Open Text Corp 8-K, filed Aug 3, 2023
Open Text Corp (OTEX)
8-K
2023-08-03
For: 2023-08-03
View Original
Added on
April 09, 2026
About this 8-K
Open Text Corp filed this 8-K on August 3, 2023.
Items reported
- Item 2.02: Financial results
- Item 8.01: Other events
- Item 9.01: Financial statements and exhibits
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 3, 2023
______________________
(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 3, 2023 , Open Text Corporation (the “Company”) issued a press release announcing its financial results for the quarter ended June 30, 2023. A copy of the press release is furnished as Exhibit 99.1 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 $0.25 per Common Share, payable on September 22, 2023, to the shareholders of the Company of record on September 1, 2023.
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 | ||||||||
| 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 | ||||||||
| 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 2023 Financial Results
Reports Record Total Revenues of $4.5 Billion with 28% Growth
Fiscal 2023 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 | ||||||||||||||||||
| $4,485 | $4,617 | $3,615 | $3,718 | $1,700 | $1,739 | ||||||||||||||||||
| +28.4% | +32.2% | +26.2% | +29.7% | +10.8% | +13.3% | ||||||||||||||||||
Annual Recurring Revenues represent 81% of Total Revenues | |||||||||||||||||||||||
•Total revenues of $4.5 billion up 28.4% Y/Y or up 32.2% Y/Y in constant currency (CC)
•Annual Recurring Revenues (ARR) of $3.6 billion, up 26.2% Y/Y or up 29.7% Y/Y in CC
•Cloud revenues of $1.7 billion up 10.8% Y/Y or up 13.3% Y/Y in CC
•FY'23 enterprise cloud bookings(1) of $528 million, up 9.5% Y/Y
•10 consecutive quarters of cloud and ARR organic growth in constant currency
•Operating cash flows were $779 million and free cash flows(2) were $655 million
•GAAP-based net income of $150 million, down 62.1% Y/Y, margin of 3.4%
•Adjusted EBITDA(2) of $1.5 billion, margin of 32.8% while making key investments in cloud, AI and Security
•Record capital returns of $260 million via dividends
•GAAP-based diluted earnings per share (EPS) of $0.56, Non-GAAP diluted EPS(2) of $3.29
•Increased annualized dividend to $1.00 per share, subject to quarterly Board approval. Declared quarterly dividend of $0.25 per share.
•Includes Micro Focus results from February 1, 2023 to June 30, 2023
Fiscal 2023 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 | ||||||||||||||||||
| $1,491 | $1,502 | $1,157 | $1,167 | $452 | $455 | ||||||||||||||||||
| +65.2% | +66.5% | +56.4% | +57.7% | +9.7% | +10.6% | ||||||||||||||||||
Annual Recurring Revenues represent 78% of Total Revenues | |||||||||||||||||||||||
•Total revenues of $1.5 billion, up 65.2% Y/Y or up 66.5% in CC
•Annual recurring revenues of $1.2 billion, up 56.4% Y/Y or up 57.7% in CC
•Cloud revenues of $452 million, up 9.7% Y/Y or up 10.6% Y/Y in CC
•Quarterly enterprise cloud bookings(1) of $164 million, up 12.3%
•Operating cash flows were $115 million and free cash flows(2) were $91 million
•GAAP-based net loss of ($49) million, down (147.7)% Y/Y, margin of (3.3)%, due to acquisition expenses
•Adjusted EBITDA(2) of $463 million, margin of 31.0%
•GAAP-based diluted earnings per share (EPS) of ($0.18), Non-GAAP diluted EPS(2) of $0.91
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Waterloo, ON, August 3, 2023 - Open Text Corporation (NASDAQ: OTEX), (TSX: OTEX), today announced its financial results for the fourth quarter and year ended June 30, 2023.
“OpenText Fiscal 2023 progress and results are exceptional and record setting, with 28% total revenue growth. OpenText delivered record total revenues of $4.5 billion of which 81%, or $3.6 billion, is annually recurring,” said Mark J. Barrenechea, OpenText CEO & CTO. “Our mission to empower individuals and organizations of all sizes to achieve the Information Advantage. Looking ahead, Fiscal 2024 will be another year of outstanding growth for OpenText led by Cloud and our expanded Information Management mission, with Micro Focus products contributing organic growth.”
“OpenText holds a distinctive position as a leader in Information Management. Our comprehensive range of products, effective go-to-market strategies, and talented employees position us favorably for sustained growth and profitability,” added Mr. Barrenechea. “Today we are announcing opentext.ai and OpenText Aviator™, our vision and initial AI products, to be the trusted partner for our customer’s AI journey. I am extremely optimistic about the future of OpenText, and helping our customers unlock the value of their information.”
“OpenText delivered an exceptional operating performance in Fiscal 2023 with adjusted EBITDA of $1.5 billion and free cash flows of $655 million. Our balance sheet and liquidity position remain strong with approximately $1.2 billion in cash as of June 30, 2023, and a net leverage ratio of 3.5x,” said Madhu Ranganathan, OpenText EVP, CFO. “The value we are generating through the OpenText Business System of Total Growth is truly remarkable. We accelerated our initial integration of Micro Focus operations ahead of schedule, we remain on track to meet our near-term and long-term operating goals.”
(1) Enterprise cloud bookings is defined as the total value from cloud services and subscription contracts, entered into in the fiscal year that are new, committed and incremental to our existing contracts, entered into with our enterprise based customers.
(2) Please see Note 2 “Use of Non-GAAP Financial Measures” to the consolidated financial statements below.
Financial Highlights for Fiscal 2023 and Q4 with Year Over Year Comparisons
Summary of Annual Results | ||||||||||||||||||||||||||
| (In millions, except per share data) | FY'23 | FY'22 | $ Change | % Change | FY'23 in CC* | % Change in CC* | ||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||
| Cloud services and subscriptions | $1,700.4 | $1,535.0 | $165.4 | 10.8 | % | $1,739.1 | 13.3 | % | ||||||||||||||||||
| Customer support | 1,915.0 | 1,331.0 | $584.1 | 43.9 | % | 1,978.8 | 48.7 | % | ||||||||||||||||||
| Total annual recurring revenues** | $3,615.5 | $2,866.0 | $749.5 | 26.2 | % | $3,717.9 | 29.7 | % | ||||||||||||||||||
| License | 539.0 | 358.4 | $180.7 | 50.4 | % | 555.4 | 55.0 | % | ||||||||||||||||||
| Professional service and other | 330.5 | 269.5 | $61.0 | 22.6 | % | 344.1 | 27.7 | % | ||||||||||||||||||
Total revenues | $4,485.0 | $3,493.8 | $991.1 | 28.4 | % | $4,617.4 | 32.2 | % | ||||||||||||||||||
| GAAP-based operating income | $ | 516.3 | $644.8 | ($128.5) | (19.9) | % | N/A | N/A | ||||||||||||||||||
Non-GAAP-based operating income (1) | $1,365.3 | $1,176.9 | $188.4 | 16.0 | % | $1,387.5 | 17.9 | % | ||||||||||||||||||
| GAAP-based net income attributable to OpenText | $150.4 | $397.1 | ($246.7) | (62.1) | % | N/A | N/A | |||||||||||||||||||
| GAAP-based EPS, diluted | $0.56 | $1.46 | ($0.90) | (61.6) | % | N/A | N/A | |||||||||||||||||||
Non-GAAP-based EPS, diluted (1)(2) | $3.29 | $3.22 | $0.07 | 2.2 | % | $3.37 | 4.7 | % | ||||||||||||||||||
Adjusted EBITDA (1) | $1,472.9 | $1,265.0 | $207.9 | 16.4 | % | $1,495.8 | 18.2 | % | ||||||||||||||||||
| Operating cash flows | $779.2 | $981.8 | ($202.6) | (20.6) | % | N/A | N/A | |||||||||||||||||||
Free cash flows (1) | $655.4 | $888.7 | ($233.3) | (26.3) | % | N/A | N/A | |||||||||||||||||||
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Summary of Quarterly Results | ||||||||||||||||||||||||||
| (In millions, except per share data) | Q4 FY'23 | Q4 FY'22 | $ Change | % Change | Q4 FY'23 in CC* | % Change in CC* | ||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||
| Cloud services and subscriptions | $451.7 | $411.6 | $40.1 | 9.7 | % | $455.4 | 10.6 | % | ||||||||||||||||||
