EX-99.1 2 exhibit991q4-19pressrelease.htm EXHIBIT 99.1 Exhibit


Exhibit 99.1
OpenText Reports Fourth Quarter and Fiscal Year 2019 Financial Results

Record Cloud and Annual Recurring Revenues (ARR)
Strong Margin Expansion
Record Operating Cash Flows

Highlights
Fiscal Year 2019
•
Total Revenues of $2.87 billion, up 1.9%, and $2.92 billion, in constant currency, up 3.8%
•
Annual Recurring Revenues (ARR) of $2.16 billion, up 4.6%, and $2.19 billion in constant currency, up 6.2%
•
Cloud Services and Subscriptions Revenues of $907.8 million, up 9.5%, and $918.6 million in constant currency, up 10.8%
•
GAAP net income attributable to OpenText of $285.5 million, up 17.9%
•
Adjusted EBITDA of $1.10 billion, up 7.8%, Margin of 38.4%, up 210 basis points
•
GAAP EPS, diluted of $1.06, up 16.5%
•
Non-GAAP EPS, diluted of $2.76, up 7.8%, and $2.79 in constant currency, up 9.0%
•
Record annual Operating Cash Flows of $876.3 million, up 23.8%.

Fourth Quarter
•
Total Revenues of $747.2 million, down 0.9%, and $769.3 million in constant currency, up 2.0%
•
Annual Recurring Revenues of $557.1 million, up 4.2%, and $572.0 million in constant currency, up 7.0%
•
Cloud Services and Subscriptions Revenues of $241.9 million, up 11.0%, and $246.5 million in constant currency, up 13.1%
•
GAAP net income attributable to OpenText of $72.0 million, up 16.6%
•
Adjusted EBITDA of $283.9 million, up 0.8%, Margin of 38.0%, up 60 basis points
•
GAAP EPS, diluted of $0.27, up 17.4%
•
Non-GAAP EPS, diluted of $0.72, no change, and $0.74 in constant currency, up 2.8%
•
Operating Cash Flows of $229.8 million, up 12.6%

Waterloo, ON, August 1, 2019 - Open Text Corporation (NASDAQ: OTEX), (TSX: OTEX), “The Information Company,” today announced its financial results for the fourth quarter and year ended June 30, 2019.
“Fiscal 2019 was a momentous year for OpenText as we delivered in constant currency $2.92 billion in total revenues, a record $918.6 million in cloud revenues, up 10.8% year-over-year growth and $2.19 billion in Annual Recurring Revenues, up 6.2% year-over-year growth, representing 75% of total revenues,” said Mark J. Barrenechea, OpenText CEO & CTO. “We enter Fiscal 2020 with the strongest EIM offering in the industry, empowering customers to unlock their information advantage and win in Industry 4.0. Our expanded partnerships with Google and SAP and recently announced next generation product line, OpenText Cloud Edition, will help revolutionize the way businesses capture, govern, exchange and use information in the cloud.”
Barrenechea further added, “We delivered a solid fourth quarter with total revenues of $769.3 million, up 2.0% year-over-year, and cloud revenues of $246.5 million, up 13.1% year-over-year, each in constant currency. Operating Cash Flows were $229.8 million, up 12.6% year-over-year. These solid results were delivered against the back drop of a $22 million foreign currency headwind to revenue during the quarter.”
“During Fiscal 2019, we had record Adjusted EBITDA margin of 38.4%, delivered Operating Cash Flows of $876.3 million and deployed $381.4 million of capital to acquire Liaison Technologies & Catalyst Repository Systems,” said Madhu Ranganathan, OpenText EVP and CFO. “We ended the year with $941 million of Cash & Cash Equivalents and 1.5x Consolidated Net Leverage ratio, compared to 1.9x a year ago. As we look into Fiscal 2020

1


and beyond, we have never been stronger in our operating framework and balance sheet flexibility to continue our investments in product innovation, go-to-market and strategic acquisitions.”
Financial Highlights for Fiscal 2019 with Year Over Year Comparisons
Summary of Annual Results
 
 
 
 
 
 
 
 
(in millions except per share data)
FY19
FY18
$ Change 
% Change 
(Y/Y)
 
FY19 in CC*
% Change in CC*
 
Revenues:
 
 
 
 
 
 
 
 
Cloud services and subscriptions

$907.8


$829.0


$78.8

9.5
 %
 

$918.6

10.8
 %
 
Customer support
1,247.9

1,232.5

15.4

1.3
 %
 
1,271.1

3.1
 %
 
Total annual recurring revenues**

$2,155.7


$2,061.5


$94.3

4.6
 %
 

$2,189.7

6.2
 %
 
License
428.1

437.5

(9.4
)
(2.2
)%
 
439.3

0.4
 %
 
Professional service and other
284.9

316.3

(31.3
)
(9.9
)%
 
293.0

(7.4
)%
 
Total revenues

$2,868.8


$2,815.2


$53.5

1.9
 %
 

$2,922.0

3.8
 %
 
GAAP-based operating income

$567.0


$506.7


$60.3

11.9
 %
 
N/A

N/A

 
Non-GAAP-based operating income (1)

$1,002.7


$933.5


$69.2

7.4
 %
 

$1,013.4

8.6
 %
 
GAAP-based EPS, diluted

$1.06


$0.91


$0.15

16.5
 %
 
N/A

N/A

 
Non-GAAP-based EPS, diluted (1)(2)

$2.76


$2.56


$0.20

7.8
 %
 

$2.79

9.0
 %
 
GAAP-based net income attributable to OpenText

$285.5


$242.2


$43.3

17.9
 %
 
N/A

N/A

 
Adjusted EBITDA (1)

$1,100.3


$1,020.4


$79.9

7.8
 %
 

$1,111.8

9.0
 %
 
Operating cash flows

$876.3


$708.1


$168.2

23.8
 %
 
N/A

N/A

 
Summary of Quarterly Results
 
 
 
 
 
 
 
 
(in millions except per share data)
Q4 FY19
Q4 FY18
$ Change 
% Change 
(Y/Y)
 
Q4 FY19 in CC*
% Change in CC*
 
Revenues:
 
 
 
 
 
 
 
 
Cloud services and subscriptions

$241.9


$217.9


$24.0

11.0
 %
 

$246.5

13.1
 %
 
Customer support
315.2

316.8

(1.5
)
(0.5
)%
 
325.4

2.7
 %
 
Total annual recurring revenues**

$557.1


$534.6


$22.5

4.2
 %
 

$572.0

7.0
 %
 
License
119.7

139.9

(20.2
)
(14.4
)%
 
124.1

(11.3
)%
 
Professional service and other
70.4

79.7

(9.3
)
(11.7
)%
 
73.2

(8.1
)%
 
Total revenues

$747.2


$754.3


($7.0
)
(0.9
)%
 

$769.3

2.0
 %
 
GAAP-based operating income

$158.0


$149.4


$8.6

5.8
 %
 
N/A

N/A

 
Non-GAAP-based operating income (1)

$259.0


$259.1


($0.1
)
—
 %
 

$266.9

3.0
 %
 
GAAP-based EPS, diluted

$0.27


$0.23


$0.04

17.4
 %
 
N/A

N/A

 
Non-GAAP-based EPS, diluted (1)(2)

$0.72


$0.72


$—

—
 %
 

$0.74

2.8
 %
 
GAAP-based net income attributable to OpenText

$72.0


$61.7


$10.3

16.6
 %
 
N/A

N/A

 
Adjusted EBITDA (1)

$283.9


$281.8


$2.1

0.8
 %
 

$292.2

3.6
 %
 
Operating cash flows

$229.8


$204.1


$25.7

12.6
 %
 
N/A

N/A

 
(1) Please see note 2 "Use of Non-GAAP Financial Measures" below
(2) Please also see note 14 to the Company's Fiscal 2018 Consolidated Financial Statements on Form 10-K. Reflective of the amount of net tax benefit arising from the internal reorganization assumed to be allocable to the current period based on the forecasted utilization period.
Note: Individual line items in tables may be adjusted by non-material amounts to enable totals to align to published financial statements.

