OpenText Reports Fourth Quarter and Fiscal Year 2013 Financial Results

Jul 31, 2013, 16:01 ET from OpenText Corporation

WATERLOO, Ontario, July 31, 2013 /PRNewswire/ -- OpenText(TM) Corporation (NASDAQ: OTEX) (TSX: OTC), announced today its financial results for the fourth quarter and fiscal year ended June 30, 2013.

Financial Highlights for Q4 FY13 (1)

  • Total revenue for the period was $347.3 million, up 14% Y/Y
  • License revenue was $78.8 million, up 1% Y/Y
  • Cloud services revenue was $41.9 million
  • Non-GAAP-based EPS, diluted was $1.43 compared to $1.17 Y/Y, up 22% Y/Y; GAAP-based EPS, diluted was $0.71 compared to $0.14 Y/Y (2)
  • Non-GAAP-based income from operations was $102.4 million and 29% of revenues; GAAP-based income from operations was $49.5 million and 14% of revenues (2)
  • Operating cash flow was $65.2 million, inclusive of a $27.0 million litigation settlement primarily relating to a legacy EasyLink liability, compared to $79.8 million Y/Y, down 18%Y/Y, with an ending cash balance of $470.4 million.

Financial Highlights for FY13 (1)

  • Total revenue for the period was $1,363.3 million, up 13% Y/Y
  • License revenue was $279.6 million, down 5% Y/Y
  • Cloud services revenue was $173.8 million
  • Non-GAAP-based EPS, diluted was $5.57 compared to $4.60 Y/Y, up 21% Y/Y; GAAP-based EPS, diluted was $2.51 compared to $2.13 Y/Y (2)
  • Non-GAAP-based income from operations was $399.6 million and 29% of revenues; GAAP-based income from operations was $197.7 million and 15% of revenues (2)
  • Operating cash flow was $318.5 million, inclusive of a $27.0 million litigation settlement primarily relating to a legacy EasyLink liability, compared to $266.5 million Y/Y, up 20%Y/Y.

"We are pleased with our performance this year, delivering historical records in revenue, operating cash flow and non-GAAP earnings while making the strategic acquisition of Easylink and introducing a quarterly dividend program," said OpenText CEO Mark J. Barrenechea. "With our sales organization expanded and fully trained, and our leadership position established as a premiere EIM provider, we demonstrated 6% organic license growth in the second half of FY2013 over the same period last year."

"Our FY14 focus is intelligent growth, a commitment to growing earnings, cash flows and creating value for our stakeholders while investing in the markets where we can win. These investments include broader EIM capabilities, expanding our distribution, both direct and through partners, expanding our presence in the cloud and furthering our reach into fast growing markets."

Business Highlights

  • Services, public sector, financial and technology industries saw the most demand
  • 5 license transactions over $1 million and 15 license transactions between $500K and $1 million
  • Customer successes in the quarter include Apotex, CONSOL Energy, Daimler South East Asia Pte Ltd, Hasbro, MAN Diesel & Turbo, Marvel Entertainment, LLC, The U.S. Department of Education and Wellington City Council.
  • OpenText unveils responsive, intuitive web experience management solution for targeted, more interactive online customer experiences and extends partner ecosystem for web experience management
  • OpenText EIM products to support SAP HANA®, cloud and mobility offerings, and expands reach of its cloud-based solutions now included in SAP® Cloud for Travel solution
  • OpenText acquires long-standing partner ICCM Professional Services Limited (ICCM), on May 23, 2013. Based in Malmesbury, United Kingdom, ICCM is focused on BPM Smart Process Applications.
  • OpenText named a leader in independent research firm's Smart Process Applications report
  • OpenText appoints Noriyuki Hayakawa as President, OpenText Japan

Dividend Program Highlights

Pursuant to the previously announced policy to declare non-cumulative quarterly dividends to holders of its common shares, the Board of Directors has declared a quarterly dividend of $0.30 per share with respect to outstanding common shares of the Company for the quarter ended June 30, 2013. The quarterly dividend is payable on September 20, 2013 to shareholders of record on August 30, 2013.

