OpenText Reports First Quarter Fiscal Year 2021 Financial Results
OpenText Corporation (NASDAQ: OTEX) reported strong financial results for Q1 FY21, with total revenues of $804.0 million, a 15.4% increase year-over-year. Highlights include:
- Record Annual Recurring Revenues (ARR) of $670.4 million (+22.0% YoY)
- Cloud revenues of $341.0 million (+43.7% YoY)
- GAAP net income rose 38.9% to $103.4 million
- Free cash flow increased 84.0% to $218.6 million
The company also announced a 15% dividend increase and plans to repurchase up to $350 million in shares.
- Annual Recurring Revenues grew by 22.0% YoY to $670.4 million, representing 83% of total revenues.
- Cloud Services and Subscription revenues rose by 43.7% YoY to $341.0 million, marking a significant revenue contributor.
- Operating cash flows increased by 70.2% YoY to $233.9 million.
- Free cash flows saw an 84.0% YoY increase to $218.6 million.
- GAAP diluted EPS grew by 40.7% YoY to $0.38.
- License revenues declined by 12.0% YoY to $68.5 million.
- Professional services revenue dropped by 6.2% YoY to $65.1 million.
Record Annual Recurring Revenues (ARR) and Cloud Revenue, Announces
WATERLOO, ON, Nov. 5, 2020 /PRNewswire/ --
First Quarter Highlights
Total Revenues (in millions) | Annual Recurring Revenues (in millions) | Cloud Revenues (in millions) | |||||
Reported | Constant Currency | Reported | Constant Currency | Reported | Constant Currency | ||
+ | + | + | + | + | + | ||
Annual Recurring Revenues represents | |||||||
- Operating Cash Flows of
$233.9 million in the quarter, up70.2% Y/Y - Free Cash Flows of
$218.6 million , up84.0% Y/Y - GAAP net income of
$103.4 million , up38.9% Y/Y - Adjusted EBITDA of
$342.3 million , up34.7% , margin of42.6% , up 610 basis points Y/Y - GAAP diluted EPS of
$0.38 , up40.7% Y/Y - Non-GAAP diluted EPS of
$0.89 , up39.1% , and$0.87 in constant currency, up35.9% Y/Y - Quarterly cash dividend increased by
15% - Repayment of
$600 million Revolver, no outstanding balances - Announces Share Repurchase Plan of up to
$350 million
Open Text Corporation (NASDAQ: OTEX), (TSX: OTEX), "The Information Company," today announced its financial results for the first quarter ended September 30, 2020.
"OpenText delivered a great start to Fiscal 2021 with record performance across all of our key metrics," said Mark J. Barrenechea, OpenText CEO & CTO. "We demonstrated outstanding execution in a challenged environment with total revenues of
"I would like to thank our talented employees for their focus and commitment to our customers during the global pandemic," said Barrenechea. "OpenText is making the largest investments in products and sales in our history. We have the products and partner relationships that matter, in order to help customers accelerate their digital transformation. We continue to grow, generate cash, and remain committed to our proven Total Growth strategy."
