Skip to main content
Search
Investor menu
Search

Press Releases Details

OpenText Reports Third Quarter Fiscal Year 2023 Financial Results

05/04/2023

Record Revenues, Nine Consecutive Quarters of Cloud Organic Growth

 

Fiscal 2023 Third Quarter Highlights

Total Revenues

(in millions)


Annual Recurring Revenues

(in millions)


Cloud Revenues

(in millions)

Reported

Constant
Currency


Reported

Constant
Currency


Reported

Constant
Currency

$1,245

$1,278


$1,011

$1,036


$435

$444

+41.1 %

+44.9 %


+37.7 %

+41.1 %


+8.3 %

+10.4 %

Annual Recurring Revenues represent 81% of Total Revenues

 

  • Total revenues of $1.24 billion, up 41.1% Y/Y or up 44.9% in constant currency
  • Annual Recurring Revenues (ARR) of $1.01 billion, up 37.7% Y/Y or up 41.1% in constant currency
  • Cloud revenues of $435 million, up 8.3% Y/Y or up 10.4% in constant currency
  • Nine consecutive quarters of cloud organic and ARR organic growth in constant currency
  • Quarterly enterprise cloud bookings(1) of $108 million, constant Y/Y
  • Operating cash flows of $337 million and free cash flows(3) of $306 million
  • TTM operating cash flows(2) of $916 million and TTM free cash flows(2)(3) of $778 million
  • GAAP-based net income of $58 million, down 22.9% Y/Y, margin of 4.6%, down 390 basis points Y/Y
  • Adjusted EBITDA(3) of $365 million, margin of 29.3% and TTM Adjusted EBITDA(2)(3) of $1.32 billion, margin of 34.0%
  • GAAP-based diluted earnings per share (EPS) of $0.21, Non-GAAP diluted EPS(3) of $0.73
  • Includes Micro Focus results from February 1, 2023 to March 31, 2023

WATERLOO, ON, May 4, 2023 /PRNewswire/ -- Open Text Corporation (NASDAQ: OTEX), (TSX: OTEX), today announced its financial results for the third quarter ended March 31, 2023.

"The OpenText Total Growth Strategy and our expanded mission with the Micro Focus acquisition delivered a record third quarter, our ninth consecutive quarter of organic cloud revenue growth and organic ARR growth in constant currency. Further, we are well advanced and ahead of schedule on our Micro Focus milestones as we have completed our talent integration and cloud roadmap," said Mark J. Barrenechea, OpenText CEO & CTO. "Total revenues were $1.24 billion, growing 41.1% year-over-year or 44.9% in constant currency and Cloud revenues of $435 million, growing 8.3% year-over-year or 10.4% in constant currency. ARR was $1.01 billion, growing 37.7% year-over-year or 41.1% in constant currency."

"With Titanium X, our new cloud roadmap, OpenText will help customers accelerate their digital businesses through information-led transformations to maximize the strategic benefits of new rules and opportunities for growth, efficiency and responsibility," added Mr. Barrenechea. "At OpenText, the heart of our culture is the unwavering commitment to customer success. The acquisition of Micro Focus expands the OpenText mission once again, and places OpenText as the trusted company to power and protect customer information. Our Q3 results demonstrate the potential for our expanded business."

"OpenText's third quarter results demonstrated continued solid execution, supporting our momentum in the Information Management market. We are on the right path with the products, people and customer focus to position OpenText for continued success," said Madhu Ranganathan, OpenText EVP, CFO. "We remain on track to realize our growth targets and acquisition commitments, including $400 million cost savings plan, consolidated net leverage ratio of less than 3x within eight full quarters and meet our free cash flow plan."

(1) Enterprise cloud bookings is defined as the total value from cloud services and subscription contracts, entered into in the period that are new, committed and incremental to our existing contracts, excluding the impact of Carbonite and Zix.
(2) TTM  is calculated as Q4FY'22, plus year-to-date FY'23 included within our current and historical filings on Forms 10-Q and 10-K.
(3) Please see Note 2 "Use of Non-GAAP Financial Measures" to the consolidated financial statements below.

 

Financial Highlights for Q3 Fiscal 2023 with Year Over Year Comparisons

Summary of Quarterly Results









(In millions, except per share data)

Q3 FY'23

Q3 FY'22

$ Change 

% Change 


Q3 FY'23  
in CC*

% Change
in CC*


Revenues:









Cloud services and subscriptions

$435.4

$401.9

$33.5

8.3 %


$443.7

10.4 %


Customer support

575.9

332.5

243.4

73.2 %


592.8

78.3 %


Total annual recurring revenues**

$1,011.3

$734.5

$276.9

37.7 %


$1,036.5

41.1 %


License

139.7

80.6

59.1

73.3 %


145.0

79.9 %


Professional service and other

93.6

67.2

26.4

39.4 %


96.8

44.1 %


Total revenues

$1,244.7

$882.3

$362.4

41.1 %


$1,278.3

44.9 %


GAAP-based operating income

$64.0

$131.6

($67.6)

