OpenText Reports Fourth Quarter and Fiscal Year 2023 Financial Results

Total Revenues

(in millions)

Annual Recurring Revenues

(in millions)

Cloud Revenues

(in millions)

Reported

Constant
Currency

Reported

Constant
Currency

Reported

Constant
Currency

$4,485

$4,617

$3,615

$3,718

$1,700

$1,739

+28.4 %

+32.2 %

+26.2 %

+29.7 %

+10.8 %

+13.3 %

Annual Recurring Revenues represent 81% of Total Revenues

Total Revenues

(in millions)

Annual Recurring Revenues

(in millions)

Cloud Revenues

(in millions)

Reported

Constant
Currency

Reported

Constant
Currency

Reported

Constant
Currency

$1,491

$1,502

$1,157

$1,167

$452

$455

+65.2 %

+66.5 %

+56.4 %

+57.7 %

+9.7 %

+10.6 %

Annual Recurring Revenues represent 78% of Total Revenues

⁽¹⁾

Enterprise cloud bookings is defined as the total value from cloud services and subscription contracts, entered into in the fiscal year that are new, committed and incremental to our existing contracts, entered into with our enterprise based customers.

⁽²⁾

Please see Note 2 "Use of Non-GAAP Financial Measures" to the consolidated financial statements below.

Summary of Annual Results

(In millions, except per share data)

FY'23

FY'22

$ Change 

% Change 

FY'23 
in CC*

% Change
in CC*

Revenues:

Cloud services and subscriptions

$1,700.4

$1,535.0

$165.4

10.8 %

$1,739.1

13.3 %

Customer support

1,915.0

1,331.0

$584.1

43.9 %

1,978.8

48.7 %

Total annual recurring revenues**

$3,615.5

$2,866.0

$749.5

26.2 %

$3,717.9

29.7 %

License

539.0

358.4

$180.7

50.4 %

555.4

55.0 %

Professional service and other

330.5

269.5

$61.0

22.6 %

344.1

27.7 %

Total revenues

$4,485.0

$3,493.8

$991.1

28.4 %

$4,617.4

32.2 %

GAAP-based operating income

$     516.3

$644.8

($128.5)

(19.9) %

N/A

N/A

Non-GAAP-based operating income ⁽¹⁾

$1,365.3

$1,176.9

$188.4

16.0 %

$1,387.5

17.9 %

GAAP-based net income attributable to OpenText

$150.4

$397.1

($246.7)

(62.1) %

N/A

N/A

GAAP-based EPS, diluted

$0.56

$1.46

($0.90)

(61.6) %

N/A

N/A

Non-GAAP-based EPS, diluted ⁽¹⁾⁽²⁾

$3.29

$3.22

$0.07

2.2 %

$3.37

4.7 %

Adjusted EBITDA ⁽¹⁾

$1,472.9

$1,265.0

$207.9

16.4 %

$1,495.8

18.2 %

Operating cash flows

$779.2

$981.8

($202.6)

(20.6) %

N/A

N/A

Free cash flows ⁽¹⁾

$655.4

$888.7

($233.3)

(26.3) %

N/A

N/A

Summary of Quarterly Results

(In millions, except per share data)

Q4 FY'23

Q4 FY'22

$ Change 

% Change 

Q4 FY'23 
in CC*

% Change
in CC*

Revenues:

Cloud services and subscriptions

$451.7

$411.6

$40.1

9.7 %

$455.4

10.6 %

Customer support

705.3

328.3

$376.9

114.8 %

711.4

116.7 %

Total annual recurring revenues**

$1,156.9

$739.9

$417.0

56.4 %

$1,166.8

57.7 %

License

228.8

94.7

$134.1

141.6 %

229.2

142.0 %

Professional service and other

105.1

67.8

$37.3

54.9 %

106.3

56.7 %

Total revenues

$1,490.8

$902.5

$588.4

65.2 %

$1,502.3

66.5 %

GAAP-based operating income

$121.3

$137.6

($16.3)

