OpenText Reports Second Quarter Fiscal Year 2022 Financial Results

⁽¹⁾ Please see note 2 "Use of Non-GAAP Financial Measures" 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.

•  Organic revenue growth is calculated by removing the revenue contribution from newly acquired companies for the first year post acquisition.

⁽¹⁾ Please see note 2 "Use of Non-GAAP Financial Measures" 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

CONDENSED CONSOLIDATED BALANCE SHEETS

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

December 31, 2021

June 30, 2021

ASSETS

(unaudited)

Cash and cash equivalents

$1,511,792

$1,607,306

Accounts receivable trade, net of allowance for credit losses of $15,849 as of December 31, 2021 and $22,151 as of June 30, 2021

427,020

438,547

Contract assets

22,336

25,344

Income taxes recoverable

19,855

32,312

Prepaid expenses and other current assets

98,551

   Total current assets

2,099,356

2,202,060

Property and equipment

243,850

233,595

Operating lease right of use assets

230,973

234,532

Long-term contract assets

22,920

19,222

Goodwill

5,195,078

4,691,673

Acquired intangible assets

1,355,003

1,187,260

Deferred tax assets

747,780

796,738

Other assets

228,142

208,894

Long-term income taxes recoverable

41,428

35,362

   Total assets

$10,164,530

$9,609,336

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable and accrued liabilities

$364,739

$423,592

Current portion of long-term debt

10,000

10,000

Operating lease liabilities

62,910

58,315

Deferred revenues

848,977

852,629

Income taxes payable

16,219

17,368

   Total current liabilities

1,302,845

1,361,904

Long-term liabilities:

Accrued liabilities

16,401

28,830

Pension liability

75,055

74,511

Long-term debt

4,211,488

3,578,859

Long-term operating lease liabilities

214,824

224,453

Long-term deferred revenues

90,669

98,989

Long-term income taxes payable

34,133

34,113

Deferred tax liabilities

89,290

108,224

   Total long-term liabilities

4,731,860

4,147,979

Shareholders' equity:

Share capital and additional paid-in capital

271,006,308 and 271,540,755 Common Shares issued and outstanding at December 31, 2021 and June 30, 2021, respectively; authorized Common Shares: unlimited

1,990,913

1,947,764

Accumulated other comprehensive income

31,349

66,238

Retained earnings

2,174,467

2,153,326

Treasury stock, at cost (1,476,420 and 1,567,664 shares at December 31, 2021 and June 30, 2021, respectively)

(67,966)

(69,386)

   Total OpenText shareholders' equity

4,128,763

4,097,942

   Non-controlling interests

1,062

1,511

   Total shareholders' equity

4,129,825

4,099,453

   Total liabilities and shareholders' equity

$10,164,530

$9,609,336

OPEN TEXT CORPORATION

 CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

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

(unaudited)

Three Months Ended December 31,

Six Months Ended December 31,

2021

2020

2021

2020

Revenues:

Cloud services and subscriptions

$364,886

$350,454

$721,475

$691,440

Customer support

334,875

334,492

670,112

663,891

License

109,493

107,348

183,022

175,871

Professional service and other

67,545

63,350

134,498

128,455

Total revenues

876,799

855,644

1,709,107

1,659,657

Cost of revenues:

Cloud services and subscriptions

122,129

117,882

241,908

230,506

Customer support

29,668

29,668

59,151

58,862

License

3,741

4,302

7,710

6,791

Professional service and other

53,041

46,619

104,766

93,200

Amortization of acquired technology-based intangible assets

52,602

54,091

105,769

112,128

Total cost of revenues

261,181

252,562

519,304

501,487

Gross profit

615,618

603,082

1,189,803

1,158,170

Operating expenses:

Research and development

103,622

100,238

203,787

194,141

Sales and marketing

163,938

147,897

310,178

280,297

General and administrative

71,513

62,765

142,990

118,954

Depreciation

21,779

20,280

43,165

42,283

Amortization of acquired customer-based intangible assets

52,665

54,926

104,549

109,919

Special charges (recoveries)

9,217

(17,494)

9,561

(4,250)

Total operating expenses

422,734

368,612

814,230

741,344

Income from operations

192,884

234,470

375,573

416,826

Other income (expense), net

(25,037)

5,251

4,745

8,134

Interest and other related expense, net

(40,245)

(37,595)

(77,300)

(76,684)

Income before income taxes

127,602

202,126

303,018

348,276

Provision for (recovery of) income taxes

39,266

267,559

82,716

310,303

Net income (loss) for the period

$88,336

$(65,433)

$220,302

$37,973

Net (income) loss attributable to non-controlling interests

(38)

(44)

(89)

(74)

Net income (loss) attributable to OpenText

$88,298

$(65,477)