*CC: Constant currency for this purpose is defined as the current period reported revenues/expenses/earnings represented at the prior comparative period's foreign exchange rate.
**Annual recurring revenue is defined as the sum of Cloud services and subscriptions revenue and Customer support revenue.




2




Dividend Program
As part of our quarterly, non-cumulative cash dividend program, the Board declared on July 31, 2019 a cash dividend of $0.1746 per common share. The record date for this dividend is August 30, 2019 and the payment date is September 20, 2019. Future declarations of dividends and the establishment of future record and payment dates are subject to the final determination and discretion of the Board of Directors.

OpenText Quarterly Business Highlights
•
26 customer transactions over $1 million, 13 in the OpenText Cloud and 13 off-cloud
•
Financial, Consumer Goods, Services, Technology and Public Sector industries saw the most demand in cloud and license
•
Key customer wins in the quarter included: BMW Group, Core-Mark Holding Company, Inc., Creative Foam Corporation, Credito Emiliano SpA , Lanxess Deutschland GmbH, Phillips Lytle LLP, Premier Healthcare Solutions, Inc. and Vertican Technologies, Inc.
•
OpenText hosts largest Enterprise Information Management conference, OpenText Enterprise World, in Toronto
•
OpenText announces the next generation Enterprise Information Management Cloud at Enterprise World
•
OpenText announces strategic partnership with Google Cloud
•
OpenText and Mastercard Partner to Transform Financial Processes Across Global Supply Chains
•
OpenText named a Customer Communications Management leader in 2019 Aspire CCM leaderboard
•
OpenText AppWorks named a leader in Digital Process Automation for Deep Deployments
•
New OpenText Content Management Services to be delivered through SAP® Cloud Platform
•
OpenText releases new Cloud and Hybrid offerings for SAP® solutions
•
OpenText receives 2019 SAP® Pinnacle Award as the SAP Solution Extension Partner of the Year

Summary of Annual Results
 
 
 
 
 
FY19
FY18
% Change
 
Revenue (million)

$2,868.8


$2,815.2

1.9
%
 
GAAP-based gross margin
67.6
%
66.2
%
140

bps
GAAP-based EPS, diluted

$1.06


$0.91

16.5
%
 
Non-GAAP-based gross margin (1)
74.1
%
73.0
%
110

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

$2.76


$2.56

7.8
%
 

Summary of Quarterly Results
 
 
 
 
 
 
 
 
Q4 FY19
Q3 FY19
Q4 FY18
% Change 
(Q4 FY19 vs Q3 FY19)
 
% Change
(Q4 FY19 vs Q4 FY18)
 
Revenue (million)

$747.2


$719.1


$754.3

3.9
%
 
(0.9
)%
 
GAAP-based gross margin
68.3
%
66.7
%
67.5
%
160

bps
80

bps
GAAP-based EPS, diluted

$0.27


$0.27


$0.23

—
%
 
17.4
 %
 
Non-GAAP-based gross margin (1)
74.2
%
73.0
%
74.0
%
120

bps
20

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

$0.72


$0.64


$0.72

12.5
%
 
—
 %
 
(1) Please see note 2 "Use of Non-GAAP Financial Measures" below
(2) Please also see note 14 to the Company's Fiscal 2018 Consolidated Financial Statements on Form 10-K. Reflective of the amount of net tax benefit arising from the internal reorganization assumed to be allocable to the current period based on the forecasted utilization period.

3


OpenText Capital Markets Day 2019
Institutional investors and equity research analysts are invited to attend OpenText's 2019 Capital Markets Day on Friday, September 6, 2019 at the Lotte New York Palace hotel in New York, NY. This event will include an annual strategic update with formal presentations by the OpenText executive team. To register, please contact investors@opentext.com. Presentation material as well as listen-only teleconference and webcast details will be publicly available on the Investor Relations website at: http://investors.opentext.com/investor-events-and-presentations.

Conference Call Information

The public is invited to listen to the earnings conference call today at 5:00 p.m. ET (2:00 p.m. PT) by dialing 1-800-319-4610 (toll-free) or +1-604-638-5340 (international). Please dial-in 10 minutes ahead of time to ensure proper connection. Alternatively, a live webcast of the earnings conference call will be available on the Investor Relations section of the Company's website at http://investors.opentext.com/investor-events-and-presentations.

A replay of the call will be available beginning August 1, 2019 at 7:00 p.m. ET through 11:59 p.m. on August 15, 2019 and can be accessed by dialing 1-855-669-9658 (toll-free) or +1-604-674-8052 (international) and using passcode 3382 followed by the number sign.

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

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

Cautionary Statement Regarding Forward-Looking Statements
Certain statements in this press release, including statements about the focus of Open Text Corporation (“OpenText” or “the Company”) in our fiscal year ending June 30, 2020 (Fiscal 2020) on growth, anticipated benefits of our partnerships and next generation product lines, the strength of our operating framework and balance sheet flexibility, continued investments in product innovation, go-to-market and strategic acquisitions, M&A continuing to be our leading growth contributor, our capital allocation strategy, creating value through investments in broader Enterprise Information Management (EIM) capabilities, the Company's presence in the cloud and in growth markets, expected growth in our revenue lines, total growth from acquisitions, innovation and organic initiatives, the focus on recurring revenues, improving operational efficiency, expanding cash flow and strengthening the business, adjusted operating income and cash flow, its financial condition, the adjusted operating margin target range, results of operations and earnings, announced acquisitions, ongoing tax matters, the integration of the acquired businesses, declaration of quarterly dividends, future tax rates, new platform and product offerings, scaling OpenText to new levels in Fiscal 2020 and beyond, and other matters, may contain words such as "anticipates", "expects", "intends", "plans", "believes", "seeks", "estimates", "may", "could", "would", "might", "will" and variations of these words or similar expressions are considered forward-looking statements or information under applicable securities laws. In addition, any information or statements that refer to expectations, beliefs, plans, projections, objectives, performance or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking, and based on our current expectations, forecasts and projections about the operating environment, economies and markets in which we operate. Forward-looking statements reflect our current estimates, beliefs and assumptions, which are based on management's perception of historic trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances, such as certain assumptions about the economy, as well as market, financial and operational assumptions. Management's estimates, beliefs and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events and, as such, are subject to change. We can give no assurance that such estimates, beliefs and assumptions will prove to be correct. Such forward-looking statements involve known and unknown risks, uncertainties and other factors and assumptions that may cause the actual results, performance or achievements to differ materially. Such factors include, but are not limited to: (i) the future performance, financial and otherwise, of OpenText; (ii) the ability of OpenText to bring new products and services to market and to increase sales; (iii) the strength of the Company's product development pipeline; (iv) the Company's growth and profitability prospects; (v) the estimated size and growth prospects of the EIM market including expected growth in the Artificial Intelligence market; (vi) the Company's competitive

