Flows.
22
(3) The following tables provide a composition of our major currencies for revenue and expenses, expressed as a percentage, for the three and nine months ended March 31, 2022 and 2021:
Three Months Ended March 31, 2022
Three Months Ended March 31, 2021
Currencies
% of Revenue
% of Expenses(1)
% of Revenue
% of Expenses(1)
EURO
21
%
12
%
24
%
14
%
GBP
5
%
5
%
5
%
6
%
CAD
3
%
14
%
3
%
11
%
USD
63
%
53
%
60
%
53
%
Other
8
%
16
%
8
%
16
%
Total
100
%
100
%
100
%
100
%
Nine Months Ended March 31, 2022
Nine Months Ended March 31, 2021
Currencies
% of Revenue
% of Expenses(1)
% of Revenue
% of Expenses(1)
EURO
23
%
13
%
23
%
14
%
GBP
5
%
6
%
5
%
5
%
CAD
3
%
14
%
3
%
10
%
USD
61
%
52
%
61
%
55
%
Other
8
%
15
%
8
%
16
%
Total
100
%
100
%
100
%
100
%
(1) Expenses include all cost of revenues and operating expenses included within the Condensed Consolidated Statements of Income, except for amortization of intangible assets, share-based compensation and special charges (recoveries).
