OpenText Reports Fourth Quarter and Fiscal Year 2021 Financial Results
Record Annual Total Revenues with Cloud Revenue Growth of 21.6%
Repurchases 2.5 Million Common Shares and Increases Dividend by 10%
Fiscal 2021 Fourth Quarter 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
$893.5
$859.4
$694.4
$671.8
$360.2
$352.7
+8.1%
+4.0%
+5.6%
+2.2%
+8.3%
+6.0%
Annual Recurring Revenues represent 78% of Total Revenues
•Operating cash flows were $296.2 million and free cash flows were $268.8 million
•GAAP-based net income of $181.3 million, up 586.9% Y/Y, margin of 20.3%, up 1,710 basis points Y/Y
•Adjusted EBITDA of $314.8 million, down 0.8%, margin of 35.2%, down 320 basis points Y/Y
•GAAP-based diluted EPS of $0.66, up 560.0% Y/Y
•Non-GAAP diluted EPS of $0.80, constant Y/Y
•During the quarter, the company repurchased and cancelled 2.5 million common shares for $119.1 million under our Share Repurchase Plan
•Quarterly cash dividend increased by 10%
Fiscal 2021 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
$3,386.1
$3,304.8
$2,741.5
$2,686.6
$1,407.4
$1,389.7
+8.9%
+6.3%
+12.7%
+10.4%
+21.6%
+20.0%
Annual Recurring Revenues represent 81% of Total Revenues
•Operating cash flows were $876.1 million and free cash flows were $812.4 million, which include the IRS settlement payment of $299.6 million
•GAAP-based net income of $310.7 million, up 32.6% Y/Y, margin of 9.2%, up 170 basis points Y/Y
•Adjusted EBITDA of $1,315.0 million, up 14.5%, margin of 38.8%, up 190 basis points Y/Y
•GAAP-based diluted EPS of $1.14, up 32.6% Y/Y
•Non-GAAP diluted EPS of $3.39, up 17.3% Y/Y
Waterloo, ON, August 5, 2021 - Open Text Corporation (NASDAQ: OTEX), (TSX: OTEX), today announced its financial results for the fourth quarter and year ended June 30, 2021.
“Our robust fourth quarter results contributed to a record fiscal year, as we successfully helped our customers navigate the challenges of an evolving market and workforce,” said Mark J. Barrenechea, OpenText CEO & CTO. “In Fiscal 2021,
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OpenText delivered a record $3.39 billion in total revenues, up 8.9% year-over-year, supported by record Cloud revenues of $1.4 billion, up 21.6% from a year ago. Annual Recurring Revenues (ARR) reached a record $2.7 billion, up 12.7% year-over-year, representing 81% of total revenues.”
“Information Management’s time has come, and OpenText is perfectly positioned to lead the market as we digitally empower many of the most innovative global organizations, in nearly every vertical and line of business. OpenText Cloud Editions enables customers to accelerate growth and stay ahead of the competition by maximizing the value of their information through our cloud-based Information Management platform.”
“I am very pleased with our fourth quarter and Fiscal 2021 results,” said Madhu Ranganathan, OpenText EVP, CFO. “In Fiscal 2021, we excelled in our operational performance, generating a record $1.3 billion of adjusted EBITDA, up 14.5% year-over-year, and free cash flows of $812.4 million which includes the IRS settlement payment of $299.6 million. With approximately $1.6 billion of cash as of June 30, 2021, and a net leverage ratio of 1.5x, our balance sheet and liquidity position remain strong. We are well positioned to drive our organic growth initiatives and to deploy capital that meet OpenText’s growth and returns based metrics.”
