OpenText Reports Fourth Quarter and Fiscal Year 2022 Financial Results
Record Total Revenues, Annual Cloud Revenues and Annual Recurring Revenues
Fiscal 2022 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
$3,494
$3,533
$2,866
$2,892
$1,535
$1,545
+3.2%
+4.3%
+4.5%
+5.5%
+9.1%
+9.8%
Annual Recurring Revenues represent 82% of Total Revenues
•Record Total revenues of $3.5 billion up 3.2% Y/Y or up 4.3% Y/Y in constant currency
•Record Annual recurring revenues of $2.9 billion, up 4.5% Y/Y or up 5.5% Y/Y in constant currency
•Record Cloud revenues of $1.5 billion up 9.1% Y/Y or up 9.8% in constant currency, becomes our largest revenue contributor
•Record FY’22 Enterprise cloud bookings(1) of $466 million
•Operating cash flows were $982 million and free cash flows(1) were $889 million, up 9.4% Y/Y
•GAAP-based net income of $397 million, up 27.8% Y/Y, margin of 11.4%, up 220 basis points Y/Y
•Adjusted EBITDA(1) of $1.3 billion, margin of 36.2% while making key investments in cloud, edge and security
•Record capital returns of $415 million via dividends and share repurchases
•GAAP-based diluted earnings per share (EPS) of $1.46, Non-GAAP diluted EPS of $3.22
•Quarterly cash dividend increased by 10%
Fiscal 2022 Fourth Quarter Highlights
Total Revenues
(in millions)
Annual Recurring Revenues
(in millions)
Cloud Revenues
(in millions)
Reported
Constant Currency
Reported
Constant Currency
Reported
Constant Currency
$902
$935
$740
$762
$412
$420
+1.0%
+4.7%
+6.6%
+9.8%
+14.3%
+16.6%
Annual Recurring Revenues represent 82% of Total Revenues
•Total revenues of $902 million, up 1.0% Y/Y or up 4.7% in constant currency
•Annual recurring revenues of $740 million, up 6.6% Y/Y or up 9.8% in constant currency
•Cloud revenues of $412 million, up 14.3% Y/Y or up 16.6% in constant currency
•Operating cash flows were $252 million and free cash flows(1) were $214 million
•GAAP-based net income of $102 million, down 43.6% Y/Y, margin of 11.3%, down 900 basis points Y/Y
•Adjusted EBITDA(2) of $314 million, margin of 34.8%
•GAAP-based diluted earnings per share (EPS) of $0.38, Non-GAAP diluted EPS(1) of $0.80
•During the quarter, the Company repurchased and cancelled 1.0 million shares for $41 million under our share repurchase plans
1
Waterloo, ON, August 4, 2022 - Open Text Corporation (NASDAQ: OTEX), (TSX: OTEX), today announced its financial results for the fourth quarter and year ended June 30, 2022.
“Our strong fourth quarter and year-end results reflect customers’ accelerating journey to the OpenText Cloud,” said Mark J. Barrenechea, OpenText CEO & CTO. “In Fiscal 2022, OpenText delivered a record $3.5 billion of total revenues, led by record cloud revenues and cloud bookings. Fiscal 2022 annual recurring revenues reached record $2.9 billion, representing 82% of total revenues.”
“OpenText is more relevant than ever before as we help customers build and own their digital fabrics to transform their organizations and do more with less,” added Mr. Barrenechea. “Through our recently unveiled Project Titanium, we have taken a massive step forward in strengthening the OpenText Cloud as a foundation of modern work, digital supply chains, customer experiences and secure computing. OpenText is ready for all economic scenarios, and our outlook for Fiscal 2023 focuses on continued cloud and free cash flow growth.”
“Let me thank our entire team for their amazing efforts to keep one another safe and well while delivering outstanding service to our customers. The team continues to raise their game each quarter amidst a dynamic environment.”
“OpenText delivered an exceptional year,” said Madhu Ranganathan, OpenText EVP, CFO. “Our team delivered a solid Fiscal 2022 with adjusted EBITDA of $1.3 billion and strong free cash flows of $889 million. With approximately $1.7 billion in cash as of June 30, 2022 and a net leverage ratio of 2.0x, our balance sheet and liquidity position remain strong. Our strategic investments in product innovation and go-to-market initiatives continue to position us well to win in the cloud.”
(1) Enterprise cloud bookings is defined as the total value from cloud services and subscription contracts, entered into in the fiscal year that are new, committed and incremental to our existing contracts, excluding the impact of Carbonite and Zix.
(2) Please see Note 2 “Use of Non-GAAP Financial Measures” to the consolidated financial statements below.
