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 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 October 31, 2018 |
OPEN TEXT CORPORATION | ||||
October 31, 2018 | By: | /s/ Madhu Ranganathan | ||
Madhu Ranganathan Executive Vice President and Chief Financial Officer |
Exhibit No. | Description | |
99.1 |
Summary of Quarterly Results | ||||||||||||||||||
(in millions except per share data) | Q1 FY19 | Q1 FY18 | $ Change | % Change (Y/Y) | Q1 FY19 in CC* | % Change in CC* | ||||||||||||
Revenues: | ||||||||||||||||||
Cloud services and subscriptions | $208.1 | $193.9 | $14.2 | 7.3 | % | $208.2 | 7.4 | % | ||||||||||
Customer support | 311.6 | 295.4 | 16.1 | 5.5 | % | 311.4 | 5.4 | % | ||||||||||
Total annual recurring revenues** | $519.6 | $489.3 | $30.4 | 6.2 | % | $519.6 | 6.2 | % | ||||||||||
License | 76.9 | 78.2 | (1.3 | ) | (1.7 | )% | 77.6 | (0.8 | )% | |||||||||
Professional service and other | 70.6 | 73.2 | (2.6 | ) | (3.5 | )% | 71.6 | (2.2 | )% | |||||||||
Total revenues | $667.2 | $640.7 | $26.5 | 4.1 | % | $668.8 | 4.4 | % | ||||||||||
GAAP-based operating income | $99.2 | $87.6 | $11.6 | 13.2 | % | |||||||||||||
Non-GAAP-based operating income (1) | $222.4 | $201.7 | $20.8 | 10.3 | % | $220.6 | 9.4 | % | ||||||||||
GAAP-based EPS, diluted | $0.13 | $0.14 | ($0.01 | ) | (7.1 | )% | ||||||||||||
Non-GAAP-based EPS, diluted (1)(2) | $0.60 | $0.54 | $0.06 | 11.1 | % | $0.59 | 9.3 | % | ||||||||||
GAAP-based net income attributable to OpenText | $36.3 | $36.6 | ($0.3 | ) | (0.7 | )% | ||||||||||||
Adjusted EBITDA (1) | $246.3 | $220.4 | $25.8 | 11.7 | % | |||||||||||||
Operating cash flows | $171.4 | $67.2 | $104.2 | 154.9 | % |
• | 14 customer transactions over $1 million, 9 in the OpenText Cloud and 5 on-premise |
• | Financial, Services, Consumer Goods, Technology and Healthcare industries saw the most demand in cloud and license |
• | Key customer wins in the quarter included City of Austin, Coop Danmark, Equiniti, Feilo Sylvania, Kemet Electronics, Oki Data, TDC Group, Evertec Inc., Municipal Institute of Information Technology in Barcelona, Snohomish County PUD, CODELCO, Gauteng Province, Goldcorp, Government of Valle del Cauca and the Skipton Building Society |
• | OpenText Named as a Leader in Gartner Magic Quadrant for Content Services Platforms |
• | OpenText Announces Extended ECM for Microsoft Dynamics 365 |
• | OpenText enables intelligent and connected customer service in the Cloud; availability of OpenText Qfiniti for Amazon Connect |
• | OpenText announces new cloud application for Legal and a growing suite of offerings for Legal customers |
• | OpenText elects directors at its Annual General Meeting of Shareholders |
Summary of Quarterly Results | |||||||||||||||
Q1 FY19 | Q4 FY18 | Q1 FY18 | % Change (Q1 FY19 vs Q4 FY18) | % Change (Q1 FY19 vs Q1 FY18) | |||||||||||
Revenue (million) | $667.2 | $754.3 | $640.7 | (11.5 | )% | 4.1 | % | ||||||||
GAAP-based gross margin | 66.1 | % | 67.5 | % | 65.2 | % | (140 | ) | bps | 90 | bps | ||||
GAAP-based EPS, diluted | $0.13 | $0.23 | $0.14 | (43.5 | )% | (7.1 | )% | ||||||||
Non-GAAP-based gross margin (1) | 73.4 | % | 74.0 | % | 72.2 | % | (60 | ) | bps | 120 | bps | ||||
Non-GAAP-based EPS, diluted (1)(2) | $0.60 | $0.72 | $0.54 | (16.7 | )% | 11.1 | % |
September 30, 2018 | June 30, 2018 | ||||||
ASSETS | (unaudited) | ||||||
Cash and cash equivalents | $ | 787,919 | $ | 682,942 | |||
Accounts receivable trade, net of allowance for doubtful accounts of $12,970 as of September 30, 2018 and $9,741 as of June 30, 2018 | 416,346 | 487,956 | |||||
Contract assets | 8,767 | — | |||||
Income taxes recoverable | 31,450 | 55,623 | |||||
Prepaid expenses and other current assets | 80,624 | 101,059 | |||||
Total current assets | 1,325,106 | 1,327,580 | |||||
Property and equipment | 246,500 | 264,205 | |||||
Long-term contract assets | 12,041 | — | |||||
Goodwill | 3,578,641 | 3,580,129 | |||||
Acquired intangible assets | 1,203,284 | 1,296,637 | |||||
Deferred tax assets | 1,106,377 | 1,122,729 | |||||
Other assets | 116,536 | 111,267 | |||||