| Customer support | 705.3 | 328.3 | $376.9 | 114.8 | % | 711.4 | 116.7 | % | ||||||||||||||||||
| Total annual recurring revenues** | $1,156.9 | $739.9 | $417.0 | 56.4 | % | $1,166.8 | 57.7 | % | ||||||||||||||||||
| License | 228.8 | 94.7 | $134.1 | 141.6 | % | 229.2 | 142.0 | % | ||||||||||||||||||
| Professional service and other | 105.1 | 67.8 | $37.3 | 54.9 | % | 106.3 | 56.7 | % | ||||||||||||||||||
Total revenues | $1,490.8 | $902.5 | $588.4 | 65.2 | % | $1,502.3 | 66.5 | % | ||||||||||||||||||
| GAAP-based operating income | $121.3 | $137.6 | ($16.3) | (11.8) | % | N/A | N/A | |||||||||||||||||||
Non-GAAP-based operating income (1) | $431.7 | $291.0 | $140.8 | 48.4 | % | $421.5 | 44.9 | % | ||||||||||||||||||
| GAAP-based net income attributable to OpenText | ($48.7) | $102.2 | ($150.9) | (147.7) | % | N/A | N/A | |||||||||||||||||||
| GAAP-based EPS, diluted | ($0.18) | $0.38 | ($0.56) | (147.4) | % | N/A | N/A | |||||||||||||||||||
Non-GAAP-based EPS, diluted (1)(2) | $0.91 | $0.80 | $0.11 | 13.8 | % | $0.88 | 10.0 | % | ||||||||||||||||||
Adjusted EBITDA (1) | $462.8 | $313.6 | $149.2 | 47.6 | % | $452.7 | 44.3 | % | ||||||||||||||||||
| Operating cash flows | $115.3 | $251.9 | ($136.6) | (54.2) | % | N/A | N/A | |||||||||||||||||||
Free cash flows (1) | $91.2 | $213.8 | ($122.5) | (57.3) | % | N/A | N/A | |||||||||||||||||||
(1) Please see Note 2 “Use of Non-GAAP Financial Measures” to the consolidated financial statements below.
(2) Please also see Note 14 to the Company's Fiscal 2018 Consolidated Financial Statements on Form 10-K. Reflective of the amount of net tax benefit arising from the internal reorganization assumed to be allocable to the current period based on the forecasted utilization period.
Note: Individual line items in tables may be adjusted by non-material amounts to enable totals to align to published financial statements.
*CC: Constant currency for this purpose is defined as the current period reported revenues/expenses/earnings represented at the prior comparative period's foreign exchange rate.
**Annual recurring revenue is defined as the sum of Cloud services and subscriptions revenue and Customer support revenue.
Dividend Program
As part of our quarterly, non-cumulative cash dividend program, the Board declared on August 2, 2023, a quarterly cash dividend of $0.25 per common share. The record date for this dividend is September 1, 2023, and the payment date is September 22, 2023. 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: BNP Paribas, Carl Zeiss AG, CNA Insurance, Daiken, DHL eCommerce Benelux, Elevance Health, Engie Italia, FEMA (US Department of Homeland Security), ID Logistics, Investors Heritage Life Insurance Company, Renesas, RS Component, Swedbank, TechMahindra, Warta
•OpenText and Anritsu Service Assurance signed a new deal for 5G network capabilities and next-generation architecture
•Today we are announcing opentext.ai, our AI strategy and initial AI products including OpenText Aviator™ and IDOL, to be the trusted partner for our customers’ AI journey
•OpenText powers organizations to achieve digital success in a multi-cloud world with Cloud Editions 23.3
•OpenText has been recognized as a Leader in the 2023 Gartner Magic Quadrant review for Application Security Testing (AST) for the 10th consecutive year
•OpenText received a 2023 SAP® Pinnacle Award in the Partner Solution Success category, which recognizes its outstanding contributions as an SAP partner
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Summary of Annual Results | ||||||||||||||
FY'23 | FY'22 | % Change | ||||||||||||
| Revenue (millions) | $4,485.0 | $3,493.8 | 28.4 | % | ||||||||||
| GAAP-based gross margin | 70.6 | % | 69.6 | % | 105 | bps | ||||||||
Non-GAAP-based gross margin (1) | 76.1 | % | 75.6 | % | 49 | bps | ||||||||
| GAAP-based EPS, diluted | $0.56 | $1.46 | (61.6) | % | ||||||||||
Non-GAAP-based EPS, diluted (1)(2) | $3.29 | $3.22 | 2.2 | % | ||||||||||
Summary of Quarterly Results | |||||||||||||||||||||||
Q4 FY'23 | Q3 FY'23 | Q4 FY'22 | % Change (Q4 FY'23 vs Q3 FY'23) | % Change (Q4 FY'23 vs Q4 FY'22) | |||||||||||||||||||
| Revenue (millions) | $1,490.8 | $1,244.7 | $902.5 | 19.8 | % | 65.2 | % | ||||||||||||||||
| GAAP-based gross margin | 71.4 | % | 70.3 | % | 70.2 | % | 110 | bps | 120 | bps | |||||||||||||
Non-GAAP-based gross margin (1) | 76.9 | % | 75.8 | % | 75.9 | % | 110 | bps | 100 | bps | |||||||||||||
| GAAP-based EPS, diluted | ($0.18) | $0.21 | $0.38 | (185.7) | % | (147.4) | % | ||||||||||||||||
Non-GAAP-based EPS, diluted (1)(2) | $0.91 | $0.73 | $0.80 | 24.7 | % | 13.8 | % | ||||||||||||||||
(1) Please see Note 2 “Use of Non-GAAP Financial Measures” to the consolidated financial statements below.
(2) Please also see Note 14 to the Company's Fiscal 2018 Consolidated Financial Statements on Form 10-K. Reflective of the amount of net tax benefit arising from the internal reorganization assumed to be allocable to the current period based on the forecasted utilization period.
Conference Call Information
OpenText posted an 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 3, 2023, at 7:00 p.m. ET through 11:59 p.m. on August 17, 2023, and can be accessed by dialing 1-855-669-9658 (toll-free) or +1-604-674-8052 (international) and using passcode 0296 followed by the number sign.
Please see Note 2 “Use of Non-GAAP Financial Measures” to the consolidated financial statements below 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”) on growth, future cloud growth and market share gains, future organic growth initiatives and deployment of capital, intention to maintain a dividend program, including any targeted annualized dividend, the associated benefits of the Micro Focus acquisition, future tax rates, new platform and product offerings and associated benefits to customers, our announcement of opentext.ai and OpenText Aviator™, including our AI strategy, vision and initial AI products, 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 intended to identify forward-looking statements or information under applicable securities laws (forward-looking statements). In addition, any statements or information that refer to expectations, beliefs, plans, projections, objectives, performance or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements, and based on our current
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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. Future declarations of dividends are also subject to the final determination and discretion of the Board of Directors, and an annualized dividend has not been approved or declared by the Board. Forward-looking statements involve known and unknown risks and uncertainties such as those relating to: all statements regarding the expected future financial position, results of operations, cash flows, dividends, financing plans, business strategy, budgets, capital expenditures, competitive positions, growth opportunities, plans and objectives of management, including any anticipated synergy benefits; our ability to integrate successfully Micro Focus’ operations and programs, including incurring unanticipated costs, delays or difficulties; and 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 Report 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. Further, readers should note that we may announce information using our website, press releases, securities law filings, public conference calls, webcasts and the social media channels identified on the Investors section of our website (https://investors.opentext.com). Such social media channels may include the Company's or our CEO's blog, Twitter account or LinkedIn account. The information posted through such channels may be material. Accordingly, readers should monitor such channels in addition to our other forms of communication.
