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OpenText Reports Third Quarter Fiscal Year 2014 Financial Results, Raises Quarterly Cash Dividend by 15% - Valley News Live - KVLY/KXJB - Fargo/Grand Forks

OpenText Reports Third Quarter Fiscal Year 2014 Financial Results, Raises Quarterly Cash Dividend by 15%

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SOURCE Open Text Corporation

WATERLOO, Ontario, April 24, 2014 /PRNewswire/ -- Open Text Corporation (NASDAQ: OTEX) (TSX: OTC) announced today its financial results for the third quarter ended March 31, 2014.

Financial Highlights for Q3 FY14 (1)

  • Total revenue was $442.8 million, up 31% Y/Y
  • License revenue was $73.1 million, up 6% Y/Y
  • Customer Support revenue was $180.3 million, up 8% Y/Y
  • Non-GAAP-based EPS, diluted was $0.84 compared to $0.63 Y/Y; GAAP-based EPS, diluted was $0.38 compared to $0.22 Y/Y, on a post stock-split basis.(2)
  • Non-GAAP-based income from operations was $129.0 million and 29% of revenues; GAAP-based income from operations was $66.8 million and 15% of revenues.(2)
  • Operating cash flow was $141.4 million, compared to $116.8 million Y/Y, up 21%Y/Y, with an ending cash balance of $336.1 million.

"In the third quarter we delivered strong year-over-year results with revenue growth of 31%, adjusted operating income growth of 43% and operating cash flow growth of 21%," said OpenText CEO Mark J. Barrenechea

"With our intelligent growth strategy, we are focused on delivering value through acquisitions, innovation and now an increased dividend program. The GXS integration is off to a fast start and has established OpenText as a key cloud services provider. Our newly upgraded EIM product suite is driving customer demand, and reinforces our market position as a leader in EIM."

Business Highlights

  • On January 16, 2014 OpenText bought GXS, a Maryland-based leader in business-to-business (B2B) cloud integration
  • Public sector, services and technology industries saw the most demand
  • 6 license transactions over $1 million and 10 license transactions between $500K and $1 million
  • Customer successes in the quarter include PBS, Western Cape Local Government, T-Mobile, Nokia and The Home Office 
  • Delivers on the future of business process management with Process Suite launch
  • Launches Experience Suite to provide an omni-channel digital experience strategy
  • OpenText Tempo delivers new capabilities to increase business productivity through secure social collaboration
  • Launches SharePoint Services for OpenText Extended Enterprise Content Management for SAP® Solutions
  • Opens first Australian data centre for locally hosted OpenText Cloud Services

Dividend Program Highlights

Cash Dividend - Raised by 15%
As part of our quarterly, non cumulative cash dividend program the Board declared, on April 24, 2014 a fifteen percent increase in its quarterly cash dividend from $0.15 to $0.1725 per Common Share. The record date for this dividend is May 23, 2014 and the payment date is June 13, 2014. Future declarations of dividends and the establishment of future record and payment dates are subject to the final determination and discretion of our Board of Directors.

Summary of Quarterly Results









Q3 FY14

Q2 FY14

Q3 FY13

% Change

(Q/Q)


% Change

(Y/Y)


Revenue (million)

$442.8

$363.5

$337.7

21.8%


31.1%


GAAP-based gross margin

67.3%

70.3%

63.9%

(300)

bps

340

bps

GAAP-based operating margin

15.1%

20.3%

12.1%

(520)

bps

300

bps

GAAP-based EPS, diluted

$0.38

$0.45

$0.22

(15.6)%


72.7%


Non-GAAP-based gross margin (2)

71.3%

74.0%

70.8%

(270)

bps

50

bps

Non-GAAP-based operating margin (2)

29.1%

30.9%

26.8%

(180)

bps

230

bps

Non-GAAP-based EPS, diluted (2)

$0.84

$0.79

$0.63

6.3%


33.3%


 

Summary of Year to Date Results







Q3 FY14

Q2 FY14

Q3 FY13

% Change

(Y/Y)


Revenue (million)

$1,130.7

$688.0

$1,016.1

11.3%


GAAP-based gross margin

68.3%

68.8%

63.8%

450

bps

GAAP-based operating margin

17.1%

18.3%

14.6%

250

bps

GAAP-based EPS, diluted

$1.08

$0.71

$0.90

20.0%


Non-GAAP-based gross margin (2)

73.0%

74.0%

70.8%

220

bps

Non-GAAP-based operating margin (2)

30.1%

30.7%

29.2%

90

bps

Non-GAAP-based EPS, diluted (2)

$2.32

$1.48

$2.07

12.1%


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 1-800-814-4859 (toll-free) or 416-644-3414 (international). Please dial in 15 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/events.cfm .