4


position in the EIM market and its ability to take advantage of future opportunities in this market; (vii) the benefits of the Company's products and services to be realized by customers; (viii) the demand for the Company's products and services and the extent of deployment of the Company's products and services in the EIM marketplace; (ix) downward pressure on our share price and dilutive effect of future sales or issuances of equity securities (including in connection with future acquisitions); (x) the Company's financial condition and capital requirements; and (xi) statements about the impact of product releases. The risks and uncertainties that may affect forward-looking statements include, but are not limited to: (i) integration of acquisitions and related restructuring efforts, including the quantum of restructuring charges and the timing thereof; (ii) the potential for the incurrence of or assumption of debt in connection with acquisitions and the impact on the ratings or outlooks of rating agencies on the Company's outstanding debt securities; (iii) the possibility that the Company may be unable to meet its future reporting requirements under the U.S. Securities Exchange Act of 1934, as amended, and the rules promulgated thereunder, or applicable Canadian securities regulation; (iv) the risks associated with bringing new products and services to market; (v) failure to comply with privacy laws and regulations that are extensive, open to various interpretations and complex to implement including General Data Protection Regulation (GDPR) and Country by Country Reporting (CBCR); (vi) fluctuations in currency exchange rates; (vii) delays in the purchasing decisions of the Company's customers; (viii) the competition the Company faces in its industry and/or marketplace; (ix) the final determination of litigation, tax audits (including tax examinations in the United States and elsewhere) and other legal proceedings; (x) potential exposure to greater than anticipated tax liabilities or expenses, including with respect to changes in Canadian, U.S. or international tax regimes including tax reform legislation enacted through the Tax Cuts and Jobs Act in the United States; (xi) the possibility of technical, logistical or planning issues in connection with the deployment of the Company's products or services; (xii) the continuous commitment of the Company's customers; and (xiii) demand for the Company's products and services. For additional information with respect to risks and other factors which could occur, see the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other securities filings with the Securities and Exchange Commission (SEC) and other securities regulators. Readers are cautioned not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. Unless otherwise required by applicable securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.


For more information, please contact:

Harry E. Blount
Senior Vice President, Global Head of Investor Relations
Open Text Corporation
415-963-0825
investors@opentext.com



Copyright ©2019 Open Text. OpenText is a trademark or registered trademark of Open Text. The list of trademarks is not exhaustive of other trademarks. Registered trademarks, product names, company names, brands and service names mentioned herein are property of Open Text. All rights reserved. For more information, visit: http://www.opentext.com/who-we-are/copyright-information.

5

OPEN TEXT CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars, except share data)
 
June 30, 2019
 
June 30, 2018
ASSETS
 
 
 
Cash and cash equivalents
$
941,009

 
$
682,942

Accounts receivable trade, net of allowance for doubtful accounts of $17,011 as of June 30, 2019 and $9,741 as of June 30, 2018
463,785

 
487,956

Contract assets
20,956

 
—

Income taxes recoverable
38,340

 
55,623

Prepaid expenses and other current assets
97,238

 
101,059

Total current assets
1,561,328

 
1,327,580

Property and equipment
249,453

 
264,205

Long-term contract assets
15,386

 
—

Goodwill
3,769,908

 
3,580,129

Acquired intangible assets
1,146,504

 
1,296,637

Deferred tax assets
1,004,450

 
1,122,729

Other assets
148,977

 
111,267

Deferred charges
—

 
38,000

Long-term income taxes recoverable
37,969

 
24,482

Total assets
$
7,933,975

 
$
7,765,029

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable and accrued liabilities
$
329,903

 
$
302,154

Current portion of long-term debt
10,000

 
10,000

Deferred revenues
641,656

 
644,211

Income taxes payable
33,158

 
38,234

Total current liabilities
1,014,717

 
994,599

Long-term liabilities:
 
 
 
Accrued liabilities
49,441

 
52,827

Deferred credits
—

 
2,727

Pension liability
75,239

 
65,719

Long-term debt
2,604,878

 
2,610,523

Deferred revenues
46,974

 
69,197

Long-term income taxes payable
202,184

 
172,241

Deferred tax liabilities
55,872

 
79,938

Total long-term liabilities
3,034,588

 
3,053,172

Shareholders' equity:
 
 
 
Share capital and additional paid-in capital
 
 
 
269,834,442 and 267,651,084 Common Shares issued and outstanding at June 30, 2019 and June 30, 2018, respectively; authorized Common Shares: unlimited
1,774,214

 
1,707,073

Accumulated other comprehensive income
24,124

 
33,645

Retained earnings
2,113,883

 
1,994,235

Treasury stock, at cost (802,871 shares at June 30, 2019 and 690,336 shares at June 30, 2018, respectively)
(28,766
)
 
(18,732
)
Total OpenText shareholders' equity
3,883,455

 
3,716,221

Non-controlling interests
1,215

 
1,037

Total shareholders' equity
3,884,670

 
3,717,258

Total liabilities and shareholders' equity
$
7,933,975

 
$
7,765,029

 


6


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

 
 
Year Ended June 30,
 
 
2019
 
2018
 
2017
Revenues:
 
 
 
 
 
 
License
 
$
428,092

 
$
437,512

 
$
369,144

Cloud services and subscriptions
 
907,812

 
828,968

 
705,495

Customer support
 
1,247,915

 
1,232,504

 
981,102

Professional service and other
 
284,936

 
316,257

 
235,316

Total revenues
 
2,868,755

 
2,815,241

 
2,291,057

Cost of revenues:
 
 
 
 
 
 
License
 
14,347

 
13,693

 
13,632

Cloud services and subscriptions
 
383,993

 
364,160

 
299,850

Customer support
 
124,343

 
133,889

 
122,565

Professional service and other
 
224,635

 
253,389

 
194,954

Amortization of acquired technology-based intangible assets
 
183,385

 
185,868

 
130,556

Total cost of revenues
 
930,703

 
950,999

 
761,557

Gross profit
 
1,938,052

 
1,864,242

 
1,529,500

Operating expenses:
 
 
 
 
 
 
Research and development
 
321,836

 
322,909

 
281,215

Sales and marketing
 
518,035

 
529,141

 
444,454

General and administrative
 
207,909

 
205,227

 
170,353

Depreciation
 
97,716

 
86,943

 
64,318

Amortization of acquired customer-based intangible assets
 
189,827

 
184,118

 
150,842

Special charges
 
35,719

 
29,211

 
63,618

Total operating expenses
 
1,371,042

 
1,357,549

 
1,174,800

Income from operations
 
567,010

 
506,693

 
354,700

Other income (expense), net
 
10,156

 
17,973

 
15,743

Interest and other related expense, net
 
(136,592
)
 
(138,540
)
 
