OTEX 8-K
Open Text Corp (OTEX)
8-K
2022-08-05
For: 2022-08-04
View Original
Added on
April 09, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
______________________
FORM 8-K
______________________
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 4, 2022
______________________
(Exact name of Registrant as specified in its charter)
______________________
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||||||
(Address of principal executive offices)
(519 ) 888-7111
(Registrant's telephone number, including area code)
______________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition
The following information is furnished pursuant to Item 2.02, “Results of Operations and Financial Condition.”
On August 4, 2022 , Open Text Corporation (the “Company”) issued a press release announcing its financial results for the quarter ended June 30, 2022. A copy of the press release is furnished as Exhibit 99.1 to this Form 8-K.
The Company also issued a letter to shareholders (the "shareholder letter") announcing its financial results for the quarter ended June 30, 2022. A copy of the shareholder letter is furnished as Exhibit 99.2 to this Form 8-K.
The information in this Item 2.02 and the exhibits attached hereto are furnished to, but not “filed” with, the Securities and Exchange Commission (“SEC”) and shall not be deemed to be incorporated by reference into any of the Company’s filings with the SEC under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Item 8.01 Other Events
The following information is filed pursuant to Item 8.01 "Other Events"
Cash Dividends
Pursuant to the Company's dividend policy, the Board of Directors of the Company has declared a dividend of $0.24299 per Common Share, payable on September 23, 2022, to the shareholders of the Company of record on September 2, 2022.
OpenText believes strongly in returning value to its shareholders and intends to maintain its dividend program. Any future declarations of dividends and the establishment of future record and payment dates are all subject to the final determination and discretion of the Board of Directors.
The declaration, payment and amount of any future dividends will be made pursuant to the Company's dividend policy and is subject to final determination each quarter by the Board of Directors in its discretion based on a number of factors that it deems relevant, including the Company's financial position, results of operations, available cash resources, cash requirements and alternative uses of cash that the Board of Directors may conclude would be in the best interest of the shareholders of the Company. Payment of dividends is also subject to relevant contractual limitations, including those in the Company's existing credit agreements. Accordingly, there can be no assurance that any future dividends will be equal or similar in amount to any dividends previously paid or that the Board of Directors will not decide to reduce, suspend or discontinue the payment of dividends in the future.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
Exhibit No. | Description | |||||||
| 99.1 | ||||||||
| 99.2 | ||||||||
| 101.INS | XBRL instance document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |||||||
| 101.SCH | Inline XBRL taxonomy extension schema. | |||||||
| 101.CAL | Inline XBRL taxonomy extension calculation linkbase. | |||||||
| 101.DEF | Inline XBRL taxonomy extension definition linkbase. | |||||||
| 101.LAB | Inline XBRL taxonomy extension label linkbase. | |||||||
| 101.PRE | Inline XBRL taxonomy extension presentation. | |||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| OPEN TEXT CORPORATION | ||||||||||||||
| By: | /s/ MADHU RANGANATHAN | |||||||||||||
| Madhu Ranganathan Executive Vice President and Chief Financial Officer | ||||||||||||||
Exhibit Index
Exhibit No. | Description | |||||||
| 99.1 | ||||||||
| 99.2 | ||||||||
| 101.INS | XBRL instance document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |||||||
| 101.SCH | Inline XBRL taxonomy extension schema. | |||||||
| 101.CAL | Inline XBRL taxonomy extension calculation linkbase. | |||||||
| 101.DEF | Inline XBRL taxonomy extension definition linkbase. | |||||||
| 101.LAB | Inline XBRL taxonomy extension label linkbase. | |||||||
| 101.PRE | Inline XBRL taxonomy extension presentation. | |||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |||||||
Exhibit 99.1
OpenText Reports Fourth Quarter and Fiscal Year 2022 Financial Results
Record Total Revenues, Annual Cloud Revenues and Annual Recurring Revenues
Fiscal 2022 Annual Highlights Y/Y
Total Revenues (in millions) | Annual Recurring Revenues (in millions) | Cloud Revenues (in millions) | |||||||||||||||||||||
| Reported | Constant Currency | Reported | Constant Currency | Reported | Constant Currency | ||||||||||||||||||
| $3,494 | $3,533 | $2,866 | $2,892 | $1,535 | $1,545 | ||||||||||||||||||
| +3.2% | +4.3% | +4.5% | +5.5% | +9.1% | +9.8% | ||||||||||||||||||
Annual Recurring Revenues represent 82% of Total Revenues | |||||||||||||||||||||||
•Record Total revenues of $3.5 billion up 3.2% Y/Y or up 4.3% Y/Y in constant currency
•Record Annual recurring revenues of $2.9 billion, up 4.5% Y/Y or up 5.5% Y/Y in constant currency
•Record Cloud revenues of $1.5 billion up 9.1% Y/Y or up 9.8% in constant currency, becomes our largest revenue contributor
•Record FY’22 Enterprise cloud bookings(1) of $466 million
•Operating cash flows were $982 million and free cash flows(1) were $889 million, up 9.4% Y/Y
•GAAP-based net income of $397 million, up 27.8% Y/Y, margin of 11.4%, up 220 basis points Y/Y
•Adjusted EBITDA(1) of $1.3 billion, margin of 36.2% while making key investments in cloud, edge and security
•Record capital returns of $415 million via dividends and share repurchases
•GAAP-based diluted earnings per share (EPS) of $1.46, Non-GAAP diluted EPS of $3.22
•Quarterly cash dividend increased by 10%
Fiscal 2022 Fourth Quarter Highlights
Total Revenues (in millions) | Annual Recurring Revenues (in millions) | Cloud Revenues (in millions) | |||||||||||||||||||||
| Reported | Constant Currency | Reported | Constant Currency | Reported | Constant Currency | ||||||||||||||||||
| $902 | $935 | $740 | $762 | $412 | $420 | ||||||||||||||||||
| +1.0% | +4.7% | +6.6% | +9.8% | +14.3% | +16.6% | ||||||||||||||||||
Annual Recurring Revenues represent 82% of Total Revenues | |||||||||||||||||||||||
•Total revenues of $902 million, up 1.0% Y/Y or up 4.7% in constant currency
•Annual recurring revenues of $740 million, up 6.6% Y/Y or up 9.8% in constant currency
•Cloud revenues of $412 million, up 14.3% Y/Y or up 16.6% in constant currency
•Operating cash flows were $252 million and free cash flows(1) were $214 million
•GAAP-based net income of $102 million, down 43.6% Y/Y, margin of 11.3%, down 900 basis points Y/Y
•Adjusted EBITDA(2) of $314 million, margin of 34.8%
•GAAP-based diluted earnings per share (EPS) of $0.38, Non-GAAP diluted EPS(1) of $0.80
•During the quarter, the Company repurchased and cancelled 1.0 million shares for $41 million under our share repurchase plans
1
Waterloo, ON, August 4, 2022 - Open Text Corporation (NASDAQ: OTEX), (TSX: OTEX), today announced its financial results for the fourth quarter and year ended June 30, 2022.
“Our strong fourth quarter and year-end results reflect customers’ accelerating journey to the OpenText Cloud,” said Mark J. Barrenechea, OpenText CEO & CTO. “In Fiscal 2022, OpenText delivered a record $3.5 billion of total revenues, led by record cloud revenues and cloud bookings. Fiscal 2022 annual recurring revenues reached record $2.9 billion, representing 82% of total revenues.”
“OpenText is more relevant than ever before as we help customers build and own their digital fabrics to transform their organizations and do more with less,” added Mr. Barrenechea. “Through our recently unveiled Project Titanium, we have taken a massive step forward in strengthening the OpenText Cloud as a foundation of modern work, digital supply chains, customer experiences and secure computing. OpenText is ready for all economic scenarios, and our outlook for Fiscal 2023 focuses on continued cloud and free cash flow growth.”
“Let me thank our entire team for their amazing efforts to keep one another safe and well while delivering outstanding service to our customers. The team continues to raise their game each quarter amidst a dynamic environment.”
“OpenText delivered an exceptional year,” said Madhu Ranganathan, OpenText EVP, CFO. “Our team delivered a solid Fiscal 2022 with adjusted EBITDA of $1.3 billion and strong free cash flows of $889 million. With approximately $1.7 billion in cash as of June 30, 2022 and a net leverage ratio of 2.0x, our balance sheet and liquidity position remain strong. Our strategic investments in product innovation and go-to-market initiatives continue to position us well to win in the cloud.”
(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, excluding the impact of Carbonite and Zix.
(2) Please see Note 2 “Use of Non-GAAP Financial Measures” to the consolidated financial statements below.