(51.4) %


N/A

N/A


Non-GAAP-based operating income (1)

$334.6

$262.2

$72.4

27.6 %


$336.4

28.3 %


GAAP-based net income attributable to OpenText

$57.6

$74.7

($17.1)

(22.9) %


N/A

N/A


GAAP-based EPS, diluted

$0.21

$0.28

($0.07)

(25.0) %


N/A

N/A


Non-GAAP-based EPS, diluted (1)(2)

$0.73

$0.70

$0.03

4.3 %


$0.73

4.3 %


Adjusted EBITDA (1)

$365.1

$284.5

$80.6

28.3 %


$367.3

29.1 %


Operating cash flows

$336.8

$323.6

$13.2

4.1 %


N/A

N/A


Free cash flows (1)

$305.5

$306.0

($0.4)

(0.1) %


N/A

N/A



Summary of YTD Results









(In millions, except per share data)

FY'23  YTD

FY'22  YTD

$ Change 

% Change 


FY'23  YTD
in CC*

% Change
in CC*


Revenues:









Cloud services and subscriptions

$1,248.8

$1,123.4

$125.4

11.2 %


$1,283.7

14.3 %


Customer support

1,209.7

1,002.6

207.1

20.7 %


1,267.4

26.4 %


Total annual recurring revenues**

$2,458.5

$2,126.0

$332.5

15.6 %


$2,551.0

20.0 %


License

310.2

263.7

46.6

17.7 %


326.2

23.7 %


Professional service and other

225.4

201.7

23.7

11.8 %


237.8

17.9 %


Total revenues

$2,994.2

$2,591.4

$402.8

15.5 %


$3,115.1

20.2 %


GAAP-based operating income

$395.0

$507.2

($112.2)

(22.1) %


N/A

N/A


Non-GAAP-based operating income (1)

$933.6

$886.0

$47.6

5.4 %


$966.0

9.0 %


GAAP-based net income attributable to OpenText

$199.1

$294.9

($95.8)

(32.5) %


N/A

N/A


GAAP-based EPS, diluted

$0.74

$1.08

($0.34)

(31.5) %


N/A

N/A


Non-GAAP-based EPS, diluted (1)(2)

$2.39

$2.43

($0.04)

(1.6) %


$2.50

2.9 %


Adjusted EBITDA (1)

$1,010.1

$951.4

$58.7

6.2 %


$1,043.1

9.6 %


Operating cash flows

$663.9

$729.9

($66.0)

(9.0) %


N/A

N/A


Free cash flows (1)

$564.1

$674.9

($110.8)

(16.4) %


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.

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

As part of our quarterly, non-cumulative cash dividend program, the Board declared on May 2, 2023, a cash dividend of $0.24299 per common share. The record date for this dividend is June 2, 2023 and the payment date is June 23, 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.

Quarterly Business Highlights

  • OpenText World EMEA unveils Cloud Editions 23.2 to help customers accelerate their cloud-based digital transformation
  • OpenText announced the latest technology innovations on its Project Titanium X roadmap and the future of information management in the cloud
  • Key customer wins in the quarter include: Air Liquide, Ascensus, Australia Post, California Employment Development Department, Carrefour, Citibank, Conduent, Ireland Office of the Government Chief Information Officer, MAN Energy Solutions, Ministry of the Interior and Kingdom Relations of Netherlands, Pacific Life, Patelco Credit Union and Wienerberger Group
  • OpenText named a Leader in The Forrester Wave™: Content Platforms, Q1 2023
  • OpenText launched the latest version of ValueEdge, an innovative modular, cloud-based DevOps and value stream management (VSM) platform

 

Summary of Quarterly Results









Q3 FY'23

Q2 FY'23

Q3 FY'22

% Change 

(Q3 FY'23
vs Q2 FY'23)


% Change

(Q3 FY'23 vs
Q3 FY'22)


Revenue (millions)

$1,244.7

$897.4

$882.3

38.7 %


41.1 %


GAAP-based gross margin

70.3 %

70.8 %

68.9 %

(50)

bps

140

bps

Non-GAAP-based gross margin (1)

75.8 %

76.0 %

74.5 %

(20)

bps

130

bps

GAAP-based earnings (loss) per share, diluted

$0.21

$0.96

$0.28

(78.1) %


(25.0) %


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

$0.73

$0.89

$0.70

(18.0) %


4.3 %



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

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

Conference Call Information

OpenText posted an investor presentation on its Investor Relations website at http://investors.opentext.comand 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 May 4, 2023 at 7:00 p.m. ET through 11:59 p.m. on May 18, 2023 and can be accessed by dialing 1-855-669-9658 (toll-free) or +1-604-674-8052 (international) and using passcode 9973 followed by the number sign.