(120,892
)
Income before income taxes
 
440,574

 
386,126

 
249,551

Provision for (recovery of) income taxes
 
154,937

 
143,826

 
(776,364
)
Net income for the period
 
$
285,637

 
$
242,300

 
$
1,025,915

Net (income) loss attributable to non-controlling interests
 
(136
)
 
(76
)
 
(256
)
Net income attributable to OpenText
 
$
285,501

 
$
242,224

 
$
1,025,659

Earnings per share—basic attributable to OpenText
 
$
1.06

 
$
0.91

 
$
4.04

Earnings per share—diluted attributable to OpenText
 
$
1.06

 
$
0.91

 
$
4.01

Weighted average number of Common Shares outstanding—basic
 
268,784

 
266,085

 
253,879

Weighted average number of Common Shares outstanding—diluted
 
269,908

 
267,492

 
255,805




7


OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands of U.S. dollars, except share and per share data)
(unaudited)
 
Three Months Ended June 30,
 
2019
 
2018
Revenues:
 
 
 
License
$
119,728

 
$
139,924

Cloud services and subscriptions
241,889

 
217,892

Customer support
315,248

 
316,751

Professional service and other
70,356

 
79,703

Total revenues
747,221

 
754,270

Cost of revenues:
 
 
 
License
4,128

 
3,048

Cloud services and subscriptions
103,719

 
95,346

Customer support
30,761

 
34,232

Professional service and other
55,183

 
64,896

Amortization of acquired technology-based intangible assets
42,946

 
47,477

Total cost of revenues
236,737

 
244,999

Gross profit
510,484

 
509,271

Operating expenses:
 
 
 
Research and development
83,708

 
81,816

Sales and marketing
139,416

 
147,499

General and administrative
52,954

 
52,577

Depreciation
25,000

 
22,901

Amortization of acquired customer-based intangible assets
49,200

 
47,299

Special charges
2,232

 
7,821

Total operating expenses
352,510

 
359,913

Income from operations
157,974

 
149,358

Other income (expense), net
3,191

 
(8,938
)
Interest and other related expense, net
(32,841
)
 
(35,345
)
Income before income taxes
128,324

 
105,075

Provision for (recovery of) income taxes
56,309

 
43,182

Net income for the period
$
72,015

 
$
61,893

Net (income) loss attributable to non-controlling interests
(32
)
 
(170
)
Net income attributable to OpenText
$
71,983

 
$
61,723

Earnings per share—basic attributable to OpenText
$
0.27

 
$
0.23

Earnings per share—diluted attributable to OpenText
$
0.27

 
$
0.23

Weighted average number of Common Shares outstanding—basic
269,446

 
267,489

Weighted average number of Common Shares outstanding—diluted
270,652

 
268,628




8


OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands of U.S. dollars)
 
Year Ended June 30,
 
2019
 
2018
 
 
Net income for the period
$
285,637

 
$
242,300

 
$
1,025,915

Other comprehensive income (loss)—net of tax:
 
 
 
 
 
Net foreign currency translation adjustments
(3,882
)
 
(9,582
)
 
(4,756
)
Unrealized gain (loss) on cash flow hedges:
 
 
 
 
 
Unrealized gain (loss) - net of tax expense (recovery) effect of $6, ($171) and $34 for the year ended June 30, 2019, 2018 and 2017, respectively
16

 
(476
)
 
95

(Gain) loss reclassified into net income - net of tax (expense) recovery effect of $539, ($489) and $67 for the year ended June 30, 2019, 2018 and 2017, respectively
1,494

 
(1,357
)
 
186

Actuarial gain (loss) relating to defined benefit pension plans:
 
 
 
 
 
Actuarial gain (loss) - net of tax expense (recovery) effect of ($2,004), ($1,846) and $840 for the year ended June 30, 2019, 2018 and 2017, respectively
(7,421
)
 
(3,383
)
 
6,216

Amortization of actuarial (gain) loss into net income - net of tax (expense) recovery effect of $292, $183 and $241 for the year ended June 30, 2019, 2018 and 2017, respectively
272

 
260

 
565

Unrealized net gain (loss) on marketable securities - net of tax effect of nil for the year ended June 30, 2019, 2018 and 2017 respectively
—

 
—

 
184

Release of unrealized gain on marketable securities - net of tax effect of nil for the year ended June 30, 2019, 2018 and 2017 respectively
—

 
(617
)
 
—

Total other comprehensive income (loss) net, for the period
(9,521
)
 
(15,155
)
 
2,490

Total comprehensive income
276,116

 
227,145

 
1,028,405

Comprehensive (income) loss attributable to non-controlling interests
(136
)
 
(76
)
 
(256
)
Total comprehensive income attributable to OpenText
$
275,980

 
$
227,069

 
$
1,028,149




9


OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands of U.S. dollars and shares)
 
Common Shares and Additional Paid in Capital
 
Treasury Stock
 
Retained
Earnings
 
Accumulated  Other
Comprehensive
Income
 
Non-Controlling Interests
 
Total
 
Shares
 
Amount
 
Shares
 
Amount
 
Balance as of June 30, 2016
242,810

 
$
965,068

 
(1,268
)
 
$
(25,268
)
 
$
992,546

 
$
46,310

 
$
541

 
$
1,979,197

Issuance of Common Shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Under employee stock option plans
1,012

 
20,732

 
—

 
—

 
—

 
—

 
—

 
20,732

Under employee stock purchase plans
427

 
11,604

 
—

 
—

 
—

 
—

 
—

 
11,604

Under the public Equity Offering
19,811

 
604,223

 
—

 
—

 
—

 
—

 
—

 
604,223

Income tax effect related to public Equity offering
—

 
5,077

 
—

 
—

 
—

 
—

 
—

 
5,077

Equity issuance costs
—

 
(19,574
)
 
—

 
—

 
—

 
—

 
—

 
(19,574
)
Share-based compensation
—

 
30,507

 
—

 
—

 
—

 
—

 
—

 
30,507

Income tax effect related to share-based compensation
—

 
1,534

 
—

 
—

 
—

 
—

 
—

 
1,534

Purchase of treasury stock
—

 
—

 
(244
)
 
(8,198
)
 
—

 
—

 
—

 
(8,198
)
Issuance of treasury stock
—

 
(5,946
)
 
410

 
5,946

 
—

 
—

 
—

 
—

Dividends declared
($0.4770 per Common Share)
—

 
—

 
—

 
—

 
(120,581
)
 
—

 
—

 
(120,581
)
Other comprehensive income - net
—

 
—

 
—

 
—

 
—

 
2,490

 
—

 
2,490

Non-controlling interest
—

 
229

 
—

 
—

 
—

 
—

 
164

 
393

Net income for the year
—

 
—

 
—

 
—

 
1,025,659

 
—

 
256

 
1,025,915

Balance as of June 30, 2017
264,060

 
$
1,613,454

 
(1,102
)
 
$
(27,520
)
 
$
1,897,624

 
$
48,800

 
$
961

 
$
3,533,319

Issuance of Common Shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Under employee stock option plans
2,870

 
54,355

 
—

 
—

 
—

 
—

 
—

 
54,355

Under employee stock purchase plans
721

 
20,458

 
—

 
—

 
—

 
—

 
—

 
20,458

Share-based compensation
—

 
27,594

 
—

 
—

 
—

 
—

 
—

 
27,594

Issuance of treasury stock
—

 
(8,788
)
 
