Canada | 0-27544 | 98-0154400 |
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
Item 2.02 | Results of Operations and Financial Condition |
Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers |
Item 8.01 | Other Events |
Item 9.01 | Financial Statements and Exhibits |
(d) | Exhibits |
Exhibit No. | Description | |
99.1 | Press Release of financial results issued by Open Text Corporation on May 8, 2017 |
OPEN TEXT CORPORATION | ||||
May 8, 2017 | By: | /s/ John M. Doolittle | ||
John M. Doolittle Executive Vice President and Chief Financial Officer |
Exhibit No. | Description | |
99.1 | Press Release of financial results issued by Open Text Corporation on May 8, 2017 |
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 | )% |
• | 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 |
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 | % |
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 |
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 |
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 |
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 |
(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. |
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 |
(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 |
(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. 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 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 |
(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. |
(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. |
(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 |
(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 March 31, 2017 | Three Months Ended 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 | % |