OpenText Reports Third Quarter Fiscal Year 2017 Financial Results

WATERLOO, Ontario, May 8, 2017 /CNW/ -- 

Total revenue of $593 million, up 35% Y/Y; or $600 million, up 36% in CC; Quarterly cash dividend increased by 15%

Open Text Corporation (NASDAQ: OTEX, TSX: OTEX) announced today its financial results for the third quarter ended March 31, 2017.

"It was a milestone quarter for OpenText as revenues reached $600 million with 36% year-over-year growth (in CC) and operating cash flow grew 46% quarter-over-quarter," said OpenText CEO and CTO, Mark J. Barrenechea. "We are a market leader in Enterprise Software for Digital Transformation and customers are responding favorably to our expanded portfolio of customer experience management, vertical content solutions, and discovery offerings.  We have invested approximately $2.4 billion in acquisitions over the last twelve months, and while the financial benefits are evident in our quarterly results, they are yet to be fully realized."

Barrenechea further added, "Our first principle is long-term growth in intrinsic value.  Over the past four years, we have returned over $400 million to shareholders via dividends and cash used for share buybacks. Our ability to deploy capital continues to expand, our financial position is strong and our outlook is positive. Today we are announcing a 15% increase to our quarterly cash dividend to $0.132 per share."

On January 23, 2017, OpenText completed the acquisition of Dell-EMC's Enterprise Content Division ("ECD Business"), including Documentum. "We are on our business case and while we expect the ECD Business revenue contribution in Q4 Fiscal 2017 to increase approximately 30% quarter over quarter, performance is expected to scale throughout Fiscal 2018," said Barrenechea.

Barrenechea concluded, "Our strategic market thesis is centered on Enterprise Information Management and we are investing for the next decade. We are also seeing growth opportunities in Artificial Intelligence ("AI"). Our customers manage the world's largest content archives, and they are looking to turn these archives into active data lakes to drive greater business insight.  We plan on showcasing Magellan, our next generation Analytics and AI platform at our upcoming Enterprise World."

Financial Highlights for Q3 FY17 with Year Over Year Comparisons

Summary of Quarterly Results










Q3 FY17

Q3 FY16

$ Change

% Change
(Y/Y)


Q3 FY17 in
CC*

% Change in
CC*


Revenues: (in millions)









Cloud services and subscriptions

$177.1


$147.5


$29.6


20.1

%


$179.2


21.5

%


Customer support

263.4


183.6


79.8


43.5

%


266.6


45.2

%


Professional service and other

65.4


45.0


20.4


45.2

%


66.1


46.9

%


Total Recurring revenues

$505.9


$376.1


$129.8


34.5

%


$512.0


36.1

%


License

87.2


64.4


22.8


35.5

%


87.9


36.6

%


Total revenues

$593.1


$440.5


$152.6


34.6

%


$599.9


36.2

%


GAAP-based operating margin

11.0

%

20.1

%

n/a

(910)


bps




Non-GAAP-based operating margin (1)

29.1

%

31.4

%

n/a

(230)


bps

29.4

%

(200)


bps

GAAP-based EPS, diluted(2)

$0.08


$0.28


($0.20)


(71.4)%






Non-GAAP-based EPS, diluted (1)(2)(3)

$0.45


$0.40


$0.05


12.5

%


$

0.46


15.0

%


Operating cash flows (in millions)

$156.3


$189.9


($33.6)


(17.7)%






















 

Summary of YTD Results










FY17 YTD

FY16 YTD

$ Change

% Change
(Y/Y)


FY17 YTD in
CC*

% Change in
CC*


Revenues: (in millions)









Cloud services and subscriptions

$521.9


$444.4


$77.5


17.4

%


$525.5


18.2

%


Customer support

693.3


553.4


139.9


25.3

%


700.5


26.6

%


Professional service and other

166.7


145.0


21.7


15.0

%


168.9


16.5

%


Total Recurring revenues

$1,381.9


$1,142.8


$239.0


20.9

%


$1,394.9


22.1

%


License

245.6


197.6


48.1


24.3

%


247.2


25.1

%


Total revenues

$1,627.5


$1,340.4


$287.1


21.4

%


$1,642.1


22.5

%


GAAP-based operating margin

15.1

%

20.5

%

n/a

(540)


bps




Non-GAAP-based operating margin (1)

31.2

%

34.2

%

n/a

(300)


bps

31.3

%

(290)


bps

GAAP-based EPS, diluted(2)

$3.88


$0.81


$3.07


379.0

%





Non-GAAP-based EPS, diluted (1)(2)(3)

$1.42


$1.32


$0.10


7.6

%


$1.44


9.1

%


Operating cash flows (in millions)

$336.8


$406.6


($69.8)


(17.2)%








(1)

Please see note 2 "Use of Non-GAAP Financial Measures" below



(2)

As a result of the two-for-one share split, effected January 24, 2017 by way of a share sub-division, all current and historical period per share data and number of Common Shares outstanding in this press release are presented on a post share split basis.