An audio replay of the conference call will also be made available approximately two hours after the conclusion of the call. The audio replay will remain available until 11:59 p.m. on May 8, 2014 and can be accessed by dialing 1-877-289-8525 (toll-free) or 416-640-1917 (international) and entering the confirmation code: 4677835 followed by the number sign.

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

About OpenText

OpenText is the largest independent software provider of Enterprise Information Management (EIM). For more information please visit www.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 Fiscal 2014 on growth in earnings and cash flows, creating value through investments in broader Enterprise Information Management (EIM) capabilities, distribution, the Company's presence in the cloud and in growth markets, its financial conditions, results of operations and earnings, declaration of quarterly dividends, and other matters, may contain words such as "anticipates", "expects", "intends", "plans", "believes", "seeks", "estimates", "may", "could", "would", and other similar language and are considered forward-looking statements or information under applicable securities laws. In addition, any information or statements that refer to expectations, beliefs, plans, projections, objectives, performance or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking, and based on our current expectations, forecasts and projections about the operating environment, economies and markets in which we operate.  Forward-looking statements reflect our current estimates, beliefs and assumptions, which are based on management's perception of historic trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances, such as certain assumptions about the economy, as well as market, financial and operational assumptions. Management's estimates, beliefs and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events and, as such, are subject to change. We can give no assurance that such estimates, beliefs and assumptions will prove to be correct. Such forward-looking statements involve known and unknown risks, uncertainties and other factors and assumptions that may cause the actual results, performance or achievements to differ materially. Such factors include, but are not limited to: (i) the future performance, financial and otherwise, of OpenText; (ii) the ability of OpenText to bring new products and services to market and to increase sales; (iii) the strength of the Company's product development pipeline; (iv) the Company's growth and profitability prospects; (v) the estimated size and growth prospects of the EIM market; (vi) the Company's competitive position in the EIM market and its ability to take advantage of future opportunities in this market; (vii) the benefits of the Company's products and services to be realized by customers; (viii) the demand for the Company's products and services and the extent of deployment of the Company's products and services in the EIM marketplace; and (ix) the Company's financial condition and capital requirements. The risks and uncertainties that may affect forward-looking statements include, but are not limited to: (i) integration of acquisitions and related restructuring efforts, including the quantum of restructuring charges and the timing thereof;  (ii) the possibility that the Company may be unable to meet its future reporting requirements under the Securities Exchange Act of 1934, as amended, and the rules promulgated thereunder; (iii) the risks associated with bringing new products and services to market; (iv) fluctuations in currency exchange rates; (v) delays in the purchasing decisions of the Company's customers; (vi) the competition the Company faces in its industry and/or marketplace; (vii) the final determination of litigation, tax audits and other legal proceedings; (viii) the possibility of technical, logistical or planning issues in connection with the deployment of the Company's products or services; (ix) the continuous commitment of the Company's customers; and (x) demand for the Company's products. 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:

United States:

Greg Secord
Vice President, Investor Relations
Open Text Corporation
San Francisco: 415-963-0825
gsecord@opentext.com

Canada:

Sonya Mehan
Senior Manager, Investor Relations
Open Text Corporation
Waterloo: 519-888-7111 ext. 2446
smehan@opentext.com

Copyright ©2014 Open Text Corporation. OpenText is a trademark or registered trademark of Open Text SA and/or Open Text ULC. 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 SA or other respective owners. All rights reserved. For more information, visit: http://www.opentext.com/2/global/site-copyright.html_SKU.