"I am proud of the company's performance in the first quarter of Fiscal 2021. OpenText's strong execution amid the global pandemic reflects the underlying discipline and agility of our operating framework," said OpenText EVP and CFO, Madhu Ranganathan. "In Q1 we generated
Financial Highlights for Q1 Fiscal 2021 with Year Over Year Comparisons
Summary of Quarterly Results | ||||||||||||||
(in millions except per share data) | Q1 FY21 | Q1 FY20 | $ Change | % Change | Q1 FY21 | % Change | ||||||||
Revenues: | ||||||||||||||
Cloud services and subscriptions | 43.7 | % | 43.4 | % | ||||||||||
Customer support | 329.4 | 312.3 | 17.1 | 5.5 | % | 327.1 | 4.8 | % | ||||||
Total annual recurring revenues** | 22.0 | % | 21.4 | % | ||||||||||
License | 68.5 | 77.9 | (9.4) | (12.0) | % | 67.1 | (13.8) | % | ||||||
Professional service and other | 65.1 | 69.4 | (4.3) | (6.2) | % | 63.6 | (8.5) | % | ||||||
Total revenues | 15.4 | % | 14.5 | % | ||||||||||
GAAP-based operating income | 37.6 | % | N/A | N/A | ||||||||||
Non-GAAP-based operating income (1) | 36.9 | % | 34.2 | % | ||||||||||
GAAP-based EPS, diluted | 40.7 | % | N/A | N/A | ||||||||||
Non-GAAP-based EPS, diluted (1)(2) | 39.1 | % | 35.9 | % | ||||||||||
GAAP-based net income attributable to OpenText | 38.9 | % | N/A | N/A | ||||||||||
Adjusted EBITDA (1) | 34.7 | % | 32.1 | % | ||||||||||
Operating cash flows | 70.2 | % | N/A | N/A | ||||||||||
Free cash flows(1) | 84.0 | % | 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 November 4, 2020 a cash dividend of
Revolver Repayment
In October 2020, following the end of the quarter, OpenText repaid
Share Repurchase Plan/Normal Course Issuer Bid
The Company also announced today the authorization of a share repurchase plan and that it intends to purchase in open market transactions, from time to time over the next 12 months, if considered advisable, up to an aggregate of US
The Company's determination to adopt the Repurchase Plan reflects its confidence in its operational execution and expanding cash flows, with the Repurchase Plan being additive to the Company's overall strategic capital allocation, complementing its ongoing M&A activity and dividend program. The Repurchase Plan will be effected in accordance with Rule 10b-18 under the U.S. Securities Exchange Act of 1934. Purchases made under the Repurchase Plan may commence on November 12, 2020 and will expire on November 11, 2021, and will be subject to a limit of 13,618,774 shares (representing
Normal Course Issuer Bid
The Company has established a Normal Course Issuer Bid (the "NCIB") in order to provide it with a means to execute purchases over the TSX as part of the overall Repurchase Plan.
The TSX has approved the Company's notice of intention to commence the NCIB pursuant to which the Company may purchase common shares over the TSX for the period commencing November 12, 2020 until November 11, 2021 in accordance with the TSX's normal course issuer bid rules, including that such purchases are to be made at prevailing market prices or as otherwise permitted. Under the rules of the TSX, the maximum number of shares that may be purchased in this period is 13,618,774 (representing
Quarterly Business Highlights
- Key customer wins in the quarter included: California Department of Managed Health Care, European Centre for Medium-Range Weather Forecasts, Fresh Direct, Heritage Lab Express, Hydro Quebec, ON Semiconductor, Pacific Gas and Electric Company, Plex Systems, Inc., Securex, Sephora, South Carolina Educational Television, Southern California Edison, Texas A&M University, UK Department of Work & Pensions, University of Central Lancashire, Wm Morrison
- OpenText launches new SaaS applications, new cloud resources for developers, and major enhancements across the OpenText portfolio
- OpenText Announces flexible cloud platform for developers
- OpenText makes electronic signature accessible to organizations of every size
- OpenText announces support for Alfresco
- OpenText World 2020 opens with record registrations of 7,000, and a focus on the future of work
Summary of Quarterly Results | ||||||||||||
Q1 FY21 | Q4 FY20 | Q1 FY20 | % Change | % Change | ||||||||
Revenue (millions) | (2.7) | % | 15.4 | % | ||||||||
GAAP-based gross margin | 69.0 | % | 68.5 | % | 67.2 | % | 50 | bps | 180 | bps | ||
GAAP-based EPS, diluted | 280.0 | % | 40.7 | % | ||||||||
Non-GAAP-based gross margin (1) | 76.5 | % | 75.8 | % | 73.1 | % | 70 | bps | 340 | bps | ||
Non-GAAP-based EPS, diluted (1)(2) | 11.3 | % | 39.1 | % | ||||||||
(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 November 5, 2020 at 7:00 p.m. ET through 11:59 p.m. on November 19, 2020 and can be accessed by dialing 1-855-669-9658 (toll-free) or +1-604-674-8052 (international) and using passcode 5342 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™, 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, future cloud growth and market share gains, generating substantial long-term value for shareholders, the financial and operational impact of the COVID-19 pandemic, 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 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, potential share repurchases pursuant to its Repurchase Plan, 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 which include, but are not limited to, actual and potential risks and uncertainties relating to the ultimate spread of COVID-19, the severity of the disease and the duration of the COVID-19 pandemic. For additional information with respect to risks and other factors which could occur, see the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other securities filings with the Securities and Exchange Commission (SEC) and other securities regulators. Readers are cautioned not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. Unless otherwise required by applicable securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
OTEX-F
For more information, please contact:
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.
