OpenText Reports Fourth Quarter and Fiscal Year 2015 Financial Results

Announces up to $200 Million Share Buyback and Update on IRS Tax Matters

Fiscal Year 2015
- Total revenue was $1.9 billion, up 14%; in CC*, up 19%
- Recurring revenue was $1.6 billion, up 18%; in CC up 23%
- Cloud services and subscriptions revenue was $605.3 million, up 62%; in CC, up 67%
- License revenue was $294.3 million, down 4%; in CC, up 3%

Q4 Fiscal 2015
- Total revenue was $482.7 million, down 2%; in CC, up 7%
- Recurring revenue was $385.6 million, down 2%; in CC up 6%
- Cloud services and subscriptions revenue was $149.0 million, down 2%; in CC, up 4%
- License revenue was $97.1 million, down 2%; in CC, up 10% 

WATERLOO, Ontario, July 29, 2015 /PRNewswire/ -- Open Text Corporation (NASDAQ: OTEX) (TSX: OTC) announced today its financial results for the fourth quarter and fiscal year ended June 30, 2015.

"OpenText is helping the world's leading brands digitize their business, both on- and off-premise, and our strategy is showing bright-line success supported by our strong fourth quarter performance.  We ended fiscal year 2015 with total revenues of $1.9 billion, up 14% year-over-year, non-GAAP operating margin of 31% and operating cash flows of  $523 million," said OpenText CEO Mark J. Barrenechea.  "With a more directly aligned sales leadership team in place, our sales organization performed extremely well in Q4, closing 26 deals over $1 million (11 cloud and 15 license)."

Barrenechea further added, "Over the last four years, our non-GAAP operating margin has grown from 27% to 31%, and our cloud revenue from zero to 33%, all while maintaining consistent license revenue on an absolute basis.  Our confidence continues into fiscal 2016 and we are raising our non-GAAP operating margin model range to 30% to 34% and raising our annual recurring revenue range to 82% to 86%."

In addition, Barrenechea added, "Today we announced a share buyback of up to $200 million and our quarterly dividend of 20 cents.  We also re-affirm our intent to allocate $3 billion in capital to acquisitions in the coming years."

Financial Highlights for Fiscal 2015 with Year Over Year Comparisons (1)

Summary of Annual Results

FY15 re-presented on a constant currency basis

FX impact - higher (lower)

FY15

FY14

$ Change

% Change

Revenues: (in millions)

Cloud services and subscriptions

$605.3

$373.4

$231.9

62.1

%

$623.3

($18.0)

Customer support

731.8

707.0

24.8

3.5

%

765.5

(33.7)

Professional service and other

220.5

238.4

(17.9)

(7.5)

%

232.7

(12.2)

Total Recurring revenues

$1,557.7

$1,318.9

$238.8

18.1

%

$

1,621.5

($63.8)

License

294.3

305.8

(11.5)

(3.8)

%

314.5

(20.2)

Total revenues

$1,851.9

$1,624.7

$227.2

14.0

%

$

1,936.0

($84.1)

Non-GAAP-based operating margin (2)

30.9

%

30.9

%

n/a

bps

31.0

%

GAAP-based operating margin

18.8

%

18.5

%

n/a

30

bps

Non-GAAP-based EPS, diluted (2)

$3.46

$3.37

$0.09

2.7

%

$3.64

($0.18)

GAAP-based EPS, diluted

$1.91

$1.81

$0.10

5.5

%

Operating cash flows (in millions)

$523.0

$417.1

$105.9

25.4

%

 

Financial Highlights for Q4 FY15 with Year Over Year Comparisons (1)

Summary of Quarterly Results

Q4 FY15 re-presented on a constant currency basis

FX impact - higher (lower)

Q4 FY15

Q4 FY14

$ Change

% Change

Revenues: (in millions)

Cloud services and subscriptions

$149.0

$151.9

($2.9)

(1.9)

%

$158.2

($9.2)

Customer support

184.2

183.9

0.3

0.2

%

201.8

(17.6)

Professional service and other

52.4

59.4

(7)

(11.8)

%

58.4

(6.0)

Total Recurring revenues

$385.6

$395.2

($9.6)

(2.4)

%

$418.4

($32.8)

License

97.1

98.9

(1.8)

(1.8)

%

109.1

(12.0)

Total revenues

$482.7

$494.0

($11.3)

(2.3)

%

$527.5

($44.8)

Non-GAAP-based operating margin (2)

30.8

%

32.8

%

n/a

(200)

bps

31.4

%

GAAP-based operating margin

17.1

%

21.8

%

n/a

(470)

bps

Non-GAAP-based EPS, diluted (2)

$0.87

$1.05

($0.18)

(17.1)

%

$0.98

($0.11)

GAAP-based EPS, diluted

$0.56

$0.72

($0.16)

(22.2)

%

Operating cash flows (in millions)

$131.8

$134.9

($3.1)

(2.3)

%

 

"I am very pleased with our bottom line performance in the quarter and for fiscal year 2015, as we increased our operating cash flow by $106 million or 25% year-over-year," said OpenText CFO John Doolittle. "On an adjusted basis, we have delivered 7 year cumulative growth rates of 19% for non-GAAP EPS, 18% for operating cash flow and 22% for non-GAAP net income."

*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.

Quarterly Business Highlights

  • Q415: 26 customer transactions over $1 million, 11 cloud contract signings in the OpenText Cloud and 15 on-premises
  • Q415: Financial, services and industrial goods industries saw the most demand
  • Cloud customer successes in the quarter include athenahealth, Wacom Co, SCL Health, Genpact, The Tennessee Valley Authority (TVA) and Local Search Association
  • On-premises customer successes in the quarter include St. Lawrence Seaway Management Corporation (SLSMC), European Central Bank (ECB), City of Calgary, PriceSmart, U.S. Department of State, Haya Real Estate SI and ASR Verzekeringen NV 
  • OpenText CEO resumes full involvement in day-to-day operations
  • OpenText CEO Mark J. Barrenechea named Results-Oriented CEO of the Year, by CEO World
  • OpenText awarded "Top Job" seal by the Institute for Leadership and HR Management at the University Of St. Gallen
  • Released new version of xECM for SAP®  with OpenText Business Center, new SAP HANA® solutions and received its 8th SAP® Pinnacle award

Update on IRS Tax Matters

As we have previously disclosed in our public filings, the United States Internal Revenue Service ("IRS") is examining certain of our tax returns for Fiscal 2010 through Fiscal 2012, and in connection with those examinations is reviewing our internal reorganization in Fiscal 2010 to consolidate certain intellectual property ownership in Luxembourg and Canada and our integration of certain acquisitions into the resulting structure. 