 

 

 

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

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



March 31, 2014


June 30, 2013


(Unaudited)



ASSETS




Cash and cash equivalents

$

336,071



$

470,445


Accounts receivable trade, net of allowance for doubtful accounts of $3,800 as of March 31, 2014 and $4,871 as of June 30, 2013

257,292



174,927


Income taxes recoverable

23,405



17,173


Prepaid expenses and other current assets

71,157



43,464


Deferred tax assets

10,844



11,082


Total current assets

698,769



717,091


Property and equipment

129,571



88,364


Goodwill

2,105,596



1,246,872


Acquired intangible assets

770,160



363,615


Deferred tax assets

133,170



135,695


Other assets

50,071



25,082


Deferred charges

56,190



67,633


Long-term income taxes recoverable

10,994



10,465


Total assets

$

3,954,521



$

2,654,817


LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable and accrued liabilities

$

230,162



$

188,443


Current portion of long-term debt

62,384



51,742


Deferred revenues

334,665



282,387


Income taxes payable

9,118



4,184


Deferred tax liabilities

1,441



1,127


Total current liabilities

637,770



527,883


Long-term liabilities:




Accrued liabilities

41,486



17,849


Deferred credits

18,675



11,608


Pension liability

55,917



24,509


Long-term debt

1,270,000



513,750


Deferred revenues

17,726



11,830


Long-term income taxes payable

158,856



140,508


Deferred tax liabilities

187,917



69,672


Total long-term liabilities

1,750,577



789,726


Shareholders' equity:




Share capital




121,592,348 and 118,057,772 Common Shares issued and outstanding at March 31, 2014 and June 30, 2013, respectively; Authorized Common Shares: unlimited

788,316



651,642


Additional paid-in capital

109,769



101,865


Accumulated other comprehensive income

39,489



39,890


Retained earnings

649,207



572,885


Treasury stock, at cost (836,952 shares at March 31, 2014 and 1,221,756 at June 30, 2013, respectively)

(20,871)



(29,074)


Total OpenText shareholders' equity

1,565,910



1,337,208


Non-controlling interests

264



-


Total shareholders' equity

1,566,174



1,337,208


Total liabilities and shareholders' equity

$

3,954,521



$

2,654,817


 

 

 

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,



2014


2013


2014


2013

Revenues:









License


$

73,083



$

69,035



$

209,553



$

200,816


Cloud services


128,400



43,194



212,178



131,909


Customer support


180,290



166,573



523,155



493,327


Professional service and other


60,981



58,893



185,835



190,017


Total revenues


442,754



337,695



1,130,721



1,016,069


Cost of revenues:









License


3,527



3,079



9,867



12,578


Cloud services


49,464



18,741



79,692



54,669


Customer support


25,206



27,497



71,785



81,597


Professional service and other


49,218



49,701



145,898



148,995


Amortization of acquired technology-based intangible assets


17,147



23,058



51,712



70,031


Total cost of revenues


144,562



122,076



358,954



367,870


Gross profit


298,192



215,619



771,767



648,199


Operating expenses:









Research and development


47,199



43,003



129,332



121,627


Sales and marketing


93,700



77,327



244,403



209,819


General and administrative


39,336



25,762



101,037



81,468


Depreciation


10,527



6,064



23,883



18,278


Amortization of acquired customer-based intangible assets


24,679



17,149



54,388



51,548


Special charges


15,902



5,444



25,901



17,267


Total operating expenses


231,343



174,749



578,944



500,007


Income from operations


66,849



40,870



192,823



148,192


Other income (expense), net


1,652



237



2,838



1,707


Interest and other related expense, net


(9,734)



(4,109)



(17,159)



(12,992)


Income before income taxes


58,767



36,998



178,502



136,907


Provision for income taxes


12,971



11,187



48,576



30,559


Net income for the period


$

45,796



$

25,811



$

129,926



$

106,348


Add: net loss attributable to non-controlling interests


88



-



88



-


Net income attributable to OpenText


$

45,884



$

25,811



$

130,014



$

106,348


Earnings per share-basic attributable to OpenText


$

0.38



$

0.22



$

1.09



$

0.91


Earnings per share-diluted attributable to OpenText


$

0.38



$

0.22



$

1.08



$

0.90


Weighted average number of Common Shares outstanding-basic


120,873



117,192



119,048



117,028


Weighted average number of Common Shares outstanding-diluted


122,100



118,154



120,031



118,002


Dividends declared per Common Share


$

0.15



$

-



$

0.45



$

-


 

 

 

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,


2014


2013


2014


2013

Net income for the period

$

45,796



$

25,811



$

129,926



$

106,348


Other comprehensive income-net of tax:








Net foreign currency translation adjustments

(1,087)



(3,325)



(733)



(4,790)


Unrealized gain (loss) on cash flow hedges








Unrealized gain (loss)

(1,604)



(908)



(1,517)



1,097


(Gain) loss reclassified into net income

1,237



75



2,410



(1,439)


