Open Text Reports Second Quarter Fiscal Year 2013 Financial Results

WATERLOO, ON, Jan. 24, 2013 /PRNewswire/ - Open Text(TM) Corporation (NASDAQ: OTEX) (TSX: OTC), announced today its financial results for the second quarter ended December 31, 2012.

Financial Highlights for Q2 FY13 (1)

  • Total revenue for the period was $352.2 million, up 10% Y/Y
  • License revenue was $76.1 million, compared to $89.7 million last year
  • Cloud services revenue was $46.2 million
  • Non-GAAP-based EPS, diluted was $1.58 compared to $1.39 Y/Y, up 14% Y/Y; GAAP-based EPS, diluted was $1.04 compared to $0.81 Y/Y (2)
  • Non-GAAP-based operating income was $113.0 million and 32.1% of revenues; GAAP-based income from operations was $67.2 million and 19% of revenues (2)
  • Operating cash flow was $74.7 million compared to $44.7 million up 67%Y/Y, with an ending cash balance of $367.3 million.

"We performed well in the quarter, delivering the highest quarterly revenue, non-GAAP operating margin, and non-GAAP EPS in the Company's history," said OpenText CEO Mark J. Barrenechea.  "We continue to invest in expanding our sales force and building new products, balanced with strong earnings.  I am confident these investments will yield results."

"We are committed to leading the market with the broadest range of EIM software and services, both on premise and in the cloud."

Business Highlights

  • Financial, services, technology and basic materials industries saw the most demand
  • 5 license transactions over $1 million and 11 license transactions between $500K and $1 million in the second quarter
  • Customer successes in the second quarter include Husch Blackwell Sanders, Defense Logistics Agency, LG&E and KU Services Company, Howard County Maryland, Mitsubishi Electric Information Systems, Sprint and Lincolnshire County Council
  • OpenText delivers Enterprise Information Management apps for Windows® 8
  • OpenText offers software trade-in for Autonomy customers
  • Latest release of OpenText Managed File Transfer helps customers reduce information exchange risks
  • OpenText delivers Tempo Social and Tempo Box in the cloud
  • OpenText unveils EIM cloud
  • OpenText announces InfoFusion
  • Leading analyst firm validates OpenText as leader in growing global enterprise fax software and services markets
  • OpenText expands in India: growing customer base, expanded R&D capacity
  • Leading organizations in India increasingly adopt OpenText's cloud services and solutions to help accelerate growth and revenue

               
Summary of Quarterly Results              
  Q2 FY13 Q1 FY13 Q2 FY12 % Change (Q/Q)     % Change (Y/Y)    
Revenue (million) $352.2 $326.2 $321.5 8.0%   9.6%  
GAAP-based gross margin 65.2% 63.0% 67.1% 220 bps (190) bps
GAAP-based operating income margin 19.1% 12.3% 17.2% 680 bps 190 bps
GAAP-based EPS, diluted $1.04 $0.33 $0.81 215.2%   28.4%  
Non-GAAP-based gross margin (2) 71.8% 70.4% 73.8% 140 bps (200) bps
Non-GAAP-based operating margin (2) 32.1% 28.7% 30.7% 340 bps 140 bps
Non-GAAP-based EPS, diluted (2) $1.58 $1.31 $1.39 20.6%   13.7%  

             
Summary of Year to Date Results            
  Q2 FY13 Q1 FY13 Q2 FY12   % Change (Y/Y)
(bps)
 
Revenue (million) $678.4 $326.2 $609.5   11.3%  
GAAP-based gross margin 64.1% 63.0% 66.0%   (190) bps
GAAP-based operating income margin 15.8% 12.3% 13.5%   230 bps
GAAP-based EPS, diluted $1.37 $0.33 $1.41   (2.8)%  
Non-GAAP-based gross margin (2) 71.1% 70.4% 73.0%   (190) bps
Non-GAAP-based operating margin (2) 30.5% 28.7% 28.1%   240 bps
Non-GAAP-based EPS, diluted (2) $2.89 $1.31 $2.42   19.4%  

Conference Call Information

The public is invited to listen to the earnings conference call at 5:00 p.m. ET (2:00 p.m. PT) by dialing 800-814-4859 (toll-free) or 416-644-3414 (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=701D0000000VhlpIAC .