Financial Highlights for Fiscal 2022 and Q4 with Year Over Year Comparisons
Summary of Annual Results
(In millions, except per share data)
FY'22
FY'21
$ Change
% Change
FY'22 in CC*
% Change in CC*
Revenues:
Cloud services and subscriptions
$1,535.0
$1,407.4
$127.6
9.1
%
$1,544.7
9.8
%
Customer support
1,331.0
1,334.1
($3.1)
(0.2)
%
1,347.3
1.0
%
Total annual recurring revenues**
$2,866.0
$2,741.5
$124.5
4.5
%
$2,892.0
5.5
%
License
358.4
384.7
($26.4)
(6.9)
%
367.0
(4.6)
%
Professional service and other
269.5
259.9
$9.6
3.7
%
274.3
5.5
%
Total revenues
$3,493.8
$3,386.1
$107.7
3.2
%
$3,533.3
4.3
%
GAAP-based operating income
$
644.8
$740.9
($96.1)
(13.0)
%
N/A
N/A
Non-GAAP-based operating income (1)
$1,176.9
$1,230.0
($53.0)
(4.3)
%
$1,199.9
(2.4)
%
GAAP-based net income attributable to OpenText
$397.1
$310.7
$86.4
27.8
%
N/A
N/A
GAAP-based EPS, diluted
$1.46
$1.14
$0.32
28.1
%
N/A
N/A
Non-GAAP-based EPS, diluted (1)(2)
$3.22
$3.39
($0.17)
(5.0)
%
$3.35
(1.2)
%
Adjusted EBITDA (1)
$1,265.0
$1,315.0
($50.0)
(3.8)
%
$1,288.1
(2.1)
%
Operating cash flows
$981.8
$876.1
$105.7
12.1
%
N/A
N/A
Free cash flows (1)
$888.7
$812.4
$76.3
9.4
%
N/A
N/A
2
Summary of Quarterly Results
(In millions, except per share data)
Q4 FY'22
Q4 FY'21
$ Change
% Change
Q4 FY'22 in CC*
% Change in CC*
Revenues:
Cloud services and subscriptions
$411.6
$360.2
$51.4
14.3
%
$420.0
16.6
%
Customer support
328.3
334.3
($5.9)
(1.8)
%
342.3
2.4
%
Total annual recurring revenues**
$739.9
$694.4
$45.5
6.6
%
$762.2
9.8
%
License
94.7
132.5
($37.9)
(28.6)
%
101.3
(23.6)
%
Professional service and other
67.8
66.6
$1.3
1.9
%
71.9
7.9
%
Total revenues
$902.5
$893.5
$8.9
1.0
%
$935.4
4.7
%
GAAP-based operating income
$137.6
$171.7
($34.1)
(19.9)
%
N/A
N/A
Non-GAAP-based operating income (1)
$291.0
$293.9
($2.9)
(1.0)
%
$303.9
3.4
%
GAAP-based net income attributable to OpenText
$102.2
$181.3
($79.1)
(43.6)
%
N/A
N/A
GAAP-based EPS, diluted
$0.38
$0.66
($0.28)
(42.4)
%
N/A
N/A
Non-GAAP-based EPS, diluted (1)(2)
$0.80
$0.80
$—
—
%
$0.89
11.3
%
Adjusted EBITDA (1)
$313.6
$314.8
($1.2)
(0.4)
%
$326.7
3.8
%
Operating cash flows
$251.9
$296.2
($44.2)
(14.9)
%
N/A
N/A
Free cash flows (1)
$213.8
$268.8
($55.0)
(20.5)
%
N/A
N/A
(1) Please see Note 2 “Use of Non-GAAP Financial Measures” to the consolidated financial statements below.
(2) Please also see Note 14 to the Company's Fiscal 2018 Consolidated Financial Statements on Form 10-K. Reflective of the amount of net tax benefit arising from the internal reorganization assumed to be allocable to the current period based on the forecasted utilization period.
Note: Individual line items in tables may be adjusted by non-material amounts to enable totals to align to published financial statements.
*CC: Constant currency for this purpose is defined as the current period reported revenues/expenses/earnings represented at the prior comparative period's foreign exchange rate.
**Annual recurring revenue is defined as the sum of Cloud services and subscriptions revenue and Customer support revenue.
