What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-02-03 compared with 2021-11-04 · 473 added, 207 removed, 733 unchanged (48% of the section changed)

13 unchanged sentences

(vii) product and solution developments, enhancements and releases and the timing thereof;

(viii) the Company’s financial conditions, results of operations and earnings;

(viii) the Company’s financial condition, results of operations and earnings;

(ix) the basis for any future growth and for our financial performance;

11 unchanged sentences

(xxi) potential legal and/or regulatory proceedings;

(xxii) acquisitions and their expected impact;

(xxii) acquisitions and their expected impact, including our ability to successfully integrate the assets we acquire or utilize such assets to their full capacity, including those acquired in connection with the acquisition of Zix Corporation (see note 19 "Acquisitions" to our Condensed Consolidated Financial Statements for more details);

(xxiii) tax audits;

18 unchanged sentences

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

(v) the potential for the incurrence of or assumption of debt in connection with acquisitions and the impact on the ratings or outlooks of rating agencies on our outstanding debt securities;

(vi) the possibility that the Company may be unable to meet its future reporting requirements under the Exchange Act, and the rules promulgated thereunder, or applicable Canadian securities regulation;

(vii) the risks associated with bringing new products and services to market;

(viii) fluctuations in currency exchange rates (including as a result of the impact of Brexit and any policy changes resulting from trade and tariff disputes);

(ix) delays in the purchasing decisions of the Company’s customers;

(x) competition the Company faces in its industry and/or marketplace;

(xi) the final determination of litigation, tax audits (including tax examinations in Canada, the United States or elsewhere) and other legal proceedings;

(xii) potential exposure to greater than anticipated tax liabilities or expenses, including with respect to changes in Canadian, United

States or international tax regimes;

(xiii) the possibility of technical, logistical or planning issues in connection with the deployment of the Company’s products or services;

(xiv) the continuous commitment of the Company’s customers;

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

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

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

(xviii) downward pressure on our share price and dilutive effect of future sales or issuances of equity securities (including in connection with future acquisitions);

and (xix) potential changes in ratings or outlooks of rating agencies on our outstanding debt securities.

(v) the possibility that we may be unable to successfully integrate the assets we acquire or fail to utilize such assets to their full capacity and not realize the benefits we expect from our acquired portfolios and businesses, including the acquisition of Zix Corporation, (vi) the potential for the incurrence of or assumption of debt in connection with acquisitions and the impact on the ratings or outlooks of rating agencies on our outstanding debt securities;

(vii) the possibility that the Company may be unable to meet its future reporting requirements under the Exchange Act, and the rules promulgated thereunder, or applicable Canadian securities regulation;

(viii) the risks

associated with bringing new products and services to market;

(ix) fluctuations in currency exchange rates (including as a result of the impact of Brexit and any policy changes resulting from trade and tariff disputes);

(x) delays in the purchasing decisions of the Company’s customers;

(xi) competition the Company faces in its industry and/or marketplace;

(xii) the final determination of litigation, tax audits (including tax examinations in Canada, the United States or elsewhere) and other legal proceedings;

(xiii) potential exposure to greater than anticipated tax liabilities or expenses, including with respect to changes in Canadian, United States or international tax regimes;

(xiv) the possibility of technical, logistical or planning issues in connection with the deployment of the Company’s products or services;

(xv) the continuous commitment of the Company’s customers;

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

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

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

(xix) downward pressure on our share price and dilutive effect of future sales or issuances of equity securities (including in connection with future acquisitions);

and (xx) potential changes in ratings or outlooks of rating agencies on our outstanding debt securities.

Other factors that may affect forward-looking statements include, but are not limited to:

4 unchanged sentences

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

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

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

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

15 unchanged sentences

the accompanying Notes to our Condensed Consolidated Financial Statements under Part I, Item 1 of this Quarterly Report on Form 10-Q.

All dollar and percentage comparisons made herein refer to the three months ended September 30, 2021 compared with the three months ended September 30, 2020, unless otherwise noted.

All dollar and percentage comparisons made herein refer to the three and six months ended December 31, 2021 compared with the three and six months ended December 31, 2020, unless otherwise noted.

Where we say “we”, “us”, “our”, “OpenText” or “the Company”, we mean Open Text Corporation or Open Text Corporation and its subsidiaries, as applicable.

3 unchanged sentences

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

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

We have a complete

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

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

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

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

7 unchanged sentences

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

As of September 30, 2021, we employed a total of approximately 14,500 individuals, of which 6,900 or 47% are in the Americas, 2,700 or 19% are in EMEA and 4,900 or 34% are in Asia Pacific.

As of December 31, 2021, we employed a total of approximately 15,000 individuals, of which 7,300 or 49% are in the Americas, 2,700 or 18% are in EMEA and 5,000 or 33% are in Asia Pacific.

Currently, we have employees in 35 countries enabling strong access to multiple talent pools while ensuring reach and proximity to our customers.

1 unchanged sentence

Quarterly Summary:

During the first quarter of Fiscal 2022 we saw the following activity:

During the second quarter of Fiscal 2022 we saw the following activity:

• Total revenue was $876.8 million, up 2.5% compared to the same period in the prior fiscal year;

up 2.0% after factoring in the favorable impact of $12.6 million of foreign exchange rate changes.

up 2.7% after factoring in the unfavorable impact of $2.0 million of foreign exchange rate changes.

• Total annual recurring revenue, which we define as the sum of cloud services and subscriptions revenue and customer support revenue, was $699.8 million, up 2.2% compared to the same period in the prior fiscal year;

up 1.7% after factoring in the favorable impact of $10.2 million of foreign exchange rate changes.

up 2.3% after factoring in the unfavorable impact of $0.7 million of foreign exchange rate changes.

