OpenText Reports Second Quarter Fiscal Year 2014 Financial Results - 21 News Now, More Local News for Youngstown, Ohio -

OpenText Reports Second Quarter Fiscal Year 2014 Financial Results

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SOURCE Open Text Corporation

WATERLOO, Ontario, Jan. 23, 2014 /PRNewswire/ -- Open Text Corporation (NASDAQ: OTEX) (TSX: OTC) announced today its financial results for the second quarter ended December 31, 2013.

Financial Highlights for Q2 FY14 (1)

  • Total revenue was $363.5 million, up 3% Y/Y
  • License revenue was $81.2 million, up 7% Y/Y
  • Customer Support revenue was $174.4 million, up 6% Y/Y
  • Non-GAAP-based EPS, diluted was $1.58 compared to $1.58, flat Y/Y; GAAP-based EPS, diluted was $0.90 compared to $1.04 Y/Y (2)
  • Non-GAAP-based income from operations was $112.3 million and 31% of revenues; GAAP-based income from operations was $73.9 million and 20% of revenues (2)
  • Operating cash flow was $60.9 million, compared to $74.7 million Y/Y, down 19%Y/Y, with an ending cash balance of $515.4 million.

"The OpenText product lineup has never been stronger with our Enterprise Suites for EIM, AppWorks for Developers and now GXS for B2B integration," said OpenText CEO Mark J. Barrenechea.  "We are committed to leading Enterprise Information Management with the best products and cloud-based services. The OpenText Cloud now manages over 16 billion transactions per year, approximately 600,000 trading partners and 40,000 customers.  I am pleased with our progress that includes 7% year over year license growth."

Business Highlights

  • OpenText buys GXS, a Maryland-based leader in business-to-business (B2B) cloud integration
  • Financial, services and public sector industries saw the most demand
  • 6 license transactions over $1 million and 15 license transactions between $500K and $1 million
  • Hosted OpenText Enterprise World 2013, the Company's largest conference ever; launched seven product suites and developer platform AppWorks
  • Customer successes in the quarter include CZ, Home Trust, Sobeys Inc., Insurance Corporation of British Columbia, Fox Entertainment Group, MMM Group, Qatar University and iGATE-CHCS Services, Inc. 
  • OpenText begins to ship integration suites as part of Project Red Oxygen
  • Unveiled new generation of web-based high-performance remote application access solution
  • Launched new secure messaging cloud services
  • Unveiled OpenText Extended ECM for Oracle E-Business Suite
  • Partnered with hybris software, an SAP company, to enhance its customer experience management (CEM) ecosystem
  • OpenText named a leader in Document Output for Customer Communications Management in leading analyst firm report (Forrester Research, Inc.)

Dividend Program Highlights

Stock Dividends
On January 23, 2014, we announced that our Board of Directors approved a two-for-one stock split of our outstanding Common Shares.  The two-for-one stock split will be implemented by way of a stock dividend whereby shareholders will receive one Common Share for each Common Share held. The record date for the stock dividend will be February 7, 2014 and the payment date will be February 18, 2014. We are undertaking the stock split to make our Common Shares more readily accessible to individual shareholders, increase and broaden our shareholder base, and improve the liquidity of the market for our Common Shares. As of January 22, 2014 there were 60,473,680 OpenText Common Shares outstanding. Adjusting for the stock split, there will be 120,947,360 OpenText Common Shares outstanding.

Cash Dividends
As part of our quarterly, non cumulative cash dividend program we declared, on January 23, 2014 a dividend of $0.15 per Common Share (or $0.30 per Common Share on a pre stock split basis). The record date for this dividend is February 25, 2014 and the payment date is March 14, 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









Q2 FY14

Q1 FY14

Q2 FY13

% Change 

(Q/Q)


% Change

(Y/Y)


Revenue (million)

$

363.5


$

324.5


$

352.2


12.0%



3.2%



GAAP-based gross margin

70.3%


67.2%


64.8%


310


bps

550


bps

GAAP-based operating margin

20.3%


16.0%


19.1%


430


bps

120


bps

GAAP-based EPS, diluted

$

0.90


$

0.52


$

1.04


73.1%



(13.5)%



Non-GAAP-based gross margin (2)