Financial Highlights for Q4 and Fiscal 2021 with Year Over Year Comparisons
Summary of Quarterly Results
(In millions, except per share data)
Q4 FY'21
Q4 FY'20
$ Change
% Change
Q4 FY'21 in CC*
% Change in CC*
Revenues:
Cloud services and subscriptions
$360.2
$332.6
$27.5
8.3
%
$352.7
6.0
%
Customer support
334.3
324.9
9.3
2.9
%
319.1
(1.8)
%
Total annual recurring revenues**
$694.4
$657.5
$36.9
5.6
%
$671.8
2.2
%
License
132.5
105.8
26.7
25.3
%
124.6
17.8
%
Professional service and other
66.6
63.3
3.3
5.2
%
63.0
(0.4)
%
Total revenues
$893.5
$826.6
$66.9
8.1
%
$859.4
4.0
%
GAAP-based operating income
$171.7
$91.2
$80.5
88.2
%
N/A
N/A
Non-GAAP-based operating income (1)
$293.9
$293.8
$0.1
—
%
$285.7
(2.7)
%
GAAP-based net income attributable to OpenText
$181.3
$26.4
$154.9
586.9
%
N/A
N/A
GAAP-based EPS, diluted
$0.66
$0.10
$0.56
560.0
%
N/A
N/A
Non-GAAP-based EPS, diluted (1)(2)
$0.80
$0.80
$—
—
%
$0.78
(2.5)
%
Adjusted EBITDA (1)
$314.8
$317.4
($2.6)
(0.8)
%
$306.3
(3.5)
%
Operating cash flows
$296.2
$280.3
$15.9
5.7
%
N/A
N/A
Free cash flows (1)
$268.8
$262.5
$6.2
2.4
%
N/A
N/A
2
Summary of Annual Results
(In millions, except per share data)
FY'21
FY'20
$ Change
% Change
FY'21 in CC*
% Change in CC*
Revenues:
Cloud services and subscriptions
$1,407.4
$1,157.7
$249.8
21.6
%
$1,389.7
20.0
%
Customer support
1,334.1
1,275.6
58.5
4.6
%
1,297.0
1.7
%
Total annual recurring revenues**
$2,741.5
$2,433.3
$308.2
12.7
%
$2,686.6
10.4
%
License
384.7
402.9
(18.1)
(4.5)
%
368.1
(8.6)
%
Professional service and other
259.9
273.6
(13.7)
(5.0)
%
250.0
(8.6)
%
Total revenues
$3,386.1
$3,109.7
$276.4
8.9
%
$3,304.8
6.3
%
GAAP-based operating income
$740.9
$503.5
$237.4
47.1
%
N/A
N/A
Non-GAAP-based operating income (1)
$1,230.0
$1,058.8
$171.2
16.2
%
$1,193.9
12.8
%
GAAP-based net income attributable to OpenText
$310.7
$234.2
$76.4
32.6
%
N/A
N/A
GAAP-based EPS, diluted
$1.14
$0.86
$0.28
32.6
%
N/A
N/A
Non-GAAP-based EPS, diluted (1)(2)
$3.39
$2.89
$0.50
17.3
%
$3.28
13.5
%
Adjusted EBITDA (1)
$1,315.0
$1,148.1
$167.0
14.5
%
$1,278.2
11.3
%
Operating cash flows
$876.1
$954.5
($78.4)
(8.2)
%
N/A
N/A
Free cash flows (1)
$812.4
$881.8
($69.4)
(7.9)
%
N/A
N/A
(1) Please see note 2 "Use of Non-GAAP Financial Measures" 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 and Share Repurchases
As part of our quarterly, non-cumulative cash dividend program, the Board declared on August 4, 2021, a cash dividend increase of 10% to $0.2209 per common share. The record date for this dividend is September 3, 2021 and the payment date is September 24, 2021. 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.
“Since Fiscal 2013, OpenText has delivered approximately $1.3 billion to shareholders through our dividend and share repurchase programs. In Fiscal 2021 we repurchased and cancelled 2.5 million common shares through our share repurchase plan, and in the next fiscal year, we expect to increase shareholder returns by allocating approximately 33% of free cash flows towards both our dividend and share repurchase programs,” said Mark J. Barrenechea.
Quarterly Business Highlights
•Key customer wins in the quarter included VMware, Wells Fargo, EDF, Cerner, Raytheon, Revlon, Froneri, DHL, Transport for London, Big Cart Holdings, California Department of State Hospitals, Enercon, Multibank Panama, Netherlands Police, Rapid Radiology and Services Australia
•Cloud Editions 21.3 strengthens Information Management in the cloud at scale
•OpenText partners with Google Cloud to extend availability of solution extensions for SAP® applications to the Asia Pacific Japan region
•Industry-leading solutions from OpenText Complement RISE with SAP
•OpenText launches Managed Detection and Response (MDR) Service
•OpenText named a leader in Content Platforms by Forrester
•OpenText recognized as an overall leader for fourth consecutive year in the 2021 Customer Communications Management Aspire Leaderboard
•OpenText World Asia Pacific showcases OpenText Cloud Editions
•Published our second Corporate Citizenship Report confirming our commitment to ESG
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Summary of Quarterly Results
Q4 FY'21
Q3 FY'21
Q4 FY'20
% Change (Q4 FY'21 vs Q3 FY'21)
% Change (Q4 FY'21 vs Q4 FY'20)
Revenue (millions)
$893.5
$832.9
$826.6
7.3
%
8.1
%
GAAP-based gross margin
69.6
%
68.6
%
68.5
%
100
bps
110
bps
Non-GAAP-based gross margin (1)
75.8
%
75.2
%
75.8
%
60
bps
—
bps
GAAP-based EPS, diluted
$0.66
$0.33
$0.10
100.0
%
560.0
%
Non-GAAP-based EPS, diluted (1)(2)
$0.80
$0.75
$0.80
6.7
%
—
%
Summary of Annual Results
FY'21
FY'20
% Change
Revenue (millions)
$3,386.1
$3,109.7
8.9
%
GAAP-based gross margin
69.4
%
67.7
%
170
bps
Non-GAAP-based gross margin (1)
76.1
%
74.5
%
160
bps
GAAP-based EPS, diluted
$1.14
$0.86
32.6
%
Non-GAAP-based EPS, diluted (1)(2)
$3.39
$2.89
17.3
%
(1) Please see note 2 "Use of Non-GAAP Financial Measures" 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
The public is invited to listen to the earnings conference call today at 5:00 p.m. ET (2:00 p.m. PT) by dialing 1-800-319-4610 (toll-free) or +1-604-638-5340 (international). Please dial-in 10 minutes ahead of time to ensure proper connection. Alternatively, a live webcast of the earnings conference call will be available on the Investor Relations section of the Company's website at http://investors.opentext.com/investor-events-and-presentations.