$220,213

$37,899

Earnings (loss) per share—basic attributable to OpenText

$0.32

$(0.24)

$0.81

$0.14

Earnings (loss) per share—diluted attributable to OpenText

$0.32

$(0.24)

$0.81

$0.14

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

272,112

272,433

272,078

272,210

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

272,931

272,433

273,074

273,019

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands of U.S. dollars)

(unaudited)

Three Months Ended December 31,

Six Months Ended December 31,

2021

2020

2021

2020

Net income (loss) for the period

$88,336

$(65,433)

$220,302

$37,973

Other comprehensive income (loss)—net of tax:

Net foreign currency translation adjustments

(21,347)

26,065

(31,439)

48,710

Unrealized gain (loss) on cash flow hedges:

Unrealized gain (loss) - net of tax expense (recovery) effect of $37 and $751 for the three months ended December 31, 2021 and 2020, respectively; ($354) and $1,056 for the six months ended December 31, 2021 and 2020, respectively

104

2,082

(982)

2,927

(Gain) loss reclassified into net income (loss) - net of tax (expense) recovery effect of ($7) and ($227) for the three months ended December 31, 2021 and 2020, respectively; ($110) and ($283) for the six months ended December 31, 2021 and 2020, respectively

(18)

(628)

(305)

(784)

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

Actuarial gain (loss) - net of tax expense (recovery) effect of ($104) and ($441) for the three months ended December 31, 2021 and 2020, respectively; ($336) and ($1,357) for the six months ended December 31, 2021 and 2020, respectively

(1,435)

(981)

(2,484)

(2,686)

Amortization of actuarial (gain) loss into net income (loss) - net of tax (expense) recovery effect of $67 and $93 for the three months ended December 31, 2021 and 2020, respectively; $135 and $180 for the six months ended December 31, 2021 and 2020, respectively

159

243

321

484

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

(22,537)

26,781

(34,889)

48,651

Total comprehensive income (loss)

65,799

(38,652)

185,413

86,624

Comprehensive (income) loss attributable to non-controlling interests

(38)

(44)

(89)

(74)

Total comprehensive income (loss) attributable to OpenText

$65,761

$(38,696)

$185,324

$86,550

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands of U.S. dollars and shares)

(unaudited)

Three Months Ended December 31, 2021

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 September 30, 2021

272,534

$1,991,719

(1,426)

$(63,477)

$2,225,363

$53,886

$1,024

$4,208,515

Issuance of Common Shares

Under employee stock option plans

56

1,966

—

—

—

—

—

1,966

Under employee stock purchase plans

226

9,421

—

—

—

—

—

9,421

Share-based compensation

—

14,409

—

—

—

—

—

14,409

Purchase of treasury stock

—

—

(400)

(19,593)

—

—

—

(19,593)

Issuance of treasury stock

—

(15,104)

350

15,104

—

—

—

—

Repurchase of Common Shares

(1,810)

(11,498)

—

—

(79,536)

—

—

(91,034)

Dividends declared

($0.2209 per Common Share)

—

—

—

—

(59,658)

—

—

(59,658)

Other comprehensive income (loss) - net

—

—

—

—

—

(22,537)

—

(22,537)

Net income for the period

—

—

—

—

88,298

—

38

88,336

Balance as of December 31, 2021

271,006

$1,990,913

(1,476)

$(67,966)

$2,174,467

$31,349

$1,062

$4,129,825

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands of U.S. dollars and shares)

(unaudited)

Six Months Ended December 31, 2021

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, 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

852

29,265

—

—

—

—

—

29,265

Under employee stock purchase plans

423

17,910

—

—

—

—

—

17,910

Share-based compensation

—

28,343

—

—

—

—

—

28,343

Purchase of treasury stock

—

—

(400)

(19,593)

—

—

—

(19,593)

Issuance of treasury stock

—

(21,013)

492

21,013

—

—

—

—

Repurchase of Common Shares

(1,810)

(11,498)

—

—

(79,536)

—

—

(91,034)

Dividends declared

($0.4418 per Common Share)

—

—

—

—

(119,536)

—

—

(119,536)

Other comprehensive income (loss) - net

—

—

—

—

—

(34,889)

—

(34,889)

Distribution to non-controlling interest

—

142

—

—

—

—

(538)

(396)

Net income for the period

—

—

—

—

220,213

—

89

220,302

Balance as of December 31, 2021

271,006

$1,990,913

(1,476)

$(67,966)

$2,174,467

$31,349

$1,062

$4,129,825

Six Months Ended December 31, 2020

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, net

—

—

—

—

(2,450)

—

—

(2,450)

Issuance of Common Shares

Under employee stock option plans

524

15,498

—

—

—

—

—

15,498

Under employee stock purchase plans

202

7,553

193

6,690

—

—

—

14,243

Share-based compensation

—

26,262

—

—

—

—

—

26,262

Purchase of treasury stock

—

—

(965)