Deferred charges | — | 38,000 | |||||
Long-term income taxes recoverable | 30,563 | 24,482 | |||||
Total assets | $ | 7,619,048 | $ | 7,765,029 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable and accrued liabilities | $ | 252,079 | $ | 302,154 | |||
Current portion of long-term debt | 10,000 | 10,000 | |||||
Deferred revenues | 582,139 | 644,211 | |||||
Income taxes payable | 31,055 | 38,234 | |||||
Total current liabilities | 875,273 | 994,599 | |||||
Long-term liabilities: | |||||||
Accrued liabilities | 51,168 | 52,827 | |||||
Deferred credits | — | 2,727 | |||||
Pension liability | 64,730 | 65,719 | |||||
Long-term debt | 2,609,127 | 2,610,523 | |||||
Deferred revenues | 43,585 | 69,197 | |||||
Long-term income taxes payable | 173,807 | 172,241 | |||||
Deferred tax liabilities | 74,328 | 79,938 | |||||
Total long-term liabilities | 3,016,745 | 3,053,172 | |||||
Shareholders' equity: | |||||||
Share capital and additional paid-in capital | |||||||
268,331,579 and 267,651,084 Common Shares issued and outstanding at September 30, 2018 and June 30, 2018, respectively; authorized Common Shares: unlimited | 1,730,933 | 1,707,073 | |||||
Accumulated other comprehensive income | 32,256 | 33,645 | |||||
Retained earnings | 1,993,099 | 1,994,235 | |||||
Treasury stock, at cost (991,368 shares at September 30, 2018 and 690,336 shares at June 30, 2018, respectively) | (30,381 | ) | (18,732 | ) | |||
Total OpenText shareholders' equity | 3,725,907 | 3,716,221 | |||||
Non-controlling interests | 1,123 | 1,037 | |||||
Total shareholders' equity | 3,727,030 | 3,717,258 | |||||
Total liabilities and shareholders' equity | $ | 7,619,048 | $ | 7,765,029 |
Three Months Ended September 30, | |||||||
2018 | 2017 | ||||||
Revenues: | |||||||
License | $ | 76,887 | $ | 78,231 | |||
Cloud services and subscriptions | 208,083 | 193,853 | |||||
Customer support | 311,551 | 295,404 | |||||
Professional service and other | 70,636 | 73,199 | |||||
Total revenues | 667,157 | 640,687 | |||||
Cost of revenues: | |||||||
License | 3,872 | 2,960 | |||||
Cloud services and subscriptions | 87,703 | 84,134 | |||||
Customer support | 30,465 | 32,770 | |||||
Professional service and other | 56,796 | 59,428 | |||||
Amortization of acquired technology-based intangible assets | 47,477 | 43,960 | |||||
Total cost of revenues | 226,313 | 223,252 | |||||
Gross profit | 440,844 | 417,435 | |||||
Operating expenses: | |||||||
Research and development | 77,470 | 77,574 | |||||
Sales and marketing | 120,182 | 122,615 | |||||
General and administrative | 50,924 | 48,902 | |||||
Depreciation | 23,854 | 18,878 | |||||
Amortization of acquired customer-based intangible assets | 45,876 | 43,789 | |||||
Special charges | 23,311 | 18,031 | |||||
Total operating expenses | 341,617 | 329,789 | |||||
Income from operations | 99,227 | 87,646 | |||||
Other income (expense), net | 1,522 | 10,224 | |||||
Interest and other related expense, net | (34,531 | ) | (33,811 | ) | |||
Income before income taxes | 66,218 | 64,059 | |||||
Provision for (recovery of) income taxes | 29,850 | 27,369 | |||||
Net income for the period | $ | 36,368 | $ | 36,690 | |||
Net (income) loss attributable to non-controlling interests | (44 | ) | (94 | ) | |||
Net income attributable to OpenText | $ | 36,324 | $ | 36,596 | |||
Earnings per share—basic attributable to OpenText | $ | 0.14 | $ | 0.14 | |||
Earnings per share—diluted attributable to OpenText | $ | 0.13 | $ | 0.14 | |||
Weighted average number of Common Shares outstanding—basic | 268,028 | 264,802 | |||||
Weighted average number of Common Shares outstanding—diluted | 269,387 | 266,235 | |||||
Dividends declared per Common Share | $ | 0.1518 | $ | 0.1320 |
Three Months Ended September 30, | ||||||||
2018 | 2017 | |||||||
Net income for the period | $ | 36,368 | $ | 36,690 | ||||
Other comprehensive income (loss) —net of tax: | ||||||||
Net foreign currency translation adjustments | (3,520 | ) | 906 | |||||
Unrealized gain (loss) on cash flow hedges: | ||||||||
Unrealized gain (loss) - net of tax expense (recovery) effect of $181 and $463 for the three months ended September 30, 2018 and 2017, respectively | 502 | 1,285 | ||||||