Financial Highlights for Fiscal 2022 and Q4 with Year Over Year Comparisons
Summary of Annual Results | ||||||||||||||||||||||||||
| (In millions, except per share data) | FY'22 | FY'21 | $ Change | % Change | FY'22 in CC* | % Change in CC* | ||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||
| Cloud services and subscriptions | $1,535.0 | $1,407.4 | $127.6 | 9.1 | % | $1,544.7 | 9.8 | % | ||||||||||||||||||
| Customer support | 1,331.0 | 1,334.1 | ($3.1) | (0.2) | % | 1,347.3 | 1.0 | % | ||||||||||||||||||
| Total annual recurring revenues** | $2,866.0 | $2,741.5 | $124.5 | 4.5 | % | $2,892.0 | 5.5 | % | ||||||||||||||||||
| License | 358.4 | 384.7 | ($26.4) | (6.9) | % | 367.0 | (4.6) | % | ||||||||||||||||||
| Professional service and other | 269.5 | 259.9 | $9.6 | 3.7 | % | 274.3 | 5.5 | % | ||||||||||||||||||
Total revenues | $3,493.8 | $3,386.1 | $107.7 | 3.2 | % | $3,533.3 | 4.3 | % | ||||||||||||||||||
| GAAP-based operating income | $ | 644.8 | $740.9 | ($96.1) | (13.0) | % | N/A | N/A | ||||||||||||||||||
Non-GAAP-based operating income (1) | $1,176.9 | $1,230.0 | ($53.0) | (4.3) | % | $1,199.9 | (2.4) | % | ||||||||||||||||||
| GAAP-based net income attributable to OpenText | $397.1 | $310.7 | $86.4 | 27.8 | % | N/A | N/A | |||||||||||||||||||
| GAAP-based EPS, diluted | $1.46 | $1.14 | $0.32 | 28.1 | % | N/A | N/A | |||||||||||||||||||
Non-GAAP-based EPS, diluted (1)(2) | $3.22 | $3.39 | ($0.17) | (5.0) | % | $3.35 | (1.2) | % | ||||||||||||||||||
Adjusted EBITDA (1) | $1,265.0 | $1,315.0 | ($50.0) | (3.8) | % | $1,288.1 | (2.1) | % | ||||||||||||||||||
| Operating cash flows | $981.8 | $876.1 | $105.7 | 12.1 | % | N/A | N/A | |||||||||||||||||||
Free cash flows (1) | $888.7 | $812.4 | $76.3 | 9.4 | % | N/A | N/A | |||||||||||||||||||
2
Summary of Quarterly Results | ||||||||||||||||||||||||||
| (In millions, except per share data) | Q4 FY'22 | Q4 FY'21 | $ Change | % Change | Q4 FY'22 in CC* | % Change in CC* | ||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||
| Cloud services and subscriptions | $411.6 | $360.2 | $51.4 | 14.3 | % | $420.0 | 16.6 | % | ||||||||||||||||||
| Customer support | 328.3 | 334.3 | ($5.9) | (1.8) | % | 342.3 | 2.4 | % | ||||||||||||||||||
| Total annual recurring revenues** | $739.9 | $694.4 | $45.5 | 6.6 | % | $762.2 | 9.8 | % | ||||||||||||||||||
| License | 94.7 | 132.5 | ($37.9) | (28.6) | % | 101.3 | (23.6) | % | ||||||||||||||||||
| Professional service and other | 67.8 | 66.6 | $1.3 | 1.9 | % | 71.9 | 7.9 | % | ||||||||||||||||||
Total revenues | $902.5 | $893.5 | $8.9 | 1.0 | % | $935.4 | 4.7 | % | ||||||||||||||||||
| GAAP-based operating income | $137.6 | $171.7 | ($34.1) | (19.9) | % | N/A | N/A | |||||||||||||||||||
Non-GAAP-based operating income (1) | $291.0 | $293.9 | ($2.9) | (1.0) | % | $303.9 | 3.4 | % | ||||||||||||||||||
| GAAP-based net income attributable to OpenText | $102.2 | $181.3 | ($79.1) | (43.6) | % | N/A | N/A | |||||||||||||||||||
| GAAP-based EPS, diluted | $0.38 | $0.66 | ($0.28) | (42.4) | % | N/A | N/A | |||||||||||||||||||
Non-GAAP-based EPS, diluted (1)(2) | $0.80 | $0.80 | $— | — | % | $0.89 | 11.3 | % | ||||||||||||||||||
Adjusted EBITDA (1) | $313.6 | $314.8 | ($1.2) | (0.4) | % | $326.7 | 3.8 | % | ||||||||||||||||||
| Operating cash flows | $251.9 | $296.2 | ($44.2) | (14.9) | % | N/A | N/A | |||||||||||||||||||
Free cash flows (1) | $213.8 | $268.8 | ($55.0) | (20.5) | % | 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.
Dividend and Share Repurchases
As part of our quarterly, non-cumulative cash dividend program, the Board declared on August 3, 2022, a cash dividend increase of 10% to $0.24299 per common share. The record date for this dividend is September 2, 2022 and the payment date is September 23, 2022. OpenText believes strongly in returning value to its shareholders and intends to maintain its dividend program. Any future declarations of dividends and the establishment of future record and payment dates are all subject to the final determination and discretion of the Board of Directors.
Quarterly Business Highlights
•Key customer wins in the quarter include: Carl Zeiss AG, Citgo Petroleum Corporation, Close Brothers, Evermark, Hydro Quebec, Legal Aid Western Australia, MUFG Bank, One World Apparel, Phillips Lytle, Region Skane, Salt River Project, Sysmex
•OpenText accelerates cloud investments with Project Titanium
•OpenText powers the Information Advantage with Cloud Editions 22.2
•OpenText extends reach of its Information Management solutions in DACH region through partnership with Scheer Group
•OpenText showcases Business-to-Anything integration at Gartner® Supply Chain Symposium/Xpo 2022
•OpenText unveils new threat intelligence technology and other security advancements at RSA Conference
•OpenText partners with Girl Scouts to help members become cyber resilient
•OpenText World EMEA 2022 showcases innovations enabling the Information Advantage
3
Summary of Annual Results | ||||||||||||||
FY'22 | FY'21 | % Change | ||||||||||||
| Revenue (millions) | $3,493.8 | $3,386.1 | 3.2 | % | ||||||||||
| GAAP-based gross margin | 69.6 | % | 69.4 | % | 15 | bps | ||||||||
Non-GAAP-based gross margin (1) | 75.6 | % | 76.1 | % | (54) | bps | ||||||||
| GAAP-based EPS, diluted | $1.46 | $1.14 | 28.1 | % | ||||||||||
Non-GAAP-based EPS, diluted (1)(2) | $3.22 | $3.39 | (5.0) | % | ||||||||||
Summary of Quarterly Results | |||||||||||||||||||||||
Q4 FY'22 | Q3 FY'22 | Q4 FY'21 | % Change (Q4 FY'22 vs Q3 FY'22) | % Change (Q4 FY'22 vs Q4 FY'21) | |||||||||||||||||||
| Revenue (millions) | $902.5 | $882.3 | $893.5 | 2.3 | % | 1.0 | % | ||||||||||||||||
| GAAP-based gross margin | 70.2 | % | 68.9 | % | 69.6 | % | 130 | bps | 60 | bps | |||||||||||||
Non-GAAP-based gross margin (1) | 75.9 | % | 74.5 | % | 75.8 | % | 140 | bps | 10 | bps | |||||||||||||
| GAAP-based EPS, diluted | $0.38 | $0.28 | $0.66 | 35.7 | % | (42.4) | % | ||||||||||||||||
Non-GAAP-based EPS, diluted (1)(2) | $0.80 | $0.70 | $0.80 | 14.3 | % | — | % | ||||||||||||||||
(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.
Conference Call Information
OpenText posted our quarterly shareholder letter and investor presentation on its Investor Relations website at http://investors.opentext.com and invites the public to listen to the earnings conference call today at 5:00 p.m. ET (2:00 p.m. PT) by dialing 1-800-319-4610 (toll-free) or +1-604-638-5340 (international). Please dial-in 10 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/investor-events-and-presentations.
A replay of the call will be available beginning August 4, 2022 at 7:00 p.m. ET through 11:59 p.m. on August 18, 2022 and can be accessed by dialing 1-855-669-9658 (toll-free) or +1-604-674-8052 (international) and using passcode 9157 followed by the number sign.
Please see below note (2) for a reconciliation of U.S. GAAP-based financial measures used in this press release to Non-GAAP-based financial measures.
About OpenText
OpenText, The Information Company™, enables organizations to gain insight through market leading information management solutions, powered by OpenText Cloud Editions. For more information about OpenText (NASDAQ: OTEX, TSX: OTEX) visit 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 our fiscal year ending June 30, 2023 (Fiscal 2023) on growth, future cloud growth and market share gains, future organic growth initiatives and deployment of capital, intention to maintain a dividend program, potential share repurchases pursuant to its share repurchase plans, future tax rates, new platform and product offerings and associated benefits to customers, scaling OpenText, and other matters, which may contain words such as “anticipates”, “expects”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “may”, “could”, “would”, “might”, “will” and variations of these words or similar expressions 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,
4
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 and uncertainties such as those relating to the duration and severity of the COVID-19 pandemic, including any new strains or resurgences, as well as our ability to develop, protect and maintain our intellectual property and proprietary technology and to operate without infringing on the proprietary rights of others. 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.
For more information, please contact:
Harry E. Blount
Senior Vice President, Global Head of Investor Relations
Open Text Corporation
415-963-0825
Copyright ©2022 Open Text. OpenText is a trademark or registered trademark of Open Text. 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. All rights reserved. For more information, visit: http://www.opentext.com/who-we-are/copyright-information.
