What changed in this filing

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Item 7. Management’s Discussion and Analysis

2021-08-05 compared with 2020-08-06 · 398 added, 358 removed, 805 unchanged (48% of the section changed)

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This Annual Report on Form 10-K, including this Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A), contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 21E of the U.S.

Securities Exchange Act of 1934, as amended (the Exchange Act), and Section 27A of the U.S.

Securities Exchange Act of 1934, as amended (the Exchange Act), and Section 27A

Securities Act of 1933, as amended (the Securitie s Act ), and is subject to the safe harbors created by those sections.

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When used in this report, the words “anticipates”, “expects”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “may”, “could”, “would”, "might", "will" and other similar language, as they relate to Open Text Corporation (OpenText or the Company), are intended to identify forward-looking statements under applicable securities laws.

Specific forward-looking statements in this report include, but are not limited to:

(i) statements about our focus in the fiscal year beginning July 1, 2020 and ending June 30, 2021 (Fiscal 2021) on growth in earnings and cash flows;

Specific forward-looking statements in this report include, but are not limited to, statements regarding:

(i) our focus in the fiscal year beginning July 1, 2021 and ending June 30, 2022 (Fiscal 2022) and July 1, 2022 and ending June 30, 2023 (Fiscal 2023) on growth in earnings and cash flows;

(ii) creating value through investments in broader Information Management capabilities;

(iii) our future business plans and business planning process;

(iv) statements relating to

business trends;

(v) statements relating to distribution;

(iv) business trends;

(v) distribution;

(vi) the Company’s presence in the cloud and in growth markets;

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(xxi) potential legal and/or regulatory proceedings;

(xxii) statements about acquisitions and their expected impact;

and (xxiii) other matters.

(xxii) acquisitions and their expected impact;

(xxiii) tax audits, including expected payments in connection with the IRS Settlement (as defined below);

and (xxiv) other matters.

In addition, any statements or information that refer to expectations, beliefs, plans, projections, objectives, performance or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking, and based on our current expectations, forecasts and projections about the operating environment, economies and markets in which we operate.

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(ii) our continued operation of a secure and reliable business network;

(iii) the stability of general economic and market conditions, currency exchange rates, and interest rates;

(iii) the stability of general economic and market conditions, currency exchange rates, and interest rates, including potential for inflation and rising interest rates;

(iv) equity and debt markets continuing to provide us with access to capital;

(v) our continued ability to identify, source and finance attractive and executable business combination opportunities;

and (vi) our continued compliance with third party intellectual property rights.

and (vi) our continued ability to avoid infringing third party intellectual property rights.

Management’s estimates, beliefs and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events and, as such, are subject to change.

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(i) actual and potential risks and uncertainties relating to the ultimate geographic spread of COVID-19, the severity of the disease and the duration of the COVID-19 pandemic and issues relating to its resurgence, including potential material adverse effects on our business, operations and financial performance;

(ii) actions that may be taken by governmental authorities to contain the COVID-19 pandemic or to treat its impact on our business;

(ii) actions that may be taken by governmental authorities to contain the COVID-19 pandemic or to treat its impact on our business (or failure to implement additional stimulus programs) and the availability, effectiveness and use of treatments and vaccines;

(iii) the actual and potential negative impacts of COVID-19 on the global economy and financial markets;

and (iv) the actual and potential risk and uncertainties relating to the implementation of our COVID-19 Restructuring Plan, including the possibility that the actual cash or non-cash cost of restructuring might exceed the estimated amounts;

and (iv) the actual and potential risk and uncertainties relating to the implementation of our COVID-19 Restructuring Plan (as defined herein), including the possibility that the actual cash or non-cash cost of restructuring might exceed the estimated amounts;

(v) integration of acquisitions and related restructuring efforts, including the quantum of restructuring charges and the timing thereof;

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(xvi) demand for the Company’s products and services;

(xvii) increase in exposure to international business risks (including as a result of the impact of Brexit and any policy changes resulting from the transition from the North American Free Trade Agreement to the United States-Mexico-Canada Agreement) as we continue to increase our international operations;

(xvii) increase in exposure to international business risks (including as a result of the impact of Brexit and any policy changes resulting from the transition from the North American

Free Trade Agreement to the United States-Mexico-Canada Agreement) as we continue to increase our international operations;

(xviii) inability to raise capital at all or on not unfavorable terms in the future;

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(v) infringement of third-party proprietary rights triggering indemnification obligations and resulting in significant expenses or restrictions on our ability to provide our products or services;

(vi) failure to comply with privacy laws and regulations that are extensive, open to various interpretations and complex to implement including General Data Protection Regulation (GDPR), California Consumer Privacy Act (CCPA), and Country by Country Reporting (including with respect to transferring personal data outside of the EEA, as a result of the recent ruling of the Court of Justice of the European Union that the EU-US Privacy Shield is an invalid data transfer mechanism and that Standard Contractual Clauses are a valid transfer mechanism unless the country to which personal data is exported restricts the ability to comply with such Clauses);

(vii) the Company’s growth and other profitability prospects;

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(ix) the Company’s competitive position in the Information Management market and its ability to take advantage of future opportunities in this market;

(x) the benefits of the Company’s products and services to

be realized by customers;

(x) the benefits of the Company’s products and services to be realized by customers;

(xi) the demand for the Company’s products and services and the extent of deployment of the Company’s products and services in the Information Management marketplace;

(xii) the Company’s financial condition and capital requirements;

(xiii) system or network failures or information security breaches in connection with the Company's offerings and information technology systems generally;

(xiii) system or network failures or information security, cybersecurity or other data breaches in connection with the Company's offerings or the information technology systems used by the Company generally, the risk of which may be increased during times of natural disaster or pandemic (including COVID-19) due to remote working arrangements;

and (xiv) failure to attract and retain key personnel to develop and effectively manage the Company's business.

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EXECUTIVE OVERVIEW

OpenText is an Information Management company that provides software and services to maximize the strategic benefits of data and content for increased productivity, growth and competitive advantage.

With a focus on Information Management technologies and services, we continue to innovate and provide customers with the capabilities they need to build resilient businesses and become tomorrow's disruptors.

We provide our customers with choice and flexibility in their path to digital transformation with solutions that can be run on-premise, cloud, hybrid, or as a managed service.

We also accelerate and simplify our customers’ path to information modernization with intelligent tools and services for moving off paper, automating classification, and building clean data lakes for artificial intelligence (AI), analytics and automation.

At OpenText, we believe information and knowledge make business and people better.

We are an Information Management company that provides software and services that empower digital businesses of all sizes to become more intelligent, secure and connected.

Our innovations maximize the strategic benefits of data and content for our customers, strengthening their productivity, growth and competitive advantage.

Our comprehensive Information Management platform and services provide secure and scalable solutions for global companies, small and medium-sized businesses (SMB), governments and consumers around the world.

We have a complete and integrated portfolio of Information Management solutions delivered at scale in the OpenText Cloud, helping organizations master modern work, power modern experiences and optimize their digital supply chains.

To do this, we bring together our Content Cloud, Business Network Cloud, Experience Cloud, Security and Protection Cloud and Developer Cloud.

We also accelerate information modernization with intelligent tools and services for moving off paper, automating classification and building clean data lakes for Artificial Intelligence (AI), analytics and automation.

We are fundamentally integrated into the parts of our customers' businesses that matter, so they can securely manage the complexity of information flow end to end.

Furthermore, with automation and AI, we connect, synthesize and deliver information where it is needed to drive new efficiencies, experiences and insights.

We make information more valuable by connecting it to digital business processes, enriching it with capture and analytics, protecting and securing it throughout its entire lifecycle, and leveraging it to captivate customers.

Through automation and AI, we connect, synthesize and deliver information where

it is needed to drive new efficiencies, experiences and insights.

Our solutions also connect large digital supply chains in manufacturing, retail and financial services.

Our solutions enable organizations and consumers to secure their information so that they can collaborate with confidence, stay ahead of the regulatory technology curve, identify threats on any endpoint or across their networks, leverage eDiscovery and digital forensics to defensibly investigate and collect evidence, and ensure business continuity in the event of a security incident.

Our solutions also enable organizations and consumers to secure their information so that they can collaborate with confidence, stay ahead of the regulatory technology curve, identify threats on any endpoint or across their networks, enable privacy, leverage eDiscovery and digital forensics to defensibly investigate and collect evidence, and ensure business continuity in the event of a security incident.

Our initial public offering was on the NASDAQ in 1996 and we were subsequently listed on the Toronto Stock Exchange (TSX) in 1998.

We are a multinational company and as of June 30, 2020 , employed approximately 14,400 people worldwide.

Our ticker symbol on both the NASDAQ and the TSX is "OTEX".

As of June 30, 2021, we employed a total of approximately 14,300 individuals, of which 6,800 or 48% are in the Americas, 2,600 or 18% are in EMEA and 4,900 or 34% are in Asia Pacific.

Currently, we have employees in 34 countries enabling strong access to multiple talent pools while ensuring reach and proximity to our customers.

Please see "Results of Operations" below for our definitions of geographic regions.

Fiscal 2021 Summary:

During Fiscal 2020 we saw the following activity:

• Total revenue was $3,386.1 million, up 8.9% compared to the prior fiscal year;

up 9.7% after factoring in the impact of $37.1 million of foreign exchange rate changes.

up 6.3% after factoring in the favorable impact of $81.3 million of foreign exchange rate changes.

• Total annual recurring revenue, which we define as the sum of cloud services and subscriptions revenue and customer support revenue, was $2,741.5 million, up 12.7% compared to the prior fiscal year;

up 14.1% after factoring in the impact of $26.3 million of foreign exchange rate changes.

up 10.4% after factoring in the favorable impact of $54.9 million of foreign exchange rate changes.

• Cloud services and subscriptions revenue was $1,407.4 million, up 21.6% compared to the prior fiscal year;

up 28.4% after factoring in the impact of $8.1 million of foreign exchange rate changes.

License revenue was $402.9 million , down 5.9% compared to the prior fiscal year;

down 4.5% after factoring in the impact of $5.9 million of foreign exchange rate changes.

GAAP-based EPS, diluted, was $0.86 compared to $1.06 in the prior fiscal year.

Non-GAAP-based EPS, diluted, was $2.89 compared to $2.76 in the prior fiscal year.

up 20.0% after factoring in the favorable impact of $17.8 million of foreign exchange rate changes.

• GAAP-based gross margin was 69.4% compared to 67.7% in the prior fiscal year.

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• Non-GAAP-based net income attributable to OpenText was $927.2 million compared to $784.5 million in the prior fiscal year.

• GAAP-based earnings per share (EPS), diluted, was $1.14 compared to $0.86 in the prior fiscal year.

• Non-GAAP-based EPS, diluted, was $3.39 compared to $2.89 in the prior fiscal year.

• Adjusted EBITDA was $1,315.0 million compared to $1,148.1 million in the prior fiscal year.

Operating cash flow was $954.5 million for the year ended June 30, 2020 , up 8.9% from the prior fiscal year.

• Operating cash flow was $876.1 million compared to $954.5 million in the prior fiscal year, down 8.2%.

• During Fiscal 2021, we made payments of $299.6 million relating to the IRS Settlement (as defined herein) and repaid the $600 million previously drawn under the Revolver (as defined herein) using cash on hand.

• Cash and cash equivalents were $1,607.3 million as of June 30, 2021, compared to $1,692.9 million as of June 30, 2020.

As of June 30, 2020 , our cash and cash equivalents and the current portion of our long-term debt include a $600 million draw down on the Revolver, defined below, in order to increase our cash position and preserve financial flexibility in light of current uncertainty in the global markets resulting from the COVID-19 pandemic.

Issued $900 million in aggregate principal amount of 3.875% Senior Notes due 2028 and $900 million in aggregate principal amount of 4.125% Senior Notes due 2030.

See "Use of Non-GAAP Financial Measures" below for definitions and reconciliations of GAAP-based measures to Non-GAAP-based measures.

Our competitive position in the marketplace requires us to maintain an evolving array of technologies, products, services and capabilities.

As a result of the continually evolving marketplace in which we operate, we regularly evaluate acquisition opportunities within our market and at any time may be in various stages of discussions with respect to such opportunities.

Acquisition of XMedius

On March 9, 2020 , we acquired all the equity interest in XMedius for $73.3 million in an all cash transaction.

XMedius is a provider of secure information exchange and unified communication solutions.

We believe the acquisition complements our Customer Experience Management (CEM) and Business Network (BN) platforms.

The results of operations of XMedius have been consolidated with those of OpenText beginning March 9, 2020 .

Acquisition of Carbonite

On December 24, 2019 , we acquired all the equity interest in Carbonite, a leading provider of cloud-based subscription backup, disaster recovery and endpoint security to SMBs, consumers, and a wide variety of partners.

Total consideration for Carbonite was $1.4 billion , paid in cash (inclusive of cash acquired).

