OpenText Reports Third Quarter Fiscal Year 2021 Financial Results

·16 min read

Record Annual Recurring Revenues (ARR), Record Cloud Revenues

WATERLOO, ON, May 6, 2021 /PRNewswire/ --

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

$832.9

$807.9


$691.8

$673.8


$355.8

$350.0

+2.2%

(0.8)%


+4.4%

+1.7%


+4.8%

+3.1%

Annual Recurring Revenues represent 83% of Total Revenues

  • Operating cash flows were $63.6 million and free cash flows were $50.3 million, which include an IRS settlement payment of $290.0 million

  • GAAP-based net income of $91.5 million, up 252.4% Y/Y, margin of 11.0%, up 780 basis points Y/Y

  • Adjusted EBITDA of $297.1 million, up 14.5%, margin of 35.7%, up 390 basis points Y/Y

  • GAAP-based diluted EPS of $0.33, up 230.0% Y/Y

  • Non-GAAP diluted EPS of $0.75, up 23.0%, and $0.71 in constant currency, up 16.4% Y/Y

Open Text Corporation (NASDAQ: OTEX), (TSX: OTEX), "The Information Company," today announced its financial results for the third quarter ended March 31, 2021.

"The shift to modern work, digital customer experiences, supply chain retooling and continued economic stimulus are creating positive demand for OpenText Cloud Editions ™ and other services," said Mark J. Barrenechea, OpenText CEO & CTO. "OpenText delivered a robust quarter with organic revenue growth in Annual Recurring Revenues (ARR) and Cloud services and subscriptions, driving Total Growth and profitability across the organization. Total revenues in the quarter grew 2.2% year-over-year to $832.9 million, Cloud services and subscriptions revenues grew 4.8% year-over-year to a record $355.8 million. Annual Recurring Revenues grew to a record $691.8 million, up 4.4% year-over-year, representing 83% of total revenues. We are well positioned to grow and extend our leadership in Information Management as we focus on expanding our global sales initiatives and capturing market share."

"OpenText Cloud Editions – The Ultimate Cloud™ brings together everything a company needs to accelerate their digital transformation, grow, engage with their customers, and stay ahead of the competition," said Mr. Barrenechea. "With flexible deployment options and secure, purpose-built solutions to support modern work, OpenText's complete Information Management suite continues to be vital for companies of all sizes. Through our GROW with OpenText program, we will continue to successfully deliver compelling innovations that provide our customers with a competitive digital advantage."

"In Q3 we continued on our proven path, achieving excellence in operational performance while investing in initiatives to drive organic growth," said OpenText EVP, CFO, Madhu Ranganathan. "We delivered $297.1 million of Adjusted EBITDA and $63.6 million of free cash flows, which include the IRS settlement payment of $290.0 million, and we continue to focus on generating consistent free cash flows. Our balance sheet and liquidity position remain strong with approximately $1.5 billion of cash after the IRS settlement payment and a 1.6x net leverage ratio, giving us the financial strength and flexibility to invest in future growth and deploy capital for the right acquisitions."

Financial Highlights for Q3 Fiscal 2021 with Year Over Year Comparisons


Summary of Quarterly Results

(In millions, except per share data)

Q3 FY'21

Q3 FY'20

$ Change

% Change

(Y/Y)


Q3 FY'21
in CC*

% Change
in CC*


Revenues:









Cloud services and subscriptions

$355.8


$339.5


$16.4


4.8

%


$350.0


3.1

%


Customer support

335.9


322.9


13.1


4.0

%


323.8


0.3

%


Total annual recurring revenues**

$691.8


$662.3


$29.4


4.4

%


$673.8


1.7

%


License

76.3


81.1


(4.8)


(5.9)

%


72.2


(10.9)

%


Professional service and other

64.9


71.3


(6.4)


(9.0)

%


61.8


(13.3)

%


Total revenues

$832.9


$814.7


$18.3


2.2

%


$807.9


(0.8)

%


GAAP-based operating income

$152.4


$95.1


$57.3


60.3

%


N/A


N/A



Non-GAAP-based operating income (1)

