OPEN TEXT CORP 10-Q

Item 1. Financial Statements OPEN TEXT CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands of U.S. dollars, except share data) September 30, 2021 June 30, 2021 ASSETS (unaudited) Cash and cash equivalents $ 1,735,265 $ 1,607,306 Accounts receivable trade, net of allowance for credit losses of $ 18,643 as of September 30, 2021 and $ 22,151 as of June 30, 2021 (note 4) 370,968 438,547 Contract assets (note 3) 24,312 25,344 Income taxes recoverable (note 15) 12,756 32,312 Prepaid expenses and other current assets (note 9) 107,486 98,551 Total current assets 2,250,787 2,202,060 Property and equipment (note 5) 223,359 233,595 Operating lease right of use assets (note 6) 223,885 234,532 Long-term contract assets (note 3) 19,550 19,222 Goodwill (note 7) 4,686,907 4,691,673 Acquired intangible assets (note 8) 1,080,692 1,187,260 Deferred tax assets (note 15) 767,182 796,738 Other assets (note 9) 231,181 208,894 Long-term income taxes recoverable (note 15) 35,821 35,362 Total assets $ 9,519,364 $ 9,609,336 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable and accrued liabilities (note 10) $ 299,370 $ 423,592 Current portion of long-term debt (note 11) 10,000 10,000 Operating lease liabilities (note 6) 58,033 58,315 Deferred revenues (note 3) 814,989 852,629 Income taxes payable (note 15) 15,615 17,368 Total current liabilities 1,198,007 1,361,904 Long-term liabilities: Accrued liabilities (note 10) 26,876 28,830 Pension liability (note 12) 75,022 74,511 Long-term debt (note 11) 3,577,520 3,578,859 Long-term operating lease liabilities (note 6) 211,277 224,453 Long-term deferred revenues (note 3) 95,930 98,989 Long-term income taxes payable (note 15) 33,799 34,113 Deferred tax liabilities (note 15) 92,418 108,224 Total long-term liabilities 4,112,842 4,147,979 Shareholders’ equity: Share capital and additional paid-in capital (note 13) 272,533,754 and 271,540,755 Common Shares issued and outstanding at September 30, 2021 and June 30, 2021, respectively; authorized Common Shares: unlimited 1,991,719 1,947,764 Accumulated other comprehensive income (note 20) 53,886 66,238 Retained earnings 2,225,363 2,153,326 Treasury stock, at cost ( 1,426,212 and 1,567,664 shares at September 30, 2021 and June 30, 2021, respectively) ( 63,477 ) ( 69,386 ) Total OpenText shareholders' equity 4,207,491 4,097,942 Non-controlling interests 1,024 1,511 Total shareholders’ equity 4,208,515 4,099,453 Total liabilities and shareholders’ equity $ 9,519,364 $ 9,609,336 Guarantees and contingencies (note 14) Related party transactions (note 24) Subsequent events (note 25) See accompanying Notes to Condensed Consolidated Financial Statements 3 OPEN TEXT CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands of U.S. dollars, except share and per share data) (unaudited) Three Months Ended September 30, 2021 2020 Revenues (note 3): Cloud services and subscriptions $ 356,589 $ 340,986 Customer support 335,237 329,399 License 73,529 68,523 Professional service and other 66,953 65,105 Total revenues 832,308 804,013 Cost of revenues: Cloud services and subscriptions 119,779 112,624 Customer support 29,483 29,194 License 3,969 2,489 Professional service and other 51,725 46,581 Amortization of acquired technology-based intangible assets (note 8) 53,167 58,037 Total cost of revenues 258,123 248,925 Gross profit 574,185 555,088 Operating expenses: Research and development 100,165 93,903 Sales and marketing 146,240 132,400 General and administrative 71,477 56,189 Depreciation 21,386 22,003 Amortization of acquired customer-based intangible assets (note 8) 51,884 54,993 Special charges (recoveries) (note 18) 344 13,244 Total operating expenses 391,496 372,732 Income from operations 182,689 182,356 Other income (expense), net (note 22) 29,782 2,883 Interest and other related expense, net ( 37,055 ) ( 39,089 ) Income before income taxes 175,416 146,150 Provision for (recovery of) income taxes (note 15) 43,450 42,744 Net income for the period $ 131,966 $ 103,406 Net (income) loss attributable to non-controlling interests ( 51 ) ( 30 ) Net income attributable to OpenText $ 131,915 $ 103,376 Earnings per share—basic attributable to OpenText (note 23) $ 0.48 $ 0.38 Earnings per share—diluted attributable to OpenText (note 23) $ 0.48 $ 0.38 Weighted average number of Common Shares outstanding—basic (in '000's) 272,044 271,986 Weighted average number of Common Shares outstanding—diluted (in '000's) 273,232 272,847 See accompanying Notes to Condensed Consolidated Financial Statements 4 OPEN TEXT CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands of U.S. dollars) (unaudited) Three Months Ended September 30, 2021 2020 Net income for the period $ 131,966 $ 103,406 Other comprehensive income (loss)—net of tax: Net foreign currency translation adjustments ( 10,092 ) 22,645 Unrealized gain (loss) on cash flow hedges: Unrealized gain (loss) - net of tax expense (recovery) effect of ($ 391 ) and $ 305 for the three months ended September 30, 2021 and 2020, respectively ( 1,086 ) 845 (Gain) loss reclassified into net income - net of tax (expense) recovery effect of ($ 103 ) and ($ 56 ) for the three months ended September 30, 2021 and 2020, respectively ( 287 ) ( 156 ) Actuarial gain (loss) relating to defined benefit pension plans: Actuarial gain (loss) - net of tax expense (recovery) effect of ($ 232 ) and ($ 916 ) for the three months ended September 30, 2021 and 2020, respectively ( 1,049 ) ( 1,705 ) Amortization of actuarial (gain) loss into net income - net of tax (expense) recovery effect of $ 68 and $ 87 for the three months ended September 30, 2021 and 2020, respectively 162 241 Total other comprehensive income (loss) net, for the period ( 12,352 ) 21,870 Total comprehensive income 119,614 125,276 Comprehensive (income) loss attributable to non-controlling interests ( 51 ) ( 30 ) Total comprehensive income attributable to OpenText $ 119,563 $ 125,246 See accompanying Notes to Condensed Consolidated Financial Statements 5 OPEN TEXT CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (In thousands of U.S. dollars and shares) (unaudited) Three Months Ended September 30, 2021 Common Shares and Additional Paid in Capital Treasury Stock Retained Earnings Accumulated Other Comprehensive Income Non-Controlling Interests Total Shares Amount Shares Amount Balance as of June 30, 2021 271,541 $ 1,947,764 ( 1,568 ) $ ( 69,386 ) $ 2,153,326 $ 66,238 $ 1,511 $ 4,099,453 Issuance of Common Shares Under employee stock option plans 796 27,299 — — — — — 27,299 Under employee stock purchase plans 197 8,489 — — — — — 8,489 Share-based compensation — 13,934 — — — — — 13,934 Issuance of treasury stock — ( 5,909 ) 142 5,909 — — — — Dividends declared ($ 0.2209 per Common Share) — — — — ( 59,878 ) — — ( 59,878 ) Other comprehensive income (loss) - net — — — — — ( 12,352 ) — ( 12,352 ) Distribution to non-controlling interest — 142 — — — — ( 538 ) ( 396 ) Net income for the period — — — — 131,915 — 51 131,966 Balance as of September 30, 2021 272,534 $ 1,991,719 ( 1,426 ) $ ( 63,477 ) $ 2,225,363 $ 53,886 $ 1,024 $ 4,208,515 Three Months Ended September 30, 2020 Common Shares and Additional Paid in Capital Treasury Stock Retained Earnings Accumulated Other Comprehensive Income Non-Controlling Interests Total Shares Amount Shares Amount Balance as of June 30, 2020 271,863 $ 1,851,777 ( 622 ) $ ( 23,608 ) $ 2,159,396 $ 17,825 $ 1,319 $ 4,006,709 Adoption of ASU 2016-13 - cumulative effect, net — — — — ( 2,450 ) — — ( 2,450 ) Issuance of Common Shares Under employee stock option plans 311 8,605 — — — — — 8,605 Under employee stock purchase plans — 293 193 6,690 — — — 6,983 Share-based compensation — 11,736 — — — — — 11,736 Purchase of treasury stock — — ( 965 ) ( 41,870 ) — — — ( 41,870 ) Dividends declared ($ 0.1746 per Common Share) — — — — ( 47,269 ) — — ( 47,269 ) Other comprehensive income (loss) - net — — — — — 21,870 — 21,870 Net income for the period — — — — 103,376 — 30 103,406 Balance as of September 30, 2020 272,174 $ 1,872,411 ( 1,394 ) $ ( 58,788 ) $ 2,213,053 $ 39,695 $ 1,349 $ 4,067,720 See accompanying Notes to Condensed Consolidated Financial Statements 6 OPEN TEXT CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands of U.S. dollars) (unaudited) Three Months Ended September 30, 2021 2020 Cash flows from operating activities: Net income for the period $ 131,966 $ 103,406 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of intangible assets 126,437 135,033 Share-based compensation expense 13,934 11,736 Pension expense 1,486 1,505 Amortization of debt issuance costs 1,161 1,112 Loss on sale and write down of property and equipment 27 573 Deferred taxes 14,682 ( 1,180 ) Share in net (income) loss of equity investees ( 29,315 ) ( 6,221 ) Changes in operating assets and liabilities: Accounts receivable 76,526 74,842 Contract assets ( 7,248 ) ( 9,838 ) Prepaid expenses and other current assets ( 9,811 ) ( 3,491 ) Income taxes 16,761 21,032 Accounts payable and accrued liabilities ( 114,334 ) ( 51,429 ) Deferred revenue ( 38,516 ) ( 41,268 ) Other assets 7,542 549 Operating lease assets and liabilities, net ( 1,629 ) ( 2,457 ) Net cash provided by operating activities 189,669 233,904 Cash flows from investing activities: Additions of property and equipment ( 26,712 ) ( 15,305 ) Other investing activities 296 ( 2,237 ) Net cash used in investing activities ( 26,416 ) ( 17,542 ) Cash flows from financing activities: Proceeds from issuance of Common Shares from exercise of stock options and ESPP 36,720 15,839 Repayment of long-term debt and Revolver ( 2,500 ) ( 2,500 ) Purchase of treasury stock — ( 41,870 ) Distribution to non-controlling interest ( 396 ) — Payments of dividends to shareholders ( 59,878 ) ( 47,269 ) Net cash provided by (used in) financing activities ( 26,054 ) ( 75,800 ) Foreign exchange gain (loss) on cash held in foreign currencies ( 9,277 ) 10,792 Increase (decrease) in cash, cash equivalents and restricted cash during the period 127,922 151,354 Cash, cash equivalents and restricted cash at beginning of the period 1,609,800 1,697,263 Cash, cash equivalents and restricted cash at end of the period $ 1,737,722 $ 1,848,617 Reconciliation of cash, cash equivalents and restricted cash: September 30, 2021 September 30, 2020 Cash and cash equivalents $ 1,735,265 $ 1,845,582 Restricted cash (1) 2,457 3,035 Total cash, cash equivalents and restricted cash $ 1,737,722 $ 1,848,617 (1) Restricted cash is classified under the Prepaid expenses and other current assets and Other assets line items on the Condensed Consolidated Balance Sheets (note 9). Supplemental