Canada | 0-27544 | 98-0154400 |
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
Item 2.02 | Results of Operations and Financial Condition |
Item 8.01 | Other Events |
Item 9.01 | Financial Statements and Exhibits |
(d) | Exhibits |
Exhibit No. | Description | |
99.1 | Press Release of financial results issued by Open Text Corporation on April 27, 2016 |
OPEN TEXT CORPORATION | ||||
April 27, 2016 | By: | /s/ John M. Doolittle | ||
John M. Doolittle Executive Vice President and Chief Financial Officer |
Exhibit No. | Description | |
99.1 | Press Release of financial results issued by Open Text Corporation on April 27, 2016 |
• | Record operating cash flow of $190 million; up 33% Y/Y |
• | Total revenue of $441 million, down 2%; up 2% Y/Y in CC* |
• | Non-GAAP-based EPS of $0.80, up 21%; up 23% Y/Y in CC |
• | Release 16 launched; the world's first integrated digital information platform |
• | Increases quarterly cash dividend by 15% |
Summary of Quarterly Results | |||||||||||||||||
Q3 FY16 | Q3 FY15 | $ Change | % Change (Y/Y) | Q3 FY16 in CC* | % Change in CC* | ||||||||||||
Revenues: (in millions) | |||||||||||||||||
Cloud services and subscriptions | $147.5 | $147.5 | $— | — | % | $151.2 | 2.5 | % | |||||||||
Customer support | 183.6 | 184.2 | (0.6 | ) | (0.3 | )% | 189.2 | 2.7 | % | ||||||||
Professional service and other | 45.0 | 52.3 | (7.3 | ) | (13.9 | )% | 47.3 | (9.6 | %) | ||||||||
Total Recurring revenues | $376.1 | $384.0 | ($7.9 | ) | (2.0 | )% | $387.7 | 1.0 | % | ||||||||
License | 64.4 | 63.6 | 0.8 | 1.3 | % | 67.4 | 6.0 | % | |||||||||
Total revenues | $440.5 | $447.6 | ($7.1 | ) | (1.6 | )% | $455.1 | 1.7 | % | ||||||||
Non-GAAP-based operating margin (2) | 31.4 | % | 25.7 | % | n/a | 570 | bps | 30.5 | % | ||||||||
GAAP-based operating margin | 20.1 | % | 11.8 | % | n/a | 830 | bps | ||||||||||
Non-GAAP-based EPS, diluted (2) | $0.80 | $0.66 | $0.14 | 21.2 | % | $0.81 | 22.7 | % | |||||||||
GAAP-based EPS, diluted | $0.57 | $0.22 | $0.35 | 159.1 | % | ||||||||||||
Operating cash flows (in millions) | $189.9 | $143.1 | $46.8 | 32.7 | % |
• | OpenText launches Release 16, delivering the most comprehensive digital platform for enterprise digital transformation |
• | OpenText signs definitive agreement to acquire certain customer experience software assets of HP Inc. |
• | OpenText signs definitive agreement to acquire ANX |
• | 18 customer transactions over $1 million, 8 cloud contract signings in the OpenText Cloud and 10 on-premises |
• | Financial, services and consumer goods industries saw the most demand in cloud |
• | Financial, public and technology industries saw the most demand in license |
• | Cloud customer successes in the quarter include Standard Insurance Company, Cooperation Manufacturing Plant Aguascalientes, MDR, Dun & Bradstreet Company, SAP, Stokke, 7PSolutions, SharkNinja Operating LLC, DC Comics and BRF |
• | On-premises customer successes in the quarter include Public Broadcasting Service (PBS), Bosch, Diebold, Cancer Treatment Centers of America, Public Works and Government Services Canada, Government of the Northwest Territories, National Bank of Canada, Carl Zeiss Meditec AG, Mainova, SMC Corporation of America, Cameron LNG, Cooper Tire and Rubber Company, Linde AG, Applied Informatics and Research Inc., Department of International Affairs, Arvato Bertelsmann, Bank of Montreal, Nielson, DnB Finans, Tillväxtverket and Sampension |
• | OpenText announces SAP® Hybris® Digital Documents by OpenText, offering a unified platform for engaging digital content and communications |
• | OpenText Innovation Tour 2016 events in over 10 countries and 5,000 customers |
Summary of Quarterly Results | |||||||||||||||
Q3 FY16 | Q2 FY16 | Q3 FY15 | % Change (Q3 FY16 vs Q2 FY16) | % Change (Q3 FY16 vs Q3 FY15) | |||||||||||
Revenue (million) | $440.5 | $465.3 | $447.6 | (5.3 | )% | (1.6 | )% | ||||||||
GAAP-based gross margin | 67.9 | % | 70.0 | % | 66.0 | % | (210 | ) | bps | 190 | bps | ||||
GAAP-based operating margin | 20.1 | % | 23.6 | % | 11.8 | % | (350 | ) | bps | 830 | bps | ||||
GAAP-based EPS, diluted | $0.57 | $0.72 | $0.22 | (20.8 | )% | 159.1 | % | ||||||||
Non-GAAP-based gross margin (2) | 72.0 | % | 74.2 | % | 71.1 | % | (220 | ) | bps | 90 | bps | ||||
Non-GAAP-based operating margin (2) | 31.4 | % | 37.0 | % | 25.7 | % | (560 | ) | bps | 570 | bps | ||||
Non-GAAP-based EPS, diluted (2) | $0.80 | $1.01 | $0.66 | (20.8 | )% | 21.2 | % |
Summary of Year to Date Results | ||||||||||||
