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OpenText Reports Q3 F'24 Financial Results

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OpenText reported record Q3 total revenues of $1.45 billion, up 16.3% year-over-year, with cloud revenues of $455 million and annual recurring revenues of $1.146 billion. The company also announced a $250 million share repurchase program and completed the sale of its AMC business for $2.275 billion. Adjusted EBITDA increased by 27.0% year-over-year, and free cash flows grew by 13.9%. The reinstatement of a share repurchase plan reflects confidence in operational execution and expanding cash flows.

Positive

  • Record Q3 total revenues of $1.45 billion, up 16.3% year-over-year

  • Cloud revenues of $455 million and annual recurring revenues of $1.146 billion

  • Completed sale of AMC business for $2.275 billion

  • Adjusted EBITDA increased by 27.0% year-over-year

  • Free cash flows grew by 13.9%

Negative

  • Net income attributable to OpenText increased by 8.9% year-over-year, below the revenue growth rate

  • Non-GAAP-based EPS decreased by 24.2% compared to the previous quarter

Insights

OpenText's Q3 F'24 report shows a robust performance with total revenues of $1.447 billion, which is a 16.3% year-over-year increase. Particularly noteworthy is the growth in Annual Recurring Revenues (ARR), which now represent 79% of total revenues, highlighting a shift towards a more predictable revenue stream. This move towards ARR is a strategic advantage, as it often leads to higher valuation multiples for technology companies. The adjusted EBITDA margin of 32.0% is a positive indicator of operational efficiency and profitability. OpenText's completion of the sale of its AMC business for $2.275 billion and the subsequent debt repayment of $2 billion significantly improves the company's balance sheet, providing increased financial flexibility. The announcement of a $250 million share buyback program signals management's confidence in the intrinsic value of the company and is generally perceived as a positive signal by investors. One area for investors to watch is the comparatively slower growth in cloud revenues at 4.4%, which, while still positive, lags behind the other revenue segments. This could suggest potential challenges in OpenText's cloud transition strategy or increased competition in cloud services.

The Q3 F'24 financials place OpenText in a strong position within the information management and AI sectors. A 52.6% surge in enterprise cloud bookings indicates growing market demand and the successful capture of new business in this segment. This is critical as cloud-based solutions continue to disrupt traditional markets and OpenText's performance here could be a harbinger of future growth. It's also important to note the strategic focus on using proceeds from the AMC business sale for capital flexibility, including M&A activity focused on cloud-based offerings. This proactive approach to growth through acquisitions can provide a pathway to rapidly expanding OpenText's product suite and market reach. Investors should be encouraged by the company's agility in adjusting its strategy to emerging industry trends, but should also remain cognizant of the potential risks associated with integrating acquisitions and entering new markets.

Record Q3 Total Revenues and Enterprise Cloud Bookings

Announces $250 Million Share Repurchase Program

Fiscal 2024 Third Quarter Highlights

Total Revenues

(in millions)


Annual Recurring Revenues

(in millions)


Cloud Revenues

(in millions)

Reported

Constant
Currency


Reported

Constant
Currency


Reported

Constant
Currency

$1,447

$1,444


$1,146

$1,143


$455

$454

+16.3 %

+16.0 %


+13.3 %

+13.1 %


+4.4 %

+4.4 %

Annual Recurring Revenues represent 79% of Total Revenues

  • Total revenues of $1.447 billion, up 16.3% Y/Y or up 16.0% in constant currency (CC)
  • Annual Recurring Revenues (ARR) of $1.146 billion, up 13.3% Y/Y or up 13.1% in CC
  • Cloud revenues of $455 million, up 4.4% Y/Y and up 4.4% in CC
  • Quarterly enterprise cloud bookings(1) of $165 million, up 52.6% Y/Y
  • Operating cash flows of $385 million, up 14.2% Y/Y
  • Free cash flows(2) of $348 million, up 13.9% Y/Y
  • GAAP-based net income of $98 million
  • Adjusted EBITDA(2) of $464 million, up 27.0% Y/Y, margin of 32.0%
  • GAAP-based diluted earnings per share (EPS) of $0.36, Non-GAAP diluted EPS(2) of $0.94
  • Completed previously announced sale of AMC business to Rocket Software for $2.275 billion in cash before taxes, fees and other adjustments

WATERLOO, ON, May 2, 2024 /PRNewswire/ -- Open Text Corporation (NASDAQ: OTEX), (TSX: OTEX), today announced its financial results for the third quarter ended March 31, 2024.

"OpenText delivered strong financial performance in Q3 with revenues of $1.45 billion, or 16% year-over-year growth, reflecting customer demand for information management and new AI capabilities," said Mark J. Barrenechea, OpenText CEO & CTO. "OpenText sits at the center of connected ecosystems, the internet of clouds, and we play a trusted role as our customers adopt cloud, security and AI."

Mr. Barrenechea added: "OpenText is focused on growth, profitability and the future of Information Management. The divestiture of our AMC/Mainframe business is now complete, and we are using the net proceeds to repay $2 billion of debt. With our increased capital flexibility, we are pleased to announce a new capital allocation program, continuance of our dividend program, and a new $250 million share buyback."

"In Q3, OpenText successfully achieved its operating goals while focusing on supporting our growth initiatives," said Madhu Ranganathan, OpenText President, CFO & Corporate Development. "We delivered $464 million of adjusted EBITDA, up 27% year-over-year and free cash flows of $348 million, up 14% year-over-year. With the divestiture now complete and our capital flexibility restored, we expect to commence OpenText's cloud-based M&A strategy to complement our focus on organic  growth."

(1)

Enterprise cloud bookings is defined as the total value from cloud services and subscription contracts, entered into in the period that are new, committed and incremental to our existing contracts, entered into with our enterprise based customers.