A replay of the call will be available beginning August 5, 2021 at 7:00 p.m. ET through 11:59 p.m. on August 19, 2021 and can be accessed by dialing 1-855-669-9658 (toll-free) or +1-604-674-8052 (international) and using passcode 7298 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. Additionally, “off-cloud” is a term we use to describe license transactions.
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, declaration of quarterly dividends, potential share repurchases pursuant to its Repurchase Plan, future tax rates, new platform and product offerings, scaling OpenText to new levels in Fiscal 2022 and beyond, and other matters, may contain words such as "anticipates", "expects", "intends", "plans", "believes", "seeks", "estimates", "may", "could", "would", "might", "will" and variations of these words or similar expressions are considered forward-looking statements or information under applicable securities laws. In addition, any information or statements that refer to expectations, beliefs, plans, projections, objectives, performance or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking, and based on our current expectations, forecasts and projections about the operating environment, economies and markets in which we operate. Forward-looking statements reflect our current
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estimates, beliefs and assumptions, which are based on management's perception of historic trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances, such as certain assumptions about the economy, as well as market, financial and operational assumptions. Management's estimates, beliefs and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events and, as such, are subject to change. We can give no assurance that such estimates, beliefs and assumptions will prove to be correct. Such forward-looking statements involve known and unknown risks, uncertainties and other factors and assumptions that may cause the actual results, performance or achievements to differ materially which include, but are not limited to, actual and potential risks and uncertainties relating to the ultimate spread of COVID-19, the severity of the disease and the duration of the COVID-19 pandemic. 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 $22,151 as of June 30, 2021 and $20,906 as of June 30, 2020
438,547
466,357
Contract assets
25,344
29,570
Income taxes recoverable
32,312
61,186
Prepaid expenses and other current assets
98,551
136,436
Total current assets
2,202,060
2,386,399
Property and equipment
233,595
244,555
Operating lease right of use assets
234,532
207,869
Long-term contract assets
19,222
15,427
Goodwill
4,691,673
4,672,356
Acquired intangible assets
1,187,260
1,612,564
Deferred tax assets
796,738
911,565
Other assets
208,894
154,467
Long-term income taxes recoverable
35,362
29,620
Total assets
$
9,609,336
$
10,234,822
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities
$
423,592
$
373,314
Current portion of long-term debt
10,000
610,000
Operating lease liabilities
58,315
64,071
Deferred revenues
852,629
812,218
Income taxes payable
17,368
44,630
Total current liabilities
1,361,904
1,904,233
Long-term liabilities:
Accrued liabilities
28,830
34,955
Pension liability
74,511
73,129
Long-term debt
3,578,859
3,584,311
Long-term operating lease liabilities
224,453
217,165
Long-term deferred revenues
98,989
94,382
Long-term income taxes payable
34,113
171,200
Deferred tax liabilities
108,224
148,738
Total long-term liabilities
4,147,979
4,323,880
Shareholders' equity:
Share capital and additional paid-in capital
271,540,755 and 271,863,354 Common Shares issued and outstanding at June 30, 2021 and June 30, 2020, respectively; authorized Common Shares: unlimited
1,947,764
1,851,777
Accumulated other comprehensive income
66,238
17,825
Retained earnings
2,153,326
2,159,396
Treasury stock, at cost (1,567,664 and 622,297 shares at June 30, 2021 and June 30, 2020, respectively)
(69,386)
(23,608)
Total OpenText shareholders' equity
4,097,942
4,005,390
Non-controlling interests
1,511
1,319
Total shareholders' equity
4,099,453
4,006,709
Total liabilities and shareholders' equity
$
9,609,336
$
10,234,822
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,
2021
2020
Revenues:
Cloud services and subscriptions
$
360,160
$
332,618
Customer support
334,256
324,915
License
132,541
105,803
Professional service and other
66,570
63,276
Total revenues
893,527
826,612
Cost of revenues:
Cloud services and subscriptions
127,583
116,569
Customer support
32,938
32,568
License
4,315
3,404
Professional service and other
53,662
48,435
Amortization of acquired technology-based intangible assets
53,215
59,719
Total cost of revenues
271,713
260,695
Gross profit
621,814
565,917
Operating expenses:
Research and development
117,235
100,766
Sales and marketing
183,237
152,882
General and administrative
73,019
62,574
Depreciation
21,021
23,649