Q3 FY16 YTD | Q3 FY15 YTD | $ Change | % Change | |||||||||
Revenues: (in millions) | ||||||||||||
Cloud services and subscriptions | $444.4 | $456.3 | ($11.9 | ) | (2.6 | )% | ||||||
Customer support | 553.4 | 547.6 | 5.8 | 1.1 | % | |||||||
Professional service and other | 145.0 | 168.2 | (23.2 | ) | (13.8 | )% | ||||||
Total Recurring revenues | $1,142.8 | $1,172.1 | ($29.3 | ) | (2.5 | )% | ||||||
License | 197.6 | 197.1 | 0.5 | 0.2 | % | |||||||
Total revenues | $1,340.4 | $1,369.2 | ($28.8 | ) | (2.1 | )% | ||||||
Non-GAAP-based operating margin (2) | 34.2 | % | 31.0 | % | n/a | 320 | bps | |||||
GAAP-based operating margin | 20.5 | % | 19.4 | % | n/a | 110 | bps | |||||
Non-GAAP-based EPS, diluted (2) | $2.65 | $2.59 | $0.06 | 2.3 | % | |||||||
GAAP-based EPS, diluted | $1.62 | $1.35 | $0.27 | 20.0 | % | |||||||
Operating cash flows (in millions) | $406.6 | $391.2 | $15.4 | 3.9 | % |
March 31, 2016 | June 30, 2015 | ||||||
(unaudited) | |||||||
ASSETS | |||||||
Cash and cash equivalents | $ | 877,405 | $ | 699,999 | |||
Short-term investments | 13,008 | 11,166 | |||||
Accounts receivable trade, net of allowance for doubtful accounts of $7,932 as of March 31, 2016 and $5,987 as of June 30, 2015 | 266,450 | 284,131 | |||||
Income taxes recoverable | 15,577 | 21,151 | |||||
Prepaid expenses and other current assets | 56,030 | 53,191 | |||||
Deferred tax assets | 27,952 | 30,711 | |||||
Total current assets | 1,256,422 | 1,100,349 | |||||
Property and equipment | 172,020 | 160,419 | |||||
Goodwill | 2,169,637 | 2,161,592 | |||||
Acquired intangible assets | 558,571 | 679,479 | |||||
Deferred tax assets | 156,148 | 155,411 | |||||
Other assets | 75,286 | 85,576 | |||||
Deferred charges | 26,575 | 37,265 | |||||
Long-term income taxes recoverable | 8,706 | 8,404 | |||||
Total assets | $ | 4,423,365 | $ | 4,388,495 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable and accrued liabilities | $ | 212,886 | $ | 241,370 | |||
Current portion of long-term debt | 8,000 | 8,000 | |||||
Deferred revenues | 368,020 | 358,066 | |||||
Income taxes payable | 20,906 | 17,001 | |||||
Deferred tax liabilities | 734 | 997 | |||||
Total current liabilities | 610,546 | 625,434 | |||||
Long-term liabilities: | |||||||
Accrued liabilities | 31,357 | 34,682 | |||||
Deferred credits | 9,503 | 12,943 | |||||
Pension liability | 58,292 | 56,737 | |||||
Long-term debt | 1,574,000 | 1,580,000 | |||||
Deferred revenues | 33,868 | 28,223 | |||||
Long-term income taxes payable | 142,616 | 151,484 | |||||
Deferred tax liabilities | 52,701 | 69,185 | |||||
Total long-term liabilities | 1,902,337 | 1,933,254 | |||||
Shareholders' equity: | |||||||
Share capital | |||||||
121,220,097 and 122,293,986 Common Shares issued and outstanding at March 31, 2016 and June 30, 2015, respectively; Authorized Common Shares: unlimited | 809,708 | 808,010 | |||||
Additional paid-in capital | 140,406 | 126,417 | |||||
Accumulated other comprehensive income | 51,248 | 51,828 | |||||
Retained earnings | 933,791 | 863,015 | |||||
Treasury stock, at cost (633,647 shares at March 31, 2016 and 625,725 at June 30, 2015, respectively) | (25,268 | ) | (19,986 | ) | |||
Total OpenText shareholders' equity | 1,909,885 | 1,829,284 | |||||
Non-controlling interests | 597 | 523 | |||||
Total shareholders' equity | 1,910,482 | 1,829,807 | |||||
Total liabilities and shareholders' equity | $ | 4,423,365 | $ | 4,388,495 |
Three Months Ended March 31, | Nine Months Ended March 31, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenues: | |||||||||||||||
License | $ | 64,397 | $ | 63,561 | $ | 197,584 | $ | 197,137 | |||||||
Cloud services and subscriptions | 147,505 | 147,513 | 444,394 | 456,342 | |||||||||||
Customer support | 183,636 | 184,204 | 553,440 | 547,576 | |||||||||||
Professional service and other | 45,005 | 52,299 | 145,007 | 168,154 | |||||||||||
Total revenues | 440,543 | 447,577 | 1,340,425 | 1,369,209 | |||||||||||
Cost of revenues: | |||||||||||||||
License | 2,480 | 2,980 | 7,190 | 9,388 | |||||||||||
Cloud services and subscriptions | 61,298 | 60,776 | 179,132 | 178,886 | |||||||||||
Customer support | 22,427 | 24,084 | 64,624 | 70,878 | |||||||||||
Professional service and other | 37,599 | 42,396 | 114,038 | 129,999 | |||||||||||
Amortization of acquired technology-based intangible assets | 17,630 | 22,136 | 56,244 | 58,548 | |||||||||||
Total cost of revenues | 141,434 | 152,372 | 421,228 | 447,699 | |||||||||||