• Cloud services and subscriptions revenue was $364.9 million, up 4.1% compared to the same period in the prior fiscal year;

up 3.6% after factoring in the favorable impact of $3.4 million of foreign exchange rate changes.

• GAAP-based gross margin was 69.0% consistent with the same period in the prior fiscal year.

up 4.2% after factoring in the unfavorable impact of $0.1 million of foreign exchange rate changes.

• GAAP-based gross margin was 70.2% compared to 70.5% in the same period in the prior fiscal year.

• Non-GAAP-based gross margin was 76.4% compared to 77.1% in the same period in the prior fiscal year.

• GAAP-based net income attributable to OpenText was $131.9 million compared to $103.4 million in the same period in the prior fiscal year.

• GAAP-based net income (loss) attributable to OpenText was $88.3 million compared to ($65.5) million in the same period in the prior fiscal year.

• Non-GAAP-based net income attributable to OpenText was $242.1 million compared to $260.5 million in the same period in the prior fiscal year.

• GAAP-based earnings per share (EPS), diluted, was $0.48 compared to $0.38 in the same period in the prior fiscal year.

• GAAP-based earnings (loss) per share (EPS), diluted, was $0.32 compared to ($0.24) in the same period in the prior fiscal year.

• Non-GAAP-based EPS, diluted, was $0.89 compared to $0.95 in the same period in the prior fiscal year.

• Adjusted EBITDA was $343.5 million compared to $360.8 million in the same period in the prior fiscal year.

• Operating cash flow was $189.7 million compared to $233.9 million in the same period in the prior fiscal year, down 18.9%.

• Cash and cash equivalents were $1,735.3 million as of September 30, 2021, compared to $1,607.3 million as of June 30, 2021.

• Operating cash flow was $406.3 million for the six months ended December 31, 2021 compared to $516.4 million in the same period in the prior fiscal year, down 21.3%.

• Cash and cash equivalents were $1,511.8 million as of December 31, 2021, compared to $1,607.3 million as of June 30, 2021.

• Acquired Zix Corporation (Zix) for total consideration of $896.0 million, comprised of $875.9 million paid in cash (inclusive of $38.3 million of cash acquired) and $20.1 million currently held back and unpaid.

• Issued $850 million in aggregate principal amount of 3.875% Senior Notes due 2029 and $650 million in aggregate principal amount of 4.125% Senior Notes due 2031.

A portion of the net proceeds was used to redeem in full our outstanding Senior Notes 2026 (defined herein) in the principal amount of $850 million.

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

See "Acquisitions" below for the impact of acquisitions on the period-to-period comparability of results.

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

Acquisition of Zix Corporation

On December 23, 2021, we acquired all of the equity interest in Zix, a leader in software as a service (SaaS) based email encryption, threat protection and compliance cloud solutions for SMBs.

Total consideration for Zix was $896.0 million, comprised of $875.9 million paid in cash (inclusive of $38.3 million of cash acquired) and $20.1 million, relating to the cash settlement of pre-acquisition vested share-based compensation, currently held back and unpaid in accordance with the purchase agreement.

We believe the acquisition increases our position in the data protection, threat management, email security and compliance solutions spaces.

The results of operations of Zix have been consolidated with those of OpenText beginning December 23, 2021.

Acquisition of Bricata Inc.

On November 24, 2021, we acquired all of the equity interest in Bricata Inc.

(Bricata) for $17.9 million.

We believe the acquisition strengthens our OpenText Security and Protection Cloud with Network Detection and Response technologies.

The results of operations of Bricata have been consolidated with those of OpenText beginning November 24, 2021.

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

7 unchanged sentences

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

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

We continue to conduct business with substantial modifications to employee travel and work locations and also virtualization of sales and marketing events, which we expect to remain in place throughout Fiscal 2022, along with substantially modified interactions with customers and suppliers, among other modifications.

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

13 unchanged sentences

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

In this first quarter of Fiscal 2022, we have invested $100.2 million or 12.0% of revenue in R&D, in line with our target to spend 12% to 14% of revenues for R&D this fiscal year.

On a fiscal year-to-date basis, we have invested $203.8 million or 11.9% of revenue in R&D, in line with our target to spend 12% to 14% of revenues for R&D this fiscal year.

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

2 unchanged sentences

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

The OpenText Cloud is designed to build

additional flexibility and scalability for our customers:

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

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

15 unchanged sentences

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

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

As of December 31, 2021, we have recorded certain estimates in our Condensed Consolidated Financial Statements resulting from the pandemic, particularly with respect to the COVID-19 Restructuring Plan and allowance for credit losses, based on management's estimates and assumptions utilizing the most currently available information.

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

6 unchanged sentences

Summary of Results of Operations

Three Months Ended September 30,

Three Months Ended December 31, Six Months Ended December 31,

(In thousands) 2021 Change

increase (decrease) 2020 2021 Change

increase (decrease) 2020

37 unchanged sentences

Asia Pacific (4)

8.4 % 7.9 % 8.4 % 8.3 %

Other Metrics:

2 unchanged sentences

76.4 % 77.1 % 76.1 % 76.8 %

Net income, attributable to OpenText $ 131,915 $ 103,376

GAAP-based EPS, diluted $ 0.48 $ 0.38

Net income (loss), attributable to OpenText $ 88,298 $ (65,477) $ 220,213 $ 37,899

GAAP-based earnings (loss) per share, diluted $ 0.32 $ (0.24) $ 0.81 $ 0.14

Non-GAAP-based EPS, diluted (5)

11 unchanged sentences

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

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

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

(Carbonite), was approximately 93%, compared to approximately 95% for the quarter ended September 30, 2020.