$275.2


$234.7


$40.5


17.3

%


$263.4


12.2

%


GAAP-based net income attributable to OpenText

$91.5


$26.0


$65.5


252.4

%


N/A


N/A



GAAP-based EPS, diluted

$0.33


$0.10


$0.23


230.0

%


N/A


N/A



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

$0.75


$0.61


$0.14


23.0

%


$0.71


16.4

%


Adjusted EBITDA (1)

$297.1


$259.5


$37.7


14.5

%


$285.2


9.9

%


Operating cash flows

$63.6


$329.6


($266.0)


(80.7)

%


N/A


N/A



Free cash flows (1)

$50.3


$312.8


($262.5)


(83.9)

%


N/A


N/A



Summary of YTD Results








(In millions, except per share data)

FY'21 YTD

FY'20 YTD

$ Change

% Change

(Y/Y)


FY'21 YTD
in CC*

% Change
in CC*


Revenues:









Cloud services and subscriptions

$1,047.3


$825.1


$222.2


26.9

%


$1,036.9


25.7

%


Customer support

999.8


950.7


49.1


5.2

%


977.9


2.9

%


Total annual recurring revenues**

$2,047.1


$1,775.7


$271.4


15.3

%


$2,014.8


13.5

%


License

252.2


297.0


(44.9)


(15.1)

%


243.5


(18.0)

%


Professional service and other

193.3


210.3


(17.0)


(8.1)

%


187.0


(11.1)

%


Total revenues

$2,492.6


$2,283.1


$209.5


9.2

%


$2,445.4


7.1

%


GAAP-based operating income

$569.2


$412.3


$156.9


38.1

%


N/A


N/A



Non-GAAP-based operating income (1)

$936.1


$765.0


$171.1


22.4

%


$908.2


18.7

%


GAAP-based net income attributable to OpenText

$129.4


$207.8


($78.4)


(37.7)

%


N/A


N/A



GAAP-based EPS, diluted

$0.47


$0.77


($0.30)


(39.0)

%


N/A


N/A



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

$2.59


$2.09


$0.50


23.9

%


$2.50


19.6

%


Adjusted EBITDA (1)

$1,000.2


$830.7


$169.5


20.4

%


$971.9


17.0

%


Operating cash flows

$579.9


$674.3


($94.4)


(14.0)

%


N/A


N/A



Free cash flows (1)

$543.7


$619.3


($75.6)


(12.2)

%


N/A


N/A





(1)

Please see note 2 "Use of Non-GAAP Financial Measures" below.



(2)

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



Note:

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



*CC:

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

**

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

Dividend Program

As part of our quarterly, non-cumulative cash dividend program, the Board declared on May 5, 2021 a cash dividend of $0.2008 per common share. The record date for this dividend is June 4, 2021 and the payment date is June 25, 2021. OpenText believes strongly in returning value to its shareholders and intends to maintain its dividend program. Any future declarations of dividends and the establishment of future record and payment dates are all subject to the final determination and discretion of the Board of Directors.

Quarterly Business Highlights

  • Key customer wins in the quarter included AccessDx, Achievers, AIA Philam Life, Central 1, Impulse Dynamics, Johnson & Johnson, Maersk, New Balance Athletic Shoe, Inc., Royal Bank of Canada, State of Qatar Ministry of Interior, Uniper and Vitesco Technologies

  • Launched OpenText World Europe and Asia Pacific

  • Announced the release of Cloud Editions 21.2, enabling organizations to GROW with OpenText

  • Announced new Content Services platform to power modern work in the Cloud

  • OpenText Migrate achieved AWS Outposts Ready designation

  • Announced OpenText™ EnCase Endpoint Security is now certified on Microsoft Azure

  • Launched Webroot Business Management Console 6.0

  • Appointed Kristina Lengyel as Executive Vice President, Customer Solutions

  • Appointed Renee McKenzie as Senior Vice President, Chief Information Officer

Summary of Quarterly Results







Q3 FY'21

Q2 FY'21

Q3 FY'20

% Change

(Q3 FY'21 vs Q2 FY'21)


% Change

(Q3 FY'21 vs Q3 FY'20)


Revenue (millions)

$832.9


$855.6


$814.7


(2.7)

%


2.2

%


GAAP-based gross margin

68.6

%

70.5

%

65.4

%

(190)


bps

320


bps

GAAP-based earnings (loss) per share, diluted

$0.33


($0.24)


$0.10


(237.5)

%


230.0

%


Non-GAAP-based gross margin (1)

75.2

%

77.1

%

73.3

%

(190)


bps

190


bps

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

$0.75


$0.95


$0.61


(21.1)

%


23.0

%




(1)

Please see note 2 "Use of Non-GAAP Financial Measures" below.