Please see below note (2) for a reconciliation of U.S. GAAP-based financial measures used in this press release to Non-GAAP-based financial measures.

About OpenText

OpenText, The Information Company™, enables organizations to gain insight through market leading information management solutions, powered by OpenText Cloud Editions. For more information about OpenText (NASDAQ: OTEX, TSX: OTEX) visit opentext.com.

Cautionary Statement Regarding Forward-Looking Statements

Certain statements in this press release, including statements about the focus of Open Text Corporation ("OpenText" or "the Company") in our fiscal year ending June 30, 2023 (Fiscal 2023) on growth, future cloud growth and market share gains, future organic growth initiatives and deployment of capital, intention to maintain a dividend program, the associated benefits of the Micro Focus acquisition, future tax rates, new platform and product offerings and associated benefits to customers, scaling OpenText, and other matters, which may contain words such as "anticipates", "expects", "intends", "plans", "believes", "seeks", "estimates", "may", "could", "would", "might", "will" and variations of these words or similar expressions are considered forward-looking statements or information under applicable securities laws. In addition, any information or statements that refer to expectations, beliefs, plans, projections, objectives, performance or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking, and based on our current expectations, forecasts and projections about the operating environment, economies and markets in which we operate. Forward-looking statements reflect our current estimates, beliefs and assumptions, which are based on management's perception of historic trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances, such as certain assumptions about the economy, as well as market, financial and operational assumptions. Management's estimates, beliefs and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events and, as such, are subject to change. We can give no assurance that such estimates, beliefs and assumptions will prove to be correct. Such forward-looking statements involve known and unknown risks and uncertainties such as those relating to: 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; duration and severity of the COVID-19 pandemic, including any new strains or resurgence; 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.

OTEX-F

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.

 

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



March 31, 2023


June 30, 2022

ASSETS

(unaudited)



Cash and cash equivalents

$             1,396,817


$             1,693,741

Accounts receivable trade, net of allowance for credit losses of $16,550 as of
March 31, 2023 and $16,473 as of June 30, 2022

676,280


426,652

Contract assets

61,374


26,167

Income taxes recoverable

47,803


18,255

Prepaid expenses and other current assets

250,661


120,552

Total current assets

2,432,935


2,285,367

Property and equipment

340,615


244,709

Operating lease right of use assets

297,640


198,132

Long-term contract assets

63,380


19,719

Goodwill

8,748,543


5,244,653

Acquired intangible assets

4,221,885


1,075,208

Deferred tax assets

889,143


810,154

Other assets

343,677


256,987

Long-term income taxes recoverable

89,730


44,044

Total assets

$          17,427,548


$          10,178,973

LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable and accrued liabilities

$                910,713


$                448,607

Current portion of long-term debt

495,850


10,000

Operating lease liabilities

94,015


56,380

Deferred revenues

1,785,121


902,202

Income taxes payable

198,371


51,069

Total current liabilities

3,484,070


1,468,258

Long-term liabilities:




Accrued liabilities

64,120


18,208

Pension liability

112,168


60,951

Long-term debt

8,565,238


4,209,567

Long-term operating lease liabilities

286,025


198,695

Long-term deferred revenues

240,357


91,144

Long-term income taxes payable

189,351


34,003

Deferred tax liabilities

363,072


65,887

Total long-term liabilities

9,820,331


4,678,455

Shareholders' equity:




Share capital and additional paid-in capital




270,479,181 and 269,522,639 Common Shares issued and outstanding at
March 31, 2023 and June 30, 2022, respectively; authorized Common Shares:
unlimited

2,130,343


2,038,674

Accumulated other comprehensive income (loss)

(33,114)


(7,659)

Retained earnings

2,163,338


2,160,069

Treasury stock, at cost (3,216,394 and 3,706,420 shares at March 31, 2023 and
June 30, 2022, respectively)

(138,700)


(159,966)

Total OpenText shareholders' equity

4,121,867


4,031,118

Non-controlling interests

1,280


1,142

Total shareholders' equity

4,123,147


4,032,260

Total liabilities and shareholders' equity

$          17,427,548


$          10,178,973

 

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



Three Months Ended

March 31,


Nine Months Ended

March 31,


2023


2022


2023


2022

Revenues:








Cloud services and subscriptions

$       435,449


$       401,947


$    1,248,774


$    1,123,422

Customer support

575,884


332,514


1,209,743


1,002,626

License

139,722


80,641


310,230


263,663

Professional service and other

93,619


67,181


225,403


201,679

Total revenues

1,244,674


882,283


2,994,150


2,591,390

Cost of revenues:








Cloud services and subscriptions

157,658


136,020


423,771


377,928

Customer support

67,067


31,763


123,010


90,914

License

3,840


3,196


10,461


10,906

Professional service and other

78,526


56,693


186,390


161,459

Amortization of acquired technology-based intangible assets

62,639


46,564


146,139


152,333

Total cost of revenues

369,730


274,236


889,771


793,540

Gross profit

874,944


608,047


2,104,379


1,797,850

Operating expenses:








Research and development

210,731


117,730


430,629


321,517

Sales and marketing

271,013


180,955


615,354


491,133

General and administrative

127,047


88,137


282,724


231,127

Depreciation

30,577


22,370


76,609


65,535

Amortization of acquired customer-based intangible assets

97,237


56,215


205,121


160,764

Special charges (recoveries)

74,350


11,031


98,937


20,592

Total operating expenses

810,955


476,438


1,709,374


1,290,668

Income from operations

63,989


131,609


395,005


507,182

Other income (expense), net

85,706


24,392


59,824


29,137

Interest and other related expense, net

(104,502)


(40,238)


(183,599)


(117,538)

Income before income taxes

45,193


115,763


271,230


418,781

Provision for (recovery of) income taxes

(12,420)


41,041


71,979


123,757

Net income for the period

$         57,613


$         74,722


$       199,251


$       295,024

Net (income) loss attributable to non-controlling interests

(57)


(41)


(138)


(130)

Net income attributable to OpenText

$         57,556


$         74,681


$       199,113


$       294,894

Earnings per share—basic attributable to OpenText

$              0.21


$              0.28


$              0.74


$              1.09

Earnings per share—diluted attributable to OpenText

$              0.21


$              0.28


$              0.74


$              1.08

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

270,441


270,693


270,143


271,623

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

270,650


271,211


270,173


272,439

 

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



Three Months Ended

March 31,


Nine Months Ended
March 31,


2023


2022


2023


2022

Net income

$         57,613


$         74,722


$       199,251


$       295,024

Other comprehensive income (loss)—net of tax:








Net foreign currency translation adjustments

(28,640)


(13,073)


(25,587)


(44,512)

Unrealized gain (loss) on cash flow hedges:








Unrealized gain (loss) - net of tax expense (recovery) effect of $15 and $233 for the three months ended March 31, 2023 and 2022, respectively; ($844) and $(158) for the nine months ended March 31, 2023 and 2022, respectively

38


648


(2,343)


(334)

(Gain) loss reclassified into net income - net of tax (expense) recovery effect of $252 and $79 for the three months ended March 31, 2023 and 2022, respectively; $861 and $(24) for the nine months ended March 31, 2023 and 2022, respectively

699


219


2,388


(86)

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








Unrealized gain (loss) - net of tax expense (recovery) effect of $238 and $— for the three months ended March 31, 2023 and 2022, respectively; $238 and $— for the nine months ended March 31, 2023 and 2022, respectively

(900)



(900)


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








Actuarial gain (loss) - net of tax expense (recovery) effect of ($892) and $(579) for the three months ended March 31, 2023 and 2022, respectively; $318 and $(811) for the nine months ended March 31, 2023 and 2022, respectively

(3,318)


(2,033)


878


(4,517)

Amortization of actuarial (gain) loss into net income - net of tax (expense) recovery effect of $25 and $66 for the three months ended March 31, 2023 and 2022, respectively; $76 and $134 for the nine months ended March 31, 2023 and 2022, respectively

35


156


109


477

Total other comprehensive income (loss) net

(32,086)


(14,083)


(25,455)


(48,972)

Total comprehensive income

25,527


60,639


173,796


246,052

Comprehensive (income) loss attributable to non-controlling interests

(57)


(41)


(138)


(130)

Total comprehensive income attributable to OpenText

$         25,470


$         60,598


$       173,658


$       245,922

 

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



Three Months Ended March 31, 2023


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 December 31, 2022

270,235


$  2,092,079


(3,295)


$ (142,126)


$  2,171,236


$          (1,028)


$      1,223


$  4,121,384

Issuance of Common Shares
















Under employee stock option plans

16


479







479

Under employee stock purchase plans

228


5,776







5,776

Share-based compensation


36,505







36,505

Issuance of treasury stock


(4,496)


79


3,426





(1,070)

Dividends declared

($0.24299 per Common Share)





(65,454)




(65,454)

Other comprehensive income (loss) - net






(32,086)



(32,086)

Net income for the period





57,556



57


57,613

Balance as of March 31, 2023

270,479


$  2,130,343


(3,216)


$ (138,700)


$  2,163,338


$        (33,114)


$      1,280


$  4,123,147



Three Months Ended March 31, 2022


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 December 31, 2021

271,006


$  1,990,913


(1,476)


$ (67,966)


$  2,174,467


$          31,349


$      1,062


$  4,129,825

Issuance of Common Shares
















Under employee stock option plans

53


1,863







1,863

Under employee stock purchase plans

172


7,003







7,003

Share-based compensation


16,748







16,748

Purchase of treasury stock



(1,300)


(56,067)





(56,067)

Repurchase of Common Shares

(1,000)


