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OpenText Reports Second Quarter Fiscal Year 2024 Financial Results

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OpenText Corporation (OTEX) reported record total revenues of $1.535 billion, up 71% year-over-year, with annual recurring revenues of $1.146 billion, up 58% year-over-year. Cloud revenues were $450 million, up 10.1% year-over-year. The company also announced a definitive agreement to divest the Application Modernization and Connectivity business to Rocket Software for $2.275 billion. OpenText's adjusted EBITDA was $566 million, with a margin of 36.9%, and the company achieved operating cash flows of $351 million and free cash flows of $305 million. The company declared a cash dividend of $0.25 per common share and demonstrated strong business execution in Q2.
Positive
  • Record total revenues of $1.535 billion, up 71% year-over-year
  • Annual recurring revenues of $1.146 billion, up 58% year-over-year
  • Cloud revenues of $450 million, up 10.1% year-over-year
  • Definitive agreement to divest the Application Modernization and Connectivity business to Rocket Software for $2.275 billion
  • Adjusted EBITDA of $566 million, with a margin of 36.9%
  • Operating cash flows of $351 million and free cash flows of $305 million
  • Declared a cash dividend of $0.25 per common share
Negative
  • None.

Insights

The reported increase in total revenues by 71% year-over-year (YoY) to $1.535 billion is a significant indicator of robust growth, particularly in the context of enterprise cloud services. The rise in Annual Recurring Revenues (ARR) by 58% YoY to $1.146 billion signals a strong shift towards a recurring revenue model, which is highly valued by investors for its predictability and stability. The substantial 10.1% increase in cloud revenues, although lower than the total revenue growth rate, still points to a healthy expansion in a highly competitive sector.

Furthermore, the divestiture of the Application Modernization and Connectivity (AMC) business for $2.275 billion is a strategic move that could streamline operations and focus on core growth areas, such as cloud services and AI. This transaction is expected to bolster liquidity and reduce debt, enhancing financial flexibility. However, investors should note the sharp decline in GAAP-based net income from $258.5 million to $37.7 million YoY, which may warrant a closer examination of the underlying causes, such as one-time charges or changes in tax liabilities.

The reported increase in enterprise cloud bookings by 62.8% YoY to $236 million is a strong indicator of the company's competitive positioning within the cloud sector. This growth is reflective of the market's increasing demand for cloud solutions and the company's ability to capture a larger market share. The projected growth in Cloud Booking outlook to 25-30% for the year suggests confidence in the company's product offerings, particularly the new Aviator™ AI products and their market reception.

It's important to contextualize the company's performance within the broader industry trends. The Information Management sector is experiencing significant transformation with the advent of AI and cloud technologies and the company's strategic pivot towards these areas could position it favorably against competitors. However, investors should be cautious and seek to understand the competitive landscape, including the actions of major players and potential market disruptors.

The financial results of OpenText Corporation reflect underlying economic trends, such as the increasing adoption of cloud computing and AI technologies across various industries. The company's strong performance, particularly in ARR, suggests a healthy economic environment for tech companies with a focus on recurring revenue models. The decision to divest the AMC business aligns with broader economic principles of focusing on core competencies and growth areas to maximize shareholder value.

However, the reported figures in constant currency terms, which show slightly lower growth rates, indicate the impact of currency fluctuations on international revenues. This highlights the importance of considering global economic factors and exchange rate risks when evaluating the company's financial performance. The increase in free cash flows by 87% YoY to $305 million is a positive sign of operational efficiency and provides the company with capital to invest in strategic initiatives or return value to shareholders through dividends or share repurchases.

Record Total Revenues of $1.535 billion Up 71% Y/Y

Record Enterprise Cloud Bookings

Fiscal 2024 Second Quarter Highlights

Total Revenues

(in millions)


Annual Recurring Revenues

(in millions)


Cloud Revenues

(in millions)

Reported

Constant
Currency


Reported

Constant
Currency


Reported

Constant
Currency

$1,535

$1,509


$1,146

$1,128


$450

$446

+71.0 %

+68.2 %


+58.0 %

+55.6 %


+10.1 %

+9.2 %

Annual Recurring Revenues represent 75% of Total Revenues

  • Record total revenues of $1.535 billion, up 71.0% Y/Y or up 68.2% in constant currency (CC)
  • Annual Recurring Revenues (ARR) of $1.146 billion, up 58.0% Y/Y or up 55.6% in CC
  • Cloud revenues of $450 million, up 10.1% Y/Y or up 9.2% in CC
  • Record quarterly enterprise cloud bookings(1) of $236 million, up 62.8% Y/Y
  • Operating cash flows of $351 million and free cash flows(2) of $305 million
  • GAAP-based net income of $38 million
  • Adjusted EBITDA(2) of $566 million, margin of 36.9%
  • GAAP-based diluted earnings per share (EPS) of $0.14, Non-GAAP diluted EPS(2) of $1.24
  • Announced definitive agreement to divest the Application Modernization and Connectivity (AMC) business to Rocket Software for $2.275 billion, net proceeds to reduce debt, applied to the Acquisition Term Loan and Term Loan B

WATERLOO, ON, Feb. 1, 2024 /PRNewswire/ -- Open Text Corporation (NASDAQ: OTEX), (TSX: OTEX), today announced its financial results for the second quarter ended December 31, 2023.

