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Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the three months ended December 31, 2017. (In thousands except for per share amounts) |
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Three Months Ended December 31, 2017 |
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GAAP-based Measures |
GAAP-based Measures
|
Adjustments |
Note |
Non-GAAP-based Measures |
Non-GAAP-based Measures % of Total Revenue |
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Cost of revenues |
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Cloud services and subscriptions |
$ |
90,418 |
$ |
(462) |
(1) |
$ |
89,956 |
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|
Customer support |
33,194 |
(327) |
(1) |
32,867 |
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|
Professional service and other |
64,985 |
(603) |
(1) |
64,382 |
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Amortization of acquired technology-based intangible assets |
47,128 |
(47,128) |
(2) |
— |
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GAAP-based gross profit and gross margin (%) /
|
494,093 |
67.3 |
% |
48,520 |
(3) |
542,613 |
73.9 |
% |
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Operating expenses |
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Research and development |
80,304 |
(1,587) |
(1) |
78,717 |
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Sales and marketing |
129,142 |
(2,095) |
(1) |
127,047 |
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General and administrative |
48,985 |
(2,084) |
(1) |
46,901 |
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Amortization of acquired customer-based intangible assets |
46,268 |
(46,268) |
(2) |
— |
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Special charges (recoveries) |
715 |
(715) |
(4) |
— |
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GAAP-based income from operations and operating margin (%) / Non-GAAP-based income from operations and operating margin (%) |
166,608 |
22.7 |
% |
101,269 |
(5) |
267,877 |
36.5 |
% |
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Other income (expense), net |
5,547 |
(5,547) |
(6) |
— |
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Provision for (recovery of) income taxes |
53,146 |
(22,095) |
(7) |
31,051 |
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GAAP-based net income / Non-GAAP-based net income, attributable to OpenText |
85,111 |
117,817 |
(8) |
202,928 |
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GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText |
$ |
0.32 |
$ |
0.44 |
(8) |
$ |
0.76 |
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(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. |
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(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. |
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(3) |
GAAP-based and Non-GAAP-based gross profit stated in dollars, and gross margin stated as a percentage of total revenue. |
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(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 one-time, non-recurring charges or recoveries that are not indicative or related to continuing operations, and are therefore excluded from our internal analysis of operating results. |
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(5) |
GAAP-based and Non-GAAP-based income from operations stated in dollars, and operating margin stated as a percentage of total revenue. |
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(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. Other income (expense) also includes our share of income (losses) from our holdings in non-marketable securities 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. |
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(7) |
Adjustment relates to differences between the GAAP-based tax provision rate of approximately 38% and a Non-GAAP-based tax rate of approximately 13%; 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. Such excluded expenses 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 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 13%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense. In addition, as a result of the changes in US tax reform legislation that was enacted on December 22, 2017 through the Tax Cuts and Jobs Act, the Company has reassessed its Non-GAAP-based tax rate to be approximately 14% for the six months ended December 31, 2017, down from 15%. Pursuant to this, the Non-GAAP-based tax rate of approximately 13% for the three months ended December 31, 2017 includes a one-time cumulative catch up of recoveries and charges, as though the Company's Non-GAAP-based tax rate was 14% as of July 1, 2017. |
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(8) |
Reconciliation of GAAP-based net income to Non-GAAP-based net income: |