Our cloud arrangements can be broadly categorized as platform as a service (PaaS), SaaS, cloud subscriptions and managed services.

For the quarter ended December 31, 2021, our cloud renewal rate, excluding the impact of Carbonite Inc.

(Carbonite), was approximately 93%, compared to approximately 96% for the quarter ended December 31, 2020.

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

Three Months Ended September 30,

Three Months Ended December 31, Six Months Ended December 31,

(In thousands) 2021 Change

increase (decrease) 2020 2021 Change

increase (decrease) 2020

11 unchanged sentences

Asia Pacific 7.3 % 7.4 % 7.3 % 7.2 %

Cloud services and subscriptions revenues increased by $15.6 million or 4.6% during the three months ended September 30, 2021 as compared to the same period in the prior fiscal year;

Three Months Ended December 31, 2021 Compared to Three Months Ended December 31, 2020

Cloud services and subscriptions revenues increased by $14.4 million or 4.1% during the three months ended December 31, 2021 as compared to the same period in the prior fiscal year;

up 4.2% after factoring in the unfavorable impact of $0.1 million of foreign exchange rate changes.

Geographically, the overall change was attributable to an increase in Americas of $13.3 million and an increase in Asia Pacific of $1.2 million, partially offset by a decrease in EMEA of $0.1 million.

There were 27 cloud services contracts greater than $1.0 million that closed during the second quarter of Fiscal 2022, compared to 15 contracts during the second quarter of Fiscal 2021.

Cost of Cloud services and subscriptions revenues increased by $4.2 million during the three months ended December 31, 2021 as compared to the same period in the prior fiscal year.

This was primarily due to an increase in third party network usage fees of $3.1 million, an increase in labour-related costs of $0.7 million and an increase in other miscellaneous costs of $0.4 million.

Overall, the gross margin percentage on Cloud services and subscriptions revenues increased to 67% from 66%.

Six Months Ended December 31, 2021 Compared to Six Months Ended December 31, 2020

Cloud services and subscriptions revenues increased by $30.0 million or 4.3% during the six months ended December 31, 2021 as compared to the same period in the prior fiscal year;

up 3.9% after factoring in the favorable impact of $3.3 million of foreign exchange rate changes.

Geographically, the overall change was attributable to an increase in Americas of $12.5 million, an increase in EMEA of $1.6 million and an increase in Asia Pacific of $1.4 million.

There were 7 cloud services contracts greater than $1.0 million that closed during the first quarter of Fiscal 2022, compared to 6 contracts during the first quarter of Fiscal 2021.

Cost of Cloud services and subscriptions revenues increased by $7.2 million during the three months ended September 30, 2021 as compared to the same period in the prior fiscal year.

This was primarily due to an increase in labour-related costs of $3.1 million and an increase in third party network usage fees of $3.4 million.

Overall, the gross margin percentage on Cloud services and subscriptions revenues decreased to 66% from 67%.

Geographically, the overall change was attributable to an increase in Americas of $25.9 million, an increase in Asia Pacific of $2.6 million and an increase in EMEA of $1.5 million.

There were 43 cloud services contracts greater than $1.0 million that closed during the first six months of Fiscal 2022, compared to 21 contracts during the first six months of Fiscal 2021.

Cost of Cloud services and subscriptions revenues increased by $11.4 million during the six months ended December 31, 2021 as compared to the same period in the prior fiscal year.

This was primarily due to an increase in third party network usage

fees of $6.5 million, an increase in labour-related costs of $3.8 million and an increase in other miscellaneous costs of $1.1 million.

Overall, the gross margin percentage on Cloud services and subscriptions revenues remained stable at 67%.

2) Customer Support:

5 unchanged sentences

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

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

For the quarter ended December 31, 2021, our Customer support renewal rate was approximately 94%, consistent with the quarter ended December 31, 2020.

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

Three Months Ended September 30,

Three Months Ended December 31, Six Months Ended December 31,

(In thousands) 2021 Change

increase (decrease) 2020 2021 Change

increase (decrease) 2020

11 unchanged sentences

Asia Pacific 8.4 % 8.1 % 8.6 % 8.1 %

Customer support revenues increased by $5.8 million or 1.8% during the three months ended September 30, 2021 as compared to the same period in the prior fiscal year;

down 0.3% after factoring in the favorable impact of $6.8 million of foreign exchange rate changes.

Three Months Ended December 31, 2021 Compared to Three Months Ended December 31, 2020

Customer support revenues increased by $0.4 million or 0.1% during the three months ended December 31, 2021 as compared to the same period in the prior fiscal year;

up 0.3% after factoring in the unfavorable impact of $0.5 million of foreign exchange rate changes.

Geographically, the overall change was attributable to an increase in Asia Pacific of $0.9 million and an increase in EMEA of $0.8 million, partially offset by a decrease in Americas of $1.3 million.

Cost of Customer support revenues were stable during the three months ended December 31, 2021 as compared to the same period in the prior fiscal year.

Overall, the gross margin percentage on Customer support revenues remained stable at 91%.

Six Months Ended December 31, 2021 Compared to Six Months Ended December 31, 2020

Customer support revenues increased by $6.2 million or 0.9% during the six months ended December 31, 2021 as compared to the same period in the prior fiscal year;

constant after factoring in the favorable impact of $6.2 million of foreign exchange rate changes.

Geographically, the overall change was attributable to an increase in EMEA of $6.9 million and an increase in Asia Pacific of $3.3 million, partially offset by a decrease in Americas of $3.9 million.