OPEN TEXT CORPORATION | |||||||
September 30, 2020 | June 30, 2020 | ||||||
ASSETS | (unaudited) | ||||||
Cash and cash equivalents | $ | 1,845,582 | $ | 1,692,850 | |||
Accounts receivable trade, net of allowance for credit losses of | 396,897 | 466,357 | |||||
Contract assets | 26,236 | 29,570 | |||||
Income taxes recoverable | 26,869 | 61,186 | |||||
Prepaid expenses and other current assets | 140,474 | 136,436 | |||||
Total current assets | 2,436,058 | 2,386,399 | |||||
Property and equipment | 235,498 | 244,555 | |||||
Operating lease right of use assets | 196,884 | 207,869 | |||||
Long-term contract assets | 19,066 | 15,427 | |||||
Goodwill | 4,682,784 | 4,672,356 | |||||
Acquired intangible assets | 1,506,407 | 1,612,564 | |||||
Deferred tax assets | 893,256 | 911,565 | |||||
Other assets | 161,142 | 154,467 | |||||
Long-term income taxes recoverable | 30,719 | 29,620 | |||||
Total assets | $ | 10,161,814 | $ | 10,234,822 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable and accrued liabilities | $ | 313,468 | $ | 373,314 | |||
Current portion of long-term debt | 610,000 | 610,000 | |||||
Operating lease liabilities | 60,447 | 64,071 | |||||
Deferred revenues | 770,919 | 812,218 | |||||
Income taxes payable | 29,666 | 44,630 | |||||
Total current liabilities | 1,784,500 | 1,904,233 | |||||
Long-term liabilities: | |||||||
Accrued liabilities | 42,081 | 34,955 | |||||
Pension liability | 78,536 | 73,129 | |||||
Long-term debt | 3,582,923 | 3,584,311 | |||||
Long-term operating lease liabilities | 207,723 | 217,165 | |||||
Long-term deferred revenues | 96,180 | 94,382 | |||||
Long-term income taxes payable | 176,396 | 171,200 | |||||
Deferred tax liabilities | 125,755 | 148,738 | |||||
Total long-term liabilities | 4,309,594 | 4,323,880 | |||||
Shareholders' equity: | |||||||
Share capital and additional paid-in capital | |||||||
272,173,923 and 271,863,354 Common Shares issued and outstanding at September 30, 2020 and June 30, 2020, respectively; authorized Common Shares: unlimited | 1,872,411 | 1,851,777 | |||||
Accumulated other comprehensive income | 39,695 | 17,825 | |||||
Retained earnings | 2,213,053 | 2,159,396 | |||||
Treasury stock, at cost (1,393,771 and 622,297 shares at September 30, 2020 and June 30, 2020, respectively) | (58,788) | (23,608) | |||||
Total OpenText shareholders' equity | 4,066,371 | 4,005,390 | |||||
Non-controlling interests | 1,349 | 1,319 | |||||
Total shareholders' equity | 4,067,720 | 4,006,709 | |||||
Total liabilities and shareholders' equity | $ | 10,161,814 | $ | 10,234,822 | |||
OPEN TEXT CORPORATION | |||||||
Three Months Ended September 30, | |||||||
2020 | 2019 | ||||||
Revenues: | |||||||
Cloud services and subscriptions | $ | 340,986 | $ | 237,265 | |||
Customer support | 329,399 | 312,298 | |||||
License | 68,523 | 77,898 | |||||
Professional service and other | 65,105 | 69,427 | |||||
Total revenues | 804,013 | 696,888 | |||||
Cost of revenues: | |||||||
Cloud services and subscriptions | 112,624 | 102,162 | |||||
Customer support | 29,194 | 29,387 | |||||
License | 2,489 | 2,323 | |||||
Professional service and other | 46,581 | 54,338 | |||||
Amortization of acquired technology-based intangible assets | 58,037 | 40,298 | |||||
Total cost of revenues | 248,925 | 228,508 | |||||
Gross profit | 555,088 | 468,380 | |||||
Operating expenses: | |||||||
Research and development | 93,903 | 81,178 | |||||
Sales and marketing | 132,400 | 128,618 | |||||
General and administrative | 56,189 | 51,535 | |||||
Depreciation | 22,003 | 20,277 | |||||
Amortization of acquired customer-based intangible assets | 54,993 | 49,158 | |||||
Special charges (recoveries) | 13,244 | 5,101 | |||||
Total operating expenses | 372,732 | 335,867 | |||||
Income from operations | 182,356 | 132,513 | |||||
Other income (expense), net | 2,883 | (2,785) | |||||
Interest and other related expense, net | (39,089) | (32,210) | |||||
Income before income taxes | 146,150 | 97,518 | |||||
Provision for (recovery of) income taxes | 42,744 | 23,091 | |||||
Net income for the period | $ | 103,406 | $ | 74,427 | |||
Net (income) loss attributable to non-controlling interests | (30) | (26) | |||||