As part of these examinations, we received from the IRS a Notice of Proposed Adjustment ("NOPA") in draft form proposing a one-time approximately $280 million increase to our U.S. federal taxes arising from the reorganization in Fiscal 2010 and proposing penalties equal to 20% of the additional taxes, plus interest at the applicable statutory rate (which will continue to accrue until the matter is resolved and may be substantial).  A NOPA is an IRS position and does not impose an obligation to pay tax.  The draft NOPA may be changed before the final NOPA is issued, including because the IRS reserved the right in the draft NOPA to increase the adjustment.  Based on our discussions with the IRS, we expect we will receive an additional NOPA proposing an approximately $80 million increase to our U.S. federal taxes for Fiscal 2012 arising from the integration of Global 360 Holding Corp. into the structure that resulted from the reorganization, accompanied by proposed penalties and interest (although there can be no assurance that this will be the amount reflected in the NOPA when received).  Depending upon the outcome of these matters, additional state income taxes plus penalty and interest may be due.

We strongly disagree with the IRS' position and intend to vigorously contest the proposed adjustments to our taxable income.  We have not recorded any material accruals in respect of these examinations in our Consolidated Financial Statements.  See our Annual Report on Form 10-K filed today for additional information on these matters.

Normal Course Issuer Bid

The Company also announced today that it intends to purchase in open market transactions, from time to time over the next 12 months, if considered advisable, up to an aggregate of $200,000,000 of its common shares on NASDAQ Global Select Market, the Toronto Stock Exchange (the "TSX") and/or other exchanges and alternative trading systems in Canada and/or the United States, if eligible. The price that OpenText will pay for common shares in open market transactions will be the market price at the time of purchase or such other price as may be permitted by applicable law or stock exchange rules.

The Board believes that the proposed purchases are in the best interests of the Company and are a desirable use of corporate funds. The share purchases will be effected in accordance with Rule 10b-18 under the U.S. Securities Exchange Act of 1934 and the TSX's normal course issuer bid rules, which contain restrictions on the number of shares that may be purchased on a single day (being 77,957 common shares in the case of the TSX) based on the average daily trading volumes of OpenText's common shares on the applicable exchange (being 311,828 common shares for the past six months in the case of the TSX), subject to certain exceptions for block purchases. The purchases over the TSX will be made pursuant to a normal course issuer bid ("NCIB"), which the TSX has accepted notice of. Under the NCIB, up to 5% of its 122,337,654 common shares outstanding as of July 27, 2015, or 6,116,882 common shares, are permitted to be purchased commencing on August 6, 2015 until August 5, 2016. All common shares purchased by OpenText pursuant to the NCIB will be cancelled.

OpenText also announced that it has entered into an automatic share purchase plan pursuant to which its designated broker may undertake purchases of its common shares under the NCIB, subject to certain parameters, during pre-determined trading blackout periods when OpenText would not otherwise be permitted to purchase its common shares.

Dividend Program Highlights

Cash Dividend

As part of our quarterly, non cumulative cash dividend program the Board declared on July 28, 2015 a cash dividend of $0.20 per Common Share. The record date for this dividend is August 28, 2015 and the payment date is September 18, 2015. Future declarations of dividends and the establishment of future record and payment dates are subject to the final determination and discretion of our Board of Directors.

Summary of Annual Results

FY15

FY14

% Change

Revenue (million)

$1,851.9

$1,624.7

14.0

%

GAAP-based gross margin

67.5

%

68.5

%

(100)

bps

GAAP-based operating margin

18.8

%

18.5

%

30

bps

GAAP-based EPS, diluted

$1.91

$1.81

5.5

%

Non-GAAP-based gross margin (2)

72.0

%

72.9

%

(90)

bps

Non-GAAP-based operating margin (2)

30.9

%

30.9

%

bps

Non-GAAP-based EPS, diluted (2)

$3.46

$3.37

2.7

%

 

Summary of Quarterly Results

Q4 FY15

Q3 FY15

Q4 FY14

% Change

(Q4 FY15 vs Q3 FY15)

% Change

(Q4 FY15 vs Q4 FY14)

Revenue (million)

$482.7

$447.6

$494.0

7.8

%

(2.3)

%

GAAP-based gross margin

68.7

%

65.7

%

69.1

%

300

bps

(40)

bps

GAAP-based operating margin

17.1

%

11.8

%

21.8

%

530

bps

(470)

bps

GAAP-based EPS, diluted

$0.56

$0.22

$0.72

154.5

%

(22.2)

%

Non-GAAP-based gross margin (2)

73.5

%

70.8

%

72.9

%

270

bps

60

bps

Non-GAAP-based operating margin (2)

30.8

%

25.7

%

32.8

%

510

bps

(200)

bps

Non-GAAP-based EPS, diluted (2)

$0.87

$0.66

$1.05

31.8

%

(17.1)

%

 

Conference Call Information

The public is invited to listen to the earnings conference call today at 5:00 p.m. ET (2:00 p.m. PT) by dialing 1-800-319-4610 (toll-free) or +1-604-638-5340 (international). Please dial-in 15 minutes ahead of time to ensure proper connection. Alternatively, a live webcast of the earnings conference call will be available on the Investor Relations section of the Company's website at http://investors.opentext.com/events.cfm.

A replay of the call will be available beginning July 29, 2015 at 7:00 p.m. ET through 11:59 p.m. on August 12, 2015 and can be accessed by dialing 1-855-669-9658 (toll-free) or +1-604-674-8052 (international) and using passcode 1469 followed by the number sign.

Please see below note (2) for a reconciliation of non-U.S. GAAP-based financial measures used in this press release, to U.S. GAAP-based financial measures.

About OpenText

OpenText is the largest independent software provider of Enterprise Information Management (EIM). For more information please visit www.opentext.com.