Cost of Customer support revenues increased by $0.3 million during the three months ended September 30, 2021 as compared to the same period in the prior fiscal year.

This was primarily due to an increase in labour-related costs of $0.2 million.

Cost of Customer support revenues increased by $0.3 million during the six months ended December 31, 2021 as compared to the same period in the prior fiscal year.

This was primarily due to an increase in other miscellaneous costs of $0.8 million, partially offset by a decrease in labour-related costs of $0.5 million.

Overall, the gross margin percentage on Customer support revenues remained stable at 91%.

2 unchanged sentences

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

Three Months Ended September 30,

Three Months Ended December 31, Six Months Ended December 31,

(In thousands) 2021 Change

increase (decrease) 2020 2021 Change

increase (decrease) 2020

11 unchanged sentences

Asia Pacific 10.1 % 7.5 % 9.2 % 11.1 %

License revenues increased by $5.0 million or 7.3% during the three months ended September 30, 2021 as compared to the same period in the prior fiscal year;

up 5.8% after factoring in the favorable impact of $1.1 million of foreign exchange rate changes.

Geographically, the overall change was attributable to an increase in EMEA of $7.7 million and an increase in Americas of $3.1 million, partially offset by a decrease in Asia Pacific of $5.8 million.

During the first quarter of Fiscal 2022, we closed 17 license contracts greater than $0.5 million, of which 9 contracts were greater than $1.0 million, contributing $20.9 million of License revenues.

This was compared to 15 license contracts greater than $0.5 million during the first quarter of Fiscal 2021, of which 6 contracts were greater than $1.0 million, contributing $14.8 million of License revenues.

Cost of License revenues increased by $1.5 million during the three months ended September 30, 2021 as compared to the same period in the prior fiscal year as a result of higher third party technology costs.

Overall, the gross margin percentage on License revenues decreased to 95% from 96%.

Three Months Ended December 31, 2021 Compared to Three Months Ended December 31, 2020

License revenues increased by $2.1 million or 2.0% during the three months ended December 31, 2021 as compared to the same period in the prior fiscal year;

up 3.0% after factoring in the unfavorable impact of $1.1 million of foreign exchange rate changes.

Geographically, the overall change was attributable to an increase Americas of $4.4 million and an increase in Asia Pacific of $3.1 million, partially offset by a decrease in EMEA of $5.4 million.

During the second quarter of Fiscal 2022, we closed 32 license contracts greater than $0.5 million, of which 15 contracts were greater than $1.0 million, contributing $41.4 million of License revenues.

This was compared to 36 license contracts greater than $0.5 million during the second quarter of Fiscal 2021, of which 9 contracts were greater than $1.0 million, contributing $32.7 million of License revenues.

Cost of License revenues decreased by $0.6 million during the three months ended December 31, 2021 as compared to the same period in the prior fiscal year as a result of lower third party technology costs.

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

Six Months Ended December 31, 2021 Compared to Six Months Ended December 31, 2020

License revenues increased by $7.2 million or 4.1% during the six months ended December 31, 2021 as compared to the same period in the prior fiscal year;

up 4.1% after factoring in the insignificant impact of foreign exchange rate changes.

Geographically, the overall change was attributable to an increase in Americas of $7.5 million and an increase in EMEA of $2.3 million, partially offset by a decrease in Asia Pacific of $2.7 million.

During the first six months of Fiscal 2022, we closed 49 license contracts greater than $0.5 million, of which 24 contracts were greater than $1.0 million, contributing $62.3 million of License revenues.

This was compared to 51 license contracts greater than $0.5 million during the first six months of Fiscal 2021, of which 15 contracts were greater than $1.0 million, contributing $47.5 million of License revenues.

Cost of License revenues increased by $0.9 million during the six months ended December 31, 2021 as compared to the same period in the prior fiscal year as a result of higher third party technology costs.

Overall, the gross margin percentage on License revenues remained stable at 96%.

4) Professional Service and Other:

5 unchanged sentences

The most significant components of these costs are personnel-related expenses, travel costs and third party subcontracting.

Three Months Ended September 30,

Three Months Ended December 31, Six Months Ended December 31,

(In thousands) 2021 Change

increase (decrease) 2020 2021 Change

increase (decrease) 2020

11 unchanged sentences

Asia Pacific 12.0 % 10.6 % 11.5 % 10.5 %

Professional service and other revenues increased by $1.8 million or 2.8% during the three months ended September 30, 2021 as compared to the same period in the prior fiscal year;

Three Months Ended December 31, 2021 Compared to Three Months Ended December 31, 2020

Professional service and other revenues increased by $4.2 million or 6.6% during the three months ended December 31, 2021 as compared to the same period in the prior fiscal year;

up 7.0% after factoring in the unfavorable impact of $0.2 million of foreign exchange rate changes.

Geographically, the overall change was attributable to an increase in Americas of $2.0 million, an increase in Asia Pacific of $1.3 million and an increase in EMEA of $0.9 million.

Cost of Professional service and other revenues increased by $6.4 million during the three months ended December 31, 2021 as compared to the same period in the prior fiscal year.

This was primarily due to an increase in labour-related costs of $6.4 million.

Overall, the gross margin percentage on Professional service and other revenues decreased to 22% from 26%.

Six Months Ended December 31, 2021 Compared to Six Months Ended December 31, 2020

Professional service and other revenues increased by $6.0 million or 4.7% during the six months ended December 31, 2021 as compared to the same period in the prior fiscal year;

up 3.9% after factoring in the favorable impact of $1.1 million of foreign exchange rate changes.