5
OPEN TEXT CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars, except share data)
| June 30, 2022 | June 30, 2021 | ||||||||||
| ASSETS | |||||||||||
| Cash and cash equivalents | $ | 1,693,741 | $ | 1,607,306 | |||||||
Accounts receivable trade, net of allowance for credit losses of $16,473 as of June 30, 2022 and $22,151 as of June 30, 2021 | 426,652 | 438,547 | |||||||||
| Contract assets | 26,167 | 25,344 | |||||||||
| Income taxes recoverable | 18,255 | 32,312 | |||||||||
| Prepaid expenses and other current assets | 120,552 | 98,551 | |||||||||
| Total current assets | 2,285,367 | 2,202,060 | |||||||||
| Property and equipment | 244,709 | 233,595 | |||||||||
| Operating lease right of use assets | 198,132 | 234,532 | |||||||||
| Long-term contract assets | 19,719 | 19,222 | |||||||||
| Goodwill | 5,244,653 | 4,691,673 | |||||||||
| Acquired intangible assets | 1,075,208 | 1,187,260 | |||||||||
| Deferred tax assets | 810,154 | 796,738 | |||||||||
| Other assets | 256,987 | 208,894 | |||||||||
| Long-term income taxes recoverable | 44,044 | 35,362 | |||||||||
| Total assets | $ | 10,178,973 | $ | 9,609,336 | |||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable and accrued liabilities | $ | 448,607 | $ | 423,592 | |||||||
| Current portion of long-term debt | 10,000 | 10,000 | |||||||||
| Operating lease liabilities | 56,380 | 58,315 | |||||||||
| Deferred revenues | 902,202 | 852,629 | |||||||||
| Income taxes payable | 51,069 | 17,368 | |||||||||
| Total current liabilities | 1,468,258 | 1,361,904 | |||||||||
| Long-term liabilities: | |||||||||||
| Accrued liabilities | 18,208 | 28,830 | |||||||||
| Pension liability | 60,951 | 74,511 | |||||||||
| Long-term debt | 4,209,567 | 3,578,859 | |||||||||
| Long-term operating lease liabilities | 198,695 | 224,453 | |||||||||
| Long-term deferred revenues | 91,144 | 98,989 | |||||||||
| Long-term income taxes payable | 34,003 | 34,113 | |||||||||
| Deferred tax liabilities | 65,887 | 108,224 | |||||||||
| Total long-term liabilities | 4,678,455 | 4,147,979 | |||||||||
| Shareholders' equity: | |||||||||||
| Share capital and additional paid-in capital | |||||||||||
269,522,639 and 271,540,755 Common Shares issued and outstanding at June 30, 2022 and June 30, 2021, respectively; authorized Common Shares: unlimited | 2,038,674 | 1,947,764 | |||||||||
| Accumulated other comprehensive income (loss) | (7,659) | 66,238 | |||||||||
| Retained earnings | 2,160,069 | 2,153,326 | |||||||||
Treasury stock, at cost (3,706,420 and 1,567,664 shares at June 30, 2022 and June 30, 2021, respectively) | (159,966) | (69,386) | |||||||||
| Total OpenText shareholders' equity | 4,031,118 | 4,097,942 | |||||||||
| Non-controlling interests | 1,142 | 1,511 | |||||||||
| Total shareholders' equity | 4,032,260 | 4,099,453 | |||||||||
| Total liabilities and shareholders' equity | $ | 10,178,973 | $ | 9,609,336 | |||||||
6
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, | |||||||||||
| 2022 | 2021 | ||||||||||
| Revenues: | |||||||||||
| Cloud services and subscriptions | $ | 411,595 | $ | 360,160 | |||||||
| Customer support | 328,339 | 334,256 | |||||||||
| License | 94,688 | 132,541 | |||||||||
| Professional service and other | 67,832 | 66,570 | |||||||||
| Total revenues | 902,454 | 893,527 | |||||||||
| Cost of revenues: | |||||||||||
| Cloud services and subscriptions | 133,785 | 127,583 | |||||||||
| Customer support | 30,571 | 32,938 | |||||||||
| License | 2,595 | 4,315 | |||||||||
| Professional service and other | 55,436 | 53,662 | |||||||||
| Amortization of acquired technology-based intangible assets | 46,274 | 53,215 | |||||||||
| Total cost of revenues | 268,661 | 271,713 | |||||||||
| Gross profit | 633,793 | 621,814 | |||||||||
| Operating expenses: | |||||||||||
| Research and development | 118,931 | 117,235 | |||||||||
| Sales and marketing | 185,985 | 183,237 | |||||||||
| General and administrative | 85,958 | 73,019 | |||||||||
| Depreciation | 22,706 | 21,021 | |||||||||
| Amortization of acquired customer-based intangible assets | 56,341 | 52,469 | |||||||||
| Special charges (recoveries) | 26,281 | 3,152 | |||||||||
| Total operating expenses | 496,202 | 450,133 | |||||||||
| Income from operations | 137,591 | 171,681 | |||||||||
| Other income (expense), net | (19) | 45,017 | |||||||||
| Interest and other related expense, net | (40,342) | (37,550) | |||||||||
| Income before income taxes | 97,230 | 179,148 | |||||||||
| Provision for income taxes | (5,005) | (2,215) | |||||||||
| Net income for the period | $ | 102,235 | $ | 181,363 | |||||||
| Net (income) loss attributable to non-controlling interests | (39) | (80) | |||||||||
| Net income attributable to OpenText | $ | 102,196 | $ | 181,283 | |||||||
| Earnings per share—basic attributable to OpenText | $ | 0.38 | $ | 0.66 | |||||||
| Earnings per share—diluted attributable to OpenText | $ | 0.38 | $ | 0.66 | |||||||
Weighted average number of Common Shares outstanding—basic (in '000's) | 270,152 | 272,892 | |||||||||
Weighted average number of Common Shares outstanding—diluted (in '000's) | 270,394 | 273,981 | |||||||||
7
OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands of U.S. dollars, except share and per share data)
| Year Ended June 30, | |||||||||||||||||
| 2022 | 2021 | 2020 | |||||||||||||||
| Revenues: | |||||||||||||||||
| Cloud services and subscriptions | $ | 1,535,017 | $ | 1,407,445 | $ | 1,157,686 | |||||||||||
| Customer support | 1,330,965 | 1,334,062 | 1,275,586 | ||||||||||||||
| License | 358,351 | 384,711 | 402,851 | ||||||||||||||
| Professional service and other | 269,511 | 259,897 | 273,613 | ||||||||||||||
| Total revenues | 3,493,844 | 3,386,115 | 3,109,736 | ||||||||||||||
| Cost of revenues: | |||||||||||||||||
| Cloud services and subscriptions | 511,713 | 481,818 | 449,940 | ||||||||||||||
| Customer support | 121,485 | 122,753 | 123,894 | ||||||||||||||
| License | 13,501 | 13,916 | 11,321 | ||||||||||||||
| Professional service and other | 216,895 | 197,183 | 212,903 | ||||||||||||||
| Amortization of acquired technology-based intangible assets | 198,607 | 218,796 | 205,717 | ||||||||||||||
| Total cost of revenues | 1,062,201 | 1,034,466 | 1,003,775 | ||||||||||||||
| Gross profit | 2,431,643 | 2,351,649 | 2,105,961 | ||||||||||||||
| Operating expenses: | |||||||||||||||||
| Research and development | 440,448 | 421,447 | 370,411 | ||||||||||||||
| Sales and marketing | 677,118 | 622,221 | 585,044 | ||||||||||||||
| General and administrative | 317,085 | 263,521 | 237,532 | ||||||||||||||
| Depreciation | 88,241 | 85,265 | 89,458 | ||||||||||||||
| Amortization of acquired customer-based intangible assets | 217,105 | 216,544 | 219,559 | ||||||||||||||
| Special charges (recoveries) | 46,873 | 1,748 | 100,428 | ||||||||||||||
| Total operating expenses | 1,786,870 | 1,610,746 | 1,602,432 | ||||||||||||||
| Income from operations | 644,773 | 740,903 | 503,529 | ||||||||||||||
| Other income (expense), net | 29,118 | 61,434 | (11,946) | ||||||||||||||
| Interest and other related expense, net | (157,880) | (151,567) | (146,378) | ||||||||||||||
| Income before income taxes | 516,011 | 650,770 | 345,205 | ||||||||||||||
| Provision for (recovery of) income taxes | 118,752 | 339,906 | 110,837 | ||||||||||||||
| Net income | $ | 397,259 | $ | 310,864 | $ | 234,368 | |||||||||||
| Net loss attributable to non-controlling interests | (169) | (192) | (143) | ||||||||||||||
| Net income attributable to OpenText | $ | 397,090 | $ | 310,672 | $ | 234,225 | |||||||||||
| Earnings per share—basic attributable to OpenText | $ | 1.46 | $ | 1.14 | $ | 0.86 | |||||||||||
| Earnings per share—diluted attributable to OpenText | $ | 1.46 | $ | 1.14 | $ | 0.86 | |||||||||||
Weighted average number of Common Shares outstanding—basic (in '000's) | 271,271 | 272,533 | 270,847 | ||||||||||||||
Weighted average number of Common Shares outstanding—diluted (in '000's) | 271,909 | 273,479 | 271,817 | ||||||||||||||
8
OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands of U.S. dollars)
| Year Ended June 30, | |||||||||||||||||
| 2022 | 2021 | 2020 | |||||||||||||||
| Net income | $ | 397,259 | $ | 310,864 | $ | 234,368 | |||||||||||
| Other comprehensive income (loss)—net of tax: | |||||||||||||||||
| Net foreign currency translation adjustments | (78,724) | 42,440 | (7,784) | ||||||||||||||
| Unrealized gain (loss) on cash flow hedges: | |||||||||||||||||
Unrealized gain (loss) - net of tax expense (recovery) effect of ($671), $1,532, and ($599) for the year ended June 30, 2022, 2021 and 2020, respectively | (1,859) | 4,246 | (1,662) | ||||||||||||||
(Gain) loss reclassified into net income - net of tax (expense) recovery effect of $134, ($1,182) and $355 for the year ended June 30, 2022, 2021 and 2020, respectively | 373 | (3,280) | 985 | ||||||||||||||
| Actuarial gain (loss) relating to defined benefit pension plans: | |||||||||||||||||
Actuarial gain (loss) - net of tax expense (recovery) effect of $1,866, $990 and $1,219 for the year ended June 30, 2022, 2021 and 2020, respectively | 5,595 | 3,987 | 1,245 | ||||||||||||||
Amortization of actuarial (gain) loss into net income - net of tax (expense) recovery effect of $290, $379 and $520 for the year ended June 30, 2022, 2021 and 2020, respectively | 718 | 1,020 | 917 | ||||||||||||||
| Total other comprehensive income (loss) net | (73,897) | 48,413 | (6,299) | ||||||||||||||
| Total comprehensive income | 323,362 | 359,277 | 228,069 | ||||||||||||||
Comprehensive (income) loss attributable to non-controlling interests | (169) | (192) | (143) | ||||||||||||||
| Total comprehensive income attributable to OpenText | $ | 323,193 | $ | 359,085 | $ | 227,926 | |||||||||||