(2)

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

 

Financial Highlights for Q3 Fiscal 2024 with Year Over Year Comparisons

Summary of Quarterly Results









(In millions, except per share data)

Q3 FY'24

Q3 FY'23

$ Change 

% Change 


Q3 FY'24 
in CC*

% Change
in CC*


Revenues:









Cloud services and subscriptions

$454.5

$435.4

$19.1

4.4 %


$454.4

4.4 %


Customer support

691.4

575.9

115.6

20.1 %


689.0

19.6 %


Total annual recurring revenues**

$1,146.0

$1,011.3

$134.6

13.3 %


$1,143.4

13.1 %


License

200.4

139.7

60.6

43.4 %


200.0

43.2 %


Professional service and other

100.8

93.6

7.2

7.7 %


100.2

7.0 %


Total revenues

$1,447.1

$1,244.7

$202.5

16.3 %


$1,443.7

16.0 %


GAAP-based operating income

$227.1

$64.0

$163.1

254.9 %


N/A

N/A


Non-GAAP-based operating income (1)

$431.6

$334.6

$97.0

29.0 %


$429.7

28.4 %


GAAP-based net income attributable to OpenText

$98.3

$57.6

$40.7

70.8 %


N/A

N/A


GAAP-based EPS, diluted

$0.36

$0.21

$0.15

71.4 %


N/A

N/A


Non-GAAP-based EPS, diluted (1)(2)

$0.94

$0.73

$0.21

28.8 %


$0.94

28.8 %


Adjusted EBITDA (1)

$463.7

$365.1

$98.6

27.0 %


$461.5

26.4 %


Operating cash flows

$384.7

$336.8

$47.9

14.2 %


N/A

N/A


Free cash flows (1)

$348.2

$305.5

$42.6

13.9 %


N/A

N/A


 

Summary of YTD Results









(In millions, except per share data)

FY'24 YTD

FY'23 YTD

$ Change 

% Change 


FY'24 
YTD in CC*

% Change
in CC*


Revenues:









Cloud services and subscriptions

$1,355.6

$1,248.8

$106.9

8.6 %


$1,349.1

8.0 %


Customer support

2,084.9

1,209.7

875.2

72.3 %


2,059.8

70.3 %


Total annual recurring revenues**

$3,440.5

$2,458.5

$982.0

39.9 %


$3,408.9

38.7 %


License

662.6

310.2

352.4

113.6 %


654.3

110.9 %


Professional service and other

304.3

225.4

78.8

35.0 %


299.3

32.8 %


Total revenues

$4,407.4

$2,994.2

$1,413.3

47.2 %


$4,362.4

45.7 %


GAAP-based operating income

$693.8

$395.0

$298.8

75.7 %


N/A

N/A


Non-GAAP-based operating income (1)

$1,425.3

$933.6

$491.7

52.7 %


$1,394.1

49.3 %


GAAP-based net income attributable to OpenText

$216.9

$199.1

$17.7

8.9 %


N/A

N/A


GAAP-based EPS, diluted

$0.80

$0.74

$0.06

8.1 %


N/A

N/A


Non-GAAP-based EPS, diluted (1)(2)

$3.19

$2.39

$0.80

33.5 %


$3.10

29.7 %


Adjusted EBITDA (1)

$1,524.8

$1,010.1

$514.7

51.0 %


$1,492.3

47.7 %


Operating cash flows

$782.5

$663.9

$118.6

17.9 %


N/A

N/A


Free cash flows (1)

$663.2

$564.1

$99.0

17.6 %


N/A

N/A




(1)

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



(2)

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



Note: Individual line items in tables may be adjusted by non-material amounts to enable totals to align to published financial statements.


*CC: Constant currency for this purpose is defined as the current period reported revenues/expenses/earnings represented at the prior comparative period's foreign exchange rate.


**Annual recurring revenue is defined as the sum of Cloud services and subscriptions revenue and Customer support revenue.

Dividend

As part of our quarterly, non-cumulative cash dividend program, the Board declared on April 30, 2024, a cash dividend of $0.25 per common share. The record date for this dividend is May 31, 2024 and the payment date is June 18, 2024. 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.

Share Repurchase Plan/Normal Course Issuer Bid

OpenText also announced today the reinstatement of its share repurchase plan and that it intends to purchase for cancellation in open market transactions, from time to time over the next 12 months, if considered advisable, up to an aggregate of $250 million of its common shares on the Toronto Stock Exchange (the "TSX"), the NASDAQ Global Select Market and/or other exchanges and alternative trading systems in Canada and/or the United States, if eligible, subject to applicable law and stock exchange rules (the "Repurchase Plan"). The price that OpenText will pay for common shares in open market transactions will be the market price at the time of purchase or such other price as may be permitted by applicable law or stock exchange rules.

The Company's determination to reinstate 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, as amended.  Purchases made under the Repurchase Plan may commence on May 7, 2024 and will expire on May 6, 2025, and will be subject to a limit of 13,643,472 shares (representing 5% of the Company's issued and outstanding common shares as of April 26, 2024). All common shares purchased by OpenText pursuant to the Repurchase Plan will be cancelled.

Normal Course Issuer Bid

The Company has reinstated its 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 May 7, 2024 until May 6, 2025 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 13,643,472 shares (representing 5% of the Company's issued and outstanding common shares as of April 26, 2024), and the maximum number of shares that may be purchased on a single day is 138,175 common shares, which is 25% of 552,700 (the average daily trading volume for the common shares on the TSX for the six months ended March 31, 2024), subject to certain exceptions for block purchases, subject in any case to the volume and other limitations under Rule 10b-18.

The Company did not renew its NCIB that expired on November 11, 2022, and therefore has not purchased any common shares under a NCIB within the past 12 months.

Quarterly Business Highlights

  • OpenText completes divestment of its AMC business to Rocket Software for $2.275 billion in cash before taxes, fees and other adjustments
  • OpenText announced Cloud Editions (CE) 24.2 at OpenText World Europe, unveiling the latest information management solutions powered by AI
  • Key customer wins in the quarter include: Akamai Technologies, BAE Systems, Commercial Vehicle Group, Insecurity Inc., Kuveyt Turk, Lotte Non-Life Insurance Co, MAN Energy Solutions, Merck, Metso, Nestle Operational Services Worldwide, Redcentric Plc, Serica Energy, Shell International Petroleum, The Standard and Tyson Foods
  • OpenText strengthens leadership team and appoints three presidents, including Todd Cione as President WW Sales
  • OpenText earned prestigious Environment, Social and Governance (ESG) recognitions and achievements, including qualifying as a constituent of the Dow Jones Sustainability North America Index (DJSI) for the second year in a row as well as receiving its second consecutive "AAA" rating from MSCI
  • OpenText named a member of the U.S. Government public-private cybersecurity initiative, Joint Cyber Defense Collaborative (JCDC) to strengthen U.S. government cybersecurity
  • OpenText announced the second generation of its advanced cybersecurity auditing technology, Fortify Audit Assistant, debuting at the inaugural OpenText Security Summit 2024

Summary of Quarterly Results









Q3 FY'24

Q2 FY'24

Q3 FY'23

% Change 

(Q3 FY'24 vs
Q2 FY'24)


% Change

(Q3 FY'24 vs
Q3 FY'23)


Revenue (millions)

$1,447.1

$1,534.9

$1,244.7

(5.7) %


16.3 %


GAAP-based gross margin

73.0 %

73.6 %

70.3 %

(60)

bps

270

bps

Non-GAAP-based gross margin (1)

76.7 %

78.6 %

75.8 %

(190)

bps

90

bps

GAAP-based earnings (loss) per share, diluted

$0.36

$0.14

$0.21

157.1 %


71.4 %


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

$0.94

$1.24

$0.73

(24.2) %


28.8 %




(1)

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



(2)

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

Conference Call Information

OpenText posted an investor presentation on its Investor Relations website and invites the public to listen to the earnings conference call webcast today at 5:00 p.m. ET (2:00 p.m. PT) from the Investor Relations section of the Company's website at https://investors.opentext.com. To join the webcast instantly, use this webcast link. A webcast replay will be available shortly following completion of the live call.  

