EX-99.1 2 exhibit991q4-20pressre.htm EXHIBIT 99.1 Exhibit


Exhibit 99.1
OpenText Reports Fourth Quarter and Fiscal Year 2020 Financial Results

Record Cloud, Record Annual Recurring Revenues (ARR) and Record Operating Cash Flows
Declares Cash Dividend of $0.1746 Per Common Share

Fiscal 2020 Fourth Quarter Highlights Y/Y
Total Revenues
(in millions)
 
Annual Recurring Revenues
(in millions)
 
Cloud Revenues
(in millions)
Reported
Constant Currency
 
Reported
Constant Currency
 
Reported
Constant Currency
$826.6
$838.2
 
$657.5
$665.9
 
$332.6
$335.7
+10.6%
+12.2%
 
+18.0%
+19.5%
 
+37.5%
+38.8%
Annual Recurring Revenues represents 80% of Total Revenues

•
Operating Cash Flows of $280.3 million in the quarter, up 22.0% Y/Y
•
GAAP net income of $26.4 million, down 63.3% Y/Y
•
Adjusted EBITDA of $317.4 million, up 11.8%, margin of 38.4%, up 40 basis points Y/Y
•
GAAP diluted EPS of $0.10, down 63.0% Y/Y
•
Non-GAAP diluted EPS of $0.80, up 11.1%, and $0.80 in constant currency, up 11.1% Y/Y

Fiscal 2020 Annual Highlights Y/Y
Total Revenues
(in millions)
 
Annual Recurring Revenues
(in millions)
 
Cloud Revenues
(in millions)
Reported
Constant Currency
 
Reported
Constant Currency
 
Reported
Constant Currency
$3,109.7
$3,146.8
 
$2,433.3
$2,459.5
 
$1,157.7
$1,165.8
+8.4%
+9.7%
 
+12.9%
+14.1%
 
+27.5%
+28.4%
Annual Recurring Revenues represents 78% of Total Revenues

•
Record Operating Cash Flows of $954.5 million for the year, up 8.9% Y/Y
•
GAAP net income of $234.2 million, down 18.0% Y/Y
•
Adjusted EBITDA of $1,148.1 million, up 4.3%, margin of 36.9%, down 150 basis points Y/Y
•
GAAP diluted EPS of $0.86, down 18.9% Y/Y
•
Non-GAAP diluted EPS of $2.89, up 4.7%, and $2.94 in constant currency, up 6.5% Y/Y

Waterloo, ON, August 6, 2020 - Open Text Corporation (NASDAQ: OTEX), (TSX: OTEX), “The Information Company,” today announced its financial results for the fourth quarter and year ended June 30, 2020.
"Fiscal 2020 was a pivotal year for OpenText, highlighting that digital technologies are the key to business resilience. Businesses that build digital capabilities will recover faster and emerge stronger from this pandemic,” said Mark J.

1


Barrenechea, OpenText CEO & CTO. “OpenText delivered a record $3.15 billion in total revenues, up 9.7% year-over-year, a record $1.17 billion in cloud revenues, up 28.4% year-over-year and a record $2.46 billion in Annual Recurring Revenues, up 14.1% year-over-year, representing 78% of total revenues - all in constant currency. These record annual results were delivered against the backdrop of a major global pandemic, demonstrating the durability and resilience of our customers and our business.”
Barrenechea added, “I am very proud of the OpenText team and our many accomplishments in Fiscal 2020, including the launch of OpenText Cloud Editions, the acquisitions of Carbonite, Inc. and XMedius, expansion of our Information Management platform into the small and medium business market and valuable expanded partnerships with Google, Amazon and Microsoft. Our commitment to our customers has been unwavering throughout this global crisis as we accelerate their digital transformation, ensuring their systems and processes can handle the changing reality of today, while continuing to develop solutions for the problems of tomorrow.”
“On behalf of OpenText, we commend the brave women and men serving on the front lines of the pandemic, keeping us healthy, safe and productive,” said Barrenechea. “Looking ahead to Fiscal 2021, we are well positioned to weather the short-term challenges ahead, build a stronger and better company, and gain market share.”
“OpenText demonstrated strong Q4 and Fiscal 2020 results that reflect the excellence of our people and operating framework. The durability of our business model and the discipline of OpenText was especially effective as we achieved these results amid the challenge of a global pandemic,” said OpenText EVP and CFO, Madhu Ranganathan. “In Fiscal 2020, we generated in constant currency $1.16 billion of adjusted EBITDA, $954.5 million in Operating Cash Flows and deployed $1,379.0 million of capital to acquire Carbonite, Inc. and XMedius. The integration of Carbonite remains on track to be on our operating model by the end of Fiscal 2021. With $1.7 Billion in cash as of June 30, 2020 and a net leverage ratio of 2.0x, we are well positioned to drive Total Growth, including both organically and through M&A.”