Gross profit | 299,109 | 295,205 | 919,197 | 921,510 | |||||||||||
Operating expenses: | |||||||||||||||
Research and development | 48,160 | 53,222 | 140,310 | 144,134 | |||||||||||
Sales and marketing | 84,600 | 97,146 | 248,420 | 269,167 | |||||||||||
General and administrative | 37,731 | 45,552 | 107,067 | 120,962 | |||||||||||
Depreciation | 13,754 | 12,809 | 39,998 | 37,516 | |||||||||||
Amortization of acquired customer-based intangible assets | 27,966 | 28,250 | 83,564 | 79,498 | |||||||||||
Special charges (recoveries) | (1,671 | ) | 5,622 | 24,754 | 4,032 | ||||||||||
Total operating expenses | 210,540 | 242,601 | 644,113 | 655,309 | |||||||||||
Income from operations | 88,569 | 52,604 | 275,084 | 266,201 | |||||||||||
Other income (expense), net | 2,120 | (9,550 | ) | (1,832 | ) | (28,737 | ) | ||||||||
Interest and other related expense, net | (16,228 | ) | (16,872 | ) | (54,461 | ) | (36,426 | ) | |||||||
Income before income taxes | 74,461 | 26,182 | 218,791 | 201,038 | |||||||||||
Provision for (recovery of) income taxes | 5,353 | (309 | ) | 20,629 | 35,401 | ||||||||||
Net income for the period | $ | 69,108 | $ | 26,491 | $ | 198,162 | $ | 165,637 | |||||||
Net (income) loss attributable to non-controlling interests | 7 | 119 | (75 | ) | (114 | ) | |||||||||
Net income attributable to OpenText | $ | 69,115 | $ | 26,610 | $ | 198,087 | $ | 165,523 | |||||||
Earnings per share—basic attributable to OpenText | $ | 0.57 | $ | 0.22 | $ | 1.63 | $ | 1.36 | |||||||
Earnings per share—diluted attributable to OpenText | $ | 0.57 | $ | 0.22 | $ | 1.62 | $ | 1.35 | |||||||
Weighted average number of Common Shares outstanding—basic | 121,159 | 122,158 | 121,514 | 122,042 | |||||||||||
Weighted average number of Common Shares outstanding—diluted | 121,706 | 123,054 | 122,044 | 122,980 | |||||||||||
Dividends declared per Common Share | $ | 0.2000 | $ | 0.1725 | $ | 0.6000 | $ | 0.5175 |
Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net income for the period | $ | 69,108 | $ | 26,491 | $ | 198,162 | $ | 165,637 | ||||||||
Other comprehensive income—net of tax: | ||||||||||||||||
Net foreign currency translation adjustments | 988 | 9,280 | (40 | ) | 17,626 | |||||||||||
Unrealized gain (loss) on cash flow hedges: | ||||||||||||||||
Unrealized gain (loss) | 2,115 | (2,801 | ) | (2,704 | ) | (7,017 | ) | |||||||||
Loss reclassified into net income | 1,086 | 2,488 | 2,412 | 3,485 | ||||||||||||
Actuarial gain (loss) relating to defined benefit pension plans: | ||||||||||||||||
Actuarial loss | (1,848 | ) | (3,052 | ) | (87 | ) | (10,107 | ) | ||||||||
Amortization of actuarial loss into net income | 88 | 75 | 261 | 280 | ||||||||||||
Unrealized net gain (loss) on short-term investments | (557 | ) | 4 | (422 | ) | 4 | ||||||||||
Unrealized gain on marketable securities (Actuate) | — | — | — | 1,906 | ||||||||||||
Release of unrealized gain on marketable securities (Actuate) | — | (1,906 | ) | — | (1,906 | ) | ||||||||||
Total other comprehensive income (loss), net, for the period | 1,872 | 4,088 | (580 | ) | 4,271 | |||||||||||
Total comprehensive income | 70,980 | 30,579 | 197,582 | 169,908 | ||||||||||||
Comprehensive (income) loss attributable to non-controlling interests | 7 | 119 | (75 | ) | (114 | ) | ||||||||||
Total comprehensive income attributable to OpenText | $ | 70,987 | $ | 30,698 | $ | 197,507 | $ | 169,794 |
Three Months Ended March 31, | Nine Months Ended March 31, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Cash flows from operating activities: | |||||||||||||||
Net income for the period | $ | 69,108 | $ | 26,491 | $ | 198,162 | $ | 165,637 | |||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||
Depreciation and amortization of intangible assets | 59,350 | 63,195 | 179,806 | 175,562 | |||||||||||
Share-based compensation expense | 5,966 | 6,562 | 19,080 | 15,940 | |||||||||||
Excess tax expense (benefits) on share-based compensation expense | (217 | ) | 16 | (257 | ) | (1,611 | ) | ||||||||
Pension expense | 1,134 | 1,180 | 3,459 | 3,602 | |||||||||||
Amortization of debt issuance costs | 1,158 | 1,135 | 3,470 | 3,410 | |||||||||||
Amortization of deferred charges and credits | 2,652 | 2,630 | 7,250 | 7,893 | |||||||||||
Loss on sale and write down of property and equipment | 218 | 118 | 1,108 | 118 | |||||||||||
Release of unrealized gain on marketable securities to income | — | (3,098 | ) | — | (3,098 | ) | |||||||||
Write off of unamortized debt issuance costs | — | 2,919 | — | 2,919 | |||||||||||
