OpenText Reports Third Quarter Fiscal Year 2014 Financial Results, Raises Quarterly Cash Dividend by 15%

24 Apr, 2014, 16:01 ET from Open Text Corporation

WATERLOO, Ontario, April 24, 2014 /PRNewswire/ -- Open Text Corporation (NASDAQ: OTEX) (TSX: OTC) announced today its financial results for the third quarter ended March 31, 2014.

Financial Highlights for Q3 FY14 (1)

  • Total revenue was $442.8 million, up 31% Y/Y
  • License revenue was $73.1 million, up 6% Y/Y
  • Customer Support revenue was $180.3 million, up 8% Y/Y
  • Non-GAAP-based EPS, diluted was $0.84 compared to $0.63 Y/Y; GAAP-based EPS, diluted was $0.38 compared to $0.22 Y/Y, on a post stock-split basis.(2)
  • Non-GAAP-based income from operations was $129.0 million and 29% of revenues; GAAP-based income from operations was $66.8 million and 15% of revenues.(2)
  • Operating cash flow was $141.4 million, compared to $116.8 million Y/Y, up 21%Y/Y, with an ending cash balance of $336.1 million.

"In the third quarter we delivered strong year-over-year results with revenue growth of 31%, adjusted operating income growth of 43% and operating cash flow growth of 21%," said OpenText CEO Mark J. Barrenechea

"With our intelligent growth strategy, we are focused on delivering value through acquisitions, innovation and now an increased dividend program. The GXS integration is off to a fast start and has established OpenText as a key cloud services provider. Our newly upgraded EIM product suite is driving customer demand, and reinforces our market position as a leader in EIM."

Business Highlights

  • On January 16, 2014 OpenText bought GXS, a Maryland-based leader in business-to-business (B2B) cloud integration
  • Public sector, services and technology industries saw the most demand
  • 6 license transactions over $1 million and 10 license transactions between $500K and $1 million
  • Customer successes in the quarter include PBS, Western Cape Local Government, T-Mobile, Nokia and The Home Office 
  • Delivers on the future of business process management with Process Suite launch
  • Launches Experience Suite to provide an omni-channel digital experience strategy
  • OpenText Tempo delivers new capabilities to increase business productivity through secure social collaboration
  • Launches SharePoint Services for OpenText Extended Enterprise Content Management for SAP® Solutions
  • Opens first Australian data centre for locally hosted OpenText Cloud Services

Dividend Program Highlights

Cash Dividend - Raised by 15% As part of our quarterly, non cumulative cash dividend program the Board declared, on April 24, 2014 a fifteen percent increase in its quarterly cash dividend from $0.15 to $0.1725 per Common Share. The record date for this dividend is May 23, 2014 and the payment date is June 13, 2014. Future declarations of dividends and the establishment of future record and payment dates are subject to the final determination and discretion of our Board of Directors.

Summary of Quarterly Results

Q3 FY14

Q2 FY14

Q3 FY13

% Change

(Q/Q)

% Change

(Y/Y)

Revenue (million)

$442.8

$363.5

$337.7

21.8%

31.1%

GAAP-based gross margin

67.3%

70.3%

63.9%

(300)

bps

340

bps

GAAP-based operating margin

15.1%

20.3%

12.1%

(520)

bps

300

bps

GAAP-based EPS, diluted

$0.38

$0.45

$0.22

(15.6)%

72.7%

Non-GAAP-based gross margin (2)

71.3%

74.0%

70.8%

(270)

bps

50

bps

Non-GAAP-based operating margin (2)

29.1%

30.9%

26.8%

(180)

bps

230

bps

Non-GAAP-based EPS, diluted (2)

$0.84

$0.79

$0.63

6.3%

33.3%

 

Summary of Year to Date Results

Q3 FY14

Q2 FY14

Q3 FY13

% Change

(Y/Y)

Revenue (million)

$1,130.7

$688.0

$1,016.1

11.3%

GAAP-based gross margin

68.3%

68.8%

63.8%

450

bps

GAAP-based operating margin

17.1%

18.3%

14.6%

250

bps

GAAP-based EPS, diluted

$1.08

$0.71

$0.90

20.0%

Non-GAAP-based gross margin (2)

73.0%

74.0%

70.8%

220

bps

Non-GAAP-based operating margin (2)

30.1%

30.7%

29.2%

90

bps

Non-GAAP-based EPS, diluted (2)

$2.32

$1.48

$2.07

12.1%

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 1-800-814-4859 (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://investors.opentext.com/events.cfm .