(6,381)




(38,702)




(45,083)

Dividends declared

($0.2209 per Common Share)





(59,077)




(59,077)

Other comprehensive income (loss) - net






(14,083)



(14,083)

Net income for the period





74,681



41


74,722

Balance as of March 31, 2022

270,231


$  2,010,146


(2,776)


$ (124,033)


$  2,151,369


$          17,266


$      1,103


$  4,055,851

 

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

 


Nine Months Ended March 31, 2023


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, 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

88


2,473







2,473

Under employee stock purchase plans

868


22,997







22,997

Share-based compensation


88,535







88,535

Issuance of treasury stock


(22,336)


490


21,266





(1,070)

Dividends declared

($0.72897 per Common Share)





(195,844)




(195,844)

Other comprehensive income (loss) - net






(25,455)



(25,455)

Net income for the period





199,113



138


199,251

Balance as of March 31, 2023

270,479


$  2,130,343


(3,216)


$  (138,700)


$  2,163,338


$        (33,114)


$      1,280


$  4,123,147



Nine Months Ended March 31, 2022


Common Shares and
Additional Paid in Capital


Treasury Stock


Retained

Earnings


Accumulated  Other

Comprehensive

Income


Non-Controlling Interests


Total


Shares


Amount


Shares


Amount


Balance as of June 30, 2021

271,541


$  1,947,764


(1,568)


$ (69,386)


$  2,153,326


$          66,238


$      1,511


$  4,099,453

Issuance of Common Shares
















Under employee stock option plans

905


31,128







31,128

Under employee stock purchase plans

595


24,913







24,913

Share-based compensation


45,091







45,091

Purchase of treasury stock



(1,700)


(75,660)





(75,660)

Issuance of treasury stock


(21,013)


492


21,013





Repurchase of Common Shares

(2,810)


(17,879)




(118,238)




(136,117)

Dividends declared

($0.6627 per Common Share)





(178,613)




(178,613)

Other comprehensive income (loss) - net






(48,972)



(48,972)

Distribution to non-controlling interest


142






(538)


(396)

Net income for the period





294,894



130


295,024

Balance as of March 31, 2022

270,231


$  2,010,146


(2,776)


$ (124,033)


$  2,151,369


$          17,266


$      1,103


$  4,055,851

 

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



Three Months Ended

March 31,


Nine Months Ended

March 31,


2023


2022


2023


2022

Cash flows from operating activities:








Net income for the period

$           57,613


$           74,722


$         199,251


$         295,024

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








Depreciation and amortization of intangible assets

190,453


125,149


427,869


378,632

Share-based compensation expense

36,368


16,748


88,398


45,091

Pension expense

2,362


1,868


5,806


4,883

Amortization of debt issuance costs

5,330


1,482


8,496


3,936

Write off of right of use assets

3,344



7,119


Loss on extinguishment of debt

21



8,152


27,413

Loss on sale and write down of property and equipment

1,307


58


1,428


96

Deferred taxes

(131,898)


22,440


(178,700)


43,332

Share in net (income) loss of equity investees

4,724


(27,746)


11,547


(59,103)

Changes in financial instruments

102,713



112,567


Changes in operating assets and liabilities:








Accounts receivable

167,866


17,241


141,269


68,428

Contract assets

(11,442)


(8,463)


(29,896)


(27,208)

Prepaid expenses and other current assets

(62,121)


(4,501)


(65,186)


(15,722)

Income taxes

87,277


(14,011)


131,517


(11,235)

Accounts payable and accrued liabilities

(146,638)


42,891


(137,674)


(65,738)

Deferred revenue

(13,498)


76,335


(42,631)


25,642

Other assets

54,708


(386)


(5,998)


16,527

Operating lease assets and liabilities, net

(11,714)


(270)


(19,430)


(128)

Net cash provided by operating activities

336,775


323,557


663,904


729,870

Cash flows from investing activities:








Additions of property and equipment

(31,233)


(17,590)


(99,772)


(54,937)

Purchase of Micro Focus International PLC, net of cash acquired

(5,655,606)



(5,655,606)


Purchase of Zix Corporation, net of cash acquired


(18,602)



(856,175)

Purchase of Bricata Inc.