Financial Highlights for Q4 Fiscal 2020 with Year Over Year Comparisons
Summary of Quarterly Results
 
 
 
 
 
 
 
 
(in millions except per share data)
Q4 FY20
Q4 FY19
$ Change 
% Change 
(Y/Y)
 
Q4 FY20 in CC*
% Change in CC*
 
Revenues:
 
 
 
 
 
 
 
 
Cloud services and subscriptions

$332.6


$241.9


$90.7

37.5
 %
 

$335.7

38.8
 %
 
Customer support
324.9

315.2

9.7

3.1
 %
 
330.2

4.7
 %
 
Total annual recurring revenues**

$657.5


$557.1


$100.4

18.0
 %
 

$665.9

19.5
 %
 
License
105.8

119.7

(13.9
)
(11.6
)%
 
107.4

(10.3
)%
 
Professional service and other
63.3

70.4

(7.1
)
(10.1
)%
 
64.9

(7.7
)%
 
Total revenues

$826.6


$747.2


$79.4

10.6
 %
 

$838.2

12.2
 %
 
GAAP-based operating income

$91.2


$158.0


($66.8
)
(42.3
)%
 
N/A

N/A

 
Non-GAAP-based operating income (1)

$293.8


$259.0


$34.8

13.4
 %
 

$294.8

13.9
 %
 
GAAP-based EPS, diluted

$0.10


$0.27


($0.17
)
(63.0
)%
 
N/A

N/A

 
Non-GAAP-based EPS, diluted (1)(2)

$0.80


$0.72


$0.08

11.1
 %
 

$0.80

11.1
 %
 
GAAP-based net income attributable to OpenText

$26.4


$72.0


($45.6
)
(63.3
)%
 
N/A

N/A

 
Adjusted EBITDA (1)

$317.4


$283.9


$33.4

11.8
 %
 

$318.3

12.1
 %
 
Operating cash flows

$280.3


$229.8


$50.5

22.0
 %
 
N/A

N/A

 


2


Summary of Annual Results
 
 
 
 
 
 
 
 
(in millions except per share data)
FY20
FY19
$ Change 
% Change 
(Y/Y)
 
FY20 in CC*
% Change in CC*
 
Revenues:
 
 
 
 
 
 
 
 
Cloud services and subscriptions

$1,157.7


$907.8


$249.9

27.5
 %
 

$1,165.8

28.4
 %
 
Customer support
1,275.6

1,247.9

27.7

2.2
 %
 
1,293.7

3.7
 %
 
Total annual recurring revenues**

$2,433.3


$2,155.7


$277.5

12.9
 %
 

$2,459.5

14.1
 %
 
License
402.9

428.1

(25.2
)
(5.9
)%
 
408.7

(4.5
)%
 
Professional service and other
273.6

284.9

(11.3
)
(4.0
)%
 
278.6

(2.2
)%
 
Total revenues

$3,109.7


$2,868.8


$241.0

8.4
 %
 

$3,146.8

9.7
 %
 
GAAP-based operating income

$503.5


$567.0


($63.5
)
(11.2
)%
 
N/A

N/A

 
Non-GAAP-based operating income (1)

$1,058.8


$1,002.7


$56.1

5.6
 %
 

$1,074.8

7.2
 %
 
GAAP-based EPS, diluted

$0.86


$1.06


($0.20
)
(18.9
)%
 
N/A

N/A

 
Non-GAAP-based EPS, diluted (1)(2)

$2.89


$2.76


$0.13

4.7
 %
 

$2.94

6.5
 %
 
GAAP-based net income attributable to OpenText

$234.2


$285.5


($51.3
)
(18.0
)%
 
N/A

N/A

 
Adjusted EBITDA (1)

$1,148.1


$1,100.3


$47.8

4.3
 %
 

$1,163.4

5.7
 %
 
Operating cash flows

$954.5


$876.3


$78.3

8.9
 %
 
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.



Dividend Program
As part of our quarterly, non-cumulative cash dividend program, the Board declared on August 5, 2020 a cash dividend of $0.1746 per common share. The record date for this dividend is September 4, 2020 and the payment date is September 25, 2020. OpenText believes strongly in returning value to its shareholders and intends to maintain its dividend program. Any future declarations of dividends and the establishment of future record and payment dates are all subject to the final determination and discretion of the Board of Directors.
  
Quarterly Business Highlights
•
Key customer wins in the quarter included AIA Thailand, Amway, Arch Resources, Asahi Intecc, Becton Dickinson and Company, Doosan Babcock, iCare Insurance and Care NSW, Leonardo Group, Merck KGaA, Michelin, National Institute of Allergy and Infectious Diseases & the National Institutes of Health Office of Management, Panasonic Corporation, Rapid Radiology, Rivian Automotive, Southwest Gas, US Defense Health Agency and Williams Companies
•
OpenText extends Content Services technology for Microsoft Teams
•
New Webroot® DNS Protection delivers privacy and security
•
OpenText receives 2020 SAP® Pinnacle Award SAP Solution Extensions Partner of the Year
•
OpenText recognized as overall leader in 2020 Aspire Customer Communications Management leaderboard
•
OpenText Named a leader in IDC MarketScape for Customer Communications Management


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Summary of Quarterly Results
 
 
 
 
 
 
 
 
Q4 FY20
Q3 FY20
Q4 FY19
% Change 
(Q4 FY20 vs Q3 FY20)
 
% Change
(Q4 FY20 vs Q4 FY19)
 
Revenue (millions)

