May 1, 2019

OpenText Reports Third Quarter Fiscal Year 2019 Financial Results

Total Revenues of $719 million, up 5% Y/Y

Annual Recurring Revenues of $549 million, up 5% Y/Y

Operating Cash Flows of $286 million, up 6% Y/Y

Quarterly cash dividend increased by 15%

WATERLOO, Ontario, May 1, 2019 /PRNewswire/ -- Open Text Corporation (NASDAQ: OTEX), (TSX: OTEX), "The Information Company," today announced its financial results for the third quarter ended March 31, 2019.

"OpenText delivered record third quarter results with total revenues of $719 million, up 5% or $739 million, up 8% in constant currency.  We also delivered strong adjusted EBITDA margin of 36%, representing 15% growth," said Mark J. Barrenechea, OpenText CEO & CTO.  "OpenText annual recurring revenues grew 5% to $549 million, and cloud revenues grew 14% to $239 million.  Customers are looking for an information advantage provided through Enterprise Information Management (EIM).  Building upon our vision of the Intelligent and Connected Enterprise, with a continued focus on customer-driven innovation, we are strategically well positioned to compete and win in the EIM marketplace."  

Barrenechea further added, "Our commitment to Total Growth leverages the OpenText Business System as a framework for both organic growth and future M&A opportunities. With this framework we are well positioned to scale OpenText to new levels in the coming years. Supported by confidence in our long-term model and cash flow performance, we are announcing a 15% increase to our quarterly cash dividend to $0.1746 per share."

"We had solid business execution during the quarter, with a focus on growing margins and cash flows," said Madhu Ranganathan, OpenText EVP and CFO. "We generated operating cash flows of $286 million, an increase of 6% from the prior year, while integrating two acquisitions during the quarter. The results reflect continued strength of our operational focus."

Ranganathan added, "Our balance sheet and liquidity position remain strong with approximately $765 million of cash at the end of the quarter and a 1.7x consolidated net leverage ratio to support our Total Growth strategy."

Financial Highlights for Q3 2019 with Year Over Year Comparisons

Summary of Quarterly Results









(in millions except per share data)

Q3 FY19

Q3 FY18

$ Change

% Change
(Y/Y)


Q3 FY19 in
CC*

% Change
in CC*


Revenues:









Cloud services and subscriptions

$238.6


$209.1


$29.5


14.1

%


$242.7


16.1

%


Customer support

310.8


312.3


(1.5)


(0.5)

%


319.4


2.3

%


Total annual recurring revenues**

$549.4


$521.4


$28.0


5.4

%


$562.1


7.8

%


License

98.7


84.1


14.6


17.4

%


102.8


22.2

%


Professional service and other

71.1


80.4


(9.3)


(11.6)

%


73.6


(8.4)

%


Total revenues

$719.1


$685.9


$33.3


4.9

%


$738.5


7.7

%


GAAP-based operating income

$135.9


$102.8


$33.1


32.2

%





Non-GAAP-based operating income (1)

$236.8


$204.6


$32.3


15.8

%


$241.2


17.9

%


GAAP-based EPS, diluted

$0.27


$0.22


$0.05


22.7

%





Non-GAAP-based EPS, diluted (1)(2)

$0.64


$0.54


$0.10


18.5

%


$0.65


20.4

%


GAAP-based net income attributable to OpenText

$72.8


$58.8


$14.0


23.8

%





Adjusted EBITDA (1)

$261.8


$227.6


$34.2


15.0

%





Operating cash flows

$286.0


$270.6


$15.4


5.7

%





 

Summary of YTD Results









(in millions except per share data)

FY19 YTD

FY18 YTD

$ Change

% Change
(Y/Y)


FY19 YTD
in CC*

% Change
in CC*


Revenues:









Cloud services and subscriptions

$665.9


$611.1


$54.8


9.0

%


$672.2


10.0

%


Customer support

932.7


915.8


16.9


1.8

%


945.6


3.3

%


Total annual recurring revenues**

$1,598.6


$1,526.8


$71.8


4.7

%


$1,617.8


6.0

%


License

308.4


297.6


10.8


3.6

%


315.2


5.9

%


Professional service and other

214.6


236.6


(22.0)


(9.3)

%


219.8


(7.1)

%


Total revenues

$2,121.5


$2,061.0


$60.6


2.9

%


$2,152.8


4.5

%


GAAP-based operating income

$409.0


$357.3


$51.7


14.5

%





Non-GAAP-based operating income (1)