"OpenText demonstrated remarkable performance in the second quarter achieving record total revenues of $1.535 billion, up 71% year-over-year," said Mark J. Barrenechea, OpenText CEO & CTO. "Driven by increased cloud demand, we saw record quarterly enterprise cloud bookings of $236 million, up 63% year-over year, led by continued strong enterprise content, Micro Focus cloud contribution and customers beginning their AI journey. With continued strength in our enterprise cloud businesses and our new Aviator ™ AI products, we are raising our Cloud Booking outlook to 25% to 30% growth this year."

Mr. Barrenechea further added: "In November 2023, we announced our intention to divest the AMC business. This divestiture positions us to focus on higher-growth opportunities within Information Management such as Cloud and AI and we remain on track to closing the transaction in the fourth quarter of Fiscal 2024, subject to regulatory approvals and customary closing conditions."

"I am pleased with OpenText's solid business execution in Q2," said Madhu Ranganathan, OpenText EVP, CFO. "We delivered $566 million of adjusted EBITDA, up 66% year-over-year and free cash flows of $305 million, up 87% year-over-year. Our balance sheet and liquidity position remain strong with approximately $1 billion in cash as of December 31, 2023. We remain on track to grow Micro Focus organically and bring Micro Focus on to the OpenText operating model by the end of this fiscal year."

(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 consolidated financial statements below.

Financial Highlights for Q2 Fiscal 2024 with Year Over Year Comparisons

Summary of Quarterly Results










(In millions, except per share data)

Q2 FY'24

Q2 FY'23

$ Change 

% Change 


Q2 FY'24
in CC*

% Change
in CC*


Revenues:









Cloud services and subscriptions

$450.1

$408.7

$41.4

10.1 %


$446.1

9.2 %


Customer support

695.8

316.5

379.3

119.8 %


682.3

115.6 %


Total annual recurring revenues**

$1,145.9

$725.2

$420.7

58.0 %


$1,128.4

55.6 %


License

289.2

108.0

181.3

167.9 %


283.6

162.7 %


Professional service and other

99.8

64.3

35.5

55.2 %


97.3

51.3 %


Total revenues

$1,534.9

$897.4

$637.4

71.0 %


$1,509.3

68.2 %


GAAP-based operating income

$253.9

$184.7

$69.2

37.5 %


N/A

N/A


Non-GAAP-based operating income (1)

$532.9

$318.1

$214.8

67.5 %


$517.0

62.5 %


GAAP-based net income attributable to OpenText

$37.7

$258.5

($220.8)

(85.4) %


N/A

N/A


GAAP-based EPS, diluted

$0.14

$0.96

($0.82)

(85.4) %


N/A

N/A


Non-GAAP-based EPS, diluted (1)(2)

$1.24

$0.89

$0.35

39.3 %


$1.20

34.8 %


Adjusted EBITDA (1)

$566.3

$340.9

$225.3

66.1 %


$549.7

61.2 %


Operating cash flows

$350.7

$195.2

$155.5

79.7 %


N/A

N/A


Free cash flows (1)

$305.4

$163.0

$142.5

87.4 %


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

$901.1

$813.3

$87.8

10.8 %


$894.7

10.0 %


Customer support

1,393.5

633.9

759.6

119.8 %


1,370.8

116.3 %


Total annual recurring revenues**

$2,294.6

$1,447.2

$847.4

58.6 %


$2,265.4

56.5 %


License

462.3

170.5

291.8

171.1 %


454.2

166.4 %


Professional service and other

203.5

131.8

71.7

54.4 %


199.1

51.1 %


Total revenues

$2,960.3

$1,749.5

$1,210.8

69.2 %


$2,918.8

66.8 %


GAAP-based operating income

$466.8

$331.0

$135.7

41.0 %


N/A

N/A


Non-GAAP-based operating income (1)

$993.7

$599.0

$394.7

65.9 %


$964.4

61.0 %


GAAP-based net income attributable to OpenText

$118.6

$141.6

($23.0)

(16.2) %


N/A

N/A


GAAP-based EPS, diluted

$0.44

$0.52

($0.08)

(15.4) %


N/A

N/A


Non-GAAP-based EPS, diluted (1)(2)

$2.25

$1.66

$0.59

35.5 %


$2.17

30.7 %


Adjusted EBITDA (1)

$1,061.1

$645.0

$416.1

64.5 %


$1,030.7

59.8 %


Operating cash flows

$397.8

$327.1

$70.6

21.6 %


N/A

N/A


Free cash flows (1)

$315.0

$258.6

$56.4

21.8 %


N/A

N/A









(1) Please see Note 2 "Use of Non-GAAP Financial Measures" to the 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 January 31, 2024, a cash dividend of $0.25 per common share. The record date for this dividend is March 1, 2024 and the payment date is March 20, 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.