$826.6


$814.7


$747.2

1.5
%
 
10.6
 %
 
GAAP-based gross margin
68.5
%
65.4
%
68.3
%
310

bps
20

bps
GAAP-based EPS, diluted

$0.10


$0.10


$0.27

—
%
 
(63.0
)%
 
Non-GAAP-based gross margin (1)
75.8
%
73.3
%
74.2
%
250

bps
160

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

$0.80


$0.61


$0.72

31.1
%
 
11.1
 %
 

Summary of Annual Results
 
 
 
 
 
FY20
FY19
% Change
 
Revenue (millions)

$3,109.7


$2,868.8

8.4
 %
 
GAAP-based gross margin
67.7
%
67.6
%
10

bps
GAAP-based EPS, diluted

$0.86


$1.06

(18.9
)%
 
Non-GAAP-based gross margin (1)
74.5
%
74.1
%
40

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

$2.89


$2.76

4.7
 %
 
(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.
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 6, 2020 at 7:00 p.m. ET through 11:59 p.m. on August 20, 2020 and can be accessed by dialing 1-855-669-9658 (toll-free) or +1-604-674-8052 (international) and using passcode 4814 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.

OpenText Investor Day 2020

OpenText will host a virtual Investor Day on Thursday, November 12, 2020. The virtual conference will include an annual strategic update with formal presentations by the OpenText executive team. Further details will be provided closer to the event date. Investors and Analysts are invited to pre-register by contacting investors@opentext.com.

About OpenText

OpenText, The Information Company™, enables organizations to gain insight through market leading information management solutions, on-premises or in the cloud. For more information about OpenText (NASDAQ: OTEX, TSX: OTEX) visit opentext.com.
Cautionary Statement Regarding Forward-Looking Statements

Certain statements in this press release, including statements about the focus of Open Text Corporation (“OpenText” or “the Company”) in our fiscal year ending June 30, 2021 (Fiscal 2021) on growth, the financial and operational impact of COVID-19 and associated preemptive measures and restructuring plans, anticipated benefits of our partnerships and next generation product lines, the strength of our operating framework and balance sheet flexibility, continued investments in product

4


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 Information Management 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 2021 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 Information Management market including expected growth in the Artificial Intelligence market; (vi) the Company's competitive position in the Information Management 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 Information Management 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.







5


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 ©2020 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.

6

OPEN TEXT CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars, except share data)
 
June 30, 2020
 
June 30, 2019
ASSETS
 
 
 
Cash and cash equivalents
$
1,692,850

 
$
941,009

Accounts receivable trade, net of allowance for doubtful accounts of $20,906 as of June 30, 2020 and $17,011 as of June 30, 2019
466,357

 
463,785

Contract assets
29,570

 
20,956

Income taxes recoverable
61,186

 
38,340

Prepaid expenses and other current assets
136,436

 
97,238

Total current assets
2,386,399

 
1,561,328

Property and equipment
244,555

 
249,453

Operating lease right of use assets
207,869

 
—

Long-term contract assets
15,427

 
15,386

Goodwill
4,672,356

 
3,769,908

Acquired intangible assets
1,612,564

 
1,146,504

Deferred tax assets
911,565

 
1,004,450

Other assets
154,467

 
148,977

Long-term income taxes recoverable
29,620

 
37,969

Total assets
$
10,234,822

 
$
7,933,975

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable and accrued liabilities
$
373,314

 
$
329,903

Current portion of long-term debt
610,000

 
10,000

Operating lease liabilities
64,071

 
—

Deferred revenues
812,218

 
641,656

Income taxes payable
44,630

 
33,158

Total current liabilities
1,904,233

 
1,014,717

Long-term liabilities:
 
 
 
Accrued liabilities
34,955

 
49,441

Pension liability
73,129

 
75,239

Long-term debt
3,584,311

 
2,604,878

Long-term operating lease liabilities
217,165

 
—

Deferred revenues
94,382

 
46,974

Long-term income taxes payable
171,200

 
202,184

Deferred tax liabilities
148,738

 
55,872

Total long-term liabilities
4,323,880

 
3,034,588

Shareholders' equity:
 
 
 
Share capital and additional paid-in capital
 
 
 
271,863,354 and 269,834,442 Common Shares issued and outstanding at June 30, 2020 and June 30, 2019, respectively; authorized Common Shares: unlimited
1,851,777

 
1,774,214

Accumulated other comprehensive income
17,825

 
24,124

Retained earnings
2,159,396

 
2,113,883

Treasury stock, at cost (622,297 shares at June 30, 2020 and 802,871 shares at June 30, 2019, respectively)
(23,608
)
 
(28,766
)
Total OpenText shareholders' equity
4,005,390

 
3,883,455

Non-controlling interests
1,319

 
1,215

Total shareholders' equity
4,006,709

 
3,884,670

Total liabilities and shareholders' equity
$
10,234,822

 
$
7,933,975

 


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,
 
2020
 
2019
Revenues:
 
 
 
License
$
105,803

 
$
119,728

Cloud services and subscriptions
332,618

 
241,889

Customer support
324,915

 
315,248

Professional service and other
63,276

 
70,356

Total revenues
826,612

 
747,221

Cost of revenues:
 
 
 