Dividend and Share Repurchases
As part of our quarterly, non-cumulative cash dividend program, the Board declared on August 3, 2022, a cash dividend increase of 10% to $0.24299 per common share. The record date for this dividend is September 2, 2022 and the payment date is September 23, 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: Carl Zeiss AG, Citgo Petroleum Corporation, Close Brothers, Evermark, Hydro Quebec, Legal Aid Western Australia, MUFG Bank, One World Apparel, Phillips Lytle, Region Skane, Salt River Project, Sysmex
•OpenText accelerates cloud investments with Project Titanium
•OpenText powers the Information Advantage with Cloud Editions 22.2
•OpenText extends reach of its Information Management solutions in DACH region through partnership with Scheer Group
•OpenText showcases Business-to-Anything integration at Gartner® Supply Chain Symposium/Xpo 2022
•OpenText unveils new threat intelligence technology and other security advancements at RSA Conference
•OpenText partners with Girl Scouts to help members become cyber resilient
•OpenText World EMEA 2022 showcases innovations enabling the Information Advantage
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Summary of Annual Results
FY'22
FY'21
% Change
Revenue (millions)
$3,493.8
$3,386.1
3.2
%
GAAP-based gross margin
69.6
%
69.4
%
15
bps
Non-GAAP-based gross margin (1)
75.6
%
76.1
%
(54)
bps
GAAP-based EPS, diluted
$1.46
$1.14
28.1
%
Non-GAAP-based EPS, diluted (1)(2)
$3.22
$3.39
(5.0)
%
Summary of Quarterly Results
Q4 FY'22
Q3 FY'22
Q4 FY'21
% Change
(Q4 FY'22 vs Q3 FY'22)
% Change
(Q4 FY'22 vs Q4 FY'21)
Revenue (millions)
$902.5
$882.3
$893.5
2.3
%
1.0
%
GAAP-based gross margin
70.2
%
68.9
%
69.6
%
130
bps
60
bps
Non-GAAP-based gross margin (1)
75.9
%
74.5
%
75.8
%
140
bps
10
bps
GAAP-based EPS, diluted
$0.38
$0.28
$0.66
35.7
%
(42.4)
%
Non-GAAP-based EPS, diluted (1)(2)
$0.80
$0.70
$0.80
14.3
%
—
%
(1) Please see Note 2 “Use of Non-GAAP Financial Measures” to the consolidated financial statements below.
(2) Please also see Note 14 to the Company's Fiscal 2018 Consolidated Financial Statements on Form 10-K. Reflective of the amount of net tax benefit arising from the internal reorganization assumed to be allocable to the current period based on the forecasted utilization period.
Conference Call Information
OpenText posted our 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 August 4, 2022 at 7:00 p.m. ET through 11:59 p.m. on August 18, 2022 and can be accessed by dialing 1-855-669-9658 (toll-free) or +1-604-674-8052 (international) and using passcode 9157 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, 2023 (Fiscal 2023) 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 and associated benefits to customers, scaling OpenText, and other matters, which may contain words such as “anticipates”, “expects”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “may”, “could”, “would”, “might”, “will” and variations of these words or similar expressions are 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,
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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 $16,473 as of June 30, 2022 and $22,151 as of June 30, 2021
426,652
438,547
Contract assets
26,167
25,344
Income taxes recoverable
18,255
32,312
Prepaid expenses and other current assets
120,552
98,551
Total current assets
2,285,367
2,202,060
Property and equipment
244,709
233,595
Operating lease right of use assets
198,132
234,532
Long-term contract assets
19,719
19,222
Goodwill
5,244,653
4,691,673
Acquired intangible assets
1,075,208
1,187,260
Deferred tax assets
810,154
796,738
Other assets
256,987
208,894
Long-term income taxes recoverable
44,044
35,362
Total assets
$
10,178,973
$
9,609,336
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities
$
448,607
$
423,592
Current portion of long-term debt
10,000
10,000
Operating lease liabilities
56,380
58,315
Deferred revenues
902,202
852,629
Income taxes payable
51,069
17,368
Total current liabilities
1,468,258
1,361,904
Long-term liabilities:
Accrued liabilities
18,208
28,830
Pension liability
60,951
74,511
Long-term debt
4,209,567
3,578,859
Long-term operating lease liabilities
198,695
224,453
Long-term deferred revenues
91,144
98,989
Long-term income taxes payable
34,003
34,113
Deferred tax liabilities
65,887
108,224
Total long-term liabilities
4,678,455
4,147,979
Shareholders' equity:
Share capital and additional paid-in capital
269,522,639 and 271,540,755 Common Shares issued and outstanding at June 30, 2022 and June 30, 2021, respectively; authorized Common Shares: unlimited
2,038,674
1,947,764
Accumulated other comprehensive income (loss)
(7,659)
66,238
Retained earnings
2,160,069
2,153,326