(11.8) %

N/A

N/A

Non-GAAP-based operating income ⁽¹⁾

$431.7

$291.0

$140.8

48.4 %

$421.5

44.9 %

GAAP-based net income attributable to OpenText

($48.7)

$102.2

($150.9)

(147.7) %

N/A

N/A

GAAP-based EPS, diluted

($0.18)

$0.38

($0.56)

(147.4) %

N/A

N/A

Non-GAAP-based EPS, diluted ⁽¹⁾⁽²⁾

$0.91

$0.80

$0.11

13.8 %

$0.88

10.0 %

Adjusted EBITDA ⁽¹⁾

$462.8

$313.6

$149.2

47.6 %

$452.7

44.3 %

Operating cash flows

$115.3

$251.9

($136.6)

(54.2) %

N/A

N/A

Free cash flows ⁽¹⁾

$91.2

$213.8

($122.5)

(57.3) %

N/A

N/A

⁽¹⁾

Please see Note 2 "Use of Non-GAAP Financial Measures" to the consolidated financial statements below.

⁽²⁾

Please also see Note 14 to the Company's Fiscal 2018 Consolidated Financial Statements on Form 10-K. Reflective of the amount of net tax benefit arising from the internal reorganization assumed to be allocable to the current period based on the forecasted utilization period.

Note:

Individual line items in tables may be adjusted by non-material amounts to enable totals to align to published financial statements.

*CC:

Constant currency for this purpose is defined as the current period reported revenues/expenses/earnings represented at the prior comparative period's foreign exchange rate.

**

Annual recurring revenue is defined as the sum of Cloud services and subscriptions revenue and Customer support revenue.

Summary of Annual Results

FY'23

FY'22

% Change

Revenue (millions)

$4,485.0

$3,493.8

28.4 %

GAAP-based gross margin

70.6 %

69.6 %

105

bps

Non-GAAP-based gross margin ⁽¹⁾

76.1 %

75.6 %

49

bps

GAAP-based EPS, diluted

$0.56

$1.46

(61.6) %

Non-GAAP-based EPS, diluted ⁽¹⁾⁽²⁾

$3.29

$3.22

2.2 %

Summary of Quarterly Results

Q4 FY'23

Q3 FY'23

Q4 FY'22

% Change 

(Q4 FY'23 vs
Q3 FY'23)

% Change

(Q4 FY'23 vs
Q4 FY'22)

Revenue (millions)

$1,490.8

$1,244.7

$902.5

19.8 %

65.2 %

GAAP-based gross margin

71.4 %

70.3 %

70.2 %

110

bps

120

bps

Non-GAAP-based gross margin ⁽¹⁾

76.9 %

75.8 %

75.9 %

110

bps

100

bps

GAAP-based EPS, diluted

($0.18)

$0.21

$0.38

(185.7) %

(147.4) %

Non-GAAP-based EPS, diluted ⁽¹⁾⁽²⁾

$0.91

$0.73

$0.80

24.7 %

13.8 %

⁽¹⁾

Please see Note 2 "Use of Non-GAAP Financial Measures" to the consolidated financial statements below.

⁽²⁾

Please also see Note 14 to the Company's Fiscal 2018 Consolidated Financial Statements on Form 10-K. Reflective of the amount of net tax benefit arising from the internal reorganization assumed to be allocable to the current period based on the forecasted utilization period.

OPEN TEXT CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars, except share data)

June 30, 2023

June 30, 2022

ASSETS

Cash and cash equivalents

$             1,231,625

$             1,693,741

Accounts receivable trade, net of allowance for credit losses of $13,828 as of
June 30, 2023 and $16,473 as of June 30, 2022

682,517

426,652

Contract assets

71,196

26,167

Income taxes recoverable

68,161

18,255

Prepaid expenses and other current assets

221,732

120,552

Total current assets

2,275,231

2,285,367

Property and equipment

356,904

244,709

Operating lease right of use assets

285,723

198,132

Long-term contract assets

64,553

19,719

Goodwill

8,662,603

5,244,653

Acquired intangible assets

4,080,879

1,075,208

Deferred tax assets

926,719

810,154

Other assets

342,318

256,987

Long-term income taxes recoverable

94,270

44,044

Total assets

$          17,089,200

$          10,178,973

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable and accrued liabilities