License
3,404

 
4,128

Cloud services and subscriptions
116,569

 
103,719

Customer support
32,568

 
30,761

Professional service and other
48,435

 
55,183

Amortization of acquired technology-based intangible assets
59,719

 
42,946

Total cost of revenues
260,695

 
236,737

Gross profit
565,917

 
510,484

Operating expenses:
 
 
 
Research and development
100,766

 
83,708

Sales and marketing
152,882

 
139,416

General and administrative
62,574

 
52,954

Depreciation
23,649

 
25,000

Amortization of acquired customer-based intangible assets
58,998

 
49,200

Special charges (recoveries)
75,849

 
2,232

Total operating expenses
474,718

 
352,510

Income from operations
91,199

 
157,974

Other income (expense), net
7,790

 
3,191

Interest and other related expense, net
(40,529
)
 
(32,841
)
Income before income taxes
58,460

 
128,324

Provision for (recovery of) income taxes
32,037

 
56,309

Net income
$
26,423

 
$
72,015

Net (income) loss attributable to non-controlling interests
(31
)
 
(32
)
Net income attributable to OpenText
$
26,392

 
$
71,983

Earnings per share—basic attributable to OpenText
$
0.10

 
$
0.27

Earnings per share—diluted attributable to OpenText
$
0.10

 
$
0.27

Weighted average number of Common Shares outstanding—basic
271,717

 
269,446

Weighted average number of Common Shares outstanding—diluted
272,367

 
270,652







8


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

 
Year Ended June 30,
 
2020
 
2019
 
2018
Revenues:
 
 
 
 
 
License
$
402,851

 
$
428,092

 
$
437,512

Cloud services and subscriptions
1,157,686

 
907,812

 
828,968

Customer support
1,275,586

 
1,247,915

 
1,232,504

Professional service and other
273,613

 
284,936

 
316,257

Total revenues
3,109,736

 
2,868,755

 
2,815,241

Cost of revenues:
 
 
 
 
 
License
11,321

 
14,347

 
13,693

Cloud services and subscriptions
449,940

 
383,993

 
364,160

Customer support
123,894

 
124,343

 
133,889

Professional service and other
212,903

 
224,635

 
253,389

Amortization of acquired technology-based intangible assets
205,717

 
183,385

 
185,868

Total cost of revenues
1,003,775

 
930,703

 
950,999

Gross profit
2,105,961

 
1,938,052

 
1,864,242

Operating expenses:
 
 
 
 
 
Research and development
370,411

 
321,836

 
322,909

Sales and marketing
585,044

 
518,035

 
529,141

General and administrative
237,532

 
207,909

 
205,227

Depreciation
89,458

 
97,716

 
86,943

Amortization of acquired customer-based intangible assets
219,559

 
189,827

 
184,118

Special charges (recoveries)
100,428

 
35,719

 
29,211

Total operating expenses
1,602,432

 
1,371,042

 
1,357,549

Income from operations
503,529

 
567,010

 
506,693

Other income (expense), net
(11,946
)
 
10,156

 
17,973

Interest and other related expense, net
(146,378
)
 
(136,592
)
 
(138,540
)
Income before income taxes
345,205

 
440,574

 
386,126

Provision for (recovery of) income taxes
110,837

 
154,937

 
143,826

Net income
$
234,368

 
$
285,637

 
$
242,300

Net (income) loss attributable to non-controlling interests
(143
)
 
(136
)
 
(76
)
Net income attributable to OpenText
$
234,225

 
$
285,501

 
$
242,224

Earnings per share—basic attributable to OpenText
$
0.86

 
$
1.06

 
$
0.91

Earnings per share—diluted attributable to OpenText
$
0.86

 
$
1.06

 
$
0.91

Weighted average number of Common Shares outstanding—basic
270,847

 
268,784

 
266,085

Weighted average number of Common Shares outstanding—diluted
271,817

 
269,908

 
267,492





9


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

 
Year Ended June 30,
 
2020
 
2019
 
2018
Net income for the period
$
234,368

 
$
285,637

 
$
242,300

Other comprehensive income (loss)—net of tax:
 
 
 
 
 
Net foreign currency translation adjustments
(7,784
)
 
(3,882
)
 
(9,582
)
Unrealized gain (loss) on cash flow hedges:
 
 
 
 
 
Unrealized gain (loss) - net of tax expense (recovery) effect of ($599), $6 and ($171) for the year ended June 30, 2020, 2019 and 2018, respectively
(1,662
)
 
16

 
(476
)
(Gain) loss reclassified into net income - net of tax (expense) recovery effect of $355, $539 and ($489) for the year ended June 30, 2020, 2019 and 2018, respectively
985

 
1,494

 
(1,357
)
Actuarial gain (loss) relating to defined benefit pension plans:
 
 
 
 
 
Actuarial gain (loss) - net of tax expense (recovery) effect of $1,219, ($2,004) and ($1,846) for the year ended June 30, 2020, 2019 and 2018, respectively
1,245

 
(7,421
)
 
(3,383
)
Amortization of actuarial (gain) loss into net income - net of tax (expense) recovery effect of $520, $292 and $183 for the year ended June 30, 2020, 2019 and 2018, respectively
917

 
272

 
260

Release of unrealized gain on marketable securities - net of tax effect of nil for the year ended June 30, 2020, 2019, and 2018 respectively
—