Cautionary Statement Regarding Forward-Looking Statements

Certain statements in this press release, including statements about the focus of Open Text Corporation ("OpenText" or "the Company") in Fiscal 2016 on growth in earnings and cash flows, creating value through investments in broader Enterprise Information Management (EIM) capabilities, distribution, the Company's presence in the cloud and in growth markets, its financial condition, results of operations and earnings, the update on IRS tax matters including statements concerning received and anticipated NOPAs, purchases of common shares by OpenText pursuant to the NCIB, declaration of quarterly dividends, and other matters, may contain words such as "anticipates", "expects", "intends", "plans", "believes", "seeks", "estimates", "may", "could", "would", "might", "will" and variations of these words or similar expressions are considered forward-looking statements or information under applicable securities laws. In addition, any information or statements that refer to expectations, beliefs, plans, projections, objectives, performance or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking, and based on our current expectations, forecasts and projections about the operating environment, economies and markets in which we operate. Forward-looking statements reflect our current estimates, beliefs and assumptions, which are based on management's perception of historic trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances, such as certain assumptions about the economy, as well as market, financial and operational assumptions. Management's estimates, beliefs and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events and, as such, are subject to change. We can give no assurance that such estimates, beliefs and assumptions will prove to be correct. Such forward-looking statements involve known and unknown risks, uncertainties and other factors and assumptions that may cause the actual results, performance or achievements to differ materially. Such factors include, but are not limited to: (i) the future performance, financial and otherwise, of OpenText; (ii) the ability of OpenText to bring new products and services to market and to increase sales; (iii) the strength of the Company's product development pipeline; (iv) the Company's growth and profitability prospects; (v) the estimated size and growth prospects of the EIM market; (vi) the Company's competitive position in the EIM market and its ability to take advantage of future opportunities in this market; (vii) the benefits of the Company's products and services to be realized by customers; (viii) the demand for the Company's products and services and the extent of deployment of the Company's products and services in the EIM marketplace; and (ix) the Company's financial condition and capital requirements. The risks and uncertainties that may affect forward-looking statements include, but are not limited to: (i) integration of acquisitions and related restructuring efforts, including the quantum of restructuring charges and the timing thereof; (ii) the possibility that the Company may be unable to meet its future reporting requirements under the Securities Exchange Act of 1934, as amended, and the rules promulgated thereunder; (iii) the risks associated with bringing new products and services to market; (iv) fluctuations in currency exchange rates; (v) delays in the purchasing decisions of the Company's customers; (vi) the competition the Company faces in its industry and/or marketplace; (vii) the final determination of litigation, tax audits and other legal proceedings; (viii) the possibility of technical, logistical or planning issues in connection with the deployment of the Company's products or services; (ix) the continuous commitment of the Company's customers; and (x) demand for the Company's products. For additional information with respect to risks and other factors which could occur, see the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other securities filings with the Securities and Exchange Commission (SEC) and other securities regulators. Readers are cautioned not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. Unless otherwise required by applicable securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

OTEX-F

For more information, please contact:

United States:

Greg Secord Vice President, Investor Relations Open Text Corporation San Francisco: 415-963-0825 gsecord@opentext.com

Canada:

Sonya Mehan Senior Manager, Investor Relations Open Text Corporation Waterloo: 519-888-7111 ext. 2446 smehan@opentext.com

Copyright ©2015 Open Text Corporation. OpenText is a trademark or registered trademark of Open Text SA and/or Open Text ULC. The list of trademarks is not exhaustive of other trademarks, registered trademarks, product names, company names, brands and service names mentioned herein are property of Open Text SA or other respective owners. All rights reserved. For more information, visit: http://www.opentext.com/2/global/site-copyright.html_SKU.

 

OPEN TEXT CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands of U.S. dollars, except share data)

June 30, 2015

June 30, 2014

ASSETS

Cash and cash equivalents

$

699,999

$

427,890

Short-term investments

11,166

Accounts receivable trade, net of allowance for doubtful accounts of $5,987 as of June 30, 2015 and $4,727 as of June 30, 2014

284,131

292,929

Income taxes recoverable

21,151

24,648

Prepaid expenses and other current assets

53,191

42,053

Deferred tax assets

30,711

28,215

Total current assets

1,100,349

815,735

Property and equipment

160,419

142,261

Goodwill

2,161,592

1,940,082

Acquired intangible assets

679,479

725,318

Deferred tax assets

155,411

161,247

Other assets

85,576

52,041

Deferred charges

37,265

52,376

Long-term income taxes recoverable

8,404

10,638

Total assets

$

4,388,495

$

3,899,698

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable and accrued liabilities

$

241,370

$

231,954

Current portion of long-term debt

8,000

62,582

Deferred revenues

358,066

332,664

Income taxes payable

17,001

12,948

Deferred tax liabilities

997

1,053

Total current liabilities

625,434

641,201

Long-term liabilities:

Accrued liabilities

34,682

41,999

Deferred credits

12,943

17,529

Pension liability

56,737

60,300

Long-term debt

1,580,000

1,256,750

Deferred revenues

28,223

17,248

Long-term income taxes payable

151,484

162,131

Deferred tax liabilities

69,185

60,373

Total long-term liabilities

1,933,254

1,616,330

Shareholders' equity:

Share capital

122,293,986 and 121,758,432 Common Shares issued and outstanding at June 30, 2015 and June 30, 2014, respectively; Authorized Common Shares: unlimited

808,010

792,834

Additional paid-in capital

126,417

112,398

Accumulated other comprehensive income

51,828

39,449

Retained earnings

863,015

716,317

Treasury stock, at cost (625,725 shares at June 30, 2015 and 763,278 at June 30, 2014, respectively)

(19,986)

(19,132)

Total OpenText shareholders' equity

1,829,284

1,641,866

Non-controlling interests

523

301

Total shareholders' equity

1,829,807

1,642,167

Total liabilities and shareholders' equity

$

4,388,495

$

3,899,698

 

OPEN TEXT CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(In thousands of U.S. dollars, except share and per share data)

Year Ended June 30,

2015

2014

2013

Revenues:

License

$

294,266

$

305,846

$

272,985

Cloud services and subscriptions

605,309

373,400

180,412

Customer support

731,797

707,024

658,216

Professional service and other

220,545

238,429

251,723

Total revenues

1,851,917

1,624,699

1,363,336

Cost of revenues:

License

12,899

13,161

15,995

Cloud services and subscriptions

239,719

142,666

73,464

Customer support

94,766

95,979

106,172

Professional service and other

173,399

189,947

196,663

Amortization of acquired technology-based intangible assets

81,002

69,917

93,610

Total cost of revenues

601,785

511,670

485,904

Gross profit

1,250,132

1,113,029

877,432

Operating expenses:

Research and development

196,491

176,834

164,010

Sales and marketing

369,920

345,643

289,157

General and administrative

163,042

142,450

109,325

Depreciation

50,906

35,237

24,496

Amortization of acquired customer-based intangible assets

108,239

81,023

68,745

Special charges

12,823

31,314

24,034

Total operating expenses

901,421

812,501

679,767

Income from operations

348,711

300,528

197,665

Other income (expense), net

(28,047)

3,941

(2,473)

Interest and other related expense, net

(54,620)

(27,934)

(16,982)

Income before income taxes

266,044

276,535

178,210

Provision for income taxes

31,638

58,461

29,690

Net income for the period

$

234,406

$

218,074

$

148,520

Net (income) loss attributable to non-controlling interests

(79)

51

Net income attributable to OpenText

$

234,327

$

218,125

$

148,520

Earnings per share—basic attributable to OpenText

$

1.92

$

1.82

$

1.27

Earnings per share—diluted attributable to OpenText

$

1.91

$

1.81

$

1.26

Weighted average number of Common Shares outstanding—basic

122,092

119,674

117,208

Weighted average number of Common Shares outstanding—diluted

122,957

120,576

118,124

Dividends declared per Common Share

$

0.7175

$

0.6225

$

0.1500

 

OPEN TEXT CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(In thousands of U.S. dollars, except share and per share data)

Three Months Ended June 30,

2015

2014

Revenues:

License

$

97,129

$

98,863

Cloud services and subscriptions

148,967

151,877

Customer support

184,221

183,869

Professional service and other

52,391

59,369

Total revenues

482,708

493,978

Cost of revenues:

License

3,511

3,452

Cloud services and subscriptions

58,955

57,838

Customer support

23,514

24,196

Professional service and other

42,746

49,025

Amortization of acquired technology-based intangible assets

22,454

18,205

Total cost of revenues

151,180

152,716

Gross profit

331,528

341,262

Operating expenses:

Research and development

52,357

47,502

Sales and marketing

104,024

101,240

General and administrative

41,715

41,413

Depreciation

13,390

11,354

Amortization of acquired customer-based intangible assets

28,741

26,635

Special charges

8,791

5,413

Total operating expenses

249,018

233,557

Income from operations

82,510

107,705

Other income (expense), net

690

1,103

Interest and other related expense, net

(18,194)

(10,775)

Income before income taxes

65,006

98,033

Provision for income taxes

(3,763)

9,885

Net income for the period

$

68,769

$

88,148

Net (income) loss attributable to non-controlling interests

35

(37)

Net income attributable to OpenText

$

68,804

$

88,111

Earnings per share—basic attributable to OpenText

$

0.56

$

0.72

Earnings per share—diluted attributable to OpenText

$

0.56

$

0.72

Weighted average number of Common Shares outstanding—basic

122,245

121,692

Weighted average number of Common Shares outstanding—diluted

122,888

122,511

Dividends declared per Common Share

$

0.2000

$

0.1725

 

OPEN TEXT CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands of U.S. dollars)

Year Ended June 30,

2015

2014

2013

Net income for the period

$

234,406

$

218,074

$

148,520

Other comprehensive income—net of tax:

Net foreign currency translation adjustments

15,690

(2,779)

(1,879)

Unrealized gain (loss) on cash flow hedges:

Unrealized loss

(6,064)

(357)

(1,054)

Loss (gain) reclassified into net income

5,710

3,242

(1,482)

Actuarial gain (loss) relating to defined benefit pension plans:

Actuarial loss

(3,302)

(841)

(351)

Amortization of actuarial loss into net income

357

294

292

Unrealized gain on short-term investments

(12)

Unrealized gain on marketable securities (Actuate)

1,906

Release of unrealized gain on marketable securities (Actuate)

(1,906)

Total other comprehensive income (loss), net, for the period

12,379

(441)

(4,474)

Total comprehensive income

246,785

217,633

144,046

Comprehensive income attributable to non-controlling interests

(79)

51

Total comprehensive income attributable to OpenText

$

246,706

$

217,684

$

144,046

 

OPEN TEXT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars)

Year Ended June 30,

2015

2014

2013

Cash flows from operating activities:

Net income for the period

$

234,406

$

218,074

$

148,520

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization of intangible assets

240,147

186,177

186,851

Share-based compensation expense

22,047

19,906

15,575

Excess tax benefits on share-based compensation expense

(1,675)

(1,844)

(915)

Pension expense

4,796

3,232

1,448

Amortization of debt issuance costs

4,556

3,191

2,123

Amortization of deferred charges and credits

10,525

11,307

11,815

Loss on sale and write down of property and equipment

1,368

15

24

Deferred taxes

(14,578)

(12,334)

(5,796)

Release of unrealized gain on marketable securities to income

(3,098)

Write off of unamortized debt issuance costs

2,919

Changes in operating assets and liabilities:

Accounts receivable

43,189

(17,186)

17,965

Prepaid expenses and other current assets

(3,534)

11,146

4,242

Income taxes

2,933

11,308

(17,053)

Deferred charges and credits

9,870

(9,274)

Accounts payable and accrued liabilities

(22,714)

(36,478)

(41,947)

Deferred revenue

6,775

16,601

5,418

Other assets

(5,031)

(5,858)

(494)

Net cash provided by operating activities

523,031

417,127

318,502

Cash flows from investing activities:

Additions of property and equipment

(77,046)

(42,268)

(23,107)

Proceeds from maturity of short-term investments

17,017

Purchase of patents

(192)

(192)

Purchase of Actuate Corporation, net of cash acquired

(291,800)

Purchase of Informative Graphics Corporation, net of cash acquired

(35,180)

Purchase of GXS Group, Inc., net of cash acquired

(1,076,886)

Purchase of Cordys Holding B.V., net of cash acquired

(30,588)

Purchase of EasyLink Services International Corporation, net of cash acquired

(315,331)

Purchase of Resonate KT Limited, net of cash acquired

(19,366)