$743.7


$674.4


$69.3


10.3

%


$747.2


10.8

%


GAAP-based EPS, diluted

$0.79


$0.68


$0.11


16.2

%





Non-GAAP-based EPS, diluted (1)(2)

$2.04


$1.84


$0.20


10.9

%


$2.05


11.4

%


GAAP-based net income attributable to OpenText

$213.5


$180.5


$33.0


18.3

%





Adjusted EBITDA (1)

$816.4


$738.5


$77.8


10.5

%





Operating cash flows

$646.5


$504.0


$142.5


28.3

%






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

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

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


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

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

OpenText Quarterly Business Highlights

  • 20 customer transactions over $1 million, 8 in the OpenText Cloud and 12 off-cloud
  • Financial, Consumer Goods, Services, Technology and Public Sector industries saw the most demand in cloud and license
  • Key customer wins in the quarter included Tata Steel Europe, Norton Rose Fulbright, NTT DATA Group, the European Parliament and Department of Public Works and Government Services Canada
  • OpenText Enterprise World, Europe's largest EIM conference launches organizations on a path to information advantage
  • Enterprise World Europe showcases innovations in OpenText Enterprise Information Management
  • OpenText showcases how intelligence, integration and automation drive innovation in Content Services at AIIM Conference 2019
  • OpenText hosts Enterprise World Asia – invests and drives growth in Asia Pacific region

Dividend Program Highlights

As part of our quarterly, non-cumulative cash dividend program, the Board declared on April 30, 2019 a cash dividend of $0.1746 per common share. The record date for this dividend is May 31, 2019 and the payment date is June 21, 2019. Future declarations of dividends and the establishment of future record and payment dates are subject to the final determination and discretion of the Board of Directors.

Summary of Quarterly Results









Q3 FY19

Q2 FY19

Q3 FY18

% Change
(Q3 FY19 vs
Q2 FY19)


% Change
(Q3 FY19 vs
Q3 FY18)


Revenue (million)

$719.1


$735.2


$685.9


(2.2)

%


4.9

%


GAAP-based gross margin

66.7

%

69.0

%

64.6

%

(230)


bps

210


bps

GAAP-based EPS, diluted

$0.27


$0.39


$0.22


(30.8)

%


22.7

%


Non-GAAP-based gross margin (1)

73.0

%

75.7

%

71.6

%

(270)


bps

140


bps

Non-GAAP-based EPS, diluted (1)(2)

$0.64


$0.80


$0.54


(20.0)

%


18.5

%



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

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

Upcoming Investor Events

OpenText invites institutional investors and financial analysts to attend Enterprise World Toronto on July 9, 2019. The conference offers an opportunity for investors and financial analysts to learn about OpenText and the company's latest innovations in Enterprise Information Management.  It is a one-stop opportunity to research the company, with full conference access allowing open dialogue with OpenText customers and partners onsite.

OpenText to host Capital Markets Day for Institutional Investors and Financial Analysts in New York on September 6, 2019. This will include formal presentations by the OpenText executive team for an annual strategic update.  Further details to follow closer to the event date.     

Conference Call Information

The public is invited to listen to the earnings conference call today at 5:00 p.m. ET (2:00 p.m. PT) by dialing 1-800-319-4610 (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 May 1, 2019 at 7:00 p.m. ET through 11:59 p.m. on May 15, 2019 and can be accessed by dialing 1-855-669-9658 (toll-free) or +1-604-674-8052 (international) and using passcode 3118 followed by the number sign.

Please see below note (2) for a reconciliation of U.S. GAAP-based financial measures used in this press release, to non-U.S. GAAP-based financial measures. Additionally, "off-cloud" is a term we use to describe license transactions.

About OpenText

OpenText, The Information Company™, a market leader in Enterprise Information Management software and solutions, enabling companies to manage, leverage, secure and gain insight into their enterprise information, on premises or in the cloud. For more information about OpenText (NASDAQ/TSX: OTEX) visit www.opentext.com.