cash flow disclosures (note 6 and note 21) See accompanying Notes to Condensed Consolidated Financial Statements 7 OPEN TEXT CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Three Months Ended September 30, 2021 (Tabular amounts in thousands of U.S. dollars, except share and per share data) (unaudited) NOTE 1— BASIS OF PRESENTATION The accompanying Condensed Consolidated Financial Statements include the accounts of Open Text Corporation and our subsidiaries, collectively referred to as "OpenText" or the "Company". We wholly own all of our subsidiaries with the exception of Open Text South Africa Proprietary Ltd. (OT South Africa) and EC1 Pte. Ltd. (GXS Singapore), which as of September 30, 2021, were 70 % and 81 % owned, respectively, by OpenText. All intercompany balances and transactions have been eliminated. During the three months ended September 30, 2021, we made a final cash distribution of $ 0.4 million to the non-controlling interest holder in GXS Singapore, as part of the ongoing process to liquidate the subsidiary, which is expected to be complete by the end of Fiscal 2022. Throughout this Quarterly Report on Form 10-Q: (i) the term "Fiscal 2022" means our fiscal year beginning on July 1, 2021 and ending June 30, 2022; (ii) the term "Fiscal 2021" means our fiscal year beginning on July 1, 2020 and ended June 30, 2021; (iii) the term “Fiscal 2020” means our fiscal year beginning on July 1, 2019 and ended June 30, 2020; (iv) the term “Fiscal 2019” means our fiscal year beginning on July 1, 2018 and ended June 30, 2019; (v) the term “Fiscal 2018” means our fiscal year beginning on July 1, 2017 and ended June 30, 2018; (vi) the term “Fiscal 2017” means our fiscal year beginning on July 1, 2016 and ended June 30, 2017; (vii) the term “Fiscal 2016” means our fiscal year beginning on July 1, 2015 and ended June 30, 2016; (viii) the term “Fiscal 2015” means our fiscal year beginning on July 1, 2014 and ended June 30, 2015; (ix) the term “Fiscal 2014” means our fiscal year beginning on July 1, 2013 and ended June 30, 2014; (x) the term “Fiscal 2013” means our fiscal year beginning on July 1, 2012 and ended June 30, 2013; and (xi) the term “Fiscal 2012” means our fiscal year beginning on July 1, 2011 and ended June 30, 2012. These Condensed Consolidated Financial Statements are expressed in U.S. dollars and are prepared in accordance with United States generally accepted accounting principles (U.S. GAAP). The information furnished reflects all adjustments necessary for a fair presentation of the results for the periods presented. Use of estimates The preparation of financial statements in conformity with U.S. GAAP requires us to make certain estimates, judgments and assumptions that affect the amounts reported in the Condensed Consolidated Financial Statements. These estimates, judgments and assumptions are evaluated on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe are reasonable at that time, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates. In particular, key estimates, judgments and assumptions include those related to: (i) revenue recognition, (ii) accounting for income taxes, (iii) testing of goodwill for impairment, (iv) the valuation of acquired intangible assets, (v) the valuation of long-lived assets, (vi) the recognition of contingencies, (vii) restructuring accruals, (viii) acquisition accruals and pre-acquisition contingencies, (ix) the valuation of stock options granted and obligations related to share-based payments, including the valuation of our long-term incentive plans, and (x) the valuation of pension obligations. In March 2020, COVID-19 was characterized as a pandemic by the World Health Organization. The spread of COVID-19 continues to impact the global economy. As the impacts of the pandemic continue to evolve, estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require increased judgment. As of September 30, 2021, we have recorded certain estimates resulting from the pandemic, particularly with respect to the COVID-19 Restructuring Plan (as defined herein) 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. 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 potential items such as special charges (recoveries), restructurings, asset impairments and other non-recurring costs. Please see note 18 "Special Charges (Recoveries)" and "Risk Factors" included within Part II, Item 1A of this Quarterly Report on Form 10-Q and Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for Fiscal 2021. 8 NOTE 2— RECENT ACCOUNTING PRONOUNCEMENTS Accounting Pronouncements Adopted in Fiscal 2022 During Fiscal 2022, we have adopted the following Accounting Standards Update (ASU) that did not have a material impact to our reported financial position, results of operations or cash flows: • ASU 2019-12 "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes" NOTE 3— REVENUES Disaggregation of Revenue We have four revenue streams: cloud services and subscriptions, customer support, license, and professional service and other. The following tables disaggregate our revenue by significant geographic area, based on the location of our end customer, by type of performance obligation and timing of revenue recognition for the periods indicated: Three Months Ended September 30, 2021 2020 Total Revenues by Geography: Americas (1) $ 519,692 $ 508,656 EMEA (2) 244,597 225,935 Asia Pacific (3) 68,019 69,422 Total revenues $ 832,308 $ 804,013 Total Revenues by Type of Performance Obligation: Recurring revenues (4) Cloud services and subscriptions revenue $ 356,589 $ 340,986 Customer support revenue 335,237 329,399 Total recurring revenues $ 691,826 $ 670,385 License revenue (perpetual, term and subscriptions) 73,529 68,523 Professional service and other revenue 66,953 65,105 Total revenues $ 832,308 $ 804,013 Total Revenues by Timing of Revenue Recognition: Point in time $ 73,529 $ 68,523 Over time (including professional service and other revenue) 758,779 735,490 Total revenues $ 832,308 $ 804,013 (1) Americas consists of countries in North, Central and South America. (2) EMEA primarily consists of countries in Europe, the Middle East and Africa. (3) Asia Pacific primarily consists of Japan, Australia, China, Korea, Philippines, Singapore, India and New Zealand. (4) Recurring revenue is defined as the sum of Cloud services and subscriptions revenue and Customer support revenue. Contract Balances A contract asset, net of allowance for credit losses, will be recorded if we have recognized revenue but do not have an unconditional right to the related consideration from the customer. For example, this will be the case if implementation services offered in a cloud arrangement are identified as a separate performance obligation and are provided to a customer prior to us being able to bill the customer. In addition, a contract asset may arise in relation to subscription licenses if the license revenue that is recognized upfront exceeds the amount that we are able to invoice the customer at that time. Contract assets are reclassified to accounts receivable when the rights become unconditional. 9 The balance for our contract assets and contract liabilities (i.e. deferred revenues) for the periods indicated below were as follows: As of September 30, 2021 As of June 30, 2021 Short-term contract assets $ 24,312 $ 25,344 Long-term contract assets $ 19,550 $ 19,222 Short-term deferred revenues $ 814,989 $ 852,629 Long-term deferred revenues $ 95,930 $ 98,989 The difference in the opening and closing balances of our contract assets and deferred revenues primarily results from the timing difference between our performance and the customer’s payments. We fulfill our obligations under a contract with a customer by transferring products and services in exchange for consideration from the customer. During the three months ended September 30, 2021, we reclassified $ 8.1 million of contract assets to receivables as a result of the right to the transaction consideration becoming unconditional. During the three months ended September 30, 2021 and 2020, respectively, there was no significant impairment loss recognized related to contract assets. We recognize deferred revenue when we have received consideration or an amount of consideration is due from the customer for future obligations to transfer products or services. Our deferred revenues primarily relate to customer support agreements which have been paid for by customers prior to the performance of those services. The amount of revenue that was recognized during the three months ended September 30, 2021 that was included in the deferred revenue balances at June 30, 2021 was $ 359 million (three months ended September 30, 2020—$ 343 million). Incremental Costs of Obtaining a Contract with a Customer Incremental costs of obtaining a contract include only those costs that we incur to obtain a contract that we would not have incurred if the contract had not been obtained, such as sales commissions. The following table summarizes the changes in total capitalized costs to obtain a contract, since June 30, 2021: Capitalized costs to obtain a contract as of June 30, 2021 $ 72,900 New capitalized costs incurred 7,122 Amortization of capitalized costs ( 6,170 ) Impact of foreign exchange rate changes ( 524 ) Capitalized costs to obtain a contract as of September 30, 2021 $ 73,328 During the three months ended September 30, 2021 and 2020, respectively, there was no significant impairment loss recognized related to capitalized costs to obtain a contract. Refer to note 9 "Prepaid Expenses and Other Assets" for additional information on incremental costs of obtaining a contract. Transaction Price Allocated to the Remaining Performance Obligations As of September 30, 2021, approximately $ 1.4 billion of revenue is expected to be recognized from remaining performance obligations on existing contracts. We expect to recognize approximately 46 % of this amount over the next 12 months and the remaining balance substantially over the next three years thereafter. We apply the practical expedient and do not disclose performance obligations that have original expected durations of one year or less. NOTE 4— ALLOWANCE FOR CREDIT LOSSES The following illustrates the activity in our allowance for credit losses on accounts receivable, since June 30, 2021: Balance as of June 30, 2021 $ 22,151 Credit loss expense (recovery) ( 935 ) Write-off / adjustments ( 2,573 ) Balance as of September 30, 2021 $ 18,643 Included in accounts receivable are unbilled receivables in the amount of $ 48.4 million as of September 30, 2021 (June 30, 2021—$ 51.4 million). As of September 30, 2021, we have an allowance for credit losses of $ 0.6 million for contract assets (June 30, 2021—$ 0.4 million). For additional information on contract assets please see note 3 "Revenues". 