(17,927)

Realized gain on financial instruments

131,248



131,248


Other investing activities


(651)


(873)


(3,922)

Net cash used in investing activities

(5,555,591)


(36,843)


(5,625,003)


(932,961)

Cash flows from financing activities:








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

9,399


10,788


25,172


56,476

Proceeds from long-term debt and Revolver

3,927,450



4,927,450


1,500,000

Repayment of long-term debt and Revolver

(11,463)


(2,500)


(16,463)


(857,500)

Debt extinguishment costs




(24,969)

Debt issuance costs

(65,559)


(1,812)


(77,209)


(17,159)

Repurchase of Common Shares


(45,083)



(136,117)

Purchase of treasury stock


(56,067)



(75,660)

Distribution to non-controlling interest




(396)

Payments of dividends to shareholders

(64,919)


(59,077)


(194,481)


(178,613)

Other financing activities

(2,193)



(2,193)


Net cash provided by (used in) financing activities

3,792,715


(153,751)


4,662,276


266,062

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

2,903


(11,207)


2,632


(36,920)

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

(1,423,198)


121,756


(296,191)


26,051

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

2,822,918


1,514,095


1,695,911


1,609,800

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

$      1,399,720


$      1,635,851


$      1,399,720


$      1,635,851

 

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


Reconciliation of cash, cash equivalents and restricted cash:

March 31, 2023


March 31, 2022

Cash and cash equivalents

$               1,396,817


$               1,633,702

Restricted cash (1)

2,903


2,149

Total cash, cash equivalents and restricted cash

$               1,399,720


$               1,635,851





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

 

Notes

(1)

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



(2)

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




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




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




Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) is consistently calculated as GAAP-based net income (loss), attributable to OpenText, excluding interest income (expense), provision for (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 most recently in response to our return to office planning, that have resulted in costs associated with reductions in headcount, consolidation of leased facilities and related costs, all which are recorded under the Company's "Special charges (recoveries)" caption on the Consolidated Statements of Income. Each restructuring activity is a discrete event based on a unique set of business objectives or circumstances, and each differs in terms of its operational implementation, business impact and scope, and the size of each restructuring plan can vary significantly from period to period. Therefore, the Company believes that the exclusion of these special charges (recoveries) will also better aid readers of financial statements in the understanding and comparability of the Company's operating results and underlying operational trends.




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




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

 

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 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 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 on our ongoing business and operating results.

(7)

Adjustment relates to differences between the GAAP-based tax provision rate of approximately (27%) and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based 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 (loss) 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 provision for (recovery of) income taxes

(12,420)

(0.04)

Non-GAAP-based provision for 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:


Provision for (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.

 

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

for the nine months ended March 31, 2023

(In thousands, except for per share data)


Nine 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

$   423,771


$     (7,788)

(1)

$   415,983


Customer support

123,010


(2,414)

(1)

120,596


Professional service and other

186,390


(5,172)

(1)

181,218


Amortization of acquired technology-based intangible assets

146,139


(146,139)

(2)


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

2,104,379

70.3 %

161,513

(3)

2,265,892

75.7 %

Operating expenses







Research and development

430,629


(25,481)

(1)

405,148


Sales and marketing

615,354


(28,243)

(1)

587,111


General and administrative

282,724


(19,300)

(1)

263,424


Amortization of acquired customer-based intangible assets

205,121


(205,121)

(2)


Special charges (recoveries)

98,937


(98,937)

(4)


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

395,005


538,595

(5)

933,600


Other income (expense), net

59,824


(59,824)

(6)


Provision for income taxes

71,979


33,021

(7)

105,000


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

199,113


445,750

(8)

644,863


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

$          0.74


$          1.65

(8)

$          2.39




(1)

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

(2)

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

(3)

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

(4)

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

(5)

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

(6)

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

(7)

Adjustment relates to differences between the GAAP-based tax provision rate of approximately 27% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based 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 (loss) to Non-GAAP-based net income:

 


Nine Months Ended March 31, 2023



Per share diluted

GAAP-based net income, attributable to OpenText

$                   199,113

$                          0.74

Add:



Amortization

351,260

1.30

Share-based compensation

88,398

0.32

Special charges (recoveries)

98,937

0.37

Other (income) expense, net

(59,824)

(0.22)

GAAP-based provision for income taxes

71,979

0.27

Non-GAAP-based provision for income taxes

(105,000)

(0.39)

Non-GAAP-based net income, attributable to OpenText

$                   644,863

$                          2.39

 

Reconciliation of Adjusted EBITDA



Nine Months Ended March 31, 2023

GAAP-based net income, attributable to OpenText

$                                                       199,113

Add:


Provision for income taxes

71,979

Interest and other related expense, net

183,599

Amortization of acquired technology-based intangible assets

146,139

Amortization of acquired customer-based intangible assets

205,121

Depreciation

76,609

Share-based compensation

88,398

Special charges (recoveries)

98,937

Other (income) expense, net

(59,824)

Adjusted EBITDA

$                                                    1,010,071



GAAP-based net income margin

6.7 %

Adjusted EBITDA margin

33.7 %


Reconciliation of Free cash flows



Nine Months Ended March 31, 2023

GAAP-based cash flows provided by operating activities

$                                                         663,904

Add:


Capital expenditures (1)

(99,772)

Free cash flows

$                                                         564,132



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

 

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

for the three months ended December 31, 2022

(In thousands, except for per share data)