Cautionary Statement Regarding Forward-Looking Statements
Certain statements in this press release, including statements about the focus of Open Text Corporation ("OpenText" or "the Company") in our fiscal year ending June 30, 2019 (Fiscal 2019) on growth in earnings and cash flows, creating value through investments in broader Enterprise Information Management (EIM) capabilities, distribution, the Company's presence in the cloud and in growth markets, expected growth in our revenue lines, total growth from acquisitions, innovation and organic initiatives, and distribution expansion, the focus on recurring revenues, improving efficiency, expanding cash flow and strengthening the business, adjusted operating income and cash flow, its financial condition, the adjusted operating margin target range, results of operations and earnings, announced acquisitions, ongoing tax matters, the integration of the acquired businesses, expected timing, charges and savings related to restructuring activities, declaration of quarterly dividends, future tax rates, new platform and product offerings, scaling OpenText to new levels in Fiscal 2019 and beyond, the anticipated size, benefits and timing related to our restructuring plan, and other matters, may contain words such as "anticipates", "expects", "intends", "plans", "believes", "seeks", "estimates", "may", "could", "would", "might", "will" and variations of these words or similar expressions are considered forward-looking statements or information under applicable securities laws. In addition, any information or statements that refer to expectations, beliefs, plans, projections, objectives, performance or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking, and based on our current expectations, forecasts and projections about the operating environment, economies and markets in which we operate. Forward-looking statements reflect our current estimates, beliefs and assumptions, which are based on management's perception of historic trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances, such as certain assumptions about the economy, as well as market, financial and operational assumptions. Management's estimates, beliefs and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events and, as such, are subject to change. We can give no assurance that such estimates, beliefs and assumptions will prove to be correct. Such forward-looking statements involve known and unknown risks, uncertainties and other factors and assumptions that may cause the actual results, performance or achievements to differ materially. Such factors include, but are not limited to: (i) the future performance, financial and otherwise, of OpenText; (ii) the ability of OpenText to bring new products and services to market and to increase sales; (iii) the strength of the Company's product development pipeline; (iv) the Company's growth and profitability prospects; (v) the estimated size and growth prospects of the EIM market including expected growth in the Artificial Intelligence market; (vi) the Company's competitive position in the EIM market and its ability to take advantage of future opportunities in this market; (vii) the benefits of the Company's products and services to be realized by customers; (viii) the demand for the Company's products and services and the extent of deployment of the Company's products and services in the EIM marketplace; (ix) downward pressure on our share price and dilutive effect of future sales or issuances of equity securities (including in connection with future acquisitions); (x) the Company's financial condition and capital requirements; and (xi) statements about the impact of product releases. The risks and uncertainties that may affect forward-looking statements include, but are not limited to: (i) integration of acquisitions and related restructuring efforts, including the quantum of restructuring charges and the timing thereof; (ii) the potential for the incurrence of or assumption of debt in connection with acquisitions and the impact on the ratings or outlooks of rating agencies on the Company's outstanding debt securities; (iii) the possibility that the Company may be unable to meet its future reporting requirements under the U.S. Securities Exchange Act of 1934, as amended, and the rules promulgated thereunder, or applicable Canadian securities regulation; (iv) the risks associated with bringing new products and services to market; (v) failure to comply with privacy laws and regulations that are extensive, open to various interpretations and complex to implement including General Data Protection Regulation (GDPR) and Country by Country Reporting (CBCR); (vi) fluctuations in currency exchange rates; (vii) delays in the purchasing decisions of the Company's customers; (viii) the competition the Company faces in its industry and/or marketplace; (ix) the final determination of litigation, tax audits (including tax examinations in the United States and elsewhere) and other legal proceedings; (x) potential exposure to greater than anticipated tax liabilities or expenses, including with respect to changes in Canadian, U.S. or international tax regimes including the new tax reform legislation enacted through the Tax Cuts and Jobs Act in the United States; (xi) the possibility of technical, logistical or planning issues in connection with the deployment of the Company's products or services; (xii) the continuous commitment of the Company's customers; and (xiii) demand for the Company's products and services. For additional information with respect to risks and other factors which could occur, see the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other securities filings with the Securities and Exchange Commission (SEC) and other securities regulators. Readers are cautioned not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. Unless otherwise required by applicable securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

OTEX-F

For more information, please contact:

Greg Secord
Vice President, Investor Relations
Open Text Corporation
415-963-0825
investors@opentext.com

Copyright ©2019 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.