Amortization of acquired customer-based intangible assets
52,469
58,998
Special charges (recoveries)
3,152
75,849
Total operating expenses
450,133
474,718
Income from operations
171,681
91,199
Other income (expense), net
45,017
7,790
Interest and other related expense, net
(37,550)
(40,529)
Income before income taxes
179,148
58,460
Provision for (recovery of) income taxes
(2,215)
32,037
Net income for the period
$
181,363
$
26,423
Net (income) loss attributable to non-controlling interests
(80)
(31)
Net income attributable to OpenText
$
181,283
$
26,392
Earnings per share—basic attributable to OpenText
$
0.66
$
0.10
Earnings per share—diluted attributable to OpenText
$
0.66
$
0.10
Weighted average number of Common Shares outstanding—basic (in '000's)
272,892
271,717
Weighted average number of Common Shares outstanding—diluted (in '000's)
273,981
272,367
7
OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands of U.S. dollars, except share and per share data)
Year Ended June 30,
2021
2020
2019
Revenues:
Cloud services and subscriptions
$
1,407,445
$
1,157,686
$
907,812
Customer support
1,334,062
1,275,586
1,247,915
License
384,711
402,851
428,092
Professional service and other
259,897
273,613
284,936
Total revenues
3,386,115
3,109,736
2,868,755
Cost of revenues:
Cloud services and subscriptions
481,818
449,940
383,993
Customer support
122,753
123,894
124,343
License
13,916
11,321
14,347
Professional service and other
197,183
212,903
224,635
Amortization of acquired technology-based intangible assets
218,796
205,717
183,385
Total cost of revenues
1,034,466
1,003,775
930,703
Gross profit
2,351,649
2,105,961
1,938,052
Operating expenses:
Research and development
421,447
370,411
321,836
Sales and marketing
622,221
585,044
518,035
General and administrative
263,521
237,532
207,909
Depreciation
85,265
89,458
97,716
Amortization of acquired customer-based intangible assets
216,544
219,559
189,827
Special charges (recoveries)
1,748
100,428
35,719
Total operating expenses
1,610,746
1,602,432
1,371,042
Income from operations
740,903
503,529
567,010
Other income (expense), net
61,434
(11,946)
10,156
Interest and other related expense, net
(151,567)
(146,378)
(136,592)
Income before income taxes
650,770
345,205
440,574
Provision for (recovery of) income taxes
339,906
110,837
154,937
Net income
$
310,864
$
234,368
$
285,637
Net (income) loss attributable to non-controlling interests
(192)
(143)
(136)
Net income attributable to OpenText
$
310,672
$
234,225
$
285,501
Earnings per share—basic attributable to OpenText
$
1.14
$
0.86
$
1.06
Earnings per share—diluted attributable to OpenText
$
1.14
$
0.86
$
1.06
Weighted average number of Common Shares outstanding—basic
(in '000's)
272,533
270,847
268,784
Weighted average number of Common Shares outstanding—diluted
(in '000's)
273,479
271,817
269,908
8
OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands of U.S. dollars)
Year Ended June 30,
2021
2020
2019
Net income
$
310,864
$
234,368
$
285,637
Other comprehensive income (loss)—net of tax:
Net foreign currency translation adjustments
42,440
(7,784)
(3,882)
Unrealized gain (loss) on cash flow hedges:
Unrealized gain (loss) - net of tax expense (recovery) effect of $1,532, ($599) and $6 for the year ended June 30, 2021, 2020 and 2019, respectively
4,246
(1,662)
16
(Gain) loss reclassified into net income - net of tax (expense) recovery effect of ($1,182), $355 and $539 for the year ended June 30, 2021, 2020 and 2019, respectively
(3,280)
985
1,494
Actuarial gain (loss) relating to defined benefit pension plans:
Actuarial gain (loss) - net of tax expense (recovery) effect of $990, $1,219 and ($2,004) for the year ended June 30, 2021, 2020 and 2019, respectively
3,987
1,245
(7,421)
Amortization of actuarial (gain) loss into net income - net of tax (expense) recovery effect of $379, $520 and $292 for the year ended June 30, 2021, 2020 and 2019, respectively
1,020
917
272
Total other comprehensive income (loss) net
48,413
(6,299)
(9,521)
Total comprehensive income
359,277
228,069
276,116
Comprehensive (income) loss attributable to non-controlling interests
(192)
(143)
(136)
Total comprehensive income attributable to OpenText
$
359,085
$
227,926
$
275,980
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, 2018
267,651
$
1,707,073
(691)
$
(18,732)
$
1,994,235
$
33,645
$
1,037
$
3,717,258
Issuance of Common Shares
Under employee stock option plans
1,472
35,626
—
—
—
—
—
35,626
Under employee stock purchase plans
711
21,835
—
—
—
—
—
21,835
Share-based compensation
—
26,770
—
—
—
—
—
26,770
Purchase of treasury stock
—
—
(726)
(26,499)
—
—
—
(26,499)
Issuance of treasury stock
—
(16,465)
614
16,465
—
—
—
—
Dividends declared ($0.6300 per Common Share)
—
—
—
—
(168,859)
—
—
(168,859)
Cumulative effect of ASU 2016-16
—
—
—
—
(26,780)
—
—
(26,780)
Cumulative effect of Topic 606
—
—
—
—
29,786
—
—
29,786
Other comprehensive income (loss) - net
—
—
—
—
—
(9,521)
—
(9,521)
Non-controlling interest
—