For more information, please contact:
Harry E. Blount
Senior Vice President, Global Head of Investor Relations
Open Text Corporation
415-963-0825
investors@opentext.com
Copyright ©2023 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.
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OPEN TEXT CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars, except share data)
| June 30, 2023 | June 30, 2022 | ||||||||||
| ASSETS | |||||||||||
| Cash and cash equivalents | $ | 1,231,625 | $ | 1,693,741 | |||||||
Accounts receivable trade, net of allowance for credit losses of $13,828 as of June 30, 2023 and $16,473 as of June 30, 2022 | 682,517 | 426,652 | |||||||||
| Contract assets | 71,196 | 26,167 | |||||||||
| Income taxes recoverable | 68,161 | 18,255 | |||||||||
| Prepaid expenses and other current assets | 221,732 | 120,552 | |||||||||
| Total current assets | 2,275,231 | 2,285,367 | |||||||||
| Property and equipment | 356,904 | 244,709 | |||||||||
| Operating lease right of use assets | 285,723 | 198,132 | |||||||||
| Long-term contract assets | 64,553 | 19,719 | |||||||||
| Goodwill | 8,662,603 | 5,244,653 | |||||||||
| Acquired intangible assets | 4,080,879 | 1,075,208 | |||||||||
| Deferred tax assets | 926,719 | 810,154 | |||||||||
| Other assets | 342,318 | 256,987 | |||||||||
| Long-term income taxes recoverable | 94,270 | 44,044 | |||||||||
| Total assets | $ | 17,089,200 | $ | 10,178,973 | |||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable and accrued liabilities | $ | 996,261 | $ | 448,607 | |||||||
| Current portion of long-term debt | 320,850 | 10,000 | |||||||||
| Operating lease liabilities | 91,425 | 56,380 | |||||||||
| Deferred revenues | 1,721,781 | 902,202 | |||||||||
| Income taxes payable | 89,297 | 51,069 | |||||||||
| Total current liabilities | 3,219,614 | 1,468,258 | |||||||||
| Long-term liabilities: | |||||||||||
| Accrued liabilities | 51,961 | 18,208 | |||||||||
| Pension liability | 126,312 | 60,951 | |||||||||
| Long-term debt | 8,562,096 | 4,209,567 | |||||||||
| Long-term operating lease liabilities | 271,579 | 198,695 | |||||||||
| Long-term deferred revenues | 217,771 | 91,144 | |||||||||
| Long-term income taxes payable | 193,808 | 34,003 | |||||||||
| Deferred tax liabilities | 423,955 | 65,887 | |||||||||
| Total long-term liabilities | 9,847,482 | 4,678,455 | |||||||||
| Shareholders' equity: | |||||||||||
| Share capital and additional paid-in capital | |||||||||||
270,902,571 and 269,522,639 Common Shares issued and outstanding at June 30, 2023 and June 30, 2022, respectively; authorized Common Shares: unlimited | 2,176,947 | 2,038,674 | |||||||||
| Accumulated other comprehensive income (loss) | (53,559) | (7,659) | |||||||||
| Retained earnings | 2,048,984 | 2,160,069 | |||||||||
Treasury stock, at cost (3,536,375 and 3,706,420 shares at June 30, 2023 and June 30, 2022, respectively) | (151,597) | (159,966) | |||||||||
| Total OpenText shareholders' equity | 4,020,775 | 4,031,118 | |||||||||
| Non-controlling interests | 1,329 | 1,142 | |||||||||
| Total shareholders' equity | 4,022,104 | 4,032,260 | |||||||||
| Total liabilities and shareholders' equity | $ | 17,089,200 | $ | 10,178,973 | |||||||
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, | |||||||||||
| 2023 | 2022 | ||||||||||
| Revenues: | |||||||||||
| Cloud services and subscriptions | $ | 451,659 | $ | 411,595 | |||||||
| Customer support | 705,277 | 328,339 | |||||||||
| License | 228,796 | 94,688 | |||||||||
| Professional service and other | 105,098 | 67,832 | |||||||||
| Total revenues | 1,490,830 | 902,454 | |||||||||
| Cost of revenues: | |||||||||||
| Cloud services and subscriptions | 166,394 | 133,785 | |||||||||
| Customer support | 86,695 | 30,571 | |||||||||
| License | 6,184 | 2,595 | |||||||||
| Professional service and other | 90,498 | 55,436 | |||||||||
| Amortization of acquired technology-based intangible assets | 77,045 | 46,274 | |||||||||
| Total cost of revenues | 426,816 | 268,661 | |||||||||
| Gross profit | 1,064,014 | 633,793 | |||||||||
| Operating expenses: | |||||||||||
| Research and development | 249,958 | 118,931 | |||||||||
| Sales and marketing | 333,244 | 185,985 | |||||||||
| General and administrative | 136,866 | 85,958 | |||||||||
| Depreciation | 31,152 | 22,706 | |||||||||
| Amortization of acquired customer-based intangible assets | 121,285 | 56,341 | |||||||||
| Special charges (recoveries) | 70,222 | 26,281 | |||||||||
| Total operating expenses | 942,727 | 496,202 | |||||||||
Income from operations | 121,287 | 137,591 | |||||||||
| Other income (expense), net | (25,355) | (19) | |||||||||
| Interest and other related expense, net | (145,829) | (40,342) | |||||||||
Income (loss) before income taxes | (49,897) | 97,230 | |||||||||
| Provision for (recovery of) income taxes | (1,212) | (5,005) | |||||||||
Net income (loss) for the period | $ | (48,685) | $ | 102,235 | |||||||
Net (income) attributable to non-controlling interests | (49) | (39) | |||||||||
Net income (loss) attributable to OpenText | $ | (48,734) | $ | 102,196 | |||||||
| Earnings per share—basic attributable to OpenText | $ | (0.18) | $ | 0.38 | |||||||
| Earnings per share—diluted attributable to OpenText | $ | (0.18) | $ | 0.38 | |||||||
Weighted average number of Common Shares outstanding—basic (in '000's) | 270,772 | 270,152 | |||||||||
Weighted average number of Common Shares outstanding—diluted (in '000's) | 270,772 | 270,394 | |||||||||
7
OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands of U.S. dollars, except share and per share data)
| Year Ended June 30, | |||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||
| Revenues: | |||||||||||||||||
| Cloud services and subscriptions | $ | 1,700,433 | $ | 1,535,017 | $ | 1,407,445 | |||||||||||
| Customer support | 1,915,020 | 1,330,965 | 1,334,062 | ||||||||||||||
| License | 539,026 | 358,351 | 384,711 | ||||||||||||||
| Professional service and other | 330,501 | 269,511 | 259,897 | ||||||||||||||
| Total revenues | 4,484,980 | 3,493,844 | 3,386,115 | ||||||||||||||
| Cost of revenues: | |||||||||||||||||
| Cloud services and subscriptions | 590,165 | 511,713 | 481,818 | ||||||||||||||
| Customer support | 209,705 | 121,485 | 122,753 | ||||||||||||||
| License | 16,645 | 13,501 | 13,916 | ||||||||||||||
| Professional service and other | 276,888 | 216,895 | 197,183 | ||||||||||||||
| Amortization of acquired technology-based intangible assets | 223,184 | 198,607 | 218,796 | ||||||||||||||
| Total cost of revenues | 1,316,587 | 1,062,201 | 1,034,466 | ||||||||||||||
| Gross profit | 3,168,393 | 2,431,643 | 2,351,649 | ||||||||||||||
| Operating expenses: | |||||||||||||||||
| Research and development | 680,587 | 440,448 | 421,447 | ||||||||||||||
| Sales and marketing | 948,598 | 677,118 | 622,221 | ||||||||||||||
| General and administrative | 419,590 | 317,085 | 263,521 | ||||||||||||||
| Depreciation | 107,761 | 88,241 | 85,265 | ||||||||||||||
| Amortization of acquired customer-based intangible assets | 326,406 | 217,105 | 216,544 | ||||||||||||||
| Special charges (recoveries) | 169,159 | 46,873 | 1,748 | ||||||||||||||
| Total operating expenses | 2,652,101 | 1,786,870 | 1,610,746 | ||||||||||||||
Income from operations | 516,292 | 644,773 | 740,903 | ||||||||||||||
| Other income (expense), net | 34,469 | 29,118 | 61,434 | ||||||||||||||
| Interest and other related expense, net | (329,428) | (157,880) | (151,567) | ||||||||||||||
Income before income taxes | 221,333 | 516,011 | 650,770 | ||||||||||||||
| Provision for (recovery of) income taxes | 70,767 | 118,752 | 339,906 | ||||||||||||||