 

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

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



March 31, 2019


June 30, 2018

ASSETS

(unaudited)



Cash and cash equivalents

$

765,224



$

682,942


Accounts receivable trade, net of allowance for doubtful accounts of $16,946 as of March 31, 2019 and $9,741 as of June 30, 2018

478,264



487,956


Contract assets

19,737




Income taxes recoverable

39,041



55,623


Prepaid expenses and other current assets

96,048



101,059


Total current assets

1,398,314



1,327,580


Property and equipment

241,974



264,205


Long-term contract assets

15,794




Goodwill

3,772,112



3,580,129


Acquired intangible assets

1,233,136



1,296,637


Deferred tax assets

1,035,481



1,122,729


Other assets

135,159



111,267


Deferred charges



38,000


Long-term income taxes recoverable

32,667



24,482


Total assets

$

7,864,637



$

7,765,029


LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable and accrued liabilities

$

295,749



$

302,154


Current portion of long-term debt

10,000



10,000


Deferred revenues

664,208



644,211


Income taxes payable

45,124



38,234


Total current liabilities

1,015,081



994,599


Long-term liabilities:




Accrued liabilities

50,714



52,827


Deferred credits



2,727


Pension liability

71,563



65,719


Long-term debt

2,606,283



2,610,523


Deferred revenues

50,905



69,197


Long-term income taxes payable

178,775



172,241


Deferred tax liabilities

52,944



79,938


Total long-term liabilities

3,011,184



3,053,172


Shareholders' equity:




Share capital and additional paid-in capital




269,274,185 and 267,651,084 Common Shares issued and outstanding at March 31, 2019 and June 30, 2018, respectively; authorized Common Shares: unlimited

1,751,811



1,707,073


Accumulated other comprehensive income

25,418



33,645


Retained earnings

2,088,858



1,994,235


Treasury stock, at cost (806,704 shares at March 31, 2019 and 690,336 shares at June 30, 2018, respectively)

(28,898)



(18,732)


Total OpenText shareholders' equity

3,837,189



3,716,221


Non-controlling interests

1,183



1,037


Total shareholders' equity

3,838,372



3,717,258


Total liabilities and shareholders' equity

$

7,864,637



$

7,765,029


 

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

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

(unaudited)






Three Months Ended March 31,


Nine Months Ended March 31,


2019


2018


2019


2018

Revenues:








License

$

98,721



$

84,113



$

308,364



$

297,588


Cloud services and subscriptions

238,607



209,102



665,923



611,076


Customer support

310,762



312,279



932,667



915,753


Professional service and other

71,056



80,385



214,580



236,554


Total revenues

719,146



685,879



2,121,534



2,060,971


Cost of revenues:








License

2,692



3,098



10,219



10,645


Cloud services and subscriptions

103,873



94,195



280,274



268,814


Customer support

31,844



33,770



93,582



99,657


Professional service and other

56,626



64,179



169,452



188,493


Amortization of acquired technology-based intangible assets

44,596



47,303



140,439



138,391


Total cost of revenues

239,631



242,545



693,966



706,000


Gross profit

479,515



443,334



1,427,568



1,354,971


Operating expenses:








Research and development

84,905



83,396



238,128



241,093


Sales and marketing

132,244



129,876



378,619



381,642


General and administrative

51,833



54,794



154,955



152,650


Depreciation

25,028



23,093



72,716



64,042


Amortization of acquired customer-based intangible assets

48,832



46,762



140,627



136,819


Special charges

796



2,644



33,487



21,390


Total operating expenses

343,638



340,565



1,018,532



997,636


Income from operations

135,877



102,769



409,036



357,335


Other income (expense), net

5,065



11,140



6,965



26,911


Interest and other related expense, net

(35,607)



(34,980)



(103,751)



(103,195)


Income before income taxes

105,335



78,929



312,250



281,051


Provision for (recovery of) income taxes

32,542



20,129



98,628



100,644


Net income for the period

$

72,793



$

58,800



$

213,622



$

180,407


Net (income) loss attributable to non-controlling interests

(31)



(6)



(104)



94


Net income attributable to OpenText

$

72,762



$

58,794



$

213,518



$

180,501


Earnings per share—basic attributable to OpenText

$

0.27



$

0.22



$

0.80



$

0.68


Earnings per share—diluted attributable to OpenText

$

0.27



$

0.22



$

0.79



$

0.68


Weighted average number of Common Shares outstanding—basic

268,991



266,572



268,511



265,619


Weighted average number of Common Shares outstanding—diluted

270,030



267,764



269,606



266,954


 