$                996,261

$                448,607

Current portion of long-term debt

320,850

10,000

Operating lease liabilities

91,425

56,380

Deferred revenues

1,721,781

902,202

Income taxes payable

89,297

51,069

Total current liabilities

3,219,614

1,468,258

Long-term liabilities:

Accrued liabilities

51,961

18,208

Pension liability

126,312

60,951

Long-term debt

8,562,096

4,209,567

Long-term operating lease liabilities

271,579

198,695

Long-term deferred revenues

217,771

91,144

Long-term income taxes payable

193,808

34,003

Deferred tax liabilities

423,955

65,887

Total long-term liabilities

9,847,482

4,678,455

Shareholders' equity:

Share capital and additional paid-in capital

270,902,571 and 269,522,639 Common Shares issued and outstanding at
June 30, 2023 and June 30, 2022, respectively; authorized Common Shares:
unlimited

2,176,947

2,038,674

Accumulated other comprehensive income (loss)

(53,559)

(7,659)

Retained earnings

2,048,984

2,160,069

Treasury stock, at cost (3,536,375 and 3,706,420 shares at June 30, 2023 and
June 30, 2022, respectively)

(151,597)

(159,966)

Total OpenText shareholders' equity

4,020,775

4,031,118

Non-controlling interests

1,329

1,142

Total shareholders' equity

4,022,104

4,032,260

Total liabilities and shareholders' equity

$          17,089,200

$          10,178,973

OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands of U.S. dollars, except share and per share data)
(unaudited)

Three Months Ended June 30,

2023

2022

Revenues:

Cloud services and subscriptions

$                451,659

$                411,595

Customer support

705,277

328,339

License

228,796

94,688

Professional service and other

105,098

67,832

Total revenues

1,490,830

902,454

Cost of revenues:

Cloud services and subscriptions

166,394

133,785

Customer support

86,695

30,571

License

6,184

2,595

Professional service and other

90,498

55,436

Amortization of acquired technology-based intangible assets

77,045

46,274

Total cost of revenues

426,816

268,661

Gross profit

1,064,014

633,793

Operating expenses:

Research and development

249,958

118,931

Sales and marketing

333,244

185,985

General and administrative

136,866

85,958

Depreciation

31,152

22,706

Amortization of acquired customer-based intangible assets

121,285

56,341

Special charges (recoveries)

70,222

26,281

Total operating expenses

942,727

496,202

Income from operations

121,287

137,591

Other income (expense), net

(25,355)

(19)

Interest and other related expense, net

(145,829)

(40,342)

Income (loss) before income taxes

(49,897)

97,230

Provision for (recovery of) income taxes

(1,212)

(5,005)

Net income (loss) for the period

$                (48,685)

$                102,235

Net (income) attributable to non-controlling interests

(49)

(39)

Net income (loss) attributable to OpenText

$                (48,734)

$                102,196

Earnings per share—basic attributable to OpenText

$                     (0.18)

$                       0.38

Earnings per share—diluted attributable to OpenText

$                     (0.18)

$                       0.38

Weighted average number of Common Shares outstanding—basic (in '000's)

270,772

270,152

Weighted average number of Common Shares outstanding—diluted (in '000's)

270,772

270,394

OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands of U.S. dollars, except share and per share data)

Year Ended June 30,

2023

2022

2021

Revenues:

Cloud services and subscriptions

$        1,700,433

$        1,535,017

$        1,407,445

Customer support

1,915,020

1,330,965

1,334,062

License

539,026

358,351

384,711

Professional service and other

330,501

269,511

259,897

Total revenues

4,484,980

3,493,844

3,386,115

Cost of revenues:

Cloud services and subscriptions

590,165

511,713

481,818

Customer support

209,705

121,485

122,753

License

16,645

13,501

13,916

Professional service and other

276,888

216,895

197,183

Amortization of acquired technology-based intangible assets

223,184

198,607

218,796

Total cost of revenues

1,316,587

1,062,201

1,034,466

Gross profit

3,168,393

2,431,643

2,351,649

Operating expenses:

Research and development

680,587

440,448

421,447

Sales and marketing

948,598

677,118

622,221

General and administrative

419,590

317,085

263,521

Depreciation

107,761

88,241

85,265

Amortization of acquired customer-based intangible assets

326,406

217,105

216,544

Special charges (recoveries)

169,159

46,873

1,748

Total operating expenses

2,652,101

1,786,870

1,610,746

Income from operations

516,292

644,773

740,903

Other income (expense), net

34,469

29,118

61,434

Interest and other related expense, net

(329,428)

(157,880)

(151,567)

Income before income taxes

221,333

516,011

650,770

Provision for (recovery of) income taxes

70,767

118,752

339,906

Net income

$           150,566

$           397,259

$           310,864

Net (income) attributable to non-controlling interests

(187)

(169)

(192)

Net income attributable to OpenText

$           150,379

$           397,090

$           310,672

Earnings per share—basic attributable to OpenText

$                  0.56

$                  1.46

$                  1.14

Earnings per share—diluted attributable to OpenText

$                  0.56

$                  1.46

$                  1.14

Weighted average number of Common Shares outstanding—basic

(in '000's)

270,299

271,271

272,533

Weighted average number of Common Shares outstanding—diluted

(in '000's)

270,451

271,909

273,479

OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands of U.S. dollars)

Year Ended June 30,

2023

2022

2021

Net income

$           150,566

$           397,259

$           310,864

Other comprehensive income (loss)—net of tax:

Net foreign currency translation adjustments

(40,798)

(78,724)

42,440

Unrealized gain (loss) on cash flow hedges:

Unrealized gain (loss) - net of tax ⁽¹⁾

(941)

(1,859)

4,246

(Gain) loss reclassified into net income - net of tax ⁽²⁾

2,721

373

(3,280)

Unrealized gain (loss) on available-for-sale financial assets:

Unrealized gain (loss) - net of tax ⁽³⁾

(602)

—

—

Actuarial gain (loss) relating to defined benefit pension plans:

Actuarial gain (loss) - net of tax ⁽⁴⁾

(6,605)

5,595

3,987

Amortization of actuarial (gain) loss into net income - net of tax ⁽⁵⁾

325

718

1,020

Total other comprehensive income (loss) net

(45,900)

(73,897)

48,413

Total comprehensive income

104,666

323,362

359,277

Comprehensive income attributable to non-controlling interests

(187)

(169)

(192)

Total comprehensive income attributable to OpenText

$           104,479

$           323,193

$           359,085

(1)

Net of tax expense (recovery) of ($339), ($671), and $1,532 for the year ended June 30, 2023, 2022 and 2021, respectively.

(2)

Net of tax expense (recovery) of $981, $134 and ($1,182) for the year ended June 30, 2023, 2022 and 2021, respectively.

(3)

Net of tax expense (recovery) of $159, nil, and nil for the year ended June 30, 2023, 2022 and 2021, respectively.

(4)

Net of tax expense (recovery) of ($1,961), $1,866 and $990 for the year ended June 30, 2023, 2022 and 2021, respectively.

(5)

Net of tax expense (recovery) of $143, $290 and $379 for the year ended June 30, 2023, 2022 and 2021, respectively.

OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands of U.S. dollars and shares)

Common Shares and
Additional Paid in Capital

Treasury Stock

Retained

Earnings

Accumulated  Other

Comprehensive

Income

Non-Controlling Interests

Total

Shares

Amount

Shares

Amount

Balance as of June 30, 2020

271,863

$  1,851,777

(622)

$ (23,608)

$  2,159,396

$          17,825

$      1,319

$  4,006,709

Adoption of ASU 2016-13 - cumulative effect

—

—

—

—

(2,450)

—

—

(2,450)

Issuance of Common Shares

Under employee stock option plans

1,605

49,565

—

—

—

—

—

49,565

Under employee stock purchase plans

573

22,307

193

6,690

—

—

—

28,997

Share-based compensation

—

51,969

—

—

—

—

—

51,969

Purchase of treasury stock

—

—

(1,455)