Net income attributable to OpenText | $ | 103,376 | $ | 74,401 | |||
Earnings per share—basic attributable to OpenText | $ | 0.38 | $ | 0.28 | |||
Earnings per share—diluted attributable to OpenText | $ | 0.38 | $ | 0.27 | |||
Weighted average number of Common Shares outstanding—basic (in '000's) | 271,986 | 270,013 | |||||
Weighted average number of Common Shares outstanding—diluted (in '000's) | 272,847 | 271,251 | |||||
OPEN TEXT CORPORATION | |||||||
Three Months Ended September 30, | |||||||
2020 | 2019 | ||||||
Net income for the period | $ | 103,406 | $ | 74,427 | |||
Other comprehensive income (loss)—net of tax: | |||||||
Net foreign currency translation adjustments | 22,645 | (5,611) | |||||
Unrealized gain (loss) on cash flow hedges: | |||||||
Unrealized gain (loss) - net of tax expense (recovery) effect of | 845 | (572) | |||||
(Gain) loss reclassified into net income - net of tax (expense) recovery effect of | (156) | 8 | |||||
Actuarial gain (loss) relating to defined benefit pension plans: | |||||||
Actuarial gain (loss) - net of tax expense (recovery) effect of | (1,705) | (3,084) | |||||
Amortization of actuarial (gain) loss into net income - net of tax (expense) recovery effect of | 241 | 231 | |||||
Total other comprehensive income (loss) net, for the period | 21,870 | (9,028) | |||||
Total comprehensive income | 125,276 | 65,399 | |||||
Comprehensive (income) loss attributable to non-controlling interests | (30) | (26) | |||||
Total comprehensive income attributable to OpenText | $ | 125,246 | $ | 65,373 | |||
OPEN TEXT CORPORATION | |||||||||||||||||||||||||||||
Three Months Ended September 30, 2020 | |||||||||||||||||||||||||||||
Common Shares and | Treasury Stock | Retained | Accumulated Other | Non-Controlling Interests | Total | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||
Balance as of June 30, 2020 | 271,863 | $ | 1,851,777 | (622) | $ | (23,608) | $ | 2,159,396 | $ | 17,825 | $ | 1,319 | $ | 4,006,709 | |||||||||||||||
Adoption of ASU 2016-13 - cumulative effect, net | — | — | — | — | (2,450) | — | — | (2,450) | |||||||||||||||||||||
Issuance of Common Shares | |||||||||||||||||||||||||||||
Under employee stock option plans | 311 | 8,605 | — | — | — | — | — | 8,605 | |||||||||||||||||||||
Under employee stock purchase plans | — | 293 | 193 | 6,690 | — | — | — | 6,983 | |||||||||||||||||||||
Share-based compensation | — | 11,736 | — | — | — | — | — | 11,736 | |||||||||||||||||||||
Purchase of treasury stock | — | — | (965) | (41,870) | — | — | — | (41,870) | |||||||||||||||||||||
Dividends declared | — | — | — | — | (47,269) | — | — | (47,269) | |||||||||||||||||||||
Other comprehensive income - net | — | — | — | — | — | 21,870 | — | 21,870 | |||||||||||||||||||||
Net income for the quarter | — | — | — | — | 103,376 | — | 30 | 103,406 | |||||||||||||||||||||
Balance as of September 30, 2020 | 272,174 | $ | 1,872,411 | (1,394) | $ | (58,788) | $ | 2,213,053 | $ | 39,695 | $ | 1,349 | $ | 4,067,720 | |||||||||||||||
Three Months Ended September 30, 2019 | |||||||||||||||||||||||||||||
Common Shares and | Treasury Stock | Retained | Accumulated Other | Non-Controlling Interests | Total | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||
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 | 184 | 4,576 | — | — | — | — | — | 4,576 | |||||||||||||||||||||
Under employee stock purchase plans | 172 | 6,008 | — | — | — | — | — | 6,008 | |||||||||||||||||||||
Share-based compensation | — | 6,891 | — | — | — | — | — | 6,891 | |||||||||||||||||||||
Purchase of treasury stock | — | — | (300) | (12,424) | — | — | — | (12,424) | |||||||||||||||||||||
Dividends declared | — | — | — | — | (47,006) | — | — | (47,006) | |||||||||||||||||||||
Other comprehensive income - net | — | — | — | — | — | (9,028) | — | (9,028) | |||||||||||||||||||||
Net income for the quarter | — | — | — | — | 74,401 | — | 26 | 74,427 | |||||||||||||||||||||
Balance as of September 30, 2019 | 270,190 | $ | 1,791,689 | (1,103) | $ | (41,190) | $ | 2,141,278 | $ | 15,096 | $ | 1,241 | $ | 3,908,114 | |||||||||||||||
OPEN TEXT CORPORATION | |||||||