(2)

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

Conference Call Information

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

A replay of the call will be available beginning May 6, 2021 at 7:00 p.m. ET through 11:59 p.m. on May 20, 2021 and can be accessed by dialing 1-855-669-9658 (toll-free) or +1-604-674-8052 (international) and using passcode 6557 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. Additionally, "off-cloud" is a term we use to describe license transactions.

About OpenText

OpenText, The Information Company™, enables organizations to gain insight through market leading information management solutions, 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 the focus of Open Text Corporation ("OpenText" or "the Company") in our fiscal year ending June 30, 2021 (Fiscal 2021) on growth, future cloud growth and market share gains, generating substantial long-term value for shareholders, the financial and operational impact of the COVID-19 pandemic, anticipated benefits of our partnerships and next generation product lines, the strength of our operating framework and balance sheet flexibility, continued investments in product innovation, go-to-market and strategic acquisitions, M&A continuing to be our leading growth contributor, our capital allocation strategy, creating value through investments in broader Information Management capabilities, the Company's presence in the cloud and in growth markets, expected growth in our revenue lines, total growth from acquisitions, innovation and organic initiatives, the focus on recurring revenues, improving operational efficiency, expanding cash flow and strengthening the business, adjusted operating income and cash flow, its financial condition, the adjusted operating margin target range, results of operations and earnings, announced acquisitions, ongoing tax matters, the integration of the acquired businesses, declaration of quarterly dividends, potential share repurchases pursuant to its Repurchase Plan, future tax rates, new platform and product offerings, scaling OpenText to new levels in Fiscal 2021 and beyond, and other matters, may contain words such as "anticipates", "expects", "intends", "plans", "believes", "seeks", "estimates", "may", "could", "would", "might", "will" and variations of these words or similar expressions are considered forward-looking statements or information under applicable securities laws. In addition, any information or statements that refer to expectations, beliefs, plans, projections, objectives, performance or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking, and based on our current expectations, forecasts and projections about the operating environment, economies and markets in which we operate. Forward-looking statements reflect our current estimates, beliefs and assumptions, which are based on management's perception of historic trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances, such as certain assumptions about the economy, as well as market, financial and operational assumptions. Management's estimates, beliefs and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events and, as such, are subject to change. We can give no assurance that such estimates, beliefs and assumptions will prove to be correct. Such forward-looking statements involve known and unknown risks, uncertainties and other factors and assumptions that may cause the actual results, performance or achievements to differ materially which include, but are not limited to, actual and potential risks and uncertainties relating to the ultimate spread of COVID-19, the severity of the disease and the duration of the COVID-19 pandemic. For additional information with respect to risks and other factors which could occur, see the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other securities filings with the Securities and Exchange Commission (SEC) and other securities regulators. Readers are cautioned not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. Unless otherwise required by applicable securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

OTEX-F

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

Copyright ©2021 Open Text. OpenText is a trademark or registered trademark of Open Text. The list of trademarks is not exhaustive of other trademarks. Registered trademarks, product names, company names, brands and service names mentioned herein are property of Open Text. All rights reserved. For more information, visit: http://www.opentext.com/who-we-are/copyright-information.


