Open Text : Q2 FY2020 Financial Statements

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

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

	December 31, 2019			June 30, 2019
ASSETS		(unaudited)
Cash and cash equivalents	$	675,403	$	941,009
Accounts receivable trade, net of allowance for doubtful accounts of $17,937 as of		526,020			463,785
December 31, 2019 and $17,011 as of June 30, 2019
Contract assets		22,794			20,956
Income taxes recoverable		24,615			38,340
Prepaid expenses and other current assets		104,962			97,238
Total current assets		1,353,794			1,561,328
Property and equipment		273,448			249,453
Operating lease right of use assets		253,387			-
Long-term contract assets		17,975			15,386
Goodwill		4,656,492			3,769,908
Acquired intangible assets		1,808,072			1,146,504
Deferred tax assets		930,856			1,004,450
Other assets		158,058			148,977
Long-term income taxes recoverable		46,151			37,969
Total assets	$	9,498,233		$	7,933,975
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	417,611	$	329,903
Current portion of long-term debt		913,631			10,000
Operating lease liability		66,579			-
Deferred revenues		718,861			641,656
Income taxes payable		51,298			33,158
Total current liabilities		2,167,980			1,014,717
Long-term liabilities:
Accrued liabilities		14,977			49,441
Pension liability		73,678			75,239
Long-term debt		2,600,386			2,604,878
Long-term operating lease liability		218,681			-
Deferred revenues		77,335			46,974
Long-term income taxes payable		180,507			202,184
Deferred tax liabilities		165,457			55,872
Total long-term liabilities		3,331,021			3,034,588
Shareholders' equity:
Share capital and additional paid-in capital
270,608,627 and 269,834,442 Common Shares issued and outstanding at December		1,803,663			1,774,214
31, 2019 and June 30, 2019, respectively; authorized Common Shares: unlimited
Accumulated other comprehensive income		24,690			24,124
Retained earnings		2,201,653			2,113,883
Treasury stock, at cost (847,369 shares at December 31, 2019 and 802,871 shares at		(32,066)			(28,766)
June 30, 2019, respectively)
Total OpenText shareholders' equity		3,997,940			3,883,455
Non-controlling interests		1,292			1,215
Total shareholders' equity		3,999,232			3,884,670
Total liabilities and shareholders' equity	$	9,498,233		$	7,933,975

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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,
		2019			2018			2019			2018
Revenues:
License	$	138,095	$	132,756	$	215,993	$	209,643
Cloud services and subscriptions		248,340			219,233			485,605			427,316
Customer support		315,508			310,354			627,806			621,905
Professional service and other		69,614			72,888			139,041			143,524
Total revenues		771,557			735,231			1,468,445			1,402,388
Cost of revenues:
License		3,050			3,655			5,373			7,527
Cloud services and subscriptions		103,644			88,698			205,806			176,401
Customer support		29,788			31,273			59,175			61,738
Professional service and other		53,604			56,030			107,942			112,826
Amortization of acquired technology-
based intangible assets		42,299			48,366			82,597			95,843
Total cost of revenues		232,385			228,022			460,893			454,335
Gross profit		539,172			507,209			1,007,552			948,053
Operating expenses:
Research and development		80,283			75,753			161,461			153,223
Sales and marketing		137,310			126,193			265,928			246,375
General and administrative		54,595			52,198			106,130			103,122
Depreciation		20,712			23,834			40,989			47,688
Amortization of acquired customer-based
intangible assets		51,460			45,919			100,618			91,795
Special charges		10,072			9,380			15,173			32,691
Total operating expenses		354,432			333,277			690,299			674,894
Income from operations		184,740			173,932			317,253			273,159
Other income (expense), net		1,972			378			(813)			1,900
Interest and other related expense, net		(32,376)			(33,613)			(64,586)			(68,144)
Income before income taxes		154,336			140,697			251,854			206,915
Provision for (recovery of) income taxes		46,818			36,236			69,909			66,086
Net income for the period	$	107,518		$	104,461		$	181,945		$	140,829
Net (income) loss attributable to non-
controlling interests		(51)			(29)			(77)			(73)
Net income attributable to OpenText	$	107,467	$	104,432	$	181,868	$	140,756
Earnings per share-basic attributable to	$	0.40	$	0.39	$	0.67	$	0.52
OpenText
Earnings per share-diluted attributable to
OpenText	$	0.40	$	0.39	$	0.67	$	0.52
Weighted average number of Common Shares
outstanding-basic		270,450			268,524			270,232			268,276
Weighted average number of Common Shares
outstanding-diluted		271,590			269,400			271,328			269,396