 
—

 
(617
)
Total other comprehensive income (loss) net, for the period
(6,299
)
 
(9,521
)
 
(15,155
)
Total comprehensive income
228,069

 
276,116

 
227,145

Comprehensive (income) loss attributable to non-controlling interests
(143
)
 
(136
)
 
(76
)
Total comprehensive income attributable to OpenText
$
227,926

 
$
275,980

 
$
227,069



10


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, 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

Issuance of Common Shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Under employee stock option plans
1,530

 
41,282

 
—

 
—

 
—

 
—

 
—

 
41,282

Under employee stock purchase plans
499

 
17,757

 
—

 
—

 
—

 
—

 
—

 
17,757

Share-based compensation
—

 
29,532

 
—

 
—

 
—

 
—

 
—

 
29,532

Purchase of treasury stock
—

 
—

 
(300
)
 
(12,424
)
 
—

 
—

 
—

 
(12,424
)
Issuance of treasury stock
—

 
(11,008
)
 
481

 
17,582

 
—

 
—

 
—

 
6,574

Dividends declared
($0.6984 per Common Share)
—

 
—

 
—

 
—

 
(188,712
)
 
—

 
—

 
(188,712
)
Other comprehensive income - net
—

 
—

 
—

 
—

 
—

 
(6,299
)
 
—

 
(6,299
)
Non-controlling interest
—

 
—

 
—

 
—

 
—

 
—

 
(39
)
 
(39
)
Net income for the year
—

 
—

 
—

 
—

 
234,225

 
—

 
143

 
234,368

Balance as of June 30, 2020
271,863

 
$
1,851,777

 
(622
)
 
$
(23,608
)
 
$
2,159,396

 
$
17,825

 
$
1,319

 
$
4,006,709






11


OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
(Unaudited)
 
Three Months Ended June 30,
 
2020
 
2019
Cash flows from operating activities:
 
 
 
Net income for the period
$
26,423

 
$
72,015

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization of intangible assets
142,366

 
117,146

Share-based compensation expense
8,002

 
6,618

Pension expense
1,479

 
1,212

Amortization of debt issuance costs
1,130

 
1,096

Accelerated amortization of right of use assets
36,864

 
—

Loss on sale and write down of property and equipment
9,714

 
—

Deferred taxes
14,677

 
36,118

Share in net (income) loss of equity investees
(2,225
)
 
(3,016
)
Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(1,689
)
 
22,731

Contract assets
(13,636
)
 
(8,751
)
Prepaid expenses and other current assets
458

 
(324
)
Income taxes
(478
)
 
6,285

Accounts payable and accrued liabilities
72,876

 
8,912

Deferred revenue
(12,974
)
 
(25,961
)
Other assets
(6,309
)
 
(4,304
)
Operating lease assets and liabilities, net
3,572

 
—

Net cash provided by operating activities
280,250

 
229,777

Cash flows from investing activities:
 
 
 
Additions of property and equipment
(17,704
)
 
(13,405
)
Other investing activities
(2,783
)
 
(8,762
)
Net cash used in investing activities
(20,487
)
 
(22,167
)
Cash flows from financing activities:
 
 
 
Proceeds from issuance of Common Shares from exercise of stock options and ESPP
13,493

 
15,792

Repayment of long-term debt and Revolver
(2,500
)
 
(2,500
)
Debt issuance costs
(3,636
)
 
—

Payments of dividends to shareholders
(47,335
)
 
(46,958
)
Net cash provided by (used in) financing activities
(39,978
)
 
(33,666
)
Foreign exchange gain (loss) on cash held in foreign currencies
19,882

 
83

Increase (decrease) in cash, cash equivalents and restricted cash during the period
239,667

 
174,027

Cash, cash equivalents and restricted cash at beginning of the period
1,457,596

 
769,516

Cash, cash equivalents and restricted cash at end of the period
$
1,697,263

 
$
943,543

Reconciliation of cash, cash equivalents and restricted cash:
June 30, 2020
 
June 30, 2019
Cash and cash equivalents
$
1,692,850

 
$
941,009

Restricted cash included in Other assets
4,413

 
2,534

Total Cash, cash equivalents and restricted cash
$
1,697,263

 
$
943,543




12


OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
 
Year Ended June 30,
 
2020
 
2019
 
2018
Cash flows from operating activities:
 
 
 
 
 
Net income for the period
$
234,368

 
$
285,637

 
$
242,300

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
Depreciation and amortization of intangible assets
514,734

 
470,928

 
456,929

Share-based compensation expense
29,532

 
26,770

 
27,594

Pension expense
5,802

 
4,624

 
3,738

Amortization of debt issuance costs
4,633

 
4,330

 
4,646

Amortization of deferred charges and credits
—

 
—

 
4,242

Accelerated amortization of right of use assets
36,864

 
—

 
—

Loss on extinguishment of debt
17,854

 
—

 
—

Loss on sale and write down of property and equipment
9,714

 
9,438

 
2,234

Release of unrealized gain on marketable securities to income
—

 
—

 
(841
)
Deferred taxes
51,388

 
47,425

 
89,736

Share in net (income) loss of equity investees
(8,700
)
 
(13,668
)
 