(625)
—
—
—
—
42
(583)
Net income
—
—
—
—
285,501
—
136
285,637
Balance as of June 30, 2019
269,834
$
1,774,214
(803)
$
(28,766)
$
2,113,883
$
24,124
$
1,215
$
3,884,670
Issuance of Common Shares
Under employee stock option plans
1,530
41,282
—
—
—
—
—
41,282
Under employee stock purchase plans
499
17,757
—
—
—
—
—
17,757
Share-based compensation
—
29,532
—
—
—
—
—
29,532
Purchase of treasury stock
—
—
(300)
(12,424)
—
—
—
(12,424)
Issuance of treasury stock
—
(11,008)
481
17,582
—
—
—
6,574
Dividends declared ($0.6984 per Common Share)
—
—
—
—
(188,712)
—
—
(188,712)
Other comprehensive income (loss) - net
—
—
—
—
—
(6,299)
—
(6,299)
Non-controlling interest
—
—
—
—
—
—
(39)
(39)
Net income
—
—
—
—
234,225
—
143
234,368
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
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
—
—
—
—
Repurchase of Common Shares
(2,500)
(15,475)
—
—
(103,630)
—
—
(119,105)
Dividends declared
($0.7770 per Common Share)
—
—
—
—
(210,662)
—
—
(210,662)
Other comprehensive income (loss) - 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
10
OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
(unaudited)
Three Months Ended June 30,
2021
2020
Cash flows from operating activities:
Net income for the period
$
181,363
$
26,423
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of intangible assets
126,705
142,366
Share-based compensation expense
13,350
8,002
Pension expense
1,946
1,479
Amortization of debt issuance costs
1,153
1,130
Accelerated amortization of right of use assets
—
36,864
Loss on sale and write down of property and equipment
792
9,714
Deferred taxes
(7,805)
14,677
Share in net (income) loss of equity investees
(42,877)
(2,225)
Changes in operating assets and liabilities:
Accounts receivable
(26,118)
(1,689)
Contract assets
(10,298)
(13,636)
Prepaid expenses and other current assets
40,261
458
Income taxes
(23,169)
(478)
Accounts payable and accrued liabilities
53,415
72,876
Deferred revenue
(23,305)
(12,974)
Other assets
11,149
(6,309)
Operating lease assets and liabilities, net
(373)
3,572
Net cash provided by operating activities
296,189
280,250
Cash flows from investing activities:
Additions of property and equipment
(27,408)
(17,704)
Purchase of Dynamic Solutions Group Inc.
(600)
—
Other investing activities
(2,550)
(2,783)
Net cash used in investing activities
(30,558)
(20,487)
Cash flows from financing activities:
Proceeds from issuance of Common Shares from exercise of stock options and ESPP
34,287
13,493
Repayment of long-term debt and Revolver
(2,500)
(2,500)
Debt issuance costs
—
(3,636)
Repurchase of Common Shares
(119,105)
—
Payments of dividends to shareholders
(54,374)
(47,335)
Net cash provided by (used in) financing activities
(141,692)
(39,978)
Foreign exchange gain (loss) on cash held in foreign currencies
7,181
19,882
Increase (decrease) in cash, cash equivalents and restricted cash during the period
131,120
239,667
Cash, cash equivalents and restricted cash at beginning of the period
1,478,680
1,457,596
Cash, cash equivalents and restricted cash at end of the period
$
1,609,800
$
1,697,263
Reconciliation of cash, cash equivalents and restricted cash:
June 30, 2021
June 30, 2020
Cash and cash equivalents
$
1,607,306
$
1,692,850
Restricted cash (1)
2,494
4,413
Total cash, cash equivalents and restricted cash
$
1,609,800
$
1,697,263
(1) Restricted cash is classified under the Prepaid expenses and other current assets and Other assets line items on the Consolidated Balance Sheets.
11
OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
Year Ended June 30,
2021
2020
2019
Cash flows from operating activities:
Net income
$
310,864
$
234,368
$
285,637
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of intangible assets
520,605
514,734
470,928
Share-based compensation expense
51,969
29,532
26,770
Pension expense
6,616
5,802
4,624
Amortization of debt issuance costs
4,548
4,633
4,330
Accelerated amortization of right of use assets
—
36,864
—
Loss on extinguishment of debt
—
17,854
—
Loss on sale and write down of property and equipment
2,771
9,714
9,438
Deferred taxes
73,039
51,388
47,425
Share in net (income) loss of equity investees
(62,897)
(8,700)
(13,668)
Changes in operating assets and liabilities:
Accounts receivable
60,954
84,499
75,508
Contract assets
(39,333)
(40,301)
(37,623)
Prepaid expenses and other current assets
37,733
(6,897)
(819)
Income taxes
(140,763)
(35,086)
27,291
Accounts payable and accrued liabilities
26,088
30,613
(21,732)
Deferred revenue
39,295
25,306
(1,827)
Other assets
11,914
1,127
(4)
Operating lease assets and liabilities, net
(27,283)
(914)
—
Net cash provided by operating activities
876,120
954,536
876,278
Cash flows from investing activities:
Additions of property and equipment
(63,675)
(72,709)
(63,837)
Purchase of XMedius
444
(73,335)
—
Purchase of Carbonite, Inc., net of cash and restricted cash acquired
—
(1,305,097)
—
Purchase of Dynamic Solutions Group Inc.