9
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, 2019 | 269,834 | $ | 1,774,214 | (803) | $ | (28,766) | $ | 2,113,883 | $ | 24,124 | $ | 1,215 | $ | 3,884,670 | |||||||||||||||||||||||||||||||||
| Issuance of Common Shares | |||||||||||||||||||||||||||||||||||||||||||||||
| Under employee stock option plans | 1,530 | 41,282 | — | — | — | — | — | 41,282 | |||||||||||||||||||||||||||||||||||||||
| Under employee stock purchase plans | 499 | 17,757 | — | — | — | — | — | 17,757 | |||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | 29,532 | — | — | — | — | — | 29,532 | |||||||||||||||||||||||||||||||||||||||
| Purchase of treasury stock | — | — | (300) | (12,424) | — | — | — | (12,424) | |||||||||||||||||||||||||||||||||||||||
| Issuance of treasury stock | — | (11,008) | 481 | 17,582 | — | — | — | 6,574 | |||||||||||||||||||||||||||||||||||||||
| Dividends declared ($0.6984 per Common Share) | — | — | — | — | (188,712) | — | — | (188,712) | |||||||||||||||||||||||||||||||||||||||
| Other comprehensive income - net | — | — | — | — | — | (6,299) | — | (6,299) | |||||||||||||||||||||||||||||||||||||||
| Non-controlling interest | — | — | — | — | — | — | (39) | (39) | |||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | 234,225 | — | 143 | 234,368 | |||||||||||||||||||||||||||||||||||||||
| 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 ($0.7770 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 income (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 | |||||||||||||||||||||||||||||||||
10
OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
(unaudited)
| Three Months Ended June 30, | |||||||||||
| 2022 | 2021 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income for the period | $ | 102,235 | $ | 181,363 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization of intangible assets | 125,321 | 126,705 | |||||||||
| Share-based compensation expense | 24,464 | 13,350 | |||||||||
| Pension expense | 1,723 | 1,946 | |||||||||
| Amortization of debt issuance costs | 1,486 | 1,153 | |||||||||
| Write off of right of use assets | 17,707 | — | |||||||||
| Loss on sale and write down of property and equipment | 198 | 792 | |||||||||
| Deferred taxes | (79,420) | (7,805) | |||||||||
| Share in net (income) loss of equity investees | 401 | (42,877) | |||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | 13,413 | (26,118) | |||||||||
| Contract assets | (10,758) | (10,298) | |||||||||
| Prepaid expenses and other current assets | 1,768 | 40,261 | |||||||||
| Income taxes | 45,824 | (23,169) | |||||||||
| Accounts payable and accrued liabilities | 41,561 | 53,415 | |||||||||
| Deferred revenue | (30,878) | (23,305) | |||||||||
| Other assets | 771 | 11,149 | |||||||||
| Operating lease assets and liabilities, net | (3,876) | (373) | |||||||||
| Net cash provided by operating activities | 251,940 | 296,189 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Additions of property and equipment | (38,172) | (27,408) | |||||||||
| Purchase of Bricata Inc. | 174 | — | |||||||||
| Purchase of Dynamic Solutions Group Inc. | — | (600) | |||||||||
| Other investing activities | — | (2,550) | |||||||||
| Net cash used in investing activities | (37,998) | (30,558) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from issuance of Common Shares from exercise of stock options and ESPP | 10,738 | 34,287 | |||||||||
| Repayment of long-term debt and Revolver | (2,500) | (2,500) | |||||||||
| Debt issuance costs | — | — | |||||||||
| Repurchase of Common Shares | (40,869) | (119,105) | |||||||||
| Purchase of treasury stock | (35,933) | — | |||||||||
| Payments of dividends to shareholders | (59,042) | (54,374) | |||||||||
| Net cash provided by (used in) financing activities | (127,606) | (141,692) | |||||||||
| Foreign exchange gain (loss) on cash held in foreign currencies | (26,276) | 7,181 | |||||||||
| Increase (decrease) in cash, cash equivalents and restricted cash during the period | 60,060 | 131,120 | |||||||||
| Cash, cash equivalents and restricted cash at beginning of the period | 1,635,851 | 1,478,680 | |||||||||
| Cash, cash equivalents and restricted cash at end of the period | $ | 1,695,911 | $ | 1,609,800 | |||||||
11
OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
| Reconciliation of cash, cash equivalents and restricted cash: | June 30, 2022 | June 30, 2021 | |||||||||
| Cash and cash equivalents | $ | 1,693,741 | $ | 1,607,306 | |||||||
Restricted cash (1) | 2,170 | 2,494 | |||||||||
| Total cash, cash equivalents and restricted cash | $ | 1,695,911 | $ | 1,609,800 | |||||||
(1) Restricted cash is classified under the Prepaid expenses and other current assets and Other assets line items on the Consolidated Balance Sheets. | |||||||||||
12
OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
| Year Ended June 30, | |||||||||||||||||
| 2022 | 2021 | 2020 | |||||||||||||||
| Cash flows from operating activities: | |||||||||||||||||
| Net income for the period | $ | 397,259 | $ | 310,864 | $ | 234,368 | |||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||||
| Depreciation and amortization of intangible assets | 503,953 | 520,605 | 514,734 | ||||||||||||||
| Share-based compensation expense | 69,556 | 51,969 | 29,532 | ||||||||||||||
| Pension expense | 6,606 | 6,616 | 5,802 | ||||||||||||||
| Amortization of debt issuance costs | 5,422 | 4,548 | 4,633 | ||||||||||||||
| Write off of right of use assets | 17,707 | — | 36,864 | ||||||||||||||
| Loss on extinguishment of debt | 27,413 | — | 17,854 | ||||||||||||||
| Loss on sale and write down of property and equipment | 294 | 2,771 | 9,714 | ||||||||||||||
| Deferred taxes | (36,088) | 73,039 | 51,388 | ||||||||||||||
| Share in net (income) loss of equity investees | (58,702) | (62,897) | (8,700) | ||||||||||||||
| Changes in operating assets and liabilities: | |||||||||||||||||
| Accounts receivable | 81,841 | 60,954 | 84,499 | ||||||||||||||
| Contract assets | (37,966) | (39,333) | (40,301) | ||||||||||||||
| Prepaid expenses and other current assets | (13,954) | 37,733 | (6,897) | ||||||||||||||
| Income taxes | 34,589 | (140,763) | (35,086) | ||||||||||||||
| Accounts payable and accrued liabilities | (24,177) | 26,088 | 30,613 | ||||||||||||||
| Deferred revenue | (5,236) | 39,295 | 25,306 | ||||||||||||||
| Other assets | 17,297 | 11,914 | 1,127 | ||||||||||||||
| Operating lease assets and liabilities, net | (4,004) | (27,283) | (914) | ||||||||||||||
| Net cash provided by operating activities | 981,810 | 876,120 | 954,536 | ||||||||||||||
| Cash flows from investing activities: | |||||||||||||||||
| Additions of property and equipment | (93,109) | (63,675) | (72,709) | ||||||||||||||
| Purchase of Zix Corporation, net of cash acquired | (856,175) | — | — | ||||||||||||||
| Purchase of Bricata Inc. | (17,753) | — | — | ||||||||||||||
| Purchase of XMedius | — | 444 | (73,335) | ||||||||||||||
| Purchase of Carbonite, Inc., net of cash and restricted cash acquired | — | — | (1,305,097) | ||||||||||||||
| Purchase of Dynamic Solutions Group Inc. | — | (971) | (4,149) | ||||||||||||||
| Other investing activities | (3,922) | (4,568) | (14,127) | ||||||||||||||
| Net cash used in investing activities | (970,959) | (68,770) | (1,469,417) | ||||||||||||||
| Cash flows from financing activities: | |||||||||||||||||
| Proceeds from issuance of Common Shares from exercise of stock options and ESPP | 67,215 | 80,067 | 66,600 | ||||||||||||||
| Proceeds from long-term debt and Revolver | 1,500,000 | — | 3,150,000 | ||||||||||||||
| Repayment of long-term debt and Revolver | (860,000) | (610,000) | (1,713,631) | ||||||||||||||
| Debt extinguishment costs | (24,969) | — | (11,248) | ||||||||||||||
| Debt issuance costs | (17,159) | — | (21,806) | ||||||||||||||
| Repurchase of Common Shares | (176,987) | (119,105) | — | ||||||||||||||
| Purchase of treasury stock | (111,593) | (64,847) | (12,424) | ||||||||||||||
| Distribution to non-controlling interest | (396) | — | — | ||||||||||||||
| Payments of dividends to shareholders | (237,655) | (210,662) | (188,712) | ||||||||||||||
| Net cash provided by (used in) financing activities | 138,456 | (924,547) | 1,268,779 | ||||||||||||||
| Foreign exchange gain (loss) on cash held in foreign currencies | (63,196) | 29,734 | (178) | ||||||||||||||
| Increase (decrease) in cash, cash equivalents and restricted cash during the period | 86,111 | (87,463) | 753,720 | ||||||||||||||
| Cash, cash equivalents and restricted cash at beginning of the period | 1,609,800 | 1,697,263 | 943,543 | ||||||||||||||
| Cash, cash equivalents and restricted cash at end of the period | $ | 1,695,911 | $ | 1,609,800 | $ | 1,697,263 | |||||||||||
13
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, 2022 | June 30, 2021 | June 30, 2020 | ||||||||||||||
| Cash and cash equivalents | $ | 1,693,741 | $ | 1,607,306 | $ | 1,692,850 | |||||||||||
Restricted cash (1) | 2,170 | 2,494 | 4,413 | ||||||||||||||
| Total cash, cash equivalents and restricted cash | $ | 1,695,911 | $ | 1,609,800 | $ | 1,697,263 | |||||||||||
(1) Restricted cash is classified under the Prepaid expenses and other current assets and Other assets line items on the Consolidated Balance Sheets. | |||||||||||||||||
14
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 or earnings 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, 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 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.
The following charts provide unaudited reconciliations of U.S. GAAP-based financial measures to Non-GAAP-based financial measures for the following periods presented.