Net income | $ | 150,566 | $ | 397,259 | $ | 310,864 | |||||||||||
Net (income) attributable to non-controlling interests | (187) | (169) | (192) | ||||||||||||||
Net income attributable to OpenText | $ | 150,379 | $ | 397,090 | $ | 310,672 | |||||||||||
| Earnings per share—basic attributable to OpenText | $ | 0.56 | $ | 1.46 | $ | 1.14 | |||||||||||
| Earnings per share—diluted attributable to OpenText | $ | 0.56 | $ | 1.46 | $ | 1.14 | |||||||||||
Weighted average number of Common Shares outstanding—basic (in '000's) | 270,299 | 271,271 | 272,533 | ||||||||||||||
Weighted average number of Common Shares outstanding—diluted (in '000's) | 270,451 | 271,909 | 273,479 | ||||||||||||||
8
OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands of U.S. dollars)
| Year Ended June 30, | |||||||||||||||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||||||||||||||
Net income | $ | 150,566 | $ | 397,259 | $ | 310,864 | |||||||||||||||||||||||
| Other comprehensive income (loss)—net of tax: | |||||||||||||||||||||||||||||
| Net foreign currency translation adjustments | (40,798) | (78,724) | 42,440 | ||||||||||||||||||||||||||
| Unrealized gain (loss) on cash flow hedges: | |||||||||||||||||||||||||||||
Unrealized gain (loss) - net of tax (1) | (941) | (1,859) | 4,246 | ||||||||||||||||||||||||||
(Gain) loss reclassified into net income - net of tax (2) | 2,721 | 373 | (3,280) | ||||||||||||||||||||||||||
| Unrealized gain (loss) on available-for-sale financial assets: | |||||||||||||||||||||||||||||
Unrealized gain (loss) - net of tax (3) | (602) | — | — | ||||||||||||||||||||||||||
| Actuarial gain (loss) relating to defined benefit pension plans: | |||||||||||||||||||||||||||||
Actuarial gain (loss) - net of tax (4) | (6,605) | 5,595 | 3,987 | ||||||||||||||||||||||||||
Amortization of actuarial (gain) loss into net income - net of tax (5) | 325 | 718 | 1,020 | ||||||||||||||||||||||||||
Total other comprehensive income (loss) net | (45,900) | (73,897) | 48,413 | ||||||||||||||||||||||||||
Total comprehensive income | 104,666 | 323,362 | 359,277 | ||||||||||||||||||||||||||
Comprehensive income attributable to non-controlling interests | (187) | (169) | (192) | ||||||||||||||||||||||||||
Total comprehensive income attributable to OpenText | $ | 104,479 | $ | 323,193 | $ | 359,085 | |||||||||||||||||||||||
______________________________
(1)Net of tax expense (recovery) of ($339), ($671), and $1,532 for the year ended June 30, 2023, 2022 and 2021, respectively.
(2)Net of tax expense (recovery) of $981, $134 and ($1,182) for the year ended June 30, 2023, 2022 and 2021, respectively.
(3)Net of tax expense (recovery) of $159, nil, and nil for the year ended June 30, 2023, 2022 and 2021, respectively.
(4)Net of tax expense (recovery) of ($1,961), $1,866 and $990 for the year ended June 30, 2023, 2022 and 2021, respectively.
(5)Net of tax expense (recovery) of $143, $290 and $379 for the year ended June 30, 2023, 2022 and 2021, respectively.
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, 2020 | 271,863 | $ | 1,851,777 | (622) | $ | (23,608) | $ | 2,159,396 | $ | 17,825 | $ | 1,319 | $ | 4,006,709 | |||||||||||||||||||||||||||||||||
| Adoption of ASU 2016-13 - cumulative effect | — | — | — | — | (2,450) | — | — | (2,450) | |||||||||||||||||||||||||||||||||||||||
| Issuance of Common Shares | |||||||||||||||||||||||||||||||||||||||||||||||
| Under employee stock option plans | 1,605 | 49,565 | — | — | — | — | — | 49,565 | |||||||||||||||||||||||||||||||||||||||
| Under employee stock purchase plans | 573 | 22,307 | 193 | 6,690 | — | — | — | 28,997 | |||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | 51,969 | — | — | — | — | — | 51,969 | |||||||||||||||||||||||||||||||||||||||
| Purchase of treasury stock | — | — | (1,455) | (64,847) | — | — | — | (64,847) | |||||||||||||||||||||||||||||||||||||||
| Issuance of treasury stock | — | (12,379) | 316 | 12,379 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Common Shares repurchased | (2,500) | (15,475) | — | — | (103,630) | — | — | (119,105) | |||||||||||||||||||||||||||||||||||||||
Dividends declared ($0.777 per Common Share) | — | — | — | — | (210,662) | — | — | (210,662) | |||||||||||||||||||||||||||||||||||||||
| Non-controlling interest | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Other comprehensive income - net | — | — | — | — | — | 48,413 | — | 48,413 | |||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | 310,672 | — | 192 | 310,864 | |||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2021 | 271,541 | $ | 1,947,764 | (1,568) | $ | (69,386) | $ | 2,153,326 | $ | 66,238 | $ | 1,511 | $ | 4,099,453 | |||||||||||||||||||||||||||||||||
| Issuance of Common Shares | |||||||||||||||||||||||||||||||||||||||||||||||
| Under employee stock option plans | 950 | 32,714 | — | — | — | — | — | 32,714 | |||||||||||||||||||||||||||||||||||||||
| Under employee stock purchase plans | 842 | 33,806 | — | — | — | — | — | 33,806 | |||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | 69,556 | — | — | — | — | — | 69,556 | |||||||||||||||||||||||||||||||||||||||
| Purchase of treasury stock | — | — | (2,630) | (111,593) | — | — | — | (111,593) | |||||||||||||||||||||||||||||||||||||||
| Issuance of treasury stock | — | (21,013) | 492 | 21,013 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Common Shares repurchased | (3,810) | (24,295) | — | — | (152,692) | — | — | (176,987) | |||||||||||||||||||||||||||||||||||||||
Dividends declared ($0.8836 per Common Share) | — | — | — | — | (237,655) | — | — | (237,655) | |||||||||||||||||||||||||||||||||||||||
| Non-controlling interest | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss - net | — | — | — | — | — | (73,897) | — | (73,897) | |||||||||||||||||||||||||||||||||||||||
| Distribution to non-controlling interest | — | 142 | — | — | — | — | (538) | (396) | |||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | 397,090 | — | 169 | 397,259 | |||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2022 | 269,523 | $ | 2,038,674 | (3,706) | $ | (159,966) | $ | 2,160,069 | $ | (7,659) | $ | 1,142 | $ | 4,032,260 | |||||||||||||||||||||||||||||||||
| Issuance of Common Shares | |||||||||||||||||||||||||||||||||||||||||||||||
| Under employee stock option plans | 245 | 7,830 | — | — | — | — | — | 7,830 | |||||||||||||||||||||||||||||||||||||||
| Under employee stock purchase plans | 1,135 | 31,679 | — | — | — | — | — | 31,679 | |||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | 130,119 | — | — | — | — | — | 130,119 | |||||||||||||||||||||||||||||||||||||||
| Purchase of treasury stock | — | — | (521) | (21,919) | — | — | — | (21,919) | |||||||||||||||||||||||||||||||||||||||
| Issuance of treasury stock | — | (31,355) | 691 | 30,288 | — | — | — | (1,067) | |||||||||||||||||||||||||||||||||||||||
| Common Shares repurchased | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
Dividends declared ($0.9720 per Common Share) | — | — | — | — | (261,464) | — | — | (261,464) | |||||||||||||||||||||||||||||||||||||||
| Non-controlling interest | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss - net | — | — | — | — | — | (45,900) | — | (45,900) | |||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | 150,379 | — | 187 | 150,566 | |||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2023 | 270,903 | $ | 2,176,947 | (3,536) | $ | (151,597) | $ | 2,048,984 | $ | (53,559) | $ | 1,329 | $ | 4,022,104 | |||||||||||||||||||||||||||||||||
10
OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
(unaudited)