Actuarial gain (loss) relating to defined benefit pension plans








Actuarial gain (loss)

(1,808)



124



(781)



(752)


Amortization of actuarial loss into net income

74



72



220



219


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

(3,188)



(3,962)



(401)



(5,665)


Total comprehensive income

42,608



21,849



129,525



100,683


Add: comprehensive loss attributable to non-controlling interests

88



-



88



-


Total comprehensive income attributable to OpenText

$

42,696



$

21,849



$

129,613



$

100,683


 

 

 

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,


2014


2013


2014


2013

Cash flows from operating activities:








Net income for the period

$

45,796



$

25,811



$

129,926



$

106,348


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








Depreciation and amortization of intangible assets

52,353



46,271



129,983



139,857


Share-based compensation expense

4,418



3,877



15,707



10,153


Excess tax benefits on share-based compensation expense

(594)



(1)



(1,675)



(612)


Pension expense

759



222



1,298



692


Amortization of debt issuance costs

1,016



519



2,060



1,591


Amortization of deferred charges and credits

2,706



2,762



8,640



8,620


Loss on sale and write down of property and equipment

-



-



15



24


Deferred taxes

(1,005)



(6,210)



(4,203)



(7,362)


Changes in operating assets and liabilities:








Accounts receivable

9,953



(5,019)



19,129



15,387


Prepaid expenses and other current assets

(14,464)



(3,445)



(18,625)



(2,061)


Income taxes

3,169



(1,019)



5,578



(14,907)


Deferred charges and credits

1,382



4,016



9,870



3,580


Accounts payable and accrued liabilities

(21,617)



(6,556)



(32,212)



(27,176)


Deferred revenue

60,156



54,930



20,022



18,192


Other assets

(2,614)



670



(3,300)



959


Net cash provided by operating activities

141,414



116,828



282,213



253,285


Cash flows from investing activities:








Additions of property and equipment

(8,215)



(5,875)



(28,443)



(15,792)


Purchase of patents

-



-



(192)



-


Purchase of GXS Group, Inc., net of cash acquired

(1,077,671)



-



(1,077,671)



-


Purchase of Cordys Holding B.V., net of cash acquired

-



-



(30,588)



-


Purchase of EasyLink Services International Corporation, net of cash acquired

-



-



-



(315,331)


Purchase of Resonate KT Limited, net of cash acquired

-



(19,366)



-



(19,366)


Purchase of System Solutions Australia Pty Limited (MessageManager), net of cash acquired

-



-



-



(516)


Purchase consideration for prior period acquisitions

(222)



(222)



(665)



(653)


Other investing activities

(1,573)



-



(2,547)



-


Net cash used in investing activities

(1,087,681)



(25,463)



(1,140,106)



(351,658)


Cash flows from financing activities:








Excess tax benefits on share-based compensation expense

594



1



1,675



612


Proceeds from issuance of Common Shares

14,289



1,128



19,718



7,530


Equity issuance costs

(144)



-



(144)



-


Purchase of Treasury Stock

(1,275)



-



(1,275)



-


Proceeds from long-term debt and revolver

800,000



-



800,000



-


Repayment of long-term debt

(13,412)



(7,670)



(32,499)



(23,008)


Debt issuance costs

(15,759)



-



(16,032)



-


Payments of dividends to shareholders

(18,224)



-



(53,692)



-


Net cash provided by (used in) financing activities

766,069



(6,541)



717,751



(14,866)


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

915



(5,171)



5,768



403


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

(179,283)



79,653



(134,374)



(112,836)


Cash and cash equivalents at beginning of the period

515,354



367,258



470,445



559,747


Cash and cash equivalents at end of the period

$

336,071



$

446,911



$

336,071



$

446,911




Notes




(1)

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



(2)

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




The Company uses these non-GAAP financial measures to supplement the information provided in its consolidated financial statements, which are presented in accordance with U.S. GAAP. The presentation of non-GAAP financial measures are not meant to be a substitute for financial measures presented in accordance with U.S. GAAP, but rather should be evaluated in conjunction with and as a supplement to such U.S. GAAP measures. OpenText strongly encourages investors to review its financial information in its entirety and not to rely on a single financial measure. The Company therefore believes that despite these limitations, it is appropriate to supplement the disclosure of the U.S. GAAP measures with certain non-GAAP measures defined below.




