Open Text Reports Second Quarter Fiscal Year 2013 Financial Results

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Jan 24, 2013, 04:01 ET

WATERLOO, ON, Jan. 24, 2013 /PRNewswire/ - Open Text^(TM) Corporation (NASDAQ:OTEX) (TSX: OTC), announced today its financial results for the second quarter ended December 31, 2012.

Financial Highlights for Q2 FY13 (1)

Total revenue for the period was $352.2 million, up 10% Y/Y
License revenue was $76.1 million, compared to $89.7 million last year
Cloud services revenue was $46.2 million
Non-GAAP-based EPS, diluted was $1.58 compared to $1.39 Y/Y, up 14% Y/Y; GAAP-based EPS, diluted was $1.04 compared to $0.81 Y/Y ₍₂₎
Non-GAAP-based operating income was $113.0 million and 32.1% of revenues; GAAP-based income from operations was $67.2 million and 19% of revenues ₍₂₎
Operating cash flow was $74.7 million compared to $44.7 million up 67%Y/Y, with an ending cash balance of $367.3 million.

"We performed well in the quarter, delivering the highest quarterly revenue, non-GAAP operating margin, and non-GAAP EPS in the Company's history," said OpenText CEO Mark J. Barrenechea. "We continue to invest in expanding our sales force and building new products, balanced with strong earnings. I am confident these investments will yield results."

"We are committed to leading the market with the broadest range of EIM software and services, both on premise and in the cloud."

Business Highlights

Financial, services, technology and basic materials industries saw the most demand
5 license transactions over $1 million and 11 license transactions between $500K and $1 million in the second quarter
Customer successes in the second quarter include Husch Blackwell Sanders, Defense Logistics Agency, LG&E and KU Services Company, Howard County Maryland, Mitsubishi Electric Information Systems, Sprint and Lincolnshire County Council
OpenText delivers Enterprise Information Management apps for Windows® 8
OpenText offers software trade-in for Autonomy customers
Latest release of OpenText Managed File Transfer helps customers reduce information exchange risks
OpenText delivers Tempo Social and Tempo Box in the cloud
OpenText unveils EIM cloud
OpenText announces InfoFusion
Leading analyst firm validates OpenText as leader in growing global enterprise fax software and services markets
OpenText expands in India: growing customer base, expanded R&D capacity
Leading organizations in India increasingly adopt OpenText's cloud services and solutions to help accelerate growth and revenue


Summary of Quarterly Results
	Q2 FY13	Q1 FY13	Q2 FY12	% Change (Q/Q)		% Change (Y/Y)
Revenue (million)	$352.2	$326.2	$321.5	8.0%		9.6%
GAAP-based gross margin	65.2%	63.0%	67.1%	220	bps	(190)	bps
GAAP-based operating income margin	19.1%	12.3%	17.2%	680	bps	190	bps
GAAP-based EPS, diluted	$1.04	$0.33	$0.81	215.2%		28.4%
Non-GAAP-based gross margin ₍₂₎	71.8%	70.4%	73.8%	140	bps	(200)	bps
Non-GAAP-based operating margin₍₂₎	32.1%	28.7%	30.7%	340	bps	140	bps
Non-GAAP-based EPS, diluted ₍₂₎	$1.58	$1.31	$1.39	20.6%		13.7%


Summary of Year to Date Results
	Q2 FY13	Q1 FY13	Q2 FY12	% Change (Y/Y) (bps)
Revenue (million)	$678.4	$326.2	$609.5	11.3%
GAAP-based gross margin	64.1%	63.0%	66.0%	(190)	bps
GAAP-based operating income margin	15.8%	12.3%	13.5%	230	bps
GAAP-based EPS, diluted	$1.37	$0.33	$1.41	(2.8)%
Non-GAAP-based gross margin ₍₂₎	71.1%	70.4%	73.0%	(190)	bps
Non-GAAP-based operating margin₍₂₎	30.5%	28.7%	28.1%	240	bps
Non-GAAP-based EPS, diluted ₍₂₎	$2.89	$1.31	$2.42	19.4%

Conference Call Information

The public is invited to listen to the earnings conference call at 5:00 p.m. ET (2:00 p.m. PT) by dialing 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://www.opentext.com/2/global/ex_event.html evtype=events&id=701D0000000VhlpIAC .

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 7, 2013 and can be accessed by dialing 877-289-8525 (toll-free) or 416-640-1917 (international) and entering the confirmation code: 4588113 followed by the number sign.

