OpenText Reports Fourth Quarter and Fiscal Year 2016 Financial Results

Fiscal 2016

- Total revenue of $1.8 billion, down 1%; up 3% Y/Y in CC*

- Recurring revenue of $1.5 billion, down 1%; up 3% Y/Y in CC

- Cloud services and subscription revenue of $601 million, down 1%; up 2% Y/Y in CC

- License revenue of $284 million, down 4%; up 2% Y/Y in CC

- GAAP EPS, diluted was $2.33, up 22% Y/Y

- Non-GAAP-based EPS of $3.54, up 2% Y/Y

Q4 Fiscal 2016

- Total revenue of $484 million, up 0.2%; up 0.2% Y/Y in CC

- Recurring revenue of $398 million, up 3%; up 3% Y/Y in CC

- Cloud services and subscription revenue of $157 million, up 5%; up 5% Y/Y in CC

- License revenue of $86 million, down 11%; down 12% Y/Y in CC

- GAAP EPS, diluted was $0.71, up 27% Y/Y

- Non-GAAP-based EPS of $0.89, up 2% Y/Y

WATERLOO, Ontario, July 27, 2016 /CNW/ -- Open Text Corporation (NASDAQ: OTEX) (TSX: OTC) announced today its financial results for the fourth quarter and fiscal year ended June 30, 2016.

"Fiscal 2016 was a pivotal year for OpenText, in constant currency, we grew revenues 3% and created a more efficient business and expanded our adjusted operating margin by 240 bps. More importantly, we believe we have created the foundation for Fiscal 2017 to be a double-digit growth year led by M&A," said OpenText CEO & CTO Mark J. Barrenechea.  "During our Fiscal 2016 fourth quarter we announced four acquisitions that will add revenue, operating income and cash flow."

Barrenechea further added, "In Fiscal 2017, we expect all of our revenue lines and adjusted operating income to grow double digit.  We also have the balance sheet and bandwidth to continue acquiring businesses."

Barrenechea concluded, "With our recent acquisitions, Release 16, EP Series, our enhancement packs, and Magellan, our next generation cognitive platform, we expect to grow our market share in Fiscal 2017."

Financial Highlights for Fiscal 2016 with Year Over Year Comparisons (1)


Summary of Annual Results



FY16

FY15

$ Change

% Change

(Y/Y)

FY16 in CC*

% Change in
CC*


Revenues: (in millions)








Cloud services and subscriptions

$601.0


$605.3


($4.3)


(0.7)%


$620.4


2.5%



Customer support

746.4


731.8


14.6


2.0%


779.1


6.5%



Professional service and other

193.1


220.5


(27.4)


(12.4)%


205.6


(6.8)%



Total Recurring revenues

$1,540.5


$1,557.6


($17.1)


(1.1)%


$1,605.1


3.0%



License

283.7


294.3


(10.6)


(3.6)%


298.8


1.5%



Total revenues

$1,824.2


$1,851.9


($27.7)


(1.5)%


$1,903.9


2.8%



GAAP-based operating margin

20.2%


18.8%


n/a


140 bps





Non-GAAP-based operating margin (2)

33.8%


30.9%


n/a


290 bps


33.3%


240 bps



GAAP-based EPS, diluted

$2.33


$1.91


$0.42


22.0%





Non-GAAP-based EPS, diluted (2)

$3.54


$3.46


$0.08


2.3%


$3.66


5.8%



Operating cash flows (in millions)

$525.7


$523.0


$2.7


0.5%






Note: Individual line items in tables may be adjusted by non-material amounts to enable totals to align to published financial statements.