| Three Months Ended June 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| Cash flows from operating activities: | |||||||||||
Net income (loss) for the period | $ | (48,685) | $ | 102,235 | |||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization of intangible assets | 229,482 | 125,321 | |||||||||
| Share-based compensation expense | 41,904 | 24,464 | |||||||||
| Pension expense | 3,401 | 1,723 | |||||||||
| Amortization of debt discount and issuance costs | 8,257 | 1,486 | |||||||||
| Write-off of right of use assets | 2,507 | 17,707 | |||||||||
| Loss on extinguishment of debt | — | — | |||||||||
| Loss on sale and write down of property and equipment | 903 | 198 | |||||||||
| Deferred taxes | 29,140 | (79,420) | |||||||||
| Share in net (income) loss of equity investees | 11,530 | 401 | |||||||||
| Changes in financial instruments | 16,274 | — | |||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | 27,335 | 13,413 | |||||||||
| Contract assets | (43,643) | (10,758) | |||||||||
| Prepaid expenses and other current assets | 42,151 | 1,768 | |||||||||
| Income taxes | (116,569) | 45,824 | |||||||||
| Accounts payable and accrued liabilities | 10,582 | 41,561 | |||||||||
| Deferred revenue | (85,764) | (30,878) | |||||||||
| Other assets | (5,299) | 771 | |||||||||
| Operating lease assets and liabilities, net | (8,205) | (3,876) | |||||||||
Net cash provided by operating activities | 115,301 | 251,940 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Additions of property and equipment | (24,060) | (38,172) | |||||||||
| Purchase of Micro Focus International PLC, net of cash acquired | (2,357) | — | |||||||||
| Purchase of Bricata Inc. | — | 174 | |||||||||
Net cash used in investing activities | (26,417) | (37,998) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from issuance of Common Shares from exercise of stock options and ESPP | 14,159 | 10,738 | |||||||||
| Repayment of long-term debt and Revolver | (186,463) | (2,500) | |||||||||
| Debt issuance costs | (690) | — | |||||||||
| Repurchase of Common Shares | — | (40,869) | |||||||||
| Purchase of treasury stock | (21,919) | (35,933) | |||||||||
| Payments of dividends to shareholders | (65,068) | (59,042) | |||||||||
| Other financing activities | 758 | — | |||||||||
Net cash used in financing activities | (259,223) | (127,606) | |||||||||
Foreign exchange gain (loss) on cash held in foreign currencies | 4,571 | (26,276) | |||||||||
Increase (decrease) in cash, cash equivalents and restricted cash during the period | (165,768) | 60,060 | |||||||||
| Cash, cash equivalents and restricted cash at beginning of the period | 1,399,720 | 1,635,851 | |||||||||
| Cash, cash equivalents and restricted cash at end of the period | $ | 1,233,952 | $ | 1,695,911 | |||||||
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, 2023 | June 30, 2022 | |||||||||
| Cash and cash equivalents | $ | 1,231,625 | $ | 1,693,741 | |||||||
Restricted cash (1) | 2,327 | 2,170 | |||||||||
| Total cash, cash equivalents and restricted cash | $ | 1,233,952 | $ | 1,695,911 | |||||||
(1) Restricted cash is classified under the Prepaid expenses and other current assets and Other assets line items on the Consolidated Balance Sheets. | |||||||||||
12
OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
| Year Ended June 30, | |||||||||||||||||||||||||||||
| 2023 | 2022 | 2021 | |||||||||||||||||||||||||||
| Cash flows from operating activities: | |||||||||||||||||||||||||||||
Net income for the period | $ | 150,566 | $ | 397,259 | $ | 310,864 | |||||||||||||||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||||||||||||||||
| Depreciation and amortization of intangible assets | 657,351 | 503,953 | 520,605 | ||||||||||||||||||||||||||
| Share-based compensation expense | 130,302 | 69,556 | 51,969 | ||||||||||||||||||||||||||
| Pension expense | 9,207 | 6,606 | 6,616 | ||||||||||||||||||||||||||
| Amortization of debt discount and issuance costs | 16,753 | 5,422 | 4,548 | ||||||||||||||||||||||||||
| Write-off of right of use assets | 9,626 | 17,707 | — | ||||||||||||||||||||||||||
| Loss on extinguishment of debt | 8,152 | 27,413 | — | ||||||||||||||||||||||||||
| Loss on sale and write down of property and equipment | 2,331 | 294 | 2,771 | ||||||||||||||||||||||||||
| Deferred taxes | (149,560) | (36,088) | 73,039 | ||||||||||||||||||||||||||
Share in net (income) loss of equity investees | 23,077 | (58,702) | (62,897) | ||||||||||||||||||||||||||
| Changes in financial instruments | 128,841 | — | — | ||||||||||||||||||||||||||
| Changes in operating assets and liabilities: | |||||||||||||||||||||||||||||
| Accounts receivable | 168,604 | 81,841 | 60,954 | ||||||||||||||||||||||||||
| Contract assets | (73,539) | (37,966) | (39,333) | ||||||||||||||||||||||||||
| Prepaid expenses and other current assets | (23,035) | (13,954) | 37,733 | ||||||||||||||||||||||||||
| Income taxes | 14,948 | 34,589 | (140,763) | ||||||||||||||||||||||||||
| Accounts payable and accrued liabilities | (127,092) | (24,177) | 26,088 | ||||||||||||||||||||||||||
| Deferred revenue | (128,395) | (5,236) | 39,295 | ||||||||||||||||||||||||||
| Other assets | (11,297) | 17,297 | 11,914 | ||||||||||||||||||||||||||
| Operating lease assets and liabilities, net | (27,635) | (4,004) | (27,283) | ||||||||||||||||||||||||||
Net cash provided by operating activities | 779,205 | 981,810 | 876,120 | ||||||||||||||||||||||||||
| Cash flows from investing activities: | |||||||||||||||||||||||||||||
| Additions of property and equipment | (123,832) | (93,109) | (63,675) | ||||||||||||||||||||||||||
| Purchase of Micro Focus International PLC, net of cash acquired | (5,657,963) | — | — | ||||||||||||||||||||||||||
| Purchase of Zix Corporation, net of cash acquired | — | (856,175) | — | ||||||||||||||||||||||||||
| Purchase of Bricata Inc. | — | (17,753) | — | ||||||||||||||||||||||||||
| Purchase of XMedius | — | — | 444 | ||||||||||||||||||||||||||
| Purchase of Dynamic Solutions Group Inc. | — | — | (971) | ||||||||||||||||||||||||||
Realized gain (loss) on financial instruments | 131,248 | — | — | ||||||||||||||||||||||||||
| Other investing activities | (873) | (3,922) | (4,568) | ||||||||||||||||||||||||||
Net cash used in investing activities | (5,651,420) | (970,959) | (68,770) | ||||||||||||||||||||||||||
| Cash flows from financing activities: | |||||||||||||||||||||||||||||
| Proceeds from issuance of Common Shares from exercise of stock options and ESPP | 39,331 | 67,215 | 80,067 | ||||||||||||||||||||||||||
| Proceeds from long-term debt and Revolver | 4,927,450 | 1,500,000 | — | ||||||||||||||||||||||||||
| Repayment of long-term debt and Revolver | (202,926) | (860,000) | (610,000) | ||||||||||||||||||||||||||
| Debt extinguishment costs | — | (24,969) | — | ||||||||||||||||||||||||||
| Debt issuance costs | (77,899) | (17,159) | — | ||||||||||||||||||||||||||
| Repurchase of Common Shares | — | (176,987) | (119,105) | ||||||||||||||||||||||||||
| Purchase of treasury stock | (21,919) | (111,593) | (64,847) | ||||||||||||||||||||||||||
| Distribution to non-controlling interest | — | (396) | — | ||||||||||||||||||||||||||
| Payments of dividends to shareholders | (259,549) | (237,655) | (210,662) | ||||||||||||||||||||||||||
| Other financing activities | (1,435) | — | — | ||||||||||||||||||||||||||
Net cash provided by (used in) financing activities | 4,403,053 | 138,456 | (924,547) | ||||||||||||||||||||||||||
Foreign exchange gain (loss) on cash held in foreign currencies | 7,203 | (63,196) | 29,734 | ||||||||||||||||||||||||||
Increase (decrease) in cash, cash equivalents and restricted cash during the period | (461,959) | 86,111 | (87,463) | ||||||||||||||||||||||||||