Three Months Ended September 30, | |||||||
2020 | 2019 | ||||||
Cash flows from operating activities: | |||||||
Net income for the period | $ | 103,406 | $ | 74,427 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization of intangible assets | 135,033 | 109,733 | |||||
Share-based compensation expense | 11,736 | 6,891 | |||||
Pension expense | 1,505 | 1,436 | |||||
Amortization of debt issuance costs | 1,112 | 1,127 | |||||
Loss on sale and write down of property and equipment | 573 | — | |||||
Deferred taxes | (1,180) | 6,244 | |||||
Share in net (income) loss of equity investees | (6,221) | (682) | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | 74,842 | 58,431 | |||||
Contract assets | (9,838) | (7,201) | |||||
Prepaid expenses and other current assets | (3,491) | (1,612) | |||||
Income taxes | 21,032 | 7,053 | |||||
Accounts payable and accrued liabilities | (51,429) | (62,979) | |||||
Deferred revenue | (41,268) | (61,169) | |||||
Other assets | 549 | 5,684 | |||||
Operating lease assets and liabilities, net | (2,457) | 64 | |||||
Net cash provided by operating activities | 233,904 | 137,447 | |||||
Cash flows from investing activities: | |||||||
Additions of property and equipment | (15,305) | (18,614) | |||||
Other investing activities | (2,237) | (2,036) | |||||
Net cash used in investing activities | (17,542) | (20,650) | |||||
Cash flows from financing activities: | |||||||
Proceeds from issuance of Common Shares from exercise of stock options and ESPP | 15,839 | 11,117 | |||||
Repayment of long-term debt and Revolver | (2,500) | (2,500) | |||||
Purchase of treasury stock | (41,870) | (12,424) | |||||
Payments of dividends to shareholders | (47,269) | (47,006) | |||||
Net cash provided by (used in) financing activities | (75,800) | (50,813) | |||||
Foreign exchange gain (loss) on cash held in foreign currencies | 10,792 | (7,711) | |||||
Increase (decrease) in cash, cash equivalents and restricted cash during the period | 151,354 | 58,273 | |||||
Cash, cash equivalents and restricted cash at beginning of the period | 1,697,263 | 943,543 | |||||
Cash, cash equivalents and restricted cash at end of the period | $ | 1,848,617 | $ | 1,001,816 | |||
Reconciliation of cash, cash equivalents and restricted cash: | September 30, 2020 | September 30, 2019 | |||||
Cash and cash equivalents | $ | 1,845,582 | $ | 999,298 | |||
Restricted cash (1) | 3,035 | 2,518 | |||||
Total cash, cash equivalents and restricted cash | $ | 1,848,617 | $ | 1,001,816 | |||
(1) Restricted cash is classified under the Prepaid expenses and other current assets and Other assets line items on the Condensed Consolidated Balance Sheets | |||||||
Notes | |
(1) | All dollar amounts in this press release are in U.S. Dollars unless otherwise indicated. |
(2) | Use of Non-GAAP Financial Measures: In addition to reporting financial results in accordance with U.S. GAAP, the Company provides certain financial measures that are not in accordance with U.S. GAAP (Non-GAAP). These Non-GAAP financial measures have certain limitations in that they do not have a standardized meaning and thus the Company's definition may be different from similar Non-GAAP financial measures used by other companies and/or analysts and may differ from period to period. Thus it may be more difficult to compare the Company's financial performance to that of other companies. However, the Company's management compensates for these limitations by providing the relevant disclosure of the items excluded in the calculation of these Non-GAAP financial measures both in its reconciliation to the U.S. GAAP financial measures and its consolidated financial statements, all of which should be considered when evaluating the Company's results. |
The Company uses these Non-GAAP financial measures to supplement the information provided in its consolidated financial statements, which are presented in accordance with U.S. GAAP. The presentation of Non-GAAP financial measures 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). Adjusted EBITDA margin is calculated as adjusted EBITDA expressed as a percentage of total revenue. | |