10 NOTE 5— PROPERTY AND EQUIPMENT As of September 30, 2021 Cost Accumulated Depreciation Net Furniture and fixtures $ 38,431 $ ( 33,411 ) $ 5,020 Office equipment 2,532 ( 1,250 ) 1,282 Computer hardware 309,849 ( 214,330 ) 95,519 Computer software 132,629 ( 108,097 ) 24,532 Capitalized software development costs 131,240 ( 90,206 ) 41,034 Leasehold improvements 106,542 ( 83,601 ) 22,941 Land and buildings 48,882 ( 15,851 ) 33,031 Total $ 770,105 $ ( 546,746 ) $ 223,359 As of June 30, 2021 Cost Accumulated Depreciation Net Furniture and fixtures $ 38,541 $ ( 32,500 ) $ 6,041 Office equipment 2,533 ( 1,244 ) 1,289 Computer hardware 313,946 ( 212,448 ) 101,498 Computer software 129,690 ( 104,654 ) 25,036 Capitalized software development costs 127,697 ( 86,466 ) 41,231 Leasehold improvements 106,656 ( 81,135 ) 25,521 Land and buildings 48,537 ( 15,558 ) 32,979 Total $ 767,600 $ ( 534,005 ) $ 233,595 NOTE 6— LEASES We enter into operating leases, both domestically and internationally, for certain facilities, automobiles, data centers and equipment for use in the ordinary course of business. The duration of the majority of these leases generally ranges from 1 to 10 years, some of which include options to extend for an additional 3 to 5 years after the initial term. Additionally, the land upon which our headquarters in Waterloo, Ontario, Canada is located is leased from the University of Waterloo for a period of 49 years beginning in December 2005, with an option to renew for an additional term of 49 years. Leases with an initial term of 12 months or less are not recorded on our Condensed Consolidated Balance Sheets and we do not have any material finance leases. Lease Costs and Other Information The following illustrates the various components of operating lease costs for the period indicated: Three Months Ended September 30, 2021 2020 Operating lease cost $ 15,391 $ 15,542 Short-term lease cost 119 263 Variable lease cost 588 693 Sublease income ( 1,889 ) ( 1,617 ) Total lease cost $ 14,209 $ 14,881 The weighted average remaining lease term and discount rate for the periods indicated below were as follows: As of September 30, 2021 As of June 30, 2021 Weighted-average remaining lease term 6.45 years 6.47 years Weighted-average discount rate 2.83 % 2.82 % 11 Supplemental Cash Flow Information The following table presents supplemental information relating to cash flows arising from lease transactions. Cash payments made for variable lease cost and short-term lease are not included in the measurement of operating lease liabilities, and, as such, are excluded from the amounts below: Three Months Ended September 30, 2021 2020 Cash paid for amounts included in the measurement of operating lease liabilities $ 17,452 $ 19,088 Right of use assets obtained in exchange for new operating lease liabilities $ 4,231 $ 2,297 Maturity of Lease Liabilities The following table presents the future minimum lease payments under our operating leases liabilities as of September 30, 2021: Fiscal years ending June 30, 2022 (nine months ended) $ 49,273 2023 57,119 2024 46,315 2025 37,178 2026 25,325 Thereafter 78,461 Total lease payments $ 293,671 Less: Imputed interest ( 24,361 ) Total $ 269,310 Reported as: Current operating lease liabilities $ 58,033 Non-current operating lease liabilities 211,277 Total $ 269,310 Operating lease maturity amounts included in the table above do not include sublease income expected to be received under our various sublease agreements with third parties. Under the agreements initiated with third parties, we expect to receive sublease income of $ 6.0 million over the remainder of Fiscal 2022 and $ 12.5 million thereafter. NOTE 7— GOODWILL Goodwill is recorded when the consideration paid for an acquisition of a business exceeds the fair value of identifiable net tangible and intangible assets. The following table summarizes the changes in goodwill since June 30, 2021: Balance as of June 30, 2021 $ 4,691,673 Impact of foreign exchange rate changes ( 4,766 ) Balance as of September 30, 2021 $ 4,686,907 12 NOTE 8— ACQUIRED INTANGIBLE ASSETS As of September 30, 2021 Cost Accumulated Amortization Net Technology assets $ 1,002,506 $ ( 688,550 ) $ 313,956 Customer assets 1,385,247 ( 618,511 ) 766,736 Total $ 2,387,753 $ ( 1,307,061 ) $ 1,080,692 As of June 30, 2021 Cost Accumulated Amortization Net Technology assets $ 1,003,730 $ ( 635,965 ) $ 367,765 Customer assets 1,386,533 ( 567,038 ) 819,495 Total $ 2,390,263 $ ( 1,203,003 ) $ 1,187,260 The weighted average amortization periods for acquired technology and customer intangible assets are approximately five years and seven years , respectively. The following table shows the estimated future amortization expense for the fiscal years indicated. This calculation assumes no future adjustments to acquired intangible assets: Fiscal years ending June 30, 2022 (nine months ended) $ 293,631 2023 316,603 2024 235,514 2025 123,291 2026 79,481 Thereafter 32,172 Total $ 1,080,692 NOTE 9— PREPAID EXPENSES AND OTHER ASSETS Prepaid expenses and other current assets: As of September 30, 2021 As of June 30, 2021 Deposits and restricted cash $ 6,143 $ 3,027 Capitalized costs to obtain a contract 22,541 22,601 Short-term prepaid expenses and other current assets 78,802 72,923 Total $ 107,486 $ 98,551 Other assets: As of September 30, 2021 As of June 30, 2021 Deposits and restricted cash $ 8,151 $ 11,577 Capitalized costs to obtain a contract 50,787 50,299 Investments 151,092 121,777 Long-term prepaid expenses and other long-term assets 21,151 25,241 Total $ 231,181 $ 208,894 Deposits and restricted cash primarily relate to security deposits provided to landlords in accordance with facility lease agreements and cash restricted per the terms of certain contractual-based agreements. Capitalized costs to obtain a contract relate to incremental costs of obtaining a contract, such as sales commissions, which are eligible for capitalization on contracts to the extent that such costs are expected to be recovered (see note 3 "Revenues"). 13 Investments relate to certain investment funds in which we are a limited partner. Our interests in each of these investees range from 4 % to below 20 %. These investments are accounted for using the equity method. Our share of net income or losses based on our interest in these investments, which approximates fair value, is recorded as a component of Other income (expense), net in our Condensed Consolidated Statements of Income (see note 22 "Other Income (Expense), Net"). During the three months ended September 30, 2021, our share of income (loss) from these investments was $ 29.3 million (three months ended September 30, 2020—$ 6.2 million). Prepaid expenses and other assets, both short-term and long-term, include advance payments on licenses that are being amortized over the applicable terms of the licenses and other miscellaneous assets. NOTE 10— ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Accounts payable and accrued liabilities: As of September 30, 2021 As of June 30, 2021 Accounts payable—trade $ 49,794 $ 57,500 Accrued salaries, incentives and commissions 122,787 214,884 Accrued liabilities 76,724 82,204 Accrued sales and other tax liabilities 19,541 31,583 Accrued interest on Senior Notes 25,646 31,161 Amounts payable in respect of restructuring and other special charges 1,792 4,396 Asset retirement obligations 3,086 1,864 Total $ 299,370 $ 423,592 Long-term accrued liabilities: As of September 30, 2021 As of June 30, 2021 Amounts payable in respect of restructuring and other special charges $ 3,757 $ 4,359 Other accrued liabilities 10,617 10,681 Asset retirement obligations 12,502 13,790 Total $ 26,876 $ 28,830 Asset retirement obligations We are required to return certain of our leased facilities to their original state at the conclusion of our lease. As of September 30, 2021, the present value of this obligation was $ 15.6 million (June 30, 2021—$ 15.7 million), with an undiscounted value of $ 16.3 million (June 30, 2021—$ 16.4 million). 14 NOTE 11— LONG-TERM DEBT As of September 30, 2021 As of June 30, 2021 Total debt Senior Notes 2030 $ 900,000 $ 900,000 Senior Notes 2028 900,000 900,000 Senior Notes 2026 850,000 850,000 Term Loan B 965,000 967,500 Total principal payments due 3,615,000 3,617,500 Premium on Senior Notes 2026 3,892 4,070 Debt issuance costs ( 31,372 ) ( 32,711 ) Total amount outstanding 3,587,520 3,588,859 Less: Current portion of long-term debt Term Loan B 10,000 10,000 Total current portion of long-term debt 10,000 10,000 Non-current portion of long-term debt $ 3,577,520 $ 3,578,859 Senior Unsecured Fixed Rate Notes Senior Notes 2030 On February 18, 2020, OpenText Holdings, Inc. 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. Senior Notes 2030 will mature on February 15, 2030, unless earlier redeemed, in accordance with their terms, or repurchased. For the three months ended September 30, 2021, we recorded interest expense of $ 9.3 million relating to Senior Notes 2030 (three months ended September 30, 2020—$ 9.2 million). Senior Notes 2028 On February 18, 2020, we issued $ 900 million in aggregate principal amount of 3.875 % Senior Notes due 2028 (Senior Notes 2028) 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 2028 bear interest at a rate of 3.875 % per annum, payable semi-annually in arrears on February 15 and August 15, commencing on August 15, 2020. Senior Notes 2028 will mature on February 15, 2028, unless earlier redeemed, in accordance with their terms, or repurchased. For the three months ended September 30, 2021, we recorded interest expense of $ 8.7 million relating to Senior Notes 2028 (three months ended September 30, 2020—$ 8.6 million). Senior Notes 2026 On May 31, 2016, we issued $ 600 million in aggregate principal amount of 5.875 % Senior Notes due 2026 (Senior Notes 2026) 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 2026 bear interest at a rate of 5.875 % per annum, payable semi-annually in arrears on June 1 and December 1, commencing on December 1, 2016. Senior Notes 2026 will mature on June 1, 2026, unless earlier redeemed, in accordance with their terms, or repurchased. On December 20, 2016, we issued an additional $ 250 million in aggregate principal amount by reopening our Senior Notes 2026 at an issue price of 102.75 %. The additional notes have identical terms, are fungible with and are a part of a single series with the previously issued $ 600 million aggregate principal amount of Senior Notes 2026. The outstanding aggregate principal amount of Senior Notes 2026, after taking into consideration the additional issuance, is $ 850 million. 