(5,965
)
Write off of unamortized debt issuance costs
—

 
—

 
155

Changes in operating assets and liabilities:
 
 
 
 
 
Accounts receivable
84,499

 
75,508

 
(22,566
)
Contract assets
(40,301
)
 
(37,623
)
 
—

Prepaid expenses and other current assets
(6,897
)
 
(819
)
 
(7,274
)
Income taxes and deferred charges and credits
(35,086
)
 
27,291

 
(31,323
)
Accounts payable and accrued liabilities
30,613

 
(21,732
)
 
(91,650
)
Deferred revenue
25,306

 
(1,827
)
 
35,629

Other assets
1,127

 
(4
)
 
497

Operating lease assets and liabilities, net
(914
)
 
—

 
—

Net cash provided by operating activities
954,536

 
876,278

 
708,081

Cash flows from investing activities:
 
 
 
 
 
Additions of property and equipment
(72,709
)
 
(63,837
)
 
(105,318
)
Purchase of XMedius
(73,335
)
 
—

 
—

Purchase of Carbonite, Inc., net of cash and restricted cash acquired
(1,305,097
)
 
—

 
—

Purchase of Dynamic Solutions Group Inc.
(4,149
)
 
—

 
—

Purchase of Catalyst Repository Systems Inc.
—

 
(70,800
)
 
—

Purchase of Liaison Technologies, Inc.
—

 
(310,644
)
 
—

Purchase of Hightail, Inc., net of cash acquired
—

 
—

 
(20,535
)
Purchase of Guidance Software, Inc., net of cash acquired
—

 
(2,279
)
 
(229,275
)
Purchase of Covisint Corporation, net of cash acquired
—

 
—

 
(71,279
)
Other investing activities
(14,127
)
 
(16,966
)
 
(18,034
)
Net cash used in investing activities
(1,469,417
)
 
(464,526
)
 
(444,441
)
Cash flows from financing activities:
 
 
 
 
 
Proceeds from issuance of Common Shares from exercise of stock options and ESPP
66,600

 
57,889

 
75,935

Proceeds from long-term debt and Revolver
3,150,000

 
—

 
1,200,000

Repayment of long-term debt and Revolver
(1,713,631
)
 
(10,000
)
 
(1,149,620
)
    Debt extinguishment costs
(11,248
)
 
—

 
—

Debt issuance costs
(21,806
)
 
(322
)
 
(4,375
)
Purchase of Treasury Stock
(12,424
)
 
(26,499
)
 
—

Purchase of non-controlling interest
—

 
(583
)
 
—

Payments of dividends to shareholders
(188,712
)
 
(168,859
)
 
(145,613
)
Net cash provided by (used in) financing activities
1,268,779

 
(148,374
)
 
(23,673
)
Foreign exchange gain (loss) on cash held in foreign currencies
(178
)
 
(3,826
)
 
(2,186
)
Increase (decrease) in cash, cash equivalents and restricted cash during the period
753,720


259,552

 
237,781

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

 
683,991

 
446,210

Cash, cash equivalents and restricted cash at end of the period
$
1,697,263

 
$
943,543

 
$
683,991


13


Reconciliation of cash, cash equivalents and restricted cash:
June 30, 2020
 
June 30, 2019
 
June 30, 2018
Cash and cash equivalents
$
1,692,850

 
$
941,009

 
$
682,942

Restricted cash included in Other assets and Prepaid
4,413

 
2,534

 
1,049

Total Cash, cash equivalents and restricted cash
$
1,697,263

 
$
943,543

 
$
683,991




















14


Notes
(1)
All dollar amounts in this press release are in U.S. Dollars unless otherwise indicated.
(2)
Use of Non-GAAP Financial Measures: In addition to reporting financial results in accordance with U.S. GAAP, the Company provides certain financial measures that are not in accordance with U.S. GAAP (Non-GAAP). These Non-GAAP financial measures have certain limitations in that they do not have a standardized meaning and thus the Company's definition may be different from similar Non-GAAP financial measures used by other companies and/or analysts and may differ from period to period. Thus it may be more difficult to compare the Company's financial performance to that of other companies. However, the Company's management compensates for these limitations by providing the relevant disclosure of the items excluded in the calculation of these Non-GAAP financial measures both in its reconciliation to the U.S. GAAP financial measures and its consolidated financial statements, all of which should be considered when evaluating the Company's results.
The Company uses these Non-GAAP financial measures to supplement the information provided in its consolidated financial statements, which are presented in accordance with U.S. GAAP. The presentation of Non-GAAP financial measures 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, excluding the effects of the amortization of acquired intangible assets, other income (expense), share-based compensation, and Special charges (recoveries), all net of tax and any tax benefits/expense items unrelated to current period income, as further described in the tables below. Non-GAAP-based gross profit is the arithmetical sum of GAAP-based gross profit and the amortization of acquired technology-based intangible assets and share-based compensation within cost of sales. Non-GAAP-based gross margin is calculated as Non-GAAP-based gross profit expressed as a percentage of total revenue. Non-GAAP-based income from operations is calculated as 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

15


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.




