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Press Release: OpenText Reports Second Quarter -5-

· 02/04/2021 16:01
The Company's management believes that the presentation of the above defined Non-GAAP financial measures provides useful information to investors because they portray the financial results of the Company before the impact of certain non-operational charges. The use of the term "non-operational charge" is defined for this purpose as an expense that does not impact the ongoing operating decisions taken by the Company's management. These items are excluded based upon the way the Company's management evaluates the performance of the Company's business for use in the Company's internal reports and are not excluded in the sense that they may be used under U.S. GAAP. The Company does not acquire businesses on a predictable cycle, and therefore believes that the presentation of Non-GAAP measures, which in certain cases adjust for the impact of amortization of intangible assets and the related tax effects that are primarily related to acquisitions, will provide readers of financial statements with a more consistent basis for comparison across accounting periods and be more useful in helping readers understand the Company's operating results and underlying operational trends. Additionally, the Company has engaged in various restructuring activities over the past several years, primarily due to acquisitions, that have resulted in costs associated with reductions in headcount, consolidation of leased facilities and related costs, all which are recorded under the Company's "Special charges (recoveries)" caption on the Consolidated Statements of Income (Loss). Each restructuring activity is a discrete event based on a unique set of business objectives or circumstances, and each differs in terms of its operational implementation, business impact and scope, and the size of each restructuring plan can vary significantly from period to period. Therefore, the Company believes that the exclusion of these special charges (recoveries) will also better aid readers of financial statements in the understanding and comparability of the Company's operating results and underlying operational trends. In summary, the Company believes the provision of supplemental Non-GAAP measures allow investors to evaluate the operational and financial performance of the Company's core business using the same evaluation measures that management uses, and is therefore a useful indication of OpenText's performance or expected performance of future operations and facilitates period-to-period comparison of operating performance (although prior performance is not necessarily indicative of future performance). As a result, the Company considers it appropriate and reasonable to provide, in addition to U.S. GAAP measures, supplementary Non-GAAP financial measures that exclude certain items from the presentation of its financial results. The following charts provide unaudited reconciliations of U.S. GAAP-based financial measures to Non-GAAP-based financial measures for the following periods presented. Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the three months ended December 31, 2020. (In thousands, except for per share data) ------------------------------------------------------------------------------------------ Three Months Ended December 31, 2020 Non-GAAP- GAAP-based based Measures % Non-GAAP- Measures GAAP-based of Total based % of Total Measures Revenue Adjustments Note Measures Revenue Cost of revenues Cloud services and subscriptions $ 117,882 $ (1,143) (1) $ 116,739 Customer support 29,668 (499) (1) 29,169 Professional service and other 46,619 (666) (1) 45,953 Amortization of acquired technology-based intangible assets 54,091 (54,091) (2) -- GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%) 603,082 70.5% 56,399 (3) 659,481 77.1% Operating expenses Research and development 100,238 (2,707) (1) 97,531 Sales and marketing 147,897 (4,957) (1) 142,940 General and administrative 62,765 (4,554) (1) 58,211 Amortization of acquired customer-based intangible assets 54,926 (54,926) (2) -- Special charges (recoveries) (17,494) 17,494 (4) -- GAAP-based income from operations / Non-GAAP-based income from operations 234,470 106,049 (5) 340,519 Other income (expense), net 5,251 (5,251) (6) -- Provision for (recovery of) income taxes 267,559 (225,150) (7) 42,409 GAAP-based net income (loss) / Non-GAAP-based net income, attributable to OpenText (65,477) 325,948 (8) 260,471 GAAP-based earnings (loss) per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText $ (0.24) $ 1.19 (8) $ 0.95 (1) Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results. (2) Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results. (3) GAAP-based and Non-GAAP-based gross profit stated in dollars and gross margin stated as a percentage of total revenue. (4) Adjustment relates to the exclusion of special charges (recoveries) from our Non-GAAP-based operating expenses as special charges (recoveries) are generally incurred in the periods relevant to an acquisition and include certain charges or recoveries that are not indicative or related to continuing operations, and are therefore excluded from our internal analysis of operating results. (5) GAAP-based and Non-GAAP-based income from operations stated in dollars. (6) Adjustment relates to the exclusion of other income (expense) from our Non-GAAP-based operating expenses as other income (expense) generally relates to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results. Other income (expense) also includes our share of income (losses) from our holdings in investments as a limited partner. We do not actively trade equity securities in these privately held companies nor do we plan our ongoing operations based around any anticipated fundings or distributions from these investments. We exclude gains and losses on these investments as we do not believe they are reflective of our ongoing business and operating results. (7) Adjustment relates to differences between the GAAP-based tax provision rate of approximately 132% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded items include amortization, share-based compensation, special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves, and "book to return" adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately 14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense. The GAAP-based tax provision rate for the three months ended December 31, 2020 includes an income tax provision charge from the IRS Settlement partially offset by a tax benefit from the release of unrecognized tax benefits due to the conclusion of relevant tax audits. (8) Reconciliation of GAAP-based net loss to Non-GAAP-based net income: Three Months Ended December 31, 2020 Per share diluted* GAAP-based net loss, attributable to OpenText $ (65,477) $ (0.24) Add: Amortization 109,017 0.40 Share-based compensation 14,526 0.05 Special charges (recoveries) (17,494) (0.06) Other (income) expense, net (5,251) (0.02) GAAP-based provision for (recovery of) income taxes 267,559 0.98 Non-GAAP-based provision for income taxes (42,409) (0.16)

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February 04, 2021 16:01 ET (21:01 GMT)