We believe the acquisition increases our position in the data protection and endpoint security space, further strengthens our cloud capabilities and opens a new route to connect with customers through Carbonite's marquee SMB and consumer channels and products.

The results of operations of Carbonite have been consolidated with those of OpenText beginning December 24, 2019 .

Acquisition of Dynamic Solutions Group Inc.

(The Fax Guys)

On December 2, 2019 , we acquired certain assets and certain liabilities of The Fax Guys, for $5.1 million , of which $1.0 million is currently held back and unpaid in accordance with the terms of the purchase agreement.

The results of operations of The Fax Guys have been consolidated with those of OpenText beginning December 2, 2019 .

As a result of the continually changing marketplace in which we operate, we regularly evaluate acquisition opportunities within our market and at any time may be in various stages of discussions with respect to such opportunities.

We believe our acquisitions support our long-term strategic direction, strengthen our competitive position, expand our customer base, provide greater scale to accelerate innovation, grow our earnings and provide superior shareholder value.

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See note 19 "Acquisitions" to our Consolidated Financial Statements for more details.

Impacts of COVID-19

In March 2020, COVID-19 was characterized as a pandemic by the World Health Organization.

The spread of COVID-19 has significantly impacted the global economy and has adversely impacted and may continue to adversely impact our operational and financial performance.

The extent of the adverse impact of the pandemic on the global economy and markets will continue to depend, in part, on the length and severity of the measures taken to limit the spread of the virus, the availability, effectiveness and use of treatments and vaccines and, in part, on the size and effectiveness of the compensating measures taken by governments and on actual and potential resurgences.

We are closely monitoring the potential effects and impact on our operations, businesses and financial performance, including liquidity and capital usage, though the extent is difficult to fully predict at this time due to the rapid evolution of this uncertain situation.

We continue to conduct business with substantial modifications to employee travel and work locations and also virtualization of sales and marketing events, which we expect to remain in place throughout calendar year 2021, along with substantially modified interactions with customers and suppliers, among other modifications.

We will continue to actively monitor the impact of the COVID-19 pandemic on all aspects of our business and geographies, including customer purchasing decisions, and may take further actions that alter our business operations as may be required by governments, or that we determine are in the best interest of our employees, customers, partners, suppliers, and shareholders.

It is uncertain and difficult to predict what the potential effects any such alterations or modifications may have on our business including the effects on our customers and prospects, or our financial results and our ability to successfully execute our business strategies and initiatives.

As previously disclosed, in order to preemptively mitigate the operational impacts of COVID-19, our Compensation Committee and Board approved certain compensation adjustments, effective for the period May 15, 2020 through June 30, 2021, subject to review and modification as the situation warranted.

As a precaution, we also temporarily and significantly reduced all hiring and discretionary spending, while taking note of some savings to be achieved through travel restrictions and the cancellation of certain events.

These cost reduction measures were in addition to other previously disclosed facilities and workforce related actions as part of our COVID-19 Restructuring Plan.

Please see note 18 "Special Charges (Recoveries)" to the Consolidated Financial Statements included in this Annual Report on Form 10-K for more information.

After careful consideration and review, the Compensation Committee and Board approved the restoration, effective December 1, 2020 and ahead of the initially contemplated May 15, 2020 through June 30, 2021 duration described above, of all previously announced compensation adjustments.

We continue to closely monitor discretionary spending, and remain active in our hiring across the organization.

Additionally, despite the global impact of COVID-19, we were able to deliver strong financial results for Fiscal 2021, including our fourth fiscal quarter, as a result of the hard work and commitment of our dedicated employees.

In recognition of their contributions, following the end of Fiscal 2021, the Compensation Committee approved a special one-time cash performance bonus to our broader employee base whose pay had been previously and temporarily reduced, prior to December 1, 2020, as a result of the COVID-19 compensation adjustments described above.

These employees will receive an amount equal to the reductions in their Fiscal 2021 salary and annual incentive payout made pursuant to such compensation adjustments.

Our Named Executive Officers, members of the executive leadership team and senior management are excluded from this special one-time bonus to our broader employee base.

The special performance bonus of approximately $18 million, as it relates to Fiscal 2021 performance and contributions, has been accrued as at June 30, 2021 and will be paid to employees in September 2021.

The ongoing and ultimate impact of the COVID-19 pandemic on our operations and financial performance depends on many factors that are not within our control.

For more information, please see Part I, Item 1A "Risk Factors" included elsewhere within this Annual Report on Form 10-K.

Outlook for Fiscal 2022

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We are committed to continuous innovation.

Our investments in research and development (R&D) push product innovation, increasing the value of our offerings to our installed customer base, which includes Global 10,000 companies (G10K), SMBs and consumers.

The G10K are the world's largest companies, typically those with greater than two billion in revenues, as well as the world's largest governments and organizations.

More valuable products, coupled with our established global partner program, lead to greater distribution and cross-selling opportunities which further help us to achieve organic growth.

More valuable products, coupled with our established global partner program, lead to greater distribution and cross-selling opportunities which further help us to achieve organic

Over the last three fiscal years, we have invested a cumulative total of $1.1 billion in R&D or 11.9% of cumulative revenue for that three year period.

We typically target to spend approximately 11% to 13% of revenues for R&D each fiscal year.

The cloud has become a business imperative.

What used to be discussed as a potential option for managing budgets, is now a strategic direction that drives competitive positioning, product innovation, business agility, and cost management.

We are committed to continue our investment in the OpenText Cloud, which is a purpose-built cloud environment for solutions spanning Information Management, Compliance, Cyber Resilience and B2B Integration.

Supported by a global, scalable, and secure infrastructure, the OpenText Cloud includes a foundational platform of technology services, and packaged business applications for industry and business processes.

The OpenText Cloud enables organizations to protect and manage information in public, private or hybrid deployments.

In March 2020, COVID-19 was characterized as a pandemic by the World Health Organization.

The spread of COVID-19 has significantly impacted the global economy and has adversely impacted and is expected to further adversely impact our operational and financial performance.

The extent of the adverse impact of the pandemic on the global economy and markets will continue to depend, in part, on the length and severity of the measures taken to limit the spread of the virus and, in part, on the size and effectiveness of the compensating measures taken by governments and on actual and potential resurgences.

We are conducting business with substantial modifications to employee travel and work locations and also virtualization or cancellations of all sales and marketing events, which we expect to remain in place throughout Fiscal 2021, along with substantially modified interactions with customers and suppliers, among other modifications.

In March 2020, we also drew down $600 million from the Revolver, defined below, as a preemptive measure in order to increase our cash position and preserve financial flexibility in light of current uncertainty in the global markets resulting from the COVID-19 pandemic.

As a precaution, we have temporarily and significantly reduced all hiring and discretionary spending, while taking note of some savings to be achieved through travel restrictions and the cancellation of certain events.

In addition, in order to further mitigate the operational impacts of COVID-19, our Compensation Committee and Board approved the following measures effective for the period May 15, 2020 through June 30, 2021, subject to review and modification as the situation warrants.

Please also see "Special Fiscal 2020 Performance Bonus" in Part III, Item 11, elsewhere in this Annual Report on Form 10-K.

15% base salary reduction and forbearance of any annual variable cash compensation effective May 15, 2020 for the remainder of Fiscal 2020 and for all of Fiscal 2021, totaling an approximate 60% reduction in targeted cash compensation, for our CEO & CTO;

15% base salary reduction and 15% reduction in target annual variable cash compensation for our other Named Executive Officers and members of the executive leadership team (ELT);

10% base salary reduction and 10% reduction in target annual variable cash compensation, as applicable, for Vice-President- director-, and manager-level employees;

5% base salary reduction for all other employees subject to exception for certain of our employees, such as our employees in Asia who are earning less than the equivalent of $20,000 per year;

15% reduction in cash retainer compensation fees payable to the Board of Directors;

Suspension of employer paid contributions to retirement benefits in the United States and Canada for the remainder of Fiscal 2020 and Fiscal 2021.

These cost reduction measures are in addition to other previously disclosed facilities and workforce related actions as part of our COVID-19 Restructuring Plan.

Please see note 18 "Special Charges" to the Consolidated Financial Statements included in this Annual Report on Form 10-K for more information.

The ongoing and ultimate impact of the COVID-19 pandemic on our operations and financial performance depends on many factors that are not within our control.

For more information, please see Part I, Item 1A "Risk Factors" included elsewhere within this Annual Report on Form 10-K.

We typically target to spend 12% to 14% of revenues for R&D each fiscal year.

Looking ahead, the destination for innovation is indisputably the cloud.

Businesses of all sizes rely on a combination of public and private clouds, managed services and off-cloud solutions.

As a result, we are committed to continue to modernize technology infrastructure and leverage our existing investments in the OpenText Cloud.

The combination of OpenText cloud-native applications and managed services, together with the scalability and performance of our partner public cloud providers, offer more secure, reliable and compliant solutions to customers wanting to deploy cloud-based Information Management applications.

The OpenText Cloud is designed to build additional flexibility and scalability for our customers:

becoming cloud-native, connecting anything, and extending capabilities quickly with multi-tenant SaaS applications and services.

We will continue to closely monitor the global impacts of COVID-19.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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The critical accounting policies which we believe are the most important to aid in fully understanding and evaluating our reported financial results include the following:

Revenue recognition,

Acquired intangibles, and

Income taxes.

(i) Revenue recognition,

(ii) Goodwill,

(iii) Acquired intangibles, and

(iv) Income taxes.

For a full discussion of all our accounting policies, please see note 2 "Accounting Policies and Recent Accounting Pronouncements" to the Consolidated Financial Statements included in this Annual Report on Form 10-K.

We will continue to monitor the potential impact of COVID-19 on our financial statements and related disclosures, including the need for additional estimates going forward, which could include costs related to items such as special charges, restructurings, asset impairments and other non-recurring costs.

As of June 30, 2020, we have recorded certain estimates resulting from the pandemic, particularly with respect to the COVID-19 Restructuring Plan and allowance for doubtful accounts, based on management's estimates and assumptions utilizing the most currently available information in our Consolidated Financial Statements .

As of June 30, 2021, we have recorded certain estimates in our Consolidated Financial Statements resulting from the pandemic, particularly with respect to the COVID-19 Restructuring Plan and allowance for credit losses, based on management's estimates and assumptions utilizing the most currently available information.

Such estimates may be subject to change particularly given the unprecedented nature of the COVID-19 pandemic.

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We have four revenue streams:

license, cloud services and subscriptions, customer support, and professional service and other.

License revenue

Our license revenue can be broadly categorized as perpetual licenses, term licenses and subscription licenses, all of which are deployed on the customer’s premise (on-premise).

Perpetual licenses:

We sell perpetual licenses which provide customers the right to use software for an indefinite period of time in exchange for a one-time license fee, which is generally paid at contract inception.

Our perpetual licenses provide a right to use intellectual property (IP) that is functional in nature and have significant stand-alone functionality.

Accordingly, for perpetual licenses of functional IP, revenue is recognized at the point-in-time when control has been transferred to the customer, which normally occurs once software activation keys have been made available for download.

Term licenses and Subscription licenses:

We sell both term and subscription licenses which provide customers the right to use software for a specified period in exchange for a fee, which may be paid at contract inception or paid in installments over the period of the contract.

Like perpetual licenses, both our term licenses and subscription licenses are functional IP that have significant stand-alone functionality.

Accordingly, for both term and subscription licenses, revenue is recognized at the point-in-time when the customer is able to use and benefit from the software, which is normally once software activation keys have been made available for download at the commencement of the term.

cloud services and subscriptions, customer support, license, and professional service and other.

Cloud services and subscriptions revenue

Cloud services and subscriptions revenue are from hosting arrangements where, in connection with the licensing of software, the end user does not take possession of the software, as well as from end-to-end fully outsourced business-to-business (B2B) integration solutions to our customers (collectively referred to as cloud arrangements).

Cloud services and subscriptions revenue are from hosting arrangements where, in connection with the licensing of software, the end user does not take possession of the software, as well as from end-to-end fully outsourced B2B integration solutions to our customers (collectively referred to as cloud arrangements).

The software application resides on our hardware or that of a third party, and the customer accesses and uses the software on an as-needed basis.

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Revenue relating to these services is recognized using an output method based on the expected level of service we will provide over the term of the contract.

In connection with cloud subscription and managed service contracts, we often agree to perform a variety of services before the customer goes live, such as, converting and migrating customer data, building interfaces and providing

These services are considered an outsourced suite of professional services which can involve certain project-based activities.

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Customer support revenue

Customer support revenue is associated with perpetual, term license and on-premise subscription arrangements.

Customer support revenue is associated with perpetual, term license and off-cloud subscription arrangements.

As customer support is not critical to the customers' ability to derive benefit from their right to use our software, customer support is considered a distinct performance obligation when sold together in a bundled arrangement along with the software.