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands of U.S. dollars)

(unaudited)






Three Months Ended March 31,


Nine Months Ended March 31,


2019


2018


2019


2018

Net income for the period

$

72,793



$

58,800



$

213,622



$

180,407


Other comprehensive income (loss)—net of tax:








Net foreign currency translation adjustments

3,189



3,823



(3,749)



3,283


Unrealized gain (loss) on cash flow hedges:








Unrealized gain (loss) - net of tax expense (recovery) effect of $222 and ($338) for the three months ended March 31, 2019 and 2018, respectively; ($274) and $65 for the nine months ended March 31, 2019 and 2018, respectively

615



(935)



(760)



182


(Gain) loss reclassified into net income - net of tax (expense) recovery effect of $124 and ($112) for the three months ended March 31, 2019 and 2018, respectively; $425 and ($540) for the nine months ended March 31, 2019 and 2018, respectively

346



(311)



1,179



(1,499)


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








Actuarial gain (loss) - net of tax expense (recovery) effect of ($1,177) and $413 for the three months ended March 31, 2019 and 2018, respectively; ($1,390) and $177 for the nine months ended March 31, 2019 and 2018, respectively

(4,785)



1,648



(5,109)



1,485


Amortization of actuarial (gain) loss into net income - net of tax (expense) recovery effect of $78 and $45 for the three months ended March 31, 2019 and 2018, respectively; $223 and $130 for the nine months ended March 31, 2019 and 2018, respectively

82



64



212



176


Release of unrealized gain on marketable securities - net of tax effect of nil







(617)


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

(553)



4,289



(8,227)



3,010


Total comprehensive income

72,240



63,089



205,395



183,417


Comprehensive (income) loss attributable to non-controlling interests

(31)



(6)



(104)



94


Total comprehensive income attributable to OpenText

$

72,209



$

63,083



$

205,291



$

183,511


 

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

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

(unaudited)




Nine Months Ended March 31, 2019


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, 2018

267,651



$

1,707,073



(691)



$

(18,732)



$

1,994,235



$

33,645



$

1,037



$

3,717,258


Adoption of ASU 2016-16 - cumulative effect









(26,780)







(26,780)


Adoption of Topic 606 - cumulative effect









29,786







29,786


Issuance of Common Shares
















Under employee stock option plans

494



12,431













12,431


Under employee stock purchase plans

187



5,569













5,569


Share-based compensation



6,555













6,555


Purchase of treasury stock





(304)



(11,719)









(11,719)


Issuance of treasury stock



(70)



3



70










Dividends declared

($0.1518 per Common Share)









(40,466)







(40,466)


Other comprehensive income - net











(1,389)





(1,389)


Non-controlling interest



(625)











42



(583)


Net income for the quarter









36,324





44



36,368


Balance as of September 30, 2018

268,332



$

1,730,933



(992)



$

(30,381)



$

1,993,099



$

32,256



$

1,123



$

3,727,030


Issuance of Common Shares
















Under employee stock option plans

62



1,740













1,740


Under employee stock purchase plans

175



5,696













5,696


Share-based compensation



6,885













6,885


Purchase of treasury stock





(370)



(12,815)









(12,815)


Issuance of treasury stock



(13,955)



545



13,955










Dividends declared

($0.1518 per Common Share)









(40,700)







(40,700)


Other comprehensive income - net











(6,285)





(6,285)


Net income for the quarter









104,432





29



104,461


Balance as of December 31, 2018

268,569



$

1,731,299



(817)



$

(29,241)



$

2,056,831



$

25,971



$

1,152



$

3,786,012


Issuance of Common Shares
















Under employee stock option plans

544



11,661













11,661


Under employee stock purchase plans

161



4,447













4,447


Share-based compensation



6,712













6,712


Purchase of treasury stock





(52)



(1,965)









(1,965)


Issuance of treasury stock



(2,308)



62



2,308










Dividends declared

($0.1518 per Common Share)









(40,735)







(40,735)


Other comprehensive income - net











(553)





(553)


Net income for the quarter









72,762





31



72,793


Balance as of March 31, 2019

269,274



$

1,751,811



(807)



$

(28,898)



$

2,088,858



$

25,418



$

1,183



$

3,838,372


 


Nine Months Ended March 31, 2018


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, 2017

264,060



$

1,613,454



(1,102)



$

(27,520)