411

 
8,788

 
—

 
—

 
—

 
—

Dividends declared
($0.5478 per Common Share)
—

 
—

 
—

 
—

 
(145,613
)
 
—

 
—

 
(145,613
)
Other comprehensive income - net
—

 
—

 
—

 
—

 
—

 
(15,155
)
 
—

 
(15,155
)
Net income for the year
—

 
—

 
—

 
—

 
242,224

 
—

 
76

 
242,300

Balance as of June 30, 2018
267,651

 
$
1,707,073

 
(691
)
 
$
(18,732
)
 
$
1,994,235

 
$
33,645

 
$
1,037

 
$
3,717,258

Issuance of Common Shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Under employee stock option plans
1,472

 
35,626

 
—

 
—

 
—

 
—

 
—

 
35,626

Under employee stock purchase plans
711

 
21,835

 
—

 
—

 
—

 
—

 
—

 
21,835

Share-based compensation
—

 
26,770

 
—

 
—

 
—

 
—

 
—

 
26,770

Purchase of treasury stock
—

 
—

 
(726
)
 
(26,499
)
 
—

 
—

 
—

 
(26,499
)
Issuance of treasury stock
—

 
(16,465
)
 
614

 
16,465

 
—

 
—

 
—

 
—

Dividends declared
($0.6300 per Common Share)
—

 
—

 
—

 
—

 
(168,859
)
 
—

 
—

 
(168,859
)
Cumulative effect of ASU 2016-16
—

 
—

 
—

 
—

 
(26,780
)
 
—

 
—

 
(26,780
)
Cumulative effect of Topic 606
—

 
—

 
—

 
—

 
29,786

 
—

 
—

 
29,786

Other comprehensive income - net
—

 
—

 
—

 
—

 
—

 
(9,521
)
 
—

 
(9,521
)
Non-controlling interest
—

 
(625
)
 
—

 
—

 
—

 
—

 
42

 
(583
)
Net income for the year
—

 
—

 
—

 
—

 
285,501

 
—

 
136

 
285,637

Balance as of June 30, 2019
269,834

 
$
1,774,214

 
(803
)
 
$
(28,766
)
 
$
2,113,883

 
$
24,124

 
$
1,215

 
$
3,884,670




10


OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
 
Year Ended June 30,
 
2019
 
2018
 
2017
Cash flows from operating activities:
 
 
 
 
 
Net income for the period
$
285,637

 
$
242,300

 
$
1,025,915

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
Depreciation and amortization of intangible assets
470,928

 
456,929

 
345,715

Share-based compensation expense
26,770

 
27,594

 
30,507

Excess tax expense (benefits) on share-based compensation expense
—

 
—

 
(1,534
)
Pension expense
4,624

 
3,738

 
3,893

Amortization of debt issuance costs
4,330

 
4,646

 
5,014

Amortization of deferred charges and credits
—

 
4,242

 
6,298

Loss on sale and write down of property and equipment
9,438

 
2,234

 
784

Release of unrealized gain on marketable securities to income
—

 
(841
)
 
—

Deferred taxes
47,425

 
89,736

 
(871,195
)
Share in net (income) loss of equity investees
(13,668
)
 
(5,965
)
 
(5,952
)
Write off of unamortized debt issuance costs
—

 
155

 
833

Other non-cash charges
—

 
—

 
1,033

Changes in operating assets and liabilities:
 
 
 
 
 
Accounts receivable
75,508

 
(22,566
)
 
(126,784
)
Contract assets
(37,623
)
 
—

 
—

Prepaid expenses and other current assets
(819
)
 
(7,274
)
 
(7,766
)
Income taxes and deferred charges and credits
27,291

 
(31,323
)
 
(1,683
)
Accounts payable and accrued liabilities
(21,732
)
 
(91,650
)
 
53,490

Deferred revenue
(1,827
)
 
35,629

 
3,484

Other assets
(4
)
 
497

 
(21,699
)
Net cash provided by operating activities
876,278

 
708,081

 
440,353

Cash flows from investing activities:
 
 
 
 
 
Additions of property and equipment
(63,837
)
 
(105,318
)
 
(79,592
)
Proceeds from maturity of short-term investments
—

 
—

 
9,212

Purchase of Catalyst Repository Systems Inc.
(70,800
)
 
—

 
—

Purchase of Liaison Technologies
(310,644
)
 
—

 
—

Purchase of Hightail Inc.
—

 
(20,535
)
 
—

Purchase of Guidance Software, net of cash acquired
(2,279
)
 
(229,275
)
 
—

Purchase of Covisint Corporation, net of cash acquired
—

 
(71,279
)
 
—

Purchase of ECD Business
—

 
—

 
(1,622,394
)
Purchase of HP Inc. CCM Business
—

 
—

 
(315,000
)
Purchase of Recommind, Inc.
—

 
—

 
(170,107
)
Purchase consideration for prior period acquisitions
—

 
—

 
(7,146
)
Other investing activities
(16,966
)
 
(18,034
)
 
(5,937
)
Net cash used in investing activities
(464,526
)
 
(444,441
)
 
(2,190,964
)
Cash flows from financing activities:
 
 
 
 
 
Excess tax (expense) benefits on share-based compensation expense
—

 
—

 
1,534

Proceeds from issuance of long-term debt and revolver
—

 
1,200,000

 
481,875

Proceeds from issuance of Common Shares from exercise of stock options and ESPP
57,889

 
75,935

 
35,593

Proceeds from issuance of Common shares under public Equity Offering
—

 
—

 
604,223

Repayment of long-term debt and revolver
(10,000
)
 
(1,149,620
)
 
(57,880
)
Debt issuance costs
(322
)
 
(4,375
)
 
(7,240
)
Equity issuance costs
—

 
—

 
(19,574
)
Purchase of treasury stock
(26,499
)
 
—

 
(8,198
)
Purchase of non-controlling interest
(583
)
 
—

 
(208
)
Payments of dividends to shareholders
(168,859
)
 
(145,613
)
 
(120,581
)
Net cash provided by (used in) financing activities
(148,374
)
 
(23,673
)
 
909,544

Foreign exchange gain (loss) on cash held in foreign currencies
(3,826
)
 
(2,186
)
 
1,767

Increase (decrease) in cash and cash equivalents during the period
259,552

 
237,781

 
(839,300
)
Cash and cash equivalents at beginning of the period
683,991

 
446,210

 
1,285,510

Cash and cash equivalents at end of the period
$
943,543

 
$
683,991

 
$
446,210


11


Reconciliation of cash, cash equivalents and restricted cash:
June 30, 2019
 
June 30, 2018
 
June 30, 2017
Cash and cash equivalents
$
941,009

 
$
682,942

 
$
443,357

Restricted cash included in Other assets
2,534

 
1,049

 
2,853

Total cash, cash equivalents and restricted cash
$
943,543

 
$
683,991

 
$
446,210


12


OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
(unaudited)
 
Three Months Ended June 30,
 
2019
 
2018
Cash flows from operating activities:
 
 
 
Net income for the period
$
72,015

 
$
61,893

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization of intangible assets
117,146