Deferred taxes | (7,823 | ) | (5,256 | ) | (15,692 | ) | (4,037 | ) | |||||||
Changes in operating assets and liabilities: | |||||||||||||||
Accounts receivable | 11,272 | 36,311 | 22,152 | 76,560 | |||||||||||
Prepaid expenses and other current assets | (3,202 | ) | (3,304 | ) | (2,589 | ) | (4,001 | ) | |||||||
Income taxes | 2,996 | (10,245 | ) | 3,290 | 1,354 | ||||||||||
Accounts payable and accrued liabilities | (12,615 | ) | (16,421 | ) | (27,434 | ) | (53,747 | ) | |||||||
Deferred revenue | 61,237 | 39,450 | 12,564 | 6,705 | |||||||||||
Other assets | (1,290 | ) | 1,428 | 2,233 | (1,992 | ) | |||||||||
Net cash provided by operating activities | 189,944 | 143,111 | 406,602 | 391,214 | |||||||||||
Cash flows from investing activities: | |||||||||||||||
Additions of property and equipment | (18,998 | ) | (12,325 | ) | (48,897 | ) | (60,586 | ) | |||||||
Proceeds from maturity of short-term investments | 3,915 | 7,092 | 9,239 | 7,092 | |||||||||||
Purchase of Daegis Inc., net of cash acquired | — | — | (22,146 | ) | — | ||||||||||
Purchase of Actuate Corporation, net of cash acquired | (409 | ) | (291,768 | ) | (8,153 | ) | (291,768 | ) | |||||||
Purchase of a division of Spicer Corporation | — | — | — | (222 | ) | ||||||||||
Purchase of Informative Graphics Corporation, net of cash acquired | (3,376 | ) | (35,180 | ) | (3,464 | ) | (35,180 | ) | |||||||
Purchase of ICCM Professional Services Limited, net of cash acquired | — | — | (2,027 | ) | — | ||||||||||
Purchase consideration for prior period acquisitions | — | (147 | ) | — | (590 | ) | |||||||||
Other investing activities | (2,444 | ) | (482 | ) | (6,124 | ) | (8,915 | ) | |||||||
Net cash used in investing activities | (21,312 | ) | (332,810 | ) | (81,572 | ) | (390,169 | ) | |||||||
Cash flows from financing activities: | |||||||||||||||
Excess tax (expense) benefits on share-based compensation expense | 217 | (16 | ) | 257 | 1,611 | ||||||||||
Proceeds from issuance of Common Shares | 3,840 | 3,689 | 11,828 | 12,827 | |||||||||||
Purchase of Treasury Stock | — | (1,251 | ) | (10,627 | ) | (1,251 | ) | ||||||||
Common Shares repurchased | — | — | (65,509 | ) | — | ||||||||||
Proceeds from long-term debt | — | 800,000 | — | 800,000 | |||||||||||
Repayment of long-term debt | (2,000 | ) | (493,655 | ) | (6,000 | ) | (520,485 | ) | |||||||
Debt issuance costs | — | (16,673 | ) | — | (18,076 | ) | |||||||||
Payments of dividends to shareholders | (24,099 | ) | (21,075 | ) | (71,627 | ) | (63,174 | ) | |||||||
Net cash provided by (used in) financing activities | (22,042 | ) | 271,019 | (141,678 | ) | 211,452 | |||||||||
Foreign exchange gain (loss) on cash held in foreign currencies | 4,852 | (10,953 | ) | (5,946 | ) | (27,210 | ) | ||||||||
Increase in cash and cash equivalents during the period | 151,442 | 70,367 | 177,406 | 185,287 | |||||||||||
Cash and cash equivalents at beginning of the period | 725,963 | 542,810 | 699,999 | 427,890 | |||||||||||
Cash and cash equivalents at end of the period | $ | 877,405 | $ | 613,177 | $ | 877,405 | $ | 613,177 |
(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. |
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the three months ended March 31, 2016. (In thousands except for per share amounts) | ||||||||||||||
Three Months Ended March 31, 2016 | ||||||||||||||
GAAP-based Measures | GAAP-based Measures % of Revenue | Adjustments | Note | Non-GAAP-based Measures | Non-GAAP-based Measures % of Revenue | |||||||||
Cost of revenues | ||||||||||||||
Cloud services and subscriptions | $ | 61,298 | $ | (202 | ) | (1) | $ | 61,096 | ||||||
Customer support | 22,427 | (215 | ) | (1) | 22,212 | |||||||||
Professional service and other | 37,599 | (247 | ) | (1) | 37,352 | |||||||||
Amortization of acquired technology-based intangible assets | 17,630 | (17,630 | ) | (2) | — | |||||||||
GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%) | 299,109 | 67.9 | % | 18,294 | (3) | 317,403 | 72.0 | % | ||||||
Operating expenses | ||||||||||||||
Research and development | 48,160 | (500 | ) | (1) | 47,660 | |||||||||
Sales and marketing | 84,600 | (3,213 | ) | (1) | 81,387 | |||||||||
General and administrative | 37,731 | (1,589 | ) | (1) | 36,142 | |||||||||
Amortization of acquired customer-based intangible assets | 27,966 | (27,966 | ) | (2) | — | |||||||||
Special charges (recoveries) | (1,671 | ) | 1,671 | (4) | — | |||||||||