(971)
(4,149)
—
Purchase of Catalyst Repository Systems Inc.
—
—
(70,800)
Purchase of Liaison Technologies, Inc.
—
—
(310,644)
Purchase of Guidance Software, Inc., net of cash acquired
—
—
(2,279)
Other investing activities
(4,568)
(14,127)
(16,966)
Net cash used in investing activities
(68,770)
(1,469,417)
(464,526)
Cash flows from financing activities:
Proceeds from issuance of Common Shares from exercise of stock options and ESPP
80,067
66,600
57,889
Proceeds from long-term debt and Revolver
—
3,150,000
—
Repayment of long-term debt and Revolver
(610,000)
(1,713,631)
(10,000)
Debt extinguishment costs
—
(11,248)
—
Debt issuance costs
—
(21,806)
(322)
Repurchase of Common Shares
(119,105)
—
—
Purchase of treasury stock
(64,847)
(12,424)
(26,499)
Purchase of non-controlling interest
—
—
(583)
Payments of dividends to shareholders
(210,662)
(188,712)
(168,859)
Net cash provided by (used in) financing activities
(924,547)
1,268,779
(148,374)
Foreign exchange gain (loss) on cash held in foreign currencies
29,734
(178)
(3,826)
Increase (decrease) in cash, cash equivalents and restricted cash during the period
(87,463)
753,720
259,552
Cash, cash equivalents and restricted cash at beginning of the period
1,697,263
943,543
683,991
Cash, cash equivalents and restricted cash at end of the period
$
1,609,800
$
1,697,263
$
943,543
12
OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
Reconciliation of cash, cash equivalents and restricted cash:
June 30, 2021
June 30, 2020
June 30, 2019
Cash and cash equivalents
$
1,607,306
$
1,692,850
$
941,009
Restricted cash (1)
2,494
4,413
2,534
Total cash, cash equivalents and restricted cash
$
1,609,800
$
1,697,263
$
943,543
(1) Restricted cash is classified under the Prepaid expenses and other current assets and Other assets line items on the Consolidated Balance Sheets.
13
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 the COVID-19 pandemic, 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.
14
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures
for the three months ended June 30, 2021
(In thousands, except for per share data)
Three Months Ended June 30, 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
$
127,583
$
(935)
(1)
$
126,648
Customer support
32,938
(505)
(1)
32,433
Professional service and other
53,662
(698)
(1)
52,964
Amortization of acquired technology-based intangible assets
53,215
(53,215)
(2)
—
GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%)
621,814
69.6%
55,353
(3)
677,167
75.8%
Operating expenses
Research and development
117,235
(2,664)
(1)
114,571
Sales and marketing
183,237
(4,718)
(1)
178,519
General and administrative
73,019
(3,830)
(1)
69,189
Amortization of acquired customer-based intangible assets
52,469
(52,469)
(2)
—
Special charges (recoveries)
3,152
(3,152)
(4)
—
GAAP-based income from operations / Non-GAAP-based income from operations
171,681
122,186
(5)
293,867
Other income (expense), net
45,017
(45,017)
(6)
—
Provision for (recovery of) income taxes
(2,215)
38,099
(7)
35,884
GAAP-based net income / Non-GAAP-based net income, attributable to OpenText
181,283
39,070
(8)
220,353
GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText
$
0.66
$
0.14
(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 recovery rate of approximately 1% 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
15
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 June 30, 2021
Per share diluted
GAAP-based net income, attributable to OpenText
$
181,283
$
0.66
Add:
Amortization
105,684
0.39
Share-based compensation
13,350
0.05
Special charges (recoveries)
3,152
0.01
Other (income) expense, net
(45,017)
(0.16)
GAAP-based provision for (recovery of) income taxes
(2,215)
(0.02)
Non-GAAP-based provision for income taxes
(35,884)
(0.13)
Non-GAAP-based net income, attributable to OpenText
$
220,353
$
0.80
Reconciliation of Adjusted EBITDA
Three Months Ended June 30, 2021
GAAP-based net income, attributable to OpenText
$
181,283
Add:
Provision for (recovery of) income taxes
(2,215)
Interest and other related expense, net
37,550
Amortization of acquired technology-based intangible assets
53,215
Amortization of acquired customer-based intangible assets
52,469
Depreciation
21,021
Share-based compensation
13,350
Special charges (recoveries)
3,152
Other (income) expense, net
(45,017)
Adjusted EBITDA
$
314,808
GAAP-based net income margin
20.3
%
Adjusted EBITDA margin
35.2
%
Reconciliation of Free cash flows
Three Months Ended June 30, 2021
GAAP-based cash flows provided by operating activities
$
296,189
Add:
Capital expenditures (1)
(27,408)
Free cash flows
$
268,781
(1) Defined as "Additions of property and equipment" in the Consolidated Statements of Cash Flows.