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

About OpenText

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

Cautionary Statement Regarding Forward-Looking Statements

Certain statements in this press release, including statements about Open Text Corporation ("OpenText" or "the Company") on growth, profitability and future of Information Management; future cloud booking growth and cloud demand; future organic growth initiatives and deployment of capital; intention to maintain a dividend program, including any targeted annualized dividend; expected size and timing of the Repurchase Plan, including execution thereof; organic growth of  Micro Focus; the expected impact of the divestiture of the AMC business; future tax rates; new platform and product offerings and associated benefits to customers; continued strength in enterprise cloud businesses and our new OpenText Aviator™ AI products, including our AI strategy and vision; and other matters, which may contain words such as "anticipates", "expects", "intends", "plans", "believes", "seeks", "estimates", "may", "could", "would", "might", "will" and variations of these words or similar expressions are intended to identify forward-looking statements or information under applicable securities laws (forward-looking statements). In addition, any statements or information that refer to expectations, beliefs, plans, projections, objectives, performance or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements, and are 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. Future declarations of dividends are also subject to the final determination and discretion of the Board of Directors, and an annualized dividend has not been approved or declared by the Board. Forward-looking statements involve known and unknown risks and uncertainties such as those relating to: all statements regarding the expected future financial position, results of operations, cash flows, dividends, share buybacks, financing plans, business strategy, budgets, capital expenditures, competitive positions, growth opportunities, plans and objectives of management, including any anticipated synergy benefits; incurring unanticipated costs, delays or difficulties, including as a result of the integration of Micro Focus' operations and programs and the divestiture of the AMC business; and our ability to develop, protect and maintain our intellectual property and proprietary technology and to operate without infringing on the proprietary rights of others. We rely on a combination of copyright, patent, trademark and trade secret laws, non-disclosure agreements and other contractual provisions to establish and maintain our proprietary rights, which are important to our success. From time to time, we may also enforce our intellectual property rights through litigation in line with our strategic and business objectives. The actual results that OpenText achieves may differ materially from any forward-looking statements. 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. Further, readers should note that we may announce information using our website, press releases, securities law filings, public conference calls, webcasts and the social media channels identified on the Investors section of our website (https://investors.opentext.com). Such social media channels may include the Company's or our CEO's blog, X, formerly known as Twitter, account or LinkedIn account. The information posted through such channels may be material. Accordingly, readers should monitor such channels in addition to our other forms of communication.

OTEX - F

Copyright ©2024 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: https://www.opentext.com/about/copyright-information. 

 

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



March 31, 2024


June 30, 2023

ASSETS

(unaudited)



Cash and cash equivalents

$             1,125,323


$             1,231,625

Accounts receivable trade, net of allowance for credit losses of $11,390 as of March 31, 2024 and $13,828 as of June 30, 2023

654,190


682,517

Contract assets

66,124


71,196

Income taxes recoverable

14,119


68,161

Prepaid expenses and other current assets

212,261


221,732

Assets held for sale

2,120,311


—

Total current assets

4,192,328


2,275,231

Property and equipment

346,073


356,904

Operating lease right of use assets

229,327


285,723

Long-term contract assets

42,659


64,553

Goodwill

7,528,147


8,662,603

Acquired intangible assets

2,624,117


4,080,879

Deferred tax assets

1,019,878


926,719

Other assets

314,580


342,318

Long-term income taxes recoverable

95,567


94,270

Total assets

$          16,392,676


$          17,089,200

LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable and accrued liabilities

$                898,611


$                996,261

Current portion of long-term debt

45,850


320,850

Operating lease liabilities

80,960


91,425

Deferred revenues

1,583,638


1,721,781

Income taxes payable

150,990


89,297

Liabilities held for sale

228,106


—

Total current liabilities

2,988,155


3,219,614

Long-term liabilities:




Accrued liabilities

48,031


51,961

Pension liability, net

128,955


126,312

Long-term debt

8,305,670


8,562,096

Long-term operating lease liabilities

224,984


271,579

Long-term deferred revenues

170,544


217,771

Long-term income taxes payable

154,679


193,808

Deferred tax liabilities

241,013


423,955

Total long-term liabilities

9,273,876


9,847,482

Shareholders' equity:




Share capital and additional paid-in capital




272,561,685 and 270,902,571 Common Shares issued and outstanding at March 31, 2024 and June 30, 2023, respectively; authorized Common Shares: unlimited

2,276,758


2,176,947

Accumulated other comprehensive income (loss)

(73,045)


(53,559)

Retained earnings

2,059,060


2,048,984

Treasury stock, at cost (3,376,994 and 3,536,375 shares at March 31, 2024 and June 30, 2023, respectively)

(133,606)


(151,597)

Total OpenText shareholders' equity

4,129,167


4,020,775

Non-controlling interests

1,478


1,329

Total shareholders' equity

4,130,645


4,022,104

Total liabilities and shareholders' equity

$          16,392,676


$          17,089,200

 

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



Three Months Ended

March 31,


Nine Months Ended

March 31,


2024


2023


2024


2023

Revenues:








Cloud services and subscriptions

$       454,528


$       435,449


$    1,355,633


$    1,248,774

Customer support

691,441


575,884


2,084,916


1,209,743

License

200,363


139,722


662,627


310,230

Professional service and other

100,799


93,619


304,252


225,403

Total revenues

1,447,131


1,244,674


4,407,428


2,994,150

Cost of revenues:








Cloud services and subscriptions

186,400


157,658


537,960


423,771

Customer support

74,639


67,067


223,027


123,010

License

6,769


3,840


16,591


10,461

Professional service and other

75,455


78,526


230,836


186,390

Amortization of acquired technology-based intangible assets

48,094


62,639


195,702


146,139

Total cost of revenues

391,357


369,730


1,204,116


889,771

Gross profit

1,055,774


874,944


3,203,312


2,104,379

Operating expenses:








Research and development

234,022


210,731


688,679


430,629

Sales and marketing

296,249


271,013


848,313


615,354

General and administrative

145,924


127,047


450,399


282,724

Depreciation

32,109


30,577


99,615


76,609

Amortization of acquired customer-based intangible assets

100,841


97,237


334,958


205,121

Special charges (recoveries)

19,561


74,350


87,521


98,937

Total operating expenses

828,706


810,955


2,509,485


1,709,374

Income from operations

227,068


63,989


693,827


395,005

Other income (expense), net

9,950


85,706


(38,664)


59,824

Interest and other related expense, net

(132,663)


(104,502)


(413,719)


(183,599)

Income before income taxes

104,355


45,193


241,444


271,230

Provision for (recovery of) income taxes

6,028


(12,420)


24,434


71,979

Net income for the period

$         98,327


$         57,613


$       217,010


$       199,251

Net (income) attributable to non-controlling interests

(42)


(57)


(149)


(138)

Net income attributable to OpenText

$         98,285


$         57,556


$       216,861


$       199,113

Earnings per share—basic attributable to OpenText

$              0.36


$              0.21


$              0.80


$              0.74

Earnings per share—diluted attributable to OpenText

$              0.36


$              0.21


$              0.80


$              0.74

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

272,272


270,441


271,671


270,143

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

273,033


270,650


272,349


270,173

 

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



Three Months Ended

March 31,


Nine Months Ended
March 31,


2024


2023


2024


2023

Net income for the period

$         98,327


$         57,613


$       217,010


$       199,251

Other comprehensive income (loss)—net of tax:








Net foreign currency translation adjustments

11,765


(28,640)


(18,614)


(25,587)

Unrealized gain (loss) on cash flow hedges:








Unrealized gain (loss) - net of tax (1)

(1,634)


38


(1,953)


(2,343)

(Gain) loss reclassified into net income - net of tax (2)

118


699


455


2,388

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








Unrealized gain (loss) - net of tax (3)

90


(900)


319


(900)

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








Actuarial gain (loss) - net of tax (4)

—


(3,318)


(110)


878

Amortization of actuarial (gain) loss into net income - net of tax (5)

115


35


417


109

Total other comprehensive income (loss) net, for the period

10,454


(32,086)


(19,486)


(25,455)

Total comprehensive income

108,781


25,527


197,524


173,796

Comprehensive income attributable to non-controlling interests

(42)


(57)


(149)


(138)

Total comprehensive income attributable to OpenText

$       108,739


$         25,470


$       197,375


$       173,658








(1)

Net of tax expense (recovery) of ($589) and $15 for the three months ended March 31, 2024 and 2023, respectively; $(704) and $(844) for the nine months ended March 31, 2024 and 2023, respectively.

(2)

Net of tax expense (recovery) of $42 and $252 for the three months ended March 31, 2024 and 2023, respectively; $163 and $861 for the nine months ended March 31, 2024 and 2023, respectively.

(3)

Net of tax expense (recovery) of $24 and ($238) for the three months ended March 31, 2024 and 2023, respectively; $84 and ($238) for the nine months ended March 31, 2024 and 2023, respectively.

(4)

Net of tax expense (recovery) of $— and $(892) for the three months ended March 31, 2024 and 2023, respectively; $110 and $318 for the nine months ended March 31, 2024 and 2023, respectively.

(5)

Net of tax expense (recovery) of $50 and $25 for the three months ended March 31, 2024 and 2023, respectively; $175 and $76 for the nine months ended March 31, 2024 and 2023, respectively.

 

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



Three Months Ended March 31, 2024


Common Shares and
Additional Paid in Capital


Treasury Stock


Retained

Earnings


Accumulated 
Other

Comprehensive

Income


Non-Controlling
Interests


Total


Shares


Amount


Shares


Amount


Balance as of December 31, 2023

271,855


$  2,261,856


(4,400)


$  (179,089)


$  2,029,643


$        (83,499)


$      1,436


$  4,030,347

Issuance of Common Shares
















Under employee stock option plans

517


17,315


—


—


—


—


—


17,315

Under employee stock purchase plans

190


6,698


—


—


—


—


—


6,698

Share-based compensation

—


35,947


—


—


—


—


—


35,947

Issuance of treasury stock

—


(45,058)


1,023


45,483


(425)


—


—


—

Dividends declared

($0.25 per Common Share)

—


—


—


—


(68,443)


—


—


(68,443)

Other comprehensive income (loss) - net

—


—


—


—


—


10,454


—


10,454

Net income for the period

—


—


—


—


98,285


—


42


98,327

Balance as of March 31, 2024

272,562


$  2,276,758


(3,377)


$  (133,606)


$  2,059,060


$        (73,045)


$      1,478


$  4,130,645



Three Months Ended March 31, 2023


Common Shares and
Additional Paid in Capital


Treasury Stock


Retained

Earnings


Accumulated
Other

Comprehensive

Income


Non-Controlling
Interests


Total


Shares


Amount


Shares


Amount


Balance as of December 31, 2022

270,235


$  2,092,079


(3,295)


$  (142,126)


$  2,171,236


$          (1,028)


$      1,223


$  4,121,384

Issuance of Common Shares
















Under employee stock option plans

16


479


—


—


—


—


—


479

Under employee stock purchase plans

228


5,776


—


—


—


—


—


5,776

Share-based compensation

—


36,505


—


—


—


—


—


36,505

Issuance of treasury stock

—


(4,496)


79


3,426


—


—


—


(1,070)

Dividends declared

($0.24299 per Common Share)

—


—


—


—


(65,454)


—


—


(65,454)

Other comprehensive income (loss) - net

—


—


—


—


—


(32,086)


—


(32,086)

Net income for the period

—


—


—


—


57,556


—


57


57,613

Balance as of March 31, 2023

270,479


$  2,130,343


(3,216)


$  (138,700)


$  2,163,338


$        (33,114)


$      1,280


$  4,123,147

 

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



Nine Months Ended March 31, 2024


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, 2023

270,903


$  2,176,947


(3,536)


$  (151,597)


$  2,048,984


$        (53,559)


$      1,329


$  4,022,104

Issuance of Common Shares
















Under employee stock option plans

942


31,318


—


—


—


—


—


31,318

Under employee stock purchase plans

717


23,709


—


—


—


—


—


23,709

Share-based compensation

—


112,944


—


—


—


—


—


112,944

Purchase of treasury stock

—


—


(1,400)