16


Reconciliation of selected GAAP-based measures to Non-GAAP-based measures
for the three months ended June 30, 2020.
(In thousands except for per share amounts)
 
Three Months Ended June 30, 2020
 
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
$
116,569

 
$
(490
)
(1)
$
116,079

 
Customer support
32,568

 
(310
)
(1)
32,258

 
Professional service and other
48,435

 
(377
)
(1)
48,058

 
Amortization of acquired technology-based intangible assets
59,719

 
(59,719
)
(2)
—

 
GAAP-based gross profit and gross margin (%) /
Non-GAAP-based gross profit and gross margin (%)
565,917

68.5
%
60,896

(3)
626,813

75.8
%
Operating expenses
 
 
 
 
 
 
Research and development
100,766

 
(1,590
)
(1)
99,176

 
Sales and marketing
152,882

 
(2,575
)
(1)
150,307

 
General and administrative
62,574

 
(2,660
)
(1)
59,914

 
Amortization of acquired customer-based intangible assets
58,998

 
(58,998
)
(2)
—

 
Special charges (recoveries)
75,849

 
(75,849
)
(4)
—

 
GAAP-based income from operations / Non-GAAP-based income from operations
91,199

 
202,568

(5)
293,767

 
Other income (expense), net
7,790

 
(7,790
)
(6)
—

 
Provision for (recovery of) income taxes
32,037

 
3,416

(7)
35,453

 
GAAP-based net income / Non-GAAP-based net income, attributable to OpenText
26,392

 
191,362

(8)
217,754

 
GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText
$
0.10

 
$
0.70

(8)
$
0.80

 
(1)
Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.
(2)
Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.
(3)
GAAP-based and Non-GAAP-based gross profit stated in dollars, and gross margin stated as a percentage of total revenue.
(4)
Adjustment relates to the exclusion of Special charges (recoveries) from our Non-GAAP-based operating expenses as Special charges (recoveries) are generally incurred in the periods relevant to an acquisition and include certain charges or recoveries that are not indicative or related to continuing operations, and are therefore excluded from our internal analysis of operating results.
(5)
GAAP-based and Non-GAAP-based income from operations stated in dollars.
(6)
Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) generally relates to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results. Other income (expense) also includes our share of income (losses) from our holdings in 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 55% 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

17


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, 2020
 
 
Per share diluted
GAAP-based net income, attributable to OpenText
$
26,392

$
0.10

Add:
 
 
Amortization
118,717

0.44

Share-based compensation
8,002

0.03

Special charges (recoveries)
75,849

0.28

Other (income) expense, net
(7,790
)
(0.03
)
GAAP-based provision for (recovery of) income taxes
32,037

0.12

Non-GAAP-based provision for income taxes
(35,453
)
(0.14
)
Non-GAAP-based net income, attributable to OpenText
$
217,754

$
0.80

Reconciliation of Adjusted EBITDA
 
Three Months Ended June 30, 2020
GAAP-based net income, attributable to OpenText
$
26,392

Add:
 
Provision for (recovery of) income taxes
32,037

Interest and other related expense, net
40,529

Amortization of acquired technology-based intangible assets
59,719

Amortization of acquired customer-based intangible assets
58,998

Depreciation
23,649

Share-based compensation
8,002

Special charges (recoveries)
75,849

Other (income) expense, net
(7,790
)
Adjusted EBITDA
$
317,385



18


Reconciliation of selected GAAP-based measures to Non-GAAP-based measures
for the year ended June 30, 2020.
(In thousands except for per share amounts)
 
Year Ended June 30, 2020
 
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
$
449,940

 
$
(1,642
)
(1)
$
448,298

 
Customer support
123,894

 
(1,207
)
(1)
122,687

 
Professional service and other
212,903

 
(1,294
)
(1)
211,609

 
Amortization of acquired technology-based intangible assets
205,717

 
(205,717
)
(2)
—

 
GAAP-based gross profit and gross margin (%) /
Non-GAAP-based gross profit and gross margin (%)
2,105,961

67.7
%
209,860

(3)
2,315,821

74.5
%
Operating expenses
 
 
 
 
 
 
Research and development
370,411

 
(5,309
)
(1)
365,102

 
Sales and marketing
585,044

 
(9,335
)
(1)
575,709

 
General and administrative
237,532

 
(10,745
)
(1)
226,787

 
Amortization of acquired customer-based intangible assets
219,559

 
(219,559
)
(2)
—

 
Special charges (recoveries)
100,428

 
(100,428
)
(4)
—

 
GAAP-based income from operations / Non-GAAP-based income from operations
503,529

 
555,236

(5)
1,058,765

 
Other income (expense), net
(11,946
)
 
11,946

(6)
—

 
Provision for (recovery of) income taxes
110,837

 
16,897

(7)
127,734

 
GAAP-based net income / Non-GAAP-based net income, attributable to OpenText
234,225

 
550,285

(8)
784,510

 
GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText
$
0.86

 
$
2.03

(8)
$
2.89

 
(1)
Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.
(2)
Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.
(3)
GAAP-based and Non-GAAP-based gross profit stated in dollars, and gross margin stated as a percentage of total revenue.
(4)
Adjustment relates to the exclusion of Special charges (recoveries) from our Non-GAAP-based operating expenses as Special charges (recoveries) are generally incurred in the periods relevant to an acquisition and include certain charges or recoveries that are not indicative or related to continuing operations, and are therefore excluded from our internal analysis of operating results.
(5)
GAAP-based and Non-GAAP-based income from operations stated in dollars.
(6)
Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) generally relates to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results. Other income (expense) also includes our share of income (losses) from our holdings in 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 32% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based 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