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 May 8, 2014 and can be accessed by dialing 1-877-289-8525 (toll-free) or 416-640-1917 (international) and entering the confirmation code: 4677835 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 Enterprise Information Management (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, may contain words such as "anticipates", "expects", "intends", "plans", "believes", "seeks", "estimates", "may", "could", "would", and other similar language and are considered forward-looking statements or information under applicable securities laws. In addition, any information or statements that refer to expectations, beliefs, plans, projections, objectives, performance or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking, and based on our current expectations, forecasts and projections about the operating environment, economies and markets in which we operate.  Forward-looking statements reflect our current estimates, beliefs and assumptions, which are based on management's perception of historic trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances, such as certain assumptions about the economy, as well as market, financial and operational assumptions. Management's estimates, beliefs and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events and, as such, are subject to change. We can give no assurance that such estimates, beliefs and assumptions will prove to be correct. Such forward-looking statements involve known and unknown risks, uncertainties and other factors and assumptions that may cause the actual results, performance or achievements to differ materially. Such factors include, but are not limited to: (i) the future performance, financial and otherwise, of OpenText; (ii) the ability of OpenText to bring new products and services to market and to increase sales; (iii) the strength of the Company's product development pipeline; (iv) the Company's growth and profitability prospects; (v) the estimated size and growth prospects of the EIM market; (vi) the Company's competitive position in the EIM market and its ability to take advantage of future opportunities in this market; (vii) the benefits of the Company's products and services to be realized by customers; (viii) the demand for the Company's products and services and the extent of deployment of the Company's products and services in the EIM marketplace; 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 thereunder; (iii) the risks associated with bringing new products and services 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 final determination of litigation, tax audits and other legal proceedings; (viii) the possibility of technical, logistical or planning issues in connection with the deployment of the Company's products or services; (ix) the continuous commitment of the Company's customers; and (x) 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 Securities and Exchange Commission (SEC) and other securities regulators. Readers are cautioned not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. Unless otherwise required by applicable securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

OTEX-F

For more information, please contact:

United States:

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

Canada:

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

Copyright ©2014 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

CONDENSED CONSOLIDATED BALANCE SHEETS

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

March 31, 2014

June 30, 2013

(Unaudited)

ASSETS

Cash and cash equivalents

$

336,071

$

470,445

Accounts receivable trade, net of allowance for doubtful accounts of $3,800 as of March 31, 2014 and $4,871 as of June 30, 2013

257,292

174,927

Income taxes recoverable

23,405

17,173

Prepaid expenses and other current assets

71,157

43,464

Deferred tax assets

10,844

11,082

Total current assets

698,769

717,091

Property and equipment

129,571

88,364

Goodwill

2,105,596

1,246,872

Acquired intangible assets

770,160

363,615

Deferred tax assets

133,170

135,695

Other assets

50,071

25,082

Deferred charges

56,190

67,633

Long-term income taxes recoverable

10,994

10,465

Total assets

$

3,954,521

$

2,654,817

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable and accrued liabilities

$

230,162

$

188,443

Current portion of long-term debt

62,384

51,742

Deferred revenues

334,665

282,387

Income taxes payable

9,118

4,184

Deferred tax liabilities

1,441

1,127

Total current liabilities

637,770

527,883

Long-term liabilities:

Accrued liabilities

41,486

17,849

Deferred credits

18,675

11,608

Pension liability

55,917

24,509

Long-term debt

1,270,000

513,750

Deferred revenues

17,726

11,830

Long-term income taxes payable

158,856

140,508

Deferred tax liabilities

187,917

69,672

Total long-term liabilities

1,750,577

789,726

Shareholders' equity:

Share capital

121,592,348 and 118,057,772 Common Shares issued and outstanding at March 31, 2014 and June 30, 2013, respectively; Authorized Common Shares: unlimited

788,316

651,642

Additional paid-in capital

109,769

101,865

Accumulated other comprehensive income

39,489

39,890

Retained earnings

649,207

572,885

Treasury stock, at cost (836,952 shares at March 31, 2014 and 1,221,756 at June 30, 2013, respectively)