Quarterly Business Highlights

  • OpenText announced the release of Cloud Editions 24.1 and its latest OpenText Aviator™ innovations
  • OpenText announced divestment of its AMC business to Rocket Software for $2.275 billion
  • Key customer wins in the quarter include: Beyond One (Virgin Mobile), BMW, Carl Zeiss, Coop Danmark, Edward Don & Company, F5 Networks, FedEx Express, Google, Harris County, Metropolitan Utilities District, Nakit, Openbaar Ministerie, Philips Healthcare, Preh GmbH, Turkcell and Zoho
  • OpenText named a leader in Customer Communications Management and Communications Experience Platforms in the 2023 Aspire Leaderboard
  • OpenText named a leader in the IDC MarketScape: Worldwide Multi-Enterprise Supply Chain Commerce Network 2023 Vendor Assessment

Summary of Quarterly Results









Q2 FY'24

Q1 FY'24

Q2 FY'23

% Change 

(Q2 FY'24 vs
Q1 FY'24)


% Change

(Q2 FY'24 vs
Q2 FY'23)


Revenue (millions)

$1,534.9

$1,425.4

$897.4

7.7 %


71.0 %


GAAP-based gross margin

73.6 %

71.4 %

70.8 %

220

bps

280

bps

Non-GAAP-based gross margin (1)

78.6 %

77.3 %

76.0 %

130

bps

260

bps

GAAP-based earnings (loss) per share, diluted

$0.14

$0.30

$0.96

(53.3) %


(85.4) %


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

$1.24

$1.01

$0.89

22.8 %


39.3 %



(1) Please see Note 2 "Use of Non-GAAP Financial Measures" to the 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 at https://investors.opentext.com and invites the public to listen to the earnings conference call today at 5:00 p.m. ET (2:00 p.m. PT). To join the call instantly, use this Call Me Link. Alternatively, dial 1-800-319-4610 (toll-free) or +1-604-638-5340 (international). Please dial-in 10 minutes ahead of time to ensure proper connection. A live webcast of the earnings conference call will be available on the Investor Relations section of the Company's website at https://investors.opentext.com/events-and-presentations.

A replay of the call will be available beginning February 1, 2024 at 7:00 p.m. ET through 11:59 p.m. on February 15, 2024 and can be accessed by dialing 1-855-669-9658 (toll-free) or +1-604-674-8052 (international) and using passcode 0620 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-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; 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; organic growth of  Micro Focus and timing to bring Micro Focus onto OpenText's operating model; divestitures and their expected impact, including in connection with the proposed divestiture of the AMC business and the timing of closing thereof; 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: receipt of regulatory approvals and achievement of customary closing conditions for the AMC divestiture; all statements regarding the expected future financial position, results of operations, cash flows, dividends, future share buybacks, financing plans, business strategy, budgets, capital expenditures, competitive positions, growth opportunities, plans and objectives of management, including any anticipated synergy benefits; our ability to integrate successfully Micro Focus' operations and programs, including incurring unanticipated costs, delays or difficulties; our ability to successfully complete the proposed divestiture of the AMC business, risks related to the proposed divestiture and the impact of the divestiture on our remaining 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

CONSOLIDATED BALANCE SHEETS 

(In thousands of U.S. dollars, except share data)



December 31, 2023


June 30, 2023

ASSETS

(unaudited)



Cash and cash equivalents

$             1,003,134


$             1,231,625

Accounts receivable trade, net of allowance for credit losses of $10,642 as of December 31, 2023 and $13,828 as of June 30, 2023

735,346


682,517

Contract assets

70,656


71,196

Income taxes recoverable

8,342


68,161

Prepaid expenses and other current assets

215,396


221,732

Assets held for sale

2,051,116


—

Total current assets

4,083,990


2,275,231

Property and equipment

352,570


356,904

Operating lease right of use assets

245,118


285,723

Long-term contract assets

45,427


64,553

Goodwill

7,604,409


8,662,603

Acquired intangible assets

2,773,220


4,080,879

Deferred tax assets

925,282


926,719

Other assets

318,783


342,318

Long-term income taxes recoverable

94,465


94,270

Total assets

$          16,443,264


$          17,089,200

LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable and accrued liabilities

$                948,921


$                996,261

Current portion of long-term debt

45,850


320,850

Operating lease liabilities

86,868


91,425

Deferred revenues

1,535,322


1,721,781

Income taxes payable

119,400


89,297

Liabilities held for sale

222,814


—

Total current liabilities

2,959,175


3,219,614

Long-term liabilities:




Accrued liabilities

52,632


51,961

Pension liability, net

129,238


126,312

Long-term debt

8,474,599


8,562,096

Long-term operating lease liabilities

236,481


271,579

Long-term deferred revenues

170,273


217,771

Long-term income taxes payable

152,046


193,808

Deferred tax liabilities

238,473


423,955

Total long-term liabilities

9,453,742


9,847,482

Shareholders' equity:




Share capital and additional paid-in capital




271,854,655 and 270,902,571 Common Shares issued and outstanding at December 31, 2023 and June 30, 2023, respectively; authorized Common Shares: unlimited

2,261,856


2,176,947

Accumulated other comprehensive income (loss)

(83,499)


(53,559)

Retained earnings

2,029,643


2,048,984

Treasury stock, at cost (4,400,034 and 3,536,375 shares at December 31, 2023 and June 30, 2023, respectively)

(179,089)


(151,597)

Total OpenText shareholders' equity

4,028,911


4,020,775

Non-controlling interests

1,436


1,329

Total shareholders' equity

4,030,347


4,022,104

Total liabilities and shareholders' equity

$          16,443,264


$          17,089,200

 

OPEN TEXT CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(In thousands of U.S. dollars, except share and per share data)

(unaudited)



Three Months Ended

December 31,


Six Months Ended

December 31,


2023


2022


2023


2022

Revenues:








Cloud services and subscriptions

$       450,091


$       408,674


$       901,105


$       813,325

Customer support

695,762


316,508


1,393,475


633,859

License

289,238


107,960


462,264


170,508

Professional service and other

99,777


64,298


203,453


131,784

Total revenues

1,534,868


897,440


2,960,297


1,749,476

Cost of revenues:








Cloud services and subscriptions

180,148


134,314


351,560


266,113

Customer support

73,374


28,589


148,388


55,943

License

5,983


3,863


9,822


6,621

Professional service and other

75,459


54,064


155,381


107,864

Amortization of acquired technology-based intangible assets

70,784


40,863


147,608


83,500

Total cost of revenues

405,748


261,693


812,759


520,041

Gross profit

1,129,120


635,747


2,147,538


1,229,435

Operating expenses:








Research and development

220,220


109,700


454,657


219,898

Sales and marketing

280,263


177,171


552,064


344,341

General and administrative

173,264


77,603


304,475


155,677

Depreciation

33,415


22,858


67,506


46,032

Amortization of acquired customer-based intangible assets

113,925


53,446


234,117


107,884

Special charges (recoveries)

54,166


10,306


67,960


24,587

Total operating expenses

875,253


451,084


1,680,779


898,419

Income from operations

253,867


184,663


466,759


331,016

Other income (expense), net

(68,784)


163,349


(48,614)


(25,882)

Interest and other related expense, net

(139,292)


(38,715)


(281,056)


(79,097)

Income before income taxes

45,791


309,297


137,089


226,037

Provision for income taxes

8,054


50,774


18,406


84,399

Net income for the period

$         37,737


$       258,523


$       118,683


$       141,638

Net (income) attributable to non-controlling interests

(62)


(37)


(107)


(81)

Net income attributable to OpenText

$         37,675


$       258,486


$       118,576


$       141,557

Earnings per share—basic attributable to OpenText

$              0.14


$              0.96


$              0.44


$              0.52

Earnings per share—diluted attributable to OpenText

$              0.14


$              0.96


$              0.44


$              0.52

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

271,568


270,189


271,373


269,997

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

272,141


270,189


272,019


270,009

 

OPEN TEXT CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 

(In thousands of U.S. dollars)

(unaudited)



Three Months Ended

December 31,


Six Months Ended
December 31,


2023


2022


2023


2022

Net income for the period

$         37,737


$       258,523


$       118,683


$       141,638

Other comprehensive income (loss)—net of tax:








Net foreign currency translation adjustments

(15,796)


39,419


(30,379)


3,053

Unrealized gain (loss) on cash flow hedges:








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

1,522


959


(319)


(2,381)

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

328


1,101


337


1,689

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








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

450


—


229


—

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








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

(91)


32


(110)


4,196

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

113


37


302


74

Total other comprehensive income (loss) net

(13,474)


41,548


(29,940)


6,631

Total comprehensive income

24,263


300,071


88,743


148,269

Comprehensive income attributable to non-controlling interests

(62)


(37)


(107)


(81)

Total comprehensive income attributable to OpenText

$         24,201


$       300,034


$         88,636


$       148,188

______________________________

(1)

Net of tax expense (recovery) of $549 and $347 for the three months ended December 31, 2023 and 2022, respectively; $(115) and $(859) for the six months ended December 31, 2023 and 2022, respectively.

(2)

Net of tax expense (recovery) of $118 and $397 for the three months ended December 31, 2023 and 2022, respectively; $121 and $609 for the six months ended December 31, 2023 and 2022, respectively.

(3)

Net of tax expense (recovery) of ($119) and $— for the three months ended December 31, 2023 and 2022, respectively; ($60) and $— for the six months ended December 31, 2023 and 2022, respectively.