15 For the three months ended September 30, 2021, we recorded interest expense of $ 12.5 million relating to Senior Notes 2026 (three months ended September 30, 2020—$ 12.5 million). Term Loan B On May 30, 2018, we refinanced our existing term loan facility, by entering into a new $ 1 billion term loan facility (Term Loan B), whereby we borrowed $ 1 billion on that day and repaid in full the loans under our prior $ 800 million term loan facility originally entered into on January 16, 2014. Borrowings under Term Loan B are secured by a first charge over substantially all of our assets on a pari passu basis with the Revolver (defined below). Term Loan B has a seven year term, maturing in May 2025, and repayments made under Term Loan B are equal to 0.25 % of the principal amount in equal quarterly installments for the life of Term Loan B, with the remainder due at maturity. Borrowings under Term Loan B currently bear a floating rate of interest equal to 1.75 % plus LIBOR. As of September 30, 2021, the outstanding balance on the Term Loan B bears an interest rate of 1.84 %. 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, "Risk Factors" in our Annual Report on Form 10-K for Fiscal 2021. Under Term Loan B, 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 September 30, 2021, our consolidated net leverage ratio was 1.4 :1. For the three months ended September 30, 2021, we recorded interest expense of $ 4.6 million relating to Term Loan B (three months ended September 30, 2020—$ 4.8 million). Revolver On October 31, 2019, we amended our committed revolving credit facility (the Revolver) to increase the total commitments under the Revolver from $ 450 million to $ 750 million as well as to extend the maturity from May 5, 2022 to October 31, 2024. Borrowings under the Revolver are secured by a first charge over substantially all of our assets, on a pari passu basis with Term Loan B. 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 %. 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, "Risk Factors" in our Annual Report on Form 10-K for Fiscal 2021. As of September 30, 2021, we had no outstanding balance under the Revolver (June 30, 2021— nil ). For the three months ended September 30, 2021 we did no t record any interest expense relating to the Revolver (three months ended September 30, 2020—$ 3.0 million relating to amounts previously drawn). Debt Issuance Costs and Premium on Senior Notes Debt issuance costs relate primarily to costs incurred for the purpose of obtaining our credit facilities and issuing our Senior Notes 2026, Senior Notes 2028 and Senior Notes 2030 (collectively referred to as the Senior Notes) and are being amortized through interest expense over the respective terms of the Senior Notes and Term Loan B and the Revolver using the effective interest method. The premium on Senior Notes 2026 represents the excess of the proceeds received over the face value of Senior Notes 2026. This premium is amortized as a reduction to interest expense over the term of Senior Notes 2026 using the effective interest method. 16 NOTE 12— PENSION PLANS AND OTHER POST RETIREMENT BENEFITS The following table provides details of our defined benefit pension plans and long-term employee benefit obligations for Open Text Document Technologies GmbH (CDT), GXS GmbH (GXS GER), GXS Philippines, Inc. (GXS PHP) and other plans as of September 30, 2021 and June 30, 2021: As of September 30, 2021 Total benefit obligation Current portion of benefit obligation (1) Non-current portion of benefit obligation CDT defined benefit plan $ 32,745 $ 881 $ 31,864 GXS GER defined benefit plan 23,663 1,038 22,625 GXS PHP defined benefit plan 11,613 82 11,531 Other plans 9,621 619 9,002 Total $ 77,642 $ 2,620 $ 75,022 As of June 30, 2021 Total benefit obligation Current portion of benefit obligation (1) Non-current portion of benefit obligation CDT defined benefit plan $ 32,865 $ 880 $ 31,985 GXS GER defined benefit plan 23,861 1,058 22,803 GXS PHP defined benefit plan 10,973 42 10,931 Other plans 9,594 802 8,792 Total $ 77,293 $ 2,782 $ 74,511 (1) The current portion of the benefit obligation has been included within "Accrued salaries, incentives and commissions", all within "Accounts payable and accrued liabilities" in the Condensed Consolidated Balance Sheets (see note 10 "Accounts Payable and Accrued Liabilities"). Defined Benefit Plans CDT Plan CDT sponsors an unfunded defined benefit pension plan covering substantially all CDT employees (CDT plan) which provides for old age, disability and survivors’ benefits. Benefits under the CDT plan are generally based on age at retirement, years of service and the employee’s annual earnings. The net periodic cost of this pension plan is determined using the projected unit credit method and several actuarial assumptions, the most significant of which are the discount rate and estimated service costs. No contributions have been made since the inception of the plan. GXS GER Plan As part of our acquisition of GXS Group, Inc. (GXS) in Fiscal 2014, we assumed an unfunded defined benefit pension plan covering certain German employees which provides for old age, disability and survivors' benefits. The GXS GER plan has been closed to new participants since 2006. Benefits under the GXS GER plan are generally based on a participant’s remuneration, date of hire, years of eligible service and age at retirement. The net periodic cost of this pension plan is determined using the projected unit credit method and several actuarial assumptions, the most significant of which are the discount rate and estimated service costs. No contributions have been made since the inception of the plan. GXS PHP Plan As part of our acquisition of GXS in Fiscal 2014, we assumed a primarily unfunded defined benefit pension plan covering substantially all of the GXS Philippines employees which provides for retirement, disability and survivors' benefits. Benefits under the GXS PHP plan are generally based on a participant’s remuneration, years of eligible service and age at retirement. The net periodic cost of this pension plan is determined using the projected unit credit method and several actuarial assumptions, the most significant of which are the discount rate and estimated service costs. Aside from an initial contribution which has a fair value of $ 0.04 million as of September 30, 2021, no additional contributions have been made since the inception of the plan. 17 The following are the details of the change in the benefit obligation for each of the above mentioned pension plans for the periods indicated: As of September 30, 2021 As of June 30, 2021 CDT GXS GER GXS PHP Total CDT GXS GER GXS PHP Total Benefit obligation—beginning of fiscal year $ 32,865 $ 23,861 $ 10,973 $ 67,699 $ 32,851 $ 24,105 $ 10,270 $ 67,226 Service cost 94 43 428 565 473 206 1,822 2,501 Interest cost 112 80 133 325 505 364 469 1,338 Benefits paid ( 203 ) ( 256 ) ( 131 ) ( 590 ) ( 800 ) ( 1,027 ) ( 19 ) ( 1,846 ) Actuarial (gain) loss 406 320 553 1,279 ( 1,976 ) ( 1,118 ) ( 1,853 ) ( 4,947 ) Foreign exchange (gain) loss ( 529 ) ( 385 ) ( 343 ) ( 1,257 ) 1,812 1,331 284 3,427 Benefit obligation—end of period 32,745 23,663 11,613 68,021 32,865 23,861 10,973 67,699 Less: Current portion ( 881 ) ( 1,038 ) ( 82 ) ( 2,001 ) ( 880 ) ( 1,058 ) ( 42 ) ( 1,980 ) Non-current portion of benefit obligation $ 31,864 $ 22,625 $ 11,531 $ 66,020 $ 31,985 $ 22,803 $ 10,931 $ 65,719 The following are details of net pension expense relating to the following pension plans: Three Months Ended September 30, 2021 2020 Pension expense: CDT GXS GER GXS PHP Total CDT GXS GER GXS PHP Total Service cost $ 94 $ 43 $ 428 $ 565 $ 116 $ 51 $ 431 $ 598 Interest cost 112 80 133 325 124 89 93 306 Amortization of actuarial (gains) and losses 125 6 ( 23 ) 108 173 28 — 201 Net pension expense $ 331 $ 129 $ 538 $ 998 $ 413 $ 168 $ 524 $ 1,105 Service-related net periodic pension costs are recorded within operating expense and all other non-service related net periodic pension costs are classified under "Interest and other related expense, net" on our Condensed Consolidated Statements of Income. In determining the fair value of the pension plan benefit obligations as of September 30, 2021 and June 30, 2021, respectively, we used the following weighted-average key assumptions: As of September 30, 2021 As of June 30, 2021 CDT GXS GER GXS PHP CDT GXS GER GXS PHP Assumptions: Salary increases 1.50 % 1.50 % 6.00 % 1.50 % 1.50 % 5.00 % Pension increases 1.50 % 1.50 % N/A 1.50 % 1.50 % N/A Discount rate 1.31 % 1.31 % 5.50 % 1.39 % 1.39 % 5.00 % Normal retirement age 65 - 67 65 - 67 60 65 - 67 65 - 67 60 Employee fluctuation rate: to age 20 — % — % 13.98 % — % — % 13.98 % to age 25 — % — % 7.10 % — % — % 7.10 % to age 30 1.00 % — % 3.00 % 1.00 % — % 3.00 % to age 35 0.50 % — % 2.44 % 0.50 % — % 2.44 % to age 40 — % — % 2.59 % — % — % 2.59 % to age 45 0.50 % — % 1.15 % 0.50 % — % 1.15 % to age 50 0.50 % — % — % 0.50 % — % — % from age 51 1.00 % — % — % 1.00 % — % — % 18 Anticipated pension payments under the pension plans for the fiscal years indicated below are as follows: Fiscal years ending June 30, CDT GXS GER GXS PHP 2022 (nine months ended) $ 650 $ 781 $ 25 2023 945 1,029 294 2024 1,023 1,030 193 2025 1,068 1,054 169 2026 1,105 1,042 195 2027 to 2031 6,396 5,059 2,436 Total $ 11,187 $ 9,995 $ 3,312 Other Plans Other plans include defined benefit pension plans that are offered by certain of our foreign subsidiaries. Many of these plans were assumed through our acquisitions or are required by local regulatory requirements. These other plans are primarily unfunded, with the aggregate projected benefit obligation included in our pension liability. The net periodic costs of these plans are determined using the projected unit credit method and several actuarial assumptions, the most significant of which are the discount rate and estimated service costs. NOTE 13— SHARE CAPITAL, OPTION PLANS AND SHARE-BASED PAYMENTS Cash Dividends For the three months ended September 30, 2021, pursuant to the Company’s dividend policy, we declared total non-cumulative dividends of $ 0.2209 per Common Share in the aggregate amount of $ 59.9 million, which we paid during the same period (three months ended September 30, 2020—$ 0.1746 per Common Share, in the aggregate amount of $ 47.3 million). Share Capital Our authorized share capital includes an unlimited number of Common Shares and an unlimited number of Preference Shares. No Preference Shares have been issued. Treasury Stock From time to time we may provide funds to an independent agent to facilitate repurchases of our Common Shares in connection with the settlement of awards under the Long-Term Incentive Plans (LTIP) or other plans. During the three months ended September 30, 2021, we did not repurchase any of our Common Shares on the open market for potential reissuance under our LTIP or other plans as described below (three months ended September 30, 2020— 965,154 Common Shares, respectively, at a cost of $ 41.9 million). During the three months ended September 30, 2021, we reissued 141,452 Common Shares from treasury stock in connection with the settlement of awards and other plans (three months ended September 30, 2020— 193,680 Common Shares). Share Repurchase Plan On November 5, 2020, the Board authorized a share repurchase plan (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. During the three months ended September 30, 2021, we did not repurchase any of our Common Shares under the Repurchase Plan. Subsequent to the end of the quarter, we announced on November 4, 2021 authorization of 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, 2021, up to an aggregate of $ 350 million of our Common Shares. Please see note 25 "Subsequent Events" for additional details. 