| Cash, cash equivalents and restricted cash at beginning of the period | 1,695,911 | 1,609,800 | 1,697,263 | ||||||||||||||||||||||||||
| Cash, cash equivalents and restricted cash at end of the period | $ | 1,233,952 | $ | 1,695,911 | $ | 1,609,800 | |||||||||||||||||||||||
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, 2023 | June 30, 2022 | June 30, 2021 | ||||||||||||||
| Cash and cash equivalents | $ | 1,231,625 | $ | 1,693,741 | $ | 1,607,306 | |||||||||||
Restricted cash (1) | 2,327 | 2,170 | 2,494 | ||||||||||||||
| Total cash, cash equivalents and restricted cash | $ | 1,233,952 | $ | 1,695,911 | $ | 1,609,800 | |||||||||||
(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 (loss) or earnings (loss) per share, attributable to OpenText, on a diluted basis, excluding the effects of the amortization of acquired intangible assets, other income (expense), share-based compensation, and special charges (recoveries), all net of tax and any tax benefits/expense items unrelated to current period income, as further described in the tables below. Non-GAAP-based gross profit is the arithmetical sum of GAAP-based gross profit and the amortization of acquired technology-based intangible assets and share-based compensation within cost of sales. Non-GAAP-based gross margin is calculated as Non-GAAP-based gross profit expressed as a percentage of total revenue. Non-GAAP-based income from operations is calculated as GAAP-based income from operations, excluding the amortization of acquired intangible assets, special charges (recoveries), and share-based compensation expense.
Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) is consistently calculated as GAAP-based net income (loss), attributable to OpenText, excluding interest income (expense), provision for (recovery of) income taxes, depreciation and amortization of acquired intangible assets, other income (expense), share-based compensation and special charges (recoveries). Adjusted EBITDA margin is calculated as adjusted EBITDA expressed as a percentage of total revenue.
The Company's management believes that the presentation of the above defined Non-GAAP financial measures provides useful information to investors because they portray the financial results of the Company before the impact of certain non-operational charges. The use of the term “non-operational charge” is defined for this purpose as an expense that does not impact the ongoing operating decisions taken by the Company's management. These items are excluded based upon the way the Company's management evaluates the performance of the Company's business for use in the Company's internal reports and are not excluded in the sense that they may be used under U.S. GAAP.
The Company does not acquire businesses on a predictable cycle, and therefore believes that the presentation of Non-GAAP measures, which in certain cases adjust for the impact of amortization of intangible assets and the related tax effects that are primarily related to acquisitions, will provide readers of financial statements with a more consistent basis for comparison across accounting periods and be more useful in helping readers understand the Company’s operating results and underlying operational trends. Additionally, the Company has engaged in various restructuring activities over the past several years, primarily due to acquisitions and in response to our return to office planning, that have resulted in costs associated with reductions in headcount, consolidation of leased facilities and related costs, all which are recorded under the Company’s “Special charges (recoveries)” caption on the Consolidated Statements of Income. Each restructuring activity is a discrete event based on a unique set of business objectives or circumstances, and each differs in terms of its operational implementation, business impact and scope, and the size of each restructuring plan can vary significantly from period to period. Therefore, the Company believes that the exclusion of these special charges (recoveries) will also better aid readers of financial statements in the understanding and comparability of the Company's operating results and underlying operational trends.
In summary, the Company believes the provision of supplemental Non-GAAP measures allow investors to evaluate the operational and financial performance of the Company's core business using the same evaluation measures that management uses, and is therefore a useful indication of OpenText's performance or expected performance of future operations and facilitates period-to-period comparison of operating performance (although prior performance is not necessarily indicative of future performance). As a result, the Company considers it appropriate and reasonable to provide, in addition to U.S. GAAP measures, supplementary Non-GAAP financial measures that exclude certain items from the presentation of its financial results. Information reconciling certain forward-looking GAAP measures to non-GAAP measures related to F'24 targets and F’26 aspirations, including A-EBITDA is not available without unreasonable effort due to high variability, complexity and uncertainty with respect to forecasting and quantifying certain amounts that are necessary for such reconciliations.
The following charts provide unaudited reconciliations of U.S. GAAP-based financial measures to Non-GAAP-based financial measures for the following periods presented. The Micro Focus Acquisition significantly impacts period-over-period comparability.
15
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the three months ended June 30, 2023 (In thousands, except for per share data) | ||||||||||||||||||||
| Three Months Ended June 30, 2023 | ||||||||||||||||||||
GAAP-based Measures | GAAP-based Measures % of Total Revenue | Adjustments | Note | Non-GAAP-based Measures | Non-GAAP-based Measures % of Total Revenue | |||||||||||||||
| Cost of revenues | ||||||||||||||||||||
| Cloud services and subscriptions | $ | 166,394 | $ | (2,876) | (1) | $ | 163,518 | |||||||||||||
| Customer support | 86,695 | (1,213) | (1) | 85,482 | ||||||||||||||||
| Professional service and other | 90,498 | (1,826) | (1) | 88,672 | ||||||||||||||||
| Amortization of acquired technology-based intangible assets | 77,045 | (77,045) | (2) | — | ||||||||||||||||
| GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%) | 1,064,014 | 71.4% | 82,960 | (3) | 1,146,974 | 76.9% | ||||||||||||||
| Operating expenses | ||||||||||||||||||||
| Research and development | 249,958 | (13,584) | (1) | 236,374 | ||||||||||||||||
| Sales and marketing | 333,244 | (13,467) | (1) | 319,777 | ||||||||||||||||
| General and administrative | 136,866 | (8,938) | (1) | 127,928 | ||||||||||||||||
| Amortization of acquired customer-based intangible assets | 121,285 | (121,285) | (2) | — | ||||||||||||||||
| Special charges (recoveries) | 70,222 | (70,222) | (4) | — | ||||||||||||||||
GAAP-based income from operations / Non-GAAP-based income from operations | 121,287 | 310,456 | (5) | 431,743 | ||||||||||||||||
| Other income (expense), net | (25,355) | 25,355 | (6) | — | ||||||||||||||||
Provision for (recovery of) income taxes | (1,212) | 41,240 | (7) | 40,028 | ||||||||||||||||
GAAP-based net loss / Non-GAAP-based net income, attributable to OpenText | (48,734) | 294,571 | (8) | 245,837 | ||||||||||||||||
| GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText | $ | (0.18) | $ | 1.09 | (8) | $ | 0.91 | |||||||||||||
(1) Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.