GAAP-based income from operations and operating margin (%) / Non-GAAP-based income from operations and operating margin (%) | 88,569 | 20.1 | % | 49,891 | (5) | 138,460 | 31.4 | % | ||||||
Other income (expense), net | 2,120 | (2,120 | ) | (6) | — | |||||||||
Provision for (recovery of) income taxes | 5,353 | 19,100 | (7) | 24,453 | ||||||||||
GAAP-based net income / Non-GAAP-based net income, attributable to OpenText | 69,115 | 28,671 | (8) | 97,786 | ||||||||||
GAAP-based earnings per share / Non GAAP-based earnings per share-diluted, attributable to OpenText | $ | 0.57 | $ | 0.23 | (8) | $ | 0.80 |
(1) | Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results. |
(2) | Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results. |
(3) | GAAP-based and Non-GAAP-based gross profit stated in dollars, and gross margin stated as a percentage of 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 following the relevant acquisitions and 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, and operating margin stated as a percentage of revenue. |
(6) | Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) relates primarily 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. |
(7) | Adjustment relates to differences between the GAAP-based tax provision rate of approximately 7% and a Non-GAAP-based tax rate of 20%; these rate differences are due to the income tax effects of expenses that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded expenses include amortization, share-based compensation, Special charges (recoveries) and other income (expense), net. Also excluded are tax expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves, tax arising on internal reorganizations, and “book to return” adjustments for tax return filings and tax assessments (in total “adjusted expenses”). In arriving at our Non-GAAP-based tax rate of 20%, 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 Non-GAAP-based adjusted net income to GAAP-based net income: |
Three Months Ended March 31, 2016 | ||||||
Per share diluted | ||||||
Non-GAAP-based net income, attributable to OpenText | $ | 97,786 | $ | 0.80 | ||
Less: | ||||||
Amortization | 45,596 | 0.37 | ||||
Share-based compensation | 5,966 | 0.05 | ||||
Special charges (recoveries) | (1,671 | ) | (0.01 | ) | ||
Other (income) expense, net | (2,120 | ) | (0.02 | ) | ||
GAAP-based provision for (recovery of) income taxes | 5,353 | 0.04 | ||||
Non-GAAP based provision for income taxes | (24,453 | ) | (0.20 | ) | ||
GAAP-based net income, attributable to OpenText | $ | 69,115 | $ | 0.57 |
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the nine months ended March 31, 2016. (In thousands except for per share amounts) | ||||||||||||||
Nine Months Ended March 31, 2016 | ||||||||||||||
GAAP-based Measures | GAAP-based Measures % of Revenue | Adjustments | Note | Non-GAAP-based Measures | Non-GAAP-based Measures % of Revenue | |||||||||
Cost of revenues | ||||||||||||||
Cloud services and subscriptions | $ | 179,132 | $ | (641 | ) | (1) | $ | 178,491 | ||||||
Customer support | 64,624 | (631 | ) | (1) | 63,993 | |||||||||
Professional service and other | 114,038 | (1,086 | ) | (1) | 112,952 | |||||||||
Amortization of acquired technology-based intangible assets | 56,244 | (56,244 | ) | (2) | — | |||||||||
GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%) | 919,197 | 68.6 | % | 58,602 | (3) | 977,799 | 72.9 | % | ||||||
Operating expenses | ||||||||||||||
Research and development | 140,310 | (1,988 | ) | (1) | 138,322 | |||||||||
Sales and marketing | 248,420 | (9,043 | ) | (1) | 239,377 | |||||||||
General and administrative | 107,067 | (5,691 | ) | (1) | 101,376 | |||||||||
Amortization of acquired customer-based intangible assets | 83,564 | (83,564 | ) | (2) | — | |||||||||
Special charges (recoveries) | 24,754 | (24,754 | ) | (4) | — | |||||||||
GAAP-based income from operations and operating margin (%) / Non-GAAP-based income from operations and operating margin (%) | 275,084 | 20.5 | % | 183,642 | (5) | 458,726 | 34.2 | % | ||||||
Other income (expense), net | (1,832 | ) | 1,832 | (6) | — | |||||||||
Provision for (recovery of) income taxes | 20,629 | 60,149 | (7) | 80,778 | ||||||||||
GAAP-based net income / Non-GAAP-based net income, attributable to OpenText | 198,087 | 125,325 | (8) | 323,412 | ||||||||||
GAAP-based earnings per share / Non GAAP-based earnings per share-diluted, attributable to OpenText | $ | 1.62 | $ | 1.03 | (8) | $ | 2.65 |