(Gain) loss reclassified into net income - net of tax (expense) recovery effect of $132 and ($287) for the three months ended September 30, 2018 and 2017, respectively | 366 | (797 | ) | |||||
Actuarial gain (loss) relating to defined benefit pension plans: | ||||||||
Actuarial gain (loss) - net of tax expense (recovery) effect of $306 and ($83) for the three months ended September 30, 2018 and 2017, respectively | 1,197 | (115 | ) | |||||
Amortization of actuarial (gain) loss into net income - net of tax (expense) recovery effect of $73 and $42 for the three months ended September 30, 2018 and 2017, respectively | 66 | 56 | ||||||
Release of unrealized gain on marketable securities - net of tax effect of nil | — | (617 | ) | |||||
Total other comprehensive income (loss) net, for the period | (1,389 | ) | 718 | |||||
Total comprehensive income | 34,979 | 37,408 | ||||||
Comprehensive (income) loss attributable to non-controlling interests | (44 | ) | (94 | ) | ||||
Total comprehensive income attributable to OpenText | $ | 34,935 | $ | 37,314 |
Three Months Ended September 30, | |||||||
2018 | 2017 | ||||||
Cash flows from operating activities: | |||||||
Net income for the period | $ | 36,368 | $ | 36,690 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization of intangible assets | 117,207 | 106,627 | |||||
Share-based compensation expense | 6,555 | 8,235 | |||||
Pension expense | 1,145 | 1,035 | |||||
Amortization of debt issuance costs | 1,078 | 1,298 | |||||
Amortization of deferred charges and credits | — | 1,117 | |||||
Loss on sale and write down of property and equipment | 7,789 | 163 | |||||
Release of unrealized gain on marketable securities to income | — | (841 | ) | ||||
Deferred taxes | 7,769 | 5,947 | |||||
Share in net (income) loss of equity investees | (2,372 | ) | 512 | ||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | 73,875 | 5,162 | |||||
Contract assets | (5,346 | ) | — | ||||
Prepaid expenses and other current assets | 9,732 | (2,808 | ) | ||||
Income taxes and deferred charges and credits | 12,561 | 9,148 | |||||
Accounts payable and accrued liabilities | (40,001 | ) | (64,476 | ) | |||
Deferred revenue | (57,403 | ) | (38,480 | ) | |||
Other assets | 2,444 | (2,083 | ) | ||||
Net cash provided by operating activities | 171,401 | 67,246 | |||||
Cash flows from investing activities: | |||||||
Additions of property and equipment | (24,495 | ) | (30,449 | ) | |||
Purchase of Guidance Software, net of cash acquired | (2,279 | ) | (220,765 | ) | |||
Purchase of Covisint Corporation, net of cash acquired | — | (71,279 | ) | ||||
Other investing activities | (1,004 | ) | (4,206 | ) | |||
Net cash used in investing activities | (27,778 | ) | (326,699 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from Revolver | — | 200,000 | |||||
Proceeds from issuance of Common Shares from exercise of stock options and ESPP | 18,127 | 21,825 | |||||
Repayment of long-term debt and revolver | (2,500 | ) | (1,940 | ) | |||
Debt issuance costs | (322 | ) | — | ||||
Purchase of treasury stock | (11,719 | ) | — | ||||
Repurchase of non-controlling interest | (583 | ) | — | ||||
Payments of dividends to shareholders | (40,466 | ) | (35,017 | ) | |||
Net cash provided by (used in) financing activities | (37,463 | ) | 184,868 | ||||
Foreign exchange gain (loss) on cash held in foreign currencies | 428 | 7,762 | |||||
Increase (decrease) in cash, cash equivalents and restricted cash during the period | 106,588 | (66,823 | ) | ||||
Cash, cash equivalents and restricted cash at beginning of the period | 683,991 | 446,210 | |||||
Cash, cash equivalents and restricted cash at end of the period | $ | 790,579 | $ | 379,387 |
Reconciliation of cash, cash equivalents and restricted cash: | September 30, 2018 | September 30, 2017 | |||||
Cash and cash equivalents | 787,919 | 376,390 | |||||
Restricted cash included in Other assets | 2,660 | 2,997 | |||||
Total Cash, cash equivalents and restricted cash | $ | 790,579 | $ | 379,387 |