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Customer support for term and subscription licenses is renewable concurrently with such licenses for the same duration of time.

Payments for customer support are generally made at the inception of the contract term or in installments over the term of the maintenance period.

Payments for customer support are generally made at the inception of the contract term or in installments over

the term of the maintenance period.

Our customer support team is ready to provide these maintenance services, as needed, to the customer during the contract term.

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Revenue for customer support is recognized ratably over the contract period based on the start and end dates of the maintenance term, in line with how we believe services are provided.

License revenue

Our license revenue can be broadly categorized as perpetual licenses, term licenses and subscription licenses, all of which are deployed on the customer’s premises (off-cloud).

Perpetual licenses :

We sell perpetual licenses which provide customers the right to use software for an indefinite period of time in exchange for a one-time license fee, which is generally paid at contract inception.

Our perpetual licenses provide a right to use intellectual property (IP) that is functional in nature and have significant stand-alone functionality.

Term licenses and Subscription licenses:

Like perpetual licenses, both our term licenses and subscription licenses are functional IP that have significant stand-alone functionality.

Professional service and other revenue

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If the fair value of the reporting unit exceeds its carrying value, goodwill is not considered impaired and we are not required to perform further testing.

If the carrying value of the net assets of our reporting unit exceeds its fair value, then an impairment loss equal to the difference, but not exceeding the total carrying value of goodwill allocated to the reporting unit, would be recorded.

If the carrying value

of the net assets of our reporting unit exceeds its fair value, then an impairment loss equal to the difference, but not exceeding the total carrying value of goodwill allocated to the reporting unit, would be recorded.

Our annual impairment analysis of goodwill was performed as of April 1, 2021.

Our qualitative assessment indicated that there were no indications of impairment and therefore there was no impairment of goodwill required to be recorded for Fiscal 2020 (no impairments were recorded for Fiscal 2019 and Fiscal 2018).

Our qualitative assessment indicated that there were no indications of impairment and therefore there was no impairment of goodwill required to be recorded for Fiscal 2021 (no impairments were recorded for Fiscal 2020 and Fiscal 2019, respectively).

Acquired intangibles

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The tax position is derecognized when it is no longer more likely than not that the position will be sustained on audit.

On subsequent recognition and measurement the

maximum amount which is more likely than not to be recognized at each reporting date will represent the Company's best estimate, given the information available at the reporting date, although the outcome of the tax position is not absolute or final.

On subsequent recognition and measurement the maximum amount which is more likely than not to be recognized at each reporting date will represent the Company's best estimate, given the information available at the reporting date, although the outcome of the tax position is not absolute or final.

We recognize both accrued interest and penalties related to liabilities for income taxes within the "Provision for (recovery of) income taxes" line of our Consolidated Statements of Income.

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Since tax law is complex and often subject to varied interpretations, it is uncertain whether some of the Company’s tax positions will be sustained upon audit.

Our assumptions, judgments and estimates relative to the current provision for income taxes considers current tax laws, our interpretations of current tax laws and possible outcomes of current and future audits conducted by domestic and foreign tax authorities.

Our assumptions, judgments and

estimates relative to the current provision for income taxes considers current tax laws, our interpretations of current tax laws and possible outcomes of current and future audits conducted by domestic and foreign tax authorities.

While we believe the assumptions and estimates that we have made are reasonable, such assumptions and estimates could have a material impact to our Consolidated Financial Statements upon ultimate resolution of the tax positions.

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Year Ended June 30,

(In thousands)

increase (decrease)

(In thousands) 2021 Change

increase (decrease) 2020 Change

increase (decrease) 2019

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Customer support 1,334,062 58,476 1,275,586 27,671 1,247,915

License 384,711 (18,140) 402,851 (25,241) 428,092

Professional service and other 259,897 (13,716) 273,613 (11,323) 284,936

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Customer support 39.4 % 41.0 % 43.5 %

License 11.3 % 13.0 % 14.9 %

Professional service and other 7.7 % 8.8 % 9.9 %

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Customer support 122,753 (1,141) 123,894 (449) 124,343

License 13,916 2,595 11,321 (3,026) 14,347

Professional service and other 197,183 (15,720) 212,903 (11,732) 224,635

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Customer support 90.8 % 90.3 % 90.0 %

License 96.4 % 97.2 % 96.6 %

Professional service and other 24.1 % 22.2 % 21.2 %

Total Revenues by Geography:

$ 2,069,083 $ 165,433 $ 1,903,650 $ 220,368 $ 1,683,282

1,031,607 89,326 942,281 21,859 920,422

Asia Pacific (4)

285,425 21,620 263,805 (1,246) 265,051

Total revenues $ 3,386,115 $ 276,379 $ 3,109,736 $ 240,981 $ 2,868,755

% Revenues by Geography:

61.1 % 61.2 % 58.7 %

30.5 % 30.3 % 32.1 %

Asia Pacific (4)

Year Ended June 30,

(In thousands)

increase (decrease)

8.4 % 8.5 % 9.2 %

Other Metrics:

GAAP-based gross margin 69.4 % 67.7 % 67.6 %

GAAP-based EPS, diluted

Net income, attributable to OpenText

Non-GAAP-based gross margin (5)

76.1 % 74.5 % 74.1 %

Net income, attributable to OpenText $ 310,672 $ 234,225 $ 285,501

GAAP-based EPS, diluted $ 1.14 $ 0.86 $ 1.06

Non-GAAP-based EPS, diluted (5)

$ 3.39 $ 2.89 $ 2.76

Adjusted EBITDA (5)

$ 1,315,033 $ 1,148,080 $ 1,100,291

(1) Total revenues by geography are determined based on the location of our end customer.

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(3) EMEA primarily consists of countries in Europe, the Middle East and Africa.

Asia Pacific primarily consists of Japan, Australia, China, Korea, Philippines, Singapore and New Zealand.

(4) Asia Pacific primarily consists of Japan, Australia, China, Korea, Philippines, Singapore, India and New Zealand.

(5) See "Use of Non-GAAP Financial Measures" (discussed later in this MD&A) for definitions and reconciliations of GAAP-based measures to Non-GAAP- based measures.

Revenues, Cost of Revenues and Gross Margin by Product Type

Our license revenue can be broadly categorized as perpetual licenses, term licenses and subscription licenses.

Our license revenues are impacted by the strength of general economic and industry conditions, the competitive strength of our software products, and our acquisitions.

Cost of license revenues consists primarily of royalties payable to third parties.

Year Ended June 30,

(In thousands)

increase (decrease)

License Revenues:

Total License Revenues

Cost of License Revenues

GAAP-based License Gross Profit

GAAP-based License Gross Margin %

% License Revenues by Geography:

License revenues decreased by $25.2 million or 5.9% during the year ended June 30, 2020 as compared to the prior fiscal year;

down 4.5% after factoring in the impact of $5.9 million of foreign exchange rate changes.

Geographically, the overall change was attributable to a decrease in Americas of $16.2 million , a decrease in EMEA of $8.4 million , and a decrease in Asia Pacific of $0.6 million .

During Fiscal 2020, we closed 120 license deals greater than $0.5 million, of which 48 deals were greater than $1.0 million, contributing $137.8 million of license revenues.

This was compared to 153 license deals greater than $0.5 million during Fiscal 2019, of which 49 deals were greater than $1.0 million, contributing $171.6 million of license revenues.

Cost of license revenues decreased by $3.0 million during the year ended June 30, 2020 as compared to the prior fiscal year, primarily as a result of lower third party technology costs.

Overall, the gross margin percentage on license revenues remained stable at approximately 97% .

1) Cloud Services and Subscriptions:

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Our cloud arrangements can be broadly categorized as PaaS, SaaS, cloud subscriptions and managed services.

For the year ended June 30, 2021, our cloud renewal rate, excluding the impact of Carbonite Inc.

(Carbonite), was approximately 93%, compared to approximately 96% for the year ended June 30, 2020.

Cost of Cloud services and subscriptions revenues is comprised primarily of third party network usage fees, maintenance of in-house data hardware centers, technical support personnel-related costs, and some third party royalty costs.

Year Ended June 30,

(In thousands)

increase (decrease)

(In thousands) 2021 Change

increase (decrease) 2020 Change

increase (decrease) 2019

Cloud Services and Subscriptions:

Americas $ 1,048,444 $ 209,001 $ 839,443 $ 222,667 $ 616,776

EMEA 256,199 23,343 232,856 26,629 206,227

Asia Pacific 102,802 17,415 85,387 578 84,809

Total Cloud Services and Subscriptions Revenues 1,407,445 249,759 1,157,686 249,874 907,812

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% Cloud Services and Subscriptions Revenues by Geography:

Americas 74.5 % 72.5 % 67.9 %

EMEA 18.2 % 20.1 % 22.7 %

Asia Pacific 7.3 % 7.4 % 9.4 %

Cloud services and subscriptions revenues increased by $249.8 million or 21.6% during the year ended June 30, 2021 as compared to the prior fiscal year;

up 28.4% after factoring in the impact of $8.1 million of foreign exchange rate changes.

up 20.0% after factoring in the favorable impact of $17.8 million of foreign exchange rates.

The increase was primarily driven by incremental Cloud services and subscriptions revenues from acquisitions in the comparative period.

Geographically, the overall change was attributable to an increase in Americas of $209.0 million, an increase in EMEA of $23.3 million and an increase in Asia Pacific of $17.4 million.

There were 44 Cloud services deals greater than $1.0 million that closed during Fiscal 2020, compared to 46 deals during Fiscal 2019.

There were 64 cloud services contracts greater than $1.0 million that closed during Fiscal 2021, compared to 44 contracts during Fiscal 2020.

Cost of Cloud services and subscriptions revenues increased by $31.9 million during the year ended June 30, 2021 as compared to the prior fiscal year.

This was due to an increase in labour-related costs of $54.2 million, primarily due to increased headcount from recent acquisitions, an increase in third party network usage fees of $9.9 million and an increase in other miscellaneous costs of $1.8 million.

This was due to an increase in labour-related costs of $16.8 million and an increase in third party network fees of $14.9 million, both primarily the result of recent acquisitions.

Overall, the gross margin percentage on Cloud services and subscriptions revenues increased to 66% from 61%.

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Our management reviews our Customer support renewal rates on a quarterly basis, and we use these rates as a method of monitoring our customer service performance.

For the year ended June 30, 2020 , our Customer support renewal rate was approximately 94%, compared with the Customer support renewal rate of approximately 91% for the year ended June 30, 2019 .

For the year ended June 30, 2021, our Customer support renewal rate was approximately 94%, consistent with the year ended June 30, 2020.

Cost of Customer support revenues is comprised primarily of technical support personnel and related costs, as well as third party royalty costs.

Year Ended June 30,

(In thousands)

increase (decrease)

(In thousands) 2021 Change

increase (decrease) 2020 Change

increase (decrease) 2019

Customer Support Revenues:

Americas $ 743,724 $ 9,146 $ 734,578 $ 16,369 $ 718,209

EMEA 481,558 43,111 438,447 10,735 427,712

Asia Pacific 108,780 6,219 102,561 567 101,994

Total Customer Support Revenues 1,334,062 58,476 1,275,586 27,671 1,247,915

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% Customer Support Revenues by Geography:

Americas 55.7 % 57.6 % 57.6 %

EMEA 36.1 % 34.4 % 34.3 %

Asia Pacific 8.2 % 8.0 % 8.1 %

Customer support revenues increased by $58.5 million or 4.6% during the year ended June 30, 2021 as compared to the prior fiscal year;

up 3.7% after factoring in the impact of $18.1 million of foreign exchange rate changes.

Geographically, the overall change was attributable to an increase in Americas of $16.4 million , an increase in EMEA of $10.7 million , and an increase in Asia Pacific of $0.6 million .

Cost of Customer support revenues decreased by $0.4 million during the year ended June 30, 2020 as compared to the prior fiscal year, due to a decrease in other miscellaneous expenses.

Overall, the gross margin percentage on Customer support revenues remained stable at approximately 90% .

up 1.7% after factoring in the favorable impact of $37.1 million of foreign exchange rate changes.

Geographically, the overall change was attributable to an increase in EMEA of $43.1 million, an increase in Americas of $9.1 million and an increase in Asia Pacific of $6.2 million.

Cost of Customer support revenues decreased by $1.1 million during the year ended June 30, 2021 as compared to the prior fiscal year.

This was due to a decrease in third party costs of $0.7 million and a decrease in labour-related costs of $0.6 million, partially offset by an increase in other miscellaneous costs of $0.2 million.

Overall, the gross margin percentage on Customer support revenues increased to 91% from 90%.

Our License revenue can be broadly categorized as perpetual licenses, term licenses and subscription licenses.

Our License revenues are impacted by the strength of general economic and industry conditions, the competitive strength of our software products, and our acquisitions.

Cost of License revenues consists primarily of royalties payable to third parties.