15
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the three months ended June 30, 2022 (In thousands, except for per share data) | ||||||||||||||||||||
| Three Months Ended June 30, 2022 | ||||||||||||||||||||
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 | $ | 133,785 | $ | (2,213) | (1) | $ | 131,572 | |||||||||||||
| Customer support | 30,571 | (768) | (1) | 29,803 | ||||||||||||||||
| Professional service and other | 55,436 | (1,465) | (1) | 53,971 | ||||||||||||||||
| Amortization of acquired technology-based intangible assets | 46,274 | (46,274) | (2) | — | ||||||||||||||||
| GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%) | 633,793 | 70.2% | 50,720 | (3) | 684,513 | 75.9% | ||||||||||||||
| Operating expenses | ||||||||||||||||||||
| Research and development | 118,931 | (7,186) | (1) | 111,745 | ||||||||||||||||
| Sales and marketing | 185,985 | (7,251) | (1) | 178,734 | ||||||||||||||||
| General and administrative | 85,958 | (5,582) | (1) | 80,376 | ||||||||||||||||
| Amortization of acquired customer-based intangible assets | 56,341 | (56,341) | (2) | — | ||||||||||||||||
| Special charges (recoveries) | 26,281 | (26,281) | (4) | — | ||||||||||||||||
| GAAP-based income from operations / Non-GAAP-based income from operations | 137,591 | 153,361 | (5) | 290,952 | ||||||||||||||||
| Other income (expense), net | (19) | 19 | (6) | — | ||||||||||||||||
| Provision for income taxes | (5,005) | 40,090 | (7) | 35,085 | ||||||||||||||||
| GAAP-based net income / Non-GAAP-based net income, attributable to OpenText | 102,196 | 113,290 | (8) | 215,486 | ||||||||||||||||
| GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText | $ | 0.38 | $ | 0.42 | (8) | $ | 0.80 | |||||||||||||
(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 5% 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
16
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:
| Three Months Ended June 30, 2022 | ||||||||
| Per share diluted | ||||||||
| GAAP-based net income, attributable to OpenText | $ | 102,196 | $ | 0.38 | ||||
| Add: | ||||||||
| Amortization | 102,615 | 0.38 | ||||||
| Share-based compensation | 24,465 | 0.09 | ||||||
| Special charges (recoveries) | 26,281 | 0.10 | ||||||
| Other (income) expense, net | 19 | — | ||||||
| GAAP-based provision for income taxes | (5,005) | (0.02) | ||||||
| Non-GAAP-based provision for income taxes | (35,085) | (0.13) | ||||||
| Non-GAAP-based net income, attributable to OpenText | $ | 215,486 | $ | 0.80 | ||||
Reconciliation of Adjusted EBITDA
| Three Months Ended June 30, 2022 | |||||
| GAAP-based net income, attributable to OpenText | $ | 102,196 | |||
| Add: | |||||
| Provision for income taxes | (5,005) | ||||
| Interest and other related expense, net | 40,342 | ||||
| Amortization of acquired technology-based intangible assets | 46,274 | ||||
| Amortization of acquired customer-based intangible assets | 56,341 | ||||
| Depreciation | 22,706 | ||||
| Share-based compensation | 24,464 | ||||
| Special charges (recoveries) | 26,281 | ||||
| Other (income) expense, net | 19 | ||||
| Adjusted EBITDA | $ | 313,618 | |||
| GAAP-based net income margin | 11.3 | % | |||
| Adjusted EBITDA margin | 34.8 | % | |||
Reconciliation of Free cash flows
| Three Months Ended June 30, 2022 | |||||
| GAAP-based cash flows provided by operating activities | $ | 251,940 | |||
| Add: | |||||
Capital expenditures (1) | (38,172) | ||||
| Free cash flows | $ | 213,768 | |||
(1) Defined as “Additions of property and equipment” in the Consolidated Statements of Cash Flows. | |||||
17
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the year ended June 30, 2022 (In thousands, except for per share data) | ||||||||||||||||||||
| Year Ended June 30, 2022 | ||||||||||||||||||||
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 | $ | 511,713 | $ | (5,285) | (1) | $ | 506,428 | |||||||||||||
| Customer support | 121,485 | (2,399) | (1) | 119,086 | ||||||||||||||||
| Professional service and other | 216,895 | (3,740) | (1) | 213,155 | ||||||||||||||||
| Amortization of acquired technology-based intangible assets | 198,607 | (198,607) | (2) | — | ||||||||||||||||
| GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%) | 2,431,643 | 69.6% | 210,031 | (3) | 2,641,674 | 75.6% | ||||||||||||||
| Operating expenses | ||||||||||||||||||||
| Research and development | 440,448 | (17,122) | (1) | 423,326 | ||||||||||||||||
| Sales and marketing | 677,118 | (22,628) | (1) | 654,490 | ||||||||||||||||
| General and administrative | 317,085 | (18,382) | (1) | 298,703 | ||||||||||||||||
| Amortization of acquired customer-based intangible assets | 217,105 | (217,105) | (2) | — | ||||||||||||||||
| Special charges (recoveries) | 46,873 | (46,873) | (4) | — | ||||||||||||||||
| GAAP-based income from operations / Non-GAAP-based income from operations | 644,773 | 532,141 | (5) | 1,176,914 | ||||||||||||||||
| Other income (expense), net | 29,118 | (29,118) | (6) | — | ||||||||||||||||
| Provision for income taxes | 118,752 | 23,913 | (7) | 142,665 | ||||||||||||||||
| GAAP-based net income / Non-GAAP-based net income, attributable to OpenText | 397,090 | 479,110 | (8) | 876,200 | ||||||||||||||||
| GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText | $ | 1.46 | $ | 1.76 | (8) | $ | 3.22 | |||||||||||||
(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 23% 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
18
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:
| Year Ended June 30, 2022 | ||||||||
| Per share diluted | ||||||||
| GAAP-based net income, attributable to OpenText | $ | 397,090 | $ | 1.46 | ||||
| Add: | ||||||||
| Amortization | 415,712 | 1.52 | ||||||
| Share-based compensation | 69,556 | 0.26 | ||||||
| Special charges (recoveries) | 46,873 | 0.17 | ||||||
| Other (income) expense, net | (29,118) | (0.11) | ||||||
| GAAP-based provision for income taxes | 118,752 | 0.44 | ||||||
| Non-GAAP-based provision for income taxes | (142,665) | (0.52) | ||||||
| Non-GAAP-based net income, attributable to OpenText | $ | 876,200 | $ | 3.22 | ||||
Reconciliation of Adjusted EBITDA
| Year Ended June 30, 2022 | |||||
| GAAP-based net income, attributable to OpenText | $ | 397,090 | |||
| Add: | |||||
| Provision for income taxes | 118,752 | ||||
| Interest and other related expense, net | 157,880 | ||||
| Amortization of acquired technology-based intangible assets | 198,607 | ||||
| Amortization of acquired customer-based intangible assets | 217,105 | ||||
| Depreciation | 88,241 | ||||
| Share-based compensation | 69,556 | ||||
| Special charges (recoveries) | 46,873 | ||||
| Other (income) expense, net | (29,118) | ||||
| Adjusted EBITDA | $ | 1,264,986 | |||
| GAAP-based net income margin | 11.4 | % | |||
| Adjusted EBITDA margin | 36.2 | % | |||
Reconciliation of Free cash flows
| Year Ended June 30, 2022 | |||||
| GAAP-based cash flows provided by operating activities | $ | 981,810 | |||
| Add: | |||||
Capital expenditures (1) | (93,109) | ||||
| Free cash flows | $ | 888,701 | |||
(1) Defined as “Additions of property and equipment” in the Consolidated Statements of Cash Flows. | |||||
19
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the three months ended March 31, 2022 (In thousands, except for per share data) | ||||||||||||||||||||
Three Months Ended March 31, 2022 | ||||||||||||||||||||
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 | $ | 136,020 | $ | (1,268) | (1) | $ | 134,752 | |||||||||||||
| Customer support | 31,763 | (501) | (1) | 31,262 | ||||||||||||||||
| Professional service and other | 56,693 | (907) | (1) | 55,786 | ||||||||||||||||
| Amortization of acquired technology-based intangible assets | 46,564 | (46,564) | (2) | — | ||||||||||||||||
| GAAP-based gross profit and gross margin (%) /Non-GAAP-based gross profit and gross margin (%) | 608,047 | 68.9% | 49,240 | (3) | 657,287 | 74.5% | ||||||||||||||
| Operating expenses | ||||||||||||||||||||
| Research and development | 117,730 | (4,350) | (1) | 113,380 | ||||||||||||||||
| Sales and marketing | 180,955 | (5,761) | (1) | 175,194 | ||||||||||||||||
| General and administrative | 88,137 | (3,961) | (1) | 84,176 | ||||||||||||||||
| Amortization of acquired customer-based intangible assets | 56,215 | (56,215) | (2) | — | ||||||||||||||||
| Special charges (recoveries) | 11,031 | (11,031) | (4) | — | ||||||||||||||||
| GAAP-based income from operations / Non-GAAP-based income from operations | 131,609 | 130,558 | (5) | 262,167 | ||||||||||||||||
| Other income (expense), net | 24,392 | (24,392) | (6) | — | ||||||||||||||||
| Provision for income taxes | 41,041 | (9,971) | (7) | 31,070 | ||||||||||||||||
| GAAP-based net income / Non-GAAP-based net income, attributable to OpenText | 74,681 | 116,137 | (8) | 190,818 | ||||||||||||||||
| GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText | $ | 0.28 | $ | 0.42 | (8) | $ | 0.70 | |||||||||||||
(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 35% 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-
20
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:
Three Months Ended March 31, 2022 | ||||||||
| Per share diluted | ||||||||
| GAAP-based net income, attributable to OpenText | $ | 74,681 | $ | 0.28 | ||||
| Add: | ||||||||
| Amortization | 102,779 | 0.38 | ||||||
| Share-based compensation | 16,748 | 0.06 | ||||||
| Special charges (recoveries) | 11,031 | 0.04 | ||||||
| Other (income) expense, net | (24,392) | (0.09) | ||||||
| GAAP-based provision for income taxes | 41,041 | 0.15 | ||||||
| Non-GAAP-based provision for income taxes | (31,070) | (0.12) | ||||||
| Non-GAAP-based net income, attributable to OpenText | $ | 190,818 | $ | 0.70 | ||||
Reconciliation of Adjusted EBITDA
Three Months Ended March 31, 2022 | |||||
| GAAP-based net income, attributable to OpenText | $ | 74,681 | |||
| Add: | |||||