Non-GAAP-based net income and non-GAAP-based EPS are calculated as net income or net income per share on a diluted basis, excluding, the amortization of acquired intangible assets, other income (expense), share-based compensation, and special charges, all net of tax. Non-GAAP-based gross profit is the arithmetical sum of GAAP-based gross profit and the amortization of acquired technology-based intangible assets. Non-GAAP-based gross margin is calculated as non-GAAP-based gross profit expressed as a percentage of revenue. Non-GAAP-based income from operations is calculated as income from operations, excluding, the amortization of acquired intangible assets, special charges, and share-based compensation. Non-GAAP-based operating margin is calculated as non-GAAP-based income from operations expressed as a percentage of 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 and is based upon the way the Company's management evaluates the performance of the Company's business for use in the Company's internal reports. In the course of such evaluation and for the purpose of making operating decisions, the Company's management excludes certain items from its analysis, including amortization of acquired intangible assets, special charges, share-based compensation, other income (expense), and the taxation impact of these items. These items are excluded based upon the manner in which management evaluates the business of the Company and are not excluded in the sense that they may be used under U.S. GAAP.




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 in this press release.




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

 

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the three months ended March 31, 2014.

(In thousands except for per share amounts)


Three Months Ended

March 31, 2014


GAAP-based

Measures

GAAP-based

Measures  

% of Revenue

Adjustments

Note

Non-GAAP-

based

Measures

Non-GAAP-

based Measures    

% of Revenue

Cost of revenues







Cloud services

$

49,464



$

(167)


(1)


$

49,297



Customer support

25,206



(138)


(1)


25,068



Professional service and other

49,218



(245)


(1)


48,973



Amortization of acquired technology-based intangible assets

17,147



(17,147)


(2)


-



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

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

298,192


67.3%

17,697


(3)


315,889


71.3%

Operating expenses







Research and development

47,199



(384)


(1)


46,815



Sales and marketing

93,700



(1,926)


(1)


91,774



General and administrative

39,336



(1,558)


(1)


37,778



Amortization of acquired customer-based intangible assets

24,679



(24,679)


(2)


-



Special charges

15,902



(15,902)


(4)


-



GAAP-based income from operations and operating margin (%) / Non-GAAP-based income from operations and operating margin (%)

66,849


15.1%

62,146


(5)


128,995


29.1%

Other income (expense), net

1,652



(1,652)


(6)


-



Provision for (recovery of) income taxes

12,971



3,814


(7)


16,785



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

45,884



56,680


(8)


102,564



GAAP-based earnings per share /

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

$

0.38



$

0.46


(8)


$

0.84





(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 dollar, and gross margin stated as a percentage of revenue.

(4)

Adjustment relates to the exclusion of Special charges from our Non-GAAP-based operating expenses as Special charges are generally incurred in the periods following the relevant acquisitions and 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 dollar, and operating margin stated as a percentage of revenue.

(6)

Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) relates primarily 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.

(7)

Adjustment relates to differences between the GAAP-based tax provision of approximately 22% and a Non-GAAP-based tax rate of 14%; these rate differences are due to the income tax effects of expenses that are excluded for the purpose of calculating Non-GAAP-based adjusted net income.

(8)

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

  


Three Months Ended

March 31, 2014



Per share diluted  

Non-GAAP-based net income, attributable to OpenText

$

102,564


$

0.84


Less:



Amortization

41,826


0.34


Share-based compensation

4,418


0.04


Special charges

15,902


0.13


Other (income) expense, net

(1,652)


(0.01)


GAAP-based provision for (recovery of) income taxes

12,971


0.11


Non-GAAP-based provision for income taxes

(16,785)


(0.15)


GAAP-based net income, attributable to OpenText

$

45,884


$

0.38








Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the nine months ended March 31, 2014.

(In thousands except for per share amounts)


Nine Months Ended

March 31, 2014


GAAP-based

Measures

GAAP-based

Measures  

% of Revenue

Adjustments

Note

Non-GAAP-

based

Measures

Non-GAAP-

based Measures    

% of Revenue

Cost of revenues







Cloud services

$

79,692



$

(145)


(1)


$

79,547



Customer support

71,785



(547)


(1)


71,238



Professional service and other

145,898



(743)


(1)


145,155



Amortization of acquired technology-based intangible assets

51,712



(51,712)


(2)


-



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

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

771,767


68.3%

53,147


(3)


824,914


73.0%

Operating expenses







Research and development

129,332



(1,906)