Purchase of ICCM Professional Services Limited, net of cash acquired

(11,257)

Purchase of System Solutions Australia Pty Limited, net of cash acquired

(516)

Purchase of a division of Spicer Corporation

(222)

Purchase consideration for prior period acquisitions

(590)

(887)

(875)

Other investing activities

(10,574)

(2,547)

(3,750)

Net cash used in investing activities

(398,395)

(1,153,368)

(374,394)

Cash flows from financing activities:

Excess tax benefits on share-based compensation expense

1,675

1,844

915

Proceeds from issuance of Common Shares

15,240

24,808

16,347

Equity issuance costs

(144)

Purchase of Treasury Stock

(10,126)

(1,275)

Proceeds from long-term debt

800,000

800,000

Repayment of long-term debt

(530,284)

(45,911)

(30,677)

Debt issuance costs

(18,271)

(16,685)

Payments of dividends to shareholders

(87,629)

(74,693)

(17,703)

Net cash used in (provided by) financing activities

170,605

687,944

(31,118)

Foreign exchange gain (loss) on cash held in foreign currencies

(23,132)

5,742

(2,292)

Increase (decrease) in cash and cash equivalents during the period

272,109

(42,555)

(89,302)

Cash and cash equivalents at beginning of the period

427,890

470,445

559,747

Cash and cash equivalents at end of the period

$

699,999

$

427,890

$

470,445

 

OPEN TEXT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars)

Three Months Ended June 30,

2015

2014

Cash flows from operating activities:

Net income for the period

$

68,769

$

88,148

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization of intangible assets

64,585

56,194

Share-based compensation expense

6,107

4,199

Excess tax benefits on share-based compensation expense

(64)

(169)

Pension expense

1,194

1,268

Amortization of debt issuance costs

1,146

1,131

Amortization of deferred charges and credits

2,632

2,667

Loss on sale and write down of property and equipment

1,250

Deferred taxes

(10,541)

(8,131)

Release of unrealized gain on marketable securities to income

Write off of unamortized debt issuance costs

Changes in operating assets and liabilities:

Accounts receivable

(33,371)

(36,315)

Prepaid expenses and other current assets

467

29,771

Income taxes

1,579

5,730

Deferred charges and credits

Accounts payable and accrued liabilities

31,033

(3,600)

Deferred revenue

70

(3,421)

Other assets

(3,039)

(2,558)

Net cash provided by operating activities

131,817

134,914

Cash flows from investing activities:

Additions of property and equipment

(16,460)

(13,825)

Proceeds from maturity of short-term investments

9,925

Purchase of Actuate Corporation, net of cash acquired

(32)

Purchase of GXS Group, Inc., net of cash acquired

785

Purchase consideration for prior period acquisitions

(222)

Other investing activities

(1,659)

Net cash used in investing activities

(8,226)

(13,262)

Cash flows from financing activities:

Excess tax benefits on share-based compensation expense

64

169

Proceeds from issuance of Common Shares

2,413

5,090

Purchase of Treasury Stock

(8,875)

Repayment of long-term debt

(9,799)

(13,412)

Debt issuance costs

(195)

(653)

Payments of dividends to shareholders

(24,455)

(21,001)

Net cash used in (provided by) financing activities

(40,847)

(29,807)

Foreign exchange gain (loss) on cash held in foreign currencies

4,078

(26)

Increase in cash and cash equivalents during the period

86,822

91,819

Cash and cash equivalents at beginning of the period

613,177

336,071

Cash and cash equivalents at end of the period

$

699,999

$

427,890

 

Notes

(1)

All dollar amounts in this press release are in U.S. Dollars unless otherwise indicated.

(2)

Use of Non-GAAP Financial Measures: In addition to reporting financial results in accordance with U.S. GAAP, the Company provides certain financial measures that are not in accordance with U.S. GAAP (non-GAAP).These non-GAAP financial measures have certain limitations in that they do not have a standardized meaning and thus the Company's definition may be different from similar non-GAAP financial measures used by other companies and/or analysts and may differ from period to period. Thus it may be more difficult to compare the Company's financial performance to that of other companies. However, the Company's management compensates for these limitations by providing the relevant disclosure of the items excluded in the calculation of these non-GAAP financial measures both in its reconciliation to the U.S. GAAP financial measures and its consolidated financial statements, all of which should be considered when evaluating the Company's results.

The Company uses these non-GAAP financial measures to supplement the information provided in its consolidated financial statements, which are presented in accordance with U.S. GAAP. The presentation of non-GAAP financial measures are not meant to be a substitute for financial measures presented in accordance with U.S. GAAP, but rather should be evaluated in conjunction with and as a supplement to such U.S. GAAP measures. OpenText strongly encourages investors to review its financial information in its entirety and not to rely on a single financial measure. The Company therefore believes that despite these limitations, it is appropriate to supplement the disclosure of the U.S. GAAP measures with certain non-GAAP measures defined below.

Non-GAAP-based net income and non-GAAP-based EPS are calculated as net income or net income per share on a diluted basis, excluding, the amortization of acquired intangible assets, other income (expense), share-based compensation, and special charges, all net of tax. Non-GAAP-based gross profit is the arithmetical sum of GAAP-based gross profit and the amortization of acquired technology-based intangible assets. Non-GAAP-based gross margin is calculated as non-GAAP-based gross profit expressed as a percentage of revenue. Non-GAAP-based income from operations is calculated as income from operations, excluding, the amortization of acquired intangible assets, special charges (recoveries), and share-based compensation. Non-GAAP-based operating margin is calculated as non-GAAP-based income from operations expressed as a percentage of revenue.

The Company's management believes that the presentation, of the above defined non-GAAP financial measures, provides useful information to investors because they portray the financial results of the Company before the impact of certain non-operational charges. The use of the term "non-operational charge" is defined for this purpose as an expense that does not impact the ongoing operating decisions taken by the Company's management and is based upon the way the Company's management evaluates the performance of the Company's business for use in the Company's internal reports. In the course of such evaluation and for the purpose of making operating decisions, the Company's management excludes certain items from its analysis, including amortization of acquired intangible assets, special charges (recoveries), share-based compensation, other income (expense), and the taxation impact of these items. These items are excluded based upon the manner in which management evaluates the business of the Company and are not excluded in the sense that they may be used under U.S. GAAP.