| Provision for income taxes | 41,041 | ||||
| Interest and other related expense, net | 40,238 | ||||
| Amortization of acquired technology-based intangible assets | 46,564 | ||||
| Amortization of acquired customer-based intangible assets | 56,215 | ||||
| Depreciation | 22,370 | ||||
| Share-based compensation | 16,748 | ||||
| Special charges (recoveries) | 11,031 | ||||
| Other (income) expense, net | (24,392) | ||||
| Adjusted EBITDA | $ | 284,496 | |||
| GAAP-based net income margin | 8.5 | % | |||
| Adjusted EBITDA margin | 32.2 | % | |||
Reconciliation of Free cash flows
Three Months Ended March 31, 2022 | |||||
| GAAP-based cash flows provided by operating activities | $ | 323,557 | |||
| Add: | |||||
Capital expenditures (1) | (17,590) | ||||
| Free cash flows | $ | 305,967 | |||
(1) Defined as “Additions of property and equipment” in the Consolidated Statements of Cash Flows. | |||||
21
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the three months ended June 30, 2021 (In thousands, except for per share data) | ||||||||||||||||||||
Three Months Ended June 30, 2021 | ||||||||||||||||||||
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 | $ | 127,583 | $ | (935) | (1) | $ | 126,648 | |||||||||||||
| Customer support | 32,938 | (505) | (1) | 32,433 | ||||||||||||||||
| Professional service and other | 53,662 | (698) | (1) | 52,964 | ||||||||||||||||
| Amortization of acquired technology-based intangible assets | 53,215 | (53,215) | (2) | — | ||||||||||||||||
| GAAP-based gross profit and gross margin (%) /Non-GAAP-based gross profit and gross margin (%) | 621,814 | 69.6 | % | 55,353 | (3) | 677,167 | 75.8 | % | ||||||||||||
| Operating expenses | ||||||||||||||||||||
| Research and development | 117,235 | (2,664) | (1) | 114,571 | ||||||||||||||||
| Sales and marketing | 183,237 | (4,718) | (1) | 178,519 | ||||||||||||||||
| General and administrative | 73,019 | (3,830) | (1) | 69,189 | ||||||||||||||||
| Amortization of acquired customer-based intangible assets | 52,469 | (52,469) | (2) | — | ||||||||||||||||
| Special charges (recoveries) | 3,152 | (3,152) | (4) | — | ||||||||||||||||
| GAAP-based income from operations / Non-GAAP-based income from operations | 171,681 | 122,186 | (5) | 293,867 | ||||||||||||||||
| Other income (expense), net | 45,017 | (45,017) | (6) | — | ||||||||||||||||
| Provision for income taxes | (2,215) | 38,099 | (7) | 35,884 | ||||||||||||||||
| GAAP-based net income / Non-GAAP-based net income, attributable to OpenText | 181,283 | 39,070 | (8) | 220,353 | ||||||||||||||||
| GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText | $ | 0.66 | $ | 0.14 | (8) | $ | 0.80 | |||||||||||||
(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 1% 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-
22
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:
| Three Months Ended June 30, 2021 | ||||||||
| Per share diluted | ||||||||
| GAAP-based net income, attributable to OpenText | $ | 181,283 | $ | 0.66 | ||||
| Add: | ||||||||
| Amortization | 105,684 | 0.39 | ||||||
| Share-based compensation | 13,350 | 0.05 | ||||||
| Special charges (recoveries) | 3,152 | 0.01 | ||||||
| Other (income) expense, net | (45,017) | (0.16) | ||||||
| GAAP-based provision for income taxes | (2,215) | (0.02) | ||||||
| Non-GAAP-based provision for income taxes | (35,884) | (0.13) | ||||||
| Non-GAAP-based net income, attributable to OpenText | $ | 220,353 | $ | 0.80 | ||||
Reconciliation of Adjusted EBITDA
| Three Months Ended June 30, 2021 | |||||
| GAAP-based net income, attributable to OpenText | $ | 181,283 | |||
| Add: | |||||
| Provision for income taxes | (2,215) | ||||
| Interest and other related expense, net | 37,550 | ||||
| Amortization of acquired technology-based intangible assets | 53,215 | ||||
| Amortization of acquired customer-based intangible assets | 52,469 | ||||
| Depreciation | 21,021 | ||||
| Share-based compensation | 13,350 | ||||
| Special charges (recoveries) | 3,152 | ||||
| Other (income) expense, net | (45,017) | ||||
| Adjusted EBITDA | $ | 314,808 | |||
| GAAP-based net income margin | 20.3 | % | |||
| Adjusted EBITDA margin | 35.2 | % | |||
Reconciliation of Free cash flows
| Three Months Ended June 30, 2021 | |||||
| GAAP-based cash flows provided by operating activities | $ | 296,189 | |||
| Add: | |||||
Capital expenditures (1) | (27,408) | ||||
| Free cash flows | $ | 268,781 | |||
(1) Defined as “Additions of property and equipment” in the Consolidated Statements of Cash Flows. | |||||
23
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the year ended June 30, 2021 (In thousands, except for per share data) | ||||||||||||||||||||
| Year Ended June 30, 2021 | ||||||||||||||||||||
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 | $ | 481,818 | $ | (3,419) | (1) | $ | 478,399 | |||||||||||||
| Customer support | 122,753 | (1,910) | (1) | 120,843 | ||||||||||||||||
| Professional service and other | 197,183 | (2,565) | (1) | 194,618 | ||||||||||||||||
| Amortization of acquired technology-based intangible assets | 218,796 | (218,796) | (2) | — | ||||||||||||||||
| GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%) | 2,351,649 | 69.4 | % | 226,690 | (3) | 2,578,339 | 76.1 | % | ||||||||||||
| Operating expenses | ||||||||||||||||||||
| Research and development | 421,447 | (9,859) | (1) | 411,588 | ||||||||||||||||
| Sales and marketing | 622,221 | (18,312) | (1) | 603,909 | ||||||||||||||||
| General and administrative | 263,521 | (15,904) | (1) | 247,617 | ||||||||||||||||
| Amortization of acquired customer-based intangible assets | 216,544 | (216,544) | (2) | — | ||||||||||||||||
| Special charges (recoveries) | 1,748 | (1,748) | (4) | — | ||||||||||||||||
| GAAP-based income from operations / Non-GAAP-based income from operations | 740,903 | 489,057 | (5) | 1,229,960 | ||||||||||||||||
| Other income (expense), net | 61,434 | (61,434) | (6) | — | ||||||||||||||||
| Provision for income taxes | 339,906 | (188,931) | (7) | 150,975 | ||||||||||||||||
| GAAP-based net income / Non-GAAP-based net income, attributable to OpenText | 310,672 | 616,554 | (8) | 927,226 | ||||||||||||||||
| GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText | $ | 1.14 | $ | 2.25 | (8) | $ | 3.39 | |||||||||||||
(1) Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.
(2) Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.
(3) 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 52% 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-
24
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. The GAAP-based tax provision rate for the year ended June 30, 2021 includes an income tax provision charge from IRS settlements partially offset by a tax benefit from the release of unrecognized tax benefits due to the conclusion of relevant tax audits that was recognized during the second quarter of Fiscal 2021.
(8) Reconciliation of GAAP-based net income to Non-GAAP-based net income:
| Year Ended June 30, 2021 | ||||||||
| Per share diluted | ||||||||
| GAAP-based net income, attributable to OpenText | $ | 310,672 | $ | 1.14 | ||||
| Add: | ||||||||
| Amortization | 435,340 | 1.59 | ||||||
| Share-based compensation | 51,969 | 0.19 | ||||||
| Special charges (recoveries) | 1,748 | 0.01 | ||||||
| Other (income) expense, net | (61,434) | (0.22) | ||||||
| GAAP-based provision for income taxes | 339,906 | 1.23 | ||||||
| Non-GAAP-based provision for income taxes | (150,975) | (0.55) | ||||||
| Non-GAAP-based net income, attributable to OpenText | $ | 927,226 | $ | 3.39 | ||||
Reconciliation of Adjusted EBITDA
| Year Ended June 30, 2021 | |||||
| GAAP-based net income, attributable to OpenText | $ | 310,672 | |||
| Add: | |||||
| Provision for income taxes | 339,906 | ||||
| Interest and other related expense, net | 151,567 | ||||
| Amortization of acquired technology-based intangible assets | 218,796 | ||||
| Amortization of acquired customer-based intangible assets | 216,544 | ||||
| Depreciation | 85,265 | ||||
| Share-based compensation | 51,969 | ||||
| Special charges (recoveries) | 1,748 | ||||
| Other (income) expense, net | (61,434) | ||||
| Adjusted EBITDA | $ | 1,315,033 | |||
| GAAP-based net income margin | 9.2 | % | |||
| Adjusted EBITDA margin | 38.8 | % | |||
Reconciliation of Free cash flows
| Year Ended June 30, 2021 | |||||
| GAAP-based cash flows provided by operating activities | $ | 876,120 | |||
| Add: | |||||
Capital expenditures (1) | (63,675) | ||||
| Free cash flows | $ | 812,445 | |||
(1) Defined as “Additions of property and equipment” in the Consolidated Statements of Cash Flows. | |||||
25
(3) The following tables provide a composition of our major currencies for revenue and expenses, expressed as a percentage, for the year ended June 30, 2022 and 2021:
| Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | ||||||||||||||||
| Currencies | % of Revenue | % of Expenses(1) | % of Revenue | % of Expenses(1) | |||||||||||||
| EURO | 22 | % | 12 | % | 24 | % | 14 | % | |||||||||
| GBP | 3 | % | 5 | % | 5 | % | 5 | % | |||||||||
| CAD | 3 | % | 14 | % | 3 | % | 13 | % | |||||||||
| USD | 63 | % | 54 | % | 60 | % | 53 | % | |||||||||
| Other | 9 | % | 15 | % | 8 | % | 15 | % | |||||||||
| Total | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||
| Year Ended June 30, 2022 | Year Ended June 30, 2021 | ||||||||||||||||
| Currencies | % of Revenue | % of Expenses(1) | % of Revenue | % of Expenses(1) | |||||||||||||
| EURO | 23 | % | 13 | % | 23 | % | 14 | % | |||||||||
| GBP | 4 | % | 6 | % | 5 | % | 6 | % | |||||||||
| CAD | 3 | % | 14 | % | 3 | % | 9 | % | |||||||||
| USD | 62 | % | 53 | % | 61 | % | 55 | % | |||||||||
| Other | 8 | % | 14 | % | 8 | % | 16 | % | |||||||||
| Total | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||
(1) 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 (recoveries).