(3)

Please also see note 14 to the Company's Condensed Consolidated Financial Statements on Form 10-Q. Reflective of the amount of net tax benefit arising from the internal reorganization assumed to be allocable to the current period based on the forecasted utilization period.



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

"This quarter, we grew at double digit rates across all revenue lines while generating solid operating cash flow," said OpenText CFO, John Doolittle. "This was accomplished while onboarding the largest acquisition in the Company's history. We continue to focus on integrating the ECD Business and improving margin performance for all of our recently acquired businesses."

Doolittle added, "OpenText is in a solid liquidity position and continues to acquire companies that generate positive cash flow, replenishing our capacity to fund future growth. We are reaffirming our published Fiscal Year 2017 target model and our 2020 aspirations remain unchanged."

*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

  • Completed $1.62 billion acquisition of the ECD Business, largest acquisition in our history
  • 19 customer transactions over $1 million, 12 OpenText Cloud contract signings and 7 on-premise
  • Financial, Services, Technology, Consumer Goods, Industrial Goods, and Public Sector industries saw the most demand in cloud and license
  • New customers in the quarter included Tora Trading Services, PFU Limited, Adient, Astellas Pharma Inc., RTG Furniture Corp., Froneri International plc, Shield Healthcare, LSC Communications, Mitchell & Ness, VFS Global, Engie E&P International, Sanlam, North Bristol NHS Trust, Instituto de Crédito Oficial, Bekaert, Lycamobile, Yazaki Europe Ltd., Energias de Portugal, Terna, Avenue Link, Iron Mountain, Exelon, Acciona, and Cargill
  • OpenText Enterprise World 2017 in July showcases the Future of Digital and Artificial Intelligence
  • Completed Innovation Tour 2017 where management connected with over 5,000 customers and 600 partners in 8 countries
  • Independent Research Firm Cites OpenText as a Leader in Enterprise Content Management for Transactional and Business Content Services
  • OpenText Appoints Jürgen Tinggren as a new independent member to Board of Directors
  • OpenText Named a Leader in Gartner's 2017 Magic Quadrant for Customer Communications Management Software
  • OpenText Tops B2B Integration Managed Services Providers in New Analyst Report

The Company also announced today that with ECD integration, it has streamlined its operational structure, eliminated the role of President, and further empowered its executive leadership team.  As a result, Stephen Murphy, President of OpenText has left the Company.

Dividend Program Highlights

Cash Dividend
As part of our quarterly, non-cumulative cash dividend program the Board declared on May 5, 2017, a fifteen percent increase in the quarterly cash dividend to $0.132 per common share. The record date for this dividend is May 26, 2017 and the payment date is June 16, 2017. Future declarations of dividends and the establishment of future record and payment dates are subject to the final determination and discretion of the Board of Directors.

Summary of Quarterly Results









Q3 FY17

Q2 FY17

Q3 FY16

% Change
(Q3 FY17 vs
Q2 FY17)


% Change
(Q3 FY17 vs
Q3 FY16)


Revenue (million)

$593.1


$542.7


$440.5


9.3

%


34.6

%


GAAP-based gross margin

64.5

%

69.0

%

67.9

%

(450)


bps

(340)


bps

GAAP-based operating margin

11.0

%

19.7

%

20.1

%

(870)


bps

(910)


bps

GAAP-based EPS, diluted(1)(2)

$0.08


$0.18


$0.28


(55.6)%



(71.4)%



Non-GAAP-based gross margin (3)

71.2

%

73.8

%

72.0

%

(260)


bps

(80)


bps

Non-GAAP-based operating margin (3)

29.1

%

34.0

%

31.4

%

(490)


bps

(230)


bps

Non-GAAP-based EPS, diluted (2)(3)(4)