74.0%


73.9%


71.5%


10


bps

250


bps

Non-GAAP-based operating margin (2)

30.9%


30.6%


32.1%


30


bps

(120)


bps

Non-GAAP-based EPS, diluted (2)

$

1.58


$

1.37


$

1.58


15.3%



-%



 

Summary of Year to Date Results







Q2 FY14

Q1 FY14

Q2 FY13

% Change

(Y/Y)


Revenue (million)

$

688.0


$

324.5


$

678.4


1.4%



GAAP-based gross margin

68.8%


67.2%


63.8%


500


bps

GAAP-based operating margin

18.3%


16.0%


15.8%


250


bps

GAAP-based EPS, diluted

$

1.41


$

0.52


$

1.37


2.9%



Non-GAAP-based gross margin (2)

74.0%


73.9%


70.8%


320


bps

Non-GAAP-based operating margin (2)

30.7%


30.6%


30.5%


20


bps

Non-GAAP-based EPS, diluted (2)

$

2.95


$

1.37


$

2.89


2.1%



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 February 6, 2014 and can be accessed by dialing 1-877-289-8525 (toll-free) or 416-640-1917 (international) and entering the confirmation code: 4661601 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. 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 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 to be realized by customers; (viii) the demand for the Company's product and the extent of deployment of the Company's products 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 Exchange Act, and the rules promulgated thereunder; (iii) the risks associated with bringing new products 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 possibility of technical, logistical or planning issues in connection with the deployment of the Company's products or services; (viii) the continuous commitment of the Company's customers; and (ix) 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)



December 31, 2013


June 30, 2013


(Unaudited)



ASSETS




Cash and cash equivalents

$

515,354


$

470,445

Accounts receivable trade, net of allowance for doubtful accounts of $3,937 as of December 31, 2013 and $4,871 as of June 30, 2013

173,347


174,927

Income taxes recoverable

14,048


17,173

Prepaid expenses and other current assets

48,348


43,464

Deferred tax assets

10,671


11,082

Total current assets

761,768


717,091

Property and equipment

96,737


88,364

Goodwill

1,267,317


1,246,872

Acquired intangible assets

324,185


363,615

Deferred tax assets

133,502


135,695

Other assets

26,648


25,082

Deferred charges

60,005


67,633

Long-term income taxes recoverable

10,560


10,465

Total assets

$

2,680,722


$

2,654,817

LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable and accrued liabilities

$

188,896


$

188,443

Current portion of long-term debt

54,994


51,742

Deferred revenues

246,738


282,387

Income taxes payable

6,494


4,184

Deferred tax liabilities

1,150


1,127

Total current liabilities

498,272


527,883

Long-term liabilities:




Accrued liabilities

19,344


17,849

Deferred credits

18,401


11,608

Pension liability

25,062


24,509

Long-term debt

491,250


513,750

Deferred revenues

13,014


11,830

Long-term income taxes payable

146,848


140,508

Deferred tax liabilities

62,245


69,672

Total long-term liabilities

776,164


789,726

Shareholders' equity:




Share capital




59,159,544 and 59,028,886 Common Shares issued and outstanding at December 31, 2013 and June 30, 2013, respectively; Authorized Common Shares: unlimited

656,901


651,642

Additional paid-in capital

105,281


101,865

Accumulated other comprehensive income

42,677


39,890

Retained earnings

621,547


572,885

Treasury stock, at cost (416,707 shares at December 31, 2013 and 610,878 at June 30, 2013, respectively)

(20,120)


(29,074)

Total shareholders' equity

1,406,286


1,337,208

Total liabilities and shareholders' equity

$

2,680,722


$

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
December 31,


Six Months Ended
December 31,



2013


2012


2013


2012

Revenues:









License


$

81,164


$

76,125


$

136,470


$

131,781

Cloud services


42,131


44,842


83,778


88,715

Customer support


174,425


164,658


342,865


326,754

Professional service and other


65,787


66,555


124,854


131,124

Total revenues


363,507


352,180


687,967


678,374

Cost of revenues:









License


3,304


5,331


6,340


9,499

Cloud services


15,963


17,946


30,228


35,928

Customer support


24,409


28,277


46,579


54,100

Professional service and other


51,245


49,242


96,680


99,294

Amortization of acquired technology-based intangible assets


13,035


23,191


34,565


46,973

Total cost of revenues


107,956


123,987


214,392


245,794

Gross profit


255,551


228,193


473,575


432,580

Operating expenses:









Research and development


41,917


38,718


82,133


78,624

Sales and marketing


81,290


67,977


150,703


132,492

General and administrative


32,815


28,742


61,701


55,706

Depreciation


6,898


6,105


13,356


12,214

Amortization of acquired customer-based intangible assets


12,432


17,147


29,709


34,399

Special charges


6,268


2,269


9,999


11,823

Total operating expenses


181,620


160,958


347,601


325,258

Income from operations


73,931


67,235


125,974


107,322

Other income (expense), net


(740)


1,541


1,186


1,470

Interest and other related expense, net


(3,040)


(4,515)


(7,425)


(8,883)

Income before income taxes


70,151


64,261


119,735


99,909

Provision for income taxes


16,651


3,153


35,605


19,372

Net income for the period


$

53,500


$

61,108


$

84,130


$

80,537

Earnings per share-basic


$

0.90


$

1.04


$

1.42


$

1.38

Earnings per share-diluted


$

0.90


$

1.04


$

1.41


$

1.37

Weighted average number of Common Shares outstanding-basic


59,136


58,503


59,100


58,473

Weighted average number of Common Shares outstanding-diluted


59,593


58,983


59,475


58,961

Dividends declared per Common Share


$

0.30


$

-


$

0.60


$

-

 

 


OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands of U.S. dollars)

(unaudited)



Three Months Ended
December 31,


Six Months Ended
December 31,


2013


2012


2013


2012

Net income for the period

$

53,500


$

61,108


$

84,130


$

80,537

Other comprehensive income-net of tax:








Net foreign currency translation adjustments

113


(989)


354


(1,465)

Unrealized gain (loss) on cash flow hedges








Unrealized gain (loss)

(1,433)


(495)


87


2,005

(Gain) loss reclassified into net income

589


(958)


1,173


(1,514)

Actuarial gain (loss) relating to defined benefit pension plans








Actuarial gain (loss)

944


(695)


1,027


(876)

Amortization of actuarial loss into net income

73


75


146


147

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

286


(3,062)


2,787


(1,703)

Total comprehensive income

$

53,786


$

58,046


$

86,917


$

78,834




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,


2013


2012


2013


2012

Cash flows from operating activities:








Net income for the period

$

53,500


$

61,108


$

84,130


$

80,537

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








Depreciation and amortization of intangible assets

32,365


46,443


77,630


93,586

Share-based compensation expense

6,677


3,174


11,289


6,276

Excess tax benefits on share-based compensation expense

(1,008)


(259)


(1,081)


(611)

Pension expense

309


228


539


470

Amortization of debt issuance costs

519


535


1,044


1,072

Amortization of deferred charges and credits

2,967


2,929


5,934


5,858

Loss on sale and write down of property and equipment

(6)


22


15


24

Deferred taxes

(1,329)


(2,013)


(3,198)


(1,152)

Changes in operating assets and liabilities:








Accounts receivable

(19,602)


964


9,176


20,406

Prepaid expenses and other current assets

(729)


(1,640)


(4,161)


1,384

Income taxes

(5,093)


(18,261)


2,409


(13,888)

Deferred charges and credits

5,788


-


8,488


(436)

Accounts payable and accrued liabilities

7,375


(365)


(10,595)


(20,620)

Deferred revenue

(21,574)


(18,668)


(40,134)


(36,738)

Other assets

716


497


(686)


289

Net cash provided by operating activities

60,875


74,694


140,799


136,457

Cash flows from investing activities:








Additions of property and equipment

(11,913)


(4,879)


(20,228)


(9,917)

Purchase of patents

(192)


-


(192)


-

Purchase of EasyLink Services International Corporation, net of cash acquired

-


-


-


(315,331)

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

-


(516)


-


(516)

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

-


-


(30,588)


-

Purchase consideration for prior period acquisitions

(221)


(214)


(443)


(431)