Summary of Quarterly Results

Q4 FY13

Q3 FY13

Q4 FY12

% Change

(Q/Q)

% Change

(Y/Y)

Revenue (million)

$

347.3

$

337.7

$

305.6

2.8

%

13.6

%

GAAP-based gross margin

66.0

%

63.9

%

65.8

%

210

bps

20

bps

GAAP-based operating margin

14.2

%

12.1

%

13.0

%

210

bps

120

bps

GAAP-based EPS, diluted

$

0.71

$

0.44

$

0.14

61.4

%

407.1

%

Non-GAAP-based gross margin (2)

72.9

%

70.8

%

72.9

%

210

bps

bps

Non-GAAP-based operating margin (2)

29.5

%

26.8

%

27.7

%

270

bps

180

bps

Non-GAAP-based EPS, diluted (2)

$

1.43

$

1.26

$

1.17

13.5

%

22.2

%

Summary of Year to Date Results

FY13

Q3 YTD FY13

FY12

% Change

(Y/Y) (bps)

Revenue (million)

$

1,363.3

$

1,016.1

$

1,207.5

12.9

%

GAAP-based gross margin

64.4

%

63.8

%

65.4

%

(100)

bps

GAAP-based operating margin

14.5

%

14.6

%

12.4

%

210

bps

GAAP-based EPS, diluted

$

2.51

$

1.80

$

2.13

17.8

%

Non-GAAP-based gross margin (2)

71.3

%

70.8

%

72.5

%

(120)

bps

Non-GAAP-based operating margin (2)

29.3

%

29.2

%

27.3

%

200

bps

Non-GAAP-based EPS, diluted (2)

$

5.57

$

4.14

$

4.60

21.1

%

Conference Call Information

The public is invited to listen to the earnings conference call today at 5:00 p.m. ET (2:00 p.m. PT) by dialing 877-974-0445 (toll-free) or 416-644-3415 (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://www.opentext.com/2/global/ex_event.html?evtype=events&id=701D0000000W0eGIAS.

An audio replay of the conference call will also be made available approximately two hours after the conclusion of the call. The audio replay will remain available until 11:59 p.m. on August 7, 2013 and can be accessed by dialing 877-289-8525 (toll-free) or 416-640-1917 (international) and entering the confirmation code: 4626584 followed by the number sign.

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

About OpenText

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

Cautionary Statement Regarding Forward-Looking Statements

Certain statements in this press release, including statements about the focus of Open Text Corporation ("OpenText" or "the Company") in fiscal 2014 on growth in earnings and cash flows, creating value through investments in broader EIM capabilities, distribution, the Company's presence in the cloud and in growth markets, its financial conditions, results of operations and earnings; declaration of quarterly dividends; and other matters, are considered forward-looking statements or information under applicable securities laws. 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 to market and to increase sales; (iii) the strength of the Company's product development pipeline; (iv) the Company's growth and profitability prospects; (v) the estimated size and growth prospects of the EIM market; (vi) the Company's competitive position in the EIM market and its ability to take advantage of future opportunities in this market; (vii) the benefits of the Company's products to be realized by customers; (viii) the demand for the Company's product and the extent of deployment of the Company's products in the EIM marketplace; and (ix) the Company's financial condition and capital requirements. The risks and uncertainties that may affect forward-looking statements include, but are not limited to: (i) integration of acquisitions and related restructuring efforts, including the quantum of restructuring charges and the timing thereof; (ii) the possibility that the Company may be unable to meet its future reporting requirements under the Securities Exchange Act of 1934, as amended, and the rules promulgated there under; (iii) the risks associated with bringing new products to market; (iv) fluctuations in currency exchange rates; (v) delays in the purchasing decisions of the Company's customers; (vi) the competition the Company faces in its industry and/or marketplace; (vii) the possibility of technical, logistical or planning issues in connection with the deployment of the Company's products or services; (viii) the continuous commitment of the Company's customers; and (ix) demand for the Company's products. For additional information with respect to risks and other factors which could occur, see the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other securities filings with the 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.

Copyright ©2013 OpenText Corporation. OpenText is a trademark or registered trademark of Open Text SA and/or Open Text ULC. The list of trademarks is not exhaustive of other trademarks, registered trademarks, product names, company names, brands and service names mentioned herein are property of Open Text SA or other respective owners. All rights reserved. For more information, visit: http://www.opentext.com/2/global/site-copyright.html_SKU.