Year Ended June 30,

(In thousands) 2021 Change

increase (decrease) 2020 Change

increase (decrease) 2019

License Revenues:

Americas $ 159,530 $ (40,116) $ 199,646 $ (16,225) $ 215,871

EMEA 178,503 23,296 155,207 (8,415) 163,622

Asia Pacific 46,678 (1,320) 47,998 (601) 48,599

Total License Revenues 384,711 (18,140) 402,851 (25,241) 428,092

Cost of License Revenues 13,916 2,595 11,321 (3,026) 14,347

GAAP-based License Gross Profit $ 370,795 $ (20,735) $ 391,530 $ (22,215) $ 413,745

GAAP-based License Gross Margin % 96.4 % 97.2 % 96.6 %

% License Revenues by Geography:

Americas 41.5 % 49.6 % 50.4 %

EMEA 46.4 % 38.5 % 38.2 %

Asia Pacific 12.1 % 11.9 % 11.4 %

License revenues decreased by $18.1 million or 4.5% during the year ended June 30, 2021 as compared to the prior fiscal year;

down 8.6% after factoring in the favorable impact of $16.6 million of foreign exchange rate changes.

Geographically, the overall change was attributable to a decrease in Americas of $40.1 million and a decrease in Asia Pacific of $1.3 million, partially offset by an increase in EMEA of $23.3 million.

During Fiscal 2021, we closed 122 license contracts greater than $0.5 million, of which 45 deals were greater than $1.0 million, contributing $131.6 million of License revenues.

This was compared to 120 license contracts greater than $0.5 million during Fiscal 2020, of which 48 deals were greater than $1.0 million, contributing $137.8 million of License revenues.

Cost of License revenues increased by $2.6 million during the year ended June 30, 2021 as compared to the prior fiscal year as a result of higher third party technology costs.

Overall, the gross margin percentage on License revenues decreased to 96% from 97%.

4) Professional Service and Other:

Professional service and other revenues consist of revenues from consulting contracts and contracts to provide implementation, training and integration services (professional services).

Other revenues consist of hardware revenues, which are grouped within the “Professional service and other” category because they are relatively immaterial to our service revenues.

Other revenues consist of hardware revenues, which are included within the “Professional service and other” category because they are relatively immaterial to our service revenues.

Professional services are typically performed after the purchase of new software licenses.

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Year Ended June 30,

(In thousands)

increase (decrease)

(In thousands) 2021 Change

increase (decrease) 2020 Change

increase (decrease) 2019

Professional Service and Other Revenues:

Americas $ 117,385 $ (12,598) $ 129,983 $ (2,443) $ 132,426

EMEA 115,347 (424) 115,771 (7,090) 122,861

Asia Pacific 27,165 (694) 27,859 (1,790) 29,649

Total Professional Service and Other Revenues 259,897 (13,716) 273,613 (11,323) 284,936

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% Professional Service and Other Revenues by Geography:

Americas 45.2 % 47.5 % 46.5 %

EMEA 44.4 % 42.3 % 43.1 %

Asia Pacific 10.4 % 10.2 % 10.4 %

Professional service and other revenues decreased by $13.7 million or 5.0% during the year ended June 30, 2021 as compared to the prior fiscal year;

down 2.2% after factoring in the impact of $5.0 million of foreign exchange rate changes.

Geographically, the overall change was attributable to a decrease in EMEA of $7.1 million , a decrease in Americas of $2.4 million and a decrease in Asia Pacific of $1.8 million .

down 8.6% after factoring in the favorable impact of $9.9 million of foreign exchange rate changes.

Geographically, the overall change was attributable to a decrease in the Americas of $12.6 million, a decrease in Asia Pacific of $0.7 million and a decrease in EMEA of $0.4 million.

Cost of Professional service and other revenues decreased by $15.7 million during the year ended June 30, 2021 as compared to the prior fiscal year.

This was primarily due to a decrease in labour-related costs of $11.7 million, relating to a reduction in the use of external labour and in travel related expenses.

This was due to a decrease in labour and travel-related expenses of $15.8 million resulting from the travel limitations triggered by the COVID-19 pandemic.

Overall, the gross margin percentage on Professional service and other revenues increased to 24% from 22%.

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Year Ended June 30,

(In thousands)

increase (decrease)

(In thousands) 2021 Change

increase (decrease) 2020 Change

increase (decrease) 2019

1 unchanged sentence

intangible assets $ 218,796 $ 13,079 $ 205,717 $ 22,332 $ 183,385

Amortization of acquired technology-based intangible assets increased during the year ended June 30, 2020 by $22.3 million as compared to the prior fiscal year due to an increase of $59.6 million relating to amortization of newly acquired technology-based intangible assets from recent acquisitions, partially offset by a reduction of $37.3 million relating to intangible assets from certain previous acquisitions becoming fully amortized.

Amortization of acquired technology-based intangible assets increased by $13.1 million during the year ended June 30, 2021 as compared to the prior fiscal year.

This was primarily due to an increase of $45.5 million relating to amortization of newly acquired technology-based intangible assets from recent acquisitions, partially offset by a reduction of $32.4 million relating to intangible assets from certain previous acquisitions becoming fully amortized.

Operating Expenses

Year Ended June 30,

(In thousands)

increase (decrease)

(In thousands) 2021 Change

increase (decrease) 2020 Change

increase (decrease) 2019

2 unchanged sentences

General and administrative 263,521 25,989 237,532 29,623 207,909

Depreciation 85,265 (4,193) 89,458 (8,258) 97,716

Amortization of acquired customer-based intangible assets 216,544 (3,015) 219,559 29,732 189,827

5 unchanged sentences

General and administrative 7.8 % 7.6 % 7.2 %

Depreciation 2.5 % 2.9 % 3.4 %

Amortization of acquired customer-based intangible assets 6.4 % 7.1 % 6.6 %

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Research and development expenses consist primarily of payroll and payroll-related benefits expenses, contracted research and development expenses, and facility costs.

Research and development assists with organic growth and improves product stability and functionality, and accordingly, we dedicate extensive efforts to update and upgrade our product offerings.

The primary drivers are typically budgeted software upgrades and software development.

Change between Fiscal increase (decrease)

Research and development enables organic growth and improves product stability and functionality, and accordingly, we dedicate extensive efforts to update and upgrade our product offerings.

The primary drivers are typically software upgrades and development.

Change between Fiscal Years increase (decrease)

(In thousands)

2020 and 2019

2019 and 2018

2021 and 2020 2020 and 2019

Payroll and payroll-related benefits $ 40,794 $ 37,612

2 unchanged sentences

Travel and communication (1,454) 72

Facilities 8,327 8,684

Other miscellaneous (343) (133)

Total change in research and development expenses $ 51,036 $ 48,575

Research and development expenses increased by $48.6 million during the year ended June 30, 2020 as compared to the prior fiscal year, partially as a result of recent acquisitions.

Payroll and payroll-related benefits increased $37.6 million , facility related expenses increased by $8.7 million and contract labour and consulting expense increased by $2.3 million .

Overall, our research and development expenses, as a percentage of total revenues, increased to 12% from 11% in the prior fiscal year.

Research and development expenses increased by $51.0 million during the year ended June 30, 2021 as compared to the prior fiscal year as a result of recent acquisitions, partially offset by the impact of the COVID-19 travel and spending reduction discussed under "Outlook for Fiscal 2022" above.

Payroll and payroll-related benefits, which includes salaries, benefits and variable short-term incentives, increased by $40.8 million, and facility-related expenses increased by $8.3 million.

Additionally, share-based compensation expense increased by $4.6 million.

These increases were partially offset by reductions in travel and communication expenses of $1.5 million and contract labour and consulting expenses of $0.8 million.

Overall, our research and development expenses, as a percentage of total revenues, remained stable compared to the prior fiscal year at 12%.

Our research and development labour resources increased by 104 employees, from 4,072 employees at June 30, 2020 to 4,176 employees at June 30, 2021.

Sales and marketing expenses consist primarily of personnel expenses and costs associated with advertising, marketing events and trade shows.

Change between Fiscal increase (decrease)

(In thousands)

2020 and 2019

2019 and 2018

Change between Fiscal Years increase (decrease)

(In thousands) 2021 and 2020 2020 and 2019

Payroll and payroll-related benefits $ 28,343 $ 40,637

Commissions 11,530 4,306

Contract labour and consulting 135 773

2 unchanged sentences

Marketing expenses 11,522 15,926

Bad debt expense

Facilities (4,151) 7,228

Credit loss expense (4,329) (2,000)

Other miscellaneous (209) 1,824

Total change in sales and marketing expenses $ 37,177 $ 67,009

Sales and marketing expenses increased by $67.0 million during the year ended June 30, 2020 as compared to the prior fiscal year.

Payroll and payroll-related benefits increased by $40.6 million , marketing expenses increased by $15.9 million , and facility related expenses increased by $7.2 million , all primarily as result of recent acquisitions.

Additionally, commission expense increased by $4.3 million and other miscellaneous expenses increased by $1.8 million .

These were partially offset by a reduction in travel and communication of $2.5 million , which was primarily due to the travel limitations triggered by the COVID-19 pandemic, and a reduction in bad debt expense of $2.0 million .

Overall, our sales and marketing expenses, as a percentage of total revenues, increased to 19% from 18% in the prior fiscal year.

Our sales and marketing labour resources increased by 406 employees, from 2,051 employees at June 30, 2019 to 2,457 employees at June 30, 2020 .

Sales and marketing expenses increased by $37.2 million during the year ended June 30, 2021 as compared to the prior fiscal year as a result of recent acquisitions, partially offset by the impact of the COVID-19 travel and spending reduction discussed under "Outlook for Fiscal 2022" above.

Payroll and payroll-related benefits, which includes salaries, benefits and variable short-term incentives, increased by $28.3 million, commissions increased by $11.5 million, marketing expenses increased by $11.5 million and share-based compensation expense increased by $9.0 million.

These increases were partially offset by reductions in travel and communications of $14.6 million resulting from travel limitations triggered by the COVID-19 pandemic, reductions in credit loss expense of $4.3 million and reductions in facility related expenses of $4.2 million.

Overall, our sales and marketing expenses, as a percentage of total revenues, decreased to 18% from 19% in the prior fiscal year.

Our sales and marketing labour resources decreased by 3 employees, from 2,457 employees at June 30, 2020 to 2,454 employees at June 30, 2021.

General and administrative expenses consist primarily of payroll and payroll related benefits expenses, related overhead, audit fees, other professional fees, contract labour and consulting expenses and public company costs.

Change between Fiscal increase (decrease)

(In thousands)

2020 and 2019

2019 and 2018

Change between Fiscal Years increase (decrease)

(In thousands) 2021 and 2020 2020 and 2019

Payroll and payroll-related benefits $ 11,580 $ 20,264

2 unchanged sentences

Travel and communication (3,922) (480)

Facilities (3,838) 4,127

Other miscellaneous 16,546 3,714

Total change in general and administrative expenses $ 25,989 $ 29,623

General and administrative expenses increased by $29.6 million during the year ended June 30, 2020 as compared to the prior fiscal year.

Payroll and payroll-related benefits increased by $20.3 million and facilities related costs increased by $4.1 million , primarily as a result of recent acquisitions.

Additionally, share-based compensation increased by $1.8 million and other miscellaneous expenses increased by $3.7 million , primarily due to higher professional fees such as legal, audit and tax related expenses from our recent acquisitions.

Overall, general and administrative expenses, as a percentage of total revenues, increased to 8% from 7% in the prior fiscal year.

Our general and administrative labour resources increased by 294 employees, from 1,620 employees at June 30, 2019 to 1,914 employees at June 30, 2020 .

General and administrative expenses increased by $26.0 million during the year ended June 30, 2021 as compared to the prior fiscal year as a result of recent acquisitions.

Other miscellaneous costs, which include professional fees such as legal, audit and tax related expenses, increased by $16.5 million, payroll and payroll-related benefits, which includes salaries, benefits and variable short-term incentives increased by $11.6 million, and share-based compensation expense increased by $5.2 million.

These increases were partially offset by reductions in travel and communication of $3.9 million and facility related expenses of $3.8 million, due to the impact of the COVID-19 spending reduction discussed under "Outlook for Fiscal 2022" above.

Overall, general and administrative expenses, as a percentage of total revenues, remained stable compared to the prior fiscal year at 8%.

Our general and administrative labour resources decreased by 48 employees, from 1,914 employees at June 30, 2020 to 1,866 employees at June 30, 2021.

Depreciation expenses:

Year Ended June 30,

(In thousands)

increase (decrease)

(In thousands) 2021 Change

increase (decrease) 2020 Change

increase (decrease) 2019

Depreciation expenses decreased during the year ended June 30, 2020 by $8.3 million , as compared to the prior fiscal year.

Depreciation expenses, as a percentage of total revenue, remained at approximately 3% for each such period.