 

Summary of Quarterly Results



Q4 FY16

Q4 FY15

$ Change

% Change

(Y/Y)

Q4 FY16 in CC*

% Change in
CC*


Revenues: (in millions)








Cloud services and subscriptions

$156.6


$149.0


$7.6


5.1%


$156.8


5.2%



Customer support

193.0


184.2


8.8


4.7%


193.0


4.8%



Professional service and other

48.1


52.4


(4.3)


(8.2)%


48.4


(7.6)%



Total Recurring revenues

$397.7


$385.6


$12.1


3.1%


$398.2


3.3%



License

86.1


97.1


(11)


(11.3)%


85.6


(11.8)%



Total revenues

$483.8


$482.7


$1.1


0.2%


$483.8


0.2%



GAAP-based operating margin

19.3%


17.1%


n/a


220 bps





Non-GAAP-based operating margin (2)

32.7%


30.8%


n/a


190 bps


32.1%


130 bps



GAAP-based EPS, diluted

$0.71


$0.56


$0.15


26.8%





Non-GAAP-based EPS, diluted (2)

$0.89


$0.87


$0.02


2.3%


$0.87


—%



Operating cash flows (in millions)

$119.1


$131.8


($12.7)


(9.6)%







Note: Individual line items in tables may be adjusted by non-material amounts to enable totals to align to published financial statements.


"In Fiscal 2016, we delivered solid operating cash flow. This demonstrates our strong track record of performance achieving a ten-year cumulative growth rate of 24% for both adjusted operating income and operating cash flow," said OpenText CFO John Doolittle. "Our balance sheet and liquidity position remain very strong with approximately $1.3 billion of cash at the end of the quarter. We also announced the reorganization of our intellectual property to Canada with the view of continuing to enhance operational and administrative efficiencies, among other benefits, while preserving predictability in our future tax rate." 


*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.

 

OpenText Quarterly Business Highlights

  • 20 customer transactions over $1 million, 10 OpenText Cloud contract signings and 10 on-premises
  • Financial, services and technology industries saw the most demand in cloud and license
  • New customers in the quarter included Red Hat Inc., s.Oliver, Nevada State Controller's Office, Schwan Cosmetics, Kamehameha Schools, eMeter Corporation, APA Group, State Of Iowa, KUKA, Miller Insurance Services LLP, Kno2, Delta RM, Sanofi, Mount Sinai Health System, Inland Revenue Department, HKSAR and Constellation Brands
  • OpenText signs definitive agreement to acquire Customer Communications Management assets from HP Inc.
  • OpenText signs definitive agreement to acquire Recommind, Inc.
  • OpenText signs definitive agreement to acquire, and closes acquisition of, ANXe Business Corporation
  • OpenText signs definitive agreement to acquire, and closes acquisition of, certain customer experience software and services assets and liabilities from HP Inc.
  • OpenText receives 2016 SAP® Pinnacle Award: Application Innovation Partner of the Year
  • Thousands attend OpenText Enterprise World 2016

Dividend Program Highlights

Cash Dividend

As part of our quarterly, non cumulative cash dividend program the Board declared on July 26, 2016 a cash dividend of $0.23 per Common Share. The record date for this dividend is August 26, 2016 and the payment date is September 16, 2016. 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


FY16

FY15

% Change

Revenue (million)

$1,824.2


$1,851.9


(1.5)%


GAAP-based gross margin

68.5%


67.7%


80 bps


GAAP-based operating margin

20.2%


18.8%


140 bps


GAAP-based EPS, diluted

$2.33


$1.91


22.0%


Non-GAAP-based gross margin (2)

72.8%


72.2%


60 bps


Non-GAAP-based operating margin (2)

33.8%


30.9%


290 bps


Non-GAAP-based EPS, diluted (2)

$3.54


$3.46


2.3%


 

Summary of Quarterly Results


Q4 FY16

Q3 FY16

Q4 FY15

% Change

(Q4 FY16 vs
Q3 FY16)


% Change

(Q4 FY16 vs
Q4 FY15)


Revenue (million)

$483.8


$440.5


$482.7


9.8%



0.2%



GAAP-based gross margin

68.4%


67.9%


68.8%


50 bps



(40) bps



GAAP-based operating margin

19.3%


20.1%


17.1%


(80) bps



220 bps



GAAP-based EPS, diluted

$0.71


$0.57


$0.56


24.6%



26.8%



Non-GAAP-based gross margin (2)