OPEN TEXT CORPORATION

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



March 31, 2021


June 30, 2020

ASSETS

(unaudited)



Cash and cash equivalents

$

1,475,626



$

1,692,850


Accounts receivable trade, net of allowance for credit losses of $22,931 as of March 31, 2021 and $20,906 as of June 30, 2020

402,672



466,357


Contract assets

26,276



29,570


Income taxes recoverable

17,026



61,186


Prepaid expenses and other current assets

140,576



136,436


Total current assets

2,062,176



2,386,399


Property and equipment

230,517



244,555


Operating lease right of use assets

226,021



207,869


Long-term contract assets

18,594



15,427


Goodwill

4,688,449



4,672,356


Acquired intangible assets

1,291,796



1,612,564


Deferred tax assets

833,369



911,565


Other assets

174,965



154,467


Long-term income taxes recoverable

30,734



29,620


Total assets

$

9,556,621



$

10,234,822


LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable and accrued liabilities

$

372,819



$

373,314


Current portion of long-term debt

10,000



610,000


Operating lease liabilities

56,143



64,071


Deferred revenues

873,581



812,218


Income taxes payable

26,481



44,630


Total current liabilities

1,339,024



1,904,233


Long-term liabilities:




Accrued liabilities

27,849



34,955


Pension liability

80,649



73,129


Long-term debt

3,580,206



3,584,311


Long-term operating lease liabilities

217,584



217,165


Long-term deferred revenues

99,679



94,382


Long-term income taxes payable

31,974



171,200


Deferred tax liabilities

147,731



148,738


Total long-term liabilities

4,185,672



4,323,880


Shareholders' equity:




Share capital and additional paid-in capital




272,973,445 and 271,863,354 Common Shares issued and outstanding at March 31, 2021 and June 30, 2020, respectively; authorized Common Shares: unlimited

1,915,759



1,851,777


Accumulated other comprehensive income

54,074



17,825


Retained earnings

2,130,047



2,159,396


Treasury stock, at cost (1,567,664 and 622,297 shares at March 31, 2021 and June 30, 2020, respectively)

(69,386)



(23,608)


Total OpenText shareholders' equity

4,030,494



4,005,390


Non-controlling interests

1,431



1,319


Total shareholders' equity

4,031,925



4,006,709


Total liabilities and shareholders' equity

$

9,556,621



$

10,234,822


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,


2021


2020


2021


2020

Revenues:








Cloud services and subscriptions

$

355,845



$

339,463



$

1,047,285



$

825,068


Customer support

335,915



322,865



999,806



950,671


License

76,299



81,055



252,170



297,048


Professional service and other

64,872



71,296



193,327



210,337


Total revenues

832,931



814,679



2,492,588



2,283,124


Cost of revenues:








Cloud services and subscriptions

123,729



127,565



354,235



333,371


Customer support

30,953



32,151



89,815



91,326


License

2,810



2,544



9,601



7,917


Professional service and other

50,321



56,526



143,521



164,468


Amortization of acquired technology-based intangible assets

53,453



63,401



165,581



145,998


Total cost of revenues

261,266



282,187



762,753



743,080


Gross profit

571,665



532,492



1,729,835



1,540,044


Operating expenses:








Research and development

110,071



108,184



304,212



269,645


Sales and marketing

158,687



166,234



438,984



432,162


General and administrative

71,548



68,828



190,502



174,958


Depreciation

21,961



24,820



64,244



65,809


Amortization of acquired customer-based intangible assets

54,156



59,943



164,075



160,561


Special charges (recoveries)

2,846



9,406



(1,404)



24,579


Total operating expenses

419,269



437,415



1,160,613



1,127,714


Income from operations

152,396



95,077



569,222



412,330


Other income (expense), net

8,283



(18,923)



16,417



(19,736)


Interest and other related expense, net

(37,333)



(41,263)



(114,017)



(105,849)


Income before income taxes

123,346



34,891



471,622



286,745


Provision for (recovery of) income taxes

31,818



8,891



342,121



78,800


Net income for the period

$

91,528



$

26,000



$

129,501



$

207,945


Net (income) loss attributable to non-controlling interests

(38)



(35)



(112)



(112)


Net income attributable to OpenText

$

91,490



$

25,965



$

129,389



$

207,833


Earnings per share—basic attributable to OpenText

$

0.34



$

0.10



$

0.47



$

0.77


Earnings per share—diluted attributable to OpenText

$

0.33



$

0.10



$

0.47



$

...