OPEN TEXT CORPORATION

CONSOLIDATED BALANCE SHEETS

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

June 30, 2013

June 30, 2012

ASSETS

Cash and cash equivalents

$

470,445

$

559,747

Accounts receivable trade, net of allowance for doubtful accounts of $4,871 as of June 30, 2013 and $5,655 as of June 30, 2012

174,927

163,664

Income taxes recoverable

17,173

17,849

Prepaid expenses and other current assets

43,464

45,613

Deferred tax assets

11,082

4,003

Total current assets

717,091

790,876

Property and equipment

88,364

81,157

Goodwill

1,246,872

1,040,234

Acquired intangible assets

363,615

312,563

Deferred tax assets

135,695

115,128

Other assets

25,082

22,137

Deferred charges

67,633

68,653

Long-term income taxes recoverable

10,465

13,545

Total assets

$

2,654,817

$

2,444,293

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable and accrued liabilities

$

188,443

$

132,015

Current portion of long-term debt

51,742

41,374

Deferred revenues

282,387

273,987

Income taxes payable

4,184

27,806

Deferred tax liabilities

1,127

1,612

Total current liabilities

527,883

476,794

Long-term liabilities:

Accrued liabilities

17,849

13,966

Deferred credits

11,608

10,086

Pension liability

24,509

22,074

Long-term debt

513,750

555,000

Deferred revenues

11,830

12,653

Long-term income taxes payable

140,508

147,623

Deferred tax liabilities

69,672

26,705

Total long-term liabilities

789,726

788,107

Shareholders' equity:

Share capital

59,028,886 and 58,358,990 Common Shares issued and outstanding at June 30, 2013 and June 30, 2012, respectively; Authorized Common Shares: unlimited

651,642

635,321

Additional paid-in capital

101,865

95,026

Accumulated other comprehensive income

39,890

44,364

Retained earnings

572,885

442,068

Treasury stock, at cost (610,878 and 793,494 shares at June 30, 2013 and at June 30, 2012, respectively)

(29,074)

(37,387)

Total shareholders' equity

1,337,208

1,179,392

Total liabilities and shareholders' equity

$

2,654,817

$

2,444,293

OPEN TEXT CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

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

Year Ended June 30,

2013

2012

2011

Revenues:

License

$

279,598

$

293,719

$

269,202

Cloud services

173,799

Customer support

658,216

656,568

560,541

Professional service and other

251,723

257,186

203,560

Total revenues

1,363,336

1,207,473

1,033,303

Cost of revenues:

License

16,107

18,033

18,284

Cloud services

72,365

Customer support

106,948

110,504

86,834

Professional service and other

196,874

204,909

167,854

Amortization of acquired technology-based intangible assets

93,610

84,572

68,048

Total cost of revenues

485,904

418,018

341,020

Gross profit

877,432

789,455

692,283

Operating expenses:

Research and development

164,010

169,043

145,992

Sales and marketing

289,157

274,544

232,332

General and administrative

109,325

97,072

86,696

Depreciation

24,496

21,587

22,116

Amortization of acquired customer-based intangible assets

68,745

53,326

38,966

Special charges

24,034

24,523

15,576

Total operating expenses

679,767

640,095

541,678

Income from operations

197,665

149,360

150,605

Other income (expense), net

(2,473)

3,549

(6,019)

Interest expense, net

(16,982)

(15,564)

(8,452)

Income before income taxes

178,210

137,345

136,134

Provision for (recovery of) income taxes

29,690

12,171

12,931

Net income for the period

$

148,520

$

125,174

$

123,203

Earnings per share—basic

$

2.53

$

2.16

$

2.16

Earnings per share—diluted

$

2.51

$

2.13

$

2.11

Weighted average number of Common Shares outstanding—basic

58,604

57,890

57,077

Weighted average number of Common Shares outstanding—diluted

59,062

58,734

58,260

Dividends declared per Common Share

$

0.30

$

$

OPEN TEXT CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

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

Three Months Ended

June 30,

2013

2012

Revenues:

License

$

78,782

$

78,031

Cloud services

41,890

Customer support

164,889

163,128

Professional service and other

61,706

64,465

Total revenues

347,267

305,624

Cost of revenues:

License

3,529

4,116

Cloud services

17,696

Customer support

25,351

27,780

Professional service and other

47,879

51,358

Amortization of acquired technology-based intangible assets

23,579

21,265

Total cost of revenues

118,034

104,519

Gross profit

229,233

201,105

Operating expenses:

Research and development

42,383

41,195

Sales and marketing

79,338

71,641

General and administrative

27,857

24,186

Depreciation

6,218

5,268

Amortization of acquired customer-based intangible assets

17,197

13,378

Special charges

6,767

5,747

Total operating expenses

179,760

161,415

Income from operations

49,473

39,690

Other income (expense), net

(4,180)

(6,596)

Interest expense, net

(3,990)

(4,410)

Income before income taxes

41,303

28,684

Provision for (recovery of) income taxes

(869)