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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,
			2019			2018			2019			2018
Net income for the period	$	107,518		$	104,461		$	181,945		$	140,829
Other comprehensive income (loss)-net of tax:
Net foreign currency translation adjustments		4,875			(3,418)			(736)			(6,938)
Unrealized gain (loss) on cash flow hedges:
	Unrealized gain (loss) - net of tax expense
	(recovery) effect of $301 and ($677) for the three		833			(1,877)			261			(1,375)
	months ended December 31, 2019 and 2018,
	respectively; $95 and($496) for the six months
	ended December 31, 2019 and 2018, respectively
	(Gain) loss reclassified into net income - net of tax
	(expense) recovery effect of ($26) and $169 for the		(72)			467			(64)			833
	three months ended December 31, 2019 and 2018,
	respectively; ($23) and $301 for the six months
	ended December 31, 2019 and 2018, respectively
Actuarial gain (loss) relating to defined benefit
pension plans:
	Actuarial gain (loss) - net of tax expense
	(recovery) effect of $1,308 and ($519) for the three		3,698			(1,521)			614			(324)
	months ended December 31, 2019 and 2018,
	respectively; $59 and ($213) for the six months
	ended December 31, 2019 and 2018, respectively
	Amortization of actuarial (gain) loss into net
	income - net of tax (expense) recovery effect of
	$97 and $72 for the three months ended December		260			64			491			130
	31, 2019 and 2018, respectively; $243 and $145
	for the six months ended December 31, 2019 and
	2018, respectively
Total other comprehensive income (loss) net, for the period		9,594			(6,285)			566			(7,674)
Total comprehensive income		117,112			98,176			182,511			133,155
Comprehensive (income) loss attributable to non-		(51)			(29)			(77)			(73)
controlling interests
Total comprehensive income attributable to OpenText	$	117,061		$	98,147		$	182,434		$	133,082

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OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands of U.S. dollars and shares)

(unaudited)