 
117,677

Share-based compensation expense
6,618

 
7,121

Pension expense
1,212

 
904

Amortization of debt issuance costs
1,096

 
811

Amortization of deferred charges and credits
—

 
1,067

Write off of unamortized debt issuance costs
—

 
155

Loss on sale and write down of property and equipment
—

 
1,745

Deferred taxes
36,118

 
27,096

Share in net (income) loss of equity investees
(3,016
)
 
(6,468
)
Changes in operating assets and liabilities:
 
 
 
Accounts receivable
22,731

 
33,132

Contract assets
(8,751
)
 
—

Prepaid expenses and other current assets
(324
)
 
3,261

Income taxes and deferred charges and credits
6,285

 
(9,255
)
Accounts payable and accrued liabilities
8,912

 
628

Deferred revenue
(25,961
)
 
(39,075
)
Other assets
(4,304
)
 
3,368

Net cash provided by operating activities
229,777

 
204,060

Cash flows from investing activities:
 
 
 
Additions of property and equipment
(13,405
)
 
(22,280
)
Purchase of Hightail Inc.
—

 
(69
)
Other investing activities
(8,762
)
 
(6,855
)
Net cash used in investing activities
(22,167
)
 
(29,204
)
Cash flows from financing activities:
 
 
 
Proceeds from issuance of long-term debt and revolver
—

 
1,000,000

Proceeds from issuance of Common Shares from exercise of stock options and ESPP
15,792

 
9,871

Repayment of long-term debt and revolver
(2,500
)
 
(1,043,800
)
Debt issuance costs
—

 
(4,375
)
Payments of dividends to shareholders
(46,958
)
 
(40,617
)
Net cash provided by (used in) financing activities
(33,666
)
 
(78,921
)
Foreign exchange gain (loss) on cash held in foreign currencies
83

 
(19,889
)
Increase (decrease) in cash, cash equivalents and restricted cash during the period
174,027

 
76,046

Cash, cash equivalents and restricted cash at beginning of the period
769,516

 
607,945

Cash, cash equivalents and restricted cash at end of the period
$
943,543

 
$
683,991


Reconciliation of cash, cash equivalents and restricted cash:
June 30, 2019
 
June 30, 2018
Cash and cash equivalents
941,009

 
682,942

Restricted cash included in Other assets
2,534

 
1,049

Total Cash, cash equivalents and restricted cash
$
943,543

 
$
683,991


13


Notes
(1)
All dollar amounts in this press release are in U.S. Dollars unless otherwise indicated.
(2)
Use of Non-GAAP Financial Measures: In addition to reporting financial results in accordance with U.S. GAAP, the Company provides certain financial measures that are not in accordance with U.S. GAAP (Non-GAAP). These Non-GAAP financial measures have certain limitations in that they do not have a standardized meaning and thus the Company's definition may be different from similar Non-GAAP financial measures used by other companies and/or analysts and may differ from period to period. Thus it may be more difficult to compare the Company's financial performance to that of other companies. However, the Company's management compensates for these limitations by providing the relevant disclosure of the items excluded in the calculation of these Non-GAAP financial measures both in its reconciliation to the U.S. GAAP financial measures and its consolidated financial statements, all of which should be considered when evaluating the Company's results.
The Company uses these Non-GAAP financial measures to supplement the information provided in its consolidated financial statements, which are presented in accordance with U.S. GAAP. The presentation of Non-GAAP financial measures are not meant to be a substitute for financial measures presented in accordance with U.S. GAAP, but rather should be evaluated in conjunction with and as a supplement to such U.S. GAAP measures. OpenText strongly encourages investors to review its financial information in its entirety and not to rely on a single financial measure. The Company therefore believes that despite these limitations, it is appropriate to supplement the disclosure of the U.S. GAAP measures with certain Non-GAAP measures defined below.
Non-GAAP-based net income and Non-GAAP-based EPS, attributable to OpenText, are consistently calculated as GAAP-based net income or earnings per share, attributable to OpenText, on a diluted basis, after giving effect to the amortization of acquired intangible assets, other income (expense), share-based compensation, and Special charges (recoveries), all net of tax and any tax benefits/expense items unrelated to current period income, as further described in the tables below. Non-GAAP-based gross profit is the arithmetical sum of GAAP-based gross profit and the amortization of acquired technology-based intangible assets and share-based compensation within cost of sales. Non-GAAP-based gross margin is calculated as Non-GAAP-based gross profit expressed as a percentage of total revenue. Non-GAAP-based income from operations is calculated as income from operations, excluding the amortization of acquired intangible assets, Special charges (recoveries), and share-based compensation expense.
Adjusted earnings (loss) before interest, taxes, depreciation and amortization (Adjusted EBITDA) is consistently calculated as GAAP-based net income, attributable to OpenText, excluding interest income (expense), provision for income taxes, depreciation and amortization of acquired intangible assets, other income (expense), share-based compensation and Special charges (recoveries).
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, 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

14


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


15


Reconciliation of selected GAAP-based measures to Non-GAAP-based measures
for the three months ended June 30, 2019.
(In thousands except for per share amounts)
 
Three Months Ended June 30, 2019
 
GAAP-based
Measures 
GAAP-based Measures
% of Total Revenue
Adjustments 
Note
Non-GAAP-based
Measures 
Non-GAAP-based Measures
% of Total Revenue
Cost of revenues
 
 
 
 
 
 
Cloud services and subscriptions
$
103,719

 
$
(75
)
(1)
$
103,644

 
Customer support
30,761

 
(361
)
(1)
30,400

 
Professional service and other
55,183

 
(434
)
(1)
54,749

 
Amortization of acquired technology-based intangible assets
42,946

 
(42,946
)
(2)
—

 
GAAP-based gross profit and gross margin (%) /
Non-GAAP-based gross profit and gross margin (%)
510,484

68.3
%
43,816

(3)
554,300

74.2
%
Operating expenses
 
 
 
 
 
 
Research and development
83,708

 
(1,323
)
(1)
82,385

 
Sales and marketing
139,416

 
(2,006
)
(1)
137,410

 
General and administrative
52,954

 
(2,419
)
(1)
50,535

 
Amortization of acquired customer-based intangible assets
49,200

 
(49,200
)
(2)
—

 
Special charges (recoveries)
2,232

 
(2,232
)
(4)
—

 
GAAP-based income from operations / Non-GAAP-based income from operations
157,974

 
100,996

(5)
258,970

 
Other income (expense), net
3,191

 
(3,191
)
(6)
—

 
Provision for (recovery of) income taxes
56,309

 
(24,651
)
(7)
31,658

 
GAAP-based net income / Non-GAAP-based net income, attributable to OpenText
71,983

 
122,456

(8)
194,439

 
GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText
$
0.27

 
$
0.45

(8)
$
0.72

 
(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 non-marketable securities 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 44% 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

16


allowance reserves, and “book to return” adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately 14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.
(8)
Reconciliation of GAAP-based net income to Non-GAAP-based net income:
 
Three Months Ended June 30, 2019
 
 
Per share diluted
GAAP-based net income, attributable to OpenText
$
71,983

$
0.27

Add:
 
 
Amortization
92,146

0.34

Share-based compensation
6,618

0.02

Special charges (recoveries)
2,232

0.01

Other (income) expense, net
(3,191
)
(0.01
)
GAAP-based provision for (recovery of) income taxes
56,309