Other investing activities

526


-


(974)


-

Net cash used in investing activities

(11,800)


(5,609)


(52,425)


(326,195)

Cash flows from financing activities:








Excess tax benefits on share-based compensation expense

1,008


259


1,081


611

Proceeds from issuance of Common Shares

3,606


2,409


5,429


6,402

Repayment of long-term debt

(11,419)


(7,671)


(19,087)


(15,338)

Debt issuance costs

(273)


-


(273)


-

Payments of dividends to shareholders

(17,747)


-


(35,468)


-

Net cash used in financing activities

(24,825)


(5,003)


(48,318)


(8,325)

Foreign exchange gain on cash held in foreign currencies

(43)


941


4,853


5,574

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

24,207


65,023


44,909


(192,489)

Cash and cash equivalents at beginning of the period

491,147


302,235


470,445


559,747

Cash and cash equivalents at end of the period

$

515,354


$

367,258


$

515,354


$

367,258

 

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 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

53,500




40,501


(8)


94,001



GAAP-based earnings per share /
Non GAAP-based earnings per share-diluted

$

0.90




$

0.68


(8)


$

1.58







(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 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

$

94,001


$

1.58

Less:




Amortization

25,467


0.43

Share-based compensation

6,677


0.11

Special charges

6,268


0.11

Other (income) expense, net

740


0.01

GAAP-based provision for (recovery of) income taxes

16,651


0.28

Non-GAAP-based provision for income taxes

(15,302)


(0.26)

GAAP-based net income

$

53,500


$

0.90




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

84,130




91,405


(8)


175,535



GAAP-based earnings per share /
Non GAAP-based earnings per share-diluted

$

1.41




$

1.54


(8)


$

2.95



 

(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 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:  

 


Six Months Ended
December 31, 2013



Per share diluted  

Non-GAAP-based net income

$

175,535


$

2.95

Less:



Amortization

64,274


1.08

Share-based compensation

11,289


0.19

Special charges

9,999


0.17

Other (income) expense, net

(1,186)


(0.02)

GAAP-based provision for (recovery of) income taxes

35,605


0.60

Non-GAAP-based provision for income taxes

(28,576)


(0.48)

GAAP-based net income

$

84,130


$

1.41

 


Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the three months ended September 30, 2013.

(In thousands except for per share amounts)


Three Months Ended
September 30, 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

$

14,265




$

(38)


(1)


$

14,227



Customer support

22,170




(97)


(1)


22,073



Professional service and other

45,435




(170)


(1)


45,265



Amortization of acquired technology-based intangible assets

21,530




(21,530)


(2)


-



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

218,024


67.2%


21,835


(3)


239,859


73.9%

Operating expenses











Research and development

40,216




(728)


(1)


39,488



Sales and marketing

69,413




(2,353)


(1)


67,060



General and administrative

28,886




(1,226)


(1)


27,660



Amortization of acquired customer-based intangible assets

17,277




(17,277)


(2)


-



Special charges

3,731




(3,731)


(4)


-



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

52,043


16.0%


47,150


(5)


99,193


30.6%

Other income (expense), net

1,926




(1,926)


(6)


-



Provision for (recovery of) income taxes

18,954




(5,681)


(7)


13,273



GAAP-based net income / Non-GAAP-based net income

30,630




50,905


(8)


81,535



GAAP-based earnings per share /
Non GAAP-based earnings per share-diluted

$

0.52




$

0.85


(8)


$

1.37



 

(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 38% 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
September 30, 2013




Per share diluted  

Non-GAAP-based net income

$

81,535


$

1.37

Less:




Amortization

38,807


0.65

Share-based compensation

4,612


0.08

Special charges

3,731


0.06

Other (income) expense, net

(1,926)


(0.03)

GAAP-based provision for (recovery of) income taxes

18,954


0.32

Non-GAAP-based provision for income taxes

(13,273)


(0.23)

GAAP-based net income

$

30,630


$

0.52



Reconciliation of selected GAAP-based measures to Non GAAP-based measures for the three months ended December 31, 2012.

(In thousands except for per share amounts)


Three Months Ended
December 31, 2012


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

$

17,946




$

(30)


(1)


$

17,916



Customer support

$

28,277




$

(107)


(1)


$

28,170



Professional service and other

49,242




(188)


(1)


49,054



Amortization of acquired technology-based intangible assets

23,191




(23,191)


(2)


-



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

228,193


64.8%


23,516


(3)


251,709


71.5%

Operating expenses











Research and development

38,718




(331)


(1)


38,387



Sales and marketing

67,977




(1,653)


(1)


66,324



General and administrative

28,742




(865)


(1)


27,877



Amortization of acquired customer-based intangible assets

17,147




(17,147)


(2)


-



Special charges

2,269




(2,269)


(4)


-



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

67,235


19.1%


45,781


(5)


113,016


32.1%

Other income (expense), net

1,541




(1,541)


(6)


-



Provision for (recovery of) income taxes

3,153




12,037


(7)


15,190



GAAP-based net income / Non-GAAP-based net income

61,108




32,203


(8)


93,311



GAAP-based earnings per share /
Non GAAP-based earnings per share-diluted

$

1.04




$

0.54


(8)


$

1.58



 

(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 5% 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, 2012




Per share diluted  

Non-GAAP-based net income

$

93,311


$

1.58

Less:




Amortization

40,338


0.68

Share-based compensation

3,174


0.05

Special charges

2,269


0.04

Other (income) expense, net

(1,541)


(0.03)

GAAP-based provision for (recovery of) income taxes

3,153


0.05

Non-GAAP-based provision for income taxes

(15,190)


(0.25)

GAAP-based net income

$

61,108


$

1.04



Reconciliation of selected GAAP-based measures to Non GAAP-based measures for the six months ended December 31, 2012.

(In thousands except for per share amounts)


Six Months Ended
December 31, 2012


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

$

35,928




$

(30)


(1)


$

35,898



Customer support

$

54,100




$

(145)


(1)


$

53,955



Professional service and other

99,294




(365)


(1)


98,929



Amortization of acquired technology-based intangible assets

46,973




(46,973)


(2)


-



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

432,580


63.8%


47,513


(3)


480,093


70.8%

Operating expenses












Research and development

78,624




(669)


(1)


77,955



Sales and marketing

132,492




(3,319)


(1)


129,173



General and administrative

55,706




(1,748)


(1)


53,958



Amortization of acquired customer-based intangible assets

34,399




(34,399)


(2)


-



Special charges

11,823




(11,823)


(4)


-



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

107,322


15.8%


99,471


(5)


206,793


30.5%

Other income (expense), net

1,470




(1,470)


(6)


-



Provision for (recovery of) income taxes

19,372




8,335


(7)


27,707



GAAP-based net income / Non-GAAP-based net income

80,537




89,666


(8)


170,203



GAAP-based earnings per share /
Non GAAP-based earnings per share-diluted

$

1.37




$

1.52


(8)


$

2.89



 

(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 19% 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, 2012




Per share diluted  

Non-GAAP-based net income

$

170,203


$

2.89

Less:




Amortization

81,372


1.38

Share-based compensation

6,276


0.11

Special charges

11,823


0.20

Other (income) expense, net

(1,470)


(0.02)

GAAP-based provision for (recovery of) income taxes

19,372


0.33

Non-GAAP-based provision for income taxes

(27,707)


(0.48)

GAAP-based net income

$

80,537


$

1.37

 


(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 December 31, 2013 and 2012:

 

 


Three Months Ended
December 31, 2013



Three Months Ended
December 31, 2012

Currencies

 

% of Revenue

 

% of Expenses*

 



% of Revenue

 

% of Expenses*

 

EURO

29%


19%



26%


16%

GBP

8%


9%



8%


8%

CAD

6%


17%



6%


19%

USD

46%


40%



48%


43%

Other

11%


15%



12%


14%

Total

100%


100%



100%


100%




Six Months Ended
December 31, 2013



Six Months Ended
December 31, 2012

Currencies

 

% of Revenue

 

% of Expenses*

 


% of Revenue

 

% of Expenses*

 

EURO

28%


18%



25%


16%

GBP

8%


9%



8%


8%

CAD

6%


17%



6%


18%

USD

48%


41%



49%


44%

Other

10%


15%



12%


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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