(53,085)


—


—


—


(53,085)

Issuance of treasury stock

—


(68,160)


1,559


71,076


(2,916)


—


—


—

Dividends declared

($0.75 per Common Share)

—


—


—


—


(203,869)


—


—


(203,869)

Other comprehensive income (loss) - net

—


—


—


—


—


(19,486)


—


(19,486)

Net income for the period

—


—


—


—


216,861


—


149


217,010

Balance as of March 31, 2024

272,562


$  2,276,758


(3,377)


$  (133,606)


$  2,059,060


$        (73,045)


$      1,478


$  4,130,645



Nine Months Ended March 31, 2023


Common Shares and
Additional Paid in Capital


Treasury Stock


Retained

Earnings


Accumulated  Other

Comprehensive

Income


Non-Controlling Interests


Total


Shares


Amount


Shares


Amount


Balance as of June 30, 2022

269,523


$  2,038,674


(3,706)


$  (159,966)


$  2,160,069


$          (7,659)


$      1,142


$  4,032,260

Issuance of Common Shares
















Under employee stock option plans

88


2,473


—


—


—


—


—


2,473

Under employee stock purchase plans

868


22,997


—


—


—


—


—


22,997

Share-based compensation

—


88,535


—


—


—


—


—


88,535

Issuance of treasury stock

—


(22,336)


490


21,266


—


—


—


(1,070)

Dividends declared

($0.72897 per Common Share)

—


—


—


—


(195,844)


—


—


(195,844)

Other comprehensive income (loss) - net

—


—


—


—


—


(25,455)


—


(25,455)

Net income for the period

—


—


—


—


199,113


—


138


199,251

Balance as of March 31, 2023

270,479


$  2,130,343


(3,216)


$  (138,700)


$  2,163,338


$        (33,114)


$      1,280


$  4,123,147

 

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



Three Months Ended

March 31,


Nine Months Ended

March 31,


2024


2023


2024


2023

Cash flows from operating activities:








Net income for the period

$           98,327


$           57,613


$         217,010


$         199,251

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








Depreciation and amortization of intangible assets

181,044


190,453


630,275


427,869

Share-based compensation expense

36,042


36,368


113,312


88,398

Pension expense

3,196


2,362


9,579


5,806

Amortization of debt discount and issuance costs

6,766


5,330


19,587


8,496

Write-off of right of use assets

4,278


3,344


15,241


7,119

Loss on extinguishment of debt

10,803


21


10,803


8,152

Loss on sale and write down of property and equipment, net

(162)


1,307


1,715


1,428

Deferred taxes

(72,144)


(131,898)


(249,174)


(178,700)

Share in net loss of equity investees

835


4,724


19,013


11,547

Changes in financial instruments

(16,671)


102,713


3,551


112,567

Changes in operating assets and liabilities:








Accounts receivable

111,772


167,866


51,487


141,269

Contract assets

(24,859)


(11,442)


(71,486)


(29,896)

Prepaid expenses and other current assets

728


(62,121)


4,717


(65,186)

Income taxes

16,943


87,277


75,676


131,517

Accounts payable and accrued liabilities

(24,731)


(146,638)


(72,887)


(137,674)

Deferred revenue

56,840


(13,498)


14,338


(42,631)

Other assets

650


54,708


5,868


(5,998)

Operating lease assets and liabilities, net

(4,960)


(11,714)


(16,154)


(19,430)

Net cash provided by operating activities

384,697


336,775


782,471


663,904

Cash flows from investing activities:








Additions of property and equipment

(36,537)


(31,233)


(119,316)


(99,772)

Micro Focus acquisition

—


(5,655,606)


(9,272)


(5,655,606)

Realized gain on financial instruments

—


131,248


—


131,248

Proceeds from net investment hedge derivative contracts

2,490


—


4,456


—

Other investing activities

6,315


—


(468)


(873)

Net cash used in investing activities

(27,732)


(5,555,591)


(124,600)


(5,625,003)

Cash flows from financing activities:








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

27,770


9,399


57,027


25,172

Proceeds from long-term debt and Revolver

—


3,927,450


—


4,927,450

Repayment of long-term debt and Revolver

(186,463)


(11,463)


(559,389)


(16,463)

Debt issuance costs

—


(65,559)


(2,792)


(77,209)

Purchase of treasury stock

—


—


(53,085)


—

Payments of dividends to shareholders

(67,293)


(64,919)


(200,672)


(194,481)

Other financing activities

(1,447)


(2,193)


(1,447)


(2,193)

Net cash provided by (used in) financing activities

(227,433)


3,792,715


(760,358)


4,662,276

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

(7,521)


2,903


(3,982)


2,632

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

122,011


(1,423,198)


(106,469)


(296,191)

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

1,005,472


2,822,918


1,233,952


1,695,911

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

$      1,127,483


$      1,399,720


$      1,127,483


$      1,399,720

 

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


Reconciliation of cash, cash equivalents and restricted cash:

March 31, 2024


March 31, 2023

Cash and cash equivalents

$               1,125,323


$               1,396,817

Restricted cash (1)

2,160


2,903

Total cash, cash equivalents and restricted cash

$               1,127,483


$               1,399,720





(1)

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

 

Notes

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

(2)      Use of Non-GAAP Financial Measures: In addition to reporting financial results in accordance with U.S. GAAP, the Company provides certain financial measures that are not in accordance with U.S. GAAP (Non-GAAP). These Non-GAAP financial measures have certain limitations in that they do not have a standardized meaning and thus the Company's definition may be different from similar Non-GAAP financial measures used by other companies and/or analysts and may differ from period to period. Thus it may be more difficult to compare the Company's financial performance to that of other companies. However, the Company's management compensates for these limitations by providing the relevant disclosure of the items excluded in the calculation of these Non-GAAP financial measures both in its reconciliation to the U.S. GAAP financial measures and its condensed 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 condensed consolidated financial statements, which are presented in accordance with U.S. GAAP. The presentation of Non-GAAP financial measures is not meant to be a substitute for financial measures presented in accordance with U.S. GAAP, but rather should be evaluated in conjunction with and as a supplement to such U.S. GAAP measures. OpenText strongly encourages investors to review its financial information in its entirety and not to rely on a single financial measure. The Company therefore believes that despite these limitations, it is appropriate to supplement the disclosure of the U.S. GAAP measures with certain Non-GAAP measures defined below.