72.4%


72.0%


73.6%


40bps



(120) bps



Non-GAAP-based operating margin (2)

32.7%


31.4%


30.8%


130bps



190 bps



Non-GAAP-based EPS, diluted (2)

$0.89


$0.80


$0.87


11.3%



2.3%



 

Normal Course Issuer Bid

The Company also announced today the authorization of a new share repurchase plan and 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 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 68,748 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 274,991 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 the Company's 121,443,442 common shares outstanding as of July 25, 2016, or 6,072,172 common shares, are permitted to be purchased commencing on August 6, 2016 until August 5, 2017. All common shares purchased by OpenText pursuant to the NCIB will be cancelled. During Fiscal 2016, OpenText repurchased and cancelled 1,476,248 common shares for approximately $65.5 million at a volume-weighted average price per share of $44.37 under its expiring share repurchase plan.

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.

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 27, 2016 at 7:00 p.m. ET through 11:59 p.m. August 10, 2016 and can be accessed by dialing 1-855-669-9658 (toll-free) or +1-604-674-8052 (international) and using passcode 00617 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-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 our fiscal year ending June 30, 2017 (Fiscal 2017) 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, expected growth in our revenue lines, adjusted operating income and cash flow, its financial condition, results of operations and earnings, announced acquisitions, ongoing tax matters, purchases of common shares by OpenText pursuant to the NCIB, declaration of quarterly dividends, future tax rates, 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; (ix) the Company's financial condition and capital requirements; and (x) statements about the impact of "Open Text Release 16" and other product releases. 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 potential for the incurrence of or assumption of debt in connection with acquisitions and the impact on the ratings or outlooks of rating agencies on the Company's outstanding debt securities; (iii) the possibility that the Company may be unable to meet its future reporting requirements under the U.S. Securities Exchange Act of 1934, as amended, and the rules promulgated thereunder; (iv) the risks associated with bringing new products and services to market; (v) fluctuations in currency exchange rates; (vi) delays in the purchasing decisions of the Company's customers; (vii) the competition the Company faces in its industry and/or marketplace; (viii) the final determination of litigation, tax audits (including tax examinations in the United States and elsewhere) and other legal proceedings; (ix) potential exposure to greater than anticipated tax liabilities or expenses, including with respect to changes in Canadian, U.S. or international tax regimes; (x) the possibility of technical, logistical or planning issues in connection with the deployment of the Company's products or services; (xi) the continuous commitment of the Company's customers; and (xii) demand for the Company's products and services. 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 ©2016 Open Text. OpenText is a trademark or registered trademark of Open Text. 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. 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, 2016


June 30, 2015

ASSETS




Cash and cash equivalents

$

1,283,757



$

699,999


Short-term investments

11,839



11,166


Accounts receivable trade, net of allowance for doubtful accounts of $6,740 as of June 30, 2016 and $5,987 as of June 30, 2015

285,904



284,131


Income taxes recoverable

31,752



21,151


Prepaid expenses and other current assets

59,021



53,191


Total current assets

1,672,273



1,069,638


Property and equipment

183,660



160,419


Goodwill

2,325,586



2,161,592


Acquired intangible assets

646,240



679,479


Deferred tax assets

241,161



181,587


Other assets

53,697



54,946


Deferred charges

22,776



37,265


Long-term income taxes recoverable

8,751



8,404


Total assets

$

5,154,144



$

4,353,330


LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable and accrued liabilities

$

257,450



$

241,370


Current portion of long-term debt

8,000



8,000


Deferred revenues

373,549



358,066


Income taxes payable

32,030



17,001


Total current liabilities

671,029



624,437


Long-term liabilities:




Accrued liabilities

29,848



34,682


Deferred credits

8,357



12,943


Pension liability

61,993



56,737


Long-term debt

2,137,987



1,549,370


Deferred revenues

37,461



28,223


Long-term income taxes payable

149,041



151,484


Deferred tax liabilities

79,231



65,647


Total long-term liabilities

2,503,918



1,899,086


Shareholders' equity:




Share capital




121,404,677 and 122,293,986 Common Shares issued and outstanding at June 30, 2016 and June 30, 2015, respectively; Authorized Common Shares: unlimited

817,788



808,010


Additional paid-in capital

147,280



126,417


Accumulated other comprehensive income

46,310



51,828


Retained earnings

992,546



863,015


Treasury stock, at cost (633,647 shares at June 30, 2016 and 625,725 at June 30, 2015, respectively)

(25,268)



(19,986)


Total OpenText shareholders' equity

1,978,656



1,829,284


Non-controlling interests

541



523


Total shareholders' equity

1,979,197



1,829,807


Total liabilities and shareholders' equity

$

5,154,144



$

4,353,330


 

OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands of U.S. dollars, except share and per share data)






Year Ended June 30,



2016


2015


2014

Revenues:







License


$

283,710



$

294,266



$

305,846


Cloud services and subscriptions


601,018



605,309



373,400


Customer support


746,409



731,797



707,024


Professional service and other


193,091



220,545



238,429


Total revenues


1,824,228



1,851,917



1,624,699


Cost of revenues:







License


10,296



12,899



13,161


Cloud services and subscriptions


244,021



237,310



142,193


Customer support


89,861



94,456



96,068


Professional service and other


155,584



172,742



189,403


Amortization of acquired technology-based intangible assets


74,238



81,002



69,917


Total cost of revenues


574,000



598,409



510,742


Gross profit


1,250,228



1,253,508



1,113,957


Operating expenses:







Research and development


194,057



196,491



176,834


Sales and marketing


344,235



373,610



346,941


General and administrative


140,397



162,728



142,080


Depreciation


54,929



50,906



35,237


Amortization of acquired customer-based intangible assets


113,201



108,239



81,023


Special charges


34,846



12,823



31,314


Total operating expenses


881,665



904,797



813,429


Income from operations


368,563



348,711



300,528


Other income (expense), net


(1,423)



(28,047)



3,941


Interest and other related expense, net


(76,363)



(54,620)



(27,934)


Income before income taxes


290,777



266,044



276,535


Provision for income taxes


6,282



31,638



58,461


Net income for the period


$

284,495



$

234,406



$

218,074


Net (income) loss attributable to non-controlling interests


(18)



(79)



51


Net income attributable to OpenText


$

284,477



$

234,327



$

218,125


Earnings per share—basic attributable to OpenText


$

2.34



$

1.92



$

1.82


Earnings per share—diluted attributable to OpenText


$

2.33



$

1.91



$

1.81


Weighted average number of Common Shares outstanding—basic


121,463



122,092



119,674


Weighted average number of Common Shares outstanding—diluted


122,038



122,957



120,576


Dividends declared per Common Share


$

0.8300



$

0.7175



$

0.6225


 

OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands of U.S. dollars, except share and per share data)




Three Months Ended June 30,


2016


2015

Revenues:




License

$

86,126



$

97,129


Cloud services and subscriptions

156,624



148,967


Customer support

192,969



184,221


Professional service and other

48,084



52,391


Total revenues

483,803



482,708


Cost of revenues:




License

3,106



3,511


Cloud services and subscriptions

64,889



58,424


Customer support

25,237



23,578


Professional service and other

41,546



42,743


Amortization of acquired technology-based intangible assets

17,994



22,454


Total cost of revenues

152,772



150,710


Gross profit

331,031



331,998


Operating expenses:




Research and development

53,747



52,357


Sales and marketing

95,815



104,443


General and administrative

33,330



41,766


Depreciation

14,931



13,390


Amortization of acquired customer-based intangible assets

29,637



28,741


Special charges

10,092



8,791


Total operating expenses

237,552



249,488


Income from operations

93,479



82,510


Other income (expense), net

409



690


Interest and other related expense, net

(21,902)