Three Months Ended December 31, 2022


GAAP-based

Measures

GAAP-based
Measures

% of Total
Revenue

Adjustments

Note

Non-GAAP-
based

Measures

Non-GAAP-
based
Measures

% of Total
Revenue

Cost of revenues







Cloud services and subscriptions

$   134,314


$     (2,812)

(1)

$   131,502


Customer support

28,589


(690)

(1)

27,899


Professional service and other

54,064


(1,763)

(1)

52,301


Amortization of acquired technology-based intangible assets

40,863


(40,863)

(2)


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

635,747

70.8 %

46,128

(3)

681,875

76.0 %

Operating expenses







Research and development

109,700


(7,826)

(1)

101,874


Sales and marketing

177,171


(9,437)

(1)

167,734


General and administrative

77,603


(6,294)

(1)

71,309


Amortization of acquired customer-based intangible assets

53,446


(53,446)

(2)


Special charges (recoveries)

10,306


(10,306)

(4)


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

184,663


133,437

(5)

318,100


Other income (expense), net

163,349


(163,349)

(6)


Provision for income taxes

50,774


(11,660)

(7)

39,114


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

258,486


(18,252)

(8)

240,234


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

$          0.96


$        (0.07)

(8)

$          0.89




(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, that are related to the financing of the Micro Focus Acquisition. We exclude gains and losses on these derivatives as we do not believe they are reflective on our ongoing business and operating results.

(7)

Adjustment relates to differences between the GAAP-based tax provision rate of approximately 16% 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 December 31, 2022



Per share diluted

GAAP-based net income (loss), attributable to OpenText

$                   258,486

$                          0.96

Add:



Amortization

94,309

0.35

Share-based compensation

28,822

0.10

Special charges (recoveries)

10,306

0.04

Other (income) expense, net

(163,349)

(0.60)

GAAP-based provision for income taxes

50,774

0.19

Non-GAAP-based provision for income taxes

(39,114)

(0.15)

Non-GAAP-based net income, attributable to OpenText

$                   240,234

$                          0.89

 

Reconciliation of Adjusted EBITDA



Three Months Ended December 31, 2022

GAAP-based net income (loss), attributable to OpenText

$                                                      258,486

Add:


Provision for income taxes

50,774

Interest and other related expense, net

38,715

Amortization of acquired technology-based intangible assets

40,863

Amortization of acquired customer-based intangible assets

53,446

Depreciation

22,858

Share-based compensation

28,822

Special charges (recoveries)

10,306

Other (income) expense, net

(163,349)

Adjusted EBITDA

$                                                      340,921



GAAP-based net income (loss) margin

28.8 %

Adjusted EBITDA margin

38.0 %


Reconciliation of Free cash flows



Three Months Ended December 31, 2022

GAAP-based cash flows provided by operating activities

$                                                         195,170

Add:


Capital expenditures (1)

(32,215)

Free cash flows

$                                                         162,955



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

 

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

for the three months ended March 31, 2022

(In thousands, except for per share data)


Three Months Ended March 31, 2022


GAAP-based

Measures

GAAP-based
Measures

% of Total
Revenue

Adjustments

Note

Non-GAAP-
based

Measures

Non-GAAP-
based
Measures

% of Total
Revenue

Cost of revenues







Cloud services and subscriptions

$   136,020


$     (1,268)

(1)

$   134,752


Customer support

31,763


(501)

(1)

31,262


Professional service and other

56,693


(907)

(1)

55,786


Amortization of acquired technology-based intangible assets

46,564


(46,564)

(2)


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

608,047

68.9 %

49,240

(3)

657,287

74.5 %

Operating expenses







Research and development

117,730


(4,350)

(1)

113,380


Sales and marketing

180,955


(5,761)

(1)

175,194


General and administrative

88,137


(3,961)

(1)

84,176


Amortization of acquired customer-based intangible assets

56,215


(56,215)

(2)


Special charges (recoveries)

11,031


(11,031)

(4)


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

131,609


130,558

(5)

262,167


Other income (expense), net

24,392


(24,392)

(6)


Provision for income taxes

41,041


(9,971)

(7)

31,070


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

74,681


116,137

(8)

190,818


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

$          0.28


$          0.42

(8)

$          0.70




(1)

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

(2)

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

(3)

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

(4)

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

(5)

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

(6)

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

(7)

Adjustment relates to differences between the GAAP-based tax provision rate of approximately 35% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded items include amortization, share-based compensation, special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves, and "book to return" adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately 14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.