(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 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 following the relevant acquisitions and 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, and operating margin stated as a percentage of revenue. |
(6) | Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) relates primarily 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. |
(7) | Adjustment relates to differences between the GAAP-based tax provision rate of approximately 9% and a Non-GAAP-based tax rate of 20%; these rate differences are due to the income tax effects of expenses that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded expenses include amortization, share-based compensation, Special charges (recoveries) and other income (expense), net. Also excluded are tax expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves, tax arising on internal reorganizations, and “book to return” adjustments for tax return filings and tax assessments (in total “adjusted expenses”). In arriving at our Non-GAAP-based tax rate of 20%, 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 Non-GAAP-based adjusted net income to GAAP-based net income: |
Nine Months Ended March 31, 2016 | ||||||
Per share diluted | ||||||
Non-GAAP-based net income, attributable to OpenText | $ | 323,412 | $ | 2.65 | ||
Less: | ||||||
Amortization | 139,808 | 1.15 | ||||
Share-based compensation | 19,080 | 0.16 | ||||
Special charges (recoveries) | 24,754 | 0.20 | ||||
Other (income) expense, net | 1,832 | 0.02 | ||||
GAAP-based provision for (recovery of) income taxes | 20,629 | 0.17 | ||||
Non-GAAP based provision for income taxes | (80,778 | ) | (0.67 | ) | ||
GAAP-based net income, attributable to OpenText | $ | 198,087 | $ | 1.62 |
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the three months ended December 31, 2015. (In thousands except for per share amounts) | ||||||||||||||
Three Months Ended December 31, 2015 | ||||||||||||||
GAAP-based Measures | GAAP-based Measures % of Revenue | Adjustments | Note | Non-GAAP-based Measures | Non-GAAP-based Measures % of Revenue | |||||||||
Cost of revenues | ||||||||||||||
Cloud services and subscriptions | $ | 58,918 | $ | (158 | ) | (1) | $ | 58,760 | ||||||
Customer support | 21,689 | (258 | ) | (1) | 21,431 | |||||||||
Professional service and other | 38,375 | (386 | ) | (1) | 37,989 | |||||||||
Amortization of acquired technology-based intangible assets | 18,731 | (18,731 | ) | (2) | — | |||||||||
GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%) | 325,605 | 70.0 | % | 19,533 | (3) | 345,138 | 74.2 | % | ||||||
Operating expenses | ||||||||||||||
Research and development | 45,710 | (736 | ) | (1) | 44,974 | |||||||||
Sales and marketing | 85,875 | (2,715 | ) | (1) | 83,160 | |||||||||
General and administrative | 33,767 | (2,328 | ) | (1) | 31,439 | |||||||||
Amortization of acquired customer-based intangible assets | 27,793 | (27,793 | ) | (2) | — | |||||||||
Special charges (recoveries) | 9,088 | (9,088 | ) | (4) | — | |||||||||
GAAP-based income from operations and operating margin (%) / Non-GAAP-based income from operations and operating margin (%) | 110,042 | 23.6 | % | 62,193 | (5) | 172,235 | 37.0 | % | ||||||
Other income (expense), net | 961 | (961 | ) | (6) | — | |||||||||
Provision for (recovery of) income taxes | 4,074 | 26,480 | (7) | 30,554 | ||||||||||
GAAP-based net income / Non-GAAP-based net income, attributable to OpenText | 87,686 | 34,752 | (8) | 122,438 | ||||||||||
GAAP-based earnings per share / Non GAAP-based earnings per share-diluted, attributable to OpenText | $ | 0.72 | $ | 0.29 | (8) | $ | 1.01 |
(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 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 following the relevant acquisitions and 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, and operating margin stated as a percentage of revenue. |
(6) | Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) relates primarily 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. |
(7) | Adjustment relates to differences between the GAAP-based tax provision rate of approximately 4% and a Non-GAAP-based tax rate of 20%; these rate differences are due to the income tax effects of expenses that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded expenses include amortization, share-based compensation, Special charges (recoveries) and other income (expense), net. Also excluded are tax expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves, tax arising on internal reorganizations, and “book to return” adjustments for tax return filings and tax assessments (in total “adjusted expenses”). In arriving at our Non-GAAP-based tax rate of 20%, 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 Non-GAAP-based adjusted net income to GAAP-based net income: |