(4)

Net of tax expense (recovery) of $91 and $106 for the three months ended December 31, 2023 and 2022, respectively; $110 and $1,210 for the six months ended December 31, 2023 and 2022, respectively.

(5)

Net of tax expense (recovery) of $50 and $25 for the three months ended December 31, 2023 and 2022, respectively; $125 and $51 for the six months ended December 31, 2023 and 2022, respectively.

 

OPEN TEXT CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands of U.S. dollars and shares)

(unaudited)



Three Months Ended December 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 September 30, 2023

271,228


$  2,216,921


(4,753)


$  (196,119)


$  2,062,107


$        (70,025)


$      1,374


$  4,014,258

Issuance of Common Shares
















Under employee stock option plans

340


11,111


—


—


—


—


—


11,111

Under employee stock purchase plans

287


8,370


—


—


—


—


—


8,370

Share-based compensation

—


39,993


—


—


—


—


—


39,993

Issuance of treasury stock

—


(14,539)


353


17,030


(2,491)


—


—


—

Dividends declared

($0.25 per Common Share)

—


—


—


—


(67,648)


—


—


(67,648)

Other comprehensive income (loss) - net

—


—


—


—


—


(13,474)


—


(13,474)

Net income (loss) for the period

—


—


—


—


37,675


—


62


37,737

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



Three Months Ended December 31, 2022


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 September 30, 2022

269,881


$  2,067,881


(3,586)


$  (154,792)


$  1,978,442


$        (42,576)


$      1,186


$  3,850,141

Issuance of Common Shares
















Under employee stock purchase plans

354


8,042


—


—


—


—


—


8,042

Share-based compensation

—


28,822


—


—


—


—


—


28,822

Issuance of treasury stock

—


(12,666)


291


12,666


—


—


—


—

Dividends declared

($0.24299 per Common Share)

—


—


—


—


(65,692)


—


—


(65,692)

Other comprehensive income (loss) - net

—


—


—


—


—


41,548


—


41,548

Net income for the period

—


—


—


—


258,486


—


37


258,523

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

   

OPEN TEXT CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands of U.S. dollars and shares)

(unaudited)



Six Months Ended December 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, 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

425


14,003


—


—


—


—


—


14,003

Under employee stock purchase plans

527


17,011


—


—


—


—


—


17,011

Share-based compensation

—


76,997


—


—


—


—


—


76,997

Purchase of treasury stock

—


—


(1,400)


(53,085)


—


—


—


(53,085)

Issuance of treasury stock

—


(23,102)


536


25,593


(2,491)


—


—


—

Dividends declared

($0.50 per Common Share)

—


—


—


—


(135,426)


—


—


(135,426)

Other comprehensive income (loss) - net

—


—


—


—


—


(29,940)


—


(29,940)

Net income for the period

—


—


—


—


118,576


—


107


118,683

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



Six Months Ended December 31, 2022


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

72


1,994


—


—


—


—


—


1,994

Under employee stock purchase plans

640


17,221


—


—


—


—


—


17,221

Share-based compensation

—


52,030


—


—


—


—


—


52,030

Issuance of treasury stock

—


(17,840)


411


17,840


—


—


—


—

Dividends declared

($0.48598 per Common Share)

—


—


—


—


(130,390)


—


—


(130,390)

Other comprehensive income (loss) - net

—


—


—


—


—


6,631


—


6,631

Net income for the period

—


—


—


—


141,557


—


81


141,638

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

   

OPEN TEXT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS 

(In thousands of U.S. dollars)

(unaudited)



Three Months Ended

December 31,


Six Months Ended

December 31,


2023


2022


2023


2022

Cash flows from operating activities:








Net income for the period

$           37,737


$         258,523


$         118,683


$         141,638

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








Depreciation and amortization of intangible assets

218,124


117,167


449,231


237,416

Share-based compensation expense

40,175


28,822


77,270


52,030

Pension expense

3,212


2,057


6,383


3,444

Amortization of debt discount and issuance costs

7,325


1,686


12,821


3,166

Write off of right of use assets

6,248


948


10,963


3,775

Loss on extinguishment of debt

—


8,131


—


8,131

Loss on sale and write down of property and equipment

1,419


121


1,877


121

Deferred taxes

(88,400)


(26,135)


(177,030)


(46,802)

Share in net loss of equity investees

8,482


289


18,178


6,823

Changes in financial instruments

38,117


(171,607)


20,222


9,854

Changes in operating assets and liabilities:








Accounts receivable

(91,589)


(86,091)


(60,285)


(26,597)

Contract assets

(24,061)


(9,400)


(46,627)


(18,454)

Prepaid expenses and other current assets

(15,337)


(131)


3,989


(3,065)

Income taxes

29,136


28,406


58,733


44,240

Accounts payable and accrued liabilities

76,058


36,143


(48,156)


8,964

Deferred revenue

107,974


24,646


(42,502)


(29,133)

Other assets

1,114


(12,957)


5,218


(60,706)

