OpenText Reports Second Quarter Fiscal Year 2018 Financial Results

 

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars)

(unaudited)



Three Months Ended December 31,


Six Months Ended December 31,


2017


2016


2017


2016

Cash flows from operating activities:








Net income for the period

$

84,917



$

45,034



$

121,607



$

957,945


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








Depreciation and amortization of intangible assets

115,467



73,964



222,094



145,977


Share-based compensation expense

7,158



7,572



15,393



15,712


Excess tax expense (benefits) on share-based compensation expense



(537)





(542)


Pension expense

834



871



1,869



2,061


Amortization of debt issuance costs

1,234



1,331



2,532



2,654


Amortization of deferred charges and credits

1,117



2,146



2,234



4,292


Loss on sale and write down of property and equipment





163




Release of unrealized gain on marketable securities to income





(841)




Deferred taxes

38,427



7,591



44,374



(868,233)


Share in net (income) loss of equity investees

(316)



(464)



196



(5,993)


Other non-cash charges







1,033


Changes in operating assets and liabilities:








Accounts receivable

(54,620)



(15,713)



(49,458)



456


Prepaid expenses and other current assets

(2,575)



13,074



(5,383)



11,885


Income taxes and deferred charges and credits

(7,565)



(12,841)



1,583



(9,620)


Accounts payable and accrued liabilities

(8,023)



6,604



(72,499)



(23,995)


Deferred revenue

(10,366)



(21,633)



(48,846)



(47,742)


Other assets

958



20



(1,269)



(5,420)


Net cash provided by operating activities

166,647



107,019



233,749



180,470


Cash flows from investing activities:








Additions of property and equipment

(25,488)



(11,609)



(55,937)



(32,274)


Proceeds from maturity of short-term investments







9,212


Purchase of Guidance Software,  net of cash acquired

(8,510)





(229,275)




Purchase of Covisint Corporation, net of cash acquired





(71,279)




Purchase of HP Inc. CCM Business



(2,802)





(315,000)


Purchase of Recommind, Inc.







(170,107)


Purchase of HP Inc. CEM Business







(7,289)


Purchase consideration for acquisitions completed prior to Fiscal 2017



143





143


Other investing activities

(3,855)



(440)



(8,061)



(563)


Net cash used in investing activities

(37,853)



(14,708)



(364,552)



(515,878)


Cash flows from financing activities:








Excess tax (expense) benefits on share-based compensation expense



537





542


Proceeds from issuance of long-term debt and revolver



256,875



200,000



256,875


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

7,797



5,391



29,622



10,701


Proceeds from issuance of Common shares under public Equity Offering



604,223





604,223


Repayment of long-term debt and revolver

(1,940)



(2,000)



(3,880)



(4,000)


Debt issuance costs



(2,825)





(4,155)


Equity issuance costs



(18,127)





(18,127)


Payments of dividends to shareholders

(34,811)



(27,859)



(69,828)



(55,650)


Net cash provided by (used in) financing activities

(28,954)



816,215



155,914



790,409


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

(216)



(20,979)



7,546



(16,267)


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

99,624



887,547



32,657



438,734


Cash and cash equivalents at beginning of the period

376,390



834,944



443,357



1,283,757


Cash and cash equivalents at end of the period

$

476,014



$

1,722,491



$

476,014



$

1,722,491




Notes




(1)

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



(2)

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




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




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




Adjusted earnings (loss) before interest, taxes, depreciation and amortization (Adjusted EBITDA) is calculated as GAAP-based net income, attributable to OpenText, excluding interest income (expense), provision for income taxes, depreciation and amortization of acquired intangible assets, other income (expense), share-based compensation and Special charges (recoveries).




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 (recoveries), 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.




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:


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