20,713

Net income for the period

$

42,172

$

7,971

Earnings per share—basic

$

0.72

$

0.14

Earnings per share—diluted

$

0.71

$

0.14

Weighted average number of Common Shares outstanding—basic

58,875

58,270

Weighted average number of Common Shares outstanding—diluted

59,238

58,847

Dividends declared per Common share

$

0.30

$

OPEN TEXT CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands of U.S. dollars)

Year Ended June 30,

2013

2012

2011

Net income for the period

$

148,520

$

125,174

$

123,203

Other comprehensive income—net of tax:

Net foreign currency translation adjustments

(1,879)

(9,197)

15,388

Net unrealized gain (loss) on cash flow hedges

(2,536)

(1,069)

1,275

Net actuarial gain (loss) relating to defined benefit pension plans

(59)

(5,840)

(214)

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

$

(4,474)

$

(16,106)

$

16,449

Total comprehensive income

$

144,046

$

109,068

$

139,652

OPEN TEXT CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands of U.S. dollars)

Three Months Ended June 30,

2013

2012

Net income for the period

$

42,172

$

7,971

Other comprehensive income—net of tax:

Net foreign currency translation adjustments

2,911

1,930

Net unrealized gain (loss) on cash flow hedges

(2,194)

(737)

Net actuarial gain (loss) relating to defined benefit pension plans

474

(2,318)

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

$

1,191

$

(1,125)

Total comprehensive income

$

43,363

$

6,846

OPEN TEXT CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars)

Year Ended June 30,

2013

2012

2011

Cash flows from operating activities:

Net income for the period

$

148,520

$

125,174

$

123,203

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

Depreciation and amortization of intangible assets

186,851

159,485

129,130

Share-based compensation expense

15,575

18,097

11,308

Excess tax benefits on share-based compensation expense

(915)

(2,723)

(1,888)

Pension expense

910

543

552

Amortization of debt issuance costs

2,123

1,703

1,359

Amortization of deferred charges and credits

11,815

11,579

8,519

Loss on sale and write down of property and equipment

24

203

12

Deferred taxes

(5,796)

(78,792)

(17,779)

Impairment and other non cash charges

1,389

(482)

Changes in operating assets and liabilities:

Accounts receivable

17,965

5,319

200

Prepaid expenses and other current assets

4,242

(2,079)

1,833

Income taxes

(17,053)

68,601

9,444

Deferred charges and credits

(9,274)

(22,035)

(29,071)

Accounts payable and accrued liabilities

(41,409)

(17,812)

(21,197)

Deferred revenue

5,418

(4,581)

10,738

Other assets

(494)

2,419

(2,660)

Net cash provided by operating activities

318,502

266,490

223,221

Cash flows from investing activities:

Additions of property and equipment

(23,107)

(25,828)

(36,662)

Purchase of patents

(192)

(193)

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

(516)

(1,738)

Purchase of EasyLink Services International Corporation, net of cash acquired

(315,331)

Purchase of Resonate KT Limited, net of cash acquired

(19,366)

Purchase of ICCM Professional Services Limited, net of cash acquired

(11,257)

Purchase of Operitel Corporation, net of cash acquired

(7,014)

Purchase of Global 360 Holding Corp., net of cash acquired

(245,653)

Purchase of StreamServe Inc., net of cash acquired

(57,221)

Purchase of weComm Limited, net of cash acquired

(20,198)

Purchase of Metastorm Inc., net of cash acquired

(168,657)

Purchase of New Generation Consulting Inc

(471)

Purchase consideration for prior period acquisitions

(875)

(1,113)

(4,577)

Other investing activities

(3,750)

518

Net cash used in investing activities

(374,394)

(281,539)

(287,268)

Cash flows from financing activities:

Excess tax benefits on share-based compensation expense

915

2,723

1,888

Proceeds from issuance of Common Shares

16,347

21,270

11,512

Purchase of Treasury Stock

(10,888)

(12,499)

Proceeds from long-term debt and revolver

648,500

Repayment of long-term debt and revolver

(30,677)

(349,187)

(3,575)

Debt issuance costs

(9,834)

(29)

Payments of dividends to shareholders

(17,703)

Net cash provided by (used in) financing activities

(31,118)

302,584

(2,703)

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

(2,292)

(11,928)

24,698

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

(89,302)

275,607

(42,052)

Cash and cash equivalents at beginning of the period

559,747

284,140

326,192

Cash and cash equivalents at end of the period

$

470,445

$

559,747

$

284,140

OPEN TEXT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars)

Three Months Ended June 30,

2013

2012

Cash flows from operating activities:

Net income for the period

$

42,172

$

7,971

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

Depreciation and amortization of intangible assets

46,994

39,911

Share-based compensation expense

5,422

4,691

Excess tax benefits on share-based compensation expense

(303)

(13)

Pension expense

218

66

Amortization of debt issuance costs

532

537

Amortization of deferred charges and credits

3,195

3,122

Loss on sale and write down of property and equipment

Deferred taxes

1,566

(57,700)

Impairment and other non cash charges

44

Changes in operating assets and liabilities:

Accounts receivable

2,578

14,583

Prepaid expenses and other current assets

6,303

1,028

Income taxes

(2,146)

69,551

Deferred charges and credits

(12,854)

2,043

Accounts payable and accrued liabilities

(14,233)

3,540

Deferred revenue

(12,774)

(13,078)

Other assets

(1,453)

3,550

Net cash provided by operating activities

65,217

79,846

Cash flows from investing activities:

Additions of property and equipment

(7,315)

(4,447)

Purchase of patents

(192)

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

Purchase of EasyLink Services International Corporation, net of cash acquired

Purchase of Resonate KT Limited, net of cash acquired

Purchase of ICCM Professional Services Limited, net of cash acquired

(11,257)

Purchase of Operitel Corporation, net of cash acquired

(623)

Purchase of Global 360 Holding Corp., net of cash acquired

Purchase of StreamServe Inc., net of cash acquired

Purchase of weComm Limited, net of cash acquired

Purchase of Metastorm Inc., net of cash acquired

Purchase of New Generation Consulting Inc

Purchase consideration for prior period acquisitions

(222)

(187)

Other investing activities

(3,750)

Net cash used in investing activities

(22,736)

(5,257)

Cash flows from financing activities:

Excess tax benefits on share-based compensation expense

303

13

Proceeds from issuance of Common Shares

8,817

2,934

Purchase of Treasury Stock

(10,888)

Proceeds from long-term debt and revolver

Repayment of long-term debt and revolver

(7,669)

(7,667)

Debt issuance costs

Payments of dividends to shareholders

(17,703)

Net cash provided by (used in) financing activities

(16,252)

(15,608)

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

(2,695)

(8,140)

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

23,534

50,841

Cash and cash equivalents at beginning of the period

446,911

508,906

Cash and cash equivalents at end of the period

$

470,445

$

559,747

Notes

(1)

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

(2)

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

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

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

The Company's management believes that the presentation, of the above defined non-GAAP financial measures, provides useful information to investors because they portray the financial results of the Company before the impact of certain non-operational charges. The use of the term "non-operational charge" is defined for this purpose as an expense that does not impact the ongoing operating decisions taken by the Company's management and is based upon the way the Company's management evaluates the performance of the Company's business for use in the Company's internal reports. In the course of such evaluation and for the purpose of making operating decisions, the Company's management excludes certain items from its analysis, including amortization of acquired intangible assets, special charges, 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. As a result, the Company considers it appropriate and reasonable to provide, in addition to U.S. GAAP measures, supplementary non-GAAP financial measures that exclude certain items from the presentation of its financial results in this press release.

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

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the three months ended June 30, 2013.

($ in thousands except for per share amounts)

Three Months Ended

June 30, 2013

GAAP-based

Measures

GAAP-based Measures

% of Revenue

Adjustments

Note

Non-GAAP-based

Measures

Non-GAAP-based Measures

% of Revenue

Cost of revenues

Cloud services

$

17,696

$

(48)

(1)

$

17,648

Customer Support

25,351

(159)

(1)

25,192

Professional Service and Other

47,879

(255)

(1)

47,624

Amortization of acquired technology-based intangible assets

23,579

(23,579)

(2)

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

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

229,233

66.0

%

24,041

(3)

253,274

72.9

%

Operating Expenses

Research and development

42,383

(526)

(1)

41,857

Sales and marketing

79,338

(2,476)

(1)

76,862

General and administrative

27,857

(1,958)

(1)

25,899

Amortization of acquired customer-based intangible assets

17,197

(17,197)

(2)

Special charges

6,767

(6,767)

(4)

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

49,473

14.2

%

52,965

(5)

102,438

29.5

%

Other income (expense), net

(4,180)

4,180

(6)

Provision for (recovery of) income taxes

(869)

14,652

(7)

13,783

GAAP-based net income / Non-GAAP-based net income

42,172

42,493

(8)

84,665

GAAP-based earnings per share /

Non-GAAP-based earnings per share-diluted

$

0.71

$

0.72

(8)

$

1.43

(1)

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

(2)

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

(3)

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

(4)

Adjustment relates to the exclusion of Special charges from our non-GAAP-based operating expenses as Special charges are generally incurred in the aftermath of acquisitions and are not indicative or related to continuing operations and are hence excluded from our internal analysis of operating results.