19


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, 2020
 
 
Per share diluted
GAAP-based net income, attributable to OpenText
$
234,225

$
0.86

Add:
 
 
Amortization
425,276

1.56

Share-based compensation
29,532

0.11

Special charges (recoveries)
100,428

0.37

Other (income) expense, net
11,946

0.04

GAAP-based provision for (recovery of) income taxes
110,837

0.41

Non-GAAP-based provision for income taxes
(127,734
)
(0.46
)
Non-GAAP-based net income, attributable to OpenText
$
784,510

$
2.89

Reconciliation of Adjusted EBITDA
 
Year Ended June 30, 2020
GAAP-based net income, attributable to OpenText
$
234,225

Add:
 
Provision for (recovery of) income taxes
110,837

Interest and other related expense, net
146,378

Amortization of acquired technology-based intangible assets
205,717

Amortization of acquired customer-based intangible assets
219,559

Depreciation
89,458

Share-based compensation
29,532

Special charges (recoveries)
100,428

Other (income) expense, net
11,946

Adjusted EBITDA
$
1,148,080



20


Reconciliation of selected GAAP-based measures to Non-GAAP-based measures
for the three months ended March 31, 2020.
(In thousands except for per share amounts)
 
Three Months Ended March 31, 2020
 
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
$
127,565

 
$
(398
)
(1)
$
127,167

 
Customer support
32,151

 
(284
)
(1)
31,867

 
Professional service and other
56,526

 
(328
)
(1)
56,198

 
Amortization of acquired technology-based intangible assets
63,401

 
(63,401
)
(2)
—

 
GAAP-based gross profit and gross margin (%) /
Non-GAAP-based gross profit and gross margin (%)
532,492

65.4
%
64,411

(3)
596,903

73.3
%
Operating expenses
 
 
 
 
 
 
Research and development
108,184

 
(1,243
)
(1)
106,941

 
Sales and marketing
166,234

 
(2,261
)
(1)
163,973

 
General and administrative
68,828

 
(2,342
)
(1)
66,486

 
Amortization of acquired customer-based intangible assets
59,943

 
(59,943
)
(2)
—

 
Special charges (recoveries)
9,406

 
(9,406
)
(4)
—

 
GAAP-based income from operations / Non-GAAP-based income from operations
95,077

 
139,606

(5)
234,683

 
Other income (expense), net
(18,923
)
 
18,923

(6)
—

 
Provision for (recovery of) income taxes
8,891

 
18,188

(7)
27,079

 
GAAP-based net income / Non-GAAP-based net income, attributable to OpenText
25,965

 
140,341

(8)
166,306

 
GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText
$
0.10

 
$
0.51

(8)
$
0.61

 
(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 25% 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

21


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, 2020
 
 
Per share diluted
GAAP-based net income, attributable to OpenText
$
25,965

$
0.10

Add:
 
 
Amortization
123,344

0.45

Share-based compensation
6,856

0.03

Special charges (recoveries)
9,406

0.03

Other (income) expense, net
18,923

0.07

GAAP-based provision for (recovery of) income taxes
8,891

0.03

Non-GAAP-based provision for income taxes
(27,079
)
(0.10
)
Non-GAAP-based net income, attributable to OpenText
$
166,306

$
0.61

Reconciliation of Adjusted EBITDA
 
Three Months Ended March 31, 2020
GAAP-based net income, attributable to OpenText
$
25,965

Add:
 
Provision for (recovery of) income taxes
8,891

Interest and other related expense, net
41,263

Amortization of acquired technology-based intangible assets
63,401

Amortization of acquired customer-based intangible assets
59,943

Depreciation
24,820

Share-based compensation
6,856

Special charges (recoveries)
9,406

Other (income) expense, net
18,923

Adjusted EBITDA
$
259,468



22


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

23


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



24


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

25


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


(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, 2020 and 2019:
 
Three Months Ended June 30, 2020
 
Three Months Ended June 30, 2019
Currencies
% of Revenue
% of Expenses* 
 
% of Revenue
% of Expenses* 
EURO
22
%
13
%
 
24
%
15
%
GBP
4
%
5
%
 
6
%
6
%
CAD
3
%
8
%
 
3
%
9
%
USD
63
%
57
%
 
58
%
53
%
Other
8
%
17
%
 
9
%
17
%
Total
100
%
100
%
 
100
%
100
%

26


 
Year Ended June 30, 2020
 
Year Ended June 30, 2019
Currencies
% of Revenue
% of Expenses* 
 
% of Revenue
% of Expenses* 
EURO
22
%
14
%
 
24
%
15
%
GBP
5
%
6
%
 
6
%
6
%
CAD
3
%
9
%
 
4
%
10
%
USD
61
%
55
%
 
58
%
51
%
Other
9
%
16
%
 
8
%
18
%
Total
100
%
100
%
 
100
%
100
%
*Expenses include all cost of revenues and operating expenses included within the Consolidated Statements of Income, except for amortization of intangible assets, share-based compensation and Special charges (recoveries).


27