19 Share-Based Payments Total share-based compensation expense for the periods indicated below is detailed as follows: Three Months Ended September 30, 2021 2020 Stock options $ 4,267 $ 3,294 Performance Share Units (issued under LTIP) 3,445 2,484 Restricted Share Units (issued under LTIP) 2,166 2,002 Restricted Share Units (other) 1,728 1,986 Deferred Share Units (directors) 830 738 Employee Stock Purchase Plan 1,498 1,232 Total share-based compensation expense $ 13,934 $ 11,736 Summary of Outstanding Stock Options As of September 30, 2021, an aggregate of 8,084,264 options to purchase Common Shares were outstanding and an additional 10,484,700 options to purchase Common Shares were available for issuance under our stock option plans. Our stock options generally vest over four years and expire between seven and ten years from the date of the grant. Currently we also have options outstanding that vest over five years , as well as options outstanding that vest based on meeting certain market conditions. The exercise price of all our options is set at an amount that is not less than the closing price of our Common Shares on the NASDAQ on the trading day immediately preceding the applicable grant date. A summary of activity under our stock option plans for the three months ended September 30, 2021 is as follows: Options Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term (years) Aggregate Intrinsic Value ($’000's) Outstanding at June 30, 2021 8,113,574 $ 40.16 4.88 $ 86,297 Granted 950,360 52.62 Exercised ( 796,187 ) 34.29 Forfeited or expired ( 183,483 ) 44.93 Outstanding at September 30, 2021 8,084,264 $ 42.10 5.03 $ 57,378 Exercisable at September 30, 2021 2,343,797 $ 36.22 3.59 $ 29,347 We estimate the fair value of stock options using the Black-Scholes option-pricing model or, where appropriate, the Monte Carlo pricing model, consistent with the provisions of Accounting Standards Codification (ASC) Topic 718, "Compensation—Stock Compensation" (Topic 718) and SEC Staff Accounting Bulletin No. 107. The option-pricing models require input of subjective assumptions, including the estimated life of the option and the expected volatility of the underlying stock over the estimated life of the option. We use historical volatility as a basis for projecting the expected volatility of the underlying stock and estimate the expected life of our stock options based upon historical data. We believe that the valuation techniques and the approach utilized to develop the underlying assumptions are appropriate in calculating the fair value of our stock option grants. Estimates of fair value are not intended, however, to predict actual future events or the value ultimately realized by employees who receive equity awards. 20 For the periods indicated, the weighted-average fair value of options and weighted-average assumptions estimated under the Black-Scholes option-pricing model were as follows: Three Months Ended September 30, 2021 2020 Weighted–average fair value of options granted $ 9.75 $ 8.50 Weighted-average assumptions used: Expected volatility 26.62 % 26.12 % Risk–free interest rate 0.55 % 0.20 % Expected dividend yield 1.56 % 1.52 % Expected life (in years) 4.16 4.72 Forfeiture rate (based on historical rates) 7 % 7 % Average exercise share price $ 52.62 $ 45.81 As of September 30, 2021, the total compensation cost related to the unvested stock option awards not yet recognized was $ 42.6 million, which will be recognized over a weighted-average period of 2.8 years. No cash was used by us to settle equity instruments granted under share-based compensation arrangements in any of the periods presented. We have no t capitalized any share-based compensation costs as part of the cost of an asset in any of the periods presented. The aggregate intrinsic value of options exercised during the three months ended September 30, 2021 was $ 15.4 million (three months ended September 30, 2020—$ 5.2 million). For the three months ended September 30, 2021, cash in the amount of $ 27.3 million was received as the result of the exercise of options granted under share-based payment arrangements (three months ended September 30, 2020—$ 8.6 million). The tax benefit realized by us during the three months ended September 30, 2021 from the exercise of options eligible for a tax deduction was $ 1.3 million (three months ended September 30, 2020—$ 0.7 million). Long-Term Incentive Plans We incentivize certain eligible employees, in part, with long-term compensation pursuant to our LTIP. The LTIP is a rolling three year program that grants eligible employees a certain number of target Performance Share Units (PSUs) and/or Restricted Share Units (RSUs). Target PSUs become vested upon the achievement of certain financial and/or operational performance criteria (the Performance Conditions) that are determined at the time of the grant. Target RSUs become vested when an eligible employee remains employed throughout the vesting period. PSUs and RSUs granted under the LTIPs have been measured at fair value as of the effective date, consistent with Topic 718, and will be charged to share-based compensation expense over the remaining life of the plan. We estimate the fair value of PSUs using the Monte Carlo pricing model and RSUs have been valued based upon their grant date fair value. Stock options granted under the LTIPs have been measured using the Black-Scholes option-pricing model, consistent with Topic 718. As of September 30, 2021, the total expected compensation cost related to the unvested LTIP awards not yet recognized was $ 59.7 million, which is expected to be recognized over a weighted average period of 2.3 years. LTIP grants that have recently vested, or have yet to vest, are described below. LTIP grants are referred to in this Quarterly Report on Form 10-Q based upon the year in which the grants are expected to vest. LTIP 2021 Grants made in Fiscal 2019 under the LTIP (collectively referred to as LTIP 2021), consisting of PSUs and RSUs, took effect in Fiscal 2019 starting on August 6, 2018. The Performance Conditions for vesting of the PSUs are based solely upon market conditions. The RSUs are employee service-based awards and vest over the life of the LTIP 2021. We expect to settle the LTIP 2021 awards in stock during the second quarter of Fiscal 2022. LTIP 2022 Grants made in Fiscal 2020 under the LTIP (collectively referred to as LTIP 2022), consisting of PSUs and RSUs, took effect in Fiscal 2020 starting on August 5, 2019. The Performance Conditions for vesting of the PSUs are based solely upon market conditions. The RSUs are employee service-based awards and vest over the life of the LTIP 2022. We expect to settle the LTIP 2022 awards in stock. 21 LTIP 2023 Grants made in Fiscal 2021 under the LTIP (collectively referred to as LTIP 2023), consisting of PSUs and RSUs, took effect in Fiscal 2021 starting on August 10, 2020. The Performance Conditions for vesting of the PSUs are based solely upon market conditions. The RSUs are employee service-based awards and vest over the life of the LTIP 2023. We expect to settle the LTIP 2023 awards in stock. LTIP 2024 Grants made in Fiscal 2022 under the LTIP (collectively referred to as LTIP 2024), consisting of PSUs and RSUs, took effect in Fiscal 2022 starting on August 9, 2021. The Performance Conditions for vesting of the PSUs are based solely upon market conditions. The RSUs are employee service-based awards and vest over the life of the LTIP 2024. We expect to settle the LTIP 2024 awards in stock. Restricted Share Units (RSUs) In addition to the grants made in connection with the LTIP plans discussed above, from time to time, we may grant RSUs to certain employees in accordance with employment and other non-LTIP related agreements. During the three months ended September 30, 2021, we did no t grant any such RSUs to employees (three months ended September 30, 2020— 484,956 RSUs). RSUs vest over a specified contract date, typically three years from the respective date of grants. As of September 30, 2021, the total expected compensation cost related to the unvested RSU awards not yet recognized was $ 6.6 million, which is expected to be recognized over a weighted average period of 1.5 years. We expect to settle RSU awards in stock. During the three months ended September 30, 2021, we issued 141,452 Common Shares from treasury stock in connection with the settlement of vested RSUs, with a cost of $ 5.9 million (three months ended September 30, 2020— nil ). Deferred Share Units (DSUs) During the three months ended September 30, 2021, we granted 5,335 DSUs, to certain non-employee directors (three months ended September 30, 2020— 3,667 DSUs). The DSUs were issued under our Deferred Share Unit Plan. DSUs granted as compensation for director fees vest immediately, whereas all other DSUs granted vest at our next annual general meeting following the granting of the DSUs. No DSUs are payable by us until the director ceases to be a member of the Board. During the three months ended September 30, 2021, we did no t issue any of our Common Shares from treasury stock in connection with the settlement of vested DSUs (three months ended September 30, 2020— nil ). Employee Stock Purchase Plan (ESPP) Our ESPP offers employees a purchase price discount of 15 %. During the three months ended September 30, 2021, 225,731 Common Shares were eligible for issuance to employees enrolled in the ESPP (three months ended September 30, 2020— 200,772 Common Shares). During the three months ended September 30, 2021, cash in the amount of $ 9.4 million was received from employees relating to the ESPP (three months ended September 30, 2020—$ 7.2 million). NOTE 14— GUARANTEES AND CONTINGENCIES We have entered into the following contractual obligations with minimum payments for the indicated fiscal periods as follows: Payments due between Total October 1, 2021 - June 30, 2022 July 1, 2022 - June 30, 2024 July 1, 2024 - June 30, 2026 July 1, 2026 and beyond Long-term debt obligations (1) $ 4,471,744 $ 106,893 $ 299,260 $ 2,047,341 $ 2,018,250 Purchase obligations for contracts not accounted for as lease obligations (2) 75,366 41,641 33,725 — — $ 4,547,110 $ 148,534 $ 332,985 $ 2,047,341 $ 2,018,250 (1) Includes interest up to maturity and principal payments. Please see note 11 "Long-Term Debt" for more details. (2) For contractual obligations relating to leases and purchase obligations accounted for under Topic 842, please see note 6 "Leases". 