														Three Months Ended December 31, 2019
					Common Shares and		Treasury Stock				Accumulated			Non-
					Additional Paid in Capital						Other
																		Retained		Comprehensive		Controlling
					Shares				Amount		Shares			Amount		Total
												Earnings			Income			Interests
	Balance as of September 30, 2019		270,190			$ 1,791,689			(1,103)		$	(41,190)		$ 2,141,278		$	15,096		$	1,241		$ 3,908,114
	Issuance of Common Shares
	Under employee stock option plans	231	6,783				-			-		-			-			-	6,783
	Under employee stock purchase plans	188	6,532				-			-		-			-			-	6,532
	Share-based compensation		-	7,783				-			-		-			-			-	7,783
	Issuance of treasury stock		-	(9,124)			256			9,124		-			-			-		-
	Dividends declared		-				-		-			-	(47,092)			-			-	(47,092)
	($0.1746 per Common Share)
	Other comprehensive income (loss) - net		-				-		-			-		-			9,594			-	9,594
	Net income for the quarter		-				-		-			-	107,467			-			51	107,518
	Balance as of December 31, 2019	270,609			$ 1,803,663			(847)		$	(32,066)		$ 2,201,653		$	24,690		$	1,292		$ 3,999,232
														Three Months Ended December 31, 2018
					Common Shares and		Treasury Stock				Accumulated			Non-
					Additional Paid in Capital						Other
																		Retained		Comprehensive		Controlling
					Shares				Amount		Shares			Amount					Total
												Earnings			Income			Interests
	Balance as of September 30, 2018			268,332				$ 1,730,933				(992)		$	(30,381)		$ 1,993,099		$	32,256		$	1,123		$ 3,727,030
	Issuance of Common Shares
	Under employee stock option plans	62	1,740				-			-		-			-			-	1,740
	Under employee stock purchase plans	175	5,696				-			-		-			-			-	5,696
	Share-based compensation		-	6,885				-			-		-			-			-	6,885
	Purchase of treasury stock		-				-	(370)			(12,815)		-			-			-	(12,815)
	Issuance of treasury stock		-	(13,955)		545			13,955		-			-			-		-
	Dividends		-				-		-			-	(40,700)			-			-	(40,700)
	($0.1518 per Common Share)
	Other comprehensive income (loss) - net		-				-		-			-		-			(6,285)			-	(6,285)
	Net income for the quarter		-				-		-			-	104,432			-			29	104,461
	Balance as of December 31, 2018		268,569			$ 1,731,299				(817)		$	(29,241)		$ 2,056,831		$	25,971		$	1,152		$ 3,786,012
															Six Months Ended December 31, 2019
					Common Shares and		Treasury Stock				Accumulated			Non-
					Additional Paid in Capital						Other
																		Retained		Comprehensive		Controlling
					Shares				Amount		Shares			Amount					Total
												Earnings			Income			Interests
	Balance as of June 30, 2019		269,834			$ 1,774,214			(803)		$	(28,766)		$ 2,113,883		$	24,124		$	1,215		$ 3,884,670
	Issuance of Common Shares
	Under employee stock option plans	415	11,359				-			-		-			-			-	11,359
	Under employee stock purchase plans	360	12,540				-			-		-			-			-	12,540
	Share-based compensation		-	14,674				-			-		-			-			-	14,674
	Purchase of treasury stock		-				-	(300)			(12,424)		-			-			-	(12,424)
	Issuance of treasury stock		-	(9,124)			256			9,124		-			-			-		-
	Dividends declared ($0.3492 per Common		-				-		-			-	(94,098)			-			-	(94,098)
	Share)
	Other comprehensive income (loss) - net		-				-		-			-		-			566			-	566
	Net income for the quarter		-				-		-			-	181,868			-			77	181,945
	Balance as of December 31, 2019	270,609		$ 1,803,663			(847)		$	(32,066)		$ 2,201,653		$	24,690		$	1,292		$ 3,999,232

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									Six Months Ended December 31, 2018
			Common Shares and		Treasury Stock				Accumulated			Non-
			Additional Paid in Capital						Other
												Retained		Comprehensive		Controlling
			Shares		Amount		Shares			Amount		Total
								Earnings			Income			Interests
	Balance as of June 30, 2018		267,651		$ 1,707,073		(691)		$	(18,732)		$ 1,994,235		$	33,645		$	1,037		$ 3,717,258
	Adoption of ASU 2016-16 - cumulative effect	-		-		-			-	(26,780)			-			-	(26,780)
	Adoption of Topic 606 - cumulative effect	-		-		-			-	29,786			-			-	29,786
	Issuance of Common Shares
	Under employee stock option plans	556	14,171		-			-		-			-			-	14,171
	Under employee stock purchase plans	362	11,265		-			-		-			-			-	11,265
	Share-based compensation	-	13,440		-			-		-			-			-	13,440
	Purchase of treasury stock	-		-	(674)			(24,534)		-			-			-	(24,534)
	Issuance of treasury stock	-	(14,025)	548			14,025		-			-			-		-
	Dividends declared	-		-		-			-	(81,166)			-			-	(81,166)
	($0.3036 per Common Share)
	Other comprehensive income - net	-		-		-			-		-			(7,674)			-	(7,674)
	Non-controlling interest	-	(625)		-			-		-			-			42	(583)
	Net income for the year	-		-		-			-	140,756			-			73	140,829
	Balance as of December 31, 2018	268,569		$ 1,731,299		(817)		$	(29,241)		$ 2,056,831		$	25,971		$	1,152		$ 3,786,012