$

1,897,624



$

48,800



$

961



$

3,533,319


Issuance of Common Shares
















Under employee stock option plans

1,048



16,154













16,154


Under employee stock purchase plans

180



4,837













4,837


Share-based compensation



8,235













8,235


Issuance of treasury stock



(178)



9



178










Dividends declared

($0.1320 per Common Share)









(35,017)







(35,017)


Other comprehensive income - net











718





718


Net income for the quarter









36,596





94



36,690


Balance as of September 30, 2017

265,288



$

1,642,502



(1,093)



$

(27,342)



$

1,899,203



$

49,518



$

1,055



$

3,564,936


Issuance of Common Shares
















Under employee stock option plans

145



$

3,374





$



$



$



$



$

3,374


Under employee stock purchase plans

193



5,275













5,275


Share-based compensation



7,158













7,158


Issuance of treasury stock



(8,092)



379



8,092










Dividends declared

($0.1320 per Common Share)









(34,811)







(34,811)


Other comprehensive income - net











(1,997)





(1,997)


Net income for the quarter









85,111





(194)



84,917


Balance as of December 31, 2017

265,626



$

1,650,217



(714)



$

(19,250)



$

1,949,503



$

47,521



$

861



$

3,628,852


Issuance of Common Shares
















Under employee stock option plans

1,490



30,595













30,595


Under employee stock purchase plans

150



4,532













4,532


Share-based compensation



5,080













5,080


Issuance of treasury stock



(427)



20



427










Dividends declared

($0.1320 per Common Share)









(35,168)







(35,168)


Other comprehensive income - net











4,289





4,289


Net income for the quarter



$





$



$

58,794



$



$

6



$

58,800


Balance as of March 31, 2018

267,266



$

1,689,997



(694)



$

(18,823)



$

1,973,129



$

51,810



$

867



$

3,696,980


 

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars)

(unaudited)






Three Months Ended March 31,


Nine Months Ended March 31,


2019


2018


2019


2018

Cash flows from operating activities:








Net income for the period

$

72,793



$

58,800



$

213,622



$

180,407


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








Depreciation and amortization of intangible assets

118,456



117,158



353,782



339,252


Share-based compensation expense

6,712



5,080



20,152



20,473


Pension expense

1,158



965



3,412



2,834


Amortization of debt issuance costs

1,077



1,303



3,234



3,835


Amortization of deferred charges and credits



941





3,175


Loss on sale and write down of property and equipment

10



326



9,438



489


Release of unrealized gain on marketable securities to income







(841)


Deferred taxes

2,398



18,266



11,307



62,640


Share in net (income) loss of equity investees

(2,789)



307



(10,652)



503


Changes in operating assets and liabilities:








Accounts receivable

19,229



(6,240)



52,777



(55,698)


Contract assets

(15,472)





(28,872)




Prepaid expenses and other current assets

(13,027)



(5,152)



(495)



(10,535)


Income taxes and deferred charges and credits

3,682



(23,651)



21,006



(22,068)


Accounts payable and accrued liabilities

(896)



(19,779)



(30,644)



(92,278)


Deferred revenue

93,285



123,550



24,134



74,704


Other assets

(619)



(1,285)



4,300



(2,871)


Net cash provided by operating activities

285,997



270,589



646,501



504,021


Cash flows from investing activities:








Additions of property and equipment

(16,968)



(27,101)



(50,432)



(83,038)


Purchase of Catalyst Repository Systems Inc.

(70,800)





(70,800)




Purchase of Liaison Technologies, Inc.

641





(310,644)




Purchase of Hightail Inc.



(20,466)





(20,466)


Purchase of Guidance Software,  net of cash acquired





(2,279)



(229,275)


Purchase of Covisint Corporation, net of cash acquired







(71,279)


Other investing activities

(1,831)



(3,118)



(8,204)



(11,179)


Net cash used in investing activities

(88,958)



(50,685)



(442,359)



(415,237)


Cash flows from financing activities:








Proceeds from issuance of long-term debt and revolver







200,000


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

17,811



36,442



42,097



66,064


Repayment of long-term debt and revolver

(2,500)



(101,940)



(7,500)



(105,820)


Debt issuance costs





(322)




Purchase of treasury stock

(1,965)





(26,499)




Repurchase of non-controlling interest





(583)




Payments of dividends to shareholders

(40,735)



(35,168)



(121,901)