Please see below note (2) for a reconciliation of non-US GAAP- based financial measures used in this press release, to US 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 financial conditions, and results of operations and earnings for Open Text Corporation ("OpenText" or "the Company"), may contain words such as "could", "expects", "may", "should", "will", "anticipates", "believes", "intends", "estimates", "targets", "plans", "envisions", "seeks" and other similar language and are considered forward-looking statements or information under applicable securities laws. These statements are based on the Company's current expectations, estimates, forecasts and projections about the operating environment, economies and markets in which the Company operates. These statements are subject to important assumptions, risks and uncertainties that are difficult to predict, and the actual outcome may be materially different. The Company's assumptions, although considered reasonable by the Company at the date of this press release, may prove to be inaccurate and consequently the Company's actual results could differ materially from the expectations set out herein.

Actual results or events could differ materially from those contemplated in forward-looking statements as a result of the following: (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; and (viii) the demand for the Company's product and the extent of deployment of the company's products in the EIM marketplace. Forward-looking statements may also include, without limitation, any statement relating to future events, conditions or circumstances. 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 there under; (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 SEC and other securities regulators. Unless otherwise required by applicable securities laws, the Company disclaims any intention or obligations to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Copyright ©2013 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 CONSOLIDATED BALANCE SHEETS (In thousands of U.S. dollars, except share data)
			December 31, 2012		June 30, 2012
			(unaudited)
ASSETS
Cash and cash equivalents			$	367,258	$	559,747
Accounts receivable trade, net of allowance for doubtful accounts of $6,031 as of December 31, 2012 and $5,655 as of June 30, 2012			168,073		163,664
Income taxes recoverable			19,845		17,849
Prepaid expenses and other current assets			45,157		44,011
Deferred tax assets			14,101		4,003
		Total current assets	614,434		789,274
Property and equipment			83,135		81,157
Goodwill			1,212,657		1,040,234
Acquired intangible assets			428,361		312,563
Deferred tax assets			141,736		115,128
Other assets			22,659		23,739
Deferred charges			62,095		68,653
Long-term income taxes recoverable			12,128		13,545
	Total assets		$	2,577,205	$	2,444,293
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Accounts payable and accrued liabilities		$	177,979	$	131,734
	Current portion of long-term debt		45,136		41,374
	Deferred revenues		240,347		273,987
	Income taxes payable		13,037		27,806
	Deferred tax liabilities		1,203		1,612
		Total current liabilities	477,702		476,513
Long-term liabilities:
	Accrued liabilities		19,144		14,247
	Deferred credits		8,950		10,086
	Pension liability		25,042		22,074
	Long-term debt		536,250		555,000
	Deferred revenues		12,218		12,653
	Long-term income taxes payable		151,888		147,623
	Deferred tax liabilities		75,672		26,705
		Total long-term liabilities	829,164		788,388
Shareholders' equity:
	Share capital
	58,570,575 and 58,358,990 Common Shares issued and outstanding at December 31, 2012 and June 30, 2012, respectively; Authorized Common Shares: unlimited		641,684		635,321
	Additional paid-in capital		92,463		95,026
	Accumulated other comprehensive income		42,661		44,364
	Retained earnings		522,605		442,068
	Treasury stock, at cost (610,878 and 793,494 shares at December 31, 2012 and at June 30, 2012, respectively)		(29,074)		(37,387)
Total shareholders' equity			1,270,339		1,179,392
	Total liabilities and shareholders' equity		$	2,577,205	$	2,444,293

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,
			2012		2011		2012		2011
Revenues:
	License		$	76,125	$	89,703	$	131,781	$	154,731
	Cloud services		46,151		—		91,035		—
	Customer support		164,658		165,386		326,754		327,383
	Professional service and other		65,246		66,367		128,804		127,388
		Total revenues	352,180		321,456		678,374		609,502
Cost of revenues:
	License		5,331		5,370		9,499		9,368
	Cloud services		18,261		—		36,544		—
	Customer support		28,277		28,468		54,100		54,737
	Professional service and other		47,664		50,604		96,246		100,955
	Amortization of acquired technology-based intangible assets		23,191		21,253		46,973		42,043
		Total cost of revenues	122,724		105,695		243,362		207,103
Gross profit			229,456		215,761		435,012		402,399
Operating expenses:
	Research and development		38,718		42,652		78,624		86,110
	Sales and marketing		67,977		68,451		132,492		133,331
	General and administrative		30,005		25,126		58,138		50,887
	Depreciation		6,105		5,634		12,214		10,892
	Amortization of acquired customer-based intangible assets		17,147		13,445		34,399		26,486
	Special charges		2,269		5,221		11,823		12,326
		Total operating expenses	162,221		160,529		327,690		320,032
Income from operations			67,235		55,232		107,322		82,367
Other income (expense), net			1,541		2,637		1,470		11,949
Interest expense, net			(4,515)		(3,607)		(8,883)		(6,393)
Income before income taxes			64,261		54,262		99,909		87,923
Provision for income taxes			3,153		6,819		19,372		5,494
Net income for the period			$	61,108	$	47,443	$	80,537	$	82,429
Earnings per share—basic			$	1.04	$	0.82	$	1.38	$	1.43
Earnings per share—diluted			$	1.04	$	0.81	$	1.37	$	1.41
Weighted average number of Common Shares outstanding—basic			58,503		57,846		58,473		57,642
Weighted average number of Common Shares outstanding—diluted			58,983		58,672		58,961		58,647

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,
		2012		2011		2012		2011
Net income for the period		$	61,108	$	47,443	$	80,537	$	82,429
Other comprehensive income—net of tax:
	Net foreign currency translation adjustments	(989)		(1,354)		(1,465)		(11,972)
	Net unrealized gain (loss) on cash flow hedges	(1,453)		3,132		491		(2,070)
	Net actuarial gain (loss) relating to defined benefit pension plans	(620)		342		(729)		(206)
Total other comprehensive income (loss), net, for the period		$	(3,062)	$	2,120	$	(1,703)	$	(14,248)
Total comprehensive income		$	58,046	$	49,563	$	78,834	$	68,181

OPEN TEXT CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands of U.S. dollars) (unaudited)
		Three Months Ended December 31,				Six Months Ended December 31,
		2012		2011		2012		2011
Cash flows from operating activities:
Net income for the period		$	61,108	$	47,443	$	80,537	$	82,429
Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation and amortization of intangible assets	46,443		40,332		93,586		79,421
	Share-based compensation expense	3,174		3,397		6,276		8,241
	Excess tax benefits on share-based compensation expense	(259)		(163)		(611)		(495)
	Pension expense	228		169		470		306
	Amortization of debt issuance costs	535		248		1,072		578
	Amortization of deferred charges and credits	2,929		2,707		5,858		5,379
	Loss on sale and write down of property and equipment	22		34		24		203
	Deferred taxes	(2,013)		7,891		(1,152)		(6,958)
	Impairment and other non cash charges	—		2,700		—		1,345
Changes in operating assets and liabilities:
	Accounts receivable	964		(21,681)		20,406		(27)
	Prepaid expenses and other current assets	(1,640)		2,199		1,384		8,041
	Income taxes	(18,261)		(12,141)		(13,888)		2,883
	Deferred charges and credits	—		(5,607)		(436)		(14,653)
	Accounts payable and accrued liabilities	(365)		4,608		(20,620)		(16,799)
	Deferred revenue	(18,668)		(24,808)		(36,738)		(57,806)
	Other assets	497		(2,630)		289		(2,042)
Net cash provided by operating activities		74,694		44,698		136,457		90,046
Cash flows from investing activities:
	Additions of property and equipment	(4,879)		(8,785)		(9,917)		(16,687)
	Purchase of patents	—		(193)		—		(193)
	Purchase of System Solutions Australia Pty Limited, net of cash acquired	(516)		(1,524)		(516)		(1,524)
	Purchase of Operitel Corporation, net of cash acquired	—		—		—		(6,260)
	Purchase of Global 360 Holding Corp., net of cash acquired	—		2,058		—		(245,653)
	Purchase of EasyLink Services International Corporation, net of cash acquired	—		—		(315,331)		—
	Purchase consideration for prior period acquisitions	(214)		(335)		(431)		(609)
Net cash used in investing activities		(5,609)		(8,779)		(326,195)		(270,926)
	Cash flows from financing activities:
	Excess tax benefits on share-based compensation expense	259		163		611		495
	Proceeds from issuance of Common Shares	2,409		3,424		6,402		11,261
	Purchase of Treasury Stock	—		—		—		—
	Proceeds from long-term debt and revolver	—		600,000		—		648,500
	Repayment of long-term debt and revolver	(7,671)		(332,940)		(15,338)		(333,856)
	Debt issuance costs	—		(9,309)		—		(9,309)
Net cash provided by (used in) financing activities		(5,003)		261,338		(8,325)		317,091
Foreign exchange gain (loss) on cash held in foreign currencies		941		(2,640)		5,574		(6,440)
Increase (decrease) in cash and cash equivalents during the period		65,023		294,617		(192,489)		129,771
Cash and cash equivalents at beginning of the period		302,235		119,294		559,747		284,140
Cash and cash equivalents at end of the period		$	367,258	$	413,911	$	367,258	$	413,911

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 US GAAP, the Company provides certain non-US GAAP financial measures that are not in accordance with US GAAP. These non-US 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-US 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 non-US GAAP net income and non-US GAAP EPS both in its reconciliation to the US GAAP financial measures of net income and EPS and its consolidated financial statements, all of which should be considered when evaluating the Company's results. The Company uses the financial measures non-US GAAP EPS and non-US GAAP net income to supplement the information provided in its consolidated financial statements, which are presented in accordance with US GAAP. The presentation of non-US GAAP net income and non-US GAAP EPS is not meant to be a substitute for net income or net income per share presented in accordance with US GAAP, but rather should be evaluated in conjunction with and as a supplement to such US 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 US GAAP measures with certain non-US GAAP measures for the reasons set forth below. Non-US GAAP net income and non-US GAAP EPS are calculated as net income or net income per share on a diluted basis, excluding, where applicable, the amortization of acquired intangible assets, other income (expense), share-based compensation, and restructuring, all net of tax. The Company's management believes that the presentation of non-US GAAP net income and non-US GAAP EPS provides useful information to investors because it excludes non-operational charges. The use of the term "non-operational charge" is defined by the Company as those that do not impact 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, such as amortization of acquired intangible assets, restructuring costs, 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 US GAAP. The Company believes the provision of supplemental non-US GAAP measures allows 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 Open Text's performance or expected performance of future operations and facilitates period-to-period comparison of operating performance. As a result, the Company considers it appropriate and reasonable to provide, in addition to US GAAP measures, supplementary non-US 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 US GAAP based financial measures to non-US 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, 2012. ($ in thousands except for per share amounts)
	Three Months Ended December 31, 2012
	GAAP-based Measures		Adjustments		Note	Non-GAAP-based Measures
Cost of revenues
Cloud services	18,261		(30)		(1)	18,231
Customer Support	28,277		(107)		(1)	28,170
Professional Service and Other	47,664		(188)		(1)	47,476
Amortization of acquired technology-based intangible assets	23,191		(23,191)		(2)	—
GAAP-based gross profit/ Non-GAAP-based gross profit	229,456		23,516			252,972
Operating Expenses
Research and development	38,718		(331)		(1)	38,387
Sales and marketing	67,977		(1,653)		(1)	66,324
General and administrative	30,005		(865)		(1)	29,140
Amortization of acquired customer-based intangible assets	17,147		(17,147)		(2)	—
Special charges	2,269		(2,269)		(3)	—
GAAP-based income from operations/ Non-GAAP-based operating income	67,235		45,781			113,016
Other income (expense), net	1,541		(1,541)		(4)	—
Provision for income taxes	3,153		12,037		(5)	15,190
GAAP-based net income for the period/ Non-GAAP-based net income	61,108		32,203		(6)	93,311
GAAP-based earnings per share/ Non GAAP-based earnings per share-diluted	$	1.04	$	0.54	(6)	$	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)	Adjustment relates to the exclusion of Special charges from our non-GAAP-based operating expenses as Special charges are generally incurred in the aftermath of acquisitions and are not indicative or related to continuing operations and are hence excluded from our internal analysis of operating results.
(4)	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 are generally not indicative or related to continuing operations and are hence excluded from our internal analysis of operating results.
(5)	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.
(6)	Reconciliation of non-GAAP-based adjusted net income to GAAP-based net income:

	Three Months Ended December 31, 2012
			Per share
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 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		Adjustments		Note	Non-GAAP-based Measures
Cost of revenues
Cloud services	36,544		(30)		(1)	36,514
Customer Support	54,100		(145)		(1)	53,955
Professional Service and Other	96,246		(365)		(1)	95,881
Amortization of acquired technology-based intangible assets	46,973		(46,973)		(2)	—
GAAP-based gross profit/ Non-GAAP-based gross profit	435,012		47,513			482,525
Operating Expenses
Research and development	78,624		(669)		(1)	77,955
Sales and marketing	132,492		(3,319)		(1)	129,173
General and administrative	58,138		(1,748)		(1)	56,390
Amortization of acquired customer-based intangible assets	34,399		(34,399)		(2)	—
Special charges	11,823		(11,823)		(3)	—
GAAP-based income from operations/ Non-GAAP-based operating income	107,322		99,471			206,793
Other income (expense), net	1,470		(1,470)		(4)	—
Provision for income taxes	19,372		8,335		(5)	27,707
GAAP-based net income for the period/ Non-GAAP-based net income	80,537		89,666		(6)	170,203
GAAP-based earnings per share/ Non GAAP-based earnings per share-diluted	$	1.37	$	1.52	(6)	$	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)	Adjustment relates to the exclusion of Special charges from our non-GAAP-based operating expenses as Special charges are generally incurred in the aftermath of acquisitions and are not indicative or related to continuing operations and are hence excluded from our internal analysis of operating results.
(4)	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 are generally not indicative or related to continuing operations and are hence excluded from our internal analysis of operating results.
(5)	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.
(6)	Reconciliation of non-GAAP-based adjusted net income to GAAP-based net income:

	Six Months Ended December 31, 2012
			Per share
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 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

Reconciliation of selected GAAP-based measures to Non-GAAP based measures for the three months ended September 30, 2012. ($ in thousands except for per share amounts)
	Three Months Ended September 30, 2012
	GAAP-based Measures		Adjustments		Note	Non-GAAP-based Measures
Cost of revenues
Customer Support	25,823		(38)		(1)	25,785
Professional Service and Other	48,582		(177)		(1)	48,405
Amortization of acquired technology-based intangible assets	23,782		(23,782)		(2)	—
GAAP-based gross profit/ Non-GAAP-based gross profit	205,556		23,997			229,553
Operating Expenses
Research and development	39,906		(338)		(1)	39,568
Sales and marketing	64,515		(1,666)		(1)	62,849
General and administrative	28,133		(883)		(1)	27,250
Amortization of acquired customer-based intangible assets	17,252		(17,252)		(2)	—
Special charges	9,554		(9,554)		(3)	—
GAAP-based income from operations/ Non-GAAP-based operating income	40,087		53,690			93,777
Other income (expense), net	(71)		71		(4)	—
Provision for income taxes	16,219		(3,702)		(5)	12,517
GAAP-based net income for the period/ Non-GAAP-based net income	19,429		57,463		(6)	76,892
GAAP-based earnings per share/ Non GAAP-based earnings per share-diluted	$	0.33	$	0.98	(6)	$	1.31

(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)	Adjustment relates to the exclusion of Special charges from our non-GAAP-based operating expenses as Special charges are generally incurred in the aftermath of acquisitions and are not indicative or related to continuing operations and are hence excluded from our internal analysis of operating results.
(4)	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 are generally not indicative or related to continuing operations and are hence excluded from our internal analysis of operating results.
(5)	Adjustment relates to differences between the GAAP-based tax provision of approximately 45% 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.
(6)	Reconciliation of non-GAAP-based adjusted net income to GAAP-based net income:

	Three Months Ended September 30, 2012
			Per share
Non-GAAP-based net income	$	76,892	$	1.31
Less:
Amortization	41,034		0.70
Share-based compensation	3,102		0.05
Special charges	9,554		0.16
Other (income) expense, net	71		—
GAAP-based provision for income taxes	16,219		0.28
Non-GAAP based provision for income taxes	(12,517)		(0.21)
GAAP-based net income	$	19,429	$	0.33

Reconciliation of selected GAAP-based measures to Non GAAP-based measures for the three months ended December 31, 2011. ($ in thousands except for per share amounts)
	Three Months Ended December 31, 2011
	GAAP-based measures		Adjustments		Note	Non-GAAP-based measures
Cost of Revenues:
Customer Support	28,468		(34)		(1)	28,434
Professional Service and Other	50,604		(106)		(1)	50,498
Amortization of acquired technology-based intangible assets	21,253		(21,253)		(2)	—
GAAP-based gross profit/ Non-GAAP-based gross profit	215,761		21,393			237,154
Operating Expenses
Research and development	42,652		(768)		(1)	41,884
Sales and marketing	68,451		(1,676)		(1)	66,775
General and administrative	25,126		(813)		(1)	24,313
Amortization of acquired customer-based intangible assets	13,445		(13,445)		(2)	—
Special charges	5,221		(5,221)		(3)	—
GAAP-based income from operations/ Non-GAAP-based operating income	55,232		43,316			98,548
Other income (expense), net	2,637		(2,637)		(4)	—
Provision for income taxes	6,819		6,472		(5)	13,291
GAAP-based net income for the period/ Non-GAAP-based net income	47,443		34,207		(6)	81,650
GAAP-based earnings per share/ Non GAAP-based earnings per share-diluted	$	0.81	$	0.58	(6)	$	1.39

(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)	Adjustment relates to the exclusion of Special charges from our non-GAAP-based operating expenses as Special charges are generally incurred in the aftermath of acquisitions and are not indicative or related to continuing operations and are hence excluded from our internal analysis of operating results.
(4)	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 are generally not indicative or related to continuing operations and are hence excluded from our internal analysis of operating results.
(5)	Adjustment relates to differences between the GAAP-based tax provision of approximately 13% 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.
(6)	Reconciliation of non-GAAP-based adjusted net income to GAAP-based net income:

	Three Months Ended December 31, 2011
			Per share
Non-GAAP-based net income	$	81,650	$	1.39
Less:
Amortization	34,698		0.59
Share-based compensation	3,397		0.06
Special charges	5,221		0.09
Other (income) expense, net	(2,637)		(0.04)
GAAP-based provision for income taxes	6,819		0.12
Non-GAAP based provision for income taxes	(13,291)		(0.24)
GAAP-based net income	$	47,443	$	0.81

Reconciliation of selected GAAP-based measures to Non GAAP-based measures for the six months ended December 31, 2011. ($ in thousands except for per share amounts)
	Six Months Ended December 31, 2011
	GAAP-based measures		Adjustments		Note	Non-GAAP-based measures
Cost of Revenues:
Customer Support	54,737		(58)		(1)	54,679
Professional Service and Other	100,955		(205)		(1)	100,750
Amortization of acquired technology-based intangible assets	42,043		(42,043)		(2)	—
GAAP-based gross profit/ Non-GAAP-based gross profit	402,399		42,306			444,705
Operating Expenses
Research and development	86,110		(1,844)		(1)	84,266
Sales and marketing	133,331		(3,446)		(1)	129,885
General and administrative	50,887		(2,687)		(1)	48,200
Amortization of acquired customer-based intangible assets	26,486		(26,486)		(2)	—
Special charges	12,326		(12,326)		(3)	—
GAAP-based income from operations/ Non-GAAP-based operating income	82,367		89,095			171,462
Other income (expense), net	11,949		(11,949)		(4)	—
Provision for income taxes	5,494		17,615		(5)	23,109
GAAP-based net income for the period/ Non-GAAP-based net income	82,429		59,531		(6)	141,960
GAAP-based earnings per share/ Non GAAP-based earnings per share-diluted	$	1.41	$	1.01	(6)	$	2.42

(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)	Adjustment relates to the exclusion of Special charges from our non-GAAP-based operating expenses as Special charges are generally incurred in the aftermath of acquisitions and are not indicative or related to continuing operations and are hence excluded from our internal analysis of operating results.
(4)	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 are generally not indicative or related to continuing operations and are hence excluded from our internal analysis of operating results.
(5)	Adjustment relates to differences between the GAAP-based tax provision of approximately 6% 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.
(6)	Reconciliation of non-GAAP-based adjusted net income to GAAP-based net income:

	Six Months Ended December 31, 2011
			Per share
Non-GAAP-based net income	$	141,960	$	2.42
Less:
Amortization	68,529		1.17
Share-based compensation	8,240		0.14
Special charges	12,326		0.21
Other (income) expense, net	(11,949)		(0.20)
GAAP-based provision for income taxes	5,494		0.10
Non-GAAP based provision for income taxes	(23,109)		(0.41)
GAAP-based net income	$	82,429	$	1.41

(3)	The following table provides a composition of our major currencies for revenue and expenses, expressed as a percentage, for the three and six months ended December 31, 2012:

	Three Months Ended December 31, 2012
Currencies	% of Revenue	% of Expenses*
EURO	26%	16%
GBP	8%	8%
CAD	6%	19%
USD	48%	43%
Other	12%	14%
Total	100%	100%

	Six Months Ended December 31, 2012
Currencies	% of Revenue	% of Expenses*
EURO	25%	16%
GBP	8%	8%
CAD	6%	18%
USD	49%	44%
Other	12%	14%
Total	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