Operating lease assets and liabilities, net

(5,081)


(5,448)


(11,194)


(7,716)

Net cash provided by operating activities

350,653


195,170


397,774


327,129

Cash flows from investing activities:








Additions of property and equipment

(45,240)


(32,215)


(82,779)


(68,539)

Micro Focus acquisition

—


—


(9,272)


—

Proceeds from net investment hedge derivative contracts

—


—


1,966


—

Other investing activities

(1,229)


(873)


(6,783)


(873)

Net cash used in investing activities

(46,469)


(33,088)


(96,868)


(69,412)

Cash flows from financing activities:








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

17,804


5,736


29,257


15,773

Proceeds from long-term debt and Revolver

—


1,000,000


—


1,000,000

Repayment of long-term debt and Revolver

(186,463)


(2,500)


(372,926)


(5,000)

Debt issuance costs

(831)


(11,650)


(2,792)


(11,650)

Purchase of treasury stock

—


—


(53,085)


—

Payments of dividends to shareholders

(66,414)


(64,864)


(133,379)


(129,562)

Net cash provided by (used in) financing activities

(235,904)


926,722


(532,925)


869,561

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

15,042


27,831


3,539


(271)

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

83,322


1,116,635


(228,480)


1,127,007

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

922,150


1,706,283


1,233,952


1,695,911

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

$      1,005,472


$      2,822,918


$      1,005,472


$      2,822,918

 

OPEN TEXT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS 

(In thousands of U.S. dollars)

(unaudited)


Reconciliation of cash, cash equivalents and restricted cash:

December 31, 2023


December 31, 2022

Cash and cash equivalents

$               1,003,134


$               2,820,927

Restricted cash (1)

2,338


1,991

Total cash, cash equivalents and restricted cash

$               1,005,472


$               2,822,918





(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 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 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.

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 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 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 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:


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 six months ended December 31, 2023

(In thousands, except for per share data)


Six 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

$   351,560


$     (6,600)

(1)

$   344,960


Customer support

148,388


(2,186)

(1)

146,202


Professional service and other

155,381


(3,638)

(1)

151,743


Amortization of acquired technology-based intangible assets

147,608


(147,608)

(2)

—


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

2,147,538

72.5 %

160,032

(3)

2,307,570

78.0 %

Operating expenses







Research and development

454,657


(24,501)

(1)

430,156


Sales and marketing

552,064


(25,034)

(1)

527,030


General and administrative

304,475


(15,311)

(1)

289,164


Amortization of acquired customer-based intangible assets

234,117


(234,117)

(2)

—


Special charges (recoveries)

67,960


(67,960)

(4)

—


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

466,759


526,955

(5)

993,714


Other income (expense), net

(48,614)


48,614

(6)

—


Provision for income taxes

18,406


81,367

(7)

99,773


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

118,576


494,202

(8)

612,778


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

$          0.44


$          1.81

(8)

$          2.25




(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 13% 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:




Six Months Ended December 31, 2023



Per share diluted

GAAP-based net income, attributable to OpenText

$                   118,576

$                          0.44

Add (deduct):



Amortization

381,725

1.40

Share-based compensation

77,270

0.29

Special charges (recoveries)

67,960

0.25

Other (income) expense, net

48,614

0.16

GAAP-based provision for income taxes

18,406

0.07

Non-GAAP-based provision for income taxes

(99,773)

(0.36)

Non-GAAP-based net income, attributable to OpenText

$                   612,778

$                          2.25

 

Reconciliation of Adjusted EBITDA



Six Months Ended December 31, 2023

GAAP-based net income, attributable to OpenText

$                                                       118,576

Add:


Provision for income taxes

18,406

Interest and other related expense, net

281,056

Amortization of acquired technology-based intangible assets

147,608

Amortization of acquired customer-based intangible assets

234,117

Depreciation

67,506

Share-based compensation

77,270

Special charges (recoveries)

67,960

Other (income) expense, net

48,614

Adjusted EBITDA

$                                                    1,061,113



GAAP-based net income margin

4.0 %

Adjusted EBITDA margin

35.8 %

 

Reconciliation of Free cash flows



Six Months Ended December 31, 2023

GAAP-based cash flows provided by operating activities

$                                                         397,774

Add:


Capital expenditures (1)

(82,779)

Free cash flows

$                                                         314,995



(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 September 30, 2023

(In thousands, except for per share data)


Three Months Ended September 30, 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

$   171,412


$     (2,991)

(1)

$   168,421


Customer support

75,014


(1,058)

(1)

73,956


Professional service and other

79,922


(1,882)

(1)

78,040


Amortization of acquired technology-based intangible assets

76,824


(76,824)

(2)

—


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

1,018,418

71.4 %

82,755

(3)

1,101,173

77.3 %

Operating expenses







Research and development

234,437


(11,734)

(1)

222,703


Sales and marketing

271,801


(11,807)

(1)

259,994


General and administrative

131,211


(7,623)

(1)