(5)

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

(6)

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

(7)

Adjustment relates to differences between the GAAP-based tax recovery of approximately 2% and a non-GAAP-based tax rate of 14%; 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.

(8)

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

Three Months Ended June 30, 2013

Per share

Non-GAAP-based net income

$

84,665

$

1.43

Less:

Amortization

40,776

0.69

Share-based compensation

5,422

0.09

Special charges

6,767

0.11

Other (income) expense, net

4,180

0.07

GAAP-based provision for (recovery of) income taxes

(869)

(0.01)

Non-GAAP-based provision for income taxes

(13,783)

(0.23)

GAAP-based net income

$

42,172

$

0.71

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the year ended June 30, 2013.

($ in thousands except for per share amounts)

Year Ended

June 30, 2013

GAAP-based

Measures

GAAP-based Measures

% of Revenue

Adjustments

Note

Non-GAAP-based

Measures

Non-GAAP-based Measures

% of Revenue

Cost of revenues

Cloud services

$

72,365

$

(128)

(1)

$

72,237

Customer Support

106,948

(434)

(1)

106,514

Professional Service and Other

196,874

(915)

(1)

195,959

Amortization of acquired technology-based intangible assets

93,610

(93,610)

(2)

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

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

877,432

64.4

%

95,087

(3)

972,519

71.3

%

Operating Expenses

Research and development

164,010

(1,693)

(1)

162,317

Sales and marketing

289,157

(8,429)

(1)

280,728

General and administrative

109,325

(3,976)

(1)

105,349

Amortization of acquired customer-based intangible assets

68,745

(68,745)

(2)

Special charges

24,034

(24,034)

(4)

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

197,665

14.5

%

201,964

(5)

399,629

29.3

%

Other income (expense), net

(2,473)

2,473

(6)

Provision for (recovery of) income taxes

29,690

23,881

(7)

53,571

GAAP-based net income / Non-GAAP-based net income

148,520

180,556

(8)

329,076

GAAP-based earnings per share /

Non-GAAP-based earnings per share-diluted

$

2.51

$

3.06

(8)

$

5.57

(1)

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

(2)

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

(3)

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

(4)

Adjustment relates to the exclusion of Special charges from our non-GAAP-based operating expenses as Special charges are generally incurred in the aftermath of acquisitions and are not indicative or related to continuing operations and are hence excluded from our internal analysis of operating results.

(5)

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

(6)

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

(7)

Adjustment relates to differences between the GAAP-based tax provision of approximately 17% and a non-GAAP-based tax rate of 14%; 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.

(8)

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

Year Ended

June 30, 2013

Per share

Non-GAAP-based net income

$

329,076

$

5.57

Less:

Amortization

162,355

2.75

Share-based compensation

15,575

0.26

Special charges

24,034

0.41

Other (income) expense, net

2,473

0.04

GAAP-based provision for (recovery of) income taxes

29,690

0.50

Non-GAAP-based provision for income taxes

(53,571)

(0.90)

GAAP-based net income

$

148,520

$

2.51

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the three months ended March 31, 2013.

($ in thousands except for per share amounts)

Three Months Ended March 31, 2013

GAAP-based

Measures

GAAP-based Measures

% of Revenue

Adjustments

Note

Non-GAAP-based

Measures

Non-GAAP-based Measures

% of Revenue

Cost of revenues

Cloud services

$

18,741

$

(50)

(1)

$

18,691

Customer Support

27,497

(130)

(1)

27,367

Professional Service and Other

49,701

(295)

(1)

49,406

Amortization of acquired technology-based intangible assets

23,058

(23,058)

(2)

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

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

215,619

63.9

%

23,533

(3)

239,152

70.8

%

Operating Expenses

Research and development

43,003

(498)

(1)

42,505

Sales and marketing

77,327

(2,634)

(1)

74,693

General and administrative

25,762

(270)

(1)

25,492

Amortization of acquired customer-based intangible assets

17,149

(17,149)

(2)

Special charges

5,444

(5,444)

(4)

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

40,870

12.1

%

49,528

(5)

90,398

26.8

%

Other income (expense), net

237

(237)

(6)

Provision for (recovery of) income taxes

11,187

893

(7)

12,080

GAAP-based net income / Non-GAAP-based net income

25,811

48,398

(8)

74,209

GAAP-based earnings per share /

Non-GAAP-based earnings per share-diluted

$

0.44

$

0.82

(8)

$

1.26

(1)

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

(2)

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

(3)

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

(4)

Adjustment relates to the exclusion of Special charges from our non-GAAP-based operating expenses as Special charges are generally incurred in the aftermath of acquisitions and are not indicative or related to continuing operations and are hence excluded from our internal analysis of operating results.