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

Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) is consistently calculated as GAAP-based net income (loss), attributable to OpenText, excluding interest income (expense), provision for (recovery of) income taxes, depreciation and amortization of acquired intangible assets, other income (expense), share-based compensation and special charges (recoveries). Adjusted EBITDA margin is calculated as adjusted EBITDA expressed as a percentage of total revenue.

Return of capital per share as the total value of cash dividends paid and common shares repurchased in the period divided by by the weighted average number of common shares outstanding during the period.

The Company's management believes that the presentation of the above defined Non-GAAP financial measures provides useful information to investors because they portray the financial results of the Company before the impact of certain non-operational charges. The use of the term "non-operational charge" is defined for this purpose as an expense that does not impact the ongoing operating decisions taken by the Company's management. These items are excluded based upon the way the Company's management evaluates the performance of the Company's business for use in the Company's internal reports and are not excluded in the sense that they may be used under U.S. GAAP.

The Company does not acquire businesses on a predictable cycle, and therefore believes that the presentation of Non-GAAP measures, which in certain cases adjust for the impact of amortization of intangible assets and the related tax effects that are primarily related to acquisitions, will provide readers of financial statements with a more consistent basis for comparison across accounting periods and be more useful in helping readers understand the Company's operating results and underlying operational trends. Additionally, the Company has engaged in various restructuring activities over the past several years, primarily due to acquisitions and in response to our return to office planning, that have resulted in costs associated with reductions in headcount, consolidation of leased facilities and related costs, all which are recorded under the Company's "Special charges (recoveries)" caption on the Consolidated Statements of Income. Each restructuring activity is a discrete event based on a unique set of business objectives or circumstances, and each differs in terms of its operational implementation, business impact and scope, and the size of each restructuring plan can vary significantly from period to period. Therefore, the Company believes that the exclusion of these special charges (recoveries) will also better aid readers of financial statements in the understanding and comparability of the Company's operating results and underlying operational trends.

In summary, the Company believes the provision of supplemental Non-GAAP measures allow investors to evaluate the operational and financial performance of the Company's core business using the same evaluation measures that management uses, and is therefore a useful indication of OpenText's performance or expected performance of future operations and facilitates period-to-period comparison of operating performance (although prior performance is not necessarily indicative of future performance). As a result, the Company considers it appropriate and reasonable to provide, in addition to U.S. GAAP measures, supplementary Non-GAAP financial measures that exclude certain items from the presentation of its financial results. Information reconciling certain forward-looking GAAP measures to non-GAAP measures related to F'24 targets and F'26 aspirations, including A-EBITDA is not available without unreasonable effort due to high variability, complexity and uncertainty with respect to forecasting and quantifying certain amounts that are necessary for such reconciliations.

The following charts provide unaudited reconciliations of U.S. GAAP-based financial measures to Non-GAAP-based financial measures for the following periods presented. The Micro Focus Acquisition significantly impacts period-over-period comparability.

 

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

for the three months ended March 31, 2024

(In thousands, except for per share data)


Three Months Ended March 31, 2024


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

$  186,400


$     (3,292)

(1)

$   183,108


Customer support

74,639


(1,149)

(1)

73,490


Professional service and other

75,455


(1,458)

(1)

73,997


Amortization of acquired technology-based intangible assets

48,094


(48,094)

(2)

—


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

1,055,774

73.0 %

53,993

(3)

1,109,767

76.7 %

Operating expenses







Research and development

234,022


(10,799)

(1)

223,223


Sales and marketing

296,249


(12,260)

(1)

283,989


General and administrative

145,924


(7,084)

(1)

138,840


Amortization of acquired customer-based intangible assets

100,841


(100,841)

(2)

—


Special charges (recoveries)

19,561


(19,561)

(4)

—


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

227,068


204,538

(5)

431,606


Other income (expense), net

9,950


(9,950)

(6)

—


Provision for income taxes

6,028


35,824

(7)

41,852


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

98,285


158,764

(8)

257,049


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

$         0.36


$          0.58

(8)

$          0.94




(1)

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

(2)

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

(3)

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

(4)

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

(5)

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

(6)

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

(7)

Adjustment relates to differences between the GAAP-based tax provision rate of approximately 6% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based net income. Such excluded items include amortization, share-based compensation, special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves and "book to return" adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately  14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.

(8)

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

 


Three Months Ended March 31, 2024



Per share diluted

GAAP-based net income, attributable to OpenText

$                     98,285

$                          0.36

Add (deduct):



Amortization

148,935

0.55

Share-based compensation

36,042

0.13

Special charges (recoveries)

19,561

0.07

Other (income) expense, net

(9,950)

(0.04)

GAAP-based provision for income taxes

6,028

0.02

Non-GAAP-based provision for income taxes

(41,852)

(0.15)

Non-GAAP-based net income, attributable to OpenText

$                   257,049

$                          0.94

 

Reconciliation of Adjusted EBITDA



Three Months Ended March 31, 2024

GAAP-based net income, attributable to OpenText

$                                                          98,285

Add:


Provision for income taxes

6,028

Interest and other related expense, net

132,663

Amortization of acquired technology-based intangible assets

48,094

Amortization of acquired customer-based intangible assets

100,841

Depreciation

32,109

Share-based compensation

36,042

Special charges (recoveries)

19,561

Other (income) expense, net

(9,950)

Adjusted EBITDA

$                                                       463,673



GAAP-based net income margin

6.8 %

Adjusted EBITDA margin

32.0 %

 

Reconciliation of Free cash flows



Three Months Ended March 31, 2024

GAAP-based cash flows provided by operating activities

$                                                         384,697

Add:


Capital expenditures (1)

(36,537)

Free cash flows

$                                                         348,160



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

 

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

for the nine months ended March 31, 2024

(In thousands, except for per share data)


Nine Months Ended March 31, 2024


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

$   537,960


$     (9,892)

(1)

$   528,068


Customer support

223,027


(3,335)

(1)

219,692


Professional service and other

230,836


(5,096)

(1)

225,740


Amortization of acquired technology-based intangible assets

195,702


(195,702)

(2)

—


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

3,203,312

72.7 %

214,025

(3)

3,417,337

77.5 %

Operating expenses







Research and development

688,679


(35,300)

(1)

653,379


Sales and marketing

848,313


(37,294)

(1)

811,019


General and administrative

450,399


(22,395)

(1)

428,004


Amortization of acquired customer-based intangible assets

334,958


(334,958)

(2)

—


Special charges (recoveries)

87,521


(87,521)

(4)

—


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

693,827


731,493

(5)

1,425,320


Other income (expense), net

(38,664)


38,664

(6)

—


Provision for income taxes

24,434


117,191

(7)

141,625


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

216,861


652,966

(8)

869,827


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

$          0.80


$          2.39

(8)

$          3.19




(1)

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

(2)

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

(3)

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

(4)

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

(5)

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

(6)

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

(7)

Adjustment relates to differences between the GAAP-based tax provision rate of approximately 10% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based net income. Such excluded items include amortization, share-based compensation, special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves and "book to return" adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately  14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.

(8)

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

 


Nine Months Ended March 31, 2024



Per share diluted

GAAP-based net income, attributable to OpenText

$                   216,861

$                          0.80

Add (deduct):



Amortization

530,660

1.95

Share-based compensation

113,312

0.42

Special charges (recoveries)

87,521

0.32

Other (income) expense, net

38,664

0.13

GAAP-based provision for income taxes

24,434

0.09

Non-GAAP-based provision for income taxes

(141,625)

(0.52)

Non-GAAP-based net income, attributable to OpenText

$                   869,827

$                          3.19

 

Reconciliation of Adjusted EBITDA



Nine Months Ended March 31, 2024

GAAP-based net income, attributable to OpenText

$                                                       216,861

Add:


Provision for income taxes

24,434

Interest and other related expense, net

413,719

Amortization of acquired technology-based intangible assets

195,702

Amortization of acquired customer-based intangible assets

334,958

Depreciation

99,615

Share-based compensation

113,312

Special charges (recoveries)

87,521

Other (income) expense, net

38,664

Adjusted EBITDA

$                                                    1,524,786



GAAP-based net income margin

4.9 %

Adjusted EBITDA margin

34.6 %

 

Reconciliation of Free cash flows



Nine Months Ended March 31, 2024

GAAP-based cash flows provided by operating activities

$                                                         782,471

Add:


Capital expenditures (1)

(119,316)

Free cash flows

$                                                         663,155



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

 

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

for the three months ended December 31, 2023

(In thousands, except for per share data)


Three Months Ended December 31, 2023


GAAP-based

Measures

GAAP-based Measures

% of Total Revenue

Adjustments

Note

Non-GAAP-based

Measures

Non-GAAP-based Measures

% of Total Revenue

Cost of revenues







Cloud services and subscriptions

$   180,148


$     (3,609)

(1)

$   176,539


Customer support

73,374


(1,128)

(1)

72,246


Professional service and other

75,459


(1,756)

(1)

73,703


Amortization of acquired technology-based intangible assets

70,784


(70,784)

(2)

—


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

1,129,120

73.6 %

77,277

(3)

1,206,397

78.6 %

Operating expenses







Research and development

220,220


(12,767)

(1)

207,453


Sales and marketing

280,263


(13,227)

(1)

267,036


General and administrative

173,264


(7,688)

(1)

165,576


Amortization of acquired customer-based intangible assets

113,925


(113,925)

(2)

—


Special charges (recoveries)

54,166


(54,166)

(4)

—


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

253,867


279,050

(5)

532,917


Other income (expense), net

(68,784)


68,784

(6)

—


Provision for income taxes

8,054


47,054

(7)

55,108


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

37,675


300,780

(8)

338,455


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

$          0.14


$          1.10

(8)

$          1.24




(1)

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

(2)

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

(3)

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

(4)

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

(5)

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

(6)

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

(7)

Adjustment relates to differences between the GAAP-based tax provision rate of approximately 18% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based net income. Such excluded items include amortization, share-based compensation, special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves and "book to return" adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately 14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.

(8)

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

 


Three Months Ended December 31, 2023



Per share diluted

GAAP-based net income, attributable to OpenText

$                     37,675

$                          0.14

Add (deduct):



Amortization

184,709

0.68

Share-based compensation

40,175

0.15

Special charges (recoveries)

54,166

0.20

Other (income) expense, net

68,784

0.24

GAAP-based provision for income taxes

8,054

0.03

Non-GAAP-based provision for income taxes

(55,108)

(0.20)

Non-GAAP-based net income, attributable to OpenText

$                   338,455

$                          1.24

 

Reconciliation of Adjusted EBITDA



Three Months Ended December 31, 2023

GAAP-based net income, attributable to OpenText

$                                                        37,675

Add (deduct):


Provision for income taxes

8,054

Interest and other related expense, net

139,292

Amortization of acquired technology-based intangible assets

70,784

Amortization of acquired customer-based intangible assets

113,925

Depreciation

33,415

Share-based compensation

40,175

Special charges (recoveries)

54,166

Other (income) expense, net

68,784

Adjusted EBITDA

$                                                      566,270



GAAP-based net income margin

2.5 %

Adjusted EBITDA margin

36.9 %

 

Reconciliation of Free cash flows



Three Months Ended December 31, 2023

GAAP-based cash flows provided by operating activities

$                                                         350,653

Add:


Capital expenditures (1)

(45,240)

Free cash flows

$                                                         305,413



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

 

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

for the three months ended March 31, 2023

(In thousands, except for per share data)


Three Months Ended March 31, 2023


GAAP-based

Measures

GAAP-based Measures

% of Total Revenue

Adjustments

Note

Non-GAAP-based

Measures

Non-GAAP-based Measures

% of Total Revenue

Cost of revenues







Cloud services and subscriptions

$   157,658


$     (2,943)

(1)

$   154,715


Customer support

67,067


(1,157)

(1)

65,910


Professional service and other

78,526


(1,884)

(1)

76,642


Amortization of acquired technology-based intangible assets

62,639


(62,639)

(2)

—


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

874,944

70.3 %

68,623

(3)

943,567

75.8 %

Operating expenses







Research and development

210,731


(10,801)

(1)

199,930


Sales and marketing

271,013


(11,947)

(1)

259,066


General and administrative

127,047


(7,636)

(1)

119,411


Amortization of acquired customer-based intangible assets

97,237


(97,237)

(2)

—


Special charges (recoveries)

74,350


(74,350)

(4)

—


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

63,989


270,594

(5)

334,583


Other income (expense), net

85,706


(85,706)

(6)

—


Provision for (recovery of) income taxes

(12,420)


44,631

(7)

32,211


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

57,556


140,257

(8)

197,813


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

$          0.21


$          0.52

(8)

$          0.73




(1)

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

(2)

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

(3)

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

(4)

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

(5)

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

(6)

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

(7)

Adjustment relates to differences between the GAAP-based tax provision rate of approximately 27% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based net income. Such excluded items include amortization, share-based compensation, special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves and "book to return" adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately 14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.

(8)

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

 


Three Months Ended March 31, 2023



Per share diluted

GAAP-based net income, attributable to OpenText

$                     57,556

$                          0.21

Add (deduct):



Amortization

159,876

0.59

Share-based compensation

36,368

0.13

Special charges (recoveries)

74,350

0.28

Other (income) expense, net

(85,706)

(0.32)

GAAP-based recovery of income taxes

(12,420)

(0.04)

Non-GAAP-based provision for income taxes

(32,211)

(0.12)

Non-GAAP-based net income, attributable to OpenText

$                   197,813

$                          0.73


 

Reconciliation of Adjusted EBITDA



Three Months Ended March 31, 2023

GAAP-based net income, attributable to OpenText

$                                                        57,556

Add (deduct):


Recovery of income taxes

(12,420)

Interest and other related expense, net

104,502

Amortization of acquired technology-based intangible assets

62,639

Amortization of acquired customer-based intangible assets

97,237

Depreciation

30,577

Share-based compensation

36,368

Special charges (recoveries)

74,350

Other (income) expense, net

(85,706)

Adjusted EBITDA

$                                                      365,103



GAAP-based net income margin

4.6 %

Adjusted EBITDA margin

29.3 %

 

Reconciliation of Free cash flows



Three Months Ended March 31, 2023

GAAP-based cash flows provided by operating activities

$                                                         336,775

Add:


Capital expenditures (1)

(31,233)

Free cash flows

$                                                         305,542



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

 

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

for the nine months ended March 31, 2023

(In thousands, except for per share data)


Nine Months Ended March 31, 2023


GAAP-based

Measures

GAAP-based Measures

% of Total Revenue

Adjustments

Note

Non-GAAP-based

Measures

Non-GAAP-based Measures

% of Total Revenue

Cost of revenues







Cloud services and subscriptions

$   423,771


$     (7,788)

(1)

$   415,983


Customer support

123,010


(2,414)

(1)

120,596


Professional service and other

186,390


(5,172)

(1)

181,218


Amortization of acquired technology-based intangible assets

146,139


(146,139)

(2)

—


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

2,104,379

70.3 %

161,513

(3)

2,265,892

75.7 %

Operating expenses







Research and development

430,629


(25,481)

(1)

405,148


Sales and marketing

615,354


(28,243)

(1)

587,111


General and administrative

282,724


(19,300)

(1)

263,424


Amortization of acquired customer-based intangible assets

205,121


(205,121)

(2)

—


Special charges (recoveries)

98,937


(98,937)

(4)

—


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

395,005


538,595

(5)

933,600


Other income (expense), net

59,824


(59,824)

(6)

—


Provision for income taxes

71,979


33,021

(7)

105,000


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

199,113


445,750

(8)

644,863


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

$          0.74


$          1.65

(8)

$          2.39




(1)

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

(2)

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

(3)

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

(4)

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

(5)

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

(6)

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

(7)

Adjustment relates to differences between the GAAP-based tax provision rate of approximately 27% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based net income. Such excluded items include amortization, share-based compensation, special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves and "book to return" adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately 14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.

(8)

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

 


Nine Months Ended March 31, 2023



Per share diluted

GAAP-based net income, attributable to OpenText

$                   199,113

$                          0.74

Add (deduct):



Amortization

351,260

1.30

Share-based compensation

88,398

0.32

Special charges (recoveries)

98,937

0.37

Other (income) expense, net

(59,824)

(0.22)

GAAP-based provision for income taxes

71,979

0.27

Non-GAAP-based provision for income taxes

(105,000)

(0.39)

Non-GAAP-based net income, attributable to OpenText

$                   644,863

$                          2.39

 

Reconciliation of Adjusted EBITDA



Nine Months Ended March 31, 2023

GAAP-based net income, attributable to OpenText

$                                                      199,113

Add:


Provision for income taxes

71,979

Interest and other related expense, net

183,599

Amortization of acquired technology-based intangible assets

146,139

Amortization of acquired customer-based intangible assets

205,121

Depreciation

76,609

Share-based compensation

88,398

Special charges (recoveries)

98,937

Other (income) expense, net

(59,824)

Adjusted EBITDA

$                                                   1,010,071



GAAP-based net income margin

6.7 %

Adjusted EBITDA margin

33.7 %

 

Reconciliation of Free cash flows



Nine Months Ended March 31, 2023

GAAP-based cash flows provided by operating activities

$                                                         663,904

Add:


Capital expenditures (1)

(99,772)

Free cash flows

$                                                         564,132



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

 

(3)      The following tables provide a composition of our major currencies for revenue and expenses, expressed as a percentage, for the three and nine months ended March 31, 2024 and 2023:


Three Months Ended March 31, 2024


Three Months Ended March 31, 2023

Currencies

% of Revenue

% of Expenses(1)


% of Revenue

% of Expenses(1)

EURO

22 %

12 %


21 %

12 %

GBP

5 %

7 %


5 %

8 %

CAD

3 %

10 %


3 %

11 %

USD

59 %

50 %


61 %

50 %

Other

11 %

21 %


10 %

19 %

Total

100 %

100 %


100 %

100 %



Nine Months Ended March 31, 2024


Nine Months Ended March 31, 2023

Currencies

% of Revenue

% of Expenses(1)


% of Revenue

% of Expenses(1)

EURO

22 %

12 %


20 %

12 %

GBP

5 %

7 %


5 %

6 %

CAD

3 %

10 %


3 %

12 %

USD

59 %

51 %


63 %

53 %

Other

11 %

20 %


9 %

17 %

Total

100 %

100 %


100 %

100 %



(1)

Expenses include all cost of revenues and operating expenses included within the Consolidated Statements of Income, except for amortization of intangible assets, share-based compensation and special charges (recoveries).

 

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/opentext-reports-q3-f24-financial-results-302135054.html

SOURCE Open Text Corporation

FAQ

<p>What were OpenText's total Q3 revenues?</p>

OpenText reported total Q3 revenues of $1.45 billion.

<p>How much did OpenText's cloud revenues amount to in Q3?</p>

OpenText's cloud revenues in Q3 were $455 million.

<p>What was the share repurchase program announced by OpenText?</p>

OpenText announced a $250 million share repurchase program.

<p>What was the growth rate of adjusted EBITDA in Q3 for OpenText?</p>

Adjusted EBITDA for OpenText grew by 27.0% year-over-year in Q3.

<p>How did OpenText's free cash flows perform in Q3?</p>

OpenText's free cash flows grew by 13.9% year-over-year in Q3.

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Open Text Corp

NASDAQ:OTEX

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