26
Dear Shareholders, I have never felt better about the future of OpenText, the relevancy of our technology and expertise, the intrepidness of our people and roadmap, the transformative nature of our mission to elevate all organizations of all sizes to gain the information advantage, and the value we are creating through the OpenText Business System of Total Growth, Cash Flow Expansion, and Capital Efficiency. Fiscal 2022 was a year of resilience and growth. Each one of us has been affected by the pandemic, and we’ve emerged more focused, stronger, and more connected—more connected as humans, more connected as machines. As The Information Company, we power and protect information and our purpose is to elevate every person and every organization to gain the information advantage in the OpenText Cloud. Fiscal 2022 was also a year of significant strategic progress for OpenText. We delivered another banner year based on the bedrock of our 4Cs: Customer Success, Cloud, Cash Flow and Capital Efficiency Strength. FISCAL 2022 HIGHLIGHTS • Delivered record results • Acquired Zix for $894.5 million • Strengthened our relationships with Google and Microsoft • Named SAP Pinnacle Partner of the Year, our 17th Pinnacle Award in 14 years • Extended our debt maturity profile and raised $650 million in new debt. Approximately 75% of our debt is now fixed at a 4% weighted average interest rate and a weighted average maturity of more than 7 years RECORD FINANCIAL RESULTS • Revenue was a record $3.5 billion, up 3.2% as reported and 4.3% in constant currency • Cloud revenue was a record of $1.5 billion, an increase of 9.1% as reported and 9.8% in constant currency, this is the 6th consecutive quarter of y/y cloud organic growth in constant currency • Enterprise cloud bookings(1) were $466 million • ARR was a record $2.9 billion, up 4.5% as reported and 5.5% in constant currency or 82% of total revenue, it was the sixth consecutive quarter of positive organic ARR growth in constant currency
• Cloud and off-cloud renewal rates of 94% and 94% respectively • GAAP-based net income of $397 million, up 27.8% y/y, GAAP-based net income margin of 11.4% • A-EBITDA(2) of $1.3 billion for an upper quartile margin(2) of 36.2% • Operating cash flows of $982 million, up 12.1% • Free cash flows(2) of $889 million or 25% of total revenue, up 9.4% y/y; Return on Invested Capital of 18.1%(2) • We returned over $415 million to shareholders via dividends and buybacks including the purchase and cancellation of more than 3.8 million shares during the year • We ended the year with $1.7 billion of cash, $2.4 billion of available liquidity and a net leverage ratio of 2x INFORMATION MANAGEMENT: THE CLOUD OPPORTUNITY The need for Information Management is strategic and essential and has never been more urgent. This is a $92 billion market that is growing and accelerating into the cloud which affords us the opportunity to grow even faster. There is an immediate need for OpenText to help our customers navigate through these turbulent times. For our customers, the move to digital technology is paramount, and our demand drivers are very clear: • Converting our off-cloud install base to the OpenText Cloud • The continued value realization of digitizing all transactions and repeatable work • The overhaul of supply chains for regionalization, insight, and mitigating ongoing disruptions • The exploding growth in security, data trust and compliance regulations • The need for information and process insights to remove cost and do more with less • The transition to the green agenda: new ESG audits, new trading partners, new manufacturing, de- carbonization, and 2030 pledges to be Climate Innovators It is time to standardize on the companies built for the long-term, like OpenText. We remain focused on the acceleration of our large off-cloud customer base moving to the OpenText Cloud. Scaling of our private cloud business while expanding options and opportunities for customers to deploy in public clouds. HELPING CUSTOMERS WIN Like other premier technology companies, we are managing through the macro issues: the pandemic continues, high inflation, the strength of the USD, Russia’s war on Ukraine, the energy crisis in Europe, and recessionary indicators. This is a very real context, a context that requires every company to think uniquely about their business, and to act pre-emptively and boldly. OpenText has a long history of standing tall with our customers regardless of economic, geopolitical, health or other crises and we see a real opportunity to help organizations of all sizes to use digital technology to overcome today’s challenges, emerge stronger, and outcompete their rivals. We are very proud at OpenText to have helped our customers be agile, responsive, and resilient during these times of uncertainty. OpenText is fantastically positioned to help organizations deliver on their digital imperatives – to innovate, to grow, to connect people / organizations / systems, to be well run, and to do more with less.
With disruption accelerating, now more than ever, the world’s largest companies are relying on OpenText to solve their largest challenges. From climate innovation, security, and compliance to the green bottom line, we are here to help equip organizations of all sizes gain the Information Advantage. I want to highlight some of our customers’ successes this year: Bayer, a life science company with core competencies in the areas of health care and agriculture, is contributing to finding solutions to some of the major challenges of our time. The company has selected OpenText to consolidate integration activities onto one single platform. This will enable Bayer to release several global integration providers and, therefore, harmonize and simplify their system landscape and increase agility within their IT environment. The Bank of New York Mellon’s Pershing LLC provides clearing, brokerage custody and other related services. Pershing selected OpenText Exstream Cloud Native to modernize their Customer Communications Management (CCM) process. The solution will enhance user functionality, improve creation & delivery of mission-critical client communications, and drive cost savings by migrating applications off the mainframe. BDO, the 5th largest accounting firm in the world by revenue, provides a range of services within the areas of audit, accounting, consultancy, and taxation and duties. BDO wanted to improve their information governance by centralizing their various content management systems into one single platform on Extended ECM for Microsoft Office 365 to share, collaborate, approve, and process documents via workflows. Novartis Pharmaceuticals brings innovative medicines to market to enhance health outcomes for patients and offer solutions to the healthcare providers who treat them. The company selected OpenText Intelligent Capture to capture, digitize and analyze content using AI, content analytics and auto-classification in their business processes. Hydro-Québec has been generating, transmitting and distributing electricity for over 75 years. They do their utmost to provide a reliable supply of electricity services at competitive prices while making use of clean, renewable energy sources. Over the past ten years, they’ve stored an impressive number of HR-related documents for easy retrieval and review using Document Access for SAP. Moving to Extended ECM for SuccessFactors will keep this functionality and enable more self-service transactions, allowing HR to focus on people instead of technology.
PRODUCT UPDATE Cloud has grown from $0 in Fiscal 2012 to $1.5 billion in revenue in Fiscal 2022 and now is our biggest business. OpenText’s five Cloud offerings empower customers to be more intelligent, connected, and responsible. Our products are consistently recognized by industry analysts for our category leadership. OpenText Cloud offerings can be deployed in the infrastructure framework of the customer’s choice including off-cloud, private cloud, or public cloud including our partners’ clouds. OpenText Cloud Editions allows customers to leverage our full cloud suites, with less friction and less professional services, and seamlessly going from one module to all modules. Cloud Editions is the largest, most comprehensive suite in our history – including more features and deeper integrations with leading business applications. The innovations in Cloud Editions provide customers with a complete set of tools to harness the power of information and manage it collectively, securely, and intelligently. • Content Cloud: We released deeper integrations with Salesforce and Microsoft Teams for our Core Content offering. The deeper integrations enable us to deliver more content capabilities to two fast-growing software platforms. • Business Network Cloud: We released our BN Cloud Foundations offering - a SaaS-based, self-service product offering that meaningfully expands the reach of our trading network. Many of the same market-leading services used and trusted by 40 of the 50 largest supply chains in the world are now available to businesses of all sizes. BN Foundations is off to a fast start with several major customer wins already secured. • Experience Cloud: We released integration between the Google Marketing Platform and OpenText™ Experience CDP (Customer Data Platform), OpenText™ Exstream, and OpenText™ TeamSite. • Security Cloud: We announced the release of OpenText’s Digital Evidence Center, a cloud-based solution that helps law enforcement agencies close cases faster by centralizing the collection, analysis and storage of rich media and digital evidence. • Developer Cloud: We expanded access to our API Services beyond North America so developers can commercialize their applications and extend OpenText Core Content subscriptions within Europe and the EU Data Protection Zone. Run Anywhere | Off-Cloud | Private-Cloud | Public Cloud | API-Cloud Cloud EditionsContent Cloud Business Network Cloud Experience Cloud Security Cloud Developer Cloud
PROJECT TITANIUM Over 80% of our investments will be in cloud technologies through a framework we call Project Titanium that will evolve our already robust capabilities and accelerate customer adoption of the cloud. We chose the name Titanium because it reflects our cloud fundamentals: strong, light weight, industrial strength, corrosion resistant. Titanium is both new products and new routes to market. Through these key investments, we expect to deliver: • A common platform for all OpenText software • An open and integrated data and processing platform • A growing library of APIs, open to customers and 3rd parties for increased agility and flexibility • A new digital resource center for customers to try, buy, renew, and be supported, digitally through automation and self-service. We call this service the OpenText ZONE We’re planning to deliver new capabilities every 90 days, with a compelling private cloud experience as well as new features in public cloud, including releasing many new innovations into our product line over the next 4 product releases. Project Titanium is expected to enhance all our clouds with end-to-end Information Management solutions including: • Content Cloud – to modernize work and automate processes with a next generation digital fabric • Business Network Cloud – to digitize supply chain and connect ecosystems with global scale • Experience Cloud – to create unified communication-centric customer experiences • Security Cloud – to build a resilient and safer world with prevention, compliance, governance, and remediation • Developer Cloud – to win the next generation platform and future workloads from customers, partners, and embedded IP partners through our APIs. Eco-systems will be built around our API- based Developer Cloud ZIX AND SMB&C The acquisition of Zix in December 2021 significantly enhanced our Small to Medium Businesses & Consumer (SMB&C) portfolio in data protection, threat management and e-mail security. In a little over 2 years, our SMB&C business has grown to nearly $700 million in annualized revenue. With the acquisition of Carbonite in 2019 and Zix in 2021, OpenText offers one of the market’s most comprehensive cyber resilience offerings for SMB&C partners and customers. Zix has brought best-in-class cloud innovation, an opportunity for cross-selling within our combined MSP channel, a 20-year Microsoft partnership that enhances and expands OpenText’s existing relationship, geographic expansion opportunities and the opportunity to build strategic partnerships that leverage our SMB&C cloud platform. PARTNERS: A FORCE MULTIPLIER OpenText is committed culturally and strategically to be a partner embracing company. Our partnerships with companies such as SAP SE, Google Cloud, AWS, Microsoft Corporation, Oracle Corporation, Salesforce.com Corporation, and others serve as examples of how we are working together with our partners to create next- generation Information Management solutions and deliver them to market.