0.77


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

272,832



271,221



272,414



270,559


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

273,924



272,202



273,312



271,643


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,


2021


2020


2021


2020

Net income for the period

$

91,528



$

26,000



$

129,501



$

207,945


Other comprehensive income (loss)—net of tax:








Net foreign currency translation adjustments

(12,568)



(15,484)



36,142



(16,220)


Unrealized gain (loss) on cash flow hedges:








Unrealized gain (loss) - net of tax expense (recovery) effect of $246 and ($1,276) for the three months ended March 31, 2021 and 2020, respectively; $1,302 and ($1,181) for the nine months ended March 31, 2021 and 2020, respectively

681



(3,539)



3,608



(3,278)


(Gain) loss reclassified into net income - net of tax (expense) recovery effect of ($399) and $121 for the three months ended March 31, 2021 and 2020, respectively; ($682) and $98 for the nine months ended March 31, 2021 and 2020, respectively

(1,108)



337



(1,892)



273


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








Actuarial gain (loss) - net of tax expense (recovery) effect of $944 and $1,495 for the three months ended March 31, 2021 and 2020, respectively; ($413) and $1,554 for the nine months ended March 31, 2021 and 2020, respectively

344



3,309



(2,342)



3,923


Amortization of actuarial (gain) loss into net income - net of tax (expense) recovery effect of $95 and $203 for the three months ended March 31, 2021 and 2020, respectively; $275 and $446 for the nine months ended March 31, 2021 and 2020, respectively

249



153



733



644


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

(12,402)



(15,224)



36,249



(14,658)


Total comprehensive income

79,126



10,776



165,750



193,287


Comprehensive (income) loss attributable to non-controlling interests

(38)



(35)



(112)



(112)


Total comprehensive income attributable to OpenText

$

79,088



$

10,741



$

165,638



$

193,175


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



Three Months Ended March 31, 2021


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, 2020

272,589



$

1,889,857



(1,101)



$

(47,555)



$

2,093,076



$

66,476



$

1,393



$

4,003,247


Issuance of Common Shares
















Under employee stock option plans

219



8,270













8,270


Under employee stock purchase plans

165



6,421













6,421


Share-based compensation



12,357













12,357


Purchase of treasury stock





(490)



(22,977)









(22,977)


Issuance of treasury stock



(1,146)



23



1,146










Dividends declared

($0.2008 per Common Share)









(54,519)







(54,519)


Other comprehensive income (loss) - net











(12,402)





(12,402)


Net income for the quarter









91,490





38



91,528


Balance as of March 31, 2021

272,973



$

1,915,759



(1,568)



$

(69,386)



$

2,130,047



$

54,074



$

1,431



$

4,031,925



Three Months Ended March 31, 2020


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, 2019

270,609



$

1,803,663



(847)



$

(32,066)



$

2,201,653



$

24,690



$

1,292



$

3,999,232


Issuance of Common Shares
















Under employee stock option plans

886



23,414













23,414


Under employee stock purchase plans

139



5,217













5,217


Share-based compensation



6,856













6,856


Dividends declared

($0.1746 per Common Share)









(47,279)







(47,279)


Other comprehensive income (loss) - net











(15,224)





(15,224)


Non-controlling interest













(39)



(39)


Net income for the quarter









25,965





35



26,000


Balance as of March 31, 2020

271,634



$

1,839,150



(847)



$

(32,066)



$

2,180,339



$

9,466



$

1,288



$

3,998,177



Nine Months Ended March 31, 2021


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, 2020

271,863



$

1,851,777



(622)



$

(23,608)



$

2,159,396



$

17,825



$

1,319



$

4,006,709


Adoption of ASU 2016-13 - cumulative effect, net









(2,450)







(2,450)


Issuance of Common Shares
















Under employee stock option plans

743



23,768













23,768


Under employee stock purchase plans

367



13,974



193



6,690









20,664


Share-based compensation



38,619













38,619


Purchase of treasury stock





(1,455)



(64,847)









(64,847)


Issuance of treasury stock



(12,379)



316



12,379










Dividends declared

($0.5762 per Common Share)









(156,288)







(156,288)


Other comprehensive income (loss) - net











36,249





36,249


Net income for the period









129,389





112



129,501


Balance as of March 31, 2021

272,973



$

1,915,759



(1,568)



$

(69,386)