(64,847)

—

—

—

(64,847)

Issuance of treasury stock

—

(12,379)

316

12,379

—

—

—

—

Common Shares repurchased

(2,500)

(15,475)

—

—

(103,630)

—

—

(119,105)

Dividends declared

($0.777 per Common Share)

—

—

—

—

(210,662)

—

—

(210,662)

Non-controlling interest

—

—

—

—

—

—

—

—

Other comprehensive income - net

—

—

—

—

—

48,413

—

48,413

Net income

—

—

—

—

310,672

—

192

310,864

Balance as of June 30, 2021

271,541

$  1,947,764

(1,568)

$ (69,386)

$  2,153,326

$          66,238

$      1,511

$  4,099,453

Issuance of Common Shares

Under employee stock option plans

950

32,714

—

—

—

—

—

32,714

Under employee stock purchase plans

842

33,806

—

—

—

—

—

33,806

Share-based compensation

—

69,556

—

—

—

—

—

69,556

Purchase of treasury stock

—

—

(2,630)

(111,593)

—

—

—

(111,593)

Issuance of treasury stock

—

(21,013)

492

21,013

—

—

—

—

Common Shares repurchased

(3,810)

(24,295)

—

—

(152,692)

—

—

(176,987)

Dividends declared

($0.8836 per Common Share)

—

—

—

—

(237,655)

—

—

(237,655)

Non-controlling interest

—

—

—

—

—

—

—

—

Other comprehensive loss - net

—

—

—

—

—

(73,897)

—

(73,897)

Distribution to non-controlling interest

—

142

—

—

—

—

(538)

(396)

Net income

—

—

—

—

397,090

—

169

397,259

Balance as of June 30, 2022

269,523

$  2,038,674

(3,706)

$ (159,966)

$  2,160,069

$          (7,659)

$      1,142

$  4,032,260

Issuance of Common Shares

Under employee stock option plans

245

7,830

—

—

—

—

—

7,830

Under employee stock purchase plans

1,135

31,679

—

—

—

—

—

31,679

Share-based compensation

—

130,119

—

—

—

—

—

130,119

Purchase of treasury stock

—

—

(521)

(21,919)

—

—

—

(21,919)

Issuance of treasury stock

—

(31,355)

691

30,288

—

—

—

(1,067)

Common Shares repurchased

—

—

—

—

—

—

—

—

Dividends declared ($0.9720 per Common Share)

—

—

—

—

(261,464)

—

—

(261,464)

Non-controlling interest

—

—

—

—

—

—

—

—

Other comprehensive loss - net

—

—

—

—

—

(45,900)

—

(45,900)

Net income

—

—

—

—

150,379

—

187

150,566

Balance as of June 30, 2023

270,903

$  2,176,947

(3,536)

$ (151,597)

$  2,048,984

$        (53,559)

$      1,329

$  4,022,104

OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
(unaudited)

Three Months Ended June 30,

2023

2022

Cash flows from operating activities:

Net income (loss) for the period

$                  (48,685)

$                  102,235

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization of intangible assets

229,482

125,321

Share-based compensation expense

41,904

24,464

Pension expense

3,401

1,723

Amortization of debt discount and issuance costs

8,257

1,486

Write-off of right of use assets

2,507

17,707

Loss on extinguishment of debt

—

—

Loss on sale and write down of property and equipment

903

198

Deferred taxes

29,140

(79,420)

Share in net (income) loss of equity investees

11,530

401

Changes in financial instruments

16,274

—

Changes in operating assets and liabilities:

Accounts receivable

27,335

13,413

Contract assets

(43,643)

(10,758)

Prepaid expenses and other current assets

42,151

1,768

Income taxes

(116,569)

45,824

Accounts payable and accrued liabilities

10,582

41,561

Deferred revenue

(85,764)

(30,878)

Other assets

(5,299)

771

Operating lease assets and liabilities, net

(8,205)

(3,876)

Net cash provided by operating activities

115,301

251,940

Cash flows from investing activities:

Additions of property and equipment

(24,060)

(38,172)

Purchase of Micro Focus International PLC, net of cash acquired

(2,357)

—

Purchase of Bricata Inc.