0.21

Non-GAAP-based provision for income taxes
(31,658
)
(0.12
)
Non-GAAP-based net income, attributable to OpenText
$
194,439

$
0.72


Reconciliation of Adjusted EBITDA
 
Three Months Ended June 30, 2019
GAAP-based net income, attributable to OpenText
$
71,983

Add:
 
Provision for (recovery of) income taxes
56,309

Interest and other related expense, net
32,841

Amortization of acquired technology-based intangible assets
42,946

Amortization of acquired customer-based intangible assets
49,200

Depreciation
25,000

Share-based compensation
6,618

Special charges (recoveries)
2,232

Other (income) expense, net
(3,191
)
Adjusted EBITDA
$
283,938



17


Reconciliation of selected GAAP-based measures to Non-GAAP-based measures
for the year ended June 30, 2019.
(In thousands except for per share amounts)
 
Year Ended June 30, 2019
 
GAAP-based
Measures 
GAAP-based Measures
% of Total Revenue
Adjustments 
Note
Non-GAAP-based
Measures 
Non-GAAP-based Measures
% of Total Revenue
Cost of revenues
 
 
 
 
 
 
Cloud services and subscriptions
$
383,993

 
$
(948
)
(1)
$
383,045

 
Customer support
124,343

 
(1,242
)
(1)
123,101

 
Professional service and other
224,635

 
(1,764
)
(1)
222,871

 
Amortization of acquired technology-based intangible assets
183,385

 
(183,385
)
(2)
—

 
GAAP-based gross profit and gross margin (%) /
Non-GAAP-based gross profit and gross margin (%)
1,938,052

67.6
%
187,339

(3)
2,125,391

74.1
%
Operating expenses
 
 
 
 
 
 
Research and development
321,836

 
(4,991
)
(1)
316,845

 
Sales and marketing
518,035

 
(7,880
)
(1)
510,155

 
General and administrative
207,909

 
(9,945
)
(1)
197,964

 
Amortization of acquired customer-based intangible assets
189,827

 
(189,827
)
(2)
—

 
Special charges (recoveries)
35,719

 
(35,719
)
(4)
—

 
GAAP-based income from operations / Non-GAAP-based income from operations
567,010

 
435,701

(5)
1,002,711

 
Other income (expense), net
10,156

 
(10,156
)
(6)
—

 
Provision for (recovery of) income taxes
154,937

 
(33,680
)
(7)
121,257

 
GAAP-based net income / Non-GAAP-based net income, attributable to OpenText
285,501

 
459,225

(8)
744,726

 
GAAP-based earnings per share / Non GAAP-based earnings per share-diluted, attributable to OpenText
$
1.06

 
$
1.70

(8)
$
2.76

 
(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 non-marketable securities 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

18


allowance reserves, and “book to return” adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately 14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.
(8)
Reconciliation of GAAP-based net income to Non-GAAP-based net income:  
 
Year Ended June 30, 2019
 
 
Per share diluted  

GAAP-based net income, attributable to OpenText
$
285,501

$
1.06

Add:
 
 
Amortization
373,212

1.38

Share-based compensation
26,770

0.10

Special charges (recoveries)
35,719

0.13

Other (income) expense, net
(10,156
)
(0.04
)
GAAP-based provision for (recovery of) income taxes
154,937

0.57

Non-GAAP based provision for income taxes
(121,257
)
(0.44
)
Non-GAAP-based net income, attributable to OpenText
$
744,726

$
2.76

Reconciliation of Adjusted EBITDA
 
Year Ended June 30, 2019
GAAP-based net income, attributable to OpenText
$
285,501

Add:
 
Provision for (recovery of) income taxes
154,937

Interest and other related expense, net
136,592

Amortization of acquired technology-based intangible assets
183,385

Amortization of acquired customer-based intangible assets
189,827

Depreciation
97,716

Share-based compensation
26,770

Special charges (recoveries)
35,719

Other (income) expense, net
(10,156
)
Adjusted EBITDA
$
1,100,291



19


Reconciliation of selected GAAP-based measures to Non-GAAP-based measures
for the three months ended March 31, 2019.
(In thousands except for per share amounts)
 
Three Months Ended March 31, 2019
 
GAAP-based
Measures 
GAAP-based Measures
% of Total Revenue
Adjustments 
Note
Non-GAAP-based
Measures 
Non-GAAP-based Measures
% of Total Revenue
Cost of revenues
 
 
 
 
 
 
Cloud services and subscriptions
$
103,873

 
$
(291
)
(1)
$
103,582

 
Customer support
31,844

 
(310
)
(1)
31,534

 
Professional service and other
56,626

 
(448
)
(1)
56,178

 
Amortization of acquired technology-based intangible assets
44,596

 
(44,596
)
(2)
—

 
GAAP-based gross profit and gross margin (%) /
Non-GAAP-based gross profit and gross margin (%)
479,515

66.7
%
45,645

(3)
525,160

73.0
%
Operating expenses
 
 
 
 
 
 
Research and development
84,905

 
(1,315
)
(1)
83,590

 
Sales and marketing
132,244

 
(2,458
)
(1)
129,786

 
General and administrative
51,833

 
(1,890
)
(1)
49,943

 
Amortization of acquired customer-based intangible assets
48,832

 
(48,832
)
(2)
—

 
Special charges (recoveries)
796

 
(796
)
(4)
—

 
GAAP-based income from operations / Non-GAAP-based income from operations
135,877

 
100,936

(5)
236,813

 
Other income (expense), net
5,065

 
(5,065
)
(6)
—

 
Provision for (recovery of) income taxes
32,542

 
(4,373
)
(7)
28,169

 
GAAP-based net income / Non-GAAP-based net income, attributable to OpenText
72,762

 
100,244

(8)
173,006

 
GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText
$
0.27

 
$
0.37

(8)
$
0.64

 
(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 non-marketable securities 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 31% 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

20


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, 2019
 
 
Per share diluted
GAAP-based net income, attributable to OpenText
$
72,762

$
0.27

Add:
 
 
Amortization
93,428

0.35

Share-based compensation
6,712

0.02

Special charges (recoveries)
796

—

Other (income) expense, net
(5,065
)
(0.02
)
GAAP-based provision for (recovery of) income taxes
32,542

0.12

Non-GAAP-based provision for income taxes
(28,169
)
(0.10
)
Non-GAAP-based net income, attributable to OpenText
$
173,006

$
0.64


Reconciliation of Adjusted EBITDA
 
Three Months Ended March 31, 2019
GAAP-based net income, attributable to OpenText
$
72,762

Add:
 
Provision for (recovery of) income taxes
32,542

Interest and other related expense, net
35,607

Amortization of acquired technology-based intangible assets
44,596

Amortization of acquired customer-based intangible assets
48,832

Depreciation
25,028

Share-based compensation
6,712

Special charges (recoveries)
796

Other (income) expense, net
(5,065
)
Adjusted EBITDA
$
261,810



21


Reconciliation of selected GAAP-based measures to Non-GAAP-based measures
for the three months ended June 30, 2018.
(In thousands except for per share amounts)
 