$

2,130,047



$

54,074



$

1,431



$

4,031,925



Nine Months Ended March 31, 2020


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, 2019

269,834



$

1,774,214



(803)



$

(28,766)



$

2,113,883



$

24,124



$

1,215



$

3,884,670


Issuance of Common Shares
















Under employee stock option plans

1,301



34,773













34,773


Under employee stock purchase plans

499



17,757













17,757


Share-based compensation



21,530













21,530


Purchase of treasury stock





(300)



(12,424)









(12,424)


Issuance of treasury stock



(9,124)



256



9,124










Dividends declared

($0.5238 per Common Share)









(141,377)







(141,377)


Other comprehensive income (loss) - net











(14,658)





(14,658)


Non-controlling interest













(39)



(39)


Net income for the period









207,833





112



207,945


Balance as of March 31, 2020

271,634



$

1,839,150



(847)



$

(32,066)



$

2,180,339



$

9,466



$

1,288



$

3,998,177


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,


2021


2020


2021


2020

Cash flows from operating activities:








Net income for the period

$

91,528



$

26,000



$

129,501



$

207,945


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








Depreciation and amortization of intangible assets

129,570



148,164



393,900



372,368


Share-based compensation expense

12,357



6,856



38,619



21,530


Pension expense

1,550



1,428



4,670



4,323


Amortization of debt issuance costs

1,141



1,227



3,395



3,503


Loss on extinguishment of debt



17,854





17,854


Loss on sale and write down of property and equipment

1,026





1,979




Deferred taxes

447



2,543



80,844



36,711


Share in net (income) loss of equity investees

(11,765)



(4,527)



(20,020)



(6,475)


Changes in operating assets and liabilities:








Accounts receivable

54,345



83,590



87,072



86,188


Contract assets

(8,842)



(9,006)



(29,035)



(26,665)


Prepaid expenses and other current assets

(10,494)



(6,854)



(2,528)



(7,355)


Income taxes

(286,435)



(33,717)



(117,594)



(34,608)


Accounts payable and accrued liabilities

9,211



(9,028)



(27,327)



(42,263)


Deferred revenue

81,247



102,373



62,600



38,280


Other assets

2,232



5,079



765



7,436


Operating lease assets and liabilities, net

(3,546)



(2,381)



(26,910)



(4,486)


Net cash provided by operating activities

63,572



329,601



579,931



674,286


Cash flows from investing activities:








Additions of property and equipment

(13,311)



(16,793)



(36,267)



(55,005)


Purchase of XMedius



(73,335)



444



(73,335)


Purchase of Carbonite, Inc., net of cash and restricted cash acquired



(88,458)





(1,305,097)


Purchase of Dynamic Solutions Group Inc.





(371)



(4,149)


Other investing activities

(648)



(5,803)



(2,018)



(11,344)


Net cash used in investing activities

(13,959)



(184,389)



(38,212)



(1,448,930)


Cash flows from financing activities:








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

16,603



29,990



45,780



53,107


Proceeds from long-term debt and Revolver



2,400,000





3,150,000


Repayment of long-term debt and Revolver

(2,500)



(1,706,131)



(607,500)



(1,711,131)


Debt extinguishment costs



(11,248)





(11,248)


Debt issuance costs



(17,191)





(18,170)


Purchase of treasury stock

(22,977)





(64,847)



(12,424)


Payments of dividends to shareholders

(54,519)



(47,279)



(156,288)



(141,377)


Net cash provided by (used in) financing activities

(63,393)



648,141



(782,855)



1,308,757


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

(11,218)



(15,989)



22,553



(20,060)


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

(24,998)



777,364



(218,583)



514,053


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

1,503,678



680,232



1,697,263



943,543


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

$

1,478,680



$

1,457,596



$

1,478,680



$

1,457,596


Reconciliation of cash, cash equivalents and restricted cash:

March 31, 2021


March 31, 2020

Cash and cash equivalents

$

1,475,626



$

1,452,570


Restricted cash (1)

3,054



5,026


Total cash, cash equivalents and restricted cash

$

1,478,680



$

1,457,596






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


Notes


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


(2) Use of Non-GAAP Financial Measures: In addition to reporting financial results in accordance with U.S. GAAP, the Company provides certain financial measures that are not in accordance with U.S. GAAP (Non-GAAP). These Non-GAAP financial measures have certain limitations in that they do not have a standardized meaning and thus the Company's definition may be different from similar Non-GAAP financial measures used by other companies and/or analysts and may differ from period to period. Thus it may be more difficult to compare the Company's financial performance to that of other companies. However, the Company's management compensates for these limitations by providing the relevant disclosure of the items excluded in the calculation of these Non-GAAP financial measures both in its reconciliation to the U.S. GAAP financial measures and its consolidated financial statements, all of which should be considered when evaluating the Company's results.