123,588


Amortization of acquired customer-based intangible assets

120,192


(120,192)

(2)

—


Special charges (recoveries)

13,794


(13,794)

(4)

—


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

212,892


247,905

(5)

460,797


Other income (expense), net

20,170


(20,170)

(6)

—


Provision for income taxes

10,352


34,313

(7)

44,665


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

80,901


193,422

(8)

274,323


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

$          0.30


$          0.71

(8)

$          1.01




(1)

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

(2)

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

(3)

GAAP-based and Non-GAAP-based gross profit stated in dollars and gross margin stated as a percentage of 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 11% 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 September 30, 2023



Per share diluted

GAAP-based net income, attributable to OpenText

$                     80,901

$                          0.30

Add (deduct):



Amortization

197,016

0.72

Share-based compensation

37,095

0.14

Special charges (recoveries)

13,794

0.05

Other (income) expense, net

(20,170)

(0.08)

GAAP-based provision for income taxes

10,352

0.04

Non-GAAP-based provision for income taxes

(44,665)

(0.16)

Non-GAAP-based net income, attributable to OpenText

$                   274,323

$                          1.01

 

Reconciliation of Adjusted EBITDA



Three Months Ended September 30, 2023

GAAP-based net income, attributable to OpenText

$                                                        80,901

Add (deduct):


Provision for income taxes

10,352

Interest and other related expense, net

141,764

Amortization of acquired technology-based intangible assets

76,824

Amortization of acquired customer-based intangible assets

120,192

Depreciation

34,091

Share-based compensation

37,095

Special charges (recoveries)

13,794

Other (income) expense, net

(20,170)

Adjusted EBITDA

$                                                      494,843



GAAP-based net income margin

5.7 %

Adjusted EBITDA margin

34.7 %

 

Reconciliation of Free cash flows



Three Months Ended September 30, 2023

GAAP-based cash flows provided by operating activities

$                                                           47,121

Add:


Capital expenditures (1)

(37,539)

Free cash flows

$                                                             9,582



(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, 2022

(In thousands, except for per share data)


Three Months Ended December 31, 2022


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

$   134,314


$     (2,812)

(1)

$   131,502


Customer support

28,589


(690)

(1)

27,899


Professional service and other

54,064


(1,763)

(1)

52,301


Amortization of acquired technology-based intangible assets

40,863


(40,863)

(2)

—


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

635,747

70.8 %

46,128

(3)

681,875

76.0 %

Operating expenses







Research and development

109,700


(7,826)

(1)

101,874


Sales and marketing

177,171


(9,437)

(1)

167,734


General and administrative

77,603


(6,294)

(1)

71,309


Amortization of acquired customer-based intangible assets

53,446


(53,446)

(2)

—


Special charges (recoveries)

10,306


(10,306)

(4)

—


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

184,663


133,437

(5)

318,100


Other income (expense), net

163,349


(163,349)

(6)

—


Provision for income taxes

50,774


(11,660)

(7)

39,114


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

258,486


(18,252)

(8)

240,234


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

$          0.96


$        (0.07)

(8)

$          0.89




(1)

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

(2)

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

(3)

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

(4)

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

(5)

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

(6)

Adjustment relates to the exclusion of other income (expense) from our Non-GAAP-based operating expenses as other income (expense) generally relates to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results. Other income (expense) also includes our share of income (losses) from our holdings in 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 16% 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, 2022



Per share diluted

GAAP-based net income, attributable to OpenText

$                   258,486

$                          0.96

Add (deduct):



Amortization

94,309

0.35

Share-based compensation

28,822

0.10

Special charges (recoveries)

10,306

0.04

Other (income) expense, net

(163,349)

(0.60)

GAAP-based provision for income taxes

50,774

0.19

Non-GAAP-based provision for income taxes

(39,114)

(0.15)

Non-GAAP-based net income, attributable to OpenText

$                   240,234

$                          0.89


 

Reconciliation of Adjusted EBITDA



Three Months Ended December 31, 2022

GAAP-based net income, attributable to OpenText

$                                                      258,486

Add (deduct):


Provision for income taxes

50,774

Interest and other related expense, net

38,715

Amortization of acquired technology-based intangible assets

40,863

Amortization of acquired customer-based intangible assets

53,446

Depreciation

22,858

Share-based compensation

28,822

Special charges (recoveries)

10,306

Other (income) expense, net

(163,349)

Adjusted EBITDA

$                                                      340,921



GAAP-based net income margin

28.8 %

Adjusted EBITDA margin

38.0 %

 

Reconciliation of Free cash flows



Three Months Ended December 31, 2022

GAAP-based cash flows provided by operating activities

$                                                         195,170

Add:


Capital expenditures (1)

(32,215)

Free cash flows

$                                                         162,955



(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 six months ended December 31, 2022

(In thousands, except for per share data)


Six Months Ended December 31, 2022


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

$   266,113


$     (4,845)

(1)

$   261,268


Customer support

55,943


(1,257)