—

174

Net cash used in investing activities

(26,417)

(37,998)

Cash flows from financing activities:

Proceeds from issuance of Common Shares from exercise of stock options and ESPP

14,159

10,738

Repayment of long-term debt and Revolver

(186,463)

(2,500)

Debt issuance costs

(690)

—

Repurchase of Common Shares

—

(40,869)

Purchase of treasury stock

(21,919)

(35,933)

Payments of dividends to shareholders

(65,068)

(59,042)

Other financing activities

758

—

Net cash used in financing activities

(259,223)

(127,606)

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

4,571

(26,276)

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

(165,768)

60,060

Cash, cash equivalents and restricted cash at beginning of the period

1,399,720

1,635,851

Cash, cash equivalents and restricted cash at end of the period

$               1,233,952

$               1,695,911

OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars) 

Reconciliation of cash, cash equivalents and restricted cash:

June 30, 2023

June 30, 2022

Cash and cash equivalents

$               1,231,625

$               1,693,741

Restricted cash ⁽¹⁾

2,327

2,170

Total cash, cash equivalents and restricted cash

$               1,233,952

$               1,695,911

(1)

Restricted cash is classified under the Prepaid expenses and other current assets and Other assets line items on the Consolidated Balance Sheets.

OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)

Year Ended June 30,

2023

2022

2021

Cash flows from operating activities:

Net income for the period

$             150,566

$             397,259

$             310,864

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

Depreciation and amortization of intangible assets

657,351

503,953

520,605

Share-based compensation expense

130,302

69,556

51,969

Pension expense

9,207

6,606

6,616

Amortization of debt discount and issuance costs

16,753

5,422

4,548

Write-off of right of use assets

9,626

17,707

—

Loss on extinguishment of debt

8,152

27,413

—

Loss on sale and write down of property and equipment

2,331

294

2,771

Deferred taxes

(149,560)

(36,088)

73,039

Share in net (income) loss of equity investees

23,077

(58,702)

(62,897)

Changes in financial instruments

128,841

—

—

Changes in operating assets and liabilities:

Accounts receivable

168,604

81,841

60,954

Contract assets

(73,539)

(37,966)

(39,333)

Prepaid expenses and other current assets

(23,035)

(13,954)

37,733

Income taxes

14,948

34,589

(140,763)

Accounts payable and accrued liabilities

(127,092)

(24,177)

26,088

Deferred revenue

(128,395)

(5,236)

39,295

Other assets

(11,297)

17,297

11,914

Operating lease assets and liabilities, net

(27,635)

(4,004)

(27,283)

Net cash provided by operating activities

779,205

981,810

876,120

Cash flows from investing activities:

Additions of property and equipment

(123,832)

(93,109)

(63,675)

Purchase of Micro Focus International PLC, net of cash acquired

(5,657,963)

—

—

Purchase of Zix Corporation, net of cash acquired

—

(856,175)

—

Purchase of Bricata Inc.

—

(17,753)

—

Purchase of XMedius

—

—

444

Purchase of Dynamic Solutions Group Inc.

—

—

(971)

Realized gain (loss) on financial instruments

131,248

—

—

Other investing activities

(873)

(3,922)

(4,568)

Net cash used in investing activities

(5,651,420)

(970,959)

(68,770)

Cash flows from financing activities:

Proceeds from issuance of Common Shares from exercise of stock options and ESPP

39,331

67,215

80,067

Proceeds from long-term debt and Revolver

4,927,450

1,500,000

—

Repayment of long-term debt and Revolver

(202,926)

(860,000)

(610,000)

Debt extinguishment costs

—

(24,969)

—

Debt issuance costs

(77,899)

(17,159)

—

Repurchase of Common Shares

—

(176,987)

(119,105)

Purchase of treasury stock

(21,919)

(111,593)

(64,847)

Distribution to non-controlling interest

—

(396)

—

Payments of dividends to shareholders

(259,549)

(237,655)

(210,662)

