UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ______________________ FORM 10-Q ______________________ ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022. OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 0-27544 ______________________________________ OPEN TEXT CORPORATION (Exact name of Registrant as ...

Micro Focus International plc (MFGP) Q4 2021 Results Conference Call February 8, 2022 8:30 AM ET Company Participants Ben Donnelly - Investor Relations Stephen Murdoch - Chief Executive Officer Matt Ashley - Chief Financial Officer Conference Call Participants Charlie Brennan - Credit Suisse Michael Briest - UBS Will Wallace - Numis Securities Ben Donnelly Good afternoon, and good morning, everyone. Today's earnings call covers the Year-Ended 31st of October, 2021. And I am pleased to be joined today by Ste ...

Part I Financial Information This section provides OpenText Corporation's unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures for the specified periods [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents OpenText Corporation's unaudited condensed consolidated financial statements for the three and six months ended December 31, 2021 and 2020, including balance sheets, income statements, comprehensive income, shareholders' equity, and cash flow statements, with detailed explanatory notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of OpenText Corporation's financial position at December 31, 2021, and June 30, 2021, detailing assets, liabilities, and shareholders' equity Condensed Consolidated Balance Sheet Highlights | Metric | Dec 31, 2021 (in thousands) | Jun 30, 2021 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Total Assets | $10,164,530 | $9,609,336 | | Total Liabilities | $6,034,705 | $5,509,883 | | Total Shareholders' Equity | $4,129,825 | $4,099,453 | [Condensed Consolidated Statements of Income (Loss)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20(Loss)) This section presents OpenText Corporation's financial performance, including revenues, gross profit, income from operations, and net income, for the three and six months ended December 31, 2021 and 2020 Condensed Consolidated Statements of Income (Loss) Highlights | Metric | 3 Months Ended Dec 31, 2021 (in thousands) | 3 Months Ended Dec 31, 2020 (in thousands) | YoY Change | 6 Months Ended Dec 31, 2021 (in thousands) | 6 Months Ended Dec 31, 2020 (in thousands) | YoY Change | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------- | :--------------------------------------- | :--------------------------------------- | :--------- | | Total Revenues | $876,799 | $855,644 | +2.5% | $1,709,107 | $1,659,657 | +3.0% | | Gross Profit | $615,618 | $603,082 | +2.1% | $1,189,803 | $1,158,170 | +2.7% | | Income from Operations | $192,884 | $234,470 | -17.7% | $375,573 | $416,826 | -9.9% | | Net Income (Loss) Attributable to OpenText | $88,298 | $(65,477) | N/A | $220,213 | $37,899 | +481.1% | | Diluted EPS | $0.32 | $(0.24) | N/A | $0.81 | $0.14 | +478.6% | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) This section details OpenText Corporation's comprehensive income, including net income and other comprehensive income components, for the three and six months ended December 31, 2021 and 2020 Condensed Consolidated Statements of Comprehensive Income (Loss) Highlights | Metric | 3 Months Ended Dec 31, 2021 (in thousands) | 3 Months Ended Dec 31, 2020 (in thousands) | 6 Months Ended Dec 31, 2021 (in thousands) | 6 Months Ended Dec 31, 2020 (in thousands) | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net income (loss) for the period | $88,336 | $(65,433) | $220,302 | $37,973 | | Total other comprehensive income (loss) net, for the period | $(22,537) | $26,781 | $(34,889) | $48,651 | | Total comprehensive income (loss) attributable to OpenText | $65,761 | $(38,696) | $185,324 | $86,550 | [Condensed Consolidated Statements of Shareholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity) This section outlines changes in OpenText Corporation's shareholders' equity, including share capital, retained earnings, and treasury stock, for the periods presented Condensed Consolidated Statements of Shareholders' Equity Highlights | Metric | Dec 31, 2021 (in thousands) | Jun 30, 2021 (in thousands) | | :--------------------------------------- | :-------------------------- | :-------------------------- | | Share capital and additional paid-in capital | $1,990,913 | $1,947,764 | | Accumulated other comprehensive income | $31,349 | $66,238 | | Retained earnings | $2,174,467 | $2,153,326 | | Treasury stock, at cost | $(67,966) | $(69,386) | | Total OpenText shareholders' equity | $4,128,763 | $4,097,942 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents OpenText Corporation's cash inflows and outflows from operating, investing, and financing activities for the six months ended December 31, 2021 and 2020 Condensed Consolidated Statements of Cash Flows Highlights | Metric | 6 Months Ended Dec 31, 2021 (in thousands) | 6 Months Ended Dec 31, 2020 (in thousands) | YoY Change | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------- | | Net cash provided by operating activities | $406,313 | $516,359 | -21.3% | | Net cash used in investing activities | $(896,118) | $(24,253) | +3594.0% | | Net cash provided by (used in) financing activities | $419,813 | $(719,462) | N/A | | Increase (decrease) in cash, cash equivalents and restricted cash | $(95,705) | $(193,585) | +50.5% | | Cash, cash equivalents and restricted cash at end of period | $1,514,095 | $1,503,678 | +0.7% | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures for the condensed consolidated financial statements, covering accounting policies, revenue, assets, liabilities, debt, equity, and other financial items [NOTE 1—BASIS OF PRESENTATION](index=10&type=section&id=NOTE%201%E2%80%94BASIS%20OF%20PRESENTATION) This note describes the basis of preparation for OpenText's financial statements, including GAAP compliance, consolidation principles, and key estimates and judgments - OpenText Corporation's condensed consolidated financial statements are prepared in accordance with U.S. GAAP and include all subsidiaries, with Open Text South Africa Proprietary Ltd. (**70% owned**) and EC1 Pte. Ltd. (**81% owned**) being exceptions to wholly-owned[27](index=27&type=chunk)[30](index=30&type=chunk) - Key estimates and judgments include revenue recognition, income taxes, goodwill impairment, valuation of acquired intangibles and long-lived assets, contingencies, restructuring accruals, acquisition accruals, share-based payment valuations, and pension obligations[31](index=31&type=chunk) - The COVID-19 pandemic continues to impact the global economy, requiring increased judgment in estimates, particularly for the COVID-19 Restructuring Plan and allowance for credit losses, with potential for future changes[32](index=32&type=chunk) [NOTE 2—RECENT ACCOUNTING PRONOUNCEMENTS](index=11&type=section&id=NOTE%202%E2%80%94RECENT%20ACCOUNTING%20PRONOUNCEMENTS) This note outlines the adoption of recent accounting pronouncements and their impact on OpenText's financial statements - OpenText adopted ASU 2019-12 "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes" in Fiscal 2022, which had **no material impact**[33](index=33&type=chunk) - The company early adopted ASU 2021-08 "Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers" in Q2 Fiscal 2022, with **no retrospective impact** as there were no Q1 Fiscal 2022 acquisitions, and it will not materially impact financial statements[34](index=34&type=chunk)[35](index=35&type=chunk) [NOTE 3—REVENUES](index=12&type=section&id=NOTE%203%E2%80%94REVENUES) This note disaggregates OpenText's total revenues by product type and provides details on contract balances and remaining performance obligations Total Revenues by Product Type | Revenue Stream | 3 Months Ended Dec 31, 2021 (in thousands) | 3 Months Ended Dec 31, 2020 (in thousands) | YoY Change | 6 Months Ended Dec 31, 2021 (in thousands) | 6 Months Ended Dec 31, 2020 (in thousands) | YoY Change | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | :--------- | :--------------------------------------- | :--------------------------------------- | :--------- | | Cloud services and subscriptions | $364,886 | $350,454 | +4.1% | $721,475 | $691,440 | +4.3% | | Customer support | $334,875 | $334,492 | +0.1% | $670,112 | $663,891 | +0.9% | | License | $109,493 | $107,348 | +2.0% | $183,022 | $175,871 | +4.1% | | Professional service and other | $67,545 | $63,350 | +6.6% | $134,498 | $128,455 | +4.7% | | **Total Revenues** | **$876,799** | **$855,644** | **+2.5%** | **$1,709,107** | **$1,659,657** | **+3.0%** | Contract Balances | Metric | Dec 31, 2021 (in thousands) | Jun 30, 2021 (in thousands) | | :----------------------- | :-------------------------- | :-------------------------- | | Short-term contract assets | $22,336 | $25,344 | | Long-term contract assets | $22,920 | $19,222 | | Short-term deferred revenues | $848,977 | $852,629 | | Long-term deferred revenues | $90,669 | $98,989 | - As of December 31, 2021, approximately **$1.5 billion** of revenue is expected to be recognized from remaining performance obligations, with **46%** over the next 12 months and the remainder substantially over the next three years[43](index=43&type=chunk) [NOTE 4—ALLOWANCE FOR CREDIT LOSSES](index=13&type=section&id=NOTE%204%E2%80%94ALLOWANCE%20FOR%20CREDIT%20LOSSES) This note details the allowance for credit losses on accounts receivable and unbilled receivables for OpenText Allowance for Credit Losses on Accounts Receivable | Metric | Jun 30, 2021 (in thousands) | Dec 31, 2021 (in thousands) | | :--------------------------------------- | :-------------------------- | :-------------------------- | | Balance as of | $22,151 | $15,849 | | Credit loss expense (recovery) | N/A | $(2,197) | | Write-off / adjustments | N/A | $(4,105) | - Unbilled receivables totaled **$62.3 million** as of December 31, 2021, up from **$51.4 million** at June 30, 2021[44](index=44&type=chunk) [NOTE 5—PROPERTY AND EQUIPMENT](index=14&type=section&id=NOTE%205%E2%80%94PROPERTY%20AND%20EQUIPMENT) This note provides a breakdown of OpenText's property and equipment, net of accumulated depreciation Property and Equipment (Net) | Category | Dec 31, 2021 (Net, in thousands) | Jun 30, 2021 (Net, in thousands) | | :-------------------------------- | :------------------------------- | :------------------------------- | | Furniture and fixtures | $4,988 | $6,041 | | Office equipment | $1,260 | $1,289 | | Computer hardware | $94,475 | $101,498 | | Computer software | $22,400 | $25,036 | | Capitalized software development costs | $66,770 | $41,231 | | Leasehold improvements | $21,243 | $25,521 | | Land and buildings | $32,714 | $32,979 | | **Total** | **$243,850** | **$233,595** | [NOTE 6—LEASES](index=14&type=section&id=NOTE%206%E2%80%94LEASES) This note details OpenText's lease costs, weighted-average lease metrics, and future minimum lease payments Operating Lease Costs | Lease Cost Component | 3 Months Ended Dec 31, 2021 (in thousands) | 3 Months Ended Dec 31, 2020 (in thousands) | 6 Months Ended Dec 31, 2021 (in thousands) | 6 Months Ended Dec 31, 2020 (in thousands) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Operating lease cost | $15,572 | $15,720 | $30,963 | $31,262 | | Short-term lease cost | $190 | $239 | $309 | $502 | | Variable lease cost | $577 | $607 | $1,165 | $1,300 | | Sublease income | $(1,969) | $(1,576) | $(3,858) | $(3,193) | | **Total lease cost** | **$14,370** | **$14,990** | **$28,579** | **$29,871** | Weighted-Average Lease Metrics | Metric | Dec 31, 2021 | Jun 30, 2021 | | :-------------------------- | :----------- | :----------- | | Weighted-average remaining lease term | 6.39 years | 6.47 years | | Weighted-average discount rate | 2.84 % | 2.82 % | - Future minimum lease payments total **$302.5 million**, with **$36.6 million** due in the next six months of Fiscal 2022, and expected sublease income of **$6.4 million** in the remainder of Fiscal 2022 and **$59.3 million** thereafter[51](index=51&type=chunk) [NOTE 7—GOODWILL](index=15&type=section&id=NOTE%207%E2%80%94GOODWILL) This note outlines the