(2) Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.
(3) GAAP-based and Non-GAAP-based gross profit stated in dollars and gross margin stated as a percentage of total revenue.
(4) Adjustment relates to the exclusion of special charges (recoveries) from our Non-GAAP-based operating expenses as special charges (recoveries) are generally incurred in the periods relevant to an acquisition and include certain charges or recoveries that are not indicative or related to continuing operations and are therefore excluded from our internal analysis of operating results.
(5) GAAP-based and Non-GAAP-based income from operations stated in dollars.
(6)Adjustment relates to the exclusion of other income (expense) from our Non-GAAP-based operating expenses as other income (expense) generally relates to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results. Other income (expense) also includes our share of income (losses) from our holdings in investments as a limited partner. We do not actively trade equity securities in these privately held companies nor do we plan our ongoing operations based around any anticipated fundings or distributions from these investments. We exclude gains and losses on these investments as we do not believe they are reflective of our ongoing business and operating results. Other income (expense) also includes unrealized and realized gains (losses) on our derivatives which are not designated as hedges. We exclude gains and losses on these derivatives as we do not believe they are reflective of our ongoing business and operating results.
16
(7)Adjustment relates to differences between the GAAP-based tax provision rate of approximately 2% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based net income. Such excluded items include amortization, share-based compensation, special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves and “book to return” adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately 14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.
(8)Reconciliation of GAAP-based loss to Non-GAAP-based net income:
| Three Months Ended June 30, 2023 | ||||||||
| Per share diluted | ||||||||
GAAP-based net loss, attributable to OpenText | $ | (48,734) | $ | (0.18) | ||||
| Add: | ||||||||
| Amortization | 198,330 | 0.73 | ||||||
| Share-based compensation | 41,904 | 0.15 | ||||||
| Special charges (recoveries) | 70,222 | 0.26 | ||||||
| Other (income) expense, net | 25,355 | 0.10 | ||||||
GAAP-based recovery of income taxes | (1,212) | — | ||||||
Non-GAAP-based recovery of income taxes | (40,028) | (0.15) | ||||||
Non-GAAP-based net income, attributable to OpenText | $ | 245,837 | $ | 0.91 | ||||
Reconciliation of Adjusted EBITDA
| Three Months Ended June 30, 2023 | |||||
GAAP-based net loss, attributable to OpenText | $ | (48,734) | |||
| Add: | |||||
Recovery of income taxes | (1,212) | ||||
| Interest and other related expense, net | 145,829 | ||||
| Amortization of acquired technology-based intangible assets | 77,045 | ||||
| Amortization of acquired customer-based intangible assets | 121,285 | ||||
| Depreciation | 31,152 | ||||
| Share-based compensation | 41,904 | ||||
| Special charges (recoveries) | 70,222 | ||||
| Other (income) expense, net | 25,355 | ||||
| Adjusted EBITDA | $ | 462,846 | |||
GAAP-based net loss margin | (3.3) | % | |||
| Adjusted EBITDA margin | 31.0 | % | |||
Reconciliation of Free cash flows
| Three Months Ended June 30, 2023 | |||||
| GAAP-based cash flows provided by operating activities | $ | 115,301 | |||
| Add: | |||||
Capital expenditures (1) | (24,060) | ||||
| Free cash flows | $ | 91,241 | |||
(1) Defined as “Additions of property and equipment” in the Consolidated Statements of Cash Flows. | |||||
17
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the year ended June 30, 2023 (In thousands, except for per share data) | ||||||||||||||||||||
| Year Ended June 30, 2023 | ||||||||||||||||||||
GAAP-based Measures | GAAP-based Measures % of Total Revenue | Adjustments | Note | Non-GAAP-based Measures | Non-GAAP-based Measures % of Total Revenue | |||||||||||||||
| Cost of revenues | ||||||||||||||||||||
| Cloud services and subscriptions | $ | 590,165 | $ | (10,664) | (1) | $ | 579,501 | |||||||||||||
| Customer support | 209,705 | (3,627) | (1) | 206,078 | ||||||||||||||||
| Professional service and other | 276,888 | (6,998) | (1) | 269,890 | ||||||||||||||||
| Amortization of acquired technology-based intangible assets | 223,184 | (223,184) | (2) | — | ||||||||||||||||
| GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%) | 3,168,393 | 70.6% | 244,473 | (3) | 3,412,866 | 76.1% | ||||||||||||||
| Operating expenses | ||||||||||||||||||||
| Research and development | 680,587 | (39,065) | (1) | 641,522 | ||||||||||||||||
| Sales and marketing | 948,598 | (41,710) | (1) | 906,888 | ||||||||||||||||
| General and administrative | 419,590 | (28,238) | (1) | 391,352 | ||||||||||||||||
| Amortization of acquired customer-based intangible assets | 326,406 | (326,406) | (2) | — | ||||||||||||||||
| Special charges (recoveries) | 169,159 | (169,159) | (4) | — | ||||||||||||||||
GAAP-based income from operations / Non-GAAP-based income from operations | 516,292 | 849,051 | (5) | 1,365,343 | ||||||||||||||||
| Other income (expense), net | 34,469 | (34,469) | (6) | — | ||||||||||||||||
Provision for income taxes | 70,767 | 74,261 | (7) | 145,028 | ||||||||||||||||
GAAP-based net income / Non-GAAP-based net income, attributable to OpenText | 150,379 | 740,321 | (8) | 890,700 | ||||||||||||||||
| GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText | $ | 0.56 | $ | 2.73 | (8) | $ | 3.29 | |||||||||||||
(1)Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.
(2)Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.
(3)GAAP-based and Non-GAAP-based gross profit stated in dollars and gross margin stated as a percentage of total revenue.
(4)Adjustment relates to the exclusion of special charges (recoveries) from our Non-GAAP-based operating expenses as special charges (recoveries) are generally incurred in the periods relevant to an acquisition and include certain charges or recoveries that are not indicative or related to continuing operations and are therefore excluded from our internal analysis of operating results.
(5)GAAP-based and Non-GAAP-based income from operations stated in dollars.
(6)Adjustment relates to the exclusion of other income (expense) from our Non-GAAP-based operating expenses as other income (expense) generally relates to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results. Other income (expense) also includes our share of income (losses) from our holdings in investments as a limited partner. We do not actively trade equity securities in these privately held companies nor do we plan our ongoing operations based around any anticipated fundings or distributions from these investments. We exclude gains and losses on these investments as we do not believe they are reflective of our ongoing business and operating results. Other income (expense) also includes unrealized and realized gains (losses) on our derivatives which are not designated as hedges. We exclude gains and losses on these derivatives as we do not believe they are reflective of our ongoing business and operating results.
18
(7)Adjustment relates to differences between the GAAP-based tax provision rate of approximately 32% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based net income. Such excluded items include amortization, share-based compensation, special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves and “book to return” adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately 14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.