Other financing activities

(1,435)

—

—

Net cash provided by (used in) financing activities

4,403,053

138,456

(924,547)

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

7,203

(63,196)

29,734

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

(461,959)

86,111

(87,463)

Cash, cash equivalents and restricted cash at beginning of the period

1,695,911

1,609,800

1,697,263

Cash, cash equivalents and restricted cash at end of the period

$          1,233,952

$          1,695,911

$          1,609,800

OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
(unaudited) 

Reconciliation of cash, cash equivalents and restricted cash:

June 30, 2023

June 30, 2022

June 30, 2021

Cash and cash equivalents

$        1,231,625

$        1,693,741

$        1,607,306

Restricted cash ⁽¹⁾

2,327

2,170

2,494

Total cash, cash equivalents and restricted cash

$        1,233,952

$        1,695,911

$        1,609,800

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 is 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, attributable to OpenText, are consistently calculated as GAAP-based net income (loss) or earnings (loss) per share, attributable to OpenText, on a diluted basis, excluding the effects of the amortization of acquired intangible assets, other income (expense), share-based compensation, and special charges (recoveries), all net of tax and any tax benefits/expense items unrelated to current period income, as further described in the tables below. Non-GAAP-based gross profit is the arithmetical sum of GAAP-based gross profit and the amortization of acquired technology-based intangible assets and share-based compensation within cost of sales. Non-GAAP-based gross margin is calculated as Non-GAAP-based gross profit expressed as a percentage of total revenue. Non-GAAP-based income from operations is calculated as GAAP-based income from operations, excluding the amortization of acquired intangible assets, special charges (recoveries), and share-based compensation expense.

Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) is consistently calculated as GAAP-based net income (loss), attributable to OpenText, excluding interest income (expense), provision for (recovery of) income taxes, depreciation and amortization of acquired intangible assets, other income (expense), share-based compensation and special charges (recoveries). Adjusted EBITDA margin is calculated as adjusted EBITDA expressed as a percentage of total 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. These items are excluded based upon the way the Company's management evaluates the performance of the Company's business for use in the Company's internal reports and are not excluded in the sense that they may be used under U.S. GAAP.

The Company does not acquire businesses on a predictable cycle, and therefore believes that the presentation of Non-GAAP measures, which in certain cases adjust for the impact of amortization of intangible assets and the related tax effects that are primarily related to acquisitions, will provide readers of financial statements with a more consistent basis for comparison across accounting periods and be more useful in helping readers understand the Company's operating results and underlying operational trends. Additionally, the Company has engaged in various restructuring activities over the past several years, primarily due to acquisitions and in response to our return to office planning, that have resulted in costs associated with reductions in headcount, consolidation of leased facilities and related costs, all which are recorded under the Company's "Special charges (recoveries)" caption on the Consolidated Statements of Income. Each restructuring activity is a discrete event based on a unique set of business objectives or circumstances, and each differs in terms of its operational implementation, business impact and scope, and the size of each restructuring plan can vary significantly from period to period. Therefore, the Company believes that the exclusion of these special charges (recoveries) will also better aid readers of financial statements in the understanding and comparability of the Company's operating results and underlying operational trends.

In summary, 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. Information reconciling certain forward-looking GAAP measures to non-GAAP measures related to F'24 targets and F'26 aspirations, including A-EBITDA is not available without unreasonable effort due to high variability, complexity and uncertainty with respect to forecasting and quantifying certain amounts that are necessary for such reconciliations.

The following charts provide unaudited reconciliations of U.S. GAAP-based financial measures to Non-GAAP-based financial measures for the following periods presented. The Micro Focus Acquisition significantly impacts period-over-period comparability.