(5)

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

(6)

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

(7)

Adjustment relates to differences between the GAAP-based tax provision of approximately 30% and a non-GAAP-based tax rate of 14%; 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.

(8)

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

Three Months Ended March 31, 2013

Per share

Non-GAAP-based net income

$

74,209

$

1.26

Less:

Amortization

40,207

0.68

Share-based compensation

3,877

0.07

Special charges

5,444

0.09

Other (income) expense, net

(237)

GAAP-based provision for (recovery of) income taxes

11,187

0.19

Non-GAAP-based provision for income taxes

(12,080)

(0.21)

GAAP-based net income

$

25,811

$

0.44

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the nine months ended March 31, 2013.

($ in thousands except for per share amounts)

Nine Months Ended March 31, 2013

GAAP-based

Measures

GAAP-based Measures

% of Revenue

Adjustments

Note

Non-GAAP-based

Measures

Non-GAAP-based Measures

% of Revenue

Cost of revenues

Cloud services

$

54,669

$

(80)

(1)

$

54,589

Customer Support

81,597

(275)

(1)

81,322

Professional Service and Other

148,995

(660)

(1)

148,335

Amortization of acquired technology-based intangible assets

70,031

(70,031)

(2)

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

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

648,199

63.8

%

71,046

(3)

719,245

70.8

%

Operating Expenses

Research and development

121,627

(1,167)

(1)

120,460

Sales and marketing

209,819

(5,953)

(1)

203,866

General and administrative

81,468

(2,018)

(1)

79,450

Amortization of acquired customer-based intangible assets

51,548

(51,548)

(2)

Special charges

17,267

(17,267)

(4)

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

148,192

14.6

%

148,999

(5)

297,191

29.2

%

Other income (expense), net

1,707

(1,707)

(6)

Provision for (recovery of) income taxes

30,559

9,229

(7)

39,788

GAAP-based net income / Non-GAAP-based net income

106,348

138,063

(8)

244,411

GAAP-based earnings per share /

Non-GAAP-based earnings per share-diluted

$

1.80

$

2.34

(8)

$

4.14

(1)

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

(2)

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

(3)

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

(4)

Adjustment relates to the exclusion of Special charges from our non-GAAP-based operating expenses as Special charges are generally incurred in the aftermath of acquisitions and are not indicative or related to continuing operations and are hence excluded from our internal analysis of operating results.

(5)

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

(6)

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

(7)

Adjustment relates to differences between the GAAP-based tax provision of approximately 22% and a non-GAAP-based tax rate of 14%; 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.

(8)

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

Nine Months Ended March 31, 2013

Per share

Non-GAAP-based net income

$

244,411

$

4.14

Less:

Amortization

121,579

2.06

Share-based compensation

10,153

0.17

Special charges

17,267

0.29

Other (income) expense, net

(1,707)

(0.03)

GAAP-based provision for (recovery of) income taxes

30,559

0.52

Non-GAAP-based provision for income taxes

(39,788)

(0.67)

GAAP-based net income

$

106,348

$

1.80

Reconciliation of selected GAAP-based measures to Non GAAP-based measures for the three months ended June 30, 2012.

($ in thousands except for per share amounts)

Three Months Ended June 30, 2012

GAAP-based

Measures

GAAP-based Measures

% of Revenue

Adjustments

Note

Non-GAAP-based

Measures

Non-GAAP-based Measures

% of Revenue

Cost of Revenues:

Customer Support

$

27,780

$

(58)

(1)

$

27,722

Professional Service and Other

51,358

(239)

(1)

51,119

Amortization of acquired technology-based intangible assets

21,265

(21,265)

(2)

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

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

201,105

65.8

%

21,562

(3)

222,667

72.9

%

Operating Expenses

Research and development

41,195

(1,066)

(1)

40,129

Sales and marketing

71,641

(2,771)

(1)

68,870

General and administrative

24,186

(557)

(1)

23,629

Amortization of acquired customer-based intangible assets

13,378

(13,378)

(2)