(18,194)


Income before income taxes

71,986



65,006


Recovery of income taxes

(14,347)



(3,763)


Net income for the period

$

86,333



$

68,769


Net loss attributable to non-controlling interests

57



35


Net income attributable to OpenText

$

86,390



$

68,804


Earnings per share—basic attributable to OpenText

$

0.71



$

0.56


Earnings per share—diluted attributable to OpenText

$

0.71



$

0.56


Weighted average number of Common Shares outstanding—basic

121,324



122,245


Weighted average number of Common Shares outstanding—diluted

122,020



122,888


Dividends declared per Common Share

$

0.2300



$

0.2000


 

OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands of U.S. dollars)




Year Ended June 30,


2016


2015


2014

Net income for the period

$

284,495



$

234,406



$

218,074


Other comprehensive income—net of tax:






Net foreign currency translation adjustments

(3,318)



15,690



(2,779)


Unrealized gain (loss) on cash flow hedges:






Unrealized (loss)

(2,574)



(6,064)



(357)


Loss reclassified into net income

2,956



5,710



3,242


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






Actuarial loss

(3,374)



(3,302)



(841)


Amortization of actuarial loss into net income

347



357



294


Unrealized net gain (loss) on short-term investments

445



(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

(5,518)



12,379



(441)


Total comprehensive income

278,977



246,785



217,633


Comprehensive (income) loss attributable to non-controlling interests

(18)



(79)



51


Total comprehensive income attributable to OpenText

$

278,959



$

246,706



$

217,684


 

OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)




Year Ended June 30,


2016


2015


2014

Cash flows from operating activities:






Net income for the period

$

284,495



$

234,406



$

218,074


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






Depreciation and amortization of intangible assets

242,368



240,147



186,177


Share-based compensation expense

25,978



22,047



19,906


Excess tax benefits on share-based compensation expense

(230)



(1,675)



(1,844)


Pension expense

4,577



4,796



3,232


Amortization of debt issuance costs

4,678



4,556



3,191


Amortization of deferred charges and credits

9,903



10,525



11,307


Loss on sale and write down of property and equipment

1,108



1,368



15


Release of unrealized gain on marketable securities to income



(3,098)




Write off of unamortized debt issuance costs



2,919




Deferred Taxes

(54,461)



(14,578)



(12,334)


Changes in operating assets and liabilities:






Accounts receivable

8,985



43,189



(17,186)


Prepaid expenses and other current assets

316



(3,534)



11,146


Income taxes

6,294



2,933



11,308


Deferred charges and credits





9,870


Accounts payable and accrued liabilities

(5,671)



(22,714)



(36,478)


Deferred revenue

(4,781)



6,775



16,601


Other assets

2,163



(5,031)



(5,858)


Net cash provided by operating activities

525,722



523,031



417,127


Cash flows from investing activities:






Additions of property and equipment

(70,009)



(77,046)



(42,268)


Proceeds from maturity of short-term investments

11,297



17,017




Purchase of CEM Business

(152,711)






Purchase of ANXe Business Corporation

(104,570)






Purchase of Daegis Inc., net of cash acquired

(22,146)






Purchase of Actuate Corporation, net of cash acquired

(8,153)



(291,800)




Purchase of Informative Graphics Corporation, net of cash acquired

(3,464)



(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 ICCM Professional Services Limited, net of cash acquired

(2,027)






Purchase of a division of Spicer Corporation



(222)




Purchase of Patents





(192)


Purchase consideration for prior period acquisitions



(590)



(887)


Other investing activities

(9,393)



(10,574)



(2,547)


Net cash used in investing activities

(361,176)



(398,395)



(1,153,368)


Cash flows from financing activities:






Excess tax benefits on share-based compensation expense

230



1,675



1,844


Proceeds from issuance of Common Shares

20,097



15,240



24,808


Proceeds from long-term debt

600,000



800,000



800,000


Repayment of long-term debt and revolver

(8,000)



(530,284)



(45,911)


Debt issuance costs

(6,765)



(18,271)



(16,685)


Equity issuance costs





(144)


Common Shares repurchased

(65,509)






Purchase of Treasury Stock

(10,627)



(10,126)



(1,275)


Payments of dividends to shareholders

(99,262)



(87,629)



(74,693)


Net cash provided by financing activities

430,164



170,605



687,944


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

(10,952)



(23,132)



5,742


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

583,758



272,109



(42,555)


Cash and cash equivalents at beginning of the period

699,999



427,890



470,445


Cash and cash equivalents at end of the period

$

1,283,757



$

699,999



$

427,890


 

OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)




Three Months Ended June 30,


2016


2015

Cash flows from operating activities:




Net income for the period

$

86,333



$

68,769


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




Depreciation and amortization of intangible assets

62,562



64,585


Share-based compensation expense

6,898



6,107


Excess tax expense (benefits) on share-based compensation expense

27



(64)


Pension expense

1,118



1,194


Amortization of debt issuance costs

1,208



1,146


Amortization of deferred charges and credits

2,653



2,632


Loss on sale and write down of property and equipment



1,250


Deferred taxes

(38,769)



(10,541)


Changes in operating assets and liabilities:




Accounts receivable

(13,167)



(33,371)


Prepaid expenses and other current assets

2,905



467


Income taxes

3,004



1,579


Deferred charges and credits




Accounts payable and accrued liabilities

21,763



31,033


Deferred revenue

(17,345)



70


Other assets

(70)



(3,039)


Net cash provided by operating activities

119,120



131,817


Cash flows from investing activities:




Additions of property and equipment

(21,112)



(16,460)


Proceeds from maturity of short-term investments

2,058



9,925


Purchase of CEM Business

(152,711)




Purchase of ANXe Business Corporation

(104,570)




Purchase of Actuate Corporation, net of cash acquired



(32)


Other investing activities

(3,269)



(1,659)


Net cash used in investing activities

(279,604)



(8,226)


Cash flows from financing activities:




Excess tax (expense) benefits on share-based compensation expense

(27)



64


Proceeds from issuance of Common Shares

8,269



2,413


Proceeds from long-term debt

600,000




Repayment of long-term debt and revolver

(2,000)



(9,799)


Debt issuance costs

(6,765)



(195)


Purchase of Treasury stock



(8,875)


Payments of dividends to shareholders

(27,635)



(24,455)


Net cash provided by (used in) financing activities

571,842



(40,847)


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

(5,006)



4,078


Increase in cash and cash equivalents during the period

406,352



86,822


Cash and cash equivalents at beginning of the period

877,405



613,177


Cash and cash equivalents at end of the period

$

1,283,757



$

699,999




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 earnings per share on a diluted basis, excluding the amortization of acquired intangible assets, other income (expense), share-based compensation, and Special charges (recoveries), 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 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 income from operations, excluding the amortization of acquired intangible assets, Special charges (recoveries), and share-based compensation expense. Non-GAAP-based operating margin is calculated as Non-GAAP-based income from operations 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 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, 2016.

(In thousands except for per share amounts)


Three Months Ended June 30, 2016


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

$

64,889



$

(312)


(1)

$

64,577



Customer support

25,237



(269)


(1)

24,968



Professional service and other

41,546



(540)


(1)

41,006



Amortization of acquired technology-based intangible assets

17,994



(17,994)


(2)



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

331,031


68.4%


19,115


(3)

350,146


72.4%


Operating expenses







Research and development

53,747



(836)


(1)

52,911



Sales and marketing

95,815



(3,026)


(1)

92,789



General and administrative

33,330



(1,915)


(1)

31,415



Amortization of acquired customer-based intangible assets

29,637



(29,637)


(2)



Special charges (recoveries)

10,092



(10,092)


(4)



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

93,479


19.3%


64,621


(5)

158,100


32.7%


Other income (expense), net

409



(409)


(6)



Provision for (recovery of) income taxes

(14,347)



41,644


(7)

27,297



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

86,390



22,568


(8)

108,958



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

$

0.71



$

0.18


(8)

$

0.89





(1)

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

(2)

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

(3)

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

(4)

Adjustment relates to the exclusion of Special charges (recoveries) from our Non-GAAP-based operating expenses as Special charges (recoveries) are generally incurred in the periods following the relevant acquisitions, include one-time non-recurring charges or recoveries, 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 total 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 20% and a Non-GAAP-based tax rate of 20%; 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 (recoveries) 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 20%, 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, 2016



Per share diluted

GAAP-based net income, attributable to OpenText

$

86,390


$

0.71


Add:



Amortization

47,631


0.39


Share-based compensation

6,898


0.06


Special charges (recoveries)

10,092


0.08


Other (income) expense, net

(409)



GAAP-based provision for (recovery of) income taxes

(14,347)


(0.12)


Non-GAAP based provision for income taxes

(27,297)


(0.23)


Non-GAAP-based net income, attributable to OpenText

$

108,958


$

0.89


 

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the year ended June 30, 2016.

(In thousands except for per share amounts)


Year Ended June 30, 2016


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

$

244,021



$

(953)


(1)

$

243,068



Customer support

89,861



(900)


(1)

88,961



Professional service and other

155,584



(1,626)


(1)

153,958



Amortization of acquired technology-based intangible assets

74,238



(74,238)


(2)



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

1,250,228


68.5%


77,717


(3)

1,327,945


72.8%


Operating expenses







Research and development

194,057



(2,824)


(1)

191,233



Sales and marketing

344,235



(12,069)


(1)

332,166



General and administrative

140,397



(7,606)


(1)

132,791



Amortization of acquired customer-based intangible assets

113,201



(113,201)


(2)



Special charges (recoveries)

34,846



(34,846)


(4)



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

368,563


20.2%


248,263


(5)

616,826


33.8%


Other income (expense), net

(1,423)



1,423


(6)



Provision for (recovery of) income taxes

6,282



101,793


(7)

108,075



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

284,477



147,893


(8)

432,370



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

$

2.33



$

1.21


(8)

$

3.54





(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 following the relevant acquisitions, including one-time non-recurring charges or recoveries, 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 total 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 2% and a Non-GAAP-based tax rate of 20%; 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 (recoveries) 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 20%, 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, 2016



Per share diluted

GAAP-based net income, attributable to OpenText

$

284,477


$

2.33


Add:



Amortization

187,439


1.54


Share-based compensation

25,978


0.21


Special charges (recoveries)

34,846


0.29


Other (income) expense, net

1,423


0.01


GAAP-based provision for (recovery of) income taxes

6,282


0.05


Non-GAAP based provision for income taxes

(108,075)


(0.89)


Non-GAAP-based net income, attributable to OpenText

$

432,370


$

3.54


 

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the three months ended March 31, 2016.

(In thousands except for per share amounts)


Three Months Ended March 31, 2016


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

$

61,298



$

(202)


(1)

$

61,096



Customer support

22,427



(215)


(1)

22,212



Professional service and other

37,599



(247)


(1)

37,352



Amortization of acquired technology-based intangible assets

17,630



(17,630)


(2)



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

299,109


67.9%


18,294


(3)

317,403


72.0%


Operating expenses







Research and development

48,160



(500)


(1)

47,660



Sales and marketing

84,600



(3,213)


(1)

81,387



General and administrative

37,731



(1,589)


(1)

36,142



Amortization of acquired customer-based intangible assets

27,966



(27,966)


(2)



Special charges (recoveries)

(1,671)



1,671


(4)



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

88,569


20.1%


49,891


(5)

138,460


31.4%


Other income (expense), net

2,120



(2,120)