Three Months Ended December 31, 2015 | ||||||
Per share diluted | ||||||
Non-GAAP-based net income, attributable to OpenText | $ | 122,438 | $ | 1.01 | ||
Less: | ||||||
Amortization | 46,524 | 0.38 | ||||
Share-based compensation | 6,581 | 0.05 | ||||
Special charges (recoveries) | 9,088 | 0.07 | ||||
Other (income) expense, net | (961 | ) | (0.01 | ) | ||
GAAP-based provision for (recovery of) income taxes | 4,074 | 0.03 | ||||
Non-GAAP based provision for income taxes | (30,554 | ) | (0.23 | ) | ||
GAAP-based net income, attributable to OpenText | $ | 87,686 | $ | 0.72 |
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the three months ended March 31, 2015. (In thousands except for per share amounts) | ||||||||||||||
Three Months Ended March 31, 2015 | ||||||||||||||
GAAP-based Measures | GAAP-based Measures % of Revenue | Adjustments | Note | Non-GAAP-based Measures | Non-GAAP-based Measures % of Revenue | |||||||||
Cost of revenues | ||||||||||||||
Cloud services and subscriptions | $ | 60,776 | $ | (182 | ) | (1) | $ | 60,594 | ||||||
Customer support | 24,084 | (224 | ) | (1) | 23,860 | |||||||||
Professional service and other | 42,396 | (316 | ) | (1) | 42,080 | |||||||||
Amortization of acquired technology-based intangible assets | 22,136 | (22,136 | ) | (2) | — | |||||||||
GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%) | 295,205 | 66.0 | % | 22,858 | (3) | 318,063 | 71.1 | % | ||||||
Operating expenses | ||||||||||||||
Research and development | 53,222 | (654 | ) | (1) | 52,568 | |||||||||
Sales and marketing | 97,146 | (1,919 | ) | (1) | 95,227 | |||||||||
General and administrative | 45,552 | (3,267 | ) | (1) | 42,285 | |||||||||
Amortization of acquired customer-based intangible assets | 28,250 | (28,250 | ) | (2) | — | |||||||||
Special charges (recoveries) | 5,622 | (5,622 | ) | (4) | — | |||||||||
GAAP-based income from operations and operating margin (%) / Non-GAAP-based income from operations and operating margin (%) | 52,604 | 11.8 | % | 62,570 | (5) | 115,174 | 25.7 | % | ||||||
Other income (expense), net | (9,550 | ) | 9,550 | (6) | — | |||||||||
Provision for (recovery of) income taxes | (309 | ) | 18,122 | (7) | 17,813 | |||||||||
GAAP-based net income / Non-GAAP-based net income, attributable to OpenText | 26,610 | 53,998 | (8) | 80,608 | ||||||||||
GAAP-based earnings per share / Non GAAP-based earnings per share-diluted, attributable to OpenText | $ | 0.22 | $ | 0.44 | (8) | $ | 0.66 |
(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 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 following the relevant acquisitions and 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, and operating margin stated as a percentage of revenue. |
(6) | Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) relates primarily 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. |
(7) | Adjustment relates to differences between the GAAP-based tax recovery rate of approximately 1% and a Non-GAAP-based tax rate of 18%; these rate differences are due to the income tax effects of expenses that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded expenses include amortization, share-based compensation, Special charges (recoveries) and other income (expense), net. Also excluded are tax expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves, tax arising on internal reorganizations, and “book to return” adjustments for tax return filings and tax assessments (in total “adjusted expenses”). In arriving at our Non-GAAP-based tax rate of 18%, 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 Non-GAAP-based adjusted net income to GAAP-based net income: |
Three Months Ended March 31, 2015 | ||||||
Per share diluted | ||||||
Non-GAAP-based net income, attributable to OpenText | $ | 80,608 | $ | 0.66 | ||
Less: | ||||||
Amortization | 50,386 | 0.41 | ||||
Share-based compensation | 6,562 | 0.05 | ||||
Special charges (recoveries) | 5,622 | 0.05 | ||||
Other (income) expense, net | 9,550 | 0.08 | ||||
GAAP-based provision for (recovery of) income taxes | (309 | ) | — | |||
Non-GAAP based provision for income taxes | (17,813 | ) | (0.15 | ) | ||
GAAP-based net income, attributable to OpenText | $ | 26,610 | $ | 0.22 |