The Company uses these Non-GAAP financial measures to supplement the information provided in its consolidated financial statements, which are presented in accordance with U.S. GAAP. The presentation of Non-GAAP financial measures 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 income taxes, depreciation and amortization of acquired intangible assets, other income (expense), share-based compensation and special charges (recoveries). Adjusted EBITDA margin is calculated as adjusted EBITDA expressed as a percentage of total revenue.


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


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


In summary, the Company believes the provision of supplemental Non-GAAP measures allow investors to evaluate the operational and financial performance of the Company's core business using the same evaluation measures that management uses, and is therefore a useful indication of OpenText's performance or expected performance of future operations and facilitates period-to-period comparison of operating performance (although prior performance is not necessarily indicative of future performance). As a result, the Company considers it appropriate and reasonable to provide, in addition to U.S. GAAP measures, supplementary Non-GAAP financial measures that exclude certain items from the presentation of its financial results.


The following charts provide unaudited reconciliations of U.S. GAAP-based financial measures to Non-GAAP-based financial measures for the following periods presented.


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

for the three months ended March 31, 2021

(In thousands, except for per share data)


Three Months Ended March 31, 2021


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

$

123,729



$

(505)


(1)

$

123,224



Customer support

30,953



(464)


(1)

30,489



Professional service and other

50,321



(684)


(1)

49,637



Amortization of acquired technology-based intangible assets

53,453



(53,453)


(2)



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

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

571,665


68.6%

55,106


(3)

626,771


75.2%

Operating expenses







Research and development

110,071



(2,146)


(1)

107,925



Sales and marketing

158,687



(4,580)


(1)

154,107



General and administrative

71,548



(3,978)


(1)

67,570



Amortization of acquired customer-based intangible assets

54,156



(54,156)


(2)



Special charges (recoveries)

2,846



(2,846)


(4)



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

152,396



122,812


(5)

275,208



Other income (expense), net

8,283



(8,283)


(6)



Provision for (recovery of) income taxes

31,818



1,485


(7)

33,303



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

91,490



113,044


(8)

204,534



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

$

0.33



$

0.42


(8)

$

0.75





(1)

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



(2)

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



(3)

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



(4)

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



(5)

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



(6)

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



(7)

Adjustment relates to differences between the GAAP-based tax provision rate of approximately 26% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded items include amortization, share-based compensation, special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation 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, 2021



Per share diluted

GAAP-based net income, attributable to OpenText

$

91,490


$

0.33


Add:



Amortization

107,609


0.39


Share-based compensation

12,357


0.05


Special charges (recoveries)

2,846


0.01


Other (income) expense, net

(8,283)


(0.03)


GAAP-based provision for (recovery of) income taxes

31,818


0.12


Non-GAAP-based provision for income taxes

(33,303)


(0.12)


Non-GAAP-based net income, attributable to OpenText

$

204,534


$

0.75



Reconciliation of Adjusted EBITDA



Three Months Ended March 31, 2021

GAAP-based net income, attributable to OpenText

$

91,490


Add:


Provision for (recovery of) income taxes

31,818


Interest and other related expense, net

37,333


Amortization of acquired technology-based intangible assets

53,453


Amortization of acquired customer-based intangible assets

54,156


Depreciation

21,961


Share-based compensation

12,357


Special charges (recoveries)

2,846


Other (income) expense, net

(8,283)


Adjusted EBITDA

$

297,131




GAAP-based net income margin

11.0

%

Adjusted EBITDA margin

35.7

%

Reconciliation of Free cash flows



Three Months Ended March 31, 2021

GAAP-based cash flows provided by operating activities

$

63,572


Add:


Capital expenditures (1)

(13,311)


Free cash flows

$

50,261




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


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

for the nine months ended March 31, 2021

(In thousands, except for per share data)


Nine Months Ended March 31, 2021


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

$

354,235



$

(2,484)


(1)

$

351,751



Customer support

89,815



(1,405)


(1)

88,410



Professional service and other

143,521



(1,867)


(1)

141,654



Amortization of acquired technology-based intangible assets

165,581



(165,581)


(2)



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

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

1,729,835


69.4%

171,337


(3)

1,901,172


76.3%

Operating expenses







Research and development

304,212



(7,195)


(1)

297,017



Sales and marketing

438,984



(13,594)


(1)

425,390



General and administrative

190,502



(12,074)


(1)

178,428



Amortization of acquired customer-based intangible assets

164,075



(164,075)


(2)



Special charges (recoveries)

(1,404)



1,404


(4)



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

569,222



366,871


(5)

936,093



Other income (expense), net

16,417



(16,417)


(6)



Provision for (recovery of) income taxes

342,121



(227,030)


(7)

115,091



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

129,389



577,484


(8)

706,873



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

$

0.47



$

2.12


(8)

$

2.59





(1)

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



(2)

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



(3)

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



(4)

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



(5)

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



(6)

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



(7)

Adjustment relates to differences between the GAAP-based tax provision rate of approximately 73% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded items include amortization, share-based compensation, special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation 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. The GAAP-based tax provision rate for the nine months ended March 31, 2021 includes the income tax provision charge from the IRS settlement partially offset by a tax benefit from the release of unrecognized tax benefits due to the conclusion of relevant tax audits that was recognized during the three months ended December 31, 2020.



(8)

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




Nine Months Ended March 31, 2021



Per share diluted

GAAP-based net income, attributable to OpenText

$

129,389


$

0.47


Add:



Amortization

329,656


1.21


Share-based compensation

38,619


0.14


Special charges (recoveries)

(1,404)


(0.01)


Other (income) expense, net

(16,417)


(0.06)


GAAP-based provision for (recovery of) income taxes

342,121


1.26


Non-GAAP-based provision for income taxes

(115,091)


(0.42)


Non-GAAP-based net income, attributable to OpenText

$

706,873


$

2.59


Reconciliation of Adjusted EBITDA



Nine Months Ended March 31, 2021

GAAP-based net income, attributable to OpenText

$

129,389


Add:


Provision for (recovery of) income taxes

342,121


Interest and other related expense, net

114,017


Amortization of acquired technology-based intangible assets

165,581


Amortization of acquired customer-based intangible assets

164,075


Depreciation

64,244


Share-based compensation

38,619


Special charges (recoveries)

(1,404)


Other (income) expense, net

(16,417)


Adjusted EBITDA

$

1,000,225




GAAP-based net income margin

5.2

%

Adjusted EBITDA margin

40.1

%

Reconciliation of Free cash flows



Nine Months Ended March 31, 2021

GAAP-based cash flows provided by operating activities

$

579,931


Add:


Capital expenditures (1)

(36,267)


Free cash flows

$

543,664




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


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

for the three months ended December 31, 2020

(In thousands, except for per share data)


Three Months Ended December 31, 2020


GAAP-based
Measures

GAAP-based Measures

% of Total Revenue

Adjustments

Note

Non-GAAP-
based
Measures

Non-GAAP-based Measures

% of Total Revenue

Cost of revenues







Cloud services and subscriptions

$

117,882



$

(1,143)


(1)

$

116,739



Customer support

29,668



(499)


(1)

29,169



Professional service and other

46,619



(666)


(1)

45,953



Amortization of acquired technology-based intangible assets

54,091



(54,091)


(2)



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

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

603,082


70.5%

56,399


(3)

659,481


77.1%

Operating expenses







Research and development

100,238



(2,707)


(1)

97,531



Sales and marketing

147,897



(4,957)


(1)

142,940



General and administrative

62,765



(4,554)


(1)

58,211



Amortization of acquired customer-based intangible assets

54,926



(54,926)


(2)