Special charges

5,747

(5,747)

(4)

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

39,690

13.0

%

45,081

(5)

84,771

27.7

%

Other income (expense), net

(6,596)

6,596

(6)

Provision for (recovery of) income taxes

20,713

(9,462)

(7)

11,251

GAAP-based net income / Non-GAAP-based net income

7,971

61,139

(8)

69,110

GAAP-based earnings per share /

Non-GAAP-based earnings per share-diluted

$

0.14

$

1.03

(8)

$

1.17

(1)

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

(2)

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

(3)

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

(4)

Adjustment relates to the exclusion of Special charges from our non-GAAP-based operating expenses as Special charges are generally incurred in the aftermath of acquisitions and are not indicative or related to continuing operations and are hence excluded from our internal analysis of operating results.

(5)

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

(6)

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

(7)

Adjustment relates to differences between the GAAP-based tax provision of approximately 72% and a non-GAAP-based tax rate of 14%; 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.

(8)

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

Three Months Ended June 30, 2012

Per share

Non-GAAP-based net income

$

69,110

$

1.17

Less:

Amortization

34,643

0.59

Share-based compensation

4,691

0.08

Special charges

5,747

0.10

Other (income) expense, net

6,596

0.11

GAAP-based provision for (recovery of) income taxes

20,713

0.35

Non-GAAP-based provision for income taxes

(11,251)

(0.20)

GAAP-based net income

$

7,971

$

0.14

Reconciliation of selected GAAP-based measures to Non GAAP-based measures for year ended June 30, 2012.

($ in thousands except for per share amounts)

Year Ended June 30, 2012

GAAP-based

Measures

GAAP-based Measures

% of Revenue

Adjustments

Note

Non-GAAP-based

Measures

Non-GAAP-based Measures

% of Revenue

Cost of Revenues:

Customer Support

$

110,504

$

(169)

(1)

$

110,335

Professional Service and Other

204,909

(647)

(1)

204,262

Amortization of acquired technology-based intangible assets

84,572

(84,572)

(2)

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

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

789,455

65.4

%

85,388

(3)

874,843

72.5

%

Operating Expenses

Research and development

169,043

(3,939)

(1)

165,104

Sales and marketing

274,544

(8,811)

(1)

265,733

General and administrative

97,072

(4,531)

(1)

92,541

Amortization of acquired customer-based intangible assets

53,326

(53,326)

(2)

Special charges

24,523

(24,523)

(4)

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

149,360

12.4

%

180,518

(5)

329,878

27.3

%

Other income (expense), net

3,549

(3,549)

(6)

Provision for (recovery of) income taxes

12,171

31,833

(7)

44,004

GAAP-based net income / Non-GAAP-based net income

125,174

145,136

(8)

270,310

GAAP-based earnings per share /

Non-GAAP-based earnings per share-diluted

$

2.13

$

2.47

(8)

$

4.60

(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 revenue.

(4)

Adjustment relates to the exclusion of Special charges from our non-GAAP-based operating expenses as Special charges are generally incurred in the aftermath of acquisitions and are not indicative or related to continuing operations and are hence excluded from our internal analysis of operating results.

(5)

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

(6)

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

(7)

Adjustment relates to differences between the GAAP-based tax provision of approximately 9% and a non-GAAP-based tax rate of 14%; 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.

(8)

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

Year Ended June 30, 2012

Per share

Non-GAAP-based net income

$

270,310

$

4.60

Less:

Amortization

137,898

2.35

Share-based compensation

18,097

0.31

Special charges

24,523

0.42

Other (income) expense, net

(3,549)

(0.06)

GAAP-based provision for (recovery of) income taxes

12,171

0.21

Non-GAAP-based provision for income taxes

(44,004)

(0.76)

GAAP-based net income

$

125,174

$

2.13

(3)

The following tables provide a composition of our major currencies for revenue and expenses expressed as a percentage, for the three months and year ended June 30, 2013:

Three Months Ended June 30, 2013

Currencies

% of Revenue

% of Expenses*

EURO

26

%

17

%

GBP

8

%

8

%

CAD

6

%

19

%

USD

49

%

42

%

Other

11

%

14

%

Total

100

%

100

%

Year Ended

June 30, 2013

Currencies

% of Revenue

% of Expenses*

EURO

26

%

17

%

GBP

8

%

8

%

CAD

6

%

18

%

USD

49

%

43

%

Other

11

%

14

%

Total

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.

For more information, please contact:

United States:

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

Canada:

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

SOURCE OpenText Corporation



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