The Company's management believes that the presentation of the above defined Non-GAAP financial measures provides useful information to investors because they portray the financial results of the Company before the impact of certain non-operational charges. The use of the term "non-operational charge" is defined for this purpose as an expense that does not impact the ongoing operating decisions taken by the Company's management. These items are excluded based upon the way the Company's management evaluates the performance of the Company's business for use in the Company's internal reports and are not excluded in the sense that they may be used under U.S. GAAP. | |
The Company does not acquire businesses on a predictable cycle, and therefore believes that the presentation of Non-GAAP measures, which in certain cases adjust for the impact of amortization of intangible assets and the related tax effects that are primarily related to acquisitions, will provide readers of financial statements with a more consistent basis for comparison across accounting periods and be more useful in helping readers understand the Company's operating results and underlying operational trends. Additionally, the Company has engaged in various restructuring activities over the past several years, primarily due to acquisitions, that have resulted in costs associated with reductions in headcount, consolidation of leased facilities and related costs, all which are recorded under the Company's "Special charges (recoveries)" caption on the Consolidated Statements of Income. Each restructuring activity is a discrete event based on a unique set of business objectives or circumstances, and each differs in terms of its operational implementation, business impact and scope, and the size of each restructuring plan can vary significantly from period to period. Therefore, the Company believes that the exclusion of these special charges (recoveries) will also better aid readers of financial statements in the understanding and comparability of the Company's operating results and underlying operational trends. | |
In summary the Company believes the provision of supplemental Non-GAAP measures allow investors to evaluate the operational and financial performance of the Company's core business using the same evaluation measures that management uses, and is therefore a useful indication of OpenText's performance or expected performance of future operations and facilitates period-to-period comparison of operating performance (although prior performance is not necessarily indicative of future performance). As a result, the Company considers it appropriate and reasonable to provide, in addition to U.S. GAAP measures, supplementary Non-GAAP financial measures that exclude certain items from the presentation of its financial results. | |
The following charts provide (unaudited) reconciliations of U.S. GAAP-based financial measures to Non-U.S. GAAP-based financial measures for the following periods presented. |
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the three months ended September 30, 2020. (In thousands except for per share amounts) | ||||||||||||
Three Months Ended September 30, 2020 | ||||||||||||
GAAP-based Measures | GAAP-based Measures | Adjustments | Note | Non-GAAP- Measures | Non-GAAP- | |||||||
Cost of revenues | ||||||||||||
Cloud services and subscriptions | $ | 112,624 | $ | (836) | (1) | $ | 111,788 | |||||
Customer support | 29,194 | (442) | (1) | 28,752 | ||||||||
Professional service and other | 46,581 | (517) | (1) | 46,064 | ||||||||
Amortization of acquired technology-based intangible assets | 58,037 | (58,037) | (2) | — | ||||||||
GAAP-based gross profit and gross margin (%) / | 555,088 | 59,832 | (3) | 614,920 | ||||||||
Operating expenses | ||||||||||||
Research and development | 93,903 | (2,342) | (1) | 91,561 | ||||||||
Sales and marketing | 132,400 | (4,057) | (1) | 128,343 | ||||||||
General and administrative | 56,189 | (3,542) | (1) | 52,647 | ||||||||
Amortization of acquired customer-based intangible assets | 54,993 | (54,993) | (2) | — | ||||||||
Special charges (recoveries) | 13,244 | (13,244) | (4) | — | ||||||||