changes in OpenText's goodwill balance, primarily due to recent acquisitions Changes in Goodwill | Metric | Amount (in thousands) | | :--------------------------------------- | :-------------------- | | Balance as of June 30, 2021 | $4,691,673 | | Acquisition of Zix Corporation | $508,026 | | Acquisition of Bricata Inc. | $10,382 | | Impact of foreign exchange rate changes | $(15,003) | | **Balance as of December 31, 2021** | **$5,195,078** | - Goodwill increased by **$503.4 million** to **$5.195 billion** as of December 31, 2021, primarily due to the acquisitions of Zix Corporation (**$508.0 million**) and Bricata Inc. (**$10.4 million**)[52](index=52&type=chunk) [NOTE 8—ACQUIRED INTANGIBLE ASSETS](index=16&type=section&id=NOTE%208%E2%80%94ACQUIRED%20INTANGIBLE%20ASSETS) This note provides a breakdown of OpenText's acquired intangible assets and their estimated future amortization expense Acquired Intangible Assets (Net) | Asset Type | Dec 31, 2021 (Net, in thousands) | Jun 30, 2021 (Net, in thousands) | | :-------------------------- | :------------------------------- | :------------------------------- | | Technology assets | $302,777 | $367,765 | | Customer assets | $1,052,226 | $819,495 | | **Total** | **$1,355,003** | **$1,187,260** | - The weighted average amortization periods for acquired technology and customer intangible assets are approximately **five years** and **eight years**, respectively[54](index=54&type=chunk) Estimated Future Amortization Expense for Acquired Intangible Assets | Fiscal Year Ending June 30 | Estimated Future Amortization Expense (in thousands) | | :------------------------- | :----------------------------------------------- | | 2022 (six months ended) | $210,184 | | 2023 | $358,142 | | 2024 | $277,100 | | 2025 | $165,527 | | 2026 | $121,780 | | Thereafter | $222,270 | | **Total** | **$1,355,003** | [NOTE 9—PREPAID EXPENSES AND OTHER ASSETS](index=16&type=section&id=NOTE%209%E2%80%94PREPAID%20EXPENSES%20AND%20OTHER%20ASSETS) This note details OpenText's prepaid expenses, other current assets, and other assets, including income from equity method investments Prepaid Expenses and Other Assets | Category | Dec 31, 2021 (in thousands) | Jun 30, 2021 (in thousands) | | :--------------------------------------- | :-------------------------- | :-------------------------- | | Prepaid expenses and other current assets | $118,353 | $98,551 | | Other assets | $228,142 | $208,894 | - Investments, accounted for using the equity method, generated **$2.0 million** in income for the three months ended December 31, 2021 (vs. **$2.0 million** in 2020) and **$31.4 million** for the six months ended December 31, 2021 (vs. **$8.3 million** in 2020)[59](index=59&type=chunk)[60](index=60&type=chunk) [NOTE 10—ACCOUNTS PAYABLE AND ACCRUED LIABILITIES](index=17&type=section&id=NOTE%2010%E2%80%94ACCOUNTS%20PAYABLE%20AND%20ACCRUED%20LIABILITIES) This note provides a breakdown of OpenText's accounts payable and accrued liabilities, including asset retirement obligations Accounts Payable and Accrued Liabilities | Category | Dec 31, 2021 (in thousands) | Jun 30, 2021 (in thousands) | | :--------------------------------------- | :-------------------------- | :-------------------------- | | Accounts payable and accrued liabilities (current) | $364,739 | $423,592 | | Long-term accrued liabilities | $16,401 | $28,830 | - Asset retirement obligations, primarily for leased facilities, had a present value of **$15.2 million** as of December 31, 2021 (down from **$15.7 million** at June 30, 2021)[63](index=63&type=chunk) [NOTE 11—LONG-TERM DEBT](index=18&type=section&id=NOTE%2011%E2%80%94LONG-TERM%20DEBT) This note details OpenText's long-term debt, including recent Senior Notes issuances and redemptions, and their impact on the debt structure Long-Term Debt Overview | Debt Type | Dec 31, 2021 (in thousands) | Jun 30, 2021 (in thousands) | | :-------------------------- | :-------------------------- | :-------------------------- | | Senior Notes 2031 | $650,000 | — | | Senior Notes 2030 | $900,000 | $900,000 | | Senior Notes 2029 | $850,000 | — | | Senior Notes 2028 | $900,000 | $900,000 | | Senior Notes 2026 | — | $850,000 | | Term Loan B | $962,500 | $967,500 | | **Total principal payments due** | **$4,262,500** | **$3,617,500** | | Total amount outstanding | $4,221,488 | $3,588,859 | | Non-current portion of long-term debt | $4,211,488 | $3,578,859 | - On November 24, 2021, OpenText issued **$650 million** of **4.125% Senior Notes due 2031** and **$850 million** of **3.875% Senior Notes due 2029**[66](index=66&type=chunk)[70](index=70&type=chunk) - On December 9, 2021, the company redeemed Senior Notes 2026 in full, resulting in a **$27.4 million loss on debt extinguishment**, including a **$25.0 million** early termination call premium[77](index=77&type=chunk) [NOTE 12—PENSION PLANS AND OTHER POST RETIREMENT BENEFITS](index=20&type=section&id=NOTE%2012%E2%80%94PENSION%20PLANS%20AND%20OTHER%20POST%20RETIREMENT%20BENEFITS) This note provides details on OpenText's defined benefit pension plans, including benefit obligations, net pension expense, and weighted-average discount rates Defined Benefit Pension Plans and Long-Term Employee Benefit Obligations | Plan | Dec 31, 2021 (Total benefit obligation, in thousands) | Jun 30, 2021 (Total benefit obligation, in thousands) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | | CDT defined benefit plan | $31,586 | $32,865 | | GXS GER defined benefit plan | $22,821 | $23,861 | | GXS PHP defined benefit plan | $13,668 | $10,973 | | Other plans | $9,544 | $9,594 | | **Total** | **$77,619** | **$77,293** | Net Pension Expense | Pension Expense | 3 Months Ended Dec 31, 2021 (in thousands) | 3 Months Ended Dec 31, 2020 (in thousands) | 6 Months Ended Dec 31, 2021 (in thousands) | 6 Months Ended Dec 31, 2020 (in thousands) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Service cost | $605 | $584 | $1,170 | $1,182 | | Interest cost | $346 | $324 | $671 | $629 | | Amortization of actuarial (gains) and losses | $104 | $210 | $212 | $411 | | **Net pension expense** | **$1,055** | **$1,118** | **$2,053** | **$2,222** | - The weighted-average discount rate for the CDT and GXS GER plans was **1.31%** at December 31, 2021, down from **1.39%** at June 30, 2021, while the GXS PHP plan remained at **5.00%**[93](index=93&type=chunk) [NOTE 13—SHARE CAPITAL, OPTION PLANS AND SHARE-BASED PAYMENTS](index=23&type=section&id=NOTE%2013%E2%80%94SHARE%20CAPITAL,%20OPTION%20PLANS%20AND%20SHARE-BASED%20PAYMENTS) This note details OpenText's share capital, cash dividends, share-based compensation expense, stock options, and share repurchase activities Cash Dividends and Share-Based Compensation Expense | Metric | 3 Months Ended Dec 31, 2021 (in thousands) | 3 Months Ended Dec 31, 2020 (in thousands) | 6 Months Ended Dec 31, 2021 (in thousands) | 6 Months Ended Dec 31, 2020 (in thousands) | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Cash Dividends Declared | $59,658 | $54,500 | $119,536 | $101,769 | | Total share-based compensation expense | $14,409 | $14,526 | $28,343 | $26,262 | - As of December 31, 2021, **8,212,360** stock options were outstanding, and **10,300,222** were available for issuance[102](index=102&type=chunk) - The company repurchased and cancelled **1,809,559 Common Shares** for **$91.0 million** during the three and six months ended December 31, 2021, under its share repurchase plans[100](index=100&type=chunk) [NOTE 14—GUARANTEES AND CONTINGENCIES](index=26&type=section&id=NOTE%2014%E2%80%94GUARANTEES%20AND%20CONTINGENCIES) This note outlines OpenText's contractual obligations, including long-term debt and purchase obligations, and discusses significant tax-related contingencies with the CRA Contractual Obligations | Obligation Type | Total (in thousands) | Jan 1, 2022 - Jun 30, 2022 (in thousands) | Jul 1, 2022 - Jun 30, 2024 (in thousands) | Jul 1, 2024 - Jun 30, 2026 (in thousands) | Jul 1, 2026 and beyond (in thousands) | | :--------------------------------------- | :------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :--------------------------------------- | | Long-term debt obligations | $5,397,883 | $80,931 | $318,955 | $1,216,997 | $3,781,000 | | Purchase obligations for contracts not accounted for as lease obligations | $85,190 | $51,454 | $33,736 | — | — | | **Total** | **$5,483,073** | **$132,385** | **$352,691** | **$1,216,997** | **$3,781,000** | - The Canada Revenue Agency (CRA) has disputed the company's transfer pricing methodology for Fiscal 2012-2016, with an estimated potential aggregate liability of **$73 million** for penalties, interest, and provincial taxes; the company has provisionally paid **$33 million** and is vigorously contesting the reassessments[130](index=130&type=chunk)[132](index=132&type=chunk) - The CRA also proposes to reassess Fiscal 2017, potentially reducing deferred tax assets by up to **$470 million**, which the company strongly disagrees with and intends to vigorously defend[134](index=134&type=chunk)[135](index=135&type=chunk) [NOTE 15—INCOME TAXES](index=28&type=section&id=NOTE%2015%E2%80%94INCOME%20TAXES) This note details OpenText's income tax provision and effective tax rate, explaining the factors influencing changes in tax expense Income Tax Provision and Effective Tax Rate | Metric | 3 Months Ended Dec 31, 2021 (in thousands) | 3 Months Ended Dec 31, 2020 (in thousands) | 6 Months Ended Dec 31, 2021 (in thousands) | 6 Months Ended Dec 31, 2020 (in thousands) | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Provision for (recovery of) income taxes | $39,266 | $267,559 | $82,716 | $310,303 | | Effective tax rate | 30.8% | 132.4% | 27.3% | 89.1% | - The decrease in tax expense for the three and six months ended December 31, 2021, was primarily due to a **$299.3 million** decrease related to IRS settlements in Fiscal 2021, partially offset by an increase in unrecognized tax benefits[141](index=141&type=chunk)[143](index=143&type=chunk) - The company believes it is reasonably possible that gross unrecognized tax benefits could decrease tax expense by **$4.2 million** in the next 12 months due to expiration of competent authority relief and statute-barred tax years[144](index=144&type=chunk) [NOTE 16—FAIR VALUE MEASUREMENT](index=30&type=section&id=NOTE%2016%E2%80%94FAIR%20VALUE%20MEASUREMENT) This note describes OpenText's fair value measurements for financial assets and liabilities, including foreign currency forward contracts and Senior Notes - Financial assets and liabilities measured at fair value on a recurring basis primarily include foreign currency forward contracts, which are categorized as **Level 2 measurements**[151](index=151&type=chunk) - The fair value of Senior Notes was **$3.4 billion** as of December 31, 2021 (vs. **$2.7 billion** at June 30, 2021), categorized as a **Level 2 measurement**[153](index=153&type=chunk) [NOTE 17—DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES](index=31&type=section&id=NOTE%2017%E2%80%94DERIVATIVE%20INSTRUMENTS%20AND%20HEDGING%20ACTIVITIES) This note explains OpenText's use of foreign currency forward contracts for hedging Canadian dollar payroll expenses and their accounting treatment - OpenText uses foreign currency forward contracts to hedge Canadian dollar payroll expenses, with notional amounts of **$67.3 million** as of December 31, 2021[157](index=157&type=chunk)[159](index=159&type=chunk) - These contracts are designated as cash flow hedges, with unrealized gains or losses on the effective portion included in "Other Comprehensive Income (Loss), net"[158](index=158&type=chunk) [NOTE 18—SPECIAL CHARGES (RECOVERIES)](index=32&type=section&id=NOTE%2018%E2%80%94SPECIAL%20CHARGES%20(RECOVERIES)) This note provides a breakdown of OpenText's special charges and recoveries, including those related to restructuring plans and acquisition costs Special Charges (Recoveries) Breakdown | Category | 3 Months Ended Dec 31, 2021 (in thousands) | 3 Months Ended Dec 31, 2020 (in thousands) | 6 Months Ended Dec 31, 2021 (in thousands) | 6 Months Ended Dec 31, 2020 (in thousands) | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | COVID-19 Restructuring Plan | $(369) | $(11,285) | $(815) | $(7,734) | | Fiscal 