(1)

54,686


Professional service and other

107,864


(3,288)

(1)

104,576


Amortization of acquired technology-based intangible assets

83,500


(83,500)

(2)

—


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

1,229,435

70.3 %

92,890

(3)

1,322,325

75.6 %

Operating expenses







Research and development

219,898


(14,680)

(1)

205,218


Sales and marketing

344,341


(16,296)

(1)

328,045


General and administrative

155,677


(11,664)

(1)

144,013


Amortization of acquired customer-based intangible assets

107,884


(107,884)

(2)

—


Special charges (recoveries)

24,587


(24,587)

(4)

—


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

331,016


268,001

(5)

599,017


Other income (expense), net

(25,882)


25,882

(6)

—


Provision for income taxes

84,399


(11,610)

(7)

72,789


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

141,557


305,493

(8)

447,050


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

$          0.52


$          1.14

(8)

$          1.66




(1)

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

(2)

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

(3)

GAAP-based and Non-GAAP-based gross profit stated in dollars and gross margin stated as a percentage of 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 37% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based 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:




Six Months Ended December 31, 2022



Per share diluted

GAAP-based net income, attributable to OpenText

$                   141,557

$                          0.52

Add (deduct):



Amortization

191,384

0.71

Share-based compensation

52,030

0.19

Special charges (recoveries)

24,587

0.09

Other (income) expense, net

25,882

0.10

GAAP-based provision for income taxes

84,399

0.31

Non-GAAP-based provision for income taxes

(72,789)

(0.26)

Non-GAAP-based net income, attributable to OpenText

$                   447,050

$                          1.66

 

Reconciliation of Adjusted EBITDA



Six Months Ended December 31, 2022

GAAP-based net income, attributable to OpenText

$                                                      141,557

Add:


Provision for income taxes

84,399

Interest and other related expense, net

79,097

Amortization of acquired technology-based intangible assets

83,500

Amortization of acquired customer-based intangible assets

107,884

Depreciation

46,032

Share-based compensation

52,030

Special charges (recoveries)

24,587

Other (income) expense, net

25,882

Adjusted EBITDA

$                                                      644,968



GAAP-based net income margin

8.1 %

Adjusted EBITDA margin

36.9 %

 

Reconciliation of Free cash flows



Six Months Ended December 31, 2022

GAAP-based cash flows provided by operating activities

$                                                         327,129

Add:


Capital expenditures (1)

(68,539)

Free cash flows

$                                                         258,590



(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 six months ended December 31, 2023 and 2022:


Three Months Ended December 31, 2023


Three Months Ended December 31, 2022

Currencies

% of Revenue

% of Expenses(1)


% of Revenue

% of Expenses(1)

EURO

23 %

12 %


19 %

12 %

GBP

4 %

7 %


4 %

5 %

CAD

3 %

9 %


3 %

13 %

USD

59 %

51 %


65 %

55 %

Other

11 %

21 %


9 %

15 %

Total

100 %

100 %


100 %

100 %



Six Months Ended December 31, 2023


Six Months Ended December 31, 2022

Currencies

% of Revenue

% of Expenses(1)


% of Revenue

% of Expenses(1)

EURO

22 %

11 %


20 %

11 %

GBP

5 %

8 %


4 %

5 %

CAD

3 %

10 %


3 %

14 %

USD

59 %

51 %


65 %

55 %

Other

11 %

20 %


8 %

15 %

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-second-quarter-fiscal-year-2024-financial-results-302051279.html

SOURCE Open Text Corporation

FAQ

What were OpenText's total revenues for the reported period?

OpenText reported total revenues of $1.535 billion for the reported period.

What was the year-over-year growth in annual recurring revenues?

The year-over-year growth in annual recurring revenues for OpenText was 58%.

What were the cloud revenues for OpenText?

OpenText's cloud revenues were $450 million for the reported period.

What was the amount of the cash dividend declared by OpenText?

OpenText declared a cash dividend of $0.25 per common share.

What is the ticker symbol for OpenText?

The ticker symbol for OpenText is OTEX.

Stock OTEX logo
Open Text Corp

NASDAQ:OTEX

OTEX Rankings

#1026 Ranked by Market Cap
#824 Ranked by Dividends

OTEX Latest News

Dec 5, 2024
OpenText Partners with Secure Code Warrior to Deliver Comprehensive Application Security and Customized Developer Risk Management
Nov 26, 2024
OpenText Appoints Fletcher Previn to Board of Directors
Nov 19, 2024
OpenText Makes Multi-Cloud Work with Cloud Editions 24.4
Nov 18, 2024
OpenText Launches New Partner Enterprise Learning Subscription
Nov 18, 2024
OpenText Expands Partner Ecosystem access across Full OpenText Product Suite

OTEX Stock Data

7.33B
260.08M
2.1%
77.98%
1.87%
Software - Application
Services-computer Integrated Systems Design
Link
United States of America
ONTARIO CANADA