(1)


127,426



Sales and marketing

244,403



(6,200)


(1)


238,203



General and administrative

101,037



(6,166)


(1)


94,871



Amortization of acquired customer-based intangible assets

54,388



(54,388)


(2)


-



Special charges

25,901



(25,901)


(4)


-



GAAP-based income from operations and operating margin (%) / Non-GAAP-based income from operations and operating margin (%)

192,823


17.1%

147,708


(5)


340,531


30.1%

Other income (expense), net

2,838



(2,838)


(6)


-



Provision for (recovery of) income taxes

48,576



(3,216)


(7)


45,360



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

130,014



148,086


(8)


278,100



GAAP-based earnings per share /

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

$

1.08



$

1.24


(8)


$

2.32





(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 dollar, and gross margin stated as a percentage of revenue.

(4)

Adjustment relates to the exclusion of Special charges from our Non-GAAP-based operating expenses as Special charges are generally incurred in the periods following the relevant acquisitions and 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 dollar, and operating margin stated as a percentage of revenue.

(6)

Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) relates primarily 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.

(7)

Adjustment relates to differences between the GAAP-based tax provision of approximately 27% and a Non-GAAP-based tax rate of 14%; these rate differences are due to the income tax effects of expenses that are excluded for the purpose of calculating Non-GAAP-based adjusted net income.

(8)

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

 


Nine Months Ended

March 31, 2014



Per share diluted  

Non-GAAP-based net income, attributable to OpenText

$

278,100


$

2.32


Less:



Amortization

106,100


0.88


Share-based compensation

15,707


0.13


Special charges

25,901


0.22


Other (income) expense, net

(2,838)


(0.02)


GAAP-based provision for (recovery of) income taxes

48,576


0.40


Non-GAAP-based provision for income taxes

(45,360)


(0.37)


GAAP-based net income, attributable to OpenText

$

130,014


$

1.08








Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the three months ended December 31, 2013.

(In thousands except for per share amounts)


Three Months Ended

December 31, 2013


GAAP-based

Measures

GAAP-based

Measures  

% of Revenue

Adjustments

Note

Non-GAAP-

based

Measures

Non-GAAP-

based Measures    

% of Revenue

Cost of revenues







Cloud services

$

15,963



$

60


(1)


$

16,023



Customer support

24,409



(312)


(1)


24,097



Professional service and other

51,245



(328)


(1)


50,917



Amortization of acquired technology-based intangible assets

13,035



(13,035)


(2)


-



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

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

255,551


70.3%

13,615


(3)


269,166


74.0%

Operating expenses







Research and development

41,917



(794)


(1)


41,123



Sales and marketing

81,290



(1,921)


(1)


79,369



General and administrative

32,815



(3,382)


(1)


29,433



Amortization of acquired customer-based intangible assets

12,432



(12,432)


(2)


-



Special charges

6,268



(6,268)


(4)


-



GAAP-based income from operations and operating margin (%) / Non-GAAP-based income from operations and operating margin (%)

73,931


20.3%

38,412


(5)


112,343


30.9%

Other income (expense), net

(740)



740


(6)


-



Provision for (recovery of) income taxes

16,651



(1,349)


(7)


15,302



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

53,500



40,501


(8)


94,001



GAAP-based earnings per share /

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

$

0.45



$

0.34


(8)


$

0.79





(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 dollar, and gross margin stated as a percentage of revenue.

(4)

Adjustment relates to the exclusion of Special charges from our Non-GAAP-based operating expenses as Special charges are generally incurred in the periods following the relevant acquisitions and 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 dollar, and operating margin stated as a percentage of revenue.

(6)

Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) relates primarily 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.

(7)

Adjustment relates to differences between the GAAP-based tax recovery of approximately 24% and a Non-GAAP-based tax rate of 14%; these rate differences are due to the income tax effects of expenses that are excluded for the purpose of calculating Non-GAAP-based adjusted net income.

(8)

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

 


Three Months Ended

December 31, 2013



Per share diluted  

Non-GAAP-based net income, attributable to OpenText

$

94,001


$

0.79


Less:



Amortization

25,467


0.21


Share-based compensation

6,677


0.06


Special charges

6,268


0.05


Other (income) expense, net

740


0.01


GAAP-based provision for (recovery of) income taxes

16,651


0.14


Non-GAAP-based provision for income taxes

(15,302)


(0.13)


GAAP-based net income, attributable to OpenText

$

53,500


$

0.45








Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the six months ended December 31, 2013.