GAAP-based income from operations / Non-GAAP-based income from operations | 182,356 | 138,010 | (5) | 320,366 | ||||||||
Other income (expense), net | 2,883 | (2,883) | (6) | — | ||||||||
Provision for (recovery of) income taxes | 42,744 | (3,365) | (7) | 39,379 | ||||||||
GAAP-based net income / Non-GAAP-based net income, attributable to OpenText | 103,376 | 138,492 | (8) | 241,868 | ||||||||
GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText | (8) | |||||||||||
(1) | Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results. |
(2) | Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results. |
(3) | GAAP-based and Non-GAAP-based gross profit stated in dollars, and gross margin stated as a percentage of total revenue. |
(4) | Adjustment relates to the exclusion of special charges (recoveries) from our Non-GAAP-based operating expenses as special charges (recoveries) are generally incurred in the periods relevant to an acquisition and include certain charges or recoveries that are not indicative or related to continuing operations, and are therefore excluded from our internal analysis of operating results. |
(5) | GAAP-based and Non-GAAP-based income from operations stated in dollars. |
(6) | Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) generally relates to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results. Other income (expense) also includes our share of income (losses) from our holdings in investments as a limited partner. We do not actively trade equity securities in these privately held companies nor do we plan our ongoing operations based around any anticipated fundings or distributions from these investments. We exclude gains and losses on these investments as we do not believe they are reflective of our ongoing business and operating results. |
(7) | Adjustment relates to differences between the GAAP-based tax provision rate of approximately |
(8) | Reconciliation of GAAP-based net income to Non-GAAP-based net income: |
Three Months Ended September 30, 2020 | ||||||
Per share diluted | ||||||
GAAP-based net income, attributable to OpenText | $ | 103,376 | $ | 0.38 | ||
Add: | ||||||
Amortization | 113,030 | 0.41 | ||||
Share-based compensation | 11,736 | 0.04 | ||||
Special charges (recoveries) | 13,244 | 0.05 | ||||
Other (income) expense, net | (2,883) | (0.01) | ||||
GAAP-based provision for (recovery of) income taxes | 42,744 | 0.16 | ||||
Non-GAAP-based provision for income taxes | (39,379) | (0.14) | ||||
Non-GAAP-based net income, attributable to OpenText | $ | 241,868 | $ | 0.89 | ||
Reconciliation of Adjusted EBITDA | |||
Three Months Ended September 30, 2020 | |||
GAAP-based net income, attributable to OpenText | $ | 103,376 | |
Add: | |||
Provision for (recovery of) income taxes | 42,744 | ||
Interest and other related expense, net | 39,089 | ||
Amortization of acquired technology-based intangible assets | 58,037 | ||
Amortization of acquired customer-based intangible assets | 54,993 | ||
Depreciation | 22,003 | ||
Share-based compensation | 11,736 | ||
Special charges (recoveries) | 13,244 | ||
Other (income) expense, net | (2,883) | ||
Adjusted EBITDA | $ | 342,339 | |
Reconciliation of Free cash flows | |||
Three Months Ended September 30, 2020 | |||
GAAP cash flows provided by operating activities | $ | 233,904 | |
Add: | |||
Capital expenditures (1) | (15,305) | ||
Free cash flows | $ | 218,599 | |
(1) Defined as "Additions of property & equipment" in the Condensed Consolidated Statements of Cash Flows | |||
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 | Adjustments | Note | Non-GAAP-based Measures | Non-GAAP- | |||||||||
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 (%) / | 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 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 |
(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 | |
Reconciliation of Free cash flows | |||
Three Months Ended June 30, 2020 | |||
GAAP cash flows provided by operating activities | $ | 280,250 | |
Add: | |||
Capital expenditures (1) | (17,704) | ||
Free cash flows | $ | 262,546 | |