$0.45


$0.54


$0.40


(16.7)%



12.5

%


 

Summary of Year to Date Results






Q3 FY17 YTD

Q3 FY16 YTD

% Change


Revenue (million)

$1,627.5


$1,340.4


21.4

%


GAAP-based gross margin

66.6

%

68.6

%

(200)


bps

GAAP-based operating margin

15.1

%

20.5

%

(540)


bps

GAAP-based EPS, diluted(1)(2)

$3.88


$0.81


379.0

%


Non-GAAP-based gross margin (3)

72.2

%

72.9

%

(70)


bps

Non-GAAP-based operating margin (3)

31.2

%

34.2

%

(300)


bps

Non-GAAP-based EPS, diluted (2)(3)(4)

$1.42


$1.32


7.6

%




(1)

Recorded a significant tax benefit in Q1 FY17 of $876.1 million. This significant tax benefit is specifically tied to the Company's internal reorganization and applied to Q1 FY17 only and as a result does not continue in future periods.

(2)

As a result of the two-for-one share split, effected January 24, 2017 by way of a share sub-division, all current and historical period per share data and number of Common Shares outstanding in this press release are presented on a post share split basis.

(3)

Please see note 2 "Use of Non-GAAP Financial Measures" below

(4)

Please also see note 14 to the Company's Condensed Consolidated Financial Statements on Form 10-Q. Reflective of the amount of net tax benefit arising from the internal reorganization assumed to be allocable to the current period based on the forecasted utilization period.

Conference Call Information

The public is invited to listen to the earnings conference call today at 5:00 p.m. ET (2:00 p.m. PT) by dialing 1-800-319-4610 (toll-free) or +1-604-638-5340 (international). Please dial-in 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 May 8, 2017 at 7:00 p.m. ET through 11:59 p.m. on May 22, 2017 and can be accessed by dialing 1-855-669-9658 (toll-free) or +1-604-674-8052 (international) and using passcode 1291 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 enables the digital world, creating a better way for organizations to work with information, on premises or in the cloud. For more information about OpenText (NASDAQ: OTEX, TSX: OTEX) 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, expected ECD Business revenue contributions, adjusted operating income and cash flow, its financial condition, results of operations and earnings, announced acquisitions, ongoing tax matters, the integration of the ECD Business, expected timing, charges and savings related to restructuring activities, declaration of quarterly dividends, future tax rates, new platform and product offerings 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 including expected growth in the Artificial Intelligence 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) downward pressure on our share price and dilutive effect of future sales or issuances of equity securities (including in connection with future acquisitions); (x) the Company's financial condition and capital requirements; and (xi) statements about the impact of 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, or applicable Canadian securities regulation; (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:

Greg Secord
Vice President, Investor Relations
Open Text Corporation
415-963-0825
investors@opentext.com

Copyright ©2017 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

CONDENSED CONSOLIDATED BALANCE SHEETS

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



March 31, 2017


June 30, 2016

ASSETS

 (unaudited)



Cash and cash equivalents

$

449,000



$

1,283,757


Short-term investments

2,698



11,839


Accounts receivable trade, net of allowance for doubtful accounts of $6,270 as of March 31, 2017 and $6,740 as of June 30, 2016

360,272



285,904


Income taxes recoverable

20,051



31,752


Prepaid expenses and other current assets

79,318



59,021


Total current assets

911,339



1,672,273


Property and equipment

195,124



183,660


Goodwill

3,407,526



2,325,586


Acquired intangible assets

1,558,424



646,240


Deferred tax assets

1,222,386



241,161


Other assets

72,041



53,697


Deferred charges

56,684



22,776


Long-term income taxes recoverable

9,700



8,751


Total assets

$

7,433,224



$

5,154,144


LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable and accrued liabilities

$

290,465



$

257,450


Current portion of long-term debt

232,760



8,000


Deferred revenues

573,258



373,549


Income taxes payable

34,555



32,030


Total current liabilities

1,131,038



671,029


Long-term liabilities:




Accrued liabilities

40,501



29,848


Deferred credits

6,052



8,357


Pension liability

57,300



61,993


Long-term debt

2,388,805



2,137,987


Deferred revenues

59,000



37,461


Long-term income taxes payable

149,825



149,041


Deferred tax liabilities

97,104



79,231


Total long-term liabilities

2,798,587



2,503,918


Shareholders' equity:




Share capital




263,750,312 and 242,809,354 Common Shares issued and outstanding at March 31, 2017 and June 30, 2016, respectively; authorized Common Shares: unlimited

1,431,801



817,788


Additional paid-in capital

165,635



147,280


Accumulated other comprehensive income

43,281



46,310


Retained earnings

1,886,115



992,546


Treasury stock, at cost (997,157 shares at March 31, 2017 and 1,267,294 at June 30, 2016, respectively)

(23,909)



(25,268)


Total OpenText shareholders' equity

3,502,923



1,978,656


Non-controlling interests

676



541


Total shareholders' equity

3,503,599



1,979,197


Total liabilities and shareholders' equity

$

7,433,224



$

5,154,144


 

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

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

(unaudited)



Three Months Ended March 31,


Nine Months Ended March 31,


2017


2016


2017


2016

Revenues:








License

$

87,227



$

64,397



$

245,647



$

197,584


Cloud services and subscriptions

177,109



147,505



521,857



444,394


Customer support

263,436



183,636



693,298



553,440


Professional service and other

65,358



45,005



166,701



145,007


Total revenues

593,130



440,543



1,627,503



1,340,425


Cost of revenues:








License

4,008



2,480



10,244



7,190


Cloud services and subscriptions

77,225



61,298



220,667



179,132


Customer support

34,442



22,427



87,529



64,624


Professional service and other

55,529



37,599



137,167



114,038


Amortization of acquired technology-based intangible assets

39,285



17,630



87,268



56,244


Total cost of revenues

210,489



141,434



542,875



421,228


Gross profit

382,641



299,109



1,084,628



919,197


Operating expenses:








Research and development

77,086



48,160



200,379



140,310


Sales and marketing

117,498



84,600



315,297



248,420


General and administrative

44,828



37,731



122,939



107,067


Depreciation

16,557



13,754



47,128



39,998


Amortization of acquired customer-based intangible assets

40,825



27,966



108,248



83,564


Special charges

20,586



(1,671)



44,157



24,754


Total operating expenses

317,380



210,540



838,148



644,113


Income from operations

65,261



88,569



246,480



275,084


Other income (expense), net

1,424



2,120



4,565



(1,832)


Interest and other related expense, net

(31,734)



(16,228)



(86,752)



(54,461)


Income before income taxes

34,951



74,461



164,293



218,791


Provision for (recovery of) income taxes

13,239



5,353



(815,364)



20,629


Net income for the period

$

21,712



$

69,108



$

979,657



$

198,162


Net (income) loss attributable to non-controlling interests

(96)



7



(135)



(75)


Net income attributable to OpenText

$

21,616



$

69,115



$

979,522



$

198,087


Earnings per share—basic attributable to OpenText

$

0.08



$

0.29



$

3.91



$

0.82


Earnings per share—diluted attributable to OpenText

$

0.08



$

0.28



$

3.88



$

0.81


Weighted average number of Common Shares outstanding—basic

263,329



242,318



250,538



243,028


Weighted average number of Common Shares outstanding—diluted

265,440



243,412



252,469



244,088


Dividends declared per Common Share

$

0.1150



$

0.1000



$

0.3450



$

0.3000



As a result of the two-for-one share split, effected January 24, 2017 by way of a share sub-division, all current and historical period per share data and number of Common Shares outstanding in these Condensed Consolidated Financial Statements are presented on a post share split basis.

 

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands of U.S. dollars)

(unaudited)



Three Months Ended March 31,


Nine Months Ended March 31,


2017


2016


2017


2016

Net income for the period

$

21,712



$

69,108



$

979,657



$

198,162


Other comprehensive income—net of tax:








Net foreign currency translation adjustments

2,725



988



(7,582)



(40)


Unrealized gain (loss) on cash flow hedges:








Unrealized gain (loss) - net of tax expense (recovery) effect of $125 and $763 for the three months ended March 31, 2017 and 2016, respectively; ($254) and ($974) for the nine months ended March 31, 2017 and 2016, respectively

348



2,115



(705)



(2,704)


(Gain) loss reclassified into net income - net of tax (expense) recovery effect of $14 and $391 for the three months ended March 31, 2017 and 2016, respectively; ($24) and $869 for the nine months ended March 31, 2017 and 2016, respectively

40



1,086



(68)



2,412


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








Actuarial gain (loss) - net of tax expense (recovery) effect of ($64) and ($842) for the three months ended March 31, 2017 and 2016, respectively; $420 and ($632) for the nine months ended March 31, 2017 and 2016, respectively

686



(1,848)



5,047



(87)


Amortization of actuarial loss into net income - net of tax recovery effect of $59 and $33 for the three months ended March 31, 2017 and 2016, respectively; $178 and $99 for the nine months ended March 31, 2017 and 2016, respectively

139



88



420



261


Unrealized net gain (loss) on short-term investments - net of tax effect of nil for the three and nine months ended March 31, 2017 and 2016, respectively

(541)



(557)



(141)



(422)


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

3,397



1,872



(3,029)



(580)


Total comprehensive income

25,109



70,980



976,628



197,582


Comprehensive (income) loss attributable to non-controlling interests

(96)



7



(135)



(75)


Total comprehensive income attributable to OpenText

$

25,013



$

70,987



$

976,493



$

197,507


 

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars)

(unaudited)



Three Months Ended March 31,


Nine Months Ended March 31,


2017


2016


2017


2016

Cash flows from operating activities:








Net income for the period

$

21,712



$

69,108



$

979,657



$

198,162


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








Depreciation and amortization of intangible assets

96,667



59,350



242,644



179,806


Share-based compensation expense

6,661



5,966



22,373



19,080


Excess tax (benefits) on share-based compensation expense

(1,044)



(217)



(1,586)



(257)


Pension expense

892



1,134



2,953



3,459


Amortization of debt issuance costs

1,127



1,158



3,781



3,470


Amortization of deferred charges and credits

2,146



2,652



6,438



7,250


Write off of unamortized debt issuance costs

833





833




Loss on sale and write down of property and equipment



218





1,108


Deferred taxes

(22,011)



(7,823)



(890,244)



(15,692)


Share in net (income) of equity investees

(160)





(6,153)




Other non-cash charges





1,033




Changes in operating assets and liabilities:








Accounts receivable

(37,551)



11,272



(37,095)



22,152


Prepaid expenses and other current assets

(18,119)



(3,202)



(6,234)



(2,589)


Income taxes and deferred charges and credits

11,190



2,996



1,570



3,290


Accounts payable and accrued liabilities

40,516



(12,615)



16,521



(27,434)


Deferred revenue

54,659



61,237



6,917



12,564


Other assets

(1,215)



(1,290)



(6,635)



2,233


Net cash provided by operating activities

156,303



189,944



336,773



406,602


Cash flows from investing activities:








Additions of property and equipment

(17,797)



(18,998)



(50,071)



(48,897)


Proceeds from maturity of short-term investments



3,915



9,212



9,239


Purchase of ECD Business

(1,622,394)





(1,622,394)




Purchase of HP Inc. CCM Business





(315,000)




Purchase of Recommind, Inc.





(170,107)




Purchase of HP Inc. CEM Business





(7,289)




Purchase of ANXe Business Corporation





143




Purchase of Daegis Inc., net of cash acquired







(22,146)


Purchase consideration for acquisitions completed prior to Fiscal 2016



(3,785)





(13,644)


Other investing activities

(2,450)



(2,444)



(3,013)



(6,124)


Net cash used in investing activities

(1,642,641)



(21,312)



(2,158,519)



(81,572)


Cash flows from financing activities:








Excess tax benefits on share-based compensation expense

1,044



217



1,586



257


Proceeds from issuance of long-term debt





256,875




Proceeds from Revolver

225,000





225,000




Proceeds from issuance of Common Shares from exercise of stock options and ESPP

15,967



3,840



26,668



11,828


Proceeds from issuance of Common Shares under public Equity Offering





604,223




Repayment of long-term debt and revolver

(1,940)



(2,000)



(5,940)



(6,000)


Debt issuance costs

(2,045)





(6,200)




Equity issuance costs

(1,345)





(19,472)




Common Shares repurchased







(65,509)


Purchase of treasury stock

(4,245)





(4,245)



(10,627)


Payments of dividends to shareholders

(30,303)



(24,099)



(85,953)



(71,627)


Net cash provided by (used in) financing activities

202,133



(22,042)



992,542



(141,678)


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

10,714



4,852



(5,553)



(5,946)


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

(1,273,491)



151,442



(834,757)



177,406


Cash and cash equivalents at beginning of the period

1,722,491



725,963



1,283,757



699,999


Cash and cash equivalents at end of the period

$

449,000



$

877,405



$

449,000



$

877,405


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, after giving effect to the amortization of acquired intangible assets, other income (expense), share-based compensation, and Special charges (recoveries), all net of tax and any tax benefits/expense items unrelated to current period income, as further described in the tables below. Non-GAAP-based gross profit is the arithmetical sum of GAAP-based gross profit and the amortization of acquired technology-based intangible assets and share-based compensation within cost of sales. Non-GAAP-based gross margin is calculated as Non-GAAP-based gross profit expressed as a percentage of total revenue. Non-GAAP-based income from operations is calculated as 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.




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 March 31, 2017.

(In thousands except for per share amounts)


Three Months Ended March 31, 2017


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

$

77,225



$

(268)


(1)

$

76,957



Customer support

34,442



(261)


(1)

34,181



Professional service and other

55,529



(89)


(1)

55,440



Amortization of acquired technology-based intangible assets

39,285



(39,285)


(2)



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

382,641


64.5

%

39,903


(3)

422,544


71.2

%

Operating expenses







Research and development

77,086



(1,634)


(1)

75,452



Sales and marketing

117,498



(2,081)


(1)

115,417



General and administrative

44,828



(2,328)


(1)

42,500



Amortization of acquired customer-based intangible assets

40,825



(40,825)


(2)



Special charges (recoveries)

20,586



(20,586)


(4)



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

65,261


11.0

%

107,357


(5)

172,618


29.1

%

Other income (expense), net

1,424



(1,424)


(6)



Provision for (recovery of) income taxes

13,239



7,798


(7)

21,037



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

21,616



98,135


(8)

119,751



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

$

0.08



$

0.37


(8)

$

0.45





(1)

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

(2)

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

(3)

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

(4)

Adjustment relates to the exclusion of Special charges (recoveries) from our Non-GAAP-based operating expenses as Special charges (recoveries) are generally incurred in the periods relevant to an acquisition and include one-time, non-recurring charges or recoveries that are not indicative or related to continuing operations, and are therefore excluded from our internal analysis of operating results.

(5)

GAAP-based and Non-GAAP-based income from operations stated in dollars, 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. Other income (expense) also includes our share of income (losses) from our holdings in non-marketable securities investments as a limited partner. We do not actively trade equity securities in these privately held companies nor do we plan our ongoing operations based around any anticipated fundings or distributions from these investments. We exclude gains and losses on these investments as we do not believe they are reflective of our ongoing business and operating results.

(7)

Adjustment relates to differences between the GAAP-based tax provision rate of approximately 38% and a Non-GAAP-based tax rate of approximately 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 (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves, and "book to return" adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately 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 GAAP-based net income to Non-GAAP-based net income:

 


Three Months Ended March 31, 2017



Per share diluted

GAAP-based net income, attributable to OpenText

$

21,616


$

0.08


Add:



Amortization

80,110


0.30


Share-based compensation

6,661


0.03


Special charges (recoveries)

20,586


0.08


Other (income) expense, net

(1,424)


(0.01)


GAAP-based provision for (recovery of ) income taxes

13,239


0.05


Non-GAAP-based provision for income taxes

(21,037)


(0.08)


Non-GAAP-based net income, attributable to OpenText

$

119,751


$

0.45


 

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the nine months ended March 31, 2017.

(In thousands except for per share amounts)


Nine Months Ended March 31, 2017


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

$

220,667



$

(839)


(1)

$

219,828



Customer support

87,529



(766)


(1)

86,763



Professional service and other

137,167



(1,002)


(1)

136,165



Amortization of acquired technology-based intangible assets

87,268



(87,268)


(2)



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

1,084,628


66.6

%

89,875


(3)

1,174,503


72.2

%

Operating expenses







Research and development

200,379



(5,372)


(1)

195,007



Sales and marketing

315,297



(7,230)


(1)

308,067



General and administrative

122,939



(7,164)


(1)

115,775



Amortization of acquired customer-based intangible assets

108,248



(108,248)


(2)



Special charges (recoveries)

44,157



(44,157)


(4)



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

246,480


15.1

%

262,046


(5)

508,526


31.2

%

Other income (expense), net

4,565



(4,565)


(6)



Provision for (recovery of) income taxes

(815,364)



878,495


(7)

63,131



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

979,522



(621,014)


(8)

358,508



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

$

3.88



$

(2.46)


(8)

$

1.42





(1)

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

(2)

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

(3)

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

(4)

Adjustment relates to the exclusion of Special charges (recoveries) from our Non-GAAP-based operating expenses as Special charges (recoveries) are generally incurred in the periods relevant to an acquisition and include one-time, non-recurring charges or recoveries that are not indicative or related to continuing operations, and are therefore excluded from our internal analysis of operating results.

(5)

GAAP-based and Non-GAAP-based income from operations stated in dollars, 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. Other income (expense) also includes our share of income (losses) from our holdings in non-marketable securities investments as a limited partner. We do not actively trade equity securities in these privately held companies nor do we plan our ongoing operations based around any anticipated fundings or distributions from these investments. We exclude gains and losses on these investments as we do not believe they are reflective of our ongoing business and operating results

(7)

Adjustment relates to differences between the GAAP-based tax recovery rate of approximately 496% and a Non-GAAP-based tax rate of approximately 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 (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves, and "book to return" adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately 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 GAAP-based net income to Non-GAAP-based net income:

 


Nine Months Ended March 31, 2017



Per share diluted

GAAP-based net income, attributable to OpenText

$

979,522


$

3.88


Add:



Amortization

195,516


0.77


Share-based compensation

22,373


0.09


Special charges (recoveries)

44,157


0.17


Other (income) expense, net

(4,565)


(0.02)


GAAP-based provision for (recovery of) income taxes

(815,364)


(3.23)


Non-GAAP based provision for income taxes

(63,131)


(0.24)


Non-GAAP-based net income, attributable to OpenText

$

358,508


$

1.42


 

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

(In thousands except for per share amounts)


Three Months Ended December 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

$

73,150



$

(211)


(1)

$

72,939



Customer support

27,349



(270)


(1)

27,079



Professional service and other

40,295



(468)


(1)

39,827



Amortization of acquired technology-based intangible assets

24,848



(24,848)


(2)



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

374,676


69.0

%

25,797


(3)

400,473


73.8

%

Operating expenses







Research and development

64,721



(1,995)


(1)

62,726



Sales and marketing

102,651



(2,329)


(1)

100,322



General and administrative

39,914



(2,299)


(1)

37,615



Amortization of acquired customer-based intangible assets

33,815



(33,815)


(2)



Special charges (recoveries)

11,117



(11,117)


(4)



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

107,157


19.7

%

77,352


(5)

184,509


34.0

%

Other income (expense), net

(3,558)



3,558


(6)



Provision for (recovery of) income taxes

30,822



(7,319)


(7)

23,503



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

45,022



88,229


(8)

133,251



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

$

0.18



$

0.36


(8)

$

0.54





(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 relevant to an acquisition and include one-time, non-recurring charges or recoveries that are not indicative or related to continuing operations, and are therefore excluded from our internal analysis of operating results.

(5)

GAAP-based and Non-GAAP-based income from operations stated in dollars, 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 41% and a Non-GAAP-based tax rate of approximately 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 (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves, and "book to return" adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately 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 GAAP-based net income to Non-GAAP-based net income:

 


Three Months Ended December 31, 2016



Per share diluted

GAAP-based net income, attributable to OpenText

$

45,022


$

0.18


Add:



Amortization

58,663


0.24


Share-based compensation

7,572


0.03


Special charges (recoveries)

11,117


0.04


Other (income) expense, net

3,558


0.01


GAAP-based provision for (recovery of ) income taxes

30,822


0.12


Non-GAAP-based provision for income taxes

(23,503)


(0.08)


Non-GAAP-based net income, attributable to OpenText

$

133,251


$

0.54


 

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

$

0.28



$

0.12


(8)

$

0.40





(1)

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

(2)

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

(3)

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

(4)

Adjustment relates to the exclusion of Special charges (recoveries) from our Non-GAAP-based operating expenses as Special charges (recoveries) are generally incurred in the periods relevant to an acquisition and include one-time, non-recurring charges or recoveries that are not indicative or related to continuing operations, and are therefore excluded from our internal analysis of operating results.

(5)

GAAP-based and Non-GAAP-based income from operations stated in dollars, 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. Other income (expense) also includes our share of income (losses) from our holdings in non-marketable securities investments as a limited partner. We do not actively trade equity securities in these privately held companies nor do we plan our ongoing operations based around any anticipated fundings or distributions from these investments. We exclude gains and losses on these investments as we do not believe they are reflective of our ongoing business and operating results.  

(7)

Adjustment relates to differences between the GAAP-based tax provision rate of approximately 7% and a Non-GAAP-based tax rate of approximately 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 and "book to return" adjustments for tax return filings and tax assessments. In arriving at our Non-GAAP-based tax rate of approximately 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


$

0.28


Add:



Amortization

45,596


0.19


Share-based compensation

5,966


0.03


Special charges (recoveries)

(1,671)


(0.01)


Other (income) expense, net

(2,120)


(0.01)


GAAP-based provision for (recovery of ) income taxes

5,353


0.02


Non-GAAP-based provision for income taxes

(24,453)


(0.10)


Non-GAAP-based net income, attributable to OpenText

$

97,786


$

0.40


 

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

(In thousands except for per share amounts)


Nine 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

$

179,132



$

(641)


(1)

$

178,491



Customer support

64,624



(631)


(1)

63,993



Professional service and other

114,038



(1,086)


(1)

112,952



Amortization of acquired technology-based intangible assets

56,244



(56,244)


(2)



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

919,197


68.6

%

58,602


(3)

977,799


72.9

%

Operating expenses







Research and development

140,310



(1,988)


(1)

138,322



Sales and marketing

248,420



(9,043)


(1)

239,377



General and administrative

107,067



(5,691)


(1)

101,376



Amortization of acquired customer-based intangible assets

83,564



(83,564)


(2)



Special charges (recoveries)

24,754



(24,754)


(4)



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

275,084


20.5

%

183,642


(5)

458,726


34.2

%

Other income (expense), net

(1,832)



1,832


(6)



Provision for (recovery of) income taxes

20,629



60,149


(7)

80,778



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

198,087



125,325


(8)

323,412



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

$

0.81



$

0.51


(8)

$

1.32





(1)

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

(2)

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

(3)

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

(4)

Adjustment relates to the exclusion of Special charges (recoveries) from our Non-GAAP-based operating expenses as Special charges (recoveries) are generally incurred in the periods relevant to an acquisition and include one-time, non-recurring charges or recoveries that are not indicative or related to continuing operations, and are therefore excluded from our internal analysis of operating results.

(5)

GAAP-based and Non-GAAP-based income from operations stated in dollars, 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. Other income (expense) also includes our share of income (losses) from our holdings in non-marketable securities investments as a limited partner. We do not actively trade equity securities in these privately held companies nor do we plan our ongoing operations based around any anticipated fundings or distributions from these investments. We exclude gains and losses on these investments as we do not believe they are reflective of our ongoing business and operating results.  

(7)

Adjustment relates to differences between the GAAP-based tax provision rate of approximately 9% 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 and "book to return" adjustments for tax return filings and tax assessments. 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:

 


Nine Months Ended March 31, 2016



Per share diluted

GAAP-based net income, attributable to OpenText

$

198,087


$

0.81


Add:



Amortization

139,808


0.57


Share-based compensation

19,080


0.08


Special charges (recoveries)

24,754


0.10


Other (income) expense, net

1,832


0.01


GAAP-based provision for (recovery of) income taxes

20,629


0.08


Non-GAAP based provision for income taxes

(80,778)


(0.33)


Non-GAAP-based net income, attributable to OpenText

$

323,412


$

1.32


 

(3)

The following tables provide a composition of our major currencies for revenue and expenses, expressed as a percentage, for the three and nine months ended March 31, 2017 and 2016:

 


Three Months Ended


Three Months Ended


March 31, 2017


March 31, 2016

Currencies

% of Revenue 

% of Expenses* 


% of Revenue 

% of Expenses* 

EURO

19

%

15

%


22

%

15

%

GBP

6

%

7

%


8

%

7

%

CAD

4

%

11

%


4

%

12

%

USD

62

%

52

%


56

%

49

%

Other

9

%

15

%


10

%

17

%

Total

100

%

100

%


100

%

100

%






Nine Months Ended March 31, 2017


Nine Months Ended March 31, 2016

Currencies

% of Revenue 

% of Expenses* 


% of Revenue 

% of Expenses* 

EURO

22

%

15

%


23

%

14

%

GBP

7

%

7

%


8

%

8

%

CAD

4

%

11

%


4

%

12

%

USD

58

%

52

%


54

%

50

%

Other

9

%

15

%


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 (recoveries).

 

SOURCE Open Text Corporation


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