(41,870)

—

—

—

(41,870)

Issuance of treasury stock

—

(11,233)

293

11,233

—

—

—

—

Dividends declared

($0.3754 per Common Share)

—

—

—

—

(101,769)

—

—

(101,769)

Other comprehensive income (loss) - net

—

—

—

—

—

48,651

—

48,651

Net income for the period

—

—

—

—

37,899

—

74

37,973

Balance as of December 31, 2020

272,589

$1,889,857

(1,101)

$(47,555)

$2,093,076

$66,476

$1,393

$4,003,247

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars)

(unaudited)

Three Months Ended December 31,

Six Months Ended December 31,

2021

2020

2021

2020

Cash flows from operating activities:

Net income (loss) for the period

$88,336

$(65,433)

$220,302

$37,973

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

Depreciation and amortization of intangible assets

127,046

129,297

253,483

264,330

Share-based compensation expense

14,409

14,526

28,343

26,262

Pension expense

1,529

1,615

3,015

3,120

Amortization of debt issuance costs

1,293

1,142

2,454

2,254

Loss on extinguishment of debt

27,413

—

27,413

—

Loss on sale and write down of property and equipment

11

380

38

953

Deferred taxes

6,210

81,577

20,892

80,397

Share in net (income) loss of equity investees

(2,042)

(2,034)

(31,357)

(8,255)

Changes in operating assets and liabilities:

Accounts receivable

(25,339)

(42,115)

51,187

32,727

Contract assets

(11,497)

(10,355)

(18,745)

(20,193)

Prepaid expenses and other current assets

(1,410)

11,457

(11,221)

7,966

Income taxes

(13,985)

147,809

2,776

168,841

Accounts payable and accrued liabilities

5,705

14,891

(108,629)

(36,538)

Deferred revenue

(12,177)

22,621

(50,693)

(18,647)

Other assets

9,371

(2,016)

16,913

(1,467)

Operating lease assets and liabilities, net

1,771

(20,907)

142

(23,364)

Net cash provided by operating activities

216,644

282,455

406,313

516,359

Cash flows from investing activities:

Additions of property and equipment

(10,635)

(7,651)

(37,347)

(22,956)

Purchase of Zix Corporation, net of cash acquired

(837,573)

—

(837,573)

—

Purchase of Bricata Inc.

(17,927)

—

(17,927)

—

Purchase of XMedius

—

444

—

444

Purchase of Dynamic Solutions Group Inc.

—

(371)

—

(371)

Other investing activities

(3,567)

867

(3,271)

(1,370)

Net cash used in investing activities

(869,702)

(6,711)

(896,118)

(24,253)

Cash flows from financing activities:

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

8,968

13,338

45,688

29,177

Proceeds from long-term debt and Revolver

1,500,000

—

1,500,000

—

Repayment of long-term debt and Revolver

(852,500)

(602,500)

(855,000)

(605,000)

Debt extinguishment costs

(24,969)

—

(24,969)

—

Debt issuance costs

(15,347)

—

(15,347)

—

Repurchase of Common Shares

(91,034)

—

(91,034)

—

Purchase of treasury stock

(19,593)

—

(19,593)

(41,870)

Distribution to non-controlling interest

—

—

(396)

—

Payments of dividends to shareholders

(59,658)

(54,500)

(119,536)

(101,769)

Net cash provided by (used in) financing activities

445,867

(643,662)

419,813

(719,462)

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

(16,436)

22,979

(25,713)

33,771

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

(223,627)

(344,939)

(95,705)

(193,585)

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

1,737,722

1,848,617

1,609,800

1,697,263

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

$1,514,095

$1,503,678

$1,514,095

$1,503,678

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars)

(unaudited)

Reconciliation of cash, cash equivalents and restricted cash:

December 31, 2021

December 31, 2020

Cash and cash equivalents

$1,511,792

$1,500,561

Restricted cash ⁽¹⁾

2,303

3,117

Total cash, cash equivalents and restricted cash

$1,514,095

$1,503,678

⁽¹⁾ Restricted cash is classified under the Prepaid expenses and other current assets and Other assets line items on the Condensed Consolidated Balance Sheets.

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 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 most recently in response to the COVID-19 pandemic, 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 (Loss). 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.

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

(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.

(7)

Adjustment relates to differences between the GAAP-based tax provision rate of approximately 31% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded items include amortization, share-based compensation, special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation 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 net income to Non-GAAP-based net income:

Reconciliation of Adjusted EBITDA

Reconciliation of Free cash flows

(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.

(7)

Adjustment relates to differences between the GAAP-based tax provision rate of approximately 27% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded items include amortization, share-based compensation, special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation 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.