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures

for the three months ended June 30, 2023

(In thousands, except for per share data)

Three Months Ended June 30, 2023

GAAP-based Measures

GAAP-based Measures

% of Total Revenue

Adjustments

Note

Non-GAAP-based Measures

Non-GAAP-based  Measures

% of Total Revenue

Cost of revenues

Cloud services and subscriptions

$  166,394

$     (2,876)

(1)

$   163,518

Customer support

86,695

(1,213)

(1)

85,482

Professional service and other

90,498

(1,826)

(1)

88,672

Amortization of acquired technology-based intangible assets

77,045

(77,045)

(2)

—

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

1,064,014

71.4 %

82,960

(3)

1,146,974

76.9 %

Operating expenses

Research and development

249,958

(13,584)

(1)

236,374

Sales and marketing

333,244

(13,467)

(1)

319,777

General and administrative

136,866

(8,938)

(1)

127,928

Amortization of acquired customer-based intangible assets

121,285

(121,285)

(2)

—

Special charges (recoveries)

70,222

(70,222)

(4)

—

GAAP-based income from operations / Non-GAAP-based income from operations

121,287

310,456

(5)

431,743

Other income (expense), net

(25,355)

25,355

(6)

—

Provision for (recovery of) income taxes

(1,212)

41,240

(7)

40,028

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

(48,734)

294,571

(8)

245,837

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

$       (0.18)

$          1.09

(8)

$          0.91

(1)

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

(2)

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

(3)

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

(4)

Adjustment relates to the exclusion of special charges (recoveries) from our Non-GAAP-based operating expenses as special charges (recoveries) are generally incurred in the periods relevant to an acquisition and include certain charges or recoveries that are not indicative or related to continuing operations and are therefore excluded from our internal analysis of operating results.

(5)

GAAP-based and Non-GAAP-based income from operations stated in dollars.

(6)

Adjustment relates to the exclusion of other income (expense) from our Non-GAAP-based operating expenses as other income (expense) generally relates to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results. Other income (expense) also includes our share of income (losses) from our holdings in investments as a limited partner. We do not actively trade equity securities in these privately held companies nor do we plan our ongoing operations based around any anticipated fundings or distributions from these investments. We exclude gains and losses on these investments as we do not believe they are reflective of our ongoing business and operating results. Other income (expense) also includes unrealized and realized gains (losses) on our derivatives which are not designated as hedges. We exclude gains and losses on these derivatives as we do not believe they are reflective of our ongoing business and operating results.

(7)

Adjustment relates to differences between the GAAP-based tax provision rate of approximately 2% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based net income. Such excluded items include amortization, share-based compensation, special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves and "book to return" adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately  14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.

(8)

Reconciliation of GAAP-based loss to Non-GAAP-based net income:

Three Months Ended June 30, 2023

Per share diluted

GAAP-based net loss, attributable to OpenText

$                   (48,734)

$                        (0.18)

Add:

Amortization

198,330

0.73

Share-based compensation

41,904

0.15

Special charges (recoveries)

70,222

0.26

Other (income) expense, net

25,355

0.10

GAAP-based recovery of income taxes

(1,212)

—

Non-GAAP-based recovery of income taxes

(40,028)

(0.15)

Non-GAAP-based net income, attributable to OpenText

$                   245,837

$                          0.91

Reconciliation of Adjusted EBITDA

Three Months Ended June 30, 2023

GAAP-based net loss, attributable to OpenText

$                                                      (48,734)

Add:

Recovery of income taxes

(1,212)

Interest and other related expense, net

145,829

Amortization of acquired technology-based intangible assets

77,045

Amortization of acquired customer-based intangible assets

121,285

Depreciation

31,152

Share-based compensation

41,904

Special charges (recoveries)

70,222

Other (income) expense, net

25,355

Adjusted EBITDA

$                                                       462,846

GAAP-based net loss margin

(3.3) %

Adjusted EBITDA margin

31.0 %

Reconciliation of Free cash flows

Three Months Ended June 30, 2023

GAAP-based cash flows provided by operating activities

$                                                         115,301

Add:

Capital expenditures ⁽¹⁾

(24,060)

Free cash flows

$                                                           91,241

⁽¹⁾ Defined as "Additions of property and equipment" in the Consolidated Statements of Cash Flows.

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures

for the year ended June 30, 2023

(In thousands, except for per share data)

Year Ended June 30, 2023

GAAP-based

Measures

GAAP-based Measures

% of Total Revenue

Adjustments

Note