(1) Defined as "Additions of property & equipment" in the Condensed Consolidated Statements of Cash Flows | |||
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the three months ended September 30, 2019. (In thousands except for per share amounts) | ||||||||||||||
Three Months Ended September 30, 2019 | ||||||||||||||
GAAP-based Measures | GAAP-based Measures | Adjustments | Note | Non-GAAP-based Measures | Non-GAAP- | |||||||||
Cost of revenues | ||||||||||||||
Cloud services and subscriptions | $ | 102,162 | $ | (383) | (1) | $ | 101,779 | |||||||
Customer support | 29,387 | (316) | (1) | 29,071 | ||||||||||
Professional service and other | 54,338 | (243) | (1) | 54,095 | ||||||||||
Amortization of acquired technology-based intangible assets | 40,298 | (40,298) | (2) | — | ||||||||||
GAAP-based gross profit and gross margin (%) / | 468,380 | 67.2 | % | 41,240 | (3) | 509,620 | 73.1 | % | ||||||
Operating expenses | ||||||||||||||
Research and development | 81,178 | (1,221) | (1) | 79,957 | ||||||||||
Sales and marketing | 128,618 | (2,116) | (1) | 126,502 | ||||||||||
General and administrative | 51,535 | (2,612) | (1) | 48,923 | ||||||||||
Amortization of acquired customer-based intangible assets | 49,158 | (49,158) | (2) | — | ||||||||||
Special charges (recoveries) | 5,101 | (5,101) | (4) | — | ||||||||||
GAAP-based income from operations / Non-GAAP-based income from operations | 132,513 | 101,448 | (5) | 233,961 | ||||||||||
Other income (expense), net | (2,785) | 2,785 | (6) | — | ||||||||||
Provision for (recovery of) income taxes | 23,091 | 5,154 | (7) | 28,245 | ||||||||||
GAAP-based net income / Non-GAAP-based net income, attributable to OpenText | 74,401 | 99,079 | (8) | 173,480 | ||||||||||
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 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 |
(8) | Reconciliation of GAAP-based net income to Non-GAAP-based net income: |
Three Months Ended September 30, 2019 | ||||||
Per share diluted | ||||||
GAAP-based net income, attributable to OpenText | $ | 74,401 | $ | 0.27 | ||
Add: | ||||||
Amortization | 89,456 | 0.33 | ||||
Share-based compensation | 6,891 | 0.03 | ||||
Special charges (recoveries) | 5,101 | 0.02 | ||||
Other (income) expense, net | 2,785 | 0.01 | ||||
GAAP-based provision for (recovery of) income taxes | 23,091 | 0.09 | ||||
Non-GAAP-based provision for income taxes | (28,245) | (0.11) | ||||
Non-GAAP-based net income, attributable to OpenText | $ | 173,480 | $ | 0.64 | ||
Reconciliation of Adjusted EBITDA | |||
Three Months Ended September 30, 2019 | |||
GAAP-based net income, attributable to OpenText | $ | 74,401 | |
Add: | |||
Provision for (recovery of) income taxes | 23,091 | ||
Interest and other related expense, net | 32,210 | ||
Amortization of acquired technology-based intangible assets | 40,298 | ||
Amortization of acquired customer-based intangible assets | 49,158 | ||
Depreciation | 20,277 | ||
Share-based compensation | 6,891 | ||
Special charges (recoveries) | 5,101 | ||
Other (income) expense, net | 2,785 | ||
Adjusted EBITDA | $ | 254,212 | |
Reconciliation of Free cash flows | |||
Three Months Ended September 30, 2019 | |||
GAAP cash flows provided by operating activities | $ | 137,447 | |
Add: | |||
Capital expenditures (1) | (18,614) | ||
Free cash flows | $ | 118,833 | |
(1) Defined as "Additions of property & equipment" in the Condensed Consolidated Statements of Cash Flows | |||
(3) | The following tables provide a composition of our major currencies for revenue and expenses, expressed as a percentage, for the three months ended September 30, 2020 and 2019: |
Three Months Ended September 30, 2020 | Three Months Ended September 30, 2019 | ||||||||
Currencies | % of Revenue | % of Expenses* | % of Revenue | % of Expenses* | |||||
EURO | 22 | % | 13 | % | 22 | % | 14 | % | |
GBP | 5 | % | 5 | % | 5 | % | 5 | % | |
CAD | 3 | % | 9 | % | 3 | % | 10 | % | |
USD | 63 | % | 56 | % | 60 | % | 53 | % | |
Other | 7 | % | 17 | % | 10 | % | 18 | % | |
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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SOURCE Open Text Corporation
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