22 Guarantees and Indemnifications We have entered into customer agreements which may include provisions to indemnify our customers against third party claims that our software products or services infringe certain third party intellectual property rights and for liabilities related to a breach of our confidentiality obligations. We have not made any material payments in relation to such indemnification provisions and have not accrued any liabilities related to these indemnification provisions in our Condensed Consolidated Financial Statements. Occasionally, we enter into financial guarantees with third parties in the ordinary course of our business, including, among others, guarantees relating to taxes and letters of credit on behalf of parties with whom we conduct business. Such agreements have not had a material effect on our results of operations, financial position or cash flows. Litigation We are currently involved in various claims and legal proceedings. Quarterly, we review the status of each significant legal matter and evaluate such matters to determine how they should be treated for accounting and disclosure purposes in accordance with the requirements of ASC Topic 450-20 "Loss Contingencies" (Topic 450-20). Specifically, this evaluation process includes the centralized tracking and itemization of the status of all our disputes and litigation items, discussing the nature of any litigation and claim, including any dispute or claim that is reasonably likely to result in litigation, with relevant internal and external counsel, and assessing the progress of each matter in light of its merits and our experience with similar proceedings under similar circumstances. 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 Quarterly Report on Form 10-Q, 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 described more fully below, we are unable at this time to estimate a possible loss or range of losses in respect of certain disclosed matters. Contingencies CRA Matter 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, Fiscal 2015 and Fiscal 2016. Assuming the utilization of available tax attributes (further described below), we estimate our potential aggregate liability, as of September 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 $ 72 million. As of September 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 Condensed Consolidated Balance Sheets as of September 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, 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 23 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 have made extensive submissions in support of our position. 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 Quarterly Report on Form 10-Q, we have not recorded any accruals in respect of these reassessments or proposed reassessment in our Condensed Consolidated Financial Statements. The CRA is currently in preliminary stages of auditing Fiscal 2018 and Fiscal 2019. Carbonite Class Action Complaint On August 1, 2019, prior to our acquisition of Carbonite, a purported stockholder of Carbonite filed a putative class action complaint against Carbonite, its former Chief Executive Officer, Mohamad S. Ali, and its former Chief Financial Officer, Anthony Folger, in the United States District Court for the District of Massachusetts captioned Ruben A. Luna, Individually and on Behalf of All Others Similarly Situated v. Carbonite, Inc., Mohamad S. Ali, and Anthony Folger (No. 1:19-cv-11662-LTS). The complaint alleges violations of the federal securities laws under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder. The complaint generally alleges that the defendants made materially false and misleading statements in connection with Carbonite’s Server Backup VM Edition, and seeks, among other things, the designation of the action as a class action, an award of unspecified compensatory damages, costs and expenses, including counsel fees and expert fees, and other relief as the court deems appropriate. On August 23, 2019, a nearly identical complaint was filed in the same court captioned William Feng, Individually and on Behalf of All Others Similarly Situated v. Carbonite, Inc., Mohamad S. Ali, and Anthony Folger (No. 1:19- cv-11808-LTS) (together with the Luna Complaint, the “Securities Actions”). On November 21, 2019, the court consolidated the Securities Actions, appointed a lead plaintiff, and designated a lead counsel. On January 15, 2020, the lead plaintiff filed a consolidated amended complaint generally making the same allegations and seeking the same relief as the complaint filed on August 1, 2019. The defendants moved to dismiss the Securities Actions on March 10, 2020. 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 On February 27, 2017, before our acquisition of Carbonite, a non-practicing entity named Realtime Data LLC (Realtime Data) filed a lawsuit against Carbonite in the U.S. District Court for the Eastern District of Texas "Realtime Data LLC v. Carbonite, Inc. et al (No 6:17-cv-00121-RWS-JDL)." Therein, it alleged that certain of Carbonite’s cloud storage services infringe upon certain patents held by Realtime Data. Realtime Data’s complaint against Carbonite sought damages in an unspecified amount and injunctive relief. On December 19, 2017, the U.S. District Court for the Eastern District of Texas transferred the case to the U.S. District Court for the District of Massachusetts (No. 1:17-cv-12499). Realtime Data has also filed numerous other patent suits on the same asserted patents against other companies. After a stay pending appeal in one of those suits, 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, on September 24, 2019, the U.S. Patent & Trademark Office Patent Trial and Appeal Board invalidated certain claims of that patent, including certain claims that had been asserted against Carbonite. The parties then jointly stipulated to dismiss that patent from this action. On August 23, 2021, in one of the suits against other companies, the District of Delaware (No. 1:17-cv-800), held all of the patents asserted against Carbonite to be invalid. Realtime Data has appealed that decision to the U.S. Court of Appeals for the Federal Circuit. We continue to vigorously defend the matter, and the U.S. District Court for the District of Massachusetts indicated, on September 30, 2021, that it will issue a claim construction 24 order before staying the case pending the appeal in the related case. We have not accrued a loss contingency related to this matter because litigation related to a non-practicing entity is inherently unpredictable. Although a loss is reasonably possible, an unfavorable outcome is not considered by management to be probable at this time and we remain unable to reasonably estimate a possible loss or range of loss associated with this litigation. Please also see Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for Fiscal 2021. NOTE 15— INCOME TAXES Our effective tax rate represents the net effect of the mix of income earned in various tax jurisdictions that are subject to a wide range of income tax rates. The effective tax rate decreased to a provision of 24.8 % for the three months ended September 30, 2021, compared to a provision of 29.2 % for the three months ended September 30, 2020. Tax expense increased from $ 42.7 million during the three months ended September 30, 2020 to $ 43.5 million during the three months ended September 30, 2021. This was primarily due to (i) an increase of $ 8.3 million relating to higher net income including the impact of foreign rates and (ii) an increase of $ 7.6 million related to tax benefits of internal reorganizations in Fiscal 2021 that did not reoccur in Fiscal 2022. These were partially offset by (i) a decrease of $ 4.1 million related to the US Base Erosion Anti-Abuse Tax (US BEAT), (ii) a decrease of $ 3.5 million for changes in unrecognized tax benefits, (iii) a decrease of $ 3.2 million related to differences in tax filings being lower than estimates and (iv) a decrease of $ 1.2 million related to permanent differences. The remainder of the difference was due to normal course movements and non-material items. We recognize interest expense and penalties related to income tax matters in income tax expense. For the three months ended September 30, 2021 and 2020, respectively, we recognized the following amounts as income tax-related interest expense and penalties: Three Months Ended September 30, 2021 2020 Interest expense (recoveries) $ 99 $ 2,549 Penalties expense (recoveries) ( 25 ) ( 322 ) Total $ 74 $ 2,227 The following amounts have been accrued on account of income tax-related interest expense and penalties: As of September 30, 2021 As of June 30, 2021 Interest expense accrued (1) $ 5,376 $ 5,166 Penalties accrued (1) $ 2,556 $ 2,605 (1) These balances are primarily included within "Long-term income taxes payable" within the Condensed Consolidated Balance Sheets. We believe that it is reasonably possible that the gross unrecognized tax benefits, as of September 30, 2021, could decrease tax expense in the next 12 months by $ 3.7 million, relating primarily to the expiration of competent authority relief and tax years becoming statute barred for purposes of future tax