(6)



Provision for (recovery of) income taxes

5,353



19,100


(7)

24,453



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

69,115



28,671


(8)

97,786



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

$

0.57



$

0.23


(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 following the relevant acquisitions, including one-time non-recurring charges or recoveries, 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 total 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 7% and a Non-GAAP-based tax rate of 20%; 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 (recoveries) 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 20%, 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, 2016



Per share diluted

GAAP-based net income, attributable to OpenText

$

69,115


$

0.57


Add:



Amortization

45,596


0.37


Share-based compensation

5,966


0.05


Special charges (recoveries)

(1,671)


(0.01)


Other (income) expense, net

(2,120)


(0.02)


GAAP-based provision for (recovery of) income taxes

5,353


0.04


Non-GAAP based provision for income taxes

(24,453)


(0.20)


Non-GAAP-based net income, attributable to OpenText

$

97,786


$

0.80


 

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 Total
Revenue

Adjustments

Note

Non-GAAP-
based

Measures

Non-GAAP-
based
Measures

% of Total
Revenue

Cost of revenues







Cloud services and subscriptions

$

58,424



$

(252)


(1)

$

58,172



Customer support

23,578



(200)


(1)

23,378



Professional service and other

42,743



(421)


(1)

42,322



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 (%)

331,998


68.8%


23,327


(3)

355,325


73.6%


Operating expenses







Research and development

52,357



(665)


(1)

51,692



Sales and marketing

104,443



(2,508)


(1)

101,935



General and administrative

41,766



(2,061)


(1)

39,705



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 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 following the relevant acquisitions, including one-time non-recurring charges or recoveries, 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 total 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 (recoveries) 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 GAAP-based net income to Non-GAAP-based net income:




Three Months Ended June 30, 2015



Per share diluted

GAAP-based net income, attributable to OpenText

$

68,804


$

0.56


Add:



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)


Non-GAAP-based net income, attributable to OpenText

$

106,935


$

0.87


 

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 Total
Revenue

Adjustments

Note

Non-GAAP-
based

Measures

Non-GAAP-
based
Measures

% of Total
Revenue

Cost of revenues:







Cloud services and subscriptions

$

237,310



$

(833)


(1)

$

236,477



Customer support

94,456



(832)


(1)

93,624



Professional service and other

172,742



(1,335)


(1)

171,407



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 (%)

1,253,508


67.7%


84,002


(3)

1,337,510


72.2%


Operating expenses







Research and development

196,491



(2,496)


(1)

193,995



Sales and marketing

373,610



(9,095)


(1)

364,515



General and administrative

162,728



(7,456)


(1)

155,272



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 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 following the relevant acquisitions, including one-time non-recurring charges or recoveries, 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 total 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 (recoveries) 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 GAAP-based net income to Non-GAAP-based net income:




Year Ended June 30, 2015



Per share diluted

GAAP-based net income, attributable to OpenText

$

234,327


$

1.91


Add:



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)


Non-GAAP-based net income, attributable to OpenText

$

424,926


$

3.46




(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, 2016 and 2015:










Three Months Ended
June 30, 2016


Three Months Ended
June 30, 2015

Currencies

% of Revenue 

% of Expenses* 


% of Revenue 

% of Expenses* 

EURO

25%

15%


23%

14%

GBP

7%

7%


8%

8%

CAD

5%

12%


5%

14%

USD

54%

49%


52%

48%

Other

9%

17%


12%

16%

Total

100%

100%


100%

100%






















Year Ended

June 30, 2016


Year Ended

June 30, 2015

Currencies

% of Revenue 

% of Expenses* 


% of Revenue 

% of Expenses* 

EURO

24%

15%


24%

14%

GBP

8%

7%


8%

8%

CAD

4%

12%


5%

13%

USD

54%

49%


51%

48%

Other

10%

17%


12%

17%

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 (recoveries).

 

SOURCE Open Text Corporation


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