(104,996)


Net cash provided by (used in) financing activities

(27,389)



(100,666)



(114,708)



55,248


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

1,992



10,157



(3,909)



17,703


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

171,642



129,395



85,525



161,735


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

597,874



478,550



683,991



446,210


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

$

769,516



$

607,945



$

769,516



$

607,945



Reconciliation of cash, cash equivalents and restricted cash:

March 31, 2019


March 31, 2018

Cash and cash equivalents

765,224



605,497


Restricted cash included in Other assets

4,292



2,448


Total Cash, cash equivalents and restricted cash

$

769,516



$

607,945



Notes




(1)

All dollar amounts in this press release are in U.S. Dollars unless otherwise indicated.



(2)

Use of Non-GAAP Financial Measures: In addition to reporting financial results in accordance with U.S. GAAP, the Company provides certain financial measures that are not in accordance with U.S. GAAP (Non-GAAP). These Non-GAAP financial measures have certain limitations in that they do not have a standardized meaning and thus the Company's definition may be different from similar Non-GAAP financial measures used by other companies and/or analysts and may differ from period to period. Thus it may be more difficult to compare the Company's financial performance to that of other companies. However, the Company's management compensates for these limitations by providing the relevant disclosure of the items excluded in the calculation of these Non-GAAP financial measures both in its reconciliation to the U.S. GAAP financial measures and its consolidated financial statements, all of which should be considered when evaluating the Company's results.




The Company uses these Non-GAAP financial measures to supplement the information provided in its consolidated financial statements, which are presented in accordance with U.S. GAAP. The presentation of Non-GAAP financial measures are not meant to be a substitute for financial measures presented in accordance with U.S. GAAP, but rather should be evaluated in conjunction with and as a supplement to such U.S. GAAP measures. OpenText strongly encourages investors to review its financial information in its entirety and not to rely on a single financial measure. The Company therefore believes that despite these limitations, it is appropriate to supplement the disclosure of the U.S. GAAP measures with certain Non-GAAP measures defined below.




Non-GAAP-based net income and Non-GAAP-based EPS, attributable to OpenText, are calculated as GAAP-based net income or earnings per share, attributable to OpenText, on a diluted basis, after giving effect to 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 income from operations, excluding the amortization of acquired intangible assets, Special charges (recoveries), and share-based compensation expense.




Adjusted earnings (loss) before interest, taxes, depreciation and amortization (Adjusted EBITDA) is calculated as GAAP-based net income, attributable to OpenText, excluding interest income (expense), provision for income taxes, depreciation and amortization of acquired intangible assets, other income (expense), share-based compensation and Special charges (recoveries).




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 that have resulted in costs associated with reductions in headcount, consolidation of leased facilities and related costs, all which are recorded under the Company's "Special Charges (recoveries)" caption on the Consolidated Statements of Income. Each restructuring activity is a discrete event based on a unique set of business objectives or circumstances, and each differs in terms of its operational implementation, business impact and scope, and the size of each restructuring plan can vary significantly from period to period. Therefore, the Company believes that the exclusion of these special charges (recoveries) will also better aid readers of financial statements in the understanding and comparability of the Company's operating results and underlying operational trends.




In summary the Company believes the provision of supplemental Non-GAAP measures allow investors to evaluate the operational and financial performance of the Company's core business using the same evaluation measures that management uses, and is therefore a useful indication of OpenText's performance or expected performance of future operations and facilitates period-to-period comparison of operating performance (although prior performance is not necessarily indicative of future performance). As a result, the Company considers it appropriate and reasonable to provide, in addition to U.S. GAAP measures, supplementary Non-GAAP financial measures that exclude certain items from the presentation of its financial results.




The following charts provide (unaudited) reconciliations of U.S. GAAP-based financial measures to Non-U.S. GAAP-based financial measures for the following periods presented. Results for reporting periods commencing July 1, 2018 are presented under the new Topic 606 revenue standard, while prior period results continue to be reported under the previous standard. For more details relating to our adoption of Topic 606 please see Note 1 "Basis of Presentation" and Note 3 "Revenues" to our Condensed Consolidated Financial Statements on Form 10-Q.

 

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

for the three months ended March 31, 2019.

(In thousands except for per share amounts)



Three Months Ended March 31, 2019


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

$

103,873



$

(291)


(1)

$

103,582



Customer support

31,844



(310)


(1)

31,534