16
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures
for the year ended June 30, 2021
(In thousands, except for per share data)
Year Ended June 30, 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
$
481,818
$
(3,419)
(1)
$
478,399
Customer support
122,753
(1,910)
(1)
120,843
Professional service and other
197,183
(2,565)
(1)
194,618
Amortization of acquired technology-based intangible assets
218,796
(218,796)
(2)
—
GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%)
2,351,649
69.4%
226,690
(3)
2,578,339
76.1%
Operating expenses
Research and development
421,447
(9,859)
(1)
411,588
Sales and marketing
622,221
(18,312)
(1)
603,909
General and administrative
263,521
(15,904)
(1)
247,617
Amortization of acquired customer-based intangible assets
216,544
(216,544)
(2)
—
Special charges (recoveries)
1,748
(1,748)
(4)
—
GAAP-based income from operations / Non-GAAP-based income from operations
740,903
489,057
(5)
1,229,960
Other income (expense), net
61,434
(61,434)
(6)
—
Provision for (recovery of) income taxes
339,906
(188,931)
(7)
150,975
GAAP-based net income / Non-GAAP-based net income, attributable to OpenText
310,672
616,554
(8)
927,226
GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText
$
1.14
$
2.25
(8)
$
3.39
(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 52% 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
17
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 year ended June 30, 2021 includes the income tax provision charge from the IRS settlement 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 second quarter of Fiscal 2021.
(8) Reconciliation of GAAP-based net income to Non-GAAP-based net income:
Year Ended June 30, 2021
Per share diluted
GAAP-based net income, attributable to OpenText
$
310,672
$
1.14
Add:
Amortization
435,340
1.59
Share-based compensation
51,969
0.19
Special charges (recoveries)
1,748
0.01
Other (income) expense, net
(61,434)
(0.22)
GAAP-based provision for (recovery of) income taxes
339,906
1.23
Non-GAAP-based provision for income taxes
(150,975)
(0.55)
Non-GAAP-based net income, attributable to OpenText
$
927,226
$
3.39
Reconciliation of Adjusted EBITDA
Year Ended June 30, 2021
GAAP-based net income, attributable to OpenText
$
310,672
Add:
Provision for (recovery of) income taxes
339,906
Interest and other related expense, net
151,567
Amortization of acquired technology-based intangible assets
218,796
Amortization of acquired customer-based intangible assets
216,544
Depreciation
85,265
Share-based compensation
51,969
Special charges (recoveries)
1,748
Other (income) expense, net
(61,434)
Adjusted EBITDA
$
1,315,033
GAAP-based net income margin
9.2
%
Adjusted EBITDA margin
38.8
%
Reconciliation of Free cash flows
Year Ended June 30, 2021
GAAP-based cash flows provided by operating activities
$
876,120
Add:
Capital expenditures (1)
(63,675)
Free cash flows
$
812,445
(1) Defined as "Additions of property and equipment" in the 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 (recovery of) 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-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
19
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 (recovery of) 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 (recovery of) 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 Consolidated Statements of Cash Flows.
20
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures
for the three months ended June 30, 2020
(In thousands, except for per share data)
Three Months Ended June 30, 2020
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
$
116,569
$
(490)
(1)
$
116,079
Customer support
32,568
(310)
(1)
32,258
Professional service and other
48,435
(377)
(1)
48,058
Amortization of acquired technology-based intangible assets
59,719
(59,719)
(2)
—
GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%)
565,917
68.5
%
60,896
(3)
626,813
75.8
%
Operating expenses
Research and development
100,766
(1,590)
(1)
99,176
Sales and marketing
152,882
(2,575)
(1)
150,307
General and administrative
62,574
(2,660)
(1)
59,914
Amortization of acquired customer-based intangible assets
58,998
(58,998)
(2)
—
Special charges (recoveries)
75,849
(75,849)
(4)
—
GAAP-based income from operations / Non-GAAP-based income from operations
91,199
202,568
(5)
293,767
Other income (expense), net
7,790
(7,790)
(6)
—
Provision for (recovery of) income taxes
32,037
3,416
(7)
35,453
GAAP-based net income / Non-GAAP-based net income, attributable to OpenText
26,392
191,362
(8)
217,754
GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText
$
0.10
$
0.70
(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 55% 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
21
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 June 30, 2020
Per share diluted
GAAP-based net income, attributable to OpenText
$
26,392
$
0.10
Add:
Amortization
118,717
0.44
Share-based compensation
8,002
0.03
Special charges (recoveries)
75,849
0.28
Other (income) expense, net
(7,790)
(0.03)
GAAP-based provision for (recovery of) income taxes
32,037
0.12
Non-GAAP-based provision for income taxes
(35,453)
(0.14)
Non-GAAP-based net income, attributable to OpenText
$
217,754
$
0.80
Reconciliation of Adjusted EBITDA
Three Months Ended June 30, 2020
GAAP-based net income, attributable to OpenText
$
26,392
Add:
Provision for (recovery of) income taxes
32,037
Interest and other related expense, net
40,529
Amortization of acquired technology-based intangible assets
59,719
Amortization of acquired customer-based intangible assets
58,998
Depreciation
23,649
Share-based compensation
8,002
Special charges (recoveries)
75,849
Other (income) expense, net
(7,790)
Adjusted EBITDA
$
317,385
GAAP-based net income margin
3.2
%
Adjusted EBITDA margin
38.4
%
Reconciliation of Free cash flows
Three Months Ended June 30, 2020
GAAP-based cash flows provided by operating activities
$
280,250
Add:
Capital expenditures (1)
(17,704)
Free cash flows
$
262,546
(1) Defined as "Additions of property and equipment" in the Consolidated Statements of Cash Flows.
22
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures
for the year ended June 30, 2020
(In thousands, except for per share data)
Year Ended June 30, 2020
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
$
449,940
$
(1,642)
(1)
$
448,298
Customer support
123,894
(1,207)
(1)
122,687
Professional service and other
212,903
(1,294)
(1)
211,609
Amortization of acquired technology-based intangible assets
205,717
(205,717)
(2)
—
GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%)
2,105,961
67.7
%
209,860
(3)
2,315,821
74.5
%
Operating expenses
Research and development
370,411
(5,309)
(1)
365,102
Sales and marketing
585,044
(9,335)
(1)
575,709
General and administrative
237,532
(10,745)
(1)
226,787
Amortization of acquired customer-based intangible assets
219,559
(219,559)
(2)
—
Special charges (recoveries)
100,428
(100,428)
(4)
—
GAAP-based income from operations / Non-GAAP-based income from operations
503,529
555,236
(5)
1,058,765
Other income (expense), net
(11,946)
11,946
(6)
—
Provision for (recovery of) income taxes
110,837
16,897
(7)
127,734
GAAP-based net income / Non-GAAP-based net income, attributable to OpenText
234,225
550,285
(8)
784,510
GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText
$
0.86
$
2.03
(8)
$
2.89
(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 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 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
23
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, 2020
Per share diluted
GAAP-based net income, attributable to OpenText
$
234,225
$
0.86
Add:
Amortization
425,276
1.56
Share-based compensation
29,532
0.11
Special charges (recoveries)
100,428
0.37
Other (income) expense, net
11,946
0.04
GAAP-based provision for (recovery of) income taxes
110,837
0.41
Non-GAAP-based provision for income taxes
(127,734)
(0.46)
Non-GAAP-based net income, attributable to OpenText
$
784,510
$
2.89
Reconciliation of Adjusted EBITDA
Year Ended June 30, 2020
GAAP-based net income, attributable to OpenText
$
234,225
Add:
Provision for (recovery of) income taxes
110,837
Interest and other related expense, net
146,378
Amortization of acquired technology-based intangible assets
205,717
Amortization of acquired customer-based intangible assets
219,559
Depreciation
89,458
Share-based compensation
29,532
Special charges (recoveries)
100,428
Other (income) expense, net
11,946
Adjusted EBITDA
$
1,148,080
GAAP-based net income margin
7.5
%
Adjusted EBITDA margin
36.9
%
Reconciliation of Free cash flows
Year Ended June 30, 2020
GAAP-based cash flows provided by operating activities
$
954,536
Add:
Capital expenditures (1)
(72,709)
Free cash flows
$
881,827
(1) Defined as "Additions of property and equipment" in the Consolidated Statements of Cash Flows.
24
(3) The following tables provide a composition of our major currencies for revenue and expenses, expressed as a percentage, for the three months and year ended June 30, 2021 and 2020:
Three Months Ended June 30, 2021
Three Months Ended June 30, 2020
Currencies
% of Revenue
% of Expenses(1)
% of Revenue
% of Expenses(1)
EURO
24
%
14
%
22
%
13
%
GBP
5
%
5
%
4
%
5
%
CAD
3
%
13
%
3
%
8
%
USD
60
%
53
%
63
%
57
%
Other
8
%
15
%
8
%
17
%
Total
100
%
100
%
100
%
100
%
Year Ended June 30, 2021
Year Ended June 30, 2020
Currencies
% of Revenue
% of Expenses(1)
% of Revenue
% of Expenses(1)
EURO
23
%
14
%
22
%
14
%
GBP
5
%
5
%
5
%
6
%
CAD
3
%
11
%
3
%
9
%
USD
61
%
54
%
61
%
55
%
Other
8
%
16
%
9
%
16
%
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).