Depreciation $ 85,265 $ (4,193) $ 89,458 $ (8,258) $ 97,716

Depreciation expenses decreased by $4.2 million during the year ended June 30, 2021 as compared to the prior fiscal year.

Depreciation expenses, as a percentage of total revenue, remained stable at 3% for the year ended June 30, 2021 as compared to the prior fiscal year.

Amortization of acquired customer-based intangible assets:

Year Ended June 30,

(In thousands)

increase (decrease)

(In thousands) 2021 Change

increase (decrease) 2020 Change

increase (decrease) 2019

Amortization of acquired customer-based intangible assets $ 216,544 $ (3,015) $ 219,559 $ 29,732 $ 189,827

Amortization of acquired customer-based intangible assets increased during the year ended June 30, 2020 by $29.7 million as compared to the prior fiscal year due to an increase of $63.9 million relating to amortization of newly acquired customer-based intangible assets from recent acquisitions, partially offset by a reduction of $34.2 million relating to intangible assets from certain previous acquisitions becoming fully amortized.

Amortization of acquired customer-based intangible assets decreased by $3.0 million during year ended June 30, 2021 as compared to the prior fiscal year.

This was due to a reduction of $59.0 million relating to intangible assets from certain previous acquisitions becoming fully amortized, partially offset by an increase of $56.0 million relating to amortization of newly acquired customer-based intangible assets from recent acquisitions.

Special charges (recoveries):

Special charges typically relate to amounts that we expect to pay in connection with restructuring plans, acquisition-related costs and other similar charges and recoveries.

Generally, we implement such plans in the context of integrating acquired entities with existing OpenText operations.

Special charges (recoveries) typically relate to amounts that we expect to pay in connection with restructuring plans, acquisition-related costs and other similar charges and recoveries.

Generally, we implement such plans in the context of integrating acquired entities with existing OpenText operations and most recently in response to the COVID-19 pandemic.

Actions related to such restructuring plans are typically completed within a period of one year.

In certain limited situations, if the planned activity does not need to be implemented, or an expense lower than anticipated is paid out, we record a recovery of the originally recorded expense to Special charges.

Year Ended June 30,

(In thousands)

Change increase (decrease)

(In thousands) 2021 Change increase (decrease) 2020 Change increase (decrease) 2019

Special charges (recoveries) $ 1,748 $ (98,680) $ 100,428 $ 64,709 $ 35,719

Special charges increased by $64.7 million during the year ended June 30, 2020 as compared to the prior fiscal year.

This was primarily due to (i) an increase of $52.6 million in restructuring activities, inclusive of $36.9 million from the accelerated amortization associated with the abandonment of certain right-of-use assets and $9.7 million from the disposal of fixed assets, (ii) an increase of $8.1 million in acquisition related costs, (iii) an increase of $1.5 million relating to the impact of certain pre-acquisition sales and use tax liabilities becoming statute barred during Fiscal 2019 and (iv) an increase of $2.5 million relating to other miscellaneous charges.

Special charges (recoveries) decreased by $98.7 million during the year ended June 30, 2021 as compared to the prior fiscal year.

This was due to a decrease in restructuring activities of $87.0 million, primarily related to the COVID-19 and Fiscal 2020 restructuring plans which were initiated during the second half of Fiscal 2020.

Included in the special charges for Fiscal 2021 were net recoveries of $29.5 million associated with the reversal of lease liabilities from facilities abandoned in the prior fiscal year, which have since been assigned or early terminated as well as the release of other facility charges accrued for under the plans.

Additionally, acquisition-related costs decreased by $7.8 million and other miscellaneous charges decreased by $3.9 million.

For more details on Special charges (recoveries), see note 18 "Special Charges (Recoveries)" to our Consolidated Financial Statements.

2 unchanged sentences

Year Ended June 30,

(In thousands)

Change increase (decrease)

(In thousands) 2021 Change increase (decrease) 2020 Change increase (decrease) 2019

Foreign exchange gains (losses)

OpenText share in net income (loss) of equity investees (note 9)

Income from long-term other receivable

Gain on shares held in Guidance (1)

Gain from contractual settlement (2)

$ (1,273) $ 2,911 $ (4,184) $ 146 $ (4,330)

OpenText share in net income (loss) of equity investees (1)

62,897 54,197 8,700 (4,968) 13,668

Loss debt extinguishment (2)

— 17,854 (17,854) (17,854) —

Other miscellaneous income (expense) (190) (1,582) 1,392 574 818

Total other income (expense), net $ 61,434 $ 73,380 $ (11,946) $ (22,102) $ 10,156

(1) Represents the release to income from other comprehensive income relating to the mark to market on shares we held in Guidance prior to our acquisition in the first fiscal quarter of Fiscal 2018.

(2) Represents a gain recognized in connection with the settlement of a certain breach of contractual arrangement in the second quarter of Fiscal 2018.

(3) On March 5, 2020 we redeemed Senior Notes 2023 (defined below) in full, which resulted in a loss on extinguishment of debt of $17.9 million .

Of this, $6.7 million is related to unamortized debt issuance costs and the remaining $11.2 million is related to the early termination call premium.

See note 11 "Long-Term Debt" to our Consolidated Financial Statements.

(1) OpenText’s share in net income of equity investees relates to our share of net income, which is based on changes in approximate fair value, at our interest in certain investment funds in which we are a limited partner.

Our interests in each of these investees range from 4% to below 20% and these investments are accounted for using the equity method (see note 9 "Prepaid Expenses and Other Assets" for more details).

(2) On March 5, 2020, we redeemed in full $800 million aggregate principal amount of our 5.625% Senior Notes due 2023 (Senior Notes 2023), which resulted in a loss on debt extinguishment of $17.9 million.

Of this, $6.7 million related to unamortized debt issuance costs and the remaining $11.2 million related to the early termination call premium.

Interest and Other Related Expense, Net

1 unchanged sentence

Year Ended June 30,

(In thousands)

Change increase (decrease)

(In thousands) 2021 Change increase (decrease) 2020 Change increase (decrease) 2019

Interest expense related to total outstanding debt (1)

$ 145,646 $ (3,558) $ 149,204 $ 11,717 $ 137,487

Interest income (3,856) 7,912 (11,768) (3,754) (8,014)

5 unchanged sentences

Year Ended June 30,

(In thousands)

Change increase (decrease)

(In thousands) 2021 Change increase (decrease) 2020 Change increase (decrease) 2019

Provision for (recovery of) income taxes $ 339,906 $ 229,069 $ 110,837 $ (44,100) $ 154,937

The effective tax rate decreased to a provision of 32.1% for the year ended June 30, 2020, compared to a provision of 35.2% for the year ended June 30, 2019.

The decrease in tax expense of $44.1 million was primarily due to (i) a decrease of $23.7 million relating to lower net income including the impact of foreign rates, (ii) a decrease of $51.3 million for changes in unrecognized tax benefits, (iii) a decrease of $7.0 million from tax rate differential in tax years applicable to United States loss carryforwards that became eligible for carryback under the Coronavirus Aid, Relief, and Economic Security (CARES) Act enacted in the third quarter of Fiscal 2020, and (iv) a decrease of $16.0 million related to tax costs of internal reorganizations that did not recur in Fiscal 2020.

These were partially offset by (i) an increase of $25.2 million related to the US Base Erosion Anti-avoidance Tax (US BEAT), (ii) an increase in accruals for repatriations from foreign subsidiaries of $17.3 million , (iii) an

increase in the effect of withholding taxes of $5.9 million , and (iv) an increase in the change in the valuation allowance of $4.8 million .

The effective tax rate increased to a provision of 52.2% for the year ended June 30, 2021, compared to a provision of 32.1% for the year ended June 30, 2020.

Tax expense increased by $229.1 million from $110.8 million during the year ended June 30, 2020 to $339.9 million during the year ended June 30, 2021.

This was primarily due to (i) an increase of $300.5 million relating to the IRS Settlement (as defined herein), (ii) an increase of $76.4 million relating to higher net income including the impact of foreign rates and (iii) an increase of $7.0 million related to the one-time benefit from the US CARES Act in Fiscal 2020 that did not recur in Fiscal 2021.

These were partially offset by (i) a decrease of $66.9 million for changes in unrecognized tax benefits, (ii) a decrease of $34.1 million related to tax benefits of internal reorganizations that occurred in Fiscal 2021 (iii) a decrease of $33.2 million related to the US Base Erosion Anti-Abuse Tax (US BEAT), (iv) a decrease of $5.7 million for net changes in valuation allowance, (v) a decrease of $3.1 million related to permanent differences and (vi) a decrease of $3.1 million related to differences in tax filings being higher than estimates.

The remainder of the difference was due to normal course movements and non-material items.

For information with regards to certain potential tax contingencies, see note 14 "Guarantees and Contingencies" to our Consolidated Financial Statements .

Please also see Part I, Item 1A "Risk Factors" elsewhere in this Annual Report on Form 10-K .

For information on the IRS Settlement and certain other potential tax contingencies, including the CRA matter, see note 14 "Guarantees and Contingencies" and note 15 "Income Taxes" to our Consolidated Financial Statements.

Please also see Part I, Item 1A "Risk Factors" within this Annual Report on Form 10-K.

Use of Non-GAAP Financial Measures

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GAAP measures with certain Non-GAAP measures defined below.

Non-GAAP-based net income and Non-GAAP-based EPS, attributable to OpenText, is consistently calculated as GAAP-based net income or earnings per share, attributable to OpenText, on a diluted basis, excluding the effects of the amortization of acquired intangible assets, other income (expense), share-based compensation, and Special charges (recoveries), all net of tax and any tax benefits/expense items unrelated to current period income, as further described in the tables below.

Non-GAAP-based net income and Non-GAAP-based EPS, attributable to OpenText, are consistently calculated as GAAP-based net income or earnings per share, attributable to OpenText, on a diluted basis, excluding the effects of the amortization of acquired intangible assets, other income (expense), share-based compensation, and special charges (recoveries), all net of tax and any tax benefits/expense items unrelated to current period income, as further described in the tables below.

Non-GAAP-based gross profit is the arithmetical sum of GAAP-based gross profit and the amortization of acquired technology-based intangible assets and share-based compensation within cost of sales.

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Non-GAAP-based income from operations is calculated as GAAP-based income from operations, excluding the amortization of acquired intangible assets, special charges (recoveries), and share-based compensation expense.

Adjusted earnings (loss) before interest, taxes, depreciation and amortization (Adjusted EBITDA) is consistently calculated as GAAP-based net income, attributable to OpenText excluding interest income (expense), provision for income taxes, depreciation and amortization of acquired intangible assets, other income (expense), share-based compensation and Special charges (recoveries).

Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) is consistently calculated as GAAP-based net income, attributable to OpenText, excluding interest income (expense), provision for income taxes, depreciation and amortization of acquired intangible assets, other income (expense), share-based compensation and special charges (recoveries).

The Company's management believes that the presentation of the above defined Non-GAAP financial measures provides useful information to investors because they portray the financial results of the Company before the impact of certain non-operational charges.

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The Company does not acquire businesses on a predictable cycle, and therefore believes that the presentation of Non-GAAP measures, which in certain cases adjust for the impact of amortization of intangible assets and the related tax effects that are primarily related to acquisitions, will provide readers of financial statements with a more consistent basis for comparison across accounting periods and be more useful in helping readers understand the Company’s operating results and underlying operational trends.

Additionally, the Company has engaged in various restructuring activities over the past several years, primarily due to acquisitions, that have resulted in costs associated with reductions in headcount, consolidation of leased facilities and related costs, all which are recorded under the Company’s “Special Charges (recoveries)” caption on the Consolidated Statements of Income .

Additionally, the Company has engaged in various restructuring activities over the past several years, primarily due to acquisitions and most recently in response to the COVID-19 pandemic, that have resulted in costs associated with reductions in headcount, consolidation of leased facilities and related costs, all which are recorded under the Company’s “Special charges (recoveries)” caption on the Consolidated Statements of Income.

Each restructuring activity is a discrete event based on a unique set of business objectives or circumstances, and each differs in terms of its operational implementation, business impact and scope, and the size of each restructuring plan can vary significantly from period to period.

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Year Ended June 30, 2021

GAAP-based Measures

% of Total Revenue

Non-GAAP-based Measures

GAAP-based Measures GAAP-based Measures

% of Total Revenue Adjustments Note Non-GAAP-based Measures Non-GAAP-based Measures

% of Total Revenue

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In arriving at our Non-GAAP-based tax rate of approximately 14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.

The GAAP-based tax provision rate for the year ended June 30, 2021 includes the income tax provision charge from the IRS Settlement partially offset by a tax benefit from the release of unrecognized tax benefits due to the conclusion of relevant tax audits that was recognized during the second quarter of Fiscal 2021.