(20,871)

(29,074)

Total OpenText shareholders' equity

1,565,910

1,337,208

Non-controlling interests

264

Total shareholders' equity

1,566,174

1,337,208

Total liabilities and shareholders' equity

$

3,954,521

$

2,654,817

 

 

 

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

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

(unaudited)

Three Months Ended

March 31,

Nine Months Ended

March 31,

2014

2013

2014

2013

Revenues:

License

$

73,083

$

69,035

$

209,553

$

200,816

Cloud services

128,400

43,194

212,178

131,909

Customer support

180,290

166,573

523,155

493,327

Professional service and other

60,981

58,893

185,835

190,017

Total revenues

442,754

337,695

1,130,721

1,016,069

Cost of revenues:

License

3,527

3,079

9,867

12,578

Cloud services

49,464

18,741

79,692

54,669

Customer support

25,206

27,497

71,785

81,597

Professional service and other

49,218

49,701

145,898

148,995

Amortization of acquired technology-based intangible assets

17,147

23,058

51,712

70,031

Total cost of revenues

144,562

122,076

358,954

367,870

Gross profit

298,192

215,619

771,767

648,199

Operating expenses:

Research and development

47,199

43,003

129,332

121,627

Sales and marketing

93,700

77,327

244,403

209,819

General and administrative

39,336

25,762

101,037

81,468

Depreciation

10,527

6,064

23,883

18,278

Amortization of acquired customer-based intangible assets

24,679

17,149

54,388

51,548

Special charges

15,902

5,444

25,901

17,267

Total operating expenses

231,343

174,749

578,944

500,007

Income from operations

66,849

40,870

192,823

148,192

Other income (expense), net

1,652

237

2,838

1,707

Interest and other related expense, net

(9,734)

(4,109)

(17,159)

(12,992)

Income before income taxes

58,767

36,998

178,502

136,907

Provision for income taxes

12,971

11,187

48,576

30,559

Net income for the period

$

45,796

$

25,811

$

129,926

$

106,348

Add: net loss attributable to non-controlling interests

88

88

Net income attributable to OpenText

$

45,884

$

25,811

$

130,014

$

106,348

Earnings per share—basic attributable to OpenText

$

0.38

$

0.22

$

1.09

$

0.91

Earnings per share—diluted attributable to OpenText

$

0.38

$

0.22

$

1.08

$

0.90

Weighted average number of Common Shares outstanding—basic

120,873

117,192

119,048

117,028

Weighted average number of Common Shares outstanding—diluted

122,100

118,154

120,031

118,002

Dividends declared per Common Share

$

0.15

$

$

0.45

$

 

 

 

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands of U.S. dollars)

(unaudited)

Three Months Ended

March 31,

Nine Months Ended

March 31,

2014

2013

2014

2013

Net income for the period

$

45,796

$

25,811

$

129,926

$

106,348

Other comprehensive income—net of tax:

Net foreign currency translation adjustments

(1,087)

(3,325)

(733)

(4,790)

Unrealized gain (loss) on cash flow hedges

Unrealized gain (loss)

(1,604)

(908)

(1,517)

1,097

(Gain) loss reclassified into net income

1,237

75

2,410

(1,439)

Actuarial gain (loss) relating to defined benefit pension plans

Actuarial gain (loss)

(1,808)

124

(781)

(752)

Amortization of actuarial loss into net income

74

72

220

219

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

(3,188)

(3,962)

(401)

(5,665)

Total comprehensive income

42,608

21,849

129,525

100,683

Add: comprehensive loss attributable to non-controlling interests

88

88

Total comprehensive income attributable to OpenText

$

42,696

$

21,849

$

129,613

$

100,683

 

 

 

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars)

(unaudited)

Three Months Ended

March 31,

Nine Months Ended

March 31,

2014

2013

2014

2013

Cash flows from operating activities:

Net income for the period

$

45,796

$

25,811

$

129,926

$

106,348

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

Depreciation and amortization of intangible assets

52,353

46,271

129,983

139,857

Share-based compensation expense

4,418

3,877

15,707

10,153

Excess tax benefits on share-based compensation expense

(594)

(1)

(1,675)

(612)

Pension expense

759

222

1,298

692

Amortization of debt issuance costs

1,016

519

2,060

1,591

Amortization of deferred charges and credits

2,706

2,762

8,640

8,620

Loss on sale and write down of property and equipment

15

24

Deferred taxes

(1,005)

(6,210)

(4,203)

(7,362)

Changes in operating assets and liabilities:

Accounts receivable

9,953

(5,019)

19,129

15,387

Prepaid expenses and other current assets

(14,464)

(3,445)

(18,625)

(2,061)

Income taxes

3,169

(1,019)

5,578

(14,907)

Deferred charges and credits

1,382

4,016

9,870

3,580

Accounts payable and accrued liabilities

(21,617)

(6,556)

(32,212)

(27,176)

Deferred revenue

60,156

54,930

20,022

18,192

Other assets

(2,614)

670

(3,300)

959

Net cash provided by operating activities

141,414

116,828

282,213

253,285

Cash flows from investing activities:

Additions of property and equipment

(8,215)

(5,875)

(28,443)

(15,792)

Purchase of patents

(192)

Purchase of GXS Group, Inc., net of cash acquired

(1,077,671)

(1,077,671)

Purchase of Cordys Holding B.V., net of cash acquired

(30,588)

Purchase of EasyLink Services International Corporation, net of cash acquired

(315,331)

Purchase of Resonate KT Limited, net of cash acquired

(19,366)

(19,366)

Purchase of System Solutions Australia Pty Limited (MessageManager), net of cash acquired

(516)

Purchase consideration for prior period acquisitions

(222)

(222)

(665)

(653)

Other investing activities

(1,573)

(2,547)

Net cash used in investing activities

(1,087,681)

(25,463)

(1,140,106)

(351,658)

Cash flows from financing activities:

Excess tax benefits on share-based compensation expense

594

1

1,675

612

Proceeds from issuance of Common Shares

14,289

1,128

19,718

7,530

Equity issuance costs

(144)

(144)

Purchase of Treasury Stock

(1,275)

(1,275)

Proceeds from long-term debt and revolver

800,000

800,000

Repayment of long-term debt

(13,412)

(7,670)

(32,499)

(23,008)

Debt issuance costs

(15,759)

(16,032)

Payments of dividends to shareholders

(18,224)

(53,692)

Net cash provided by (used in) financing activities

766,069

(6,541)

717,751

(14,866)

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

915

(5,171)

5,768

403

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

(179,283)

79,653

(134,374)

(112,836)

Cash and cash equivalents at beginning of the period

515,354

367,258

470,445

559,747

Cash and cash equivalents at end of the period

$

336,071

$

446,911

$

336,071

$

446,911

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 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 (although prior performance is not necessarily indicative of future performance). As a result, the Company considers it appropriate and reasonable to provide, in addition to U.S. GAAP measures, supplementary non-GAAP financial measures that exclude certain items from the presentation of its financial results 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 March 31, 2014.

(In thousands except for per share amounts)

Three Months Ended

March 31, 2014

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

$

49,464

$

(167)

(1)

$

49,297

Customer support

25,206

(138)

(1)

25,068

Professional service and other

49,218

(245)

(1)

48,973

Amortization of acquired technology-based intangible assets

17,147

(17,147)

(2)

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

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

298,192

67.3%

17,697

(3)

315,889

71.3%

Operating expenses

Research and development

47,199

(384)

(1)

46,815

Sales and marketing

93,700

(1,926)

(1)

91,774

General and administrative

39,336

(1,558)

(1)

37,778

Amortization of acquired customer-based intangible assets

24,679

(24,679)

(2)

Special charges

15,902

(15,902)

(4)

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

66,849

15.1%

62,146

(5)

128,995

29.1%

Other income (expense), net

1,652

(1,652)

(6)

Provision for (recovery of) income taxes

12,971

3,814

(7)

16,785

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

45,884

56,680

(8)

102,564

GAAP-based earnings per share /

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

$

0.38

$

0.46

(8)

$

0.84

(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 dollar, 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 periods following the relevant acquisitions and 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 dollar, 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 is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results.

(7)

Adjustment relates to differences between the GAAP-based tax provision 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:

  

Three Months Ended

March 31, 2014

Per share diluted  

Non-GAAP-based net income, attributable to OpenText

$

102,564

$

0.84

Less:

Amortization

41,826

0.34

Share-based compensation

4,418

0.04

Special charges

15,902

0.13

Other (income) expense, net

(1,652)

(0.01)

GAAP-based provision for (recovery of) income taxes

12,971

0.11

Non-GAAP-based provision for income taxes

(16,785)

(0.15)

GAAP-based net income, attributable to OpenText

$

45,884

$

0.38

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the nine months ended March 31, 2014.

(In thousands except for per share amounts)

Nine Months Ended

March 31, 2014

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

$

79,692

$

(145)

(1)

$

79,547

Customer support

71,785

(547)

(1)

71,238

Professional service and other

145,898

(743)

(1)

145,155

Amortization of acquired technology-based intangible assets

51,712

(51,712)

(2)

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

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

771,767

68.3%

53,147

(3)

824,914

73.0%

Operating expenses

Research and development

129,332

(1,906)

(1)

127,426

Sales and marketing

244,403

(6,200)

(1)

238,203

General and administrative

101,037

(6,166)

(1)

94,871

Amortization of acquired customer-based intangible assets

54,388

(54,388)

(2)

Special charges

25,901

(25,901)

(4)

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

192,823

17.1%

147,708

(5)

340,531

30.1%

Other income (expense), net

2,838

(2,838)

(6)

Provision for (recovery of) income taxes

48,576

(3,216)

(7)

45,360

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

130,014

148,086

(8)

278,100

GAAP-based earnings per share /

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

$

1.08

$

1.24

(8)

$

2.32

(1)

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

(2)

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

(3)

GAAP-based and Non-GAAP-based gross profit stated in dollar, 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 periods following the relevant acquisitions and 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 dollar, 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 is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results.

(7)

Adjustment relates to differences between the GAAP-based tax provision of approximately 27% 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, 2014

Per share diluted  

Non-GAAP-based net income, attributable to OpenText

$

278,100

$

2.32

Less:

Amortization

106,100

0.88

Share-based compensation

15,707

0.13

Special charges

25,901

0.22

Other (income) expense, net

(2,838)

(0.02)

GAAP-based provision for (recovery of) income taxes

48,576

0.40

Non-GAAP-based provision for income taxes

(45,360)

(0.37)

GAAP-based net income, attributable to OpenText

$

130,014

$

1.08

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

(In thousands except for per share amounts)

Three Months Ended

December 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

$

15,963

$

60

(1)

$

16,023

Customer support

24,409

(312)

(1)

24,097

Professional service and other

51,245

(328)

(1)

50,917

Amortization of acquired technology-based intangible assets

13,035

(13,035)

(2)

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

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

255,551

70.3%

13,615

(3)

269,166

74.0%

Operating expenses

Research and development

41,917

(794)

(1)

41,123

Sales and marketing

81,290

(1,921)

(1)

79,369

General and administrative

32,815

(3,382)

(1)

29,433

Amortization of acquired customer-based intangible assets

12,432

(12,432)

(2)

Special charges

6,268

(6,268)

(4)

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

73,931

20.3%

38,412

(5)

112,343

30.9%

Other income (expense), net

(740)

740

(6)

Provision for (recovery of) income taxes

16,651

(1,349)

(7)

15,302

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

53,500

40,501

(8)

94,001

GAAP-based earnings per share /

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

$

0.45

$

0.34

(8)

$

0.79

(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 dollar, 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 periods following the relevant acquisitions and 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 dollar, 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 is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results.

(7)

Adjustment relates to differences between the GAAP-based tax recovery of approximately 24% 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

December 31, 2013

Per share diluted  

Non-GAAP-based net income, attributable to OpenText

$

94,001

$

0.79

Less:

Amortization

25,467

0.21

Share-based compensation

6,677

0.06

Special charges

6,268

0.05

Other (income) expense, net

740

0.01

GAAP-based provision for (recovery of) income taxes

16,651

0.14

Non-GAAP-based provision for income taxes

(15,302)

(0.13)

GAAP-based net income, attributable to OpenText

$

53,500

$

0.45

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

(In thousands except for per share amounts)

Six Months Ended

December 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

$

30,228

$

22

(1)

$

30,250

Customer support

46,579

(409)

(1)

46,170

Professional service and other

96,680

(498)

(1)

96,182

Amortization of acquired technology-based intangible assets

34,565

(34,565)

(2)

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

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

473,575

68.8%

35,450

(3)

509,025

74.0%

Operating expenses

Research and development

82,133

(1,522)

(1)

80,611

Sales and marketing

150,703

(4,274)

(1)

146,429

General and administrative

61,701

(4,608)

(1)

57,093

Amortization of acquired customer-based intangible assets

29,709

(29,709)

(2)

Special charges

9,999

(9,999)

(4)

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

125,974

18.3%

85,562

(5)

211,536

30.7%

Other income (expense), net

1,186

(1,186)

(6)

Provision for (recovery of) income taxes

35,605

(7,029)

(7)

28,576

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

84,130

91,405

(8)

175,535

GAAP-based earnings per share /

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

$

0.71

$

0.77

(8)

$

1.48

(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 dollar, 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 periods following the relevant acquisitions and 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 dollar, 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 is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results.

(7)

Adjustment relates to differences between the GAAP-based tax recovery 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:

  

Six Months Ended

December 31, 2013

Per share diluted  

Non-GAAP-based net income, attributable to OpenText

$

175,535

$

1.48

Less:

Amortization

64,274

0.54

Share-based compensation

11,289

0.09

Special charges

9,999

0.08

Other (income) expense, net

(1,186)

(0.01)

GAAP-based provision for (recovery of) income taxes

35,605

0.30

Non-GAAP-based provision for income taxes

(28,576)

(0.23)

GAAP-based net income, attributable to OpenText

$

84,130

$

0.71

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, attributable to OpenText

25,811

48,398

(8)

74,209

GAAP-based earnings per share /

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

$

0.22

$

0.41

(8)

$

0.63

(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 dollar, 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 periods following the relevant acquisitions and 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 dollar, 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 is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results.

(7)

Adjustment relates to differences between the GAAP-based tax provision 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 diluted  

Non-GAAP-based net income, attributable to OpenText

$

74,209

$

0.63

Less:

Amortization

40,207

0.34

Share-based compensation

3,877

0.03

Special charges

5,444

0.05

Other (income) expense, net

(237)

GAAP-based provision for (recovery of) income taxes

11,187

0.09

Non-GAAP-based provision for income taxes

(12,080)

(0.10)

GAAP-based net income, attributable to OpenText

$

25,811

$

0.22

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, attributable to OpenText

106,348

138,063

(8)

244,411

GAAP-based earnings per share /

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

$

0.90

$

1.17

(8)

$

2.07

(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 dollar, 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 periods following the relevant acquisitions and 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 dollar, 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 is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results.

(7)

Adjustment relates to differences between the GAAP-based tax provision 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 diluted  

Non-GAAP-based net income, attributable to OpenText

$

244,411

$

2.07

Less:

Amortization

121,579

1.03

Share-based compensation

10,153

0.09

Special charges

17,267

0.15

Other (income) expense, net

(1,707)

(0.01)

GAAP-based provision for (recovery of) income taxes

30,559

0.26

Non-GAAP-based provision for income taxes

(39,788)

(0.35)

GAAP-based net income, attributable to OpenText

$

106,348

$

0.90

 

(3)

The following tables provide a composition of our major currencies for revenue and expenses, expressed as a percentage, for the three and six months ended March 31, 2014 and 2013:

 

Three Months Ended

March 31, 2014

Three Months Ended

March 31, 2013

Currencies

% of Revenue

% of Expenses*

% of Revenue

% of Expenses*

EURO

27%

17%

29%

17%

GBP

9%

10%

8%

8%

CAD

4%

14%

6%

19%

USD

48%

42%

47%

42%

Other

12%

17%

10%

14%

Total

100%

100%

100%

100%

Nine Months Ended

March 31, 2014

Nine Months Ended

March 31, 2013

Currencies

% of Revenue

% of Expenses*

% of Revenue

% of Expenses*

EURO

28%

18%

26%

17%

GBP

8%

9%

8%

8%

CAD

5%

16%

6%

18%

USD

48%

41%

49%

43%

Other

11%

16%

11%

14%

Total

100%

100%

100%

100%

*

Expenses include all cost of revenues and operating expenses included within the Consolidated Statements of Income, except for amortization of intangible assets, share-based compensation and Special charges.

 

 

SOURCE Open Text Corporation



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