examinations by local taxing jurisdictions. Our four most significant tax jurisdictions are Canada, the United States, Luxembourg and Germany. Our tax filings remain subject to audits by applicable tax authorities for a certain length of time following the tax year to which those filings relate. The earliest fiscal years open for examination are 2012 for Germany, 2016 for the United States, 2015 for Luxembourg, and 2012 for Canada. We are subject to tax audits in all major taxing jurisdictions in which we operate and currently have tax audits open in Canada, the United States, Germany, India, Austria, Italy, France, the Philippines and South Africa. On a quarterly basis we assess the status of these examinations and the potential for adverse outcomes to determine the adequacy of the provision for income and other taxes. Statements regarding the Canada audits are included in note 14 "Guarantees and Contingencies". The timing of the resolution of income tax audits is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ from the amounts accrued. It is reasonably possible that within the next 12 months we will receive additional assessments by various tax authorities or possibly reach resolution of income tax audits in one or more jurisdictions. These assessments or settlements may or may not result in changes to our contingencies related to positions on tax filings. The actual amount of any change could vary significantly depending on the ultimate timing and nature of any settlements. We cannot currently provide an estimate of the range of possible outcomes. For more information relating to certain tax audits, please refer to note 14 "Guarantees and Contingencies". 25 As of September 30, 2021, we have recognized a provision of $ 27.2 million (June 30, 2021—$ 27.5 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 not provided for additional foreign withholding taxes or deferred income tax liabilities related to undistributed earnings of all other non-Canadian subsidiaries, since such earnings are considered permanently invested in those subsidiaries or are not subject to withholding taxes. It is not practicable to reasonably estimate the amount of additional deferred income tax liabilities or foreign withholding taxes that may be payable should these earnings be distributed in the future. NOTE 16— FAIR VALUE MEASUREMENT ASC Topic 820 “Fair Value Measurement” (Topic 820) defines fair value, establishes a framework for measuring fair value, and addresses disclosure requirements for fair value measurements. Fair value is the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value, in this context, should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk, including our own credit risk. In addition to defining fair value and addressing disclosure requirements, Topic 820 establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels which are determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are: • Level 1—inputs are based upon unadjusted quoted prices for identical instruments traded in active markets. • Level 2—inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. • Level 3—inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques. Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis: Our financial assets and liabilities measured at fair value on a recurring basis consisted of the following types of instruments as of September 30, 2021 and June 30, 2021: September 30, 2021 June 30, 2021 Fair Market Measurements using: Fair Market Measurements using: September 30, 2021 Quoted prices in active markets for identical assets/ (liabilities) Significant other observable inputs Significant unobservable inputs June 30, 2021 Quoted prices in active markets for identical assets/ (liabilities) Significant other observable inputs Significant unobservable inputs (Level 1) (Level 2) (Level 3) (Level 1) (Level 2) (Level 3) Financial Assets (Liabilities): Foreign currency forward contracts designated as cash flow hedges (note 17) $ ( 736 ) $ — $ ( 736 ) $ — $ 1,131 $ — $ 1,131 $ — Total $ ( 736 ) $ — $ ( 736 ) $ — $ 1,131 $ — $ 1,131 $ — Our valuation techniques used to measure the fair values of the derivative instruments, the counterparty to which has high credit ratings, were derived from pricing models including discounted cash flow techniques, with all significant inputs derived from or corroborated by observable market data, as no quoted market prices exist for these instruments. Our discounted cash flow techniques use observable market inputs, such as, where applicable, foreign currency spot and forward rates. 26 Our cash and cash equivalents, along with our accounts receivable and accounts payable and accrued liabilities balances, are measured and recognized in our Condensed Consolidated Financial Statements at an amount that approximates the fair value (a Level 2 measurement) due to their short maturities. The fair value of our Senior Notes is determined based on observable market prices and categorized as a Level 2 measurement. As of September 30, 2021, the fair value was $ 2.7 billion (June 30, 2021—$ 2.7 billion). The carrying value of our other long-term debt facilities approximates the fair value since the interest rate is at market. Please see note 11 "Long-Term Debt" for further details. If applicable, we will recognize transfers between levels within the fair value hierarchy at the end of the reporting period in which the actual event or change in circumstance occurs. During the three months ended September 30, 2021 and 2020, respectively, we did not have any transfers between Level 1, Level 2 or Level 3. Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis We measure certain assets and liabilities at fair value on a nonrecurring basis. These assets and liabilities are recognized at fair value when they are deemed to be other-than-temporarily impaired. During the three months ended September 30, 2021 and 2020, respectively, no indications of impairments were identified and therefore no fair value measurements were required. NOTE 17— DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES Foreign Currency Forward Contracts We are engaged in hedging programs with various banks to limit the potential foreign exchange fluctuations incurred on future cash flows relating to a portion of our Canadian dollar payroll expenses. We operate internationally and are therefore exposed to foreign currency exchange rate fluctuations in the normal course of our business, in particular to changes in the Canadian dollar on account of large costs that are incurred from our centralized Canadian operations, which are denominated in Canadian dollars. As part of our risk management strategy, we use foreign currency forward contracts to hedge portions of our payroll exposure with typical maturities of between one and twelve months . We do not use foreign currency forward contracts for speculative purposes. We have designated these transactions as cash flow hedges of forecasted transactions under ASC Topic 815 “Derivatives and Hedging” (Topic 815). As the critical terms of the hedging instrument and of the entire hedged forecasted transaction are the same, in accordance with Topic 815, we have been able to conclude that changes in fair value or cash flows attributable to the risk being hedged are expected to completely offset at inception and on an ongoing basis. Accordingly, quarterly unrealized gains or losses on the effective portion of these forward contracts have been included within "Other Comprehensive Income (Loss), net". The fair value of the contracts, as of September 30, 2021, is recorded within "Accounts payable and accrued liabilities" and represents the net loss before tax effect that is expected to be reclassified from accumulated other comprehensive income into earnings with the next twelve months. As of September 30, 2021, the notional amount of forward contracts we held to sell U.S. dollars in exchange for Canadian dollars was $ 67.3 million (June 30, 2021—$ 66.9 million). Fair Value of Derivative Instruments and Effect of Derivative Instruments on Financial Performance The effect of these derivative instruments on our Condensed Consolidated Financial Statements for the periods indicated below were as follows (amounts presented do not include any income tax effects). Fair Value of Derivative Instruments in the Condensed Consolidated Balance Sheets (see note 16 "Fair Value Measurement") As of September 30, 2021 As of June 30, 2021 Derivatives Balance Sheet Location Fair Value Asset (Liability) Fair Value Asset (Liability) Foreign currency forward contracts designated as cash flow hedges Prepaid expenses and other current assets (Accounts payable and accrued liabilities) $ ( 736 ) $ 1,131 27 Effects of Derivative Instruments on Income and Other Comprehensive Income (OCI) Three Months Ended September 30, 2021 Derivatives in Cash Flow Hedging Relationship Amount of Gain or (Loss) Recognized in OCI on Derivatives (Effective Portion) Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Foreign currency forward contracts $ ( 1,477 ) Operating expenses $ 390 Three Months Ended September 30, 2020 Derivatives in Cash Flow Hedging Relationship Amount of Gain or (Loss) Recognized in OCI on Derivatives (Effective Portion) Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Foreign currency forward contracts $ 1,150 Operating expenses $ 212 NOTE 18— SPECIAL CHARGES (RECOVERIES) Special charges (recoveries) include costs and recoveries that relate to certain restructuring initiatives that we have undertaken from time to time under our various restructuring plans, as well as acquisition-related costs and other charges. Three Months Ended September 30, 2021 2020 COVID-19 Restructuring Plan $ ( 446 ) $ 3,551 Fiscal 2020 Restructuring Plan ( 72 ) 8,725 Restructuring Plans prior to Fiscal 2020 Restructuring Plan ( 84 ) 89 Acquisition-related costs 728 789 Other charges (recoveries) 218 90 Total $ 344 $ 13,244 COVID-19 Restructuring Plan During the fourth quarter of Fiscal 2020, in response to the COVID-19 pandemic, we made a strategic decision to move towards a significant work from home model. We began to implement restructuring activities to streamline our operations and significantly reduce our real estate footprint around the world (COVID-19 Restructuring Plan). The COVID-19 Restructuring Plan charges relate to workforce reductions and facility costs, including the accelerated amortization associated with the abandonment of ROU assets, the write-off of fixed assets and other related variable lease and exit costs. These charges require management to make certain judgments and estimates regarding the amount and timing of restructuring charges or recoveries. Our estimated liability could change subsequent to its recognition, requiring adjustments to the expense and the liability recorded. On a quarterly basis, we conduct an evaluation of the related liabilities and expenses and revise our assumptions and estimates as appropriate. With respect to the COVID-19 Restructuring Plan, at the time of initial abandonment we assumed there would be no additional sublease income, lease assignments or early terminations from vacated facilities. During the three months ended September 30, 2021, we recorded net recoveries of $ 0.4 million related to abandoned facilities and workforce reductions. During the three months ended September 30, 2020, we recorded net charges of $ 3.0 million related to abandoned facilities and workforce reductions and $ 0.6 million associated with the write-off of fixed assets. Since the inception of the plan, $ 44.2 million has been recorded within "Special charges (recoveries)" to date. We do not expect to incur any further significant charges relating to this plan. 28 A reconciliation of the beginning and ending restructuring liability, which is included within "Accounts payable and accrued liabilities" in our Condensed Consolidated Balance Sheets, for the three months ended September 30, 2021 is shown below. COVID-19 Restructuring Plan Workforce reduction Facility charges Total Balance payable as of June 30, 2021 $ 255 $ 4,010 $ 4,265 Accruals and adjustments ( 6 ) ( 581 ) ( 587 ) Cash payments ( 82 ) ( 385 ) ( 467 ) Foreign exchange and other non-cash adjustments ( 5 ) 70 65 Balance payable as of September 30, 2021 $ 162 $ 3,114 $ 3,276 Fiscal 2020 Restructuring Plan During Fiscal 2020, we began to implement restructuring activities to streamline our operations (Fiscal 2020 Restructuring Plan), including in connection with our acquisitions of Carbonite and XMedius, to take further steps to improve our operational efficiency. The Fiscal 2020 Restructuring Plan charges relate to workforce reductions and facility costs, including the accelerated amortization associated with the abandonment of ROU assets, the write-off of fixed assets and other related variable lease and exit costs. These charges require management to make certain judgments and estimates regarding the amount and timing of restructuring charges or recoveries. Our estimated liability could change subsequent to its recognition, requiring adjustments to the expense and the liability recorded. On a quarterly basis, we conduct an evaluation of the related liabilities and expenses and revise our assumptions and estimates as appropriate. With respect to the Fiscal 2020 Restructuring Plan, at the time of the initial abandonment we assumed there would be no additional sublease income, lease assignments or early terminations from vacated facilities. During the three months ended September 30, 2021, we recorded net recoveries of $ 0.1 million related to abandoned facilities and workforce reductions. During the three months ended September 30, 2020, we recorded net charges of $ 8.7 million related to abandoned facilities and workforce reductions. Since the inception of the plan, $ 30.3 million has been recorded within "Special charges (recoveries)" to date. We do not expect to incur any further significant charges relating to this plan. A reconciliation of the beginning and ending restructuring liability, which is included within "Accounts payable and accrued liabilities" in our Condensed Consolidated Balance Sheets, for the three months ended September 30, 2021 is shown below. Fiscal 2020 Restructuring Plan Workforce reduction Facility charges Total Balance payable as of June 30, 2021 $ 2,217 $ 1,866 $ 4,083 Accruals and adjustments ( 131 ) 40 ( 91 ) Cash payments ( 1,749 ) ( 170 ) ( 1,919 ) Foreign exchange and other non-cash adjustments ( 127 ) 13 ( 114 ) Balance payable as of September 30, 2021 $ 210 $ 1,749 $ 1,959 Acquisition-related costs Acquisition-related costs, recorded within "Special charges (recoveries)" include direct costs of potential and completed acquisitions. Acquisition-related costs for the three months ended September 30, 2021 were $ 0.7 million (three months ended September 30, 2020—$ 0.8 million). Other charges (recoveries) For the three months ended September 30, 2021, "Other charges" includes $ 0.2 million relating to other miscellaneous charges (three months ended September 30, 2020—$ 0.1 million relating to other miscellaneous charges). 29 NOTE 19— ACQUISITIONS Fiscal 2022 and Fiscal 2021 Acquisitions None. NOTE 20— ACCUMULATED OTHER COMPREHENSIVE INCOME Foreign Currency Translation Adjustments Cash Flow Hedges Defined Benefit Pension Plans Accumulated Other Comprehensive Income Balance as of June 30, 2021 $ 75,408 $ 830 $ ( 10,000 ) $ 66,238 Other comprehensive income (loss) before reclassifications, net of tax ( 10,092 ) ( 1,086 ) ( 1,049 ) ( 12,227 ) Amounts reclassified into net income, net of tax — ( 287 ) 162 ( 125 ) Total other comprehensive income (loss) net, for the period ( 10,092 ) ( 1,373 ) ( 887 ) ( 12,352 ) Balance as of September 30, 2021 $ 65,316 $ ( 543 ) $ ( 10,887 ) $ 53,886 Foreign Currency Translation Adjustments Cash Flow Hedges Defined Benefit Pension Plans Accumulated Other Comprehensive Income Balance as of June 30, 2020 $ 32,968 $ ( 136 ) $ ( 15,007 ) $ 17,825 Other comprehensive income (loss) before reclassifications, net of tax 22,645 845 ( 1,705 ) 21,785 Amounts reclassified into net income, net of tax — ( 156 ) 241 85 Total other comprehensive income (loss) net, for the period 22,645 689 ( 1,464 ) 21,870 Balance as of September 30, 2020 $ 55,613 $ 553 $ ( 16,471 ) $ 39,695 NOTE 21— SUPPLEMENTAL CASH FLOW DISCLOSURES Three Months Ended September 30, 2021 2020 Cash paid during the period for interest $ 41,659 $ 43,871 Cash received during the period for interest $ 838 $ 1,209 Cash paid during the period for income taxes $ 12,780 $ 27,704 NOTE 22— OTHER INCOME (EXPENSE), NET Three Months Ended September 30, 2021 2020 Foreign exchange gains (losses) $ 351 $ ( 3,486 ) OpenText share in net income of equity investees (1) 29,315 6,221 Other miscellaneous income (expense) 116 148 Total other income (expense), net $ 29,782 $ 2,883 (1) Represents our share in net income of equity investees, which approximates fair value, based on 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). 30 NOTE 23— EARNINGS PER SHARE Basic earnings per share are computed by dividing net income, attributable to OpenText, by the weighted average number of Common Shares outstanding during the period. Diluted earnings per share are computed by dividing net income, attributable to OpenText, by the shares used in the calculation of basic earnings per share plus the dilutive effect of Common Share equivalents, such as stock options, using the treasury stock method. Common Share equivalents are excluded from the computation of diluted earnings per share if their effect is anti-dilutive. Three Months Ended September 30, 2021 2020 Basic earnings per share Net income attributable to OpenText $ 131,915 $ 103,376 Basic earnings per share attributable to OpenText $ 0.48 $ 0.38 Diluted earnings per share Net income attributable to OpenText $ 131,915 $ 103,376 Diluted earnings per share attributable to OpenText $ 0.48 $ 0.38 Weighted-average number of shares outstanding (in '000's) Basic 272,044 271,986 Effect of dilutive securities 1,188 861 Diluted 273,232 272,847 Excluded as anti-dilutive (1) 1,973 3,944 (1) Represents options to purchase Common Shares excluded from the calculation of diluted earnings per share because the exercise price of the stock options was greater than or equal to the average price of the Common Shares during the period. NOTE 24— RELATED PARTY TRANSACTIONS Our procedure regarding the approval of any related party transaction requires that the material facts of such transaction be reviewed by the independent members of the Audit Committee and the transaction be approved by a majority of the independent members of the Audit Committee. The Audit Committee reviews all transactions in which we are, or will be, a participant and any related party has or will have a direct or indirect interest in the transaction. In determining whether to approve a related party transaction, the Audit Committee generally takes into account, among other facts it deems appropriate, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances; the extent and nature of the related person’s interest in the transaction; the benefits to the Company of the proposed transaction; if applicable, the effects on a director’s independence; and if applicable, the availability of other sources of comparable services or products. During the three months ended September 30, 2021, Mr. Stephen Sadler, a member of the Board of Directors, earned $ 4 thousand ( three months ended September 30, 2020 — $ 6 thousand) in consulting fees from OpenText for assistance with acquisition-related business activities. Mr. Sadler abstained from voting on all transactions from which he would potentially derive consulting fees. NOTE 25— SUBSEQUENT EVENTS Cash Dividends As part of our quarterly, non-cumulative cash dividend program, we declared, on November 3, 2021, a dividend of $ 0.2209 per Common Share. The record date for this dividend is December 3, 2021 and the payment date is December 22, 2021. Future declarations of dividends and the establishment of future record and payment dates are subject to the final determination and discretion of our Board. Share Repurchase Plan Subsequent to the end of the quarter, we announced on November 4, 2021 authorization of 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, 2021, up to an aggregate of $ 350 million of our Common Shares on the NASDAQ Global Select Market, the Toronto Stock Exchange (as part of a Normal Course Issuer Bid) 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 Renewed Repurchase Plan). 31 The price that we have paid and will pay for Common Shares in open market transactions has been and 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 Renewed Repurchase Plan has been and will be effected in accordance with Rule 10b-18 under the U.S. Securities Exchange Act of 1934, as amended (Exchange Act). Purchases made under the Renewed Repurchase Plan are subject to a limit of 13,638,008 shares (representing 5 % of the Company’s issued and outstanding Common Shares as of October 31, 2021). All Common Shares purchased by us pursuant to the Renewed Repurchase Plan will be cancelled. 32