(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 September 30, 2018. (In thousands except for per share amounts) | ||||||||||||||
Three Months Ended September 30, 2018 | ||||||||||||||
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 | $ | 87,703 | $ | (317 | ) | (1) | $ | 87,386 | ||||||
Customer support | 30,465 | (300 | ) | (1) | 30,165 | |||||||||
Professional service and other | 56,796 | (524 | ) | (1) | 56,272 | |||||||||
Amortization of acquired technology-based intangible assets | 47,477 | (47,477 | ) | (2) | — | |||||||||
GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%) | 440,844 | 66.1 | % | 48,618 | (3) | 489,462 | 73.4 | % | ||||||
Operating expenses | ||||||||||||||
Research and development | 77,470 | (1,359 | ) | (1) | 76,111 | |||||||||
Sales and marketing | 120,182 | (1,801 | ) | (1) | 118,381 | |||||||||
General and administrative | 50,924 | (2,254 | ) | (1) | 48,670 | |||||||||
Amortization of acquired customer-based intangible assets | 45,876 | (45,876 | ) | (2) | — | |||||||||
Special charges (recoveries) | 23,311 | (23,311 | ) | (4) | — | |||||||||
GAAP-based income from operations / Non-GAAP-based income from operations | 99,227 | 123,219 | (5) | 222,446 | ||||||||||
Other income (expense), net | 1,522 | (1,522 | ) | (6) | — | |||||||||
Provision for (recovery of) income taxes | 29,850 | (3,542 | ) | (7) | 26,308 | |||||||||
GAAP-based net income / Non-GAAP-based net income, attributable to OpenText | 36,324 | 125,239 | (8) | 161,563 | ||||||||||
GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText | $ | 0.13 | $ | 0.47 | (8) | $ | 0.60 |
(1) | Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results. |
(2) | Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results. |
(3) | GAAP-based and Non-GAAP-based gross profit stated in dollars, and gross margin stated as a percentage of total revenue. |
(4) | Adjustment relates to the exclusion of Special charges (recoveries) from our Non-GAAP-based operating expenses as Special charges (recoveries) are generally incurred in the periods relevant to an acquisition and include certain charges or recoveries that are not indicative or related to continuing operations, and are therefore excluded from our internal analysis of operating results. |
(5) | GAAP-based and Non-GAAP-based income from operations stated in dollars. |
(6) | Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) generally relates to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results. Other income (expense) also includes our share of income (losses) from our holdings in 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 45% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded items include amortization, share-based compensation, Special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation |
(8) | Reconciliation of GAAP-based net income to Non-GAAP-based net income: |
Three Months Ended September 30, 2018 | ||||||
Per share diluted | ||||||
GAAP-based net income, attributable to OpenText | $ | 36,324 | $ | 0.13 | ||
Add: | ||||||
Amortization | 93,353 | 0.35 | ||||
Share-based compensation | 6,555 | 0.02 | ||||
Special charges (recoveries) | 23,311 | 0.09 | ||||
Other (income) expense, net | (1,522 | ) | (0.01 | ) | ||
GAAP-based provision for (recovery of) income taxes | 29,850 | 0.11 | ||||
Non-GAAP-based provision for income taxes | (26,308 | ) | (0.09 | ) | ||
Non-GAAP-based net income, attributable to OpenText | $ | 161,563 | $ | 0.60 |
Three Months Ended September 30, 2018 | |||
GAAP-based net income, attributable to OpenText | $ | 36,324 | |
Add: | |||
Provision for (recovery of) income taxes | 29,850 | ||
Interest and other related expense, net | 34,531 | ||
Amortization of acquired technology-based intangible assets | 47,477 | ||
Amortization of acquired customer-based intangible assets | 45,876 | ||
Depreciation | 23,854 | ||
Share-based compensation | 6,555 | ||
Special charges (recoveries) | 23,311 | ||
Other (income) expense, net | (1,522 | ) | |
Adjusted EBITDA | $ | 246,256 |
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the three months ended June 30, 2018. (In thousands except for per share amounts) | ||||||||||||||