Treasury stock, at cost (3,706,420 and 1,567,664 shares at June 30, 2022 and June 30, 2021, respectively)
(159,966)
(69,386)
Total OpenText shareholders' equity
4,031,118
4,097,942
Non-controlling interests
1,142
1,511
Total shareholders' equity
4,032,260
4,099,453
Total liabilities and shareholders' equity
$
10,178,973
$
9,609,336
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,
2022
2021
Revenues:
Cloud services and subscriptions
$
411,595
$
360,160
Customer support
328,339
334,256
License
94,688
132,541
Professional service and other
67,832
66,570
Total revenues
902,454
893,527
Cost of revenues:
Cloud services and subscriptions
133,785
127,583
Customer support
30,571
32,938
License
2,595
4,315
Professional service and other
55,436
53,662
Amortization of acquired technology-based intangible assets
46,274
53,215
Total cost of revenues
268,661
271,713
Gross profit
633,793
621,814
Operating expenses:
Research and development
118,931
117,235
Sales and marketing
185,985
183,237
General and administrative
85,958
73,019
Depreciation
22,706
21,021
Amortization of acquired customer-based intangible assets
56,341
52,469
Special charges (recoveries)
26,281
3,152
Total operating expenses
496,202
450,133
Income from operations
137,591
171,681
Other income (expense), net
(19)
45,017
Interest and other related expense, net
(40,342)
(37,550)
Income before income taxes
97,230
179,148
Provision for income taxes
(5,005)
(2,215)
Net income for the period
$
102,235
$
181,363
Net (income) loss attributable to non-controlling interests
(39)
(80)
Net income attributable to OpenText
$
102,196
$
181,283
Earnings per share—basic attributable to OpenText
$
0.38
$
0.66
Earnings per share—diluted attributable to OpenText
$
0.38
$
0.66
Weighted average number of Common Shares outstanding—basic (in '000's)
270,152
272,892
Weighted average number of Common Shares outstanding—diluted (in '000's)
270,394
273,981
7
OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands of U.S. dollars, except share and per share data)
Year Ended June 30,
2022
2021
2020
Revenues:
Cloud services and subscriptions
$
1,535,017
$
1,407,445
$
1,157,686
Customer support
1,330,965
1,334,062
1,275,586
License
358,351
384,711
402,851
Professional service and other
269,511
259,897
273,613
Total revenues
3,493,844
3,386,115
3,109,736
Cost of revenues:
Cloud services and subscriptions
511,713
481,818
449,940
Customer support
121,485
122,753
123,894
License
13,501
13,916
11,321
Professional service and other
216,895
197,183
212,903
Amortization of acquired technology-based intangible assets
198,607
218,796
205,717
Total cost of revenues
1,062,201
1,034,466
1,003,775
Gross profit
2,431,643
2,351,649
2,105,961
Operating expenses:
Research and development
440,448
421,447
370,411
Sales and marketing
677,118
622,221
585,044
General and administrative
317,085
263,521
237,532
Depreciation
88,241
85,265
89,458
Amortization of acquired customer-based intangible assets
217,105
216,544
219,559
Special charges (recoveries)
46,873
1,748
100,428
Total operating expenses
1,786,870
1,610,746
1,602,432
Income from operations
644,773
740,903
503,529
Other income (expense), net
29,118
61,434
(11,946)
Interest and other related expense, net
(157,880)
(151,567)
(146,378)
Income before income taxes
516,011
650,770
345,205
Provision for (recovery of) income taxes
118,752
339,906
110,837
Net income
$
397,259
$
310,864
$
234,368
Net loss attributable to non-controlling interests
(169)
(192)
(143)
Net income attributable to OpenText
$
397,090
$
310,672
$
234,225
Earnings per share—basic attributable to OpenText
$
1.46
$
1.14
$
0.86
Earnings per share—diluted attributable to OpenText
$
1.46
$
1.14
$
0.86
Weighted average number of Common Shares outstanding—basic
(in '000's)
271,271
272,533
270,847
Weighted average number of Common Shares outstanding—diluted
(in '000's)
271,909
273,479
271,817
8
OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands of U.S. dollars)
Year Ended June 30,
2022
2021
2020
Net income
$
397,259
$
310,864
$
234,368
Other comprehensive income (loss)—net of tax:
Net foreign currency translation adjustments
(78,724)
42,440
(7,784)
Unrealized gain (loss) on cash flow hedges:
Unrealized gain (loss) - net of tax expense (recovery) effect of ($671), $1,532, and ($599) for the year ended June 30, 2022, 2021 and 2020, respectively
(1,859)
4,246
(1,662)
(Gain) loss reclassified into net income - net of tax (expense) recovery effect of $134, ($1,182) and $355 for the year ended June 30, 2022, 2021 and 2020, respectively
373
(3,280)
985
Actuarial gain (loss) relating to defined benefit pension plans:
Actuarial gain (loss) - net of tax expense (recovery) effect of $1,866, $990 and $1,219 for the year ended June 30, 2022, 2021 and 2020, respectively
5,595
3,987
1,245
Amortization of actuarial (gain) loss into net income - net of tax (expense) recovery effect of $290, $379 and $520 for the year ended June 30, 2022, 2021 and 2020, respectively
718
1,020
917
Total other comprehensive income (loss) net
(73,897)
48,413
(6,299)
Total comprehensive income
323,362
359,277
228,069
Comprehensive (income) loss attributable to non-controlling interests
(169)
(192)
(143)
Total comprehensive income attributable to OpenText
$
323,193
$
359,085
$
227,926
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, 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 - 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
—
$
—
—
$
—
$
(2,450)
$
—
$
—
$
(2,450)
Issuance of Common Shares
Under employee stock option plans
1,605
49,565
—
—
—
—
—
49,565
Under employee stock purchase plans
573
22,307
193
6,690
—
—
—
28,997
Share-based compensation
—
51,969
—
—
—
—
—
51,969
Purchase of treasury stock
—
—
(1,455)
(64,847)
—
—
—
(64,847)
Issuance of treasury stock
—
(12,379)
316
12,379
—
—
—
—
Common Shares repurchased
(2,500)
(15,475)
—
—
(103,630)
—
—
(119,105)
Dividends declared ($0.7770 per Common Share)
—
—
—
—
(210,662)
—
—
(210,662)
Non-controlling interest
—
—
—
—
—
—
—
—
Other comprehensive income - net
—
—
—
—
—
48,413
—
48,413
Net income
—
—
—
—
310,672
—
192
310,864
Balance as of June 30, 2021
271,541
$
1,947,764
(1,568)
$
(69,386)
$
2,153,326
$
66,238
$
1,511
$
4,099,453
Issuance of Common Shares
Under employee stock option plans
950
32,714
—
—
—
—
—
32,714
Under employee stock purchase plans
842
33,806
—
—
—
—
—
33,806
Share-based compensation
—
69,556
—
—
—
—
—
69,556
Purchase of treasury stock
—
—
(2,630)
(111,593)
—
—
—
(111,593)
Issuance of treasury stock
—
(21,013)
492
21,013
—
—
—
—
Common Shares repurchased
(3,810)
(24,295)
—
—
(152,692)
—
—
(176,987)
Dividends declared ($0.8836 per Common Share)
—
—
—
—
(237,655)
—
—
(237,655)
Non-controlling interest
—
—
—
—
—
—
—
—
Other comprehensive income (loss) - net
—
—
—
—
—
(73,897)
—
(73,897)
Distribution to non-controlling interest
—
142
—
—
—
—
(538)
(396)
Net income
—
—
—
—
397,090
—
169
397,259
Balance as of June 30, 2022
269,523
$
2,038,674
(3,706)
$
(159,966)
$
2,160,069
$
(7,659)
$
1,142
$
4,032,260
10
OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
(unaudited)
Three Months Ended June 30,
2022
2021
Cash flows from operating activities:
Net income for the period
$
102,235
$
181,363
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of intangible assets
125,321
126,705
Share-based compensation expense
24,464
13,350
Pension expense
1,723
1,946
Amortization of debt issuance costs
1,486
1,153
Write off of right of use assets
17,707
—
Loss on sale and write down of property and equipment
198
792
Deferred taxes
(79,420)
(7,805)
Share in net (income) loss of equity investees
401
(42,877)
Changes in operating assets and liabilities:
Accounts receivable
13,413
(26,118)
Contract assets
(10,758)
(10,298)
Prepaid expenses and other current assets
1,768
40,261
Income taxes
45,824
(23,169)
Accounts payable and accrued liabilities
41,561
53,415
Deferred revenue
(30,878)
(23,305)
Other assets
771
11,149
Operating lease assets and liabilities, net
(3,876)
(373)
Net cash provided by operating activities
251,940
296,189
Cash flows from investing activities:
Additions of property and equipment
(38,172)
(27,408)
Purchase of Bricata Inc.
174
—
Purchase of Dynamic Solutions Group Inc.
—
(600)
Other investing activities
—
(2,550)
Net cash used in investing activities
(37,998)
(30,558)
Cash flows from financing activities:
Proceeds from issuance of Common Shares from exercise of stock options and ESPP
10,738
34,287
Repayment of long-term debt and Revolver
(2,500)
(2,500)
Debt issuance costs
—
—
Repurchase of Common Shares
(40,869)
(119,105)
Purchase of treasury stock
(35,933)
—
Payments of dividends to shareholders
(59,042)
(54,374)
Net cash provided by (used in) financing activities
(127,606)
(141,692)
Foreign exchange gain (loss) on cash held in foreign currencies
(26,276)
7,181
Increase (decrease) in cash, cash equivalents and restricted cash during the period
60,060
131,120
Cash, cash equivalents and restricted cash at beginning of the period
1,635,851
1,478,680
Cash, cash equivalents and restricted cash at end of the period
$
1,695,911
$
1,609,800
11
OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
Reconciliation of cash, cash equivalents and restricted cash:
June 30, 2022
June 30, 2021
Cash and cash equivalents
$
1,693,741
$
1,607,306
Restricted cash (1)
2,170
2,494
Total cash, cash equivalents and restricted cash
$
1,695,911
$
1,609,800
(1) Restricted cash is classified under the Prepaid expenses and other current assets and Other assets line items on the Consolidated Balance Sheets.
12
OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
Year Ended June 30,
2022
2021
2020
Cash flows from operating activities:
Net income for the period
$
397,259
$
310,864
$
234,368
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of intangible assets
503,953
520,605
514,734
Share-based compensation expense
69,556
51,969
29,532
Pension expense
6,606
6,616
5,802
Amortization of debt issuance costs
5,422
4,548
4,633
Write off of right of use assets
17,707
—
36,864
Loss on extinguishment of debt
27,413
—
17,854
Loss on sale and write down of property and equipment
294
2,771
9,714
Deferred taxes
(36,088)
73,039
51,388
Share in net (income) loss of equity investees
(58,702)
(62,897)
(8,700)
Changes in operating assets and liabilities:
Accounts receivable
81,841
60,954
84,499
Contract assets
(37,966)
(39,333)
(40,301)
Prepaid expenses and other current assets
(13,954)
37,733
(6,897)
Income taxes
34,589
(140,763)
(35,086)
Accounts payable and accrued liabilities
(24,177)
26,088
30,613
Deferred revenue
(5,236)
39,295
25,306
Other assets
17,297
11,914
1,127
Operating lease assets and liabilities, net
(4,004)
(27,283)
(914)
Net cash provided by operating activities
981,810
876,120
954,536
Cash flows from investing activities:
Additions of property and equipment
(93,109)
(63,675)
(72,709)
Purchase of Zix Corporation, net of cash acquired
(856,175)
—
—
Purchase of Bricata Inc.
(17,753)
—
—
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)
Other investing activities
(3,922)
(4,568)
(14,127)
Net cash used in investing activities
(970,959)
(68,770)
(1,469,417)
Cash flows from financing activities:
Proceeds from issuance of Common Shares from exercise of stock options and ESPP
67,215
80,067
66,600
Proceeds from long-term debt and Revolver
1,500,000
—
3,150,000
Repayment of long-term debt and Revolver
(860,000)
(610,000)
(1,713,631)
Debt extinguishment costs
(24,969)
—
(11,248)
Debt issuance costs
(17,159)
—
(21,806)
Repurchase of Common Shares
(176,987)
(119,105)
—
Purchase of treasury stock
(111,593)
(64,847)
(12,424)
Distribution to non-controlling interest
(396)
—
—
Payments of dividends to shareholders
(237,655)
(210,662)
(188,712)
Net cash provided by (used in) financing activities
138,456
(924,547)
1,268,779
Foreign exchange gain (loss) on cash held in foreign currencies
(63,196)
29,734
(178)
Increase (decrease) in cash, cash equivalents and restricted cash during the period
86,111
(87,463)
753,720
Cash, cash equivalents and restricted cash at beginning of the period
1,609,800
1,697,263
943,543
Cash, cash equivalents and restricted cash at end of the period
$
1,695,911
$
1,609,800
$
1,697,263
13
OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
(unaudited)
Reconciliation of cash, cash equivalents and restricted cash:
June 30, 2022
June 30, 2021
June 30, 2020
Cash and cash equivalents
$
1,693,741
$
1,607,306
$
1,692,850
Restricted cash (1)
2,170
2,494
4,413
Total cash, cash equivalents and restricted cash
$
1,695,911
$
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.
14
Notes
(1) All dollar amounts in this press release are in U.S. Dollars unless otherwise indicated.
(2) Use of Non-GAAP Financial Measures: In addition to reporting financial results in accordance with U.S. GAAP, the Company provides certain financial measures that are not in accordance with U.S. GAAP (Non-GAAP). These Non-GAAP financial measures have certain limitations in that they do not have a standardized meaning and thus the Company's definition may be different from similar Non-GAAP financial measures used by other companies and/or analysts and may differ from period to period. Thus it may be more difficult to compare the Company's financial performance to that of other companies. However, the Company's management compensates for these limitations by providing the relevant disclosure of the items excluded in the calculation of these Non-GAAP financial measures both in its reconciliation to the U.S. GAAP financial measures and its consolidated financial statements, all of which should be considered when evaluating the Company's results.
The Company uses these Non-GAAP financial measures to supplement the information provided in its consolidated financial statements, which are presented in accordance with U.S. GAAP. The presentation of Non-GAAP financial measures is not meant to be a substitute for financial measures presented in accordance with U.S. GAAP, but rather should be evaluated in conjunction with and as a supplement to such U.S. GAAP measures. OpenText strongly encourages investors to review its financial information in its entirety and not to rely on a single financial measure. The Company therefore believes that despite these limitations, it is appropriate to supplement the disclosure of the U.S. GAAP measures with certain Non-GAAP measures defined below.
Non-GAAP-based net income and Non-GAAP-based EPS, attributable to OpenText, are consistently calculated as GAAP-based net income 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.
15
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures
for the three months ended June 30, 2022
(In thousands, except for per share data)
Three Months Ended June 30, 2022
GAAP-based Measures
GAAP-based Measures % of Total Revenue
Adjustments
Note
Non-GAAP-based Measures
Non-GAAP-based Measures % of Total Revenue
Cost of revenues
Cloud services and subscriptions
$
133,785
$
(2,213)
(1)
$
131,572
Customer support
30,571
(768)
(1)
29,803
Professional service and other
55,436
(1,465)
(1)
53,971
Amortization of acquired technology-based intangible assets
46,274
(46,274)
(2)
—
GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%)
633,793
70.2%
50,720
(3)
684,513
75.9%
Operating expenses
Research and development
118,931
(7,186)
(1)
111,745
Sales and marketing
185,985
(7,251)
(1)
178,734
General and administrative
85,958
(5,582)
(1)
80,376
Amortization of acquired customer-based intangible assets
56,341
(56,341)
(2)
—
Special charges (recoveries)
26,281
(26,281)
(4)
—
GAAP-based income from operations / Non-GAAP-based income from operations
137,591
153,361
(5)
290,952
Other income (expense), net
(19)
19
(6)
—
Provision for income taxes
(5,005)
40,090
(7)
35,085
GAAP-based net income / Non-GAAP-based net income, attributable to OpenText
102,196
113,290
(8)
215,486
GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText
$
0.38
$
0.42
(8)
$
0.80
(1) Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.
(2) Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.
(3) GAAP-based and Non-GAAP-based gross profit stated in dollars and gross margin stated as a percentage of total revenue.
(4) Adjustment relates to the exclusion of special charges (recoveries) from our Non-GAAP-based operating expenses as special charges (recoveries) are generally incurred in the periods relevant to an acquisition and include certain charges or recoveries that are not indicative or related to continuing operations, and are therefore excluded from our internal analysis of operating results.
(5) GAAP-based and Non-GAAP-based income from operations stated in dollars.
(6) Adjustment relates to the exclusion of other income (expense) from our Non-GAAP-based operating expenses as other income (expense) generally relates to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results. Other income (expense) also includes our share of income (losses) from our holdings in investments as a limited partner. We do not actively trade equity securities in these privately held companies nor do we plan our ongoing operations based around any anticipated fundings or distributions from these investments. We exclude gains and losses on these investments as we do not believe they are reflective of our ongoing business and operating results.
(7) Adjustment relates to differences between the GAAP-based tax provision rate of approximately 5% and a Non-GAAP-based tax rate of approximately 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
16
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 June 30, 2022
Per share diluted
GAAP-based net income, attributable to OpenText
$
102,196
$
0.38
Add:
Amortization
102,615
0.38
Share-based compensation
24,465
0.09
Special charges (recoveries)
26,281
0.10
Other (income) expense, net
19
—
GAAP-based provision for income taxes
(5,005)
(0.02)
Non-GAAP-based provision for income taxes
(35,085)
(0.13)
Non-GAAP-based net income, attributable to OpenText
$
215,486
$
0.80
Reconciliation of Adjusted EBITDA
Three Months Ended June 30, 2022
GAAP-based net income, attributable to OpenText
$
102,196
Add:
Provision for income taxes
(5,005)
Interest and other related expense, net
40,342
Amortization of acquired technology-based intangible assets
46,274
Amortization of acquired customer-based intangible assets
56,341
Depreciation
22,706
Share-based compensation
24,464
Special charges (recoveries)
26,281
Other (income) expense, net
19
Adjusted EBITDA
$
313,618
GAAP-based net income margin
11.3
%
Adjusted EBITDA margin
34.8
%
Reconciliation of Free cash flows
Three Months Ended June 30, 2022
GAAP-based cash flows provided by operating activities
$
251,940
Add:
Capital expenditures (1)
(38,172)
Free cash flows
$
213,768
(1) Defined as “Additions of property and equipment” in the Consolidated Statements of Cash Flows.