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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,
				2019			2018				2019			2018
	Cash flows from operating activities:
	Net income for the period	$	107,518		$	104,461	$	181,945	$	140,829
	Adjustments to reconcile net income to net cash provided by
	operating activities:
	Depreciation and amortization of intangible assets		114,471			118,119				224,204			235,326
	Share-based compensation expense		7,783			6,885				14,674			13,440
	Pension expense		1,459			1,109				2,895			2,254
	Amortization of debt issuance costs		1,149			1,079				2,276			2,157
	Loss on sale and write down of property and equipment		-		1,639				-			9,428
	Deferred taxes		27,924			1,140				34,168			8,909
	Share in net (income) loss of equity investees		(1,266)			(5,491)				(1,948)			(7,863)
	Changes in operating assets and liabilities:
	Accounts receivable		(55,833)			(40,327)				2,598			33,548
	Contract assets		(10,458)			(8,054)				(17,659)			(13,400)
	Prepaid expenses and other current assets		1,111			2,800				(501)			12,532
	Income taxes and deferred charges and credits		(7,944)			4,763				(891)			17,324
	Accounts payable and accrued liabilities		29,744			10,253				(33,235)			(29,748)
	Deferred revenue		(2,924)			(11,748)				(64,093)			(69,151)
	Other assets		(3,327)			2,475				2,357			4,919
	Operating lease assets and liabilities, net		(2,169)			-				(2,105)			-
	Net cash provided by operating activities		207,238			189,103				344,685			360,504
	Cash flows from investing activities:
	Additions of property and equipment		(19,598)			(8,969)				(38,212)			(33,464)
	Purchase of Carbonite, Inc., net of cash and restricted cash
	acquired		(1,216,639)			-				(1,216,639)			-
	Purchase of Dynamic Solutions Group Inc.		(4,149)			-				(4,149)			-
	Purchase of Liaison Technologies, Inc.		-		(311,285)				-			(311,285)
	Purchase of Guidance Software, Inc., net of cash acquired		-		-				-			(2,279)
	Other investing activities		(3,505)			(5,369)				(5,541)			(6,373)
	Net cash used in investing activities		(1,243,891)			(325,623)				(1,264,541)			(353,401)
	Cash flows from financing activities:
	Proceeds from long-term debt and Revolver		750,000			-				750,000			-
	Proceeds from issuance of Common Shares from exercise of		12,000			6,159				23,117			24,286
	stock options and ESPP
	Repayment of long-term debt and revolver		(2,500)			(2,500)				(5,000)			(5,000)
	Debt issuance costs		(979)			-				(979)			(322)
	Purchase of Treasury Stock		-		(12,815)				(12,424)			(24,534)
	Purchase of non-controlling interest		-		-				-			(583)
	Payments of dividends to shareholders		(47,092)			(40,700)				(94,098)			(81,166)
	Net cash provided by (used in) financing activities		711,429			(49,856)				660,616			(87,319)
	Foreign exchange gain (loss) on cash held in foreign currencies		3,640			(6,329)				(4,071)			(5,901)
	Increase (decrease) in cash, cash equivalents and restricted cash
	during the period		(321,584)			(192,705)				(263,311)			(86,117)
	Cash, cash equivalents and restricted cash at beginning of the
	period		1,001,816			790,579				943,543			683,991
	Cash, cash equivalents and restricted cash at end of the period	$	680,232		$	597,874		$	680,232		$	597,874
	Reconciliation of cash, cash equivalents and restricted cash:
		December 31, 2019				December 31, 2018
	Cash and cash equivalents						675,403							595,069
	Restricted cash included in Other assets					4,829							2,805
	Total Cash, cash equivalents and restricted cash		$				680,232		$			597,874

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