Reconciliation of selected GAAP-based measures to Non GAAP-based measures for the nine months ended March 31, 2015. (In thousands except for per share amounts) | ||||||||||||||
Nine Months Ended March 31, 2015 | ||||||||||||||
GAAP-based Measures | GAAP-based Measures % of Revenue | Adjustments | Note | Non-GAAP-based Measures | Non-GAAP-based Measures % of Revenue | |||||||||
Cost of revenues: | ||||||||||||||
Cloud services and subscriptions | $ | 178,886 | $ | (581 | ) | (1) | $ | 178,305 | ||||||
Customer support | 70,878 | (632 | ) | (1) | 70,246 | |||||||||
Professional service and other | 129,999 | (914 | ) | (1) | 129,085 | |||||||||
Amortization of acquired technology-based intangible assets | 58,548 | (58,548 | ) | (2) | — | |||||||||
GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%) | 921,510 | 67.3 | % | 60,675 | (3) | 982,185 | 71.7 | % | ||||||
Operating expenses | ||||||||||||||
Research and development | 144,134 | (1,831 | ) | (1) | 142,303 | |||||||||
Sales and marketing | 269,167 | (6,587 | ) | (1) | 262,580 | |||||||||
General and administrative | 120,962 | (5,395 | ) | (1) | 115,567 | |||||||||
Amortization of acquired customer-based intangible assets | 79,498 | (79,498 | ) | (2) | — | |||||||||
Special charges (recoveries) | 4,032 | (4,032 | ) | (4) | — | |||||||||
GAAP-based income from operations and operating margin (%) / Non-GAAP-based income from operations and operating margin (%) | 266,201 | 19.4 | % | 158,018 | (5) | 424,219 | 31.0 | % | ||||||
Other income (expense), net | (28,737 | ) | 28,737 | (6) | — | |||||||||
Provision for (recovery of) income taxes | 35,401 | 34,288 | (7) | 69,689 | ||||||||||
GAAP-based net income / Non-GAAP-based net income, attributable to OpenText | 165,523 | 152,467 | (8) | 317,990 | ||||||||||
GAAP-based earnings per share / Non GAAP-based earnings per share-diluted, attributable to OpenText | $ | 1.35 | $ | 1.24 | (8) | $ | 2.59 |
(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 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 following the relevant acquisitions and 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, and operating margin stated as a percentage of revenue. |
(6) | Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) relates primarily 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. |
(7) | Adjustment relates to the income tax effects of expenses that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded expenses include amortization, share-based compensation, Special charges (recoveries) and other income (expense), net. Also excluded are tax expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves, tax arising on internal reorganizations, and “book to return” adjustments for tax return filings and tax assessments (in total “adjusted expenses”). In arriving at our Non-GAAP-based tax rate of 18%, 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 Non-GAAP-based adjusted net income to GAAP-based net income: |
Nine Months Ended March 31, 2015 | ||||||
Per share diluted | ||||||
Non-GAAP-based net income, attributable to OpenText | $ | 317,990 | $ | 2.59 | ||
Less: | ||||||
Amortization | 138,046 | 1.12 | ||||
Share-based compensation | 15,940 | 0.13 | ||||
Special charges (recoveries) | 4,032 | 0.03 | ||||
Other (income) expense, net | 28,737 | 0.23 | ||||
GAAP-based provision for (recovery of) income taxes | 35,401 | 0.29 | ||||
Non-GAAP based provision for income taxes | (69,689 | ) | (0.56 | ) | ||
GAAP-based net income, attributable to OpenText | $ | 165,523 | $ | 1.35 |
(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, 2016 and 2015: |
Three Months Ended March 31, 2016 | Three Months Ended March 31, 2015 | ||||||||
Currencies | % of Revenue | % of Expenses* | % of Revenue | % of Expenses* | |||||
EURO | 22 | % | 15 | % | 23 | % | 14 | % | |
GBP | 8 | % | 7 | % | 8 | % | 8 | % | |
CAD | 4 | % | 12 | % | 5 | % | 12 | % | |
USD | 56 | % | 49 | % | 52 | % | 49 | % | |
Other | 10 | % | 17 | % | 12 | % | 17 | % | |
Total | 100 | % | 100 | % | 100 | % | 100 | % |
Nine Months Ended March 31, 2016 | Nine Months Ended March 31, 2015 | ||||||||
Currencies | % of Revenue | % of Expenses* | % of Revenue | % of Expenses* | |||||
EURO | 23 | % | 14 | % | 24 | % | 15 | % | |
GBP | 8 | % | 8 | % | 9 | % | 8 | % | |
CAD | 4 | % | 12 | % | 5 | % | 12 | % | |
USD | 54 | % | 50 | % | 50 | % | 47 | % | |
Other | 11 | % | 16 | % | 12 | % | 18 | % | |
Total | 100 | % | 100 | % | 100 | % | 100 | % |