The Company believes the provision of supplemental non-GAAP measures allow investors to evaluate the operational and financial performance of the Company's core business using the same evaluation measures that management uses, and is therefore a useful indication of OpenText's performance or expected performance of future operations and facilitates period-to-period comparison of operating performance (although prior performance is not necessarily indicative of future performance). As a result, the Company considers it appropriate and reasonable to provide, in addition to U.S. GAAP measures, supplementary non-GAAP financial measures that exclude certain items from the presentation of its financial results in this press release.

The following charts provide (unaudited) reconciliations of U.S. GAAP-based financial measures to non-U.S. GAAP-based financial measures for the following periods presented:

 

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the three months ended June 30, 2015.

(In thousands except for per share amounts)

Three Months Ended June 30, 2015

GAAP-based

Measures

GAAP-based Measures

% of Revenue

Adjustments

Note

Non-GAAP-based

Measures

Non-GAAP-based Measures

% of Revenue

Cost of revenues

Cloud services and subscriptions

$

58,955

$

(252)

(1)

$

58,703

Customer support

23,514

(200)

(1)

23,314

Professional service and other

42,746

(421)

(1)

42,325

Amortization of acquired technology-based intangible assets

22,454

(22,454)

(2)

GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%)

331,528

68.7

%

23,327

(3)

354,855

73.5

%

Operating expenses

Research and development

52,357

(665)

(1)

51,692

Sales and marketing

104,024

(2,508)

(1)

101,516

General and administrative

41,715

(2,061)

(1)

39,654

Amortization of acquired customer-based intangible assets

28,741

(28,741)

(2)

Special charges (recoveries)

8,791

(8,791)

(4)

GAAP-based income from operations and operating margin (%) / Non-GAAP-based income from operations and operating margin (%)

82,510

17.1

%

66,093

(5)

148,603

30.8

%

Other income (expense), net

690

(690)

(6)

Provision for (recovery of) income taxes

(3,763)

27,272

(7)

23,509

GAAP-based net income / Non-GAAP-based net income, attributable to OpenText

68,804

38,131

(8)

106,935

GAAP-based earnings per share / Non GAAP-based earnings per share-diluted, attributable to OpenText

$

0.56

$

0.31

(8)

$

0.87

 

(1)

Adjustment relates to the exclusion of share based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.

(2)

Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.

(3)

GAAP-based and Non-GAAP-based gross profit stated in dollars, and gross margin stated as a percentage of revenue.

(4)

Adjustment relates to the exclusion of Special charges (recoveries) from our Non-GAAP-based operating expenses as Special charges are generally incurred in the periods following the relevant acquisitions and are not indicative or related to continuing operations and are therefore excluded from our internal analysis of operating results.

(5)

GAAP-based and Non-GAAP-based income from operations stated in dollars, and operating margin stated as a percentage of revenue.

(6)

Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) relates primarily to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results.

(7)

Adjustment relates to differences between the GAAP-based tax recovery rate of approximately 6% and a non-GAAP-based tax rate of 18%; these rate differences are due to the income tax effects of expenses that are excluded for the purpose of calculating non-GAAP-based adjusted net income. Such excluded expenses include amortization, share-based compensation, special charges and other income (expense), net. Also excluded are tax expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves, tax arising on internal reorganizations, and "book to return" adjustments for tax return filings and tax assessments (in total "adjusted expenses"). In arriving at our non-GAAP-based tax rate of 18%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.

(8)

Reconciliation of Non-GAAP-based adjusted net income to GAAP-based net income:

 

Three Months Ended June 30, 2015

Per share diluted

Non-GAAP-based net income, attributable to OpenText

$

106,935

$

0.87

Less:

Amortization

51,195

0.42

Share-based compensation

6,107

0.05

Special charges (recoveries)

8,791

0.07

Other (income) expense, net

(690)

(0.01)

GAAP-based provision for (recovery of) income taxes

(3,763)

(0.03)

Non-GAAP based provision for income taxes

(23,509)

(0.19)

GAAP-based net income, attributable to OpenText

$

68,804

$

0.56

 

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the year ended June 30, 2015.

(In thousands except for per share amounts)

Year Ended June 30, 2015

GAAP-based

Measures

GAAP-based Measures

% of Revenue

Adjustments

Note

Non-GAAP-based

Measures

Non-GAAP-based Measures

% of Revenue

Cost of revenues

Cloud services and subscriptions

$

239,719

$

(833)

(1)

$

238,886

Customer support

94,766

(832)

(1)

93,934

Professional service and other

173,399

(1,335)

(1)

172,064

Amortization of acquired technology-based intangible assets

81,002

(81,002)

(2)

GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%)

1,250,132

67.5

%

84,002

(3)

1,334,134

72.0

%

Operating expenses

Research and development

196,491

(2,496)

(1)

193,995

Sales and marketing

369,920

(9,095)

(1)

360,825

General and administrative

163,042

(7,456)

(1)

155,586

Amortization of acquired customer-based intangible assets

108,239

(108,239)

(2)

Special charges (recoveries)

12,823

(12,823)

(4)

GAAP-based income from operations and operating margin (%) / Non-GAAP-based income from operations and operating margin (%)

348,711

18.8

%

224,111

(5)

572,822

30.9

%

Other income (expense), net

(28,047)

28,047

(6)

Provision for (recovery of) income taxes

31,638

61,559

(7)

93,197

GAAP-based net income / Non-GAAP-based net income, attributable to OpenText

234,327

190,599

(8)

424,926

GAAP-based earnings per share / Non GAAP-based earnings per share-diluted, attributable to OpenText

$

1.91

$

1.55

(8)

$

3.46

 

(1)

Adjustment relates to the exclusion of share based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.

(2)

Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.

(3)

GAAP-based and Non-GAAP-based gross profit stated in dollars, and gross margin stated as a percentage of revenue.

(4)

Adjustment relates to the exclusion of Special charges (recoveries) from our Non-GAAP-based operating expenses as Special charges are generally incurred in the periods following the relevant acquisitions and are not indicative or related to continuing operations and are therefore excluded from our internal analysis of operating results.

(5)

GAAP-based and Non-GAAP-based income from operations stated in dollars, and operating margin stated as a percentage of revenue.

(6)

Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) relates primarily to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results.