(8)

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

 


Three Months Ended March 31, 2022



Per share diluted

GAAP-based net income, attributable to OpenText

$                     74,681

$                          0.28

Add:



Amortization

102,779

0.38

Share-based compensation

16,748

0.06

Special charges (recoveries)

11,031

0.04

Other (income) expense, net

(24,392)

(0.09)

GAAP-based provision for income taxes

41,041

0.15

Non-GAAP-based provision for income taxes

(31,070)

(0.12)

Non-GAAP-based net income, attributable to OpenText

$                   190,818

$                          0.70


 

Reconciliation of Adjusted EBITDA



Three Months Ended March 31, 2022

GAAP-based net income, attributable to OpenText

$                                                        74,681

Add:


Provision for income taxes

41,041

Interest and other related expense, net

40,238

Amortization of acquired technology-based intangible assets

46,564

Amortization of acquired customer-based intangible assets

56,215

Depreciation

22,370

Share-based compensation

16,748

Special charges (recoveries)

11,031

Other (income) expense, net

(24,392)

Adjusted EBITDA

$                                                      284,496



GAAP-based net income margin

8.5 %

Adjusted EBITDA margin

32.2 %


Reconciliation of Free cash flows



Three Months Ended March 31, 2022

GAAP-based cash flows provided by operating activities

$                                                         323,557

Add:


Capital expenditures (1)

(17,590)

Free cash flows

$                                                         305,967



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

 

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

for the nine months ended March 31, 2022

(In thousands, except for per share data)


Nine Months Ended March 31, 2022


GAAP-based

Measures

GAAP-based
Measures

% of Total
Revenue

Adjustments

Note

Non-GAAP-based

Measures

Non-GAAP-
based
Measures

% of Total
Revenue

Cost of revenues







Cloud services and subscriptions

$   377,928


$     (3,072)

(1)

$   374,856


Customer support

90,914


(1,631)

(1)

89,283


Professional service and other

161,459


(2,275)

(1)

159,184


Amortization of acquired technology-based intangible assets

152,333


(152,333)

(2)


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

1,797,850

69.4 %

159,311

(3)

1,957,161

75.5 %

Operating expenses







Research and development

321,517


(9,936)

(1)

311,581


Sales and marketing

491,133


(15,377)

(1)

475,756


General and administrative

231,127


(12,800)

(1)

218,327


Amortization of acquired customer-based intangible assets

160,764


(160,764)

(2)


Special charges (recoveries)

20,592


(20,592)

(4)


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

507,182


378,780

(5)

885,962


Other income (expense), net

29,137


(29,137)

(6)


Provision for income taxes

123,757


(16,178)

(7)

107,579


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

294,894


365,821

(8)

660,715


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

$          1.08


$          1.35

(8)

$          2.43




(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 30% 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:

 


Nine Months Ended March 31, 2022



Per share diluted

GAAP-based net income, attributable to OpenText

$                   294,894

$                          1.08

Add:



Amortization

313,097

1.15

Share-based compensation

45,091

0.17

Special charges (recoveries)

20,592

0.08

Other (income) expense, net

(29,137)

(0.11)

GAAP-based provision for income taxes

123,757

0.45

Non-GAAP-based provision for income taxes

(107,579)

(0.39)

Non-GAAP-based net income, attributable to OpenText

$                   660,715

$                          2.43

 

Reconciliation of Adjusted EBITDA



Nine Months Ended March 31, 2022

GAAP-based net income, attributable to OpenText

$                                                      294,894

Add:


Provision for income taxes

123,757

Interest and other related expense, net

117,538

Amortization of acquired technology-based intangible assets

152,333

Amortization of acquired customer-based intangible assets

160,764

Depreciation

65,535

Share-based compensation

45,091

Special charges (recoveries)

20,592

Other (income) expense, net

(29,137)

Adjusted EBITDA

$                                                      951,367



GAAP-based net income margin

11.4 %

Adjusted EBITDA margin

36.7 %



Reconciliation of Free cash flows



Nine Months Ended March 31, 2022

GAAP-based cash flows provided by operating activities

$                                                         729,870

Add:


Capital expenditures (1)

(54,937)

Free cash flows

$                                                         674,933



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

 

(3) The following tables provide a composition of our major currencies for revenue and expenses, expressed as a percentage, for the three and nine months ended March 31, 2023 and 2022:



Three Months Ended March 31, 2023


Three Months Ended March 31, 2022

Currencies

% of Revenue

% of Expenses(1)


% of Revenue

% of Expenses(1)

EURO

21 %

12 %


21 %

12 %

GBP

5 %

8 %


5 %

5 %

CAD

3 %

11 %


3 %

14 %

USD

61 %

50 %


63 %

53 %

Other

10 %

19 %


8 %

16 %

Total

100 %

100 %


100 %

100 %




Nine Months Ended March 31, 2023


Nine Months Ended March 31, 2022

Currencies

% of Revenue

% of Expenses(1)


% of Revenue

% of Expenses(1)

EURO

20 %

12 %


23 %

13 %

GBP

5 %

6 %


5 %

6 %

CAD

3 %

12 %


3 %

14 %

USD

63 %

53 %


61 %

52 %

Other

9 %

17 %


8 %

15 %

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).

 

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/opentext-reports-third-quarter-fiscal-year-2023-financial-results-301816540.html

SOURCE Open Text Corporation