17
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures
for the year ended June 30, 2022
(In thousands, except for per share data)
Year Ended June 30, 2022
GAAP-based
Measures
GAAP-based Measures % of Total Revenue
Adjustments
Note
Non-GAAP-based
Measures
Non-GAAP-based Measures % of Total Revenue
Cost of revenues
Cloud services and subscriptions
$
511,713
$
(5,285)
(1)
$
506,428
Customer support
121,485
(2,399)
(1)
119,086
Professional service and other
216,895
(3,740)
(1)
213,155
Amortization of acquired technology-based intangible assets
198,607
(198,607)
(2)
—
GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%)
2,431,643
69.6%
210,031
(3)
2,641,674
75.6%
Operating expenses
Research and development
440,448
(17,122)
(1)
423,326
Sales and marketing
677,118
(22,628)
(1)
654,490
General and administrative
317,085
(18,382)
(1)
298,703
Amortization of acquired customer-based intangible assets
217,105
(217,105)
(2)
—
Special charges (recoveries)
46,873
(46,873)
(4)
—
GAAP-based income from operations / Non-GAAP-based income from operations
644,773
532,141
(5)
1,176,914
Other income (expense), net
29,118
(29,118)
(6)
—
Provision for income taxes
118,752
23,913
(7)
142,665
GAAP-based net income / Non-GAAP-based net income, attributable to OpenText
397,090
479,110
(8)
876,200
GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText
$
1.46
$
1.76
(8)
$
3.22
(1) Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.
(2) Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.
(3) GAAP-based and Non-GAAP-based gross profit stated in dollars and gross margin stated as a percentage of total revenue.
(4) Adjustment relates to the exclusion of special charges (recoveries) from our Non-GAAP-based operating expenses as special charges (recoveries) are generally incurred in the periods relevant to an acquisition and include certain charges or recoveries that are not indicative or related to continuing operations, and are therefore excluded from our internal analysis of operating results.
(5) GAAP-based and Non-GAAP-based income from operations stated in dollars.
(6) Adjustment relates to the exclusion of other income (expense) from our Non-GAAP-based operating expenses as other income (expense) generally relates to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results. Other income (expense) also includes our share of income (losses) from our holdings in investments as a limited partner. We do not actively trade equity securities in these privately held companies nor do we plan our ongoing operations based around any anticipated fundings or distributions from these investments. We exclude gains and losses on these investments as we do not believe they are reflective of our ongoing business and operating results.
(7) Adjustment relates to differences between the GAAP-based tax provision rate of approximately 23% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded items include amortization, share-based compensation, special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense
18
items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves, and “book to return” adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately 14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.
(8) Reconciliation of GAAP-based net income to Non-GAAP-based net income:
Year Ended June 30, 2022
Per share diluted
GAAP-based net income, attributable to OpenText
$
397,090
$
1.46
Add:
Amortization
415,712
1.52
Share-based compensation
69,556
0.26
Special charges (recoveries)
46,873
0.17
Other (income) expense, net
(29,118)
(0.11)
GAAP-based provision for income taxes
118,752
0.44
Non-GAAP-based provision for income taxes
(142,665)
(0.52)
Non-GAAP-based net income, attributable to OpenText
$
876,200
$
3.22
Reconciliation of Adjusted EBITDA
Year Ended June 30, 2022
GAAP-based net income, attributable to OpenText
$
397,090
Add:
Provision for income taxes
118,752
Interest and other related expense, net
157,880
Amortization of acquired technology-based intangible assets
198,607
Amortization of acquired customer-based intangible assets
217,105
Depreciation
88,241
Share-based compensation
69,556
Special charges (recoveries)
46,873
Other (income) expense, net
(29,118)
Adjusted EBITDA
$
1,264,986
GAAP-based net income margin
11.4
%
Adjusted EBITDA margin
36.2
%
Reconciliation of Free cash flows
Year Ended June 30, 2022
GAAP-based cash flows provided by operating activities
$
981,810
Add:
Capital expenditures (1)
(93,109)
Free cash flows
$
888,701
(1) Defined as “Additions of property and equipment” in the Consolidated Statements of Cash Flows.
19
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-
20
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 Consolidated Statements of Cash Flows.
21
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 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 provision 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-
22
based compensation, special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves, and “book to return” adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately 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 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 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.
23
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 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-
24
based compensation, special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves, and “book to return” adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately 14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense. The GAAP-based tax provision rate for the year ended June 30, 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 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 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 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.
25
(3) The following tables provide a composition of our major currencies for revenue and expenses, expressed as a percentage, for the year ended June 30, 2022 and 2021:
Three Months Ended June 30, 2022
Three Months Ended June 30, 2021
Currencies
% of Revenue
% of Expenses(1)
% of Revenue
% of Expenses(1)
EURO
22
%
12
%
24
%
14
%
GBP
3
%
5
%
5
%
5
%
CAD
3
%
14
%
3
%
13
%
USD
63
%
54
%
60
%
53
%
Other
9
%
15
%
8
%
15
%
Total
100
%
100
%
100
%
100
%
Year Ended June 30, 2022
Year Ended June 30, 2021
Currencies
% of Revenue
% of Expenses(1)
% of Revenue
% of Expenses(1)
EURO
23
%
13
%
23
%
14
%
GBP
4
%
6
%
5
%
6
%
CAD
3
%
14
%
3
%
9
%
USD
62
%
53
%
61
%
55
%
Other
8
%
14
%
8
%
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).