(7)

Adjustment relates to differences between the GAAP-based tax provision rate of approximately 12% and a non-GAAP-based tax rate of 18%; these rate differences are due to the income tax effects of expenses that are excluded for the purpose of calculating non-GAAP-based adjusted net income. Such excluded expenses include amortization, share-based compensation, special charges and other income (expense), net. Also excluded are tax expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves, tax arising on internal reorganizations, and "book to return" adjustments for tax return filings and tax assessments (in total "adjusted expenses"). In arriving at our non-GAAP-based tax rate of 18%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.

(8)

Reconciliation of Non-GAAP-based adjusted net income to GAAP-based net income:

 

Year Ended June 30, 2015

Per share diluted

Non-GAAP-based net income, attributable to OpenText

$

424,926

$

3.46

Less:

Amortization

189,241

1.54

Share-based compensation

22,047

0.18

Special charges (recoveries)

12,823

0.10

Other (income) expense, net

28,047

0.23

GAAP-based provision for (recovery of) income taxes

31,638

0.26

Non-GAAP based provision for income taxes

(93,197)

(0.76)

GAAP-based net income, attributable to OpenText

$

234,327

$

1.91

 

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the three months ended March 31, 2015.

(In thousands except for per share amounts)

Three Months Ended March 31, 2015

GAAP-based

Measures

GAAP-based Measures

% of Revenue

Adjustments

Note

Non-GAAP-based

Measures

Non-GAAP-based Measures

% of Revenue

Cost of revenues

Cloud services and subscriptions

$

61,950

$

(182)

(1)

$

61,768

Customer support

24,092

(224)

(1)

23,868

Professional service and other

42,403

(316)

(1)

42,087

Amortization of acquired technology-based intangible assets

22,136

(22,136)

(2)

GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%)

294,016

65.7

%

22,858

(3)

316,874

70.8

%

Operating expenses

Research and development

53,222

(654)

(1)

52,568

Sales and marketing

95,787

(1,919)

(1)

93,868

General and administrative

45,722

(3,267)

(1)

42,455

Amortization of acquired customer-based intangible assets

28,250

(28,250)

(2)

Special charges (recoveries)

5,622

(5,622)

(4)

GAAP-based income from operations and operating margin (%) / Non-GAAP-based income from operations and operating margin (%)

52,604

11.8

%

62,570

(5)

115,174

25.7

%

Other income (expense), net

(9,550)

9,550

(6)

Provision for (recovery of) income taxes

(309)

18,122

(7)

17,813

GAAP-based net income / Non-GAAP-based net income, attributable to OpenText

26,610

53,998

(8)

80,608

GAAP-based earnings per share / Non GAAP-based earnings per share-diluted, attributable to OpenText

$

0.22

$

0.44

(8)

$

0.66

 

(1)

Adjustment relates to the exclusion of share based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.

(2)

Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.

(3)

GAAP-based and Non-GAAP-based gross profit stated in dollars, and gross margin stated as a percentage of revenue.

(4)

Adjustment relates to the exclusion of Special charges (recoveries) from our Non-GAAP-based operating expenses as Special charges are generally incurred in the periods following the relevant acquisitions and are not indicative or related to continuing operations and are therefore excluded from our internal analysis of operating results.

(5)

GAAP-based and Non-GAAP-based income from operations stated in dollars, and operating margin stated as a percentage of revenue.

(6)

Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) relates primarily to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results.

(7)

Adjustment relates to differences between the GAAP-based tax recovery rate of approximately 1% and a non-GAAP-based tax rate of 18%; these rate differences are due to the income tax effects of expenses that are excluded for the purpose of calculating non-GAAP-based adjusted net income. Such excluded expenses include amortization, share-based compensation, special charges and other income (expense), net. Also excluded are tax expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves, tax arising on internal reorganizations, and "book to return" adjustments for tax return filings and tax assessments (in total "adjusted expenses"). In arriving at our non-GAAP-based tax rate of 18%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.

(8)

Reconciliation of Non-GAAP-based adjusted net income to GAAP-based net income:

 

Three Months Ended March 31, 2015

Per share diluted

Non-GAAP-based net income, attributable to OpenText

$

80,608

$

0.66

Less:

Amortization

50,386

0.41

Share-based compensation

6,562

0.05

Special charges (recoveries)

5,622

0.05

Other (income) expense, net

9,550

0.08

GAAP-based provision for (recovery of) income taxes

(309)

Non-GAAP based provision for income taxes

(17,813)

(0.15)

GAAP-based net income, attributable to OpenText

$

26,610

$

0.22

 

Reconciliation of selected GAAP-based measures to Non GAAP-based measures for the three months ended June 30, 2014.

(In thousands except for per share amounts)

Three Months Ended June 30, 2014

GAAP-based

Measures

GAAP-based Measures

% of Revenue

Adjustments

Note

Non-GAAP-based

Measures

Non-GAAP-based Measures

% of Revenue

Cost of revenues:

Cloud services and subscriptions

$

57,838

$

(197)

(1)

$

57,641

Customer support

24,196

(207)

(1)

23,989

Professional service and other

49,025

(112)

(1)

48,913

Amortization of acquired technology-based intangible assets

18,205

(18,205)

(2)

GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%)

341,262

69.1

%

18,721

(3)

359,983

72.9

%

Operating expenses

Research and development

47,502

(450)

(1)

47,052

Sales and marketing

101,240

(1,112)

(1)

100,128

General and administrative

41,413

(2,121)

(1)

39,292

Amortization of acquired customer-based intangible assets

26,635

(26,635)

(2)

Special charges (recoveries)

5,413

(5,413)

(4)

GAAP-based income from operations and operating margin (%) / Non-GAAP-based income from operations and operating margin (%)

107,705

21.8

%

54,452

(5)

162,157

32.8

%

Other income (expense), net

1,103

(1,103)

(6)

Provision for (recovery of) income taxes

9,885

12,785

(7)

22,670

GAAP-based net income / Non-GAAP-based net income, attributable to OpenText

88,111

40,564

(8)

128,675

GAAP-based earnings per share / Non GAAP-based earnings per share-diluted, attributable to OpenText

$

0.72

$

0.33

(8)

$

1.05

 

(1)

Adjustment relates to the exclusion of share based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.

(2)

Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.