(8)Reconciliation of GAAP-based net income to Non-GAAP-based net income:
| Year Ended June 30, 2023 | ||||||||
| Per share diluted | ||||||||
GAAP-based net income, attributable to OpenText | $ | 150,379 | $ | 0.56 | ||||
| Add: | ||||||||
| Amortization | 549,590 | 2.03 | ||||||
| Share-based compensation | 130,302 | 0.48 | ||||||
| Special charges (recoveries) | 169,159 | 0.63 | ||||||
| Other (income) expense, net | (34,469) | (0.13) | ||||||
GAAP-based provision for income taxes | 70,767 | 0.26 | ||||||
Non-GAAP-based recovery of income taxes | (145,028) | (0.54) | ||||||
Non-GAAP-based net income, attributable to OpenText | $ | 890,700 | $ | 3.29 | ||||
Reconciliation of Adjusted EBITDA
| Year Ended June 30, 2023 | |||||
GAAP-based net income, attributable to OpenText | $ | 150,379 | |||
| Add: | |||||
Provision for income taxes | 70,767 | ||||
| Interest and other related expense, net | 329,428 | ||||
| Amortization of acquired technology-based intangible assets | 223,184 | ||||
| Amortization of acquired customer-based intangible assets | 326,406 | ||||
| Depreciation | 107,761 | ||||
| Share-based compensation | 130,302 | ||||
| Special charges (recoveries) | 169,159 | ||||
| Other (income) expense, net | (34,469) | ||||
| Adjusted EBITDA | $ | 1,472,917 | |||
GAAP-based net income margin | 3.4 | % | |||
| Adjusted EBITDA margin | 32.8 | % | |||
Reconciliation of Free cash flows
| Year Ended June 30, 2023 | |||||
| GAAP-based cash flows provided by operating activities | $ | 779,205 | |||
| Add: | |||||
Capital expenditures (1) | (123,832) | ||||
| Free cash flows | $ | 655,373 | |||
(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, 2023 (In thousands, except for per share data) | ||||||||||||||||||||
Three Months Ended March 31, 2023 | ||||||||||||||||||||
GAAP-based Measures | GAAP-based Measures % of Total Revenue | Adjustments | Note | Non-GAAP-based Measures | Non-GAAP-based Measures % of Total Revenue | |||||||||||||||
| Cost of revenues | ||||||||||||||||||||
| Cloud services and subscriptions | $ | 157,658 | $ | (2,943) | (1) | $ | 154,715 | |||||||||||||
| Customer support | 67,067 | (1,157) | (1) | 65,910 | ||||||||||||||||
| Professional service and other | 78,526 | (1,884) | (1) | 76,642 | ||||||||||||||||
| Amortization of acquired technology-based intangible assets | 62,639 | (62,639) | (2) | — | ||||||||||||||||
| GAAP-based gross profit and gross margin (%) /Non-GAAP-based gross profit and gross margin (%) | 874,944 | 70.3% | 68,623 | (3) | 943,567 | 75.8% | ||||||||||||||
| Operating expenses | ||||||||||||||||||||
| Research and development | 210,731 | (10,801) | (1) | 199,930 | ||||||||||||||||
| Sales and marketing | 271,013 | (11,947) | (1) | 259,066 | ||||||||||||||||
| General and administrative | 127,047 | (7,636) | (1) | 119,411 | ||||||||||||||||
| Amortization of acquired customer-based intangible assets | 97,237 | (97,237) | (2) | — | ||||||||||||||||
| Special charges (recoveries) | 74,350 | (74,350) | (4) | — | ||||||||||||||||
GAAP-based income from operations / Non-GAAP-based income from operations | 63,989 | 270,594 | (5) | 334,583 | ||||||||||||||||
| Other income (expense), net | 85,706 | (85,706) | (6) | — | ||||||||||||||||
Provision for (recovery of) income taxes | (12,420) | 44,631 | (7) | 32,211 | ||||||||||||||||
GAAP-based net income / Non-GAAP-based net income, attributable to OpenText | 57,556 | 140,257 | (8) | 197,813 | ||||||||||||||||
| GAAP-based earnings (loss) per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText | $ | 0.21 | $ | 0.52 | (8) | $ | 0.73 | |||||||||||||
(1) Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.
(2) Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.
(3) GAAP-based and Non-GAAP-based gross profit stated in dollars and gross margin stated as a percentage of total revenue.
(4) Adjustment relates to the exclusion of special charges (recoveries) from our Non-GAAP-based operating expenses as special charges (recoveries) are generally incurred in the periods relevant to an acquisition and include certain charges or recoveries that are not indicative or related to continuing operations, and are therefore excluded from our internal analysis of operating results.
(5) GAAP-based and Non-GAAP-based income from operations stated in dollars.
(6) Adjustment relates to the exclusion of other income (expense) from our Non-GAAP-based operating expenses as other income (expense) generally relates to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results. Other income (expense) also includes our share of income (losses) from our holdings in investments as a limited partner. We do not actively trade equity securities in these privately held companies nor do we plan our ongoing operations based around any anticipated fundings or distributions from these investments. We exclude gains and losses on these investments as we do not believe they are reflective of our ongoing business and operating results. Other income (expense) also includes unrealized gains (losses) on our derivatives which are not designated as hedges. We exclude gains and losses on these derivatives as we do not believe they are reflective on our ongoing business and operating results.
20
(7) Adjustment relates to differences between the GAAP-based tax provision rate of approximately 27% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded items include amortization, share-based compensation, special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves, and “book to return” adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately 14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.
(8) Reconciliation of GAAP-based net income to Non-GAAP-based net income:
Three Months Ended March 31, 2023 | ||||||||
| Per share diluted | ||||||||
GAAP-based net income, attributable to OpenText | $ | 57,556 | $ | 0.21 | ||||
| Add: | ||||||||
| Amortization | 159,876 | 0.59 | ||||||
| Share-based compensation | 36,368 | 0.13 | ||||||
| Special charges (recoveries) | 74,350 | 0.28 | ||||||
| Other (income) expense, net | (85,706) | (0.32) | ||||||
GAAP-based recovery of income taxes | (12,420) | (0.04) | ||||||
Non-GAAP-based recovery of income taxes | (32,211) | (0.12) | ||||||
Non-GAAP-based net income, attributable to OpenText | $ | 197,813 | $ | 0.73 | ||||
Reconciliation of Adjusted EBITDA
Three Months Ended March 31, 2023 | |||||
GAAP-based net income, attributable to OpenText | $ | 57,556 | |||
| Add: | |||||
Recovery of income taxes | (12,420) | ||||
| Interest and other related expense, net | 104,502 | ||||
| Amortization of acquired technology-based intangible assets | 62,639 | ||||
| Amortization of acquired customer-based intangible assets | 97,237 | ||||
| Depreciation | 30,577 | ||||
| Share-based compensation | 36,368 | ||||
| Special charges (recoveries) | 74,350 | ||||
| Other (income) expense, net | (85,706) | ||||
| Adjusted EBITDA | $ | 365,103 | |||
GAAP-based net income margin | 4.6 | % | |||
| Adjusted EBITDA margin | 29.3 | % | |||
Reconciliation of Free cash flows
Three Months Ended March 31, 2023 | |||||
| GAAP-based cash flows provided by operating activities | $ | 336,775 | |||
| Add: | |||||
Capital expenditures (1) | (31,233) | ||||
| Free cash flows | $ | 305,542 | |||
(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, 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 (recovery of) 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 26%; 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-
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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 26%, 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 recovery of income taxes | (5,005) | (0.02) | ||||||
Non-GAAP-based recovery of 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: | |||||
Recovery of 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. | |||||
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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-
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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:
| 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 recovery of 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. | |||||
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(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, 2023 and 2022:
| Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | ||||||||||||||||
| Currencies | % of Revenue | % of Expenses(1) | % of Revenue | % of Expenses(1) | |||||||||||||
| EURO | 21 | % | 12 | % | 22 | % | 12 | % | |||||||||
| GBP | 5 | % | 9 | % | 3 | % | 5 | % | |||||||||
| CAD | 3 | % | 10 | % | 3 | % | 14 | % | |||||||||
| USD | 60 | % | 48 | % | 63 | % | 54 | % | |||||||||
| Other | 11 | % | 21 | % | 9 | % | 15 | % | |||||||||
| Total | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||
| Year Ended June 30, 2023 | Year Ended June 30, 2022 | ||||||||||||||||
| Currencies | % of Revenue | % of Expenses(1) | % of Revenue | % of Expenses(1) | |||||||||||||
| EURO | 20 | % | 12 | % | 23 | % | 13 | % | |||||||||
| GBP | 5 | % | 7 | % | 4 | % | 6 | % | |||||||||
| CAD | 3 | % | 11 | % | 3 | % | 14 | % | |||||||||
| USD | 62 | % | 51 | % | 62 | % | 53 | % | |||||||||
| Other | 10 | % | 19 | % | 8 | % | 14 | % | |||||||||
| 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).
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