2020 Restructuring Plan | $(76) | $(7,523) | $(148) | $1,202 | | Acquisition-related costs | $3,937 | $659 | $4,665 | $1,448 | | Other charges (recoveries) | $5,720 | $743 | $5,938 | $833 | | **Total** | **$9,217** | **$(17,494)** | **$9,561** | **$(4,250)** | - Special charges (recoveries) increased by **$26.7 million** for the three months and **$13.8 million** for the six months ended December 31, 2021, primarily due to net recoveries in the prior comparative period and increased acquisition-related costs and pre-acquisition equity incentives[286](index=286&type=chunk)[287](index=287&type=chunk) - The COVID-19 Restructuring Plan resulted in net recoveries of **$0.4 million** and **$0.8 million** for the three and six months ended December 31, 2021, respectively, related to abandoned facilities and workforce reductions[165](index=165&type=chunk) [NOTE 19—ACQUISITIONS](index=34&type=section&id=NOTE%2019%E2%80%94ACQUISITIONS) This note details OpenText's recent acquisitions of Zix Corporation and Bricata Inc., including their strategic rationale and preliminary purchase price allocations - On December 23, 2021, OpenText acquired Zix Corporation for **$896.0 million**, enhancing its position in data protection, threat management, email security, and compliance cloud solutions for SMBs[179](index=179&type=chunk)[216](index=216&type=chunk) - The preliminary purchase price allocation for Zix included **$508.0 million** in goodwill, primarily for expected synergies, and **$374.6 million** in intangible assets[181](index=181&type=chunk) - On November 24, 2021, OpenText acquired Bricata Inc. for **$17.9 million**, strengthening its Security and Protection Cloud with Network Detection and Response technologies[186](index=186&type=chunk)[217](index=217&type=chunk) [NOTE 20—ACCUMULATED OTHER COMPREHENSIVE INCOME](index=35&type=section&id=NOTE%2020%E2%80%94ACCUMULATED%20OTHER%20COMPREHENSIVE%20INCOME) This note outlines the components of OpenText's accumulated other comprehensive income, including foreign currency translation adjustments and pension plan impacts Accumulated Other Comprehensive Income Components | Component | Dec 31, 2021 (in thousands) | Jun 30, 2021 (in thousands) | | :--------------------------------------- | :-------------------------- | :-------------------------- | | Foreign Currency Translation Adjustments | $43,969 | $75,408 | | Cash Flow Hedges | $(457) | $830 | | Defined Benefit Pension Plans | $(12,163) | $(10,000) | | **Accumulated Other Comprehensive Income** | **$31,349** | **$66,238** | - Total other comprehensive income (loss) net for the six months ended December 31, 2021, was a **loss of $34.9 million**, primarily driven by negative foreign currency translation adjustments[188](index=188&type=chunk) [NOTE 21—SUPPLEMENTAL CASH FLOW DISCLOSURES](index=36&type=section&id=NOTE%2021%E2%80%94SUPPLEMENTAL%20CASH%20FLOW%20DISCLOSURES) This note provides supplemental cash flow data for OpenText, including cash paid for interest and income taxes Supplemental Cash Flow Data | Metric | 6 Months Ended Dec 31, 2021 (in thousands) | 6 Months Ended Dec 31, 2020 (in thousands) | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Cash paid during the period for interest | $73,389 | $75,433 | | Cash received during the period for interest | $1,531 | $2,336 | | Cash paid during the period for income taxes | $60,293 | $48,193 | [NOTE 22—OTHER INCOME (EXPENSE), NET](index=36&type=section&id=NOTE%2022%E2%80%94OTHER%20INCOME%20(EXPENSE),%20NET) This note details OpenText's other income and expense items, including foreign exchange gains/losses, equity investee income, and loss on debt extinguishment Other Income (Expense), Net Breakdown | Category | 3 Months Ended Dec 31, 2021 (in thousands) | 3 Months Ended Dec 31, 2020 (in thousands) | 6 Months Ended Dec 31, 2021 (in thousands) | 6 Months Ended Dec 31, 2020 (in thousands) | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Foreign exchange gains (losses) | $192 | $3,476 | $543 | $(10) | | OpenText share in net income of equity investees | $2,042 | $2,034 | $31,357 | $8,255 | | Loss on debt extinguishment | $(27,413) | — | $(27,413) | — | | Other miscellaneous income (expense) | $142 | $(259) | $258 | $(111) | | **Total other income (expense), net** | **$(25,037)** | **$5,251** | **$4,745** | **$8,134** | - A **$27.4 million loss on debt extinguishment** was recorded for the redemption of Senior Notes 2026, including a **$25.0 million** early termination call premium[190](index=190&type=chunk) [NOTE 23—EARNINGS (LOSS) PER SHARE](index=36&type=section&id=NOTE%2023%E2%80%94EARNINGS%20(LOSS)%20PER%20SHARE) This note presents OpenText's basic and diluted earnings per share, along with weighted-average shares outstanding Earnings (Loss) Per Share | Metric | 3 Months Ended Dec 31, 2021 | 3 Months Ended Dec 31, 2020 | 6 Months Ended Dec 31, 2021 | 6 Months Ended Dec 31, 2020 | | :--------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Basic EPS | $0.32 | $(0.24) | $0.81 | $0.14 | | Diluted EPS | $0.32 | $(0.24) | $0.81 | $0.14 | | Weighted-average shares outstanding—basic (in '000s) | 272,112 | 272,433 | 272,078 | 272,210 | | Weighted-average shares outstanding—diluted (in '000s) | 272,931 | 272,433 | 273,074 | 273,019 | - For periods with a net loss, outstanding Common Share equivalents are excluded from diluted EPS calculation as their effect is anti-dilutive, making basic and diluted EPS identical[191](index=191&type=chunk) [NOTE 24—RELATED PARTY TRANSACTIONS](index=37&type=section&id=NOTE%2024%E2%80%94RELATED%20PARTY%20TRANSACTIONS) This note discloses OpenText's related party transactions, including consulting fees paid to a Board member, and the approval process - During the six months ended December 31, 2021, Mr. Stephen Sadler, a Board member, earned **$0.4 million** in consulting fees for acquisition-related business activities[194](index=194&type=chunk) - The Audit Committee reviews and approves all related party transactions, ensuring terms are no less favorable than those available to unaffiliated third parties[193](index=193&type=chunk) [NOTE 25—SUBSEQUENT EVENT](index=37&type=section&id=NOTE%2025%E2%80%94SUBSEQUENT%20EVENT) This note reports a significant event occurring after the reporting period, specifically a declared dividend - On February 2, 2022, a dividend of **$0.2209 per Common Share** was declared, payable on March 25, 2022, to shareholders of record on March 4, 2022[195](index=195&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=38&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides a detailed analysis of OpenText Corporation's financial condition and results of operations for the three and six months ended December 31, 2021, covering revenues, expenses, liquidity, and capital resources [EXECUTIVE OVERVIEW](index=40&type=section&id=EXECUTIVE%20OVERVIEW) This section provides an executive summary of OpenText's business, key financial metrics, and recent strategic acquisitions - OpenText is an Information Management company providing software and services to empower digital businesses, focusing on secure and scalable solutions across Content, Business Network, Experience, Security and Protection, and Developer Clouds[206](index=206&type=chunk)[207](index=207&type=chunk) Quarterly Summary of Key Financial Metrics | Metric | 3 Months Ended Dec 31, 2021 (in millions) | 3 Months Ended Dec 31, 2020 (in millions) | YoY Change | 6 Months Ended Dec 31, 2021 (in millions) | 6 Months Ended Dec 31, 2020 (in millions) | YoY Change | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------- | :--------------------------------------- | :--------------------------------------- | :--------- | | Total Revenue | $876.8 | $855.6 | +2.5% | $1,709.1 | $1,659.7 | +3.0% | | Total Annual Recurring Revenue | $699.8 | $684.9 | +2.2% | N/A | N/A | N/A | | Cloud services and subscriptions revenue | $364.9 | $350.5 | +4.1% | N/A | N/A | N/A | | GAAP-based Net Income (Loss) attributable to OpenText | $88.3 | $(65.5) | N/A | N/A | N/A | N/A | | GAAP-based Diluted EPS | $0.32 | $(0.24) | N/A | N/A | N/A | N/A | | Adjusted EBITDA | $343.5 | $360.8 | -4.8% | $666.9 | $703.1 | -5.1% | | Operating cash flow (6 months) | N/A | N/A | N/A | $406.3 | $516.4 | -21.3% | - OpenText acquired Zix Corporation for **$896.0 million** and Bricata Inc. for **$17.9 million**, aiming to strengthen its data protection, threat management, email security, and network detection and response capabilities[216](index=216&type=chunk)[217](index=217&type=chunk) [CRITICAL ACCOUNTING POLICIES AND ESTIMATES](index=42&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) This section discusses OpenText's critical accounting policies and estimates, emphasizing areas requiring significant judgment and the impact of the COVID-19 pandemic - Critical accounting policies include revenue recognition, goodwill, acquired intangibles, and income taxes, which require significant judgment and estimates[228](index=228&type=chunk) - The COVID-19 pandemic continues to impact estimates, particularly for the COVID-19 Restructuring Plan and allowance for credit losses, with potential for future changes and non-recurring costs[229](index=229&type=chunk) [RESULTS OF OPERATIONS](index=43&type=section&id=RESULTS%20OF%20OPERATIONS) OpenText reported a 2.5% increase in total revenues for the three months ended December 31, 2021, and a 3.0% increase for the six months, driven by growth across all product types, particularly cloud services and subscriptions. Despite revenue growth, GAAP-based income from operations and Adjusted EBITDA saw declines for both periods, while GAAP-based net income and diluted EPS significantly improved for the six-month period due to lower tax expenses compared to the prior year's IRS settlements [Revenues, Cost of Revenues and Gross Margin by Product Type](index=45&type=section&id=Revenues,%20Cost%20of%20Revenues%20and%20Gross%20Margin%20by%20Product%20Type) Cloud services and subscriptions revenue increased by 4.1% (3 months) and 4.3% (6 months), with gross margin remaining stable at 66-67%. Customer support revenue saw slight increases of 0.1% (3 months) and 0.9% (6 months), maintaining a 91% gross margin. License revenue grew by 2.0% (3 months) and 4.1% (6 months), with gross margin at 96-97%. Professional service and other revenue increased by 6.6% (3 months) and 4.7% (6 months), but gross margin decreased from 26-27% to 21-22% due to higher labor costs [Cloud Services and Subscriptions](index=45&type=section&id=Cloud%20Services%20and%20Subscriptions) This section details the revenue, cost of revenues, gross profit, and gross margin for OpenText's cloud services and subscriptions segment Cloud Services and Subscriptions Performance | Metric | 3 Months Ended Dec 31, 2021 (in thousands) | 3 Months Ended Dec 31, 2020 (in thousands) | YoY Change | 6 Months Ended Dec 31, 2021 (in thousands) | 6 Months Ended Dec 31, 2020 (in thousands) | YoY Change | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------- | :--------------------------------------- | :--------------------------------------- | :--------- | | Revenues | $364,886 | $350,454 | +4.1% | $721,475 | $691,440 | +4.3% | | Cost of Revenues | $122,129 | $117,882 | +3.6% | $241,908 | $230,506 | +5.0% | | Gross Profit | $242,757 | $232,572 | +4.4% | $479,567 | $460,934 | +4.0% | | Gross Margin % | 66.5% | 66.4% | +0.1 pp | 66.5% | 66.7% | -0.2 pp | - Cloud services and subscriptions revenue increased by **4.1%** (3 months) and **4.3%** (6 months), with Americas contributing the most to growth[238](index=238&type=chunk)[241](index=241&type=chunk) - The number of cloud services contracts greater than **$1.0 million** increased to **27** in Q2 Fiscal 2022 (vs. **15** in Q2 Fiscal 2021) and **43** in the first six months of Fiscal 2022 (vs. **21** in the prior year)[239](index=239&type=chunk)[242](index=242&type=chunk) [Customer Support](index=46&type=section&id=Customer%20Support) This section details the revenue, cost of revenues, gross profit, and gross margin for OpenText's customer support segment Customer Support Performance | Metric | 3 Months Ended Dec 31, 2021 (in thousands) | 3 Months Ended Dec 31, 2020 (in thousands) | YoY Change | 6 Months Ended Dec 31, 2021 (in thousands) | 6 Months Ended Dec 31, 2020 (in thousands) | YoY Change | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------- | :--------------------------------------- | :--------------------------------------- | :--------- | | Revenues | $334,875 | $334,492 | +0.1% | $670,112 | $663,891 | +0.9% | | Cost of Revenues | $29,668 | $29,668 | 0.0% | $59,151 | $58,862 | +0.5% | | Gross Profit | $305,207 | $304,824 | +0.1% | $610,961 | $605,029 | +1.0% | | Gross Margin % | 91.1% | 91.1% | 0.0 pp | 91.2% | 91.1% | +0.1 pp | - Customer support revenues increased by **0.1%** (3 months) and **0.9%** (6 months), with EMEA and Asia Pacific showing increases, partially offset by a decrease in Americas[247](index=247&type=chunk)[249](index=249&type=chunk) - The customer support renewal rate remained stable at approximately **94%** for the quarter ended December 31, 2021[244](index=244&type=chunk) [License](index=47&type=section&id=License) This section details the revenue, cost of revenues, gross profit, and gross margin for OpenText's license segment License Performance | Metric | 3 Months Ended Dec 31, 2021 (in thousands) | 3 Months Ended Dec 31, 2020 (in thousands) | YoY Change | 6 Months Ended Dec 31, 2021 (in thousands) | 6 Months Ended Dec 31, 2020 (in thousands) | YoY Change | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------- | :--------------------------------------- | :--------------------------------------- | :--------- | | Revenues | $109,493 | $107,348 | +2.0% | $183,022 | $175,871 | +4.1% | | Cost of Revenues | $3,741 | $4,302 | -13.0% | $7,710 | $6,791 | +13.5% | | Gross Profit | $105,752 | $103,046 | +2.6% | $175,312 | $169,080 | +3.7% | | Gross Margin % | 96.6% | 96.0% | +0.6 pp | 95.8% | 96.1% | -0.3 pp | - License revenues increased by **2.0%** (3 months) and **4.1%** (6 months), with Americas and EMEA contributing to growth[253](index=253&type=chunk)[256](index=256&type=chunk) - The number of license contracts greater than **$1.0 million** increased to **15** in Q2 Fiscal 2022 (vs. **9** in Q2 Fiscal 2021) and **24** in the first six months of Fiscal 2022 (vs. **15** in the prior year)[254](index=254&type=chunk)[257](index=257&type=chunk) [Professional Service and Other](index=47&type=section&id=Professional%20Service%20and%20Other) This section details the revenue, cost of revenues, gross profit, and gross margin for OpenText's professional service and other segment Professional Service and Other Performance | Metric | 3 Months Ended Dec 31, 2021 (in thousands) | 3 Months Ended Dec 31, 2020 (in thousands) | YoY Change | 6 Months Ended Dec 31, 2021 (in thousands) | 6 Months Ended Dec 31, 2020 (in thousands) | YoY Change | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------- | :--------------------------------------- | :--------------------------------------- | :--------- | | Revenues | $67,545 | $63,350 | +6.6% | $134,498 | $128,455 | +4.7% | | Cost of Revenues | $53,041 | $46,619 | +13.8% | $104,766 | $93,200 | +12.4% | | Gross Profit | $14,504 | $16,731 | -13.3% | $29,732 | $35,255 | -15.6% | | Gross Margin % | 21.5% | 26.4% | -4.9 pp | 22.1% | 27.4% | -5.3 pp | - Professional service and other revenues increased by **6.6%** (3 months) and **4.7%** (6 months), driven by increases across all geographies[262](index=262&type=chunk)[264](index=264&type=chunk) - Gross margin percentage decreased significantly due to a rise in labor-related costs[263](index=263&type=chunk)[265](index=265&type=chunk) [Amortization of Acquired Technology-based Intangible Assets](index=48&type=section&id=Amortization%20of%20Acquired%20Technology-based%20Intangible%20Assets) This section details the amortization expense for OpenText's acquired technology-based intangible assets Amortization of Acquired Technology-based Intangible Assets | Metric | 3 Months Ended Dec 31, 2021 (in thousands) | 3 Months Ended Dec 31, 2020 (in thousands) | YoY Change | 6 Months Ended Dec 31, 2021 (in thousands) | 6 Months Ended Dec 31, 2020 (in thousands) | YoY Change | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------- | :--------------------------------------- | :--------------------------------------- | :--------- | | Amortization Expense | $52,602 | $54,091 | -2.8% | $105,769 | $112,128 | -5.7% | - Amortization expense decreased by **$1.5 million** (3 months) and **$6.4 million** (6 months) primarily because intangible assets from previous acquisitions became fully amortized[266](index=266&type=chunk)[267](index=267&type=chunk) [Operating Expenses](index=49&type=section&id=Operating%20Expenses) Total operating expenses increased by $54.1 million (3 months) and $72.9 million (6 months) year-over-year. This was primarily driven by increases in payroll and related benefits across R&D, sales & marketing, and G&A, along with higher marketing expenses and acquisition-related costs. These increases were partially offset by decreases in amortization of acquired intangible assets and net recoveries in special charges in the prior year [Research and development](index=49&type=section&id=Research%20and%20development) This section details OpenText's research and development expenses and their percentage of total revenues Research and Development Expenses | Metric | 3 Months Ended Dec 31, 2021 (in thousands) | 3 Months Ended Dec 31, 2020 (in thousands) | YoY Change | 6 Months Ended Dec 31, 2021 (in thousands) | 6 Months Ended Dec 31, 2020 (in thousands) | YoY Change | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------- | :--------------------------------------- | :--------------------------------------- | :--------- | | Expense | $103,622 | $100,238 | +3.4% | $203,787 | $194,141 | +5.0% | | % of Total Revenues | 11.8% | 11.7% | +0.1 pp | 11.9% | 11.7% | +0.2 pp | - R&D expenses increased by **$3.4 million** (3 months) and **$9.6 million** (6 months), mainly due to higher payroll and benefits, partially offset by reduced facility-related expenses[269](index=269&type=chunk)[270](index=270&type=chunk) - R&D labor resources increased by **257 employees**, from **4,107** at December 31, 2020, to **4,364** at December 31, 2021[271](index=271&type=chunk) [Sales and marketing](index=50&type=section&id=Sales%20and%20marketing) This section details OpenText's sales and marketing expenses and their percentage of total revenues Sales and Marketing Expenses | Metric | 3 Months Ended Dec 31, 2021 (in thousands) | 3 Months Ended Dec 31, 2020 (in thousands) | YoY Change | 6 Months Ended Dec 31, 2021 (in thousands) | 6 Months Ended Dec 31, 2020 (in thousands) | YoY Change | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------- | :--------------------------------------- | :--------------------------------------- | :--------- | | Expense | $163,938 | $147,897 | +10.8% | $310,178 | $280,297 | +10.7% | | % of Total Revenues | 18.7% | 17.3% | +1.4 pp | 18.1% | 16.9% | +1.2 pp | - Sales and marketing expenses increased by **$16.0 million** (3 months) and **$29.9 million** (6 months), driven by higher payroll, commissions, marketing, and travel expenses, partially offset by reduced credit loss expense[273](index=273&type=chunk)[274](index=274&type=chunk) - Sales and marketing labor resources increased by **302 employees**, from **2,415** at December 31, 2020, to **2,717** at December 31, 2021[275](index=275&type=chunk) [General and administrative](index=50&type=section&id=General%20and%20administrative) This section details OpenText's general and administrative expenses and their percentage of total revenues General and Administrative Expenses | Metric | 3 Months Ended Dec 31, 2021 (in thousands) | 3 Months Ended Dec 31, 2020 (in thousands) | YoY Change | 6 Months Ended Dec 31, 2021 (in thousands) | 6 Months Ended Dec 31, 2020 (in thousands) | YoY Change | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------- | :--------------------------------------- | :--------------------------------------- | :--------- | | Expense | $71,513 | $62,765 | +13.9% | $142,990 | $118,954 | +20.2% | | % of Total Revenues | 8.2% | 7.3% | +0.9 pp | 8.4% | 7.2% | +1.2 pp | - G&A expenses increased by **$8.7 million** (3 months) and **$24.0 million** (6 months), primarily due to higher payroll, travel, and consulting expenses, partially offset by reductions in other miscellaneous costs[276](index=276&type=chunk)[278](index=278&type=chunk) - G&A labor resources increased by **127 employees**, from **1,865** at December 31, 2020, to **1,992** at December 31, 2021[279](index=279&type=chunk) [Depreciation expenses](index=51&type=section&id=Depreciation%20expenses) This section details OpenText's depreciation expenses and their percentage of total revenues Depreciation Expenses | Metric | 3 Months Ended Dec 31, 2021 (in thousands) | 3 Months Ended Dec 31, 2020 (in thousands) | YoY Change | 6 Months Ended Dec 31, 2021 (in thousands) | 6 Months Ended Dec 31, 2020 (in thousands) | YoY Change | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------- | :--------------------------------------- | :--------------------------------------- | :--------- | | Expense | $21,779 | $20,280 | +7.4% | $43,165 | $42,283 | +2.1% | | % of Total Revenues | 2.5% | 2.4% | +0.1 pp | 2.5% | 2.5% | 0.0 pp | - Depreciation expenses increased by **$1.5 million** (3 months) and **$0.9 million** (6 months) year-over-year[280](index=280&type=chunk) [Amortization of acquired customer-based intangible assets](index=51&type=section&id=Amortization%20of%20acquired%20customer-based%20intangible%20assets) This section details the amortization expense for OpenText's acquired customer-based intangible assets Amortization of Acquired Customer-Based Intangible Assets | Metric | 3 Months Ended Dec 31, 2021 (in thousands) | 3 Months Ended Dec 31, 2020 (in thousands) | YoY Change | 6 Months Ended Dec 31, 2021 (in thousands) | 6 Months Ended Dec 31, 2020 (in thousands) | YoY Change | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------- | :--------------------------------------- | :--------------------------------------- | :--------- | | Expense | $52,665 | $54,926 | -4.2% | $104,549 | $109,919 | -4.9% | - Amortization of acquired customer-based intangible assets decreased by **$2.3 million** (3 months) and **$5.4 million** (6 months) due to previous acquisitions becoming fully amortized[282](index=282&type=chunk)[283](index=283&type=chunk) [Special charges (recoveries)](index=51&type=section&id=Special%20charges%20(recoveries)) This section details OpenText's special charges and recoveries and their percentage of total revenues Special Charges (Recoveries) | Metric | 3 Months Ended Dec 31, 2021 (in thousands) | 3 Months Ended Dec 31, 2020 (in thousands) | YoY Change | 6 Months Ended Dec 31, 2021 (in thousands) | 6 Months Ended Dec 31, 2020 (in thousands) | YoY Change | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------- | :--------------------------------------- | :--------------------------------------- | :--------- | | Total | $9,217 | $(17,494) | N/A | $9,561 | $(4,250) | N/A | | % of Total Revenues | 1.1% | -2.0% | +3.1 pp | 0.6% | -0.3% | +0.9 pp | - Special charges (recoveries) increased by **$26.7 million** (3 months) and **$13.8 million** (6 months) year-over-year, primarily due to net recoveries in the prior comparative period and increased acquisition-related costs and pre-acquisition equity incentives[286](index=286&type=chunk)[287](index=287&type=chunk) [Other Income (Expense), Net](index=52&type=section&id=Other%20Income%20(Expense),%20Net) This section details OpenText's other income and expense, net, including the impact of debt extinguishment and equity investee income Other Income (Expense), Net | Category | 3 Months Ended Dec 31, 2021 (in thousands) | 3 Months Ended Dec 31, 2020 (in thousands) | YoY Change | 6 Months Ended Dec 31, 2021 (in thousands) | 6 Months Ended Dec 31, 2020 (in thousands) | YoY Change | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------- | :--------------------------------------- | :--------------------------------------- | :--------- | | Total other income (expense), net | $(25,037) | $5,251 | N/A | $4,745 | $8,134 | -41.6% | - The company recorded a **$27.4 million loss on debt extinguishment** for the redemption of Senior Notes 2026, significantly impacting other income (expense), net[289](index=289&type=chunk) - OpenText's share in net income of equity investees increased to **$31.4 million** for the six months ended December 31, 2021, from **$8.3 million** in the prior year[289](index=289&type=chunk) [Interest and Other Related Expense, Net](index=52&type=section&id=Interest%20and%20Other%20Related%20Expense,%20Net) This section details OpenText's interest and other related expense, net, for the periods presented Interest and Other Related Expense, Net | Metric | 3 Months Ended Dec 31, 2021 (in thousands) | 3 Months Ended Dec 31, 2020 (in thousands) | YoY Change | 6 Months Ended Dec 31, 2021 (in thousands) | 6 Months Ended Dec 31, 2020 (in thousands) | YoY Change | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------- | :--------------------------------------- | :--------------------------------------- | :--------- | | Total interest and other related expense, net | $40,245 | $37,595 | +7.0% | $77,300 | $76,684 | +0.8% | - Interest expense related to total outstanding debt increased by **$2.1 million** (3 months) but decreased by **$0.5 million** (6 months)[291](index=291&type=chunk) [Provision for (Recovery of) Income Taxes](index=53&type=section&id=Provision%20for%20(Recovery%20of)%20Income%20Taxes) This section details OpenText's provision for income taxes and effective tax rate, highlighting the impact of prior-year IRS settlements Provision for (Recovery of) Income Taxes | Metric | 3 Months Ended Dec 31, 2021 (in thousands) | 3 Months Ended Dec 31, 2020 (in thousands) | YoY Change | 6 Months Ended Dec 31, 2021 (in thousands) | 6 Months Ended Dec 31, 2020 (in thousands) | YoY Change | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------- | :--------------------------------------- | :--------------------------------------- | :--------- | | Provision for (recovery of) income taxes | $39,266 | $267,559 | -85.3% | $82,716 | $310,303 | -73.3% | | Effective tax rate | 30.8% | 132.4% | -101.6 pp | 27.3% | 89.1% | -61.8 pp | - The significant decrease in tax expense was primarily due to a **$299.3 million** decrease related to IRS settlements in Fiscal 2021, partially offset by an increase in unrecognized tax benefits[293](index=293&type=chunk)[294](index=294&type=chunk) [Use of Non-GAAP Financial Measures](index=54&type=section&id=Use%20of%20Non-GAAP%20Financial%20Measures) This section explains OpenText's use of Non-GAAP financial measures to provide additional insights into core business performance by excluding certain non-operational items - OpenText uses Non-GAAP financial measures (e.g., Non-GAAP net income, EPS, gross profit, income from operations, and Adjusted EBITDA) to supplement U.S. GAAP results, providing insights into core business performance by excluding non-operational charges like amortization of acquired intangibles, share-based compensation, and special charges[297](index=297&type=chunk)[299](index=299&type=chunk)[301](index=301&type=chunk) - These Non-GAAP measures aim to offer a more consistent basis for comparison across accounting periods, especially given the unpredictable nature of acquisitions and restructuring activities[302](index=302&type=chunk) Non-GAAP Financial Measures Summary | Metric | 3 Months Ended Dec 31, 2021 (in millions) | 3 Months Ended Dec 31, 2020 (in millions) | 6 Months Ended Dec 31, 2021 (in millions) | 6 Months Ended Dec 31, 2020 (in millions) | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Non-GAAP-based Gross Profit | $670.2 | $659.5 | $1,299.9 | $1,274.4 | | Non-GAAP-based Gross Margin % | 76.4% | 77.1% | 76.1% | 76.8% | | Non-GAAP-based Income from Operations | $321.8 | $340.5 | $623.8 | $660.9 | | Non-GAAP-based Net Income, attributable to OpenText | $242.1 | $260.5 | $469.9 | $502.3 | | Non-GAAP-based Diluted EPS | $0.89 | $0.95 | $1.72 | $1.84 | | Adjusted EBITDA | $343.5 | $360.8 | $666.9 | $703.1 | [LIQUIDITY AND CAPITAL RESOURCES](index=63&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) OpenText's cash and cash equivalents decreased by $95.5 million to $1.51 billion as of December 31, 2021. Operating cash flows decreased by 21.3% due to working capital changes, while investing activities saw a significant increase in cash usage due to the Zix and Bricata acquisitions. Financing activities provided substantial cash, primarily from new debt issuances, partially offset by debt repayments and share repurchases. The company maintains sufficient liquidity and has various debt facilities and a renewed share repurchase plan in place [Cash and cash equivalents](index=63&type=section&id=Cash%20and%20cash%20equivalents) This section details OpenText's cash, cash equivalents, and restricted cash balances, along with expected liquidity and deferred tax payments Cash and Cash Equivalents and Restricted Cash | Metric | Dec 31, 2021 (in thousands) | Jun 30, 2021 (in thousands) | Change | | :--------------------------------------- | :-------------------------- | :-------------------------- | :----- | | Cash and cash equivalents | $1,511,792 | $1,607,306 | $(95,514) | | Restricted cash | $2,303 | $2,494 | $(191) | | **Total cash, cash equivalents and restricted cash** | **$1,514,095** | **$1,609,800** | **$(95,705)** | - The company expects its cash, cash equivalents, and available credit facilities to be sufficient for anticipated cash requirements for the next twelve months[346](index=346&type=chunk) - OpenText has deferred **$99.0 million** in tax payments under COVID-19 relief programs, with **$30.0 million** remaining payable in Fiscal 2022 and 2023[348](index=348&type=chunk) [Cash flows provided by operating activities](index=63&type=section&id=Cash%20flows%20provided%20by%20operating%20activities) This section details OpenText's net cash provided by operating activities, explaining the drivers of changes in cash flow and days sales outstanding Net Cash Provided by Operating Activities | Metric | 6 Months Ended Dec 31, 2021 (in thousands) | 6 Months Ended Dec 31, 2020 (in thousands) | YoY Change | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------- | | Net cash provided by operating activities | $406,313 | $516,359 | -21.3% | - Operating cash flows decreased by **$110.0 million**, primarily due to a **$227.6 million** decrease from changes in working capital, partially offset by a **$117.6 million** increase in net income before non-cash items[349](index=349&type=chunk) - Days sales outstanding (DSO) improved to **44 days** in Q2 Fiscal 2022 from **47 days** in Q2 Fiscal 2021, reflecting strong collections efficiency[349](index=349&type=chunk) [Cash flows used in investing activities](index=64&type=section&id=Cash%20flows%20used%20in%20investing%20activities) This section details OpenText's net cash used in investing activities, primarily driven by recent acquisitions Net Cash Used in Investing Activities | Metric | 6 Months Ended Dec 31, 2021 (in thousands) | 6 Months Ended Dec 31, 2020 (in thousands) | YoY Change | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------- | | Net cash used in investing activities | $(896,118) | $(24,253) | +3594.0% | - Cash used in investing activities increased significantly by **$871.9 million**, primarily due to the acquisitions of Zix (**$837.6 million**) and Bricata (**$17.9 million**)[352](index=352&type=chunk) [Cash flows provided by (used in) financing activities](index=64&type=section&id=Cash%20flows%20provided%20by%20(used%20in)%20financing%20activities) This section details OpenText's net cash provided by (used in) financing activities, highlighting the impact of debt issuances, redemptions, and share repurchases Net Cash Provided by (Used in) Financing Activities | Metric | 6 Months Ended Dec 31, 2021 (in thousands) | 6 Months Ended Dec 31, 2020 (in thousands) | YoY Change | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------- | | Net cash provided by (used in) financing activities | $419,813 | $(719,462) | N/A | - Financing cash flows increased by **$1.1 billion**, driven by **$1.5 billion** from new Senior Notes issuances (2031 and 2029), partially offset by **$850.0 million** redemption of Senior Notes 2026, **$91.0 million** in share repurchases, and **$25.0 million** in early debt termination premiums[354](index=354&type=chunk)[357](index=357&type=chunk) [Cash Dividends](index=64&type=section&id=Cash%20Dividends) This section details OpenText's cash dividends paid per common share for the periods presented Cash Dividends Paid | Metric | 3 Months Ended Dec 31, 2021 (in millions) | 3 Months Ended Dec 31, 2020 (in millions) | 6 Months Ended Dec 31, 2021 (in millions) | 6 Months Ended Dec 31, 2020 (in millions) | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Cash Dividends Paid | $59.7 | $54.5 | $119.5 | $101.8 | | Per Common Share | $0.2209 | $0.2008 | $0.4418 | $0.3754 | [Long-term Debt and Credit Facilities](index=64&type=section&id=Long-term%20Debt%20and%20Credit%20Facilities) This section details OpenText's long-term debt and credit facilities, including recent Senior Notes issuances, redemptions, and compliance with debt covenants - OpenText Holdings, Inc. issued **$650 million** of **4.125% Senior Notes due 2031** and OpenText Corporation issued **$850 million** of **3.875% Senior Notes due 2029** on November 24, 2021[356](index=356&type=chunk)[370](index=370&type=chunk) - On December 9, 2021, the company redeemed its **$850 million Senior Notes 2026** in full, using proceeds from the new issuances, resulting in a **$27.4 million loss on debt extinguishment**[384](index=384&type=chunk) - The Term Loan B has an outstanding balance of **$962.5 million** as of December 31, 2021, bearing a floating interest rate of **1.84%**, and the company's consolidated net leverage ratio of **2.0:1** is well within the **4:1** covenant[387](index=387&type=chunk)[389](index=389&type=chunk) [Shelf Registration Statement](index=69&type=section&id=Shelf%20Registration%20Statement) This section describes OpenText's universal shelf registration statement filed with the SEC for future securities offerings - On December 6, 2021, OpenText filed a universal shelf registration statement (Form S-3) with the SEC, allowing for future primary and secondary offerings of various equity and debt securities[393](index=393&type=chunk) [Share Repurchase Plan / Normal Course Issuer Bid](index=69&type=section&id=Share%20Repurchase%20Plan%20/%20Normal%20Course%20Issuer%20Bid) This section details OpenText's renewed share repurchase plan and the number of shares repurchased during the period - On November 4, 2021, the Board authorized a renewed share repurchase plan to buy back up to **$350 million** of Common Shares over 12 months, subject to a limit of **13,638,008 shares**[396](index=396&type=chunk)[397](index=397&type=chunk) - During the three and six months ended December 31, 2021, OpenText repurchased and cancelled **1,809,559 Common Shares** for **$91.0 million** under its repurchase plans[398](index=398&type=chunk) [Pensions](index=70&type=section&id=Pensions) This section details OpenText's anticipated pension payments by plan and total unfunded pension obligations Anticipated Pension Payments by Plan | Fiscal Year Ending June 30 | CDT (in thousands) | GXS GER (in thousands) | GXS PHP (in thousands) | | :------------------------- | :----------------- | :--------------------- | :--------------------- | | 2022 (six months ended) | $418 | $502 | $8 | | 2023 | $912 | $993 | $255 | | 2024 | $987 | $994 | $258 | | 2025 | $1,031 | $1,017 | $180 | | 2026 | $1,066 | $1,005 | $209 | | 2027 to 2031 | $6,172 | $4,882 | $2,767 | | **Total** | **$10,586** | **$9,393** | **$3,677** | - As of December 31, 2021, total unfunded pension plan obligations were **$77.6 million**, with **$2.6 million** payable within the next twelve mo

opentext". Investor Presentation NASDAQ: OTEX | TSX: OTEX November 4, 2021 Safe Harbor Statement This presentation may contain forward-looking statements. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, and created under the Securities Act of 1933, as amended (the Securities Act), and the Securities Exchange Act of 1934, as amended, the Securities Act (Ontario) and Canadian securities legislation in each of the provinc ...

Financial Data and Key Metrics Changes - OpenText reported its first quarter fiscal 2022 earnings, with specific financial metrics and updates available in the investor presentation [4]. Business Line Data and Key Metrics Changes - Detailed financials specific to quarterly results, including updated quarterly factors, are included in the investor presentation [4]. Market Data and Key Metrics Changes - The company will participate in several upcoming conferences, which may provide further insights into market conditions and performance [5]. Company Strategy and Development Direction and Industry Competition - The strategic overview is part of the investor presentation, which outlines the company's direction and competitive positioning [4]. Management's Comments on Operating Environment and Future Outlook - Management will provide comments during the prepared remarks and the subsequent question-and-answer session, focusing on the operating environment and future prospects [3]. Other Important Information - The conference call is expected to last approximately 60 minutes, with a replay available shortly thereafter [3]. Q&A Session All Questions and Answers - The Q&A session will follow the prepared remarks, allowing analysts and investors to ask questions regarding the company's performance and outlook [3].

Part I Financial Information [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited Condensed Consolidated Financial Statements for Q1 FY2022, detailing financial performance and position | Financial Metric | Q1 FY2022 (ended Sep 30, 2021) | Q1 FY2021 (ended Sep 30, 2020) | Change (YoY) | | :--- | :--- | :--- | :--- | | **Total Revenues** | $832.3 million | $804.0 million | +3.5% | | **Gross Profit** | $574.2 million | $555.1 million | +3.4% | | **Income from Operations** | $182.7 million | $182.4 million | +0.2% | | **Net Income (attributable to OpenText)** | $131.9 million | $103.4 million | +27.6% | | **Diluted EPS** | $0.48 | $0.38 | +26.3% | | Balance Sheet Item | Sep 30, 2021 | June 30, 2021 | | :--- | :--- | :--- | | **Total Assets** | $9,519.4 million | $9,609.3 million | | Cash and cash equivalents | $1,735.3 million | $1,607.3 million | | Goodwill | $4,686.9 million | $4,691.7 million | | **Total Liabilities** | $5,310.8 million | $5,509.9 million | | Long-term debt | $3,577.5 million | $3,578.9 million | | **Total Shareholders' Equity** | $4,208.5 million | $4,099.5 million | - Net cash provided by operating activities decreased to **$189.7 million** for the three months ended September 30, 2021, compared to **$233.9 million** in the prior-year period[17](index=17&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes provide detailed explanations of accounting policies and financial figures, covering revenue recognition, long-term debt, share capital, contingencies, and restructuring charges | Revenue by Type (Q1 FY2022) | Amount (USD thousands) | % of Total | | :--- | :--- | :--- | | Cloud services and subscriptions | $356,589 | 42.8% | | Customer support | $335,237 | 40.3% | | **Total Recurring Revenues** | **$691,826** | **83.1%** | | License | $73,529 | 8.8% | | Professional service and other | $66,953 | 8.1% | | **Total Revenues** | **$832,308** | **100.0%** | - As of September 30, 2021, the company's long-term debt totaled approximately **$3.59 billion**, primarily consisting of Senior Notes due in 2026, 2028, and 2030, and a Term Loan B[51](index=51&type=chunk) - The company is in a dispute with the Canada Revenue Agency (CRA) over transfer pricing for fiscal years 2012-2016, with a potential liability of approximately **$72 million** in penalties, interest, and taxes; a separate audit for Fiscal 2017 could reduce deferred tax assets by up to **$470 million**, which the company is vigorously contesting and has not accrued[109](index=109&type=chunk)[111](index=111&type=chunk)[114](index=114&type=chunk) - Total share-based compensation expense for the quarter was **$13.9 million**, up from **$11.7 million** in the prior-year period[83](index=83&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=33&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management analyzes the company's Q1 FY2022 financial performance, covering operational results, COVID-19 impacts, liquidity, and capital resources, emphasizing revenue growth and strategic initiatives - The company's "Total Growth" strategy emphasizes increasing recurring revenues and expanding margins to drive cash flow generation, which in turn fuels a disciplined capital allocation approach for strategic acquisitions and innovation[187](index=187&type=chunk) - For Q1 FY2022, the company invested **$100.2 million**, or **12.0% of revenue**, in Research & Development (R&D), in line with its target of **12% to 14% of revenues** for the fiscal year[188](index=188&type=chunk) - Operating expenses for R&D, Sales & Marketing, and General & Administrative all increased year-over-year, partly due to the restoration of compensation adjustments that were implemented in the prior year to mitigate the impacts of COVID-19[216](index=216&type=chunk)[220](index=220&type=chunk)[222](index=222&type=chunk) [Results of Operations](index=37&type=section&id=Results%20of%20Operations) This section details financial performance, showing total revenue growth driven by increases across all revenue streams and higher operating expenses due to restored compensation adjustments | Revenue Stream | Q1 FY2022 (USD millions) | YoY Growth | Key Drivers | | :--- | :--- | :--- | :--- | | Cloud services and subscriptions | $356.6 | 4.6% | Growth across all geographies | | Customer support | $335.2 | 1.8% | Growth in EMEA and Asia Pacific | | License | $73.5 | 7.3% | Strong performance in EMEA and Americas | | Professional service and other | $67.0 | 2.8% | Growth in EMEA and Asia Pacific | - Special charges decreased significantly to **$0.3 million** from **$13.2 million** in the prior-year quarter, primarily due to a reduction in restructuring activities related to the COVID-19 and Fiscal 2020 plans[227](index=227&type=chunk) - The effective tax rate for the quarter was **24.8%**, a decrease from **29.2%** in the same period last year[233](index=233&type=chunk) [Use of Non-GAAP Financial Measures](index=46&type=section&id=Use%20of%20Non-GAAP%20Financial%20Measures) The company explains its use of non-GAAP financial measures to provide insight into core operational performance, with detailed reconciliations from GAAP | Metric | GAAP | Non-GAAP | Key Adjustments | | :--- | :--- | :--- | :--- | | **Net Income (attributable)** | $131.9 million | $227.8 million | Amortization ($105.1 million), Share-based comp ($13.9 million), Tax effects | | **Diluted EPS** | $0.48 | $0.83 | Same as above | | **Gross Margin** | 69.0% | 75.7% | Amortization of tech intangibles, Share-based comp | | **Adjusted EBITDA** | N/A | $323.4 million | Reconciliation from Net Income provided | [Liquidity and Capital Resources](index=51&type=section&id=Liquidity%20and%20Capital%20Resources) This section details the company's financial position, cash flows, and capital management, including cash balances, operating cash flow, debt structure, and capital allocation plans - Cash and cash equivalents increased by **$128.0 million** during the quarter to **$1,735.3 million** as of September 30, 2021[257](index=257&type=chunk) - Operating cash flow decreased by **$44.2 million** YoY, primarily due to a **$62.9 million** decrease related to accounts payable and accrued liabilities[262](index=262&type=chunk) - During the quarter, the company paid cash dividends of **$59.9 million**; subsequent to the quarter's end, a new share repurchase plan was authorized for up to **$350 million**[266](index=266&type=chunk)[300](index=300&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=59&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company identifies primary market risks as interest rate fluctuations on variable-rate debt and foreign currency exchange rate volatility, detailing potential financial impacts - The company is exposed to interest rate risk on its **$965.0 million** outstanding balance of Term Loan B, where a **1%** adverse change would increase annual interest payments by approximately **$9.7 million**[327](index=327&type=chunk) - The company is exposed to foreign currency translation risk, with **$573.2 million** in cash and cash equivalents denominated in foreign currencies, where a uniform **10%** weakening against the U.S. dollar would decrease the reported cash balance by **$57.3 million**[333](index=333&type=chunk) [Controls and Procedures](index=61&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded the company's disclosure controls and procedures were effective as of September 30, 2021, with no material changes in internal control over financial reporting - The CEO and CFO concluded that as of September 30, 2021, the company's disclosure controls and procedures were effective[334](index=334&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[335](index=335&type=chunk) Part II Other Information [Risk Factors](index=61&type=section&id=Item%201A.%20Risk%20Factors) This section refers readers to the comprehensive risk factors detailed in the Annual Report on Form 10-K, indicating no new material risks for the quarter - The report refers to the risk factors discussed in the Annual Report on Form 10-K for the fiscal year ended June 30, 2021, for a comprehensive understanding of the risks and uncertainties facing the company[338](index=338&type=chunk) [Exhibits](index=61&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, primarily consisting of CEO and CFO certifications and Inline XBRL financial data files - The exhibits filed with this report include certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act, as well as XBRL instance and taxonomy documents[339](index=339&type=chunk)

Part I [Business](index=6&type=section&id=Item%201.%20Business) OpenText delivers Information Management software via five cloud platforms, driven by a "Total Growth" strategy combining organic growth, innovation, and acquisitions - OpenText provides Information Management solutions through **five integrated cloud platforms**: Content Cloud, Business Network Cloud, Experience Cloud, Security and Protection Cloud, and Developer Cloud[28](index=28&type=chunk) - The company's **"Total Growth" strategy** emphasizes organic initiatives, innovation, strategic acquisitions, and increasing recurring revenues and margins[56](index=56&type=chunk)[274](index=274&type=chunk) Revenue Streams | Revenue Stream | Description | | :--- | :--- | | **Cloud Services and Subscriptions** | SaaS, hosted services, and managed service arrangements | | **Customer Support** | Annual support and maintenance contracts providing software upgrades and technical assistance | | **License** | Fees from licensing software products for on-premise deployment | | **Professional Service and Other** | Consulting, implementation, training, and integration services | - OpenText invested a cumulative **$1.1 billion** in R&D over the last three fiscal years, representing **11.9% of cumulative revenue**, and targets **12% to 14%** of revenues annually for R&D[57](index=57&type=chunk)[276](index=276&type=chunk) - As of June 30, 2021, the company employed approximately **14,300 individuals** globally, with **48%** in the Americas, **18%** in EMEA, and **34%** in the Asia Pacific region[100](index=100&type=chunk) [Risk Factors](index=17&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from the COVID-19 pandemic, product development, competition, data security, acquisition integration, and tax audits - The **COVID-19 pandemic** poses **significant risks**, potentially affecting business operations, financial performance, and global economic conditions[122](index=122&type=chunk)[123](index=123&type=chunk)[125](index=125&type=chunk) - The company faces risks from ongoing tax audits by the **Canada Revenue Agency (CRA)** for fiscal years 2012-2017, with a potential non-cash charge of up to **$470 million** related to the Fiscal 2017 audit[171](index=171&type=chunk)[176](index=176&type=chunk)[466](index=466&type=chunk) - Failure to protect **intellectual property**, claims of infringement, and **potential defects in complex software products** could harm reputation, increase costs, and lead to litigation[136](index=136&type=chunk)[137](index=137&type=chunk)[138](index=138&type=chunk) - Acquisition-related risks include difficulties in **integrating acquired businesses**, potential for **weaker internal controls** in acquired companies, and the possibility that acquisitions may **negatively affect operating results**[161](index=161&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk) - **Data privacy and security** are major risks, with evolving laws like **GDPR and CCPA** increasing compliance costs, potentially leading to **significant liabilities, regulatory action, and reputational damage** from breaches[145](index=145&type=chunk)[179](index=179&type=chunk) [Unresolved Staff Comments](index=35&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that it has no unresolved staff comments from the Securities and Exchange Commission - There are no unresolved staff comments[210](index=210&type=chunk) [Properties](index=35&type=section&id=Item%202.%20Properties) OpenText's properties include approximately 0.3 million square feet of owned facilities and 2.4 million square feet of leased facilities globally Company Facilities Overview | Facility Type | Total Square Footage | | :--- | :--- | | Owned | ~0.3 million | | Leased | ~2.4 million | - The company's headquarters in **Waterloo, Ontario**, consists of approximately **232,000 square feet** on land leased from the University of Waterloo[212](index=212&type=chunk) [Legal Proceedings](index=35&type=section&id=Item%203.%20Legal%20Proceedings) The company is subject to various legal claims in the normal course of business but believes the final outcome will not have a materially adverse effect on its financial condition or results of operations - OpenText states that while subject to various legal claims, it does not expect the outcomes to have a **materially adverse effect** on its consolidated financial results[215](index=215&type=chunk) [Mine Safety Disclosures](index=35&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[217](index=217&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=36&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) OpenText common shares trade on NASDAQ and TSX under "OTEX", with the company maintaining a quarterly dividend policy and an active share repurchase plan - The company's common shares trade on both the **NASDAQ** and **TSX** under the ticker symbol **"OTEX"**[219](index=219&type=chunk) - A share repurchase plan was authorized on November 5, 2020, for up to **$350 million** of common shares over a **12-month period**[223](index=223&type=chunk) Share Repurchases (Year Ended June 30, 2021) | Metric | Value | | :--- | :--- | | Common Shares Repurchased | 2,500,000 | | Total Cost | $119.1 million | - The company expects to continue paying **quarterly cash dividends**, subject to Board of Directors' approval and contractual limitations[222](index=222&type=chunk) [Selected Financial Data](index=40&type=section&id=Item%206.%20Selected%20Financial%20Data) This section provides a five-year summary of OpenText's key consolidated financial data from Fiscal 2017 to 2021, highlighting growth influenced by acquisitions and a significant 2017 tax benefit Selected Financial Data (Fiscal Years 2017-2021) | (In thousands, except per share data) | 2021 | 2020 | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Revenues** | $3,386,115 | $3,109,736 | $2,868,755 | $2,815,241 | $2,291,057 | | **Net income, attributable to OpenText** | $310,672 | $234,225 | $285,501 | $242,224 | $1,025,659 | | **Net income per share, diluted** | $1.14 | $0.86 | $1.06 | $0.91 | $4.01 | | **Total Assets** | $9,609,336 | $10,234,822 | $7,933,975 | $7,765,029 | $7,480,562 | | **Cash dividends per Common Share** | $0.7770 | $0.6984 | $0.6300 | $0.5478 | $0.4770 | - Numerous acquisitions over the five-year period, including **Carbonite, Liaison, and the ECD Business**, have contributed to growth and affect period-to-period comparability[246](index=246&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=40&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In Fiscal 2021, OpenText reported increased revenues and GAAP net income, driven by recurring revenues and its "Total Growth" strategy, while operating cash flow decreased due to a tax settlement Fiscal 2021 Financial Highlights vs. Fiscal 2020 | Metric | Fiscal 2021 | Fiscal 2020 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $3,386.1 M | $3,109.7 M | +8.9% | | Annual Recurring Revenue | $2,741.5 M | $2,433.3 M | +12.7% | | GAAP Net Income | $310.7 M | $234.2 M | +32.7% | | GAAP Diluted EPS | $1.14 | $0.86 | +32.6% | | Adjusted EBITDA | $1,315.0 M | $1,148.1 M | +14.5% | | Operating Cash Flow | $876.1 M | $954.5 M | -8.2% | - Revenue growth was primarily driven by a **21.6% increase** in **Cloud services and subscriptions revenue**, largely due to incremental revenue from **acquisitions**[328](index=328&type=chunk) - Operating cash flow decreased by **$78.4 million**, mainly due to a **$299.6 million** payment related to the **IRS Settlement** and changes in working capital[267](index=267&type=chunk)[405](index=405&type=chunk) - The company settled a long-standing tax dispute with the **U.S. IRS** for Fiscal 2010 and 2012, resulting in a charge of **$300.5 million** and cash payments of **$299.6 million** during Fiscal 2021[460](index=460&type=chunk)[962](index=962&type=chunk) - During Fiscal 2021, the company repaid **$600 million** on its Revolver, repurchased **$119.1 million** of common shares, and paid **$210.7 million** in dividends[409](index=409&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=75&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risks are interest rate fluctuations on variable-rate debt and foreign currency exchange rate volatility from international operations - The company is exposed to interest rate risk primarily through its **$967.5 million** outstanding on **Term Loan B**, with a **1% increase** in interest rate increasing annual payments by approximately **$9.7 million**[473](index=473&type=chunk)[474](index=474&type=chunk) - OpenText faces **foreign currency risk** from transactions and translation, using **foreign currency forward contracts** to hedge Canadian dollar payroll expenses[477](index=477&type=chunk)[478](index=478&type=chunk) Cash and Cash Equivalents by Currency (June 30, 2021) | Currency | U.S. Dollar Equivalent (in thousands) | | :--- | :--- | | U.S. Dollar | $996,781 | | Foreign Currencies | $610,525 | | **Total** | **$1,607,306** | [Financial Statements and Supplementary Data](index=76&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for fiscal years 2019-2021, including balance sheets, income statements, and cash flows, with an unqualified opinion from KPMG LLP Consolidated Statement of Income (Year Ended June 30) | (In thousands) | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | **Total revenues** | $3,386,115 | $3,109,736 | $2,868,755 | | **Gross profit** | $2,351,649 | $2,105,961 | $1,938,052 | | **Income from operations** | $740,903 | $503,529 | $567,010 | | **Net income attributable to OpenText** | $310,672 | $234,225 | $285,501 | Consolidated Balance Sheet (As of June 30) | (In thousands) | 2021 | 2020 | | :--- | :--- | :--- | | **Total current assets** | $2,202,060 | $2,386,399 | | **Total assets** | $9,609,336 | $10,234,822 | | **Total current liabilities** | $1,361,904 | $1,904,233 | | **Total liabilities** | $5,509,883 | $6,228,113 | | **Total shareholders' equity** | $4,099,453 | $4,006,709 | Consolidated Statement of Cash Flows (Year Ended June 30) | (In thousands) | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | **Net cash provided by operating activities** | $876,120 | $954,536 | $876,278 | | **Net cash used in investing activities** | $(68,770) | $(1,469,417) | $(464,526) | | **Net cash provided by (used in) financing activities** | $(924,547) | $1,268,779 | $(148,374) | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=76&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports that there were no changes in or disagreements with its accountants on accounting and financial disclosure - None reported[483](index=483&type=chunk) [Controls and Procedures](index=76&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting (ICFR) were effective as of June 30, 2021, confirmed by KPMG LLP - Management concluded that disclosure controls and procedures were **effective** as of June 30, 2021[484](index=484&type=chunk) - Management assessed internal control over financial reporting (ICFR) as **effective** as of June 30, 2021, based on the **COSO framework (2013)**[486](index=486&type=chunk) - The independent registered public accounting firm, **KPMG LLP**, issued an **unqualified opinion** on the effectiveness of the company's ICFR[487](index=487&type=chunk)[489](index=489&type=chunk) [Other Information](index=77&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[492](index=492&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=78&type=section&id=Item%2010.%20Directors,%20Executive%20Officers%20and%20Corporate%20Governance) This section details OpenText's directors and executive officers, board committee composition, Audit Committee independence, and board diversity, noting 33% female representation - The report lists the company's directors and executive officers, including **Mark J. Barrenechea** (Vice Chair, CEO, and CTO) and **P. Thomas Jenkins** (Chairman of the Board)[495](index=495&type=chunk)[496](index=496&type=chunk)[512](index=512&type=chunk) - The Audit Committee consists of **four independent directors**, with **Mr. Randy Fowlie** qualifying as the **"audit committee financial expert"**[527](index=527&type=chunk)[528](index=528&type=chunk) - The company has a **Board Diversity Policy**, with **four women** on the Board representing approximately **33%** of the total board and **40%** of independent members[531](index=531&type=chunk)[533](index=533&type=chunk) [Executive Compensation](index=85&type=section&id=Item%2011.%20Executive%20Compensation) The company's pay-for-performance philosophy aligns executive compensation with business strategy, resulting in maximum short-term incentive payouts for NEOs in Fiscal 2021 due to strong performance, with a significant portion of compensation "at risk" - The company's compensation philosophy is based on a strong link to **business strategy, pay for performance, and market relevance**[554](index=554&type=chunk)[555](index=555&type=chunk)[556](index=556&type=chunk) FY2021 Short-Term Incentive Performance | Objective | Target (in millions) | Actual (in millions) | % of Target Achieved | Payout % | | :--- | :--- | :--- | :--- | :--- | | Worldwide Revenues | $3,110 | $3,293 | 106% | 200% | | Worldwide License and Cloud Revenues and MCV | $1,902 | $2,063 | 108% | 200% | | Worldwide Adjusted Operating Income | $1,000 | $1,217 | 122% | 200% | - A significant portion of NEO compensation is **"at risk"**, with long-term incentives comprising **80%** of the CEO's target total compensation and around **60-63%** for other NEOs[571](index=571&type=chunk) - CEO **Mark J. Barrenechea** received a special grant of **performance stock options** vesting based on achieving absolute share price growth targets, ranging from **20%** (threshold) to **60%** (maximum) increase over the exercise price[617](index=617&type=chunk)[618](index=618&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=112&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This section discloses beneficial ownership of OpenText common shares as of June 30, 2021, identifying Jarislowsky, Fraser Ltd. as the only 5%+ owner, and summarizes equity compensation plan authorizations - **Jarislowsky, Fraser Ltd.** is the only entity reported to beneficially own more than **5%** of the company's common shares, holding **16,333,691 shares**, representing **6.02%** of outstanding shares[694](index=694&type=chunk) - All executive officers and directors as a group beneficially own **7,228,707 common shares**, representing **2.64%** of the shares outstanding[694](index=694&type=chunk) Securities Authorized for Issuance under Equity Compensation Plans (as of June 30, 2021) | Plan Category | Securities to be issued upon exercise of outstanding options, warrants, and rights | Securities remaining available for future issuance | | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 8,113,574 | 11,251,577 | | Equity compensation plans not approved by security holders | 2,540,343 | — | [Certain Relationships and Related Transactions, and Director Independence](index=114&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions,%20and%20Director%20Independence) The company has a policy for related party transactions, and the Board determined all directors are independent under NASDAQ rules, except for CEO Mark J. Barrenechea and director Stephen J. Sadler - The Board has determined that all directors are **independent** except for CEO **Mark J. Barrenechea** and director **Stephen J. Sadler**[700](index=700&type=chunk) - Director **Stephen J. Sadler** received **CAD $48.0 thousand** (equivalent to **$37.1 thousand USD**) in consulting fees during Fiscal 2021 for acquisition-related business activities[701](index=701&type=chunk)[702](index=702&type=chunk) [Principal Accountant Fees and Services](index=115&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) This section details fees paid to KPMG LLP for Fiscal 2021 and 2020, primarily for audit services, with the Audit Committee pre-approving all services Fees Paid to KPMG LLP (in thousands) | Fee Category | Fiscal 2021 | Fiscal 2020 | | :--- | :--- | :--- | | Audit fees | $5,306 | $5,362 | | Audit-related fees | $41 | $257 | | Tax fees | $7 | $52 | | All other fees | $— | $— | | **Total** | **$5,354** | **$5,671** | - The Audit Committee has a policy to **pre-approve all audit and non-audit services** provided by the independent registered public accounting firm[703](index=703&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=116&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section provides an index to the Consolidated Financial Statements and lists all exhibits filed as part of the Annual Report on Form 10-K, including key agreements and certifications - This item contains the index to the **Consolidated Financial Statements**, which begin on **page 119** of the report[706](index=706&type=chunk) - A **comprehensive list of exhibits** is provided, including key agreements related to **acquisitions (e.g., Carbonite), debt instruments (e.g., Senior Notes indentures), and executive employment contracts**[708](index=708&type=chunk)[709](index=709&type=chunk)[710](index=710&type=chunk) [Form 10-K Summary](index=172&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company indicates that there is no summary for this item - None[1049](index=1049&type=chunk)

[Part I Financial Information](index=3&type=section&id=Part%20I%20Financial%20Information) Details the company's financial statements, management's analysis of operations, market risks, and internal controls [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Presents the unaudited condensed consolidated financial statements for Open Text Corporation, including balance sheets, income, and cash flow statements [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet as of March 31, 2021, shows a decrease in total assets to $9.56 billion from $10.23 billion at June 30, 2020, primarily due to a reduction in cash and cash equivalents Condensed Consolidated Balance Sheet Highlights (as of March 31, 2021 vs. June 30, 2020) | Balance Sheet Item | March 31, 2021 (in thousands) | June 30, 2020 (in thousands) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $1,475,626 | $1,692,850 | | Total current assets | $2,062,176 | $2,386,399 | | Goodwill | $4,688,449 | $4,672,356 | | Acquired intangible assets | $1,291,796 | $1,612,564 | | **Total assets** | **$9,556,621** | **$10,234,822** | | **Liabilities & Equity** | | | | Current portion of long-term debt | $10,000 | $610,000 | | Total current liabilities | $1,339,024 | $1,904,233 | | Long-term debt | $3,580,206 | $3,584,311 | | Total liabilities | $5,524,696 | $6,228,113 | | **Total shareholders' equity** | **$4,031,925** | **$4,006,709** | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) For the third quarter of fiscal 2021, total revenues increased to $832.9 million, and net income attributable to OpenText significantly increased to $91.5 million, while for the nine-month period, revenues grew to $2.49 billion but net income decreased to $129.4 million due to higher income taxes Income Statement Summary (Three Months Ended March 31) | Metric (in thousands, except EPS) | 2021 | 2020 | | :--- | :--- | :--- | | Total revenues | $832,931 | $814,679 | | Gross profit | $571,665 | $532,492 | | Income from operations | $152,396 | $95,077 | | Net income attributable to OpenText | $91,490 | $25,965 | | Earnings per share—diluted | $0.33 | $0.10 | Income Statement Summary (Nine Months Ended March 31) | Metric (in thousands, except EPS) | 2021 | 2020 | | :--- | :--- | :--- | | Total revenues | $2,492,588 | $2,283,124 | | Gross profit | $1,729,835 | $1,540,044 | | Income from operations | $569,222 | $412,330 | | Provision for income taxes | $342,121 | $78,800 | | Net income attributable to OpenText | $129,389 | $207,833 | | Earnings per share—diluted | $0.47 | $0.77 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended March 31, 2021, net cash provided by operating activities decreased to $579.9 million, while net cash used in financing activities was $782.9 million, primarily for debt repayment and dividends Cash Flow Summary (Nine Months Ended March 31) | Cash Flow Activity (in thousands) | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $579,931 | $674,286 | | Net cash used in investing activities | ($38,212) | ($1,448,930) | | Net cash provided by (used in) financing activities | ($782,855) | $1,308,757 | | **Increase (decrease) in cash** | **($218,583)** | **$514,053** | - Financing activities in the nine months to March 31, 2021, included a **$607.5 million** repayment of long-term debt and the Revolver, and **$156.3 million** in dividend payments[19](index=19&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes provide detailed disclosures on accounting policies and specific financial statement line items, including revenue recognition, debt, share-based compensation, tax contingencies, and restructuring activities [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=43&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management analyzes the company's financial performance, liquidity, and capital resources, highlighting revenue trends, operating expenses, and the impact of the IRS settlement Q3 FY2021 Key Financial Metrics | Metric | Q3 FY2021 | Change vs. Q3 FY2020 | | :--- | :--- | :--- | | Total Revenue | $832.9M | +2.2% | | Annual Recurring Revenue | $691.8M | +4.4% | | GAAP-based Net Income | $91.5M | +252% | | Non-GAAP-based Net Income | $204.5M | +23.0% | | GAAP-based EPS, diluted | $0.33 | +230% | | Non-GAAP-based EPS, diluted | $0.75 | +23.0% | | Adjusted EBITDA | $297.1M | +14.5% | - The company's strategy focuses on "Total Growth," which combines organic initiatives, innovation, and strategic acquisitions to increase recurring revenues, expand margins, and drive cash flow generation[211](index=211&type=chunk) - The company is closely monitoring the impact of the COVID-19 pandemic, which has led to substantial modifications in employee travel, work locations, and customer interactions. Cost reduction measures implemented in 2020 were largely restored by the second quarter of fiscal 2021[214](index=214&type=chunk)[215](index=215&type=chunk)[218](index=218&type=chunk) [Results of Operations](index=47&type=section&id=Results%20of%20Operations) For Q3 FY2021, total revenues grew 2.2% to $832.9 million, driven by increases in Cloud services and Customer support, while GAAP gross margin improved to 68.6% and income from operations increased by 60% due to lower expenses Revenue by Product Type (Q3 FY2021 vs Q3 FY2020) | Revenue Stream (in thousands) | Q3 2021 | Q3 2020 | % Change | | :--- | :--- | :--- | :--- | | Cloud services and subscriptions | $355,845 | $339,463 | +4.8% | | Customer support | $335,915 | $322,865 | +4.0% | | License | $76,299 | $81,055 | -5.9% | | Professional service and other | $64,872 | $71,296 | -9.0% | | **Total revenues** | **$832,931** | **$814,679** | **+2.2%** | - Cloud services revenue growth was supported by closing **16 deals greater than $1.0 million** in Q3 2021, compared to **5 such deals** in Q3 2020[230](index=230&type=chunk) - Sales and marketing expenses for Q3 2021 decreased by **$7.5 million** year-over-year, primarily due to a **$5.4 million** reduction in travel and communication expenses and a **$4.8 million** decrease in facility costs, reflecting COVID-19 related savings[265](index=265&type=chunk) [Use of Non-GAAP Financial Measures](index=61&type=section&id=Use%20of%20Non-GAAP%20Financial%20Measures) The company provides non-GAAP financial measures to supplement its GAAP results, excluding non-operational charges like amortization, share-based compensation, and special charges, with Non-GAAP net income for Q3 FY2021 at $204.5 million - Non-GAAP measures are used by management for internal analysis and are intended to help investors understand underlying operational trends by excluding items like amortization from acquisitions, special charges, and share-based compensation[292](index=292&type=chunk)[293](index=293&type=chunk) Reconciliation of GAAP to Non-GAAP Net Income (Q3 FY2021, in thousands) | Description | Amount | | :--- | :--- | | **GAAP-based net income** | **$91,490** | | Amortization | $107,609 | | Share-based compensation | $12,357 | | Special charges (recoveries) | $2,846 | | Other (income) expense, net | ($8,283) | | Tax adjustments | ($21,333) | | **Non-GAAP-based net income** | **$204,534** | [Liquidity and Capital Resources](index=70&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) As of March 31, 2021, the company held $1.48 billion in cash, with operating cash flow impacted by a $290 million IRS settlement payment, and maintained a consolidated net leverage ratio of 1.6:1 after significant debt and dividend payments - Cash from operating activities for the nine months ended March 31, 2021 was impacted by a **$290.0 million** payment related to the IRS Settlement[208](index=208&type=chunk)[329](index=329&type=chunk)[188](index=188&type=chunk) - During the second quarter of Fiscal 2021, the company repaid the entire **$600 million** previously drawn on its Revolver facility using cash on hand. As of March 31, 2021, there was no outstanding balance on the Revolver[367](index=367&type=chunk)[71](index=71&type=chunk) - The company declared and paid dividends totaling **$0.5762 per share** (**$156.3 million** in aggregate) during the nine months ended March 31, 2021[338](index=338&type=chunk)[85](index=85&type=chunk) - The company's consolidated net leverage ratio was **1.6:1** as of March 31, 2021, comfortably below the **4:1** covenant requirement for its Term Loan B and Revolver[364](index=364&type=chunk)[68](index=68&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=80&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is primarily exposed to interest rate risk on its floating-rate Term Loan B and foreign currency risk from transactions and asset translation, holding $590.2 million in foreign currency cash as of March 31, 2021 - The company's primary market risks are from fluctuations in interest rates on its **$970.0 million** Term Loan B and foreign currency exchange rates[399](index=399&type=chunk)[401](index=401&type=chunk) - A hypothetical **1%** adverse change in the interest rate on the Term Loan B would increase annual interest payments by approximately **$9.7 million**[401](index=401&type=chunk) - The company holds significant cash in foreign currencies, with the U.S. dollar equivalent of **€323.7 million**, **£83.9 million**, and **C$22.8 million** as of March 31, 2021[408](index=408&type=chunk) [Controls and Procedures](index=81&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2021, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that as of March 31, 2021, the company's disclosure controls and procedures were effective[409](index=409&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[410](index=410&type=chunk) [Part II Other Information](index=82&type=section&id=Part%20II%20Other%20Information) Presents additional information not covered in Part I, including risk factors, equity sales, and exhibits [Risk Factors](index=82&type=section&id=Item%201A.%20Risk%20Factors) This section directs readers to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended June 30, 2020, indicating no material changes or new significant risks to report for the quarter - The company refers investors to the risk factors discussed in its Annual Report on Form 10-K for the fiscal year ended June 30, 2020[413](index=413&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=82&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the third quarter of fiscal 2021, the company repurchased 489,934 Common Shares in the open market at an average price of $46.90 per share, held in trust for potential reissuance under employee incentive plans Equity Securities Purchases (Q3 FY2021) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 2021 | — | — | | Feb 2021 | — | — | | Mar 2021 | 489,934 | $46.90 | | **Total** | **489,934** | **$46.90** | - The repurchased shares are held in trust for potential reissuance under the company's Long-Term Incentive Plan (LTIP) or other plans[415](index=415&type=chunk) [Exhibits](index=84&type=section&id=Item%206.%20Exhibits) This section lists the documents filed as exhibits with the Form 10-Q, including amended stock option and employee stock purchase plans, an amendment to the CEO's employment agreement, and certifications by the CEO and CFO - Exhibits filed with the report include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act, as well as various company plans and agreements[417](index=417&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ______________________ FORM 10-Q ______________________ ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2020. OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 0-27544 ______________________________________ OPEN TEXT CORPORATION (Exact name of Registrant ...