Three Months Ended June 30, 2018
 
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
$
95,346

 
$
(310
)
(1)
$
95,036

 
Customer support
34,232

 
(300
)
(1)
33,932

 
Professional service and other
64,896

 
(516
)
(1)
64,380

 
Amortization of acquired technology-based intangible assets
47,477

 
(47,477
)
(2)
—

 
GAAP-based gross profit and gross margin (%) /
Non-GAAP-based gross profit and gross margin (%)
509,271

67.5
%
48,603

(3)
557,874

74.0
%
Operating expenses
 
 
 
 
 
 
Research and development
81,816

 
(1,453
)
(1)
80,363

 
Sales and marketing
147,499

 
(2,552
)
(1)
144,947

 
General and administrative
52,577

 
(1,990
)
(1)
50,587

 
Amortization of acquired customer-based intangible assets
47,299

 
(47,299
)
(2)
—

 
Special charges (recoveries)
7,821

 
(7,821
)
(4)
—

 
GAAP-based income from operations / Non-GAAP-based income from operations
149,358

 
109,718

(5)
259,076

 
Other income (expense), net
(8,938
)
 
8,938

(6)
—

 
Provision for (recovery of) income taxes
43,182

 
(11,860
)
(7)
31,322

 
GAAP-based net income / Non-GAAP-based net income, attributable to OpenText
61,723

 
130,516

(8)
192,239

 
GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText
$
0.23

 
$
0.49

(8)
$
0.72

 
(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 non-marketable securities 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 41% 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

22


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. We also took into consideration changes in U.S. tax reform legislation that was enacted on December 22, 2017 through the Tax Cuts and Jobs Act.
(8)
Reconciliation of GAAP-based net income to Non-GAAP-based net income:
 
Three Months Ended June 30, 2018
 
 
Per share diluted
GAAP-based net income, attributable to OpenText
$
61,723

$
0.23

Add:
 
 
Amortization
94,776

0.35

Share-based compensation
7,121

0.03

Special charges (recoveries)
7,821

0.03

Other (income) expense, net
8,938

0.03

GAAP-based provision for (recovery of) income taxes
43,182

0.16

Non-GAAP-based provision for income taxes
(31,322
)
(0.11
)
Non-GAAP-based net income, attributable to OpenText
$
192,239

$
0.72


Reconciliation of Adjusted EBITDA
 
Three Months Ended June 30, 2018
GAAP-based net income, attributable to OpenText
$
61,723

Add:

Provision for (recovery of) income taxes
43,182

Interest and other related expense, net
35,345

Amortization of acquired technology-based intangible assets
47,477

Amortization of acquired customer-based intangible assets
47,299

Depreciation
22,901

Share-based compensation
7,121

Special charges (recoveries)
7,821

Other (income) expense, net
8,938

Adjusted EBITDA
$
281,807



23


Reconciliation of selected GAAP-based measures to Non-GAAP-based measures
for the year ended June 30, 2018.
(In thousands except for per share amounts)
 
Year Ended June 30, 2018
 
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
$
364,160

 
$
(1,429
)
(1)
$
362,731

 
Customer support
133,889

 
(1,233
)
(1)
132,656

 
Professional service and other
253,389

 
(1,838
)
(1)
251,551

 
Amortization of acquired technology-based intangible assets
185,868

 
(185,868
)
(2)
—

 
GAAP-based gross profit and gross margin (%) /
Non-GAAP-based gross profit and gross margin (%)
1,864,242

66.2
%
190,368

(3)
2,054,610

73.0
%
Operating expenses
 
 
 
 
 
 
Research and development
322,909

 
(5,659
)
(1)
317,250

 
Sales and marketing
529,141

 
(9,231
)
(1)
519,910

 
General and administrative
205,227

 
(8,204
)
(1)
197,023

 
Amortization of acquired customer-based intangible assets
184,118

 
(184,118
)
(2)
—

 
Special charges (recoveries)
29,211

 
(29,211
)
(4)
—

 
GAAP-based income from operations / Non-GAAP-based income from operations
506,693

 
426,791

(5)
933,484

 
Other income (expense), net
17,973

 
(17,973
)
(6)
—

 
Provision for (recovery of) income taxes
143,826

 
(32,534
)
(7)
111,292

 
GAAP-based net income / Non-GAAP-based net income, attributable to OpenText
242,224

 
441,352

(8)
683,576

 
GAAP-based earnings per share / Non GAAP-based earnings per share-diluted, attributable to OpenText
$
0.91

 
$
1.65

(8)
$
2.56

 
(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, and operating margin stated as a percentage of total revenue.
(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 non-marketable securities 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 37% 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/

24


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. We also took into consideration changes in US tax reform legislation that was enacted on December 22, 2017 through the Tax Cuts and Jobs Act.
(8)
Reconciliation of GAAP-based net income to Non-GAAP-based net income:  
 
Year Ended June 30, 2018
 
 
Per share diluted  

GAAP-based net income, attributable to OpenText
$
242,224

$
0.91

Add:
 
 
Amortization
369,986

1.38

Share-based compensation
27,594

0.10

Special charges (recoveries)
29,211

0.11

Other (income) expense, net
(17,973
)
(0.07
)
GAAP-based provision for (recovery of) income taxes
143,826

0.54

Non-GAAP based provision for income taxes
(111,292
)
(0.41
)
Non-GAAP-based net income, attributable to OpenText
$
683,576

$
2.56


Reconciliation of Adjusted EBITDA
 
Year Ended June 30, 2018
GAAP-based net income, attributable to OpenText
$
242,224

Add:
 
Provision for (recovery of) income taxes
143,826

Interest and other related expense, net
138,540

Amortization of acquired technology-based intangible assets
185,868

Amortization of acquired customer-based intangible assets
184,118

Depreciation
86,943

Share-based compensation
27,594

Special charges (recoveries)
29,211

Other (income) expense, net
(17,973
)
Adjusted EBITDA
$
1,020,351



25



(3)
The following tables provide a composition of our major currencies for revenue and expenses, expressed as a percentage, for the three months and year ended June 30, 2019 and 2018:
 
Three Months Ended June 30, 2019
 
Three Months Ended June 30, 2018
Currencies
 
% of Revenue 
 
% of Expenses* 
 
 
% of Revenue 
 
% of Expenses* 
 
EURO
24
%
15
%
 
23
%
15
%
GBP
6
%
6
%
 
6
%
6
%
CAD
3
%
9
%
 
4
%
10
%
USD
58
%
53
%
 
58
%
52
%
Other
9
%
17
%
 
9
%
17
%
Total
100
%
100
%
 
100
%
100
%
 
Year Ended June 30, 2019
 
Year Ended June 30, 2018
Currencies
 
% of Revenue 
 
% of Expenses* 
 
 
% of Revenue 
 
% of Expenses* 
 
EURO
24
%
15
%
 
22
%
15
%
GBP
6
%
6
%
 
6
%
6
%
CAD
4
%
10
%
 
4
%
11
%
USD
58
%
51
%
 
58
%
51
%
Other
8
%
18
%
 
10
%
17
%
Total
100
%
100
%
 
100
%
100
%
*Expenses include all cost of revenues and operating expenses included within the Condensed Consolidated Statements of Income, except for amortization of intangible assets, share-based compensation and Special charges (recoveries).


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