(In thousands except for per share amounts)


Six Months Ended

December 31, 2013


GAAP-based

Measures

GAAP-based

Measures  

% of Revenue

Adjustments

Note

Non-GAAP-

based

Measures

Non-GAAP-

based Measures    

% of Revenue

Cost of revenues







Cloud services

$

30,228



$

22


(1)


$

30,250



Customer support

46,579



(409)


(1)


46,170



Professional service and other

96,680



(498)


(1)


96,182



Amortization of acquired technology-based intangible assets

34,565



(34,565)


(2)


-



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

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

473,575


68.8%

35,450


(3)


509,025


74.0%

Operating expenses







Research and development

82,133



(1,522)


(1)


80,611



Sales and marketing

150,703



(4,274)


(1)


146,429



General and administrative

61,701



(4,608)


(1)


57,093



Amortization of acquired customer-based intangible assets

29,709



(29,709)


(2)


-



Special charges

9,999



(9,999)


(4)


-



GAAP-based income from operations and operating margin (%) / Non-GAAP-based income from operations and operating margin (%)

125,974


18.3%

85,562


(5)


211,536


30.7%

Other income (expense), net

1,186



(1,186)


(6)


-



Provision for (recovery of) income taxes

35,605



(7,029)


(7)


28,576



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

84,130



91,405


(8)


175,535



GAAP-based earnings per share /

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

$

0.71



$

0.77


(8)


$

1.48





(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 dollar, and gross margin stated as a percentage of revenue.

(4)

Adjustment relates to the exclusion of Special charges from our Non-GAAP-based operating expenses as Special charges are generally incurred in the periods following the relevant acquisitions and 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 dollar, and operating margin stated as a percentage of revenue.

(6)

Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) relates primarily 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.

(7)

Adjustment relates to differences between the GAAP-based tax recovery of approximately 30% and a Non-GAAP-based tax rate of 14%; these rate differences are due to the income tax effects of expenses that are excluded for the purpose of calculating Non-GAAP-based adjusted net income.

(8)

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

  


Six Months Ended

December 31, 2013



Per share diluted  

Non-GAAP-based net income, attributable to OpenText

$

175,535


$

1.48


Less:



Amortization

64,274


0.54


Share-based compensation

11,289


0.09


Special charges

9,999


0.08


Other (income) expense, net

(1,186)


(0.01)


GAAP-based provision for (recovery of) income taxes

35,605


0.30


Non-GAAP-based provision for income taxes

(28,576)


(0.23)


GAAP-based net income, attributable to OpenText

$

84,130


$

0.71








Reconciliation of selected GAAP-based measures to Non GAAP-based measures for the three months ended March 31, 2013.

(In thousands except for per share amounts)


Three Months Ended

March 31, 2013


GAAP-based

Measures

GAAP-based

Measures  

% of Revenue

Adjustments

Note

Non-GAAP-

based

Measures

Non-GAAP-

based Measures    

% of Revenue

Cost of revenues:







Cloud services

$

18,741



$

(50)


(1)


$

18,691



Customer support

27,497



(130)


(1)


27,367



Professional service and other

49,701



(295)


(1)


49,406



Amortization of acquired technology-based intangible assets

23,058



(23,058)


(2)


-



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

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

215,619


63.9%

23,533


(3)


239,152


70.8%

Operating expenses







Research and development

43,003



(498)


(1)


42,505



Sales and marketing

77,327



(2,634)


(1)


74,693



General and administrative

25,762



(270)


(1)


25,492



Amortization of acquired customer-based intangible assets

17,149



(17,149)


(2)


-



Special charges

5,444



(5,444)


(4)


-



GAAP-based income from operations and operating margin (%) / Non-GAAP-based income from operations and operating margin (%)

40,870


12.1%

49,528


(5)


90,398


26.8%

Other income (expense), net

237



(237)


(6)


-



Provision for (recovery of) income taxes

11,187



893


(7)


12,080



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

25,811



48,398


(8)


74,209



GAAP-based earnings per share /

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

$

0.22



$

0.41


(8)


$

0.63





(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 dollar, and gross margin stated as a percentage of revenue.

(4)

Adjustment relates to the exclusion of Special charges from our Non-GAAP-based operating expenses as Special charges are generally incurred in the periods following the relevant acquisitions and 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 dollar, and operating margin stated as a percentage of revenue.

