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OpenText Reports Third Quarter Fiscal Year 2014 Financial Results, Raises Quarterly Cash Dividend by 15%(Canada Newswire Via Acquire Media NewsEdge) WATERLOO, Ontario, April 24, 2014 /CNW/ - 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 millionCustomer 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 ServicesDividend 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 StatementsCertain 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 * 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 SecordVice President, Investor RelationsOpen Text CorporationSan Francisco: 415-963-0825 [email protected] Canada: Sonya MehanSenior Manager, Investor RelationsOpen Text CorporationWaterloo: 519-888-7111 ext. [email protected] 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. SOURCE Open Text Corporation |