OpenText(OTEX) - 2022 Q2 - Quarterly Report

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 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 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) 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) 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 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 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 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 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][30] - 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] - 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] NOTE 2—RECENT ACCOUNTING PRONOUNCEMENTS 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] - 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][35] NOTE 3—REVENUES 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] NOTE 4—ALLOWANCE FOR CREDIT LOSSES 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] NOTE 5—PROPERTY AND EQUIPMENT 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 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] NOTE 7—GOODWILL 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] NOTE 8—ACQUIRED INTANGIBLE ASSETS 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] 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 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][60] NOTE 10—ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 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] NOTE 11—LONG-TERM DEBT 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][70] - 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] NOTE 12—PENSION PLANS AND OTHER POST RETIREMENT BENEFITS 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] NOTE 13—SHARE CAPITAL, OPTION PLANS AND SHARE-BASED PAYMENTS 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] - 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] NOTE 14—GUARANTEES AND CONTINGENCIES 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][132] - 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][135] NOTE 15—INCOME TAXES 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][143] - 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] NOTE 16—FAIR VALUE MEASUREMENT 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] - 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] NOTE 17—DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES 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][159] - 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] NOTE 18—SPECIAL CHARGES (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][287] - 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] NOTE 19—ACQUISITIONS 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][216] - 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] - 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][217] NOTE 20—ACCUMULATED OTHER COMPREHENSIVE INCOME 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] NOTE 21—SUPPLEMENTAL CASH FLOW DISCLOSURES 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 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] NOTE 23—EARNINGS (LOSS) PER SHARE 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] NOTE 24—RELATED PARTY TRANSACTIONS 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] - The Audit Committee reviews and approves all related party transactions, ensuring terms are no less favorable than those available to unaffiliated third parties[193] NOTE 25—SUBSEQUENT EVENT 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] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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][207] 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][217] CRITICAL ACCOUNTING POLICIES AND ESTIMATES 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] - 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] RESULTS OF OPERATIONS 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 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 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][241] - 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][242] Customer Support 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][249] - The customer support renewal rate remained stable at approximately 94% for the quarter ended December 31, 2021[244] 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][256] - 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][257] Professional Service and Other 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][264] - Gross margin percentage decreased significantly due to a rise in labor-related costs[263][265] Amortization of Acquired Technology-based Intangible Assets 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][267] Operating Expenses 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 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][270] - R&D labor resources increased by 257 employees, from 4,107 at December 31, 2020, to 4,364 at December 31, 2021[271] Sales and marketing 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][274] - Sales and marketing labor resources increased by 302 employees, from 2,415 at December 31, 2020, to 2,717 at December 31, 2021[275] General and administrative 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][278] - G&A labor resources increased by 127 employees, from 1,865 at December 31, 2020, to 1,992 at December 31, 2021[279] Depreciation expenses 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] Amortization of acquired customer-based intangible assets 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][283] Special charges (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][287] Other Income (Expense), Net 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] - 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] Interest and Other Related Expense, Net 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] Provision for (Recovery of) Income Taxes 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][294] Use of Non-GAAP Financial Measures 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][299][301] - 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] 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 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 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] - 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] Cash flows provided by operating activities 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] - Days sales outstanding (DSO) improved to 44 days in Q2 Fiscal 2022 from 47 days in Q2 Fiscal 2021, reflecting strong collections efficiency[349] Cash flows used in investing activities 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] Cash flows provided by (used in) financing activities 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][357] Cash Dividends 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 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][370] - 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] - 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][389] Shelf Registration Statement 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] Share Repurchase Plan / Normal Course Issuer Bid 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][397] - 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] 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