Three Months Ended June 30, 2018 | ||||||||||||||
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 | $ | 95,346 | $ | (310 | ) | (1) | $ | 95,036 | ||||||
Customer support | 34,232 | (300 | ) | (1) | 33,932 | |||||||||
Professional service and other | 64,896 | (516 | ) | (1) | 64,380 | |||||||||
Amortization of acquired technology-based intangible assets | 47,477 | (47,477 | ) | (2) | — | |||||||||
GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%) | 509,271 | 67.5 | % | 48,603 | (3) | 557,874 | 74.0 | % | ||||||
Operating expenses | ||||||||||||||
Research and development | 81,816 | (1,453 | ) | (1) | 80,363 | |||||||||
Sales and marketing | 147,499 | (2,552 | ) | (1) | 144,947 | |||||||||
General and administrative | 52,577 | (1,990 | ) | (1) | 50,587 | |||||||||
Amortization of acquired customer-based intangible assets | 47,299 | (47,299 | ) | (2) | — | |||||||||
Special charges (recoveries) | 7,821 | (7,821 | ) | (4) | — | |||||||||
GAAP-based income from operations / Non-GAAP-based income from operations | 149,358 | 109,718 | (5) | 259,076 | ||||||||||
Other income (expense), net | (8,938 | ) | 8,938 | (6) | — | |||||||||
Provision for (recovery of) income taxes | 43,182 | (11,860 | ) | (7) | 31,322 | |||||||||
GAAP-based net income / Non-GAAP-based net income, attributable to OpenText | 61,723 | 130,516 | (8) | 192,239 | ||||||||||
GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText | $ | 0.23 | $ | 0.49 | (8) | $ | 0.72 |
(1) | Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results. |
(2) | Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results. |
(3) | GAAP-based and Non-GAAP-based gross profit stated in dollars, and gross margin stated as a percentage of total revenue. |
(4) | Adjustment relates to the exclusion of Special charges (recoveries) from our Non-GAAP-based operating expenses as Special charges (recoveries) are generally incurred in the periods relevant to an acquisition and include certain charges or recoveries that are not indicative or related to continuing operations, and are therefore excluded from our internal analysis of operating results. |
(5) | GAAP-based and Non-GAAP-based income from operations stated in dollars. |
(6) | Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) generally relates to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results. Other income (expense) also includes our share of income (losses) from our holdings in 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 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded items include amortization, share-based compensation, Special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation |
(8) | Reconciliation of GAAP-based net income to Non-GAAP-based net income: |
Three Months Ended June 30, 2018 | ||||||
Per share diluted | ||||||
GAAP-based net income, attributable to OpenText | $ | 61,723 | $ | 0.23 | ||
Add: | ||||||
Amortization | 94,776 | 0.35 | ||||
Share-based compensation | 7,121 | 0.03 | ||||
Special charges (recoveries) | 7,821 | 0.03 | ||||
Other (income) expense, net | 8,938 | 0.03 | ||||
GAAP-based provision for (recovery of) income taxes | 43,182 | 0.16 | ||||
Non-GAAP-based provision for income taxes | (31,322 | ) | (0.11 | ) | ||
Non-GAAP-based net income, attributable to OpenText | $ | 192,239 | $ | 0.72 |
Three Months Ended June 30, 2018 | |||
GAAP-based net income, attributable to OpenText | $ | 61,723 | |
Add: | |||
Provision for (recovery of) income taxes | 43,182 | ||
Interest and other related expense, net | 35,345 | ||
Amortization of acquired technology-based intangible assets | 47,477 | ||
Amortization of acquired customer-based intangible assets | 47,299 | ||
Depreciation | 22,901 | ||
Share-based compensation | 7,121 | ||
Special charges (recoveries) | 7,821 | ||
Other (income) expense, net | 8,938 | ||
Adjusted EBITDA | $ | 281,807 |
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the three months ended September 30, 2017. (In thousands except for per share amounts) | ||||||||||||||
Three Months Ended September 30, 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 | $ | 84,134 | $ | (522 | ) | (1) | $ | 83,612 | ||||||
Customer support | 32,770 | (329 | ) | (1) | 32,441 | |||||||||
Professional service and other | 59,428 | (597 | ) | (1) | 58,831 | |||||||||
Amortization of acquired technology-based intangible assets | 43,960 | (43,960 | ) | (2) | — | |||||||||
GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%) | 417,435 | 65.2 | % | 45,408 | (3) | 462,843 | 72.2 | % | ||||||
Operating expenses | ||||||||||||||
Research and development | 77,574 | (1,626 | ) | (1) | 75,948 | |||||||||
Sales and marketing | 122,615 | (3,088 | ) | (1) | 119,527 | |||||||||
General and administrative | 48,902 | (2,073 | ) | (1) | 46,829 | |||||||||
Amortization of acquired customer-based intangible assets | 43,789 | (43,789 | ) | (2) | — | |||||||||
Special charges (recoveries) | 18,031 | (18,031 | ) | (4) | — | |||||||||
GAAP-based income from operations / Non-GAAP-based income from operations | 87,646 | 114,015 | (5) | 201,661 | ||||||||||
Other income (expense), net | 10,224 | (10,224 | ) | (6) | — | |||||||||
Provision for (recovery of) income taxes | 27,369 | (2,191 | ) | (7) | 25,178 | |||||||||
GAAP-based net income / Non-GAAP-based net income, attributable to OpenText | 36,596 | 105,982 | (8) | 142,578 | ||||||||||
GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText | $ | 0.14 | $ | 0.40 | (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 certain charges or recoveries that are not indicative or related to continuing operations, and are therefore excluded from our internal analysis of operating results. |
(5) | GAAP-based and Non-GAAP-based income from operations stated in dollars. |
(6) | Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) generally relates to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results. Other income (expense) also includes our share of income (losses) from our holdings in 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 43% and a Non-GAAP-based tax rate of approximately 15%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded items include amortization, share-based compensation, Special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation |
(8) | Reconciliation of GAAP-based net income to Non-GAAP-based net income: |
Three Months Ended September 30, 2017 | ||||||
Per share diluted | ||||||
GAAP-based net income, attributable to OpenText | $ | 36,596 | $ | 0.14 | ||
Add: | ||||||
Amortization | 87,749 | 0.33 | ||||
Share-based compensation | 8,235 | 0.03 | ||||
Special charges (recoveries) | 18,031 | 0.07 | ||||
Other (income) expense, net | (10,224 | ) | (0.04 | ) | ||
GAAP-based provision for (recovery of) income taxes | 27,369 | 0.10 | ||||
Non-GAAP-based provision for income taxes | (25,178 | ) | (0.09 | ) | ||
Non-GAAP-based net income, attributable to OpenText | $ | 142,578 | $ | 0.54 |
Three months ended September 30, 2017 | |||
GAAP-based net income, attributable to OpenText | $ | 36,596 | |
Add: | |||
Provision for (recovery of) income taxes | 27,369 | ||
Interest and other related expense, net | 33,811 | ||
Amortization of acquired technology-based intangible assets | 43,960 | ||
Amortization of acquired customer-based intangible assets | 43,789 | ||
Depreciation | 18,878 | ||
Share-based compensation | 8,235 | ||
Special charges (recoveries) | 18,031 | ||
Other (income) expense, net | (10,224 | ) | |
Adjusted EBITDA | $ | 220,445 |
(3) | The following tables provide a composition of our major currencies for revenue and expenses, expressed as a percentage, for the three months ended September 30, 2018 and 2017: |
Three Months Ended September 30, 2018 | Three Months Ended September 30, 2017 | ||||||||
Currencies | % of Revenue | % of Expenses* | % of Revenue | % of Expenses* | |||||
EURO | 23 | % | 14 | % | 21 | % | 14 | % | |
GBP | 6 | % | 6 | % | 6 | % | 6 | % | |
CAD | 4 | % | 11 | % | 4 | % | 11 | % | |
USD | 58 | % | 50 | % | 60 | % | 52 | % | |
Other | 9 | % | 19 | % | 9 | % | 17 | % | |
Total | 100 | % | 100 | % | 100 | % | 100 | % |