(3)

GAAP-based and Non-GAAP-based gross profit stated in dollars, and gross margin stated as a percentage of revenue.

(4)

Adjustment relates to the exclusion of Special charges (recoveries) from our Non-GAAP-based operating expenses as Special charges are generally incurred in the periods following the relevant acquisitions and are not indicative or related to continuing operations and are therefore excluded from our internal analysis of operating results.

(5)

GAAP-based and Non-GAAP-based income from operations stated in dollars, and operating margin stated as a percentage of revenue.

(6)

Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) relates primarily to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results.

(7)

Adjustment relates to differences between the GAAP-based tax provision rate of approximately 10% and a non-GAAP-based tax rate of 15%; these rate differences are due to the income tax effects of expenses that are excluded for the purpose of calculating non-GAAP-based adjusted net income. Such excluded expenses include amortization, share-based compensation, special charges and other income (expense), net. Also excluded are tax expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves, tax arising on internal reorganizations, and "book to return" adjustments for tax return filings and tax assessments (in total "adjusted expenses"). In arriving at our non-GAAP-based tax rate of 15%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.

(8)

Reconciliation of Non-GAAP-based adjusted net income to GAAP-based net income:

 

Three Months Ended June 30, 2014

Per share diluted

Non-GAAP-based net income, attributable to OpenText

$

128,675

$

1.05

Less:

Amortization

44,840

0.37

Share-based compensation

4,199

0.03

Special charges (recoveries)

5,413

0.04

Other (income) expense, net

(1,103)

(0.01)

GAAP-based provision for (recovery of) income taxes

9,885

0.08

Non-GAAP based provision for income taxes

(22,670)

(0.18)

GAAP-based net income, attributable to OpenText

$

88,111

$

0.72

 

Reconciliation of selected GAAP-based measures to Non GAAP-based measures for the year ended June 30, 2014.

(In thousands except for per share amounts)

Year Ended June 30, 2014

GAAP-based

Measures

GAAP-based Measures

% of Revenue

Adjustments

Note

Non-GAAP-based

Measures

Non-GAAP-based Measures

% of Revenue

Cost of revenues:

Cloud services and subscriptions

$

142,666

$

(342)

(1)

$

142,324

Customer support

95,979

(754)

(1)

95,225

Professional service and other

189,947

(855)

(1)

189,092

Amortization of acquired technology-based intangible assets

69,917

(69,917)

(2)

GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%)

1,113,029

68.5

%

71,868

(3)

1,184,897

72.9

%

Operating expenses

Research and development

176,834

(2,356)

(1)

174,478

Sales and marketing

345,643

(7,312)

(1)

338,331

General and administrative

142,450

(8,287)

(1)

134,163

Amortization of acquired customer-based intangible assets

81,023

(81,023)

(2)

Special charges (recoveries)

31,314

(31,314)

(4)

GAAP-based income from operations and operating margin (%) / Non-GAAP-based income from operations and operating margin (%)

300,528

18.5

%

202,160

(5)

502,688

30.9

%

Other income (expense), net

3,941

(3,941)

(6)

Provision for (recovery of) income taxes

58,461

9,569

(7)

68,030

GAAP-based net income / Non-GAAP-based net income, attributable to OpenText

218,125

188,650

(8)

406,775

GAAP-based earnings per share / Non GAAP-based earnings per share-diluted, attributable to OpenText

$

1.81

$

1.56

(8)

$

3.37

 

(1)

Adjustment relates to the exclusion of share based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.

(2)

Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.

(3)

GAAP-based and Non-GAAP-based gross profit stated in dollars, and gross margin stated as a percentage of revenue.

(4)

Adjustment relates to the exclusion of Special charges (recoveries) from our Non-GAAP-based operating expenses as Special charges are generally incurred in the periods following the relevant acquisitions and are not indicative or related to continuing operations and are therefore excluded from our internal analysis of operating results.

(5)

GAAP-based and Non-GAAP-based income from operations stated in dollars, and operating margin stated as a percentage of revenue.

(6)

Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) relates primarily to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results.

(7)

Adjustment relates to differences between the GAAP-based tax provision rate of approximately 21% and a non-GAAP-based tax rate of 14.3%; these rate differences are due to the income tax effects of expenses that are excluded for the purpose of calculating non-GAAP-based adjusted net income. Such excluded expenses include amortization, share-based compensation, special charges and other income (expense), net. Also excluded are tax expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves, tax arising on internal reorganizations, and "book to return" adjustments for tax return filings and tax assessments (in total "adjusted expenses"). In arriving at our non-GAAP-based tax rate of 14.3%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.

(8)

Reconciliation of Non-GAAP-based adjusted net income to GAAP-based net income:

 

Year Ended June 30, 2014

Per share diluted

Non-GAAP-based net income, attributable to OpenText

$

406,775

$

3.37

Less:

Amortization

150,940

1.25

Share-based compensation

19,906

0.17

Special charges (recoveries)

31,314

0.26

Other (income) expense, net

(3,941)

(0.03)

GAAP-based provision for (recovery of) income taxes

58,461

0.48

Non-GAAP based provision for income taxes

(68,030)

(0.57)

GAAP-based net income, attributable to OpenText

$

218,125

$

1.81

 

(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, 2015 and 2014:

 

Three Months Ended June 30, 2015

Three Months Ended June 30, 2014

Currencies

% of Revenue

% of Expenses*

% of Revenue

% of Expenses*

EURO

23

%

14

%

25

%

18

%

GBP

8

%

8

%

9

%

10

%

CAD

5

%

14

%

5

%

12

%

USD

52

%

48

%

49

%

42

%

Other

12

%

16

%

12

%

18

%

Total

100

%

100

%

100

%

100

%

 

Year Ended June 30, 2015

Year Ended June 30, 2014

Currencies

% of Revenue

% of Expenses*

% of Revenue

% of Expenses*

EURO

24

%

14

%

27

%

18

%

GBP

8

%

8

%

9

%

9

%

CAD

5

%

13

%

5

%

15

%

USD

51

%

48

%

48

%

42

%

Other

12

%

17

%

11

%

16

%

Total

100

%

100

%

100

%

100

%

 

*Expenses include all cost of revenues and operating expenses included within the Consolidated Statements of Income, except for amortization of intangible assets, share-based compensation and special charges

 

SOURCE Open Text Corporation


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