(6)

Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) relates primarily 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.

(7)

Adjustment relates to differences between the GAAP-based tax provision of approximately 30% and a Non-GAAP-based tax rate of 14%; these rate differences are due to the income tax effects of expenses that are excluded for the purpose of calculating Non-GAAP-based adjusted net income.

(8)

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

 


Three Months Ended

March 31, 2013



Per share diluted  

Non-GAAP-based net income, attributable to OpenText

$

74,209


$

0.63


Less:



Amortization

40,207


0.34


Share-based compensation

3,877


0.03


Special charges

5,444


0.05


Other (income) expense, net

(237)


-


GAAP-based provision for (recovery of) income taxes

11,187


0.09


Non-GAAP-based provision for income taxes

(12,080)


(0.10)


GAAP-based net income, attributable to OpenText

$

25,811


$

0.22








Reconciliation of selected GAAP-based measures to Non GAAP-based measures for the nine months ended March 31, 2013.

(In thousands except for per share amounts)


Nine Months Ended

March 31, 2013


GAAP-based

Measures

GAAP-based Measures  

% of Revenue

Adjustments

Note

Non-GAAP-based

Measures

Non-GAAP-based Measures    

% of Revenue

Cost of revenues:







Cloud services

$

54,669



$

(80)


(1)


$

54,589



Customer support

81,597



(275)


(1)


81,322



Professional service and other

148,995



(660)


(1)


148,335



Amortization of acquired technology-based intangible assets

70,031



(70,031)


(2)


-



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

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

648,199


63.8%

71,046


(3)


719,245


70.8%

Operating expenses







Research and development

121,627



(1,167)


(1)


120,460



Sales and marketing

209,819



(5,953)


(1)


203,866



General and administrative

81,468



(2,018)


(1)


79,450



Amortization of acquired customer-based intangible assets

51,548



(51,548)


(2)


-



Special charges

17,267



(17,267)


(4)


-



GAAP-based income from operations and operating margin (%) / Non-GAAP-based income from operations and operating margin (%)

148,192


14.6%

148,999


(5)


297,191


29.2%

Other income (expense), net

1,707



(1,707)


(6)


-



Provision for (recovery of) income taxes

30,559



9,229


(7)


39,788



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

106,348



138,063


(8)


244,411



GAAP-based earnings per share /

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

$

0.90



$

1.17


(8)


$

2.07





(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 dollar, and gross margin stated as a percentage of revenue.

(4)

Adjustment relates to the exclusion of Special charges from our Non-GAAP-based operating expenses as Special charges are generally incurred in the periods following the relevant acquisitions and 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 dollar, and operating margin stated as a percentage of revenue.

(6)

Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) relates primarily 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.

(7)

Adjustment relates to differences between the GAAP-based tax provision of approximately 22% and a Non-GAAP-based tax rate of 14%; these rate differences are due to the income tax effects of expenses that are excluded for the purpose of calculating Non-GAAP-based adjusted net income.

(8)

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

 


Nine Months Ended

March 31, 2013



Per share diluted  

Non-GAAP-based net income, attributable to OpenText

$

244,411


$

2.07


Less:



Amortization

121,579


1.03


Share-based compensation

10,153


0.09


Special charges

17,267


0.15


Other (income) expense, net

(1,707)


(0.01)


GAAP-based provision for (recovery of) income taxes

30,559


0.26


Non-GAAP-based provision for income taxes

(39,788)


(0.35)


GAAP-based net income, attributable to OpenText

$

106,348


$

0.90


 

(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 March 31, 2014 and 2013:

 


Three Months Ended

March 31, 2014


Three Months Ended

March 31, 2013

Currencies

% of Revenue

% of Expenses*


% of Revenue

% of Expenses*

EURO

27%

17%


29%

17%

GBP

9%

10%


8%

8%

CAD

4%

14%


6%

19%

USD

48%

42%


47%

42%

Other

12%

17%


10%

14%

Total

100%

100%


100%

100%










Nine Months Ended

March 31, 2014


Nine Months Ended

March 31, 2013

Currencies

% of Revenue

% of Expenses*


% of Revenue

% of Expenses*

EURO

28%

18%


26%

17%

GBP

8%

9%


8%

8%

CAD

5%

16%


6%

18%

USD

48%

41%


49%

43%

Other

11%

16%


11%

14%

Total

100%

100%


100%

100%



*

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

 

 

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