Global Partner Program Our Global Partner Program enables us to extend market coverage, build stronger relationships and provide enterprise customers with a more complete local ecosystem of partners to meet their needs. The Program is expected to lead to greater distribution and cross-selling opportunities which further help us to achieve organic growth. Global System Integrators (GSIs) GSIs provide customers with digital transformational services around OpenText technologies. Our GSIs include Accenture plc, ATOS International S.A.S., Capgemini Technology Services SAS, Cognizant Technology Solutions U.S. Corp., Deloitte Consulting LLP, and Tata Consultancy Services (TCS). Managed Service Providers (MSPs) Our network of 22,000 MSPs is a key go-to-market channel for SMB&C. Our partner program enables MSPs to deploy OpenText solutions at scale, helping us grow cloud-based cybersecurity, threat intelligence as well as backup and recovery solutions aimed at the SMB&C markets. We are a top Cloud Solution Partner with Microsoft. Hyperscaler Partners Our solutions can be deployed off-cloud, in the OpenText Cloud, in hybrid scenarios or other clouds, including through our hyperscaler partners: Google Cloud Platform (GCP), AWS and Microsoft Azure. The combination of OpenText cloud-native applications and managed services, together with the scalability and performance of our partner public cloud providers, offer more secure, reliable, and compliant solutions to customers wanting to deploy cloud-based Information Management applications. TOTAL GROWTH STRATEGY Our unique “Grow, Retain and Acquire” framework is at the heart of our Total Growth strategy. With our sales coverage goals, we are deeply focused on cross-selling and upselling Cloud Editions into our existing customer base, focusing on our account knowledge and the opportunity to introduce new applications that manage new information workloads. Our global renewals organization continues to deliver greater than 90% renewal rates while driving growth through consumption and expansion. Future Acquisitions We have $2.4 billion in cash and committed liquidity. We have the management bandwidth and financial strength to execute our M&A strategy. Acquisition valuations are coming more in line with our playbook of growth at a reasonable price. We believe that our M&A pipeline is stronger than it has been in previous years. GROW RETAIN G r o w a nA c q R e t i ui r e Information Management
THE OPENTEXT BUSINESS SYSTEM: OUR VALUE CREATION FRAMEWORK OpenText believes in creating near and long-term shareholder value through a balanced combination of Total Growth, Capital Efficiency, and Profitability. We will control what we can control – and we aspire to perform well in every scenario. We make long-term decisions; we are purposeful in balancing profits and growth. Leveraging the OpenText Business System, our vision of the future of operations at OpenText includes: • How we invest in innovation • How we engage with customers • How we operate our business • How we attract and retain talent, and • How we create value From a business model perspective, what this means is that we are accelerating into the cloud led by bookings to cash while expecting to deliver upper quartile A-EBITDA results in any economic scenario. CORPORATE CITIZENSHIP Over the past year, we have embraced new expectations, new rules, and new investments as we imagine how people and organizations can build a better future. What has become abundantly clear is that the future of growth must be both inclusive and sustainable, and in our third Corporate Citizenship Report, we share the strides we have made over the last year as part of our commitment to advancing our Environmental, Social and Governance (ESG) goals. Companies have a tremendous opportunity and responsibility to create long-term value and impact for customers, employees, and society. That is why we are introducing the OpenText Zero-In Initiative, a new framework that encompasses all our ESG commitments and programs. Our framework is based on three pillars that focus on measurable, values-driven goals under the pillars of Zero Footprint, Zero Barriers and Zero Compromise. Zero Footprint: OpenText embraces the opportunity to reduce our footprint in every possible way, and help our customers do the same. We are committing to a science-based emissions target of 50% reduction by 2030, and net-zero by 2040, and zero operational waste by 2030. The goal is to eliminate emissions to the greatest extent possible, send no waste to landfills, incinerators, or oceans, and promote a circular economy, where resources are put back into the system to be used over again. Zero Barriers: Our goal is to have a majority ethnically diverse workforce by 2030. We have committed to a 50/50 gender parity within key roles by 2030, and 40% women in leadership positions at all management levels, because for consistent equity, we must create a culture that values differences starting with a top-down approach. Zero Compromise: We intend to reach our Zero Footprint and Zero Barriers goals with the same values-based approach that we bring to work every day – with zero compromise. It is about elevating our people and our organization, and zeroing-in on what matters most. We are committed to transparency and holding ourselves accountable to our ESG goals and continuing to foster our culture of Technology for the Good. Inclusion Total Innovation Ecosystem Building Sustainability Best Teams Operational Excellence Total Growth
IN SUMMARY As I reflect on our Fiscal 2022 accomplishments, I am very proud of what we, as a team, have accomplished: • We took pre-emptive actions to address the global macro environment • We continued to invest in talent and innovation • We have incredible products that customers use to create an Information Advantage • We have a fantastic install base of customers that we will accelerate into the cloud • We delivered upper quartile profitability and an incredibly strong balance sheet OpenText is an all-weather company ready for what is ahead. We recognize the many macro issues facing all businesses, and OpenText is ready. We are built to navigate times like these. Our target capital allocation strategy delivers shareholder returns via dividends and share buybacks. We are investing in systems to achieve non-linear scaling of costs, while positioning ourselves to capture future growth and market share. OpenText remains committed to our Total Growth Strategy and expect to create value through growth, profitability, and capital efficiency. We have a seasoned proven management team and our employees delivered record results throughout the pandemic. We are hiring smartly, we are investing in Project Titanium and helping our customers accelerate their transition to the OpenText Cloud. As we begin Fiscal Year 2023, we remain committed to balancing our operational discipline with continued investments in key strategic areas to drive future total growth, expansion of free cash flows and capital efficiency. Our products are strategic and vital to our customers. The need for OpenText to help our customers navigate through these turbulent times has never been higher. Information Management is strategic and essential. We will stand tall with our customers. We intend to grow, and we intend to take share while also continuing to generate upper quartile profitability and significant value creation for our shareholders. Customers fortified their commitment to the OpenText Cloud with $466 million of new value in enterprise cloud bookings, and we expect this to grow 15%+ in Fiscal 2023. Increased cloud bookings are key to driving organic cloud revenue growth and we believe one of the best ways for investors to measure the future performance of OpenText’s growth going forward is to focus on both our enterprise bookings and total revenue growth performance. LOOKING AHEAD TO OUR LONG-TERM ASPIRATIONS • We intend on doubling the company through organic growth and acquisitions • We intend on being #1 in every cloud • We look to generate over $6 billion in cumulative free cash flows OpenText’s employees have delivered on another strong year of results, and I want to thank them for all their contributions. In this dynamic environment, we saw strong demand, took share and fortified an increased customer commitment to our cloud platform. OpenText’s best days are in front of us. I am an optimist, and deeply believe the future is brighter than today. The leadership at OpenText is committed to ensuring that our growth is based on inclusivity and sustainability. What an amazing time to be The Information Company, to be the company providing both a process advantage and an Information Advantage, to our customers.
I would like to thank our employees, our customers, our partners and our shareholders for their continued trust and confidence in OpenText. We are humbled and proud to help advance your mission and goals and work – and - to make OpenText and the world better for everyone. May the one that brings peace, bring peace for all. Sincerely, Mark J. Barrenechea OpenText CEO and CTO (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, excluding the impact of Carbonite and Zix. (2) Please refer to “Use of Non-GAAP Financial Measures” at the end of this presentation and “Reconciliation of selected GAAP-based mea- sures to Non-GAAP-based measures” included within our current and historical filings on Forms 10-Q, 10-K and 8-K. (3) Upper quartile is based on comparing OpenText against 170+ selected technology and software peers. A-EBITDA margin data sourced from Bloomberg (July 2022).
CONFERENCE CALL INFORMATION OpenText posted our quarterly shareholder letter and investor presentation on its Investor Relations website at http://investors.opentext.com and invites the public to listen to the earnings conference call on August 4, 2022 at 5:00 p.m. ET by dialing 1-800-319-4610 (toll-free) or +1-604-638-5340 (international). Please dial-in 10 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/investor-events-and-presentations. A replay of the call will be available beginning August 4, 2022 at 7:00 p.m. ET through 11:59 p.m. on August 18, 2022 and can be accessed by dialing 1-855-669-9658 (toll-free) or +1-604-674-8052 (international) and using passcode 9157 followed by the number sign. Please see Appendix below for our uses of non-GAAP based financial measures and a reconciliation of U.S. GAAP-based financial measures used in this Shareholder Letter, to Non-GAAP-based financial measures. Refer to our Form 10-K or press release for a discussion of our financial results for the three and twelve months ended June 30, 2022. Note: All dollar amounts in this Appendix are in thousands of U.S. Dollars unless otherwise indicated. ABOUT OPENTEXT OpenText, The Information Company™, enables organizations to gain insight through market leading information management solutions, powered by OpenText Cloud Editions. For more information about OpenText (NASDAQ: OTEX, TSX: OTEX) visit opentext.com. CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS Certain statements in this document, including statements about the focus of Open Text Corporation (“OpenText” or “the Company”) in our fiscal year ending June 30, 2023 (Fiscal 2023) on growth, future cloud growth and market share gains, future organic growth initiatives and deployment of capital, intention to maintain a dividend program, potential share repurchases pursuant to its share repurchase plans, future tax rates, new platform and product offerings and associated benefits to customers, scaling OpenText, and other matters, which may contain words such as “anticipates”, “expects”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “may”, “could”, “would”, “might”, “will” and variations of these words or similar expressions 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 and uncertainties such as those relating to the duration and severity of the COVID-19 pandemic, including any new strains or resurgences, as well as our ability to develop, protect and maintain our intellectual property and proprietary technology and to operate without infringing on the proprietary rights of others. 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. For more information, please contact: Harry E. Blount Senior Vice President, Global Head of Investor Relations Open Text Corporation 415-963-0825 [email protected] Copyright ©2022 Open Text. OpenText is a trademark or registered trademark of Open Text. 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. All rights reserved. For more information, visit: http://www.opentext.com/who-we-are/copyright-information.