(8) Reconciliation of GAAP-based net income to Non-GAAP-based net income:

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GAAP-based net income, attributable to OpenText $ 310,672 $ 1.14

Amortization 435,340 1.59

Share-based compensation 51,969 0.19

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Amortization of acquired customer-based intangible assets 216,544

Depreciation 85,265

Share-based compensation 51,969

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Year Ended June 30, 2020

GAAP-based Measures

% of Total Revenue

Non-GAAP-based Measures

GAAP-based Measures GAAP-based Measures

% of Total Revenue Adjustments Note Non-GAAP-based Measures Non-GAAP-based Measures

% of Total Revenue

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GAAP-based net income, attributable to OpenText $ 234,225 $ 0.86

Amortization 425,276 1.56

Share-based compensation 29,532 0.11

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Amortization of acquired customer-based intangible assets 219,559

Depreciation 89,458

Share-based compensation 29,532

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Year Ended June 30, 2019

GAAP-based Measures

% of Total Revenue

Non-GAAP-based Measures

GAAP-based Measures GAAP-based Measures

% of Total Revenue Adjustments Note Non-GAAP-based Measures Non-GAAP-based Measures

% of Total Revenue

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We exclude gains and losses on these investments as we do not believe they are reflective of our ongoing business and operating results.

Adjustment relates to differences between the GAAP-based tax recovery rate of approximately 37% and a Non-GAAP-based tax rate of approximately 14%;

(7) Adjustment relates to differences between the GAAP-based tax provision rate of approximately 35% and a Non-GAAP-based tax rate of approximately 14%;

these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based adjusted net income.

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GAAP-based net income, attributable to OpenText $ 285,501 $ 1.06

Amortization 373,212 1.38

Share-based compensation 26,770 0.10

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Amortization of acquired customer-based intangible assets 189,827

Depreciation 97,716

Share-based compensation 26,770

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(In thousands)

As of June 30, 2020

increase (decrease)

As of June 30, 2019

increase (decrease)

As of June 30, 2018

As of June 30, 2021 Change

increase (decrease) As of June 30, 2020 Change

increase (decrease) As of June 30, 2019

Cash and cash equivalents $ 1,607,306 $ (85,544) $ 1,692,850 $ 751,841 $ 941,009

Restricted cash (1)

2,494 (1,919) 4,413 1,879 2,534

Total cash, cash equivalents and restricted cash $ 1,609,800 $ (87,463) $ 1,697,263 $ 753,720 $ 943,543

(1) Restricted cash is classified under the Prepaid expenses and other current assets and Other assets line items on the Consolidated Balance Sheets.

(1) Restricted cash is classified under the Prepaid expenses and other current assets and Other assets line items on the Consolidated Balance Sheets (note 9).

Year Ended June 30,

(In thousands)

2021 Change 2020 Change 2019

Cash provided by operating activities $ 876,120 $ (78,416) $ 954,536 $ 78,258 $ 876,278

Cash used in investing activities $ (68,770) $ 1,400,647 $ (1,469,417) $ (1,004,891) $ (464,526)

Cash (used in) provided by financing activities

Cash provided by (used in) financing activities $ (924,547) $ (2,193,326) $ 1,268,779 $ 1,417,143 $ (148,364)

Cash and cash equivalents

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For more details, see "Long-term Debt and Credit Facilities" below.

Proceeds from our $600 million draw down on the Revolver (defined below), (for which notice to the lenders was provided on March 5, 2020) have resulted in total cash and cash equivalents of $1.7 billion as of June 30, 2020 .

As of June 30, 2020 , we recognized a provision of $24.8 million ( June 30, 2019 — $17.4 million ) in respect of both additional foreign taxes or deferred income tax liabilities for temporary differences related to the undistributed earnings of certain non-United States subsidiaries, and planned periodic repatriations from certain German subsidiaries, that will be subject to withholding taxes upon distribution.

During the fourth quarter of Fiscal 2020, we deferred approximately $41 million in payments, primarily as a result of the CARES Act that was enacted in the U.S.

in the third quarter of Fiscal 2020 and other COVID-19 related tax relief programs in EMEA.

These deferrals will become payable primarily in Fiscal 2021 with a portion becoming payable in Fiscal 2022.

During the year ended June 30, 2021, we made payments for U.S.

federal taxes and interest of $288.6 million and state taxes and interest of $11.0 million as a result of the IRS Settlement.

As of June 30, 2021, the outstanding settlement amount of approximately $0.9 million is recorded within "Income taxes payable" in our Consolidated Balance Sheets.

As of June 30, 2021, we have recognized a provision of $27.5 million (June 30, 2020—$24.8 million) in respect of both additional foreign taxes or deferred income tax liabilities for temporary differences related to the undistributed earnings of certain non-United States subsidiaries and planned periodic repatriations from certain German subsidiaries, that will be subject to withholding taxes upon distribution.

We have deferred a total of approximately $99 million of tax payments under the CARES Act and other COVID-19 related tax relief programs in EMEA.

During the year ended June 30, 2021, we made repayments of approximately $60 million related to amounts previously deferred.

As of June 30, 2021, we have remaining deferrals of $39 million which will become payable throughout Fiscal 2022 and Fiscal 2023.

Cash flows provided by operating activities

Cash flows from operating activities increased by $78.3 million due to an increase in net income before the impact of non-cash items of $60.7 million and an increase in changes from working capital of $17.6 million.

The increase in operating cash flow from changes in working capital was primarily due to the net impact of the following increases:

$52.3 million relating to an increase in accounts payable and accrued liabilities;

$27.1 million relating to deferred revenues;

$9.0 million relating to accounts receivable;

$1.1 million relating to changes in other assets.

These increases in operating cash flows were partially offset by the following decreases:

$62.4 million relating to changes in income taxes payable, net of receivables,

$6.1 million relating to a increase in prepaid expenses and other current assets,

$2.7 million relating to an increase in contract assets, and

$0.9 million relating to changes in net operating lease assets and liabilities.

During the fourth quarter of Fiscal 2020 our days sales outstanding (DSO) was 51 days, compared to a DSO of 56 days during the fourth quarter of Fiscal 2019.

Cash flows from operating activities decreased by $78.4 million, due to a decrease in changes from working capital of $89.7 million, partially offset by an increase in net income before the impact of non-cash items of $11.3 million.

The decrease in operating cash flow from changes in working capital was primarily due to the net impact of the following decreases:

(i) $105.7 million relating to income taxes payable, net of receivables;

(ii) $26.4 million relating to net operating lease assets and liabilities;

(iii) $23.5 million relating to accounts receivable;

(iv) $4.5 million relating to accounts payable and accrued liabilities.

These decreases in operating cash flows were partially offset by the following increases:

(i) $44.6 million relating to prepaid expenses and other current assets;

(ii) $14.0 million relating to deferred revenues;

(iii) $10.8 million relating to other assets;

(iv) $1.0 million relating to contract assets.

During the fourth quarter of Fiscal 2021 our days sales outstanding (DSO) was 44 days, compared to a DSO of 51 days during the fourth quarter of Fiscal 2020, largely as a result of strong improvement in collections efficiency.

The per day impact of our DSO in the fourth quarter of Fiscal 2021 and Fiscal 2020 on our cash flows was $9.9 million and $9.2 million, respectively.

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Our cash flows used in investing activities is primarily on account of acquisitions and additions of property and equipment.

Cash flows used in investing activities increased by $1.0 billion , primarily due to an increase in consideration paid for acquisitions during Fiscal 2020, as compared to Fiscal 2019.

During Fiscal 2020 we acquired Carbonite for $1.4 billion , inclusive of cash acquired, and XMedius for $73.3 million .

Cash flows used in investing activities decreased by $1.4 billion, primarily due to consideration paid for acquisitions during Fiscal 2020, which included the acquisitions of Carbonite for $1.3 billion and XMedius for $73.3 million.

Cash flows provided by (used in) financing activities

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These inflows are typically offset by scheduled and non-scheduled repayments of our long-term debt financing and, when applicable, the payment of dividends and/or repurchases of our Common Shares.

Cash flows provided by financing activities increased by $1.4 billion .

This was primarily due to proceeds from the issuance of Senior Notes 2028 and Seniors Notes 2030 (both defined below) of $1.8 billion.

A portion of these proceeds were used to redeem $800 million of our Senior Notes 2023 (defined below) and repay $750 million that was drawn on the Revolver in the second quarter of Fiscal 2020.

Additionally, in February 2020, all Notes due 2022, inherited through our acquisition of Carbonite, were surrendered and converted at a rate of $1,068.7341 in cash for each $1,000 principal amount, for an aggregate repayment of $153.6 million, and in March 2020, we drew $600 million from the Revolver as a preemptive measure in light of current uncertainty in the global markets.

Cash flows used in financing activities increased by $2.2 billion, primarily due to the net impact of the following long-term debt financing activities that occurred in Fiscal 2020 and did not reoccur in Fiscal 2021:

(i) $1.8 billion relating to proceeds from the issuance of Senior Notes 2028 and Senior Notes 2030 (both defined below), of which a portion of the proceeds were used to redeem $800 million of our Senior Notes 2023;

(ii) $750 million in proceeds for amounts drawn and subsequently repaid under the Revolver (defined below);

(iii) $153.6 million repayment of convertible notes, inherited through our acquisition of Carbonite, that were surrendered and converted offset by;

(iv) $600 million in proceeds for amounts drawn on the Revolver in the third quarter of Fiscal 2020, subsequently repaid during the second quarter of Fiscal 2021.

Additionally, cash flows used in financing increased due to the following activities that occurred during Fiscal 2021:

(i) $119.1 million relating to the repurchase and cancellation of 2,500,000 Common Shares under the Repurchase Plan (defined herein);

(ii) $52.4 million relating to the repurchase Common Shares on the open market for potential reissuance under our stock compensation plans;

(iii) $22.0 million relating to cash dividends paid to shareholders.

Cash Dividends

During the year ended June 30, 2020 , we declared and paid cash dividends of $0.6984 per Common Share in the aggregated amount of $188.7 million ( year ended June 30, 2019 and 2018— $0.6300 and $0.5478 per Common Share, respectively, in the aggregate amount of $168.9 million and $145.6 million , respectively).

During the year ended June 30, 2021, we declared and paid cash dividends of $0.7770 per Common Share in the aggregate amount of $210.7 million (year ended June 30, 2020 and 2019—$0.6984 and $0.6300 per Common Share, respectively, in the aggregate amount of $188.7 million and $168.9 million, respectively).

Future declarations of dividends and the establishment of future record and payment dates are subject to final determination and discretion of the Board.

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On February 18, 2020 Open Text Holdings, Inc.

(OTHI), a wholly-owned indirect subsidiary of the Company, issued $900 million in aggregate principal amount of 4.125% Senior Notes due 2030 guaranteed by us (Senior Notes 2030) in an unregistered offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (Securities Act), and to certain persons in offshore transactions pursuant to Regulation S under the Securities Act.

(OTHI), a wholly-owned indirect subsidiary of the Company, issued $900 million in aggregate principal amount of 4.125% Senior Notes due 2030 guaranteed by the Company (Senior Notes 2030) in an unregistered offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (Securities Act), and to certain persons in offshore transactions pursuant to Regulation S under the Securities Act.

Senior Notes 2030 bear interest at a rate of 4.125% per annum, payable semi-annually in arrears on February 15 and August 15, commencing on August 15, 2020.

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(ii) create, assume, incur or guarantee additional indebtedness of the Company or the guarantors without such subsidiary becoming a subsidiary guarantor of Senior Notes 2028;

and (iii) consolidate, amalgamate or merge with, or convey, transfer, lease or otherwise dispose of its property and assets substantially as an entirety to, another person.

and (iii) consolidate, amalgamate or merge with, or convey, transfer, lease or otherwise dispose of its property and assets

substantially as an entirety to, another person.

These covenants are subject to a number of important limitations and exceptions as set forth in the 2028 Indenture.

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Senior Notes 2028 are guaranteed on a senior unsecured basis by our existing and future wholly-owned subsidiaries that borrow or guarantee the obligations under our existing senior credit facilities.

Senior Notes 2028 and the guarantees rank equally in right of payment with all of our and our guarantors’ existing and future senior unsubordinated debt and will rank senior in right of payment to all of the our and our guarantors’ future subordinated debt.

Senior Notes 2028 and the guarantees rank equally in right of payment with all of our and our guarantors’ existing and future senior unsubordinated debt and will rank senior in right of payment to all of our and our guarantors’ future subordinated debt.

Senior Notes 2028 and the guarantees will be effectively subordinated to all of our and our guarantors’ existing and future secured debt, including the obligations under the senior credit facilities, to the extent of the value of the assets securing such secured debt.

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The foregoing description of the 2026 Indenture does not purport to be complete and is qualified in its entirety by reference to the full text of the 2026 Indenture, which is filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on May 31, 2016.

Senior Notes 2023

On January 15, 2015, we issued $800 million in aggregate principal amount of our 5.625% Senior Notes due 2023 (Senior Notes 2023) in an unregistered offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act and to certain persons in offshore transactions pursuant to Regulation S under the Securities Act.