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 February 7, 2013 and can be accessed by dialing 877-289-8525 (toll-free) or 416-640-1917 (international) and entering the confirmation code: 4588113 followed by the number sign.

Please see below note (2) for a reconciliation of non-US GAAP- based financial measures used in this press release, to US 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 financial conditions, and results of operations and earnings for Open Text Corporation ("OpenText" or "the Company"), may contain words such as "could", "expects", "may", "should", "will", "anticipates", "believes", "intends", "estimates", "targets", "plans", "envisions", "seeks" and other similar language and are considered forward-looking statements or information under applicable securities laws. These statements are based on the Company's current expectations, estimates, forecasts and projections about the operating environment, economies and markets in which the Company operates. These statements are subject to important assumptions, risks and uncertainties that are difficult to predict, and the actual outcome may be materially different. The Company's assumptions, although considered reasonable by the Company at the date of this press release, may prove to be inaccurate and consequently the Company's actual results could differ materially from the expectations set out herein.

Actual results or events could differ materially from those contemplated in forward-looking statements as a result of the following: (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; and (viii) the demand for the Company's product and the extent of deployment of the company's products in the EIM marketplace. Forward-looking statements may also include, without limitation, any statement relating to future events, conditions or circumstances. 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. Unless otherwise required by applicable securities laws, the Company disclaims any intention or obligations to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Copyright ©2013 Open Text 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)
  December 31, 2012 June 30, 2012
  (unaudited)  
ASSETS    
Cash and cash equivalents $ 367,258   $ 559,747  
Accounts receivable trade, net of allowance for doubtful accounts of $6,031 as of December 31,
2012 and $5,655 as of June 30, 2012
168,073   163,664  
Income taxes recoverable 19,845   17,849  
Prepaid expenses and other current assets 45,157   44,011  
Deferred tax assets 14,101   4,003  
    Total current assets 614,434   789,274  
Property and equipment 83,135   81,157  
Goodwill 1,212,657   1,040,234  
Acquired intangible assets 428,361   312,563  
Deferred tax assets 141,736   115,128  
Other assets 22,659   23,739  
Deferred charges 62,095   68,653  
Long-term income taxes recoverable 12,128   13,545  
  Total assets $ 2,577,205   $ 2,444,293  
LIABILITIES AND SHAREHOLDERS' EQUITY    
Current liabilities:    
  Accounts payable and accrued liabilities $ 177,979   $ 131,734  
  Current portion of long-term debt 45,136   41,374  
  Deferred revenues 240,347   273,987  
  Income taxes payable 13,037   27,806  
  Deferred tax liabilities 1,203   1,612  
    Total current liabilities 477,702   476,513  
Long-term liabilities:    
  Accrued liabilities 19,144   14,247  
  Deferred credits 8,950   10,086  
  Pension liability 25,042   22,074  
  Long-term debt 536,250   555,000  
  Deferred revenues 12,218   12,653  
  Long-term income taxes payable 151,888   147,623  
  Deferred tax liabilities 75,672   26,705  
    Total long-term liabilities 829,164   788,388  
Shareholders' equity:    
  Share capital    
  58,570,575 and 58,358,990 Common Shares issued and outstanding at December 31, 2012
and June 30, 2012, respectively; Authorized Common Shares: unlimited
641,684   635,321  
  Additional paid-in capital 92,463   95,026  
  Accumulated other comprehensive income 42,661   44,364  
  Retained earnings 522,605   442,068  
  Treasury stock, at cost (610,878 and 793,494 shares at December 31, 2012 and at June 30,
2012, respectively)
(29,074)   (37,387)  
Total shareholders' equity 1,270,339   1,179,392  
  Total liabilities and shareholders' equity $ 2,577,205   $ 2,444,293  

OPEN TEXT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands of U.S. dollars, except share and per share data)
(unaudited)   
    Three Months Ended
December 31,
  Six Months Ended December
31,
    2012   2011   2012   2011
Revenues:                
  License   $ 76,125     $ 89,703     $ 131,781     $ 154,731  
  Cloud services   46,151         91,035      
  Customer support   164,658     165,386     326,754     327,383  
  Professional service and other   65,246     66,367     128,804     127,388  
    Total revenues   352,180     321,456     678,374     609,502  
Cost of revenues:                
  License   5,331     5,370     9,499     9,368  
  Cloud services   18,261         36,544      
  Customer support   28,277     28,468     54,100     54,737  
  Professional service and other   47,664     50,604     96,246     100,955  
  Amortization of acquired technology-based intangible assets   23,191     21,253     46,973     42,043  
    Total cost of revenues   122,724     105,695     243,362     207,103  
Gross profit   229,456     215,761     435,012     402,399  
Operating expenses:                
  Research and development   38,718     42,652     78,624     86,110  
  Sales and marketing   67,977     68,451     132,492     133,331  
  General and administrative   30,005     25,126     58,138     50,887  
  Depreciation   6,105     5,634     12,214     10,892  
  Amortization of acquired customer-based intangible assets   17,147     13,445     34,399     26,486  
  Special charges   2,269     5,221     11,823     12,326  
    Total operating expenses   162,221     160,529     327,690     320,032  
Income from operations   67,235     55,232     107,322     82,367  
Other income (expense), net   1,541     2,637     1,470     11,949  
Interest expense, net   (4,515)     (3,607)     (8,883)     (6,393)  
Income before income taxes   64,261     54,262     99,909     87,923  
Provision for income taxes   3,153     6,819     19,372     5,494  
Net income for the period   $ 61,108     $ 47,443     $ 80,537     $ 82,429  
Earnings per share—basic   $ 1.04     $ 0.82     $ 1.38     $ 1.43  
Earnings per share—diluted   $ 1.04     $ 0.81     $ 1.37     $ 1.41  
Weighted average number of Common Shares outstanding—basic   58,503     57,846     58,473     57,642  
Weighted average number of Common Shares outstanding—diluted   58,983     58,672     58,961     58,647  

OPEN TEXT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands of U.S. dollars)
(unaudited)
  Three Months Ended
December 31,
  Six Months Ended December 31,
  2012   2011   2012   2011
Net income for the period $ 61,108     $ 47,443     $ 80,537     $ 82,429  
Other comprehensive income—net of tax:              
  Net foreign currency translation adjustments (989)     (1,354)     (1,465)     (11,972)  
  Net unrealized gain (loss) on cash flow hedges (1,453)     3,132     491     (2,070)  
  Net actuarial gain (loss) relating to defined benefit pension plans (620)     342     (729)     (206)  
Total other comprehensive income (loss), net, for the period $ (3,062)     $ 2,120     $ (1,703)     $ (14,248)  
Total comprehensive income $ 58,046     $ 49,563     $ 78,834     $ 68,181  



OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
(unaudited)
  Three Months Ended
December 31,
  Six Months Ended
December 31,
  2012   2011   2012   2011
Cash flows from operating activities:              
Net income for the period $ 61,108     $ 47,443     $ 80,537     $ 82,429  
Adjustments to reconcile net income to net cash provided by operating activities:              
  Depreciation and amortization of intangible assets 46,443     40,332     93,586     79,421  
  Share-based compensation expense 3,174     3,397     6,276     8,241  
  Excess tax benefits on share-based compensation expense (259)     (163)     (611)     (495)  
  Pension expense 228     169     470     306  
  Amortization of debt issuance costs 535     248     1,072     578  
  Amortization of deferred charges and credits 2,929     2,707     5,858     5,379  
  Loss on sale and write down of property and equipment 22     34     24     203  
  Deferred taxes (2,013)     7,891     (1,152)     (6,958)  
  Impairment and other non cash charges     2,700         1,345  
Changes in operating assets and liabilities:              
  Accounts receivable 964     (21,681)     20,406     (27)  
  Prepaid expenses and other current assets (1,640)     2,199     1,384     8,041  
  Income taxes (18,261)     (12,141)     (13,888)     2,883  
  Deferred charges and credits     (5,607)     (436)     (14,653)  
  Accounts payable and accrued liabilities (365)     4,608     (20,620)     (16,799)  
  Deferred revenue (18,668)     (24,808)     (36,738)     (57,806)  
  Other assets 497     (2,630)     289     (2,042)  
Net cash provided by operating activities 74,694     44,698     136,457     90,046  
Cash flows from investing activities:              
  Additions of property and equipment (4,879)     (8,785)     (9,917)     (16,687)  
  Purchase of patents     (193)         (193)  
  Purchase of System Solutions Australia Pty Limited, net of cash
acquired
(516)     (1,524)     (516)     (1,524)  
  Purchase of Operitel Corporation, net of cash acquired             (6,260)  
  Purchase of Global 360 Holding Corp., net of cash acquired     2,058         (245,653)  
  Purchase of EasyLink Services International Corporation, net of cash
acquired
        (315,331)      
  Purchase consideration for prior period acquisitions (214)     (335)     (431)     (609)  
Net cash used in investing activities (5,609)     (8,779)     (326,195)     (270,926)  
  Cash flows from financing activities:              
  Excess tax benefits on share-based compensation expense 259     163     611     495  
  Proceeds from issuance of Common Shares 2,409     3,424     6,402     11,261  
  Purchase of Treasury Stock              
  Proceeds from long-term debt and revolver     600,000         648,500  
  Repayment of long-term debt and revolver (7,671)     (332,940)     (15,338)     (333,856)  
  Debt issuance costs     (9,309)         (9,309)  
Net cash provided by (used in) financing activities (5,003)     261,338     (8,325)     317,091  
Foreign exchange gain (loss) on cash held in foreign currencies 941     (2,640)     5,574     (6,440)  
Increase (decrease) in cash and cash equivalents during the period 65,023     294,617     (192,489)     129,771  
Cash and cash equivalents at beginning of the period 302,235     119,294     559,747     284,140  
Cash and cash equivalents at end of the period $ 367,258     $ 413,911     $ 367,258     $ 413,911  



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 US GAAP, the Company provides certain non-US GAAP financial measures that are not in accordance with US GAAP. These non-US 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-US 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 non-US GAAP net income and non-US GAAP EPS both in its reconciliation to the US GAAP financial measures of net income and EPS and its consolidated financial statements, all of which should be considered when evaluating the Company's results. The Company uses the financial measures non-US GAAP EPS and non-US GAAP net income to supplement the information provided in its consolidated financial statements, which are presented in accordance with US GAAP. The presentation of non-US GAAP net income and non-US GAAP EPS is not meant to be a substitute for net income or net income per share presented in accordance with US GAAP, but rather should be evaluated in conjunction with and as a supplement to such US 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 US GAAP measures with certain non-US GAAP measures for the reasons set forth below. Non-US GAAP net income and non-US GAAP EPS are calculated as net income or net income per share on a diluted basis, excluding, where applicable, the amortization of acquired intangible assets, other income (expense), share-based compensation, and restructuring, all net of tax. The Company's management believes that the presentation of non-US GAAP net income and non-US GAAP EPS provides useful information to investors because it excludes non-operational charges. The use of the term "non-operational charge" is defined by the Company as those that do not impact 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, such as amortization of acquired intangible assets, restructuring costs, 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 US GAAP. The Company believes the provision of supplemental non-US GAAP measures allows 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 Open Text'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 US GAAP measures, supplementary non-US 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 US GAAP based financial measures to non-US 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 December 31, 2012.
($ in thousands except for per share amounts)
  Three Months Ended
December 31, 2012
  GAAP-based
Measures
Adjustments Note Non-GAAP-based
Measures
Cost of revenues        
Cloud services 18,261   (30)   (1) 18,231  
Customer Support 28,277   (107)   (1) 28,170  
Professional Service and Other 47,664   (188)   (1) 47,476  
Amortization of acquired technology-based intangible assets 23,191   (23,191)   (2)  
GAAP-based gross profit/ Non-GAAP-based gross profit 229,456   23,516     252,972  
Operating Expenses        
Research and development 38,718   (331)   (1) 38,387  
Sales and marketing 67,977   (1,653)   (1) 66,324  
General and administrative 30,005   (865)   (1) 29,140  
Amortization of acquired customer-based intangible assets 17,147   (17,147)   (2)  
Special charges 2,269   (2,269)   (3)  
GAAP-based income from operations/ Non-GAAP-based
operating income
67,235   45,781     113,016  
Other income (expense), net 1,541   (1,541)   (4)  
Provision for income taxes 3,153   12,037   (5) 15,190  
GAAP-based net income for the period/ Non-GAAP-based
net income
61,108   32,203   (6) 93,311  
GAAP-based earnings per share/ Non GAAP-based earnings
per share-diluted
$ 1.04   $ 0.54   (6) $ 1.58  

(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)  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.
(4)  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.
(5) Adjustment relates to differences between the GAAP-based tax provision of approximately 5% 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.
(6)  Reconciliation of non-GAAP-based adjusted net income to GAAP-based net income:

  Three Months Ended
December 31, 2012
    Per share  
Non-GAAP-based net income $ 93,311   $ 1.58  
Less:    
Amortization 40,338   0.68  
Share-based compensation 3,174   0.05  
Special charges 2,269   0.04  
Other (income) expense, net (1,541)   (0.03)  
GAAP-based provision for income taxes 3,153   0.05  
Non-GAAP based provision for income taxes (15,190)   (0.25)  
GAAP-based net income $ 61,108   $ 1.04  




Reconciliation of selected GAAP-based measures to Non-GAAP based measures for the six months ended December 31, 2012.
($ in thousands except for per share amounts)
  Six Months Ended
December 31, 2012
  GAAP-based
Measures
Adjustments Note Non-GAAP-based
Measures
Cost of revenues        
Cloud services 36,544   (30)   (1) 36,514  
Customer Support 54,100   (145)   (1) 53,955  
Professional Service and Other 96,246   (365)   (1) 95,881  
Amortization of acquired technology-based intangible assets 46,973   (46,973)   (2)  
GAAP-based gross profit/ Non-GAAP-based gross profit 435,012   47,513     482,525  
Operating Expenses        
Research and development 78,624   (669)   (1) 77,955  
Sales and marketing 132,492   (3,319)   (1) 129,173  
General and administrative 58,138   (1,748)   (1) 56,390  
Amortization of acquired customer-based intangible assets 34,399   (34,399)   (2)  
Special charges 11,823   (11,823)   (3)  
GAAP-based income from operations/ Non-GAAP-based
operating income
107,322   99,471     206,793  
Other income (expense), net 1,470   (1,470)   (4)  
Provision for income taxes 19,372   8,335   (5) 27,707  
GAAP-based net income for the period/ Non-GAAP-based
net income
80,537   89,666   (6) 170,203  
GAAP-based earnings per share/ Non GAAP-based earnings
per share-diluted
$ 1.37   $ 1.52   (6) $ 2.89  

(1)  Adjustment relates to the exclusion of share based compensation expense from our non-GAAP-based operating expenses as this expense
is excluded from our internal analysis of operating results.
(2)  Adjustment relates to the exclusion of amortization expense from our non-GAAP-based operating expenses as the timing and frequency of
amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.
(3)  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.
(4) 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.
(5)  Adjustment relates to differences between the GAAP-based tax provision of approximately 19% 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.
(6)  Reconciliation of non-GAAP-based adjusted net income to GAAP-based net income: 

  Six Months Ended
December 31, 2012
    Per share
Non-GAAP-based net income $ 170,203   $ 2.89  
Less:    
Amortization 81,372   1.38  
Share-based compensation 6,276   0.11  
Special charges 11,823   0.20  
Other (income) expense, net (1,470)   (0.02)  
GAAP-based provision for income taxes 19,372   0.33  
Non-GAAP based provision for income taxes (27,707)   (0.48)  
GAAP-based net income $ 80,537   $ 1.37  




Reconciliation of selected GAAP-based measures to Non-GAAP based measures for the three months ended September 30, 2012.
($ in thousands except for per share amounts)
  Three Months Ended
September 30, 2012
  GAAP-based
Measures
Adjustments Note Non-GAAP-based
Measures
Cost of revenues        
Customer Support 25,823   (38)   (1) 25,785  
Professional Service and Other 48,582   (177)   (1) 48,405  
Amortization of acquired technology-based intangible assets 23,782   (23,782)   (2)  
GAAP-based gross profit/ Non-GAAP-based gross profit 205,556   23,997     229,553  
Operating Expenses        
Research and development 39,906   (338)   (1) 39,568  
Sales and marketing 64,515   (1,666)   (1) 62,849  
General and administrative 28,133   (883)   (1) 27,250  
Amortization of acquired customer-based intangible assets 17,252   (17,252)   (2)  
Special charges 9,554   (9,554)   (3)  
GAAP-based income from operations/ Non-GAAP-based
operating income
40,087   53,690     93,777  
Other income (expense), net (71)   71   (4)  
Provision for income taxes 16,219   (3,702)   (5) 12,517  
GAAP-based net income for the period/ Non-GAAP-based
net income
19,429   57,463   (6) 76,892  
GAAP-based earnings per share/ Non GAAP-based earnings
per share-diluted
$ 0.33   $ 0.98   (6) $ 1.31  

(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)  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.
(4) 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.
(5)  Adjustment relates to differences between the GAAP-based tax provision of approximately 45% 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.
(6)  Reconciliation of non-GAAP-based adjusted net income to GAAP-based net income:

  Three Months Ended
September 30, 2012
    Per share
Non-GAAP-based net income $ 76,892   $ 1.31  
Less:    
Amortization 41,034   0.70  
Share-based compensation 3,102   0.05  
Special charges 9,554   0.16  
Other (income) expense, net 71    
GAAP-based provision for income taxes 16,219   0.28  
Non-GAAP based provision for income taxes (12,517)   (0.21)  
GAAP-based net income $ 19,429   $ 0.33  




Reconciliation of selected GAAP-based measures to Non GAAP-based measures for the three months ended December 31, 2011.
($ in thousands except for per share amounts)
  Three Months Ended
December 31, 2011
  GAAP-based
measures
Adjustments Note Non-GAAP-based
measures
Cost of Revenues:        
Customer Support 28,468   (34)   (1) 28,434  
Professional Service and Other 50,604   (106)   (1) 50,498  
Amortization of acquired technology-based intangible assets 21,253   (21,253)   (2)  
GAAP-based gross profit/ Non-GAAP-based gross profit 215,761   21,393     237,154  
Operating Expenses        
Research and development 42,652   (768)   (1) 41,884  
Sales and marketing 68,451   (1,676)   (1) 66,775  
General and administrative 25,126   (813)   (1) 24,313  
Amortization of acquired customer-based intangible assets 13,445   (13,445)   (2)  
Special charges 5,221   (5,221)   (3)  
GAAP-based income from operations/ Non-GAAP-based
operating income
55,232   43,316     98,548  
Other income (expense), net 2,637   (2,637)   (4)  
Provision for income taxes 6,819   6,472   (5) 13,291  
GAAP-based net income for the period/ Non-GAAP-based
net income
47,443   34,207   (6) 81,650  
GAAP-based earnings per share/ Non GAAP-based
earnings per share-diluted
$ 0.81   $ 0.58   (6) $ 1.39  

(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)  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.
(4)  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.
(5)  Adjustment relates to differences between the GAAP-based tax provision of approximately 13% 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.
(6)  Reconciliation of non-GAAP-based adjusted net income to GAAP-based net income:

  Three Months Ended
December 31, 2011
    Per share
Non-GAAP-based net income $ 81,650   $ 1.39  
Less:    
Amortization 34,698   0.59  
Share-based compensation 3,397   0.06  
Special charges 5,221   0.09  
Other (income) expense, net (2,637)   (0.04)  
GAAP-based provision for income taxes 6,819   0.12  
Non-GAAP based provision for income taxes (13,291)   (0.24)  
GAAP-based net income $ 47,443   $ 0.81  




Reconciliation of selected GAAP-based measures to Non GAAP-based measures for the six months ended December 31, 2011.
($ in thousands except for per share amounts)
  Six Months Ended
December 31, 2011
  GAAP-based
measures  
Adjustments   Note Non-GAAP-based
measures
Cost of Revenues:        
Customer Support 54,737   (58)   (1) 54,679  
Professional Service and Other 100,955   (205)   (1) 100,750  
Amortization of acquired technology-based intangible assets 42,043   (42,043)   (2)  
GAAP-based gross profit/ Non-GAAP-based gross profit 402,399   42,306     444,705  
Operating Expenses        
Research and development 86,110   (1,844)   (1) 84,266  
Sales and marketing 133,331   (3,446)   (1) 129,885  
General and administrative 50,887   (2,687)   (1) 48,200  
Amortization of acquired customer-based intangible assets 26,486   (26,486)   (2)  
Special charges 12,326   (12,326)   (3)  
GAAP-based income from operations/ Non-GAAP-based
operating income
82,367   89,095     171,462  
Other income (expense), net 11,949   (11,949)   (4)  
Provision for income taxes 5,494   17,615   (5) 23,109  
GAAP-based net income for the period/ Non-GAAP-based
net income
82,429   59,531   (6) 141,960  
GAAP-based earnings per share/ Non GAAP-based
earnings per share-diluted
$ 1.41   $ 1.01   (6) $ 2.42  

(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)  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.
(4)  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.
(5)  Adjustment relates to differences between the GAAP-based tax provision of approximately 6% 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.
(6)  Reconciliation of non-GAAP-based adjusted net income to GAAP-based net income:

  Six Months Ended
December 31, 2011
    Per share
Non-GAAP-based net income $ 141,960   $ 2.42  
Less:    
Amortization 68,529   1.17  
Share-based compensation 8,240   0.14  
Special charges 12,326   0.21  
Other (income) expense, net (11,949)   (0.20)  
GAAP-based provision for income taxes 5,494   0.10  
Non-GAAP based provision for income taxes (23,109)   (0.41)  
GAAP-based net income $ 82,429   $ 1.41  

(3)  The following table provides a composition of our major currencies for revenue and expenses, expressed as a
percentage, for the three and six months ended December 31, 2012:

  Three Months Ended
December 31, 2012  
Currencies  % of Revenue % of Expenses*
EURO 26% 16%
GBP 8% 8%
CAD 6% 19%
USD 48% 43%
Other 12% 14%
Total 100% 100%

  Six Months Ended
December 31, 2012
Currencies  % of Revenue  % of Expenses*
EURO 25% 16%
GBP 8% 8%
CAD 6% 18%
USD 49% 44%
Other 12% 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.

SOURCE Open Text Corporation



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