Geographically, the overall change was attributable to an increase in EMEA of $3.2 million and an increase in Asia Pacific of $0.6 million, partially offset by a decrease in the Americas of $1.9 million.

Cost of Professional service and other revenues increased by $5.1 million during the three months ended September 30, 2021 as compared to the same period in the prior fiscal year.

This was due to an increase in labour-related costs of $5.1 million.

Geographically, the overall change was attributable to an increase in EMEA of $4.1 million and an increase in Asia Pacific of $1.9 million.

Cost of Professional service and other revenues increased by $11.6 million during the six months ended December 31, 2021 as compared to the same period in the prior fiscal year.

This was primarily due to an increase in labour-related costs of $11.6 million.

Overall, the gross margin percentage on Professional service and other revenues decreased to 22% from 27%.

Amortization of Acquired Technology-based Intangible Assets

Three Months Ended September 30,

Three Months Ended December 31, Six Months Ended December 31,

(In thousands) 2021 Change

increase (decrease) 2020 2021 Change

increase (decrease) 2020

1 unchanged sentence

intangible assets $ 52,602 $ (1,489) $ 54,091 $ 105,769 $ (6,359) $ 112,128

Amortization of acquired technology-based intangible assets decreased by $4.9 million during the three months ended September 30, 2021 as compared to the same period in the prior fiscal year.

This was primarily due to certain intangible assets from previous acquisitions becoming fully amortized.

Amortization of acquired technology-based intangible assets decreased during the three months ended December 31, 2021 by $1.5 million as compared to the same period in the prior fiscal year, primarily due to intangible assets from previous acquisitions becoming fully amortized.

Amortization of acquired technology-based intangible assets decreased during the six months ended December 31, 2021 by $6.4 million as compared to the same period in the prior fiscal year, primarily due to intangible assets from previous acquisitions becoming fully amortized.

Operating Expenses

Three Months Ended September 30,

Three Months Ended December 31, Six Months Ended December 31,

(In thousands) 2021 Change

increase (decrease) 2020 2021 Change

increase (decrease) 2020

17 unchanged sentences

Change between Three Months Ended

September 30, 2021 and 2020

December 31, 2021 and 2020 Change between Six Months Ended

December 31, 2021 and 2020

(In thousands)

increase (decrease)

increase (decrease) increase (decrease)

Payroll and payroll-related benefits $ 5,449 $ 14,517

5 unchanged sentences

Total change in research and development expenses $ 3,384 $ 9,646

Research and development expenses increased by $6.3 million during the three months ended September 30, 2021 as compared to the same period in the prior fiscal year.

Research and development expenses increased by $3.4 million during the three months ended December 31, 2021 as compared to the same period in the prior fiscal year.

Payroll and payroll-related benefits, which is comprised of salaries, benefits and variable short-term incentives, increased by $5.4 million, including the impact of the compensation restoration discussed under "Impacts of COVID-19" above.

Additionally, share-based compensation expense increased by $0.6 million.

Additionally, other miscellaneous costs increased by $0.4 million.

These increases were partially offset by reductions in facility-related expenses of $2.5 million.

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

Our research and development labour resources increased by 116 employees, from 4,066 employees at September 30, 2020 to 4,182 employees at September 30, 2021.

Research and development expenses increased by $9.6 million during the six months ended December 31, 2021 as compared to the same period in the prior fiscal year.

Payroll and payroll-related benefits, which is comprised of salaries, benefits and variable short-term incentives, increased by $14.5 million, including the impact of the compensation restoration discussed under "Impacts of COVID-19" above.

Additionally, share-based compensation expense increased by $0.5 million and other miscellaneous costs increased by $0.4 million.

These increases were partially offset by reductions in facility-related expenses of $5.8 million.

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

Our research and development labour resources increased by 257 employees, from 4,107 employees at December 31, 2020 to 4,364 employees at December 31, 2021.

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

Change between Three Months Ended

September 30, 2021 and 2020

(In thousands) increase (decrease)

December 31, 2021 and 2020 Change between Six Months Ended

December 31, 2021 and 2020

(In thousands) increase (decrease) increase (decrease)

Payroll and payroll-related benefits $ 12,554 $ 24,115

5 unchanged sentences

Facilities (1,285) (2,970)

Credit loss expense (1,783)

Credit loss expense (recovery) (3,342) (5,125)

Other miscellaneous 665 919

Total change in sales and marketing expenses $ 16,041 $ 29,881

Sales and marketing expenses increased by $13.8 million during the three months ended September 30, 2021 as compared to the same period in the prior fiscal year.

Sales and marketing expenses increased by $16.0 million during the three months ended December 31, 2021 as compared to the same period in the prior fiscal year.

Payroll and payroll-related benefits, which is comprised of salaries, benefits and variable short-term incentives, increased by $12.6 million, including the impact of the compensation restoration discussed under "Impacts of COVID-19" above.

Additionally, commissions increased by $3.2 million, marketing expenses increased by $1.3 million and share-based compensation expense increased by $0.6 million.

Additionally, commissions increased by $3.6 million, marketing expenses increased by $3.0 million, travel and communication expenses increased by $0.8 million and other miscellaneous costs increased by $0.7 million.

These increases were partially offset by reductions in credit loss expense of $3.3 million and reductions in facility-related expenses of $1.3 million.

Overall, our sales and marketing expenses, as a percentage of total revenues, increased to 19% from 17% in the same period in the prior fiscal year.

Our sales and marketing labour resources increased by 166 employees, from 2,390 employees at September 30, 2020 to 2,556 employees at September 30, 2021.

Sales and marketing expenses increased by $29.9 million during the six months ended December 31, 2021 as compared to the same period in the prior fiscal year.

Payroll and payroll-related benefits, which is comprised of salaries, benefits and variable short-term incentives, increased by $24.1 million, including the impact of the compensation restoration discussed under "Impacts of COVID-19" above.

Additionally, commissions increased by $6.8 million, marketing expenses increased by $4.3 million, other miscellaneous costs increased by $0.9 million and travel and communication expensed increased by $0.9 million.

These increases were partially offset by reductions in credit loss expense of $5.1 million and reductions in facility-related expenses of $3.0 million.

Overall, our sales and marketing expenses, as a percentage of total revenues, increased to 18% from 17% in the same period in the prior fiscal year.

Our sales and marketing labour resources increased by 302 employees, from 2,415 employees at December 31, 2020 to 2,717 employees at December 31, 2021.

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

Change between Three Months Ended

September 30, 2021 and 2020

(In thousands) increase (decrease)

December 31, 2021 and 2020 Change between Six Months Ended

December 31, 2021 and 2020

(In thousands) increase (decrease) increase (decrease)

Payroll and payroll-related benefits $ 10,802 $ 21,610

5 unchanged sentences

Total change in general and administrative expenses $ 8,748 $ 24,036

General and administrative expenses increased by $15.3 million during the three months ended September 30, 2021 as compared to the same period in the prior fiscal year.

General and administrative expenses increased by $8.7 million during the three months ended December 31, 2021 as compared to the same period in the prior fiscal year.

Payroll and payroll-related benefits, which is comprised of salaries, benefits and variable short-term incentives, increased by $10.8 million, including the impact of the compensation restoration discussed under "Impacts of COVID-19" above.

Additionally, other miscellaneous costs, which include professional fees such as legal, audit and tax related expenses, increased by $2.8 million, contract labour and consulting increased by $1.6 million, share-based compensation increased by $0.5 million and travel and communication expenses increased by $0.5 million.

These increases were partially offset by reductions in facility related expenses of $0.9 million.

Additionally, travel and communication expenses increased by $1.7 million, contract labour and consulting increased by $1.6 million, facility related expenses increased by $0.9 million and shared-based compensation increased by $0.2 million.

These increases were partially offset by reductions in other miscellaneous costs, which

include professional fees such as legal, audit and tax related expenses, of $6.4 million.

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

Our general and administrative labour resources increased by 24 employees, from 1,888 employees at September 30, 2020 to 1,912 employees at September 30, 2021.

General and administrative expenses increased by $24.0 million during the six months ended December 31, 2021 as compared to the same period in the prior fiscal year.

Payroll and payroll-related benefits, which is comprised of salaries, benefits and variable short-term incentives, increased by $21.6 million, including the impact of the compensation restoration discussed under "Impacts of COVID-19" above.

Additionally, contract labour and consulting increased by $3.1 million, travel and communication expenses increased by $2.2 million and share-based compensation increased by $0.7 million.

These increases were partially offset by reductions in other miscellaneous costs, which include professional fees such as legal, audit and tax related expenses of $3.6 million.

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

Our general and administrative labour resources increased by 127 employees, from 1,865 employees at December 31, 2020 to 1,992 employees at December 31, 2021.

Depreciation expenses:

Three Months Ended September 30,

Three Months Ended December 31, Six Months Ended December 31,

(In thousands) 2021 Change

increase (decrease) 2020 2021 Change

increase (decrease) 2020

Depreciation $ 21,779 $ 1,499 $ 20,280 $ 43,165 $ 882 $ 42,283

Depreciation expenses decreased by $0.6 million during the three months ended September 30, 2021 as compared to the same period in the prior fiscal year.

Depreciation expenses, as a percentage of total revenue, remained stable at 3% compared to the same period in the prior fiscal year.

Depreciation expenses increased during the three and six months ended December 31, 2021 by $1.5 million and $0.9 million, respectively as compared to the same periods in the prior fiscal year.

Depreciation expenses, as a percentage of total revenue remained stable for the three and six months ended December 31, 2021 at 2% and 3%, respectively, compared to the same periods in the prior fiscal year.

Amortization of acquired customer-based intangible assets:

Three Months Ended September 30,

Three Months Ended December 31, Six Months Ended December 31,

(In thousands) 2021 Change

increase (decrease) 2020 2021 Change

increase (decrease) 2020

Amortization of acquired customer-based intangible assets $ 52,665 $ (2,261) $ 54,926 $ 104,549 $ (5,370) $ 109,919

Amortization of acquired customer-based intangible assets decreased by $3.1 million during the three months ended September 30, 2021 as compared to the same period in the prior fiscal year.

This was primarily due to certain intangible assets from previous acquisitions becoming fully amortized.

Amortization of acquired customer-based intangible assets decreased during the three months ended December 31, 2021 by $2.3 million as compared to the same period in the prior fiscal year, primarily due to intangible assets from previous acquisitions becoming fully amortized.

Amortization of acquired customer-based intangible assets decreased during the six months ended December 31, 2021 by $5.4 million as compared to the same period in the prior fiscal year, primarily due to intangible assets from previous acquisitions becoming fully amortized.

Special charges (recoveries):

3 unchanged sentences

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

Three Months Ended September 30,

(In thousands) 2021 Change increase (decrease) 2020

Three Months Ended December 31, Six Months Ended December 31,

(In thousands) 2021 Change

increase (decrease) 2020 2021 Change increase (decrease) 2020

Special charges (recoveries) $ 9,217 $ 26,711 $ (17,494) $ 9,561 $ 13,811 $ (4,250)

Special charges (recoveries) decreased by $12.9 million during the three months ended September 30, 2021 as compared to the same period in the prior fiscal year.

This was primarily due to a decrease in restructuring activities of $13.0 million, primarily related to the COVID-19 and Fiscal 2020 restructuring plans.

Special charges (recoveries) increased by $26.7 million during the three months ended December 31, 2021, primarily due to the net recoveries recognized in the comparative period, resulting in an increase in restructuring activities of $18.4 million, primarily related to the COVID-19 and Fiscal 2020 restructuring plans.

Additionally, acquisition related costs increased by $3.3 million and other miscellaneous charges increased by $5.0 million, primarily driven by $2.0 million pre-acquisition equity incentives, which upon acquisition were replaced by equivalent value cash settlements (see note 19 "Acquisitions" to our Condensed Consolidated Financial Statements) compared to the same period in the prior fiscal year.

Special charges (recoveries) increased by $13.8 million during the six months ended December 31, 2021 as compared to the same period in the prior fiscal year.

This was primarily due to the net recoveries recognized in the comparative period, resulting in an increase in restructuring activities of $5.5 million, primarily related to the COVID-19 and Fiscal 2020 restructuring plans.

Additionally, acquisition related costs increased by $3.2 million and other miscellaneous charges increased by $5.1 million, primarily driven by $2.0 million pre-acquisition equity incentives, which upon acquisition were replaced by equivalent value cash settlements (see note 19 "Acquisitions" to our Condensed Consolidated Financial Statements) compared to the same period in the prior fiscal year.

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

1 unchanged sentence

The components of other income (expense), net were as follows:

Three Months Ended September 30,

(In thousands) 2021 Change increase (decrease) 2020

Three Months Ended December 31, Six Months Ended December 31,

(In thousands) 2021 Change

increase (decrease) 2020 2021 Change increase (decrease) 2020

Foreign exchange gains (losses)

2 unchanged sentences

2,042 8 2,034 31,357 23,102 8,255

Loss on debt extinguishment (2)

(27,413) (27,413) — (27,413) (27,413) —

Other miscellaneous income (expense) 142 401 (259) 258 369 (111)

Total other income (expense), net $ (25,037) $ (30,288) $ 5,251 $ 4,745 $ (3,389) $ 8,134

(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.

(1) Represents our share in net income of equity investees, which approximates fair value and subject to volatility based on market trends and business conditions, 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" to our Condensed Consolidated Financial Statements for more details).

(2) On December 9, 2021, we redeemed Senior Notes 2026 in full, which resulted in a loss on debt extinguishment of $27.4 million.

Of this, $25.0 million related to the early termination call premium, $6.2 million related to unamortized debt issuance costs and ($3.8) million related to unamortized premium (see note 11 "Long-Term Debt" to our Condensed Consolidated Financial Statements for more details).

Interest and Other Related Expense, Net

Interest and other related expense, net is primarily comprised of interest paid and accrued on our debt facilities, offset by interest income earned on our cash and cash equivalents.

Three Months Ended September 30,

(In thousands) 2021 Change increase (decrease) 2020

Three Months Ended December 31, Six Months Ended December 31,

(In thousands) 2021 Change

increase (decrease) 2020 2021 Change increase (decrease) 2020

Interest expense related to total outstanding debt (1)

6 unchanged sentences

We operate in several tax jurisdictions and are exposed to various foreign tax rates.

Three Months Ended September 30,

(In thousands) 2021 Change increase (decrease) 2020

Three Months Ended December 31, Six Months Ended December 31,

(In thousands) 2021 Change

increase (decrease) 2020 2021 Change increase (decrease) 2020

Provision for (recovery of) income taxes $ 39,266 $ (228,293) $ 267,559 $ 82,716 $ (227,587) $ 310,303

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 effective tax rate decreased to a provision of 30.8% for the three months ended December 31, 2021, compared to a provision of 132.4% for the three months ended December 31, 2020.

Tax expense decreased from $267.6 million during the three months ended December 31, 2020 to $39.3 million during the three months ended December 31, 2021.

This was primarily due to (i) a decrease of $299.3 million related to Internal Revenue Service (IRS) settlements in Fiscal 2021, (ii) a decrease of $20.2 million relating to lower net income before taxes including the impact of foreign rates, (iii) a decrease of $7.3 million related to differences in tax filings being lower than estimates and (iv) a decrease of $6.0 million related to the US Base Erosion and Anti-Abuse Tax (US BEAT).

These were partially offset by (i) an increase of $93.4 million for changes in unrecognized tax benefits and (ii) an increase of $4.9 million related to tax benefits of internal reorganizations in Fiscal 2021 that did not reoccur in Fiscal 2022.

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

The effective tax rate decreased to a provision of 27.3% for the six months ended December 31, 2021, compared to a provision of 89.1% for the six months ended December 31, 2020.

Tax expense decreased from $310.3 million during the six months ended December 31, 2020 to $82.7 million during the six months ended December 31, 2021.

This was primarily due to (i) a decrease of $299.3 million related to IRS settlements in Fiscal 2021, (ii) a decrease of $12.0 million relating to lower net income before taxes including the impact of the foreign rates, (iii) a decrease of $10.5 million related to differences in tax filings being lower than estimates and (iv) a decrease of $10.1 million related to US BEAT.

These were partially offset by (i) an increase of $89.8 million for changes in unrecognized tax benefits and (ii) an increase of $12.5 million related to tax benefits of internal reorganizations in Fiscal 2021 that did not reoccur in Fiscal 2022.

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

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

15 unchanged sentences

GAAP measures with certain Non-GAAP measures defined below.

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

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

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

1 unchanged sentence

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

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

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

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

2 unchanged sentences

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

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

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

6 unchanged sentences

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures

for the three months ended September 30, 2021

for the three months ended December 31, 2021

(In thousands, except for per share data)

Three Months Ended September 30, 2021

Three Months Ended December 31, 2021

GAAP-based Measures GAAP-based Measures

36 unchanged sentences

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

Three Months Ended September 30, 2021

Three Months Ended December 31, 2021

Per share diluted

8 unchanged sentences

Reconciliation of Adjusted EBITDA

Three Months Ended September 30, 2021

Three Months Ended December 31, 2021

GAAP-based net income, attributable to OpenText $ 88,298

9 unchanged sentences

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures

for the three months ended September 30, 2020

for the three months ended December 31, 2020

(In thousands, except for per share data)

Three Months Ended September 30, 2020

Three Months Ended December 31, 2020

GAAP-based Measures GAAP-based Measures

17 unchanged sentences

Provision for (recovery of) income taxes 267,559 (225,150) (7) 42,409

GAAP-based net income (loss) / Non-GAAP-based net income, attributable to OpenText (65,477) 325,948 (8) 260,471

GAAP-based earnings (loss) per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText $ (0.24) $ 1.19 (8) $ 0.95

(1) Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.

(2) Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.

(3) GAAP-based and Non-GAAP-based gross profit stated in dollars and gross margin stated as a percentage of total revenue.

(4) Adjustment relates to the exclusion of special charges (recoveries) from our Non-GAAP-based operating expenses as special charges (recoveries) are generally incurred in the periods relevant to an acquisition and include certain charges or recoveries that are not indicative or related to continuing operations, and are therefore excluded from our internal analysis of operating results.

See note 18 "Special charges (recoveries)" to our Condensed Consolidated Financial Statements for more details.

(5) GAAP-based and Non-GAAP-based income from operations stated in dollars.

(6) Adjustment relates to the exclusion of other income (expense) from our Non-GAAP-based operating expenses as other income (expense) generally relates to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results.

Other income (expense) also includes our share of income (losses) from our holdings in investments as a limited partner.

We do not actively trade equity securities in these privately held companies nor do we plan our ongoing operations based around any anticipated fundings or distributions from these investments.

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

(7) Adjustment relates to differences between the GAAP-based tax provision rate of approximately 132% and a Non-GAAP-based tax rate of approximately 14%;

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

Such excluded items include amortization, share-based compensation, special charges (recoveries) and other income (expense), net.

Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves, and “book to return” adjustments for tax return filings and tax assessments.

Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period.

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

The GAAP-based tax provision rate for the three months ended December 31, 2020 includes an income tax provision charge from IRS settlements partially offset by a tax benefit from the release of unrecognized tax benefits due to the conclusion of relevant tax audits.

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

Three Months Ended December 31, 2020

Per share diluted*

GAAP-based net loss, attributable to OpenText $ (65,477) $ (0.24)

Amortization 109,017 0.40

Share-based compensation 14,526 0.05

Special charges (recoveries) (17,494) (0.06)

Other (income) expense, net (5,251) (0.02)

GAAP-based provision for (recovery of) income taxes 267,559 0.98

Non-GAAP-based provision for income taxes (42,409) (0.16)

Non-GAAP-based net income, attributable to OpenText $ 260,471 $ 0.95

*Weighted average number of Common Shares - diluted (in thousands) used in the calculation of Non-GAAP-based earnings per share for the three months ended December 31, 2020 were 273,183.

Reconciliation of Adjusted EBITDA

Three Months Ended December 31, 2020

GAAP-based net loss, attributable to OpenText $ (65,477)

Provision for (recovery of) income taxes 267,559

Interest and other related expense, net 37,595

Amortization of acquired technology-based intangible assets 54,091

Amortization of acquired customer-based intangible assets 54,926

Depreciation 20,280

Share-based compensation 14,526

Special charges (recoveries) (17,494)

Other (income) expense, net (5,251)

Adjusted EBITDA $ 360,755

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures

for the six months ended December 31, 2021

(In thousands, except for per share data)

Six Months Ended December 31, 2021

GAAP-based Measures GAAP-based Measures

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

% of Total Revenue

Cost of revenues

Cloud services and subscriptions $ 241,908 $ (1,804) (1) $ 240,104

Customer support 59,151 (1,130) (1) 58,021

Professional service and other 104,766 (1,368) (1) 103,398

Amortization of acquired technology-based intangible assets 105,769 (105,769) (2) —

GAAP-based gross profit and gross margin (%) /

Non-GAAP-based gross profit and gross margin (%) 1,189,803 69.6% 110,071 (3) 1,299,874 76.1%

Operating expenses

Research and development 203,787 (5,586) (1) 198,201

Sales and marketing 310,178 (9,616) (1) 300,562

General and administrative 142,990 (8,839) (1) 134,151

Amortization of acquired customer-based intangible assets 104,549 (104,549) (2) —

Special charges (recoveries) 9,561 (9,561) (4) —

GAAP-based income from operations / Non-GAAP-based income from operations 375,573 248,222 (5) 623,795

Other income (expense), net 4,745 (4,745) (6) —

Provision for (recovery of) income taxes 82,716 (6,207) (7) 76,509

GAAP-based net income / Non-GAAP-based net income, attributable to OpenText 220,213 249,684 (8) 469,897

17 unchanged sentences

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

Three Months Ended September 30, 2020

Six Months Ended December 31, 2021

Per share diluted

8 unchanged sentences

Reconciliation of Adjusted EBITDA

Three Months Ended September 30, 2020