Senior Notes 2023 bore interest at a rate of 5.625% per annum, payable semi-annually in arrears on January 15 and July 15, commencing on July 15, 2015.

Senior Notes 2023 were to mature on January 15, 2023, unless earlier redeemed in accordance with their terms, or repurchased.

On March 5, 2020 , we redeemed Senior Notes 2023 in full at a price equal to 101.406% of the principal amount plus accrued and unpaid interest up to but excluding the redemption date.

A portion of the net proceeds from the offerings of Senior Notes 2028 and Senior Notes 2030 was used to redeem Senior Notes 2023.

Upon redemption, Senior Notes 2023 were cancelled and any obligation thereunder was extinguished.

The resulting loss of $17.9 million has been recorded as a component of Other income (expense), net in our Consolidated Statements of Income .

See note 23 "Other Income (Expense), Net" to our Consolidated Financial Statements .

Notes due 2022

Following our acquisition of Carbonite, our consolidated debt reflected $143.8 million of principal debt convertible notes (Notes due 2022).

Notes due 2022 were originally issued by Carbonite, on April 4, 2017, in an unregistered offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act.

The Notes due 2022 were issued under an Indenture (the 2022 Notes Indenture) between Carbonite and U.S.

Bank National Association, as trustee (the 2022 Notes Trustee).

The Notes due 2022 accrued interest at 2.5% per year, which was payable semiannually in arrears on April 1 and October 1 of each year.

The Notes due 2022 were to mature on April 1, 2022, unless earlier repurchased, redeemed or converted.

Carbonite, now a subsidiary of OpenText, was the sole obligor on the Notes due 2022.

In connection with our acquisition of Carbonite, and as required by the 2022 Notes Indenture, Carbonite and the 2022 Notes Trustee entered into a first supplemental indenture, dated as of December 24, 2019 (the 2022 Notes Supplemental Indenture).

The 2022 Notes Supplemental Indenture provided that, at and after the effective time of our acquisition of Carbonite, the right to convert each $1,000 principal amount of the Notes due 2022 was changed into the right to convert such principal amount of the Notes due 2022 solely into cash in an amount equal to the Conversion Rate (as defined in the 2022 Notes Indenture) in effect on the Conversion Date (as defined in the 2022 Notes Indenture) multiplied by $23.00 , which was the price per share we paid in connection with our acquisition of Carbonite.

As a result of our acquisition of Carbonite, the Conversion Rate for the Notes due 2022 was temporarily increased by 7.7633 per $1,000 principal amount of Notes due 2022 to yield a Conversion Rate of 46.4667 per $1,000 principal amount of Notes due 2022.

The increased Conversion Rate was in effect until the close of business on February 27, 2020.

As of February 27, 2020, all Notes due 2022 had been surrendered and converted at a rate of $1,068.7341 in cash for each $1,000 principal amount.

As of such date, there are no remaining Notes due 2022 outstanding.

On May 30, 2018, we entered into a credit facility, which provides for a $1 billion term loan facility with certain lenders named therein, Barclays Bank PLC (Barclays), as sole administrative agent and collateral agent, and as lead arranger and joint bookrunner (Term Loan B) and borrowed the full amount on May 30, 2018 to, among other things, repay in full the loans under our prior $800 million term loan credit facility originally entered into on January 16, 2014.

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The Revolver has no fixed repayment date prior to the end of the term.

Borrowings under the Revolver bear interest per annum at a floating rate of LIBOR plus a fixed margin dependent on our consolidated net leverage

ratio ranging from 1.25% to 1.75% .

As of June 30, 2020 , the outstanding balance on the Revolver bears an interest rate of 1.94% .

Borrowings under the Revolver bear interest per annum at a floating rate of LIBOR plus a fixed margin dependent on our consolidated net leverage ratio ranging from 1.25% to 1.75%.

For more information regarding the impact of LIBOR, see "Stress in the global financial system may adversely affect our finances and operations in ways that may be hard to predict or to defend against" included within Part I, Item 1A of this Annual Report on Form 10-K.

During the second quarter of Fiscal 2020, we drew down $750 million from the Revolver to partially fund the acquisition of Carbonite.

In February 2020, we repaid $750 million drawn under the Revolver with a portion of the proceeds from the Senior Notes 2030 and Senior Notes 2028.

In March 2020, we drew down $600 million from the Revolver as a preemptive measure in order to increase our cash position and preserve financial flexibility in light of current uncertainty in the global markets resulting from the COVID-19 pandemic.

The proceeds from the $600 million draw down are presented within cash and cash equivalents and within the current portion of long-term debt in our Consolidated Balance Sheet as of June 30, 2020 .

Under the Revolver, we must maintain a "consolidated net leverage" ratio of no more than 4:1 at the end of each financial quarter.

Consolidated net leverage ratio is defined for this purpose as the proportion of our total debt reduced by unrestricted cash, including guarantees and letters of credit, over our trailing twelve months net income before interest, taxes, depreciation, amortization, restructuring, share-based compensation and other miscellaneous charges.

As of June 30, 2020 , our consolidated net leverage ratio was 2.0 :1.

As of June 30, 2020 , we have $600 million outstanding balance on the Revolver ( June 30, 2019 — nil ) and $150 million remains available to be drawn.

As of June 30, 2019 , we had no outstanding balance on the Revolver.

There was no activity during the year ended June 30, 2019 .

During the second quarter of Fiscal 2020, we drew down $750 million from the Revolver to partially fund the acquisition of Carbonite.

In February 2020, we repaid $750 million drawn under the Revolver with a portion of the proceeds from the Senior Notes 2030 and Senior Notes 2028.

In March 2020, we drew down $600 million from the Revolver as a preemptive measure in order to increase our cash position and preserve financial flexibility in light of uncertainty in the global markets resulting from the COVID-19 pandemic.

As of June 30, 2020, the proceeds from the $600 million draw down remained outstanding and were presented within "Cash and cash equivalents" and "Current portion of long-term debt" on the Consolidated Balance Sheets.

During the second quarter of Fiscal 2021, we repaid $600 million previously drawn on the Revolver using cash on hand.

As of June 30, 2021, we had no outstanding balance under the Revolver.

For further details relating to our debt, please see note 11 "Long-Term Debt" to our Consolidated Financial Statements.

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The type of securities and the specific terms thereof will be determined at the time of any offering and will be described in the applicable prospectus supplement to be filed separately with the SEC and Canadian securities regulators.

Share Repurchase Plan / Normal Course Issuer Bid

On November 5, 2020, the Board authorized a share repurchase plan, pursuant to which we may purchase in open market transactions, from time to time over the 12 month period commencing November 12, 2020, up to an aggregate of $350 million of our Common Shares on the NASDAQ Global Select Market, the TSX and/or other exchanges and alternative trading systems in Canada and/or the United States, if eligible, subject to applicable law and stock exchange rules (the “Repurchase Plan”).

The price that we will pay for Common Shares in open market transactions will be the market price at the time of purchase or such other price as may be permitted by applicable law or stock exchange rules.

The Repurchase Plan will be effected in accordance with Rule 10b-18 under the U.S.

Securities Exchange Act of 1934.

Purchases made under the Repurchase Plan will be subject to a limit of 13,618,774 shares (representing 5% of the Company’s issued and outstanding Common Shares as of November 4, 2020).

All Common Shares purchased by us pursuant to the Repurchase Plan will be cancelled.

During the year ended June 30, 2021, we repurchased and cancelled 2,500,000 Common Shares for $119.1 million under the Repurchase Plan.

Normal Course Issuer Bid

The Company established a Normal Course Issuer Bid (the NCIB) in order to provide it with a means to execute purchases over the TSX as part of the overall Repurchase Plan.

The TSX approved the Company’s notice of intention to commence the NCIB pursuant to which the Company may purchase Common Shares over the TSX for the period commencing November 12, 2020 until November 11, 2021 in accordance with the TSX's normal course issuer bid rules, including that such purchases are to be made at prevailing market prices or as otherwise permitted.

Under the rules of the TSX, the maximum number of Common Shares that may be purchased in this period is 13,618,774 (representing 5% of the Company’s issued and outstanding Common Shares as of November 4, 2020), and the maximum number of Common Shares that may be purchased on a single day is 143,424 Common Shares, which is 25% of 573,699 (the average daily trading volume for the Common Shares on the TSX for the six months ended October 31, 2020), subject to certain exceptions for block purchases, subject in any case to the volume and other limitations under Rule 10b-18.

As of June 30, 2021, our total unfunded pension plan obligations were $77.3 million, of which $2.8 million is payable within the next twelve months.

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Fiscal years ending June 30,

CDT GXS GER GXS PHP

2022 $ 880 $ 1,058 $ 42

2023 960 1,046 356

2024 1,039 1,047 140

2025 1,086 1,071 192

2026 1,123 1,059 202

2027 to 2031 6,501 5,142 2,516

Total $ 11,589 $ 10,423 $ 3,448

For a detailed discussion on pensions, see note 12 "Pension Plans and Other Post Retirement Benefits" to our Consolidated Financial Statements.

Commitments and Contractual Obligations

As of June 30, 2020 , we have entered the following contractual obligations with minimum payments for the indicated fiscal periods as follows:

As of June 30, 2021, we have entered into the following contractual obligations with minimum payments for the indicated fiscal periods as follows:

Payments due between

July 1, 2020 - June 30, 2021

July 1, 2021 - June 30, 2023

July 1, 2023 - June 30, 2025

Total July 1, 2021 -

June 30, 2022 July 1, 2022 -

June 30, 2024 July 1, 2024 -

June 30, 2026 July 1, 2026

Long-term debt obligations (1)

$ 4,514,954 $ 149,942 $ 299,371 $ 2,047,391 $ 2,018,250

Operating lease obligations (2)

308,349 65,260 103,510 62,033 77,546

Purchase obligations for contracts not accounted for as lease obligations 70,646 42,887 27,759 — —

$ 4,893,949 $ 258,089 $ 430,640 $ 2,109,424 $ 2,095,796

(1) Includes interest up to maturity and principal payments.

Excludes $600 million currently drawn on the Revolver, which we expect to repay within one year.

Please see note 11 "Long-Term Debt" to our Consolidated Financial Statements for more details.

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If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated, we accrue a liability for the estimated loss in accordance with Topic 450-20.

As of the date of this Annual Report on Form 10-K , the aggregate of such accrued liabilities was not material to our consolidated financial position or results of operations and we do not believe as of the date of this filing that it is reasonably possible that a loss exceeding the amounts already recognized will be incurred that would be material to our consolidated financial position or results of operations.

As of the date of this Annual Report on Form 10-K, the aggregate of such accrued liabilities was not material to our consolidated financial position or results of

operations and we do not believe as of the date of this filing that it is reasonably possible that a loss exceeding the amounts already recognized will be incurred that would be material to our consolidated financial position or results of operations.

As more fully described below, we are unable at this time to estimate a possible loss or range of losses in respect of certain disclosed matters.

Contingencies

As we have previously disclosed, the United States Internal Revenue Service (IRS) is examining certain of our tax returns for our fiscal year ended June 30, 2010 (Fiscal 2010) through our fiscal year ended June 30, 2012 (Fiscal 2012), and in connection with those examinations is reviewing our internal reorganization in Fiscal 2010 to consolidate certain intellectual property ownership in Luxembourg and Canada and our integration of certain acquisitions into the resulting structure.

We also previously disclosed that the examinations may lead to proposed adjustments to our taxes that may be material, individually or in the aggregate, and that we have not recorded any material accruals for any such potential adjustments in our Consolidated Financial Statements .

We previously disclosed that, as part of these examinations, on July 17, 2015 we received from the IRS an initial Notice of Proposed Adjustment (NOPA) in draft form, that, as revised by the IRS on July 11, 2018 proposes a one-time approximately $335 million increase to our U.S.

federal taxes arising from the reorganization in Fiscal 2010 (the 2010 NOPA), plus penalties equal to 20% of the additional proposed taxes for Fiscal 2010, and interest at the applicable statutory rate published by the IRS.

On July 11, 2018 , we also received, consistent with previously disclosed expectations, a draft NOPA proposing a one time approximately $80 million increase to our U.S.

federal taxes for Fiscal 2012 (the 2012 NOPA) arising from the integration of Global 360 Holding Corp.

into the structure that resulted from the internal reorganization in Fiscal 2010, plus penalties equal to 40% of the additional proposed taxes for Fiscal 2012, and interest.

As we have previously disclosed, the United States Internal Revenue Service (IRS) has been examining certain of our tax returns for our fiscal year ended June 30, 2010 (Fiscal 2010) through our fiscal year ended June 30, 2012 (Fiscal 2012), and in connection with those examinations has been reviewing our internal reorganization in Fiscal 2010 and Fiscal 2012 to consolidate certain intellectual property ownership in Luxembourg and Canada and our integration of certain acquisitions into the resulting structure.

We also previously disclosed that the examinations may lead to proposed adjustments to our taxes that may be material, individually or in the aggregate, and that we had not recorded any material accruals for any such potential adjustments in our Consolidated Financial Statements.

We previously disclosed that, as part of these examinations, on July 17, 2015 we received from the IRS an initial Notice of Proposed Adjustment (NOPA) in draft form, for Fiscal 2010 (the 2010 NOPA), and on July 11, 2018, we also received, consistent with previously disclosed expectations, a draft NOPA for Fiscal 2012 (the 2012 NOPA).

On January 7, 2019, we received from the IRS official notification of proposed adjustments to our taxable income for Fiscal 2010 and Fiscal 2012, together with the 2010 NOPA and 2012 NOPA in final form.

In each case, such documentation was as expected and on substantially the same terms as provided for in the previously disclosed respective draft NOPAs, with the exception of an additional proposed penalty as part of the 2012 NOPA.

A NOPA is an IRS position and does not impose an obligation to pay tax.

We continue to strongly disagree with the IRS’ positions within the NOPAs and we are vigorously contesting the proposed adjustments to our taxable income, along with any proposed penalties and interest.

As of our receipt of the final 2010 NOPA and 2012 NOPA, our estimated potential aggregate liability, as proposed by the IRS, including additional state income taxes plus penalties and interest that may be due, was approximately $770 million , comprised of approximately $455 million in U.S.

As of December 31, 2020, our estimated potential aggregate liability, as originally proposed by the IRS under the 2010 NOPA and the 2012 NOPA, including additional state income taxes plus penalties and continually accruing interest that may be due, would have been approximately $830 million, comprised of approximately $430 million in U.S.

federal and state taxes, approximately $130 million of penalties, and approximately $270 million of interest.

Interest will continue to accrue at the applicable statutory rates until the matter is resolved and may be substantial.

As previously disclosed and noted above, we strongly disagree with the IRS’ positions and we are vigorously contesting the proposed adjustments to our taxable income, along with the proposed penalties and interest.

We are pursuing various alternatives available to taxpayers to contest the proposed adjustments, including currently through IRS Appeals and potentially U.S.

Federal court.

Any such alternatives could involve a lengthy process and result in the incurrence of significant expenses.

As of the date of this Annual Report on Form 10-K , we have not recorded any material accruals in respect of these examinations in our Consolidated Financial Statements .

An adverse outcome of these tax examinations could have a material adverse effect on our financial position and results of operations.

As previously disclosed, we disagree with the IRS’ positions and have been vigorously contesting the proposed adjustments to our taxable income, along with the proposed penalties and interest.

On December 21, 2020, we entered into a closing agreement with the IRS resolving all of the proposed adjustments to our taxable income for Fiscal 2010 and Fiscal 2012 (the IRS Settlement).

The IRS Settlement resulted in charges of $300.5 million during the year ended June 30, 2021 to "Provision for (recovery of) income taxes".

In connection with the IRS Settlement, during the year ended June 30, 2021, we made aggregate payments to the IRS of $288.6 million in U.S.

federal taxes and interest and $11.0 million of certain associated state tax and interest payments.

As of June 30, 2021, the outstanding settlement amount of approximately $0.9 million is recorded within "Income taxes payable" in our Consolidated Balance Sheets.

Interest at the applicable statutory rates will continue to accrue until the time of payment.

The IRS Settlement also eliminates approximately $90 million in future withholding taxes that we had expected to incur over the next 10 years.

We believe the IRS Settlement to be in the best interest of all stakeholders, as it closes all past, present and future items related to this matter.

The IRS Settlement provides finality to this longstanding matter.

For additional information regarding the history of this IRS matter, please see note 14 "Guarantees and Contingencies" in our Annual Report on Form 10-K for Fiscal 2020.

As part of its ongoing audit of our Canadian tax returns, the Canada Revenue Agency (CRA) has disputed our transfer pricing methodology used for certain intercompany transactions with our international subsidiaries and has issued notices of reassessment for Fiscal 2012, Fiscal 2013, Fiscal 2014 and Fiscal 2015.

Assuming the utilization of available tax attributes (further described below), we estimate our potential aggregate liability, as of June 30, 2020 , in connection with the CRA's reassessments for Fiscal 2012, Fiscal 2013, Fiscal 2014 and Fiscal 2015 to be limited to penalties and interest that may be due of approximately $44 million .

The notices of reassessment for Fiscal 2012, Fiscal 2013, Fiscal 2014 and Fiscal 2015 would, as drafted, increase our taxable income by approximately $90 million to $100 million for each of those years, as well as impose a 10% penalty on the proposed adjustment to income.

We strongly disagree with the CRA's positions and believe the reassessments of Fiscal 2012, Fiscal 2013, Fiscal 2014 and Fiscal 2015 (including any penalties) are without merit.

We have filed notices of objection for Fiscal 2012, Fiscal 2013 and Fiscal 2014, and we will be filing a notice of objection for Fiscal 2015 shortly.

Assuming the utilization of available tax attributes (further described below), we estimate our potential aggregate liability, as of June 30, 2021, in connection with the CRA's reassessments for Fiscal 2012, Fiscal 2013, Fiscal 2014, Fiscal 2015 and Fiscal 2016, to be limited to penalties, interest and provincial taxes that may be due of approximately $74 million.

As of June 30, 2021, we have provisionally paid approximately $28 million in order to fully preserve our rights to object to the CRA's audit positions, being the minimum payment required under Canadian legislation while the matter is in dispute.

This amount is recorded within "Long-term income taxes recoverable" on the Consolidated Balance Sheets as of June 30, 2021.

The notices of reassessment for Fiscal 2012, Fiscal 2013, Fiscal 2014, Fiscal 2015 and Fiscal 2016 would, as drafted, increase our taxable income by approximately $90 million to $100 million for each of those years, as well as impose a 10% penalty on the proposed adjustment to income.

Audits by the CRA of our tax returns for fiscal years prior to Fiscal 2012 have been completed with no reassessment of our income tax liability.

We strongly disagree with the CRA's positions and believe the reassessments of Fiscal 2012, Fiscal 2013, Fiscal 2014, Fiscal 2015 and Fiscal 2016 (including any penalties) are without merit.

We have filed notices of objection for Fiscal 2012, Fiscal 2013, Fiscal 2014, Fiscal 2015 and Fiscal 2016.

We are currently seeking competent authority consideration under applicable international treaties in respect of these reassessments.

Even if we are unsuccessful in challenging the CRA's reassessments to increase our taxable income for Fiscal 2012, Fiscal 2013, Fiscal 2014 and Fiscal 2015, or potential reassessments that may be proposed for subsequent years currently under audit, we have elective deductions available for those years (including carry-backs from later years) that would offset such increased amounts so that no additional cash tax would be payable, exclusive of any assessed penalties and interest, as described above.

We will continue to vigorously contest the proposed adjustments to our taxable income and any penalty and interest assessments.

As of the date of this Annual Report on Form 10-K , we have not recorded any accruals in respect of these reassessments in our Consolidated Financial Statements .

Audits by the CRA of our tax returns for fiscal years prior to Fiscal 2012 have been completed with no reassessment of our income tax liability in respect of our international transactions, including the transfer pricing methodology applied to them.

The CRA is currently auditing Fiscal 2016 and Fiscal 2017.

We are engaged in ongoing discussions with the CRA and continue to vigorously contest the CRA's audit positions.

GXS India Matter

Our Indian subsidiary, GXS India Technology Centre Private Limited (GXS India), is subject to potential assessments by Indian tax authorities in the city of Bangalore.

GXS India has received assessment orders from the Indian tax authorities alleging that the transfer price applied to intercompany transactions was not appropriate.

Based on advice from our tax advisors, we believe that the facts that the Indian tax authorities are using to support their assessment are incorrect.

We have filed appeals and anticipate an eventual settlement with the Indian tax authorities.

We have accrued $1.2 million to cover our anticipated financial exposure in this matter.

Even if we are unsuccessful in challenging the CRA's reassessments to increase our taxable income for Fiscal 2012, Fiscal 2013, Fiscal 2014, Fiscal 2015 and Fiscal 2016, we have elective deductions available for those years (including carry-backs from later years) that would offset such increased amounts so that no additional cash tax would be payable, exclusive of any assessed penalties and interest, as described above.

The CRA is also currently auditing Fiscal 2017 on a basis that we strongly disagree with and will vigorously contest.

The focus of the CRA audit has been the valuation of certain intellectual property and goodwill when one of our subsidiaries continued into Canada from Luxembourg in July 2016.

In accordance with applicable rules, these assets were recognized for tax purposes at fair market value as of that time, which value was supported by an expert valuation prepared by an independent leading accounting and advisory firm.

In conjunction with the Fiscal 2017 audit, the CRA issued a proposal letter dated April 7, 2021 (Proposal Letter) indicating to us that it proposes to reassess our Fiscal 2017 tax year to reduce the depreciable basis of these assets.

We are currently engaged in dialogue with the CRA regarding the 2017 audit and expect to be making extensive submissions in support of our position shortly.

CRA’s currently-proposed position for Fiscal 2017 relies in significant part on the application of its positions regarding our transfer pricing methodology that are the basis for its reassessment of our fiscal years 2012 to 2016 described above, and that we believe are without merit.

Other aspects of CRA’s currently-proposed position for Fiscal 2017 conflict with the expert valuation prepared by the independent leading accounting and advisory firm that was used to support our original filing position.

If the CRA determines to issue a notice of reassessment in respect of Fiscal 2017 on the basis of its position set forth in the Proposal Letter and we are ultimately unsuccessful in defending our position, the estimated impact of the proposed adjustment could result in us recording an income tax expense, with no immediate cash payment, to reduce the stated value of our deferred tax assets of up to approximately $470 million.

Any such income tax expense could also have a corresponding cash tax impact that would primarily occur over a period of several future years based upon annual income realization in Canada.

We strongly disagree with the CRA’s position for Fiscal 2017 and intend to vigorously defend our original filing position.

We will continue to vigorously contest the proposed adjustments to our taxable income and any penalty and interest assessments, as well as any proposed reduction to the basis of our depreciable property.

We are confident that our original tax filing positions were appropriate.

Accordingly, as of the date of this Annual Report on Form 10-K, we have not recorded any accruals in respect of these reassessments or proposed reassessment in our Consolidated Financial Statements.

The CRA has also advised us that they are currently in preliminary stages of auditing Fiscal 2018 and Fiscal 2019.

Carbonite Class Action Complaint

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The defendants moved to dismiss the Securities Actions on March 10, 2020.

The motion was fully briefed in June 2020 and awaits the court's decision.

In light of, among other things, the early stage of the litigation, we are unable to predict the outcome of this action and are unable to reasonably estimate the amount or range of loss, if any, that could result from this proceeding.

The motion was fully briefed in June 2020 and a hearing on the motion to dismiss the Securities Actions was held on October 15, 2020.

Following the hearing, on October 22, 2020, the court granted with prejudice the defendants’ motion to dismiss the Securities Actions.

On November 20, 2020, the lead plaintiff filed a notice of appeal to the Court of Appeals for the First Circuit.

The appeal has been fully briefed and oral arguments before the Court of Appeals for the First Circuit were held on July 29, 2021.

The court’s decision on the appeal is expected in the coming months and the defendants remain confident in the District Court’s dismissal with prejudice of the Securities Actions.

Carbonite vs Realtime Data

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District Court for the District of Delaware, the Delaware Court on July 29, 2019 dismissed the lawsuit after declaring invalid three of the four patents asserted by Realtime Data against Carbonite;

that decision was appealed to the U.S.

Court of Appeals for the Federal Circuit.

By way of Order dated August 19, 2019, the U.S.

District Court for the District of Massachusetts stayed the action against Carbonite pending appeal of the dismissal in the Delaware lawsuit.

As to the fourth patent, the U.S.

Patent & Trademark Office Patent Trial and Appeal Board on September 24, 2019 invalidated certain claims of that patent.

District Court for the District of Massachusetts stayed the action against Carbonite pending the aforementioned appeal of the dismissal in the Delaware lawsuit.

On October 23, 2020, the Appeals Court vacated and remanded the Delaware Court’s decision.

Following the Appeals Court's decision, the Massachusetts District Court lifted the stay on the action against Carbonite.

On January 21, 2021, the Court held a hearing to construe the claims of the asserted patents.

As to the fourth patent asserted against Carbonite, the U.S.

Patent & Trademark Office Patent Trial and Appeal Board on September 24, 2019 invalidated certain claims of that patent, including certain claims that had been asserted against Carbonite, and the parties jointly stipulated to dismiss the patent from the action.

No trial date has been set in the action against Carbonite.

The Company is defending Carbonite vigorously.

We are vigorously defending the matter.

We have not accrued a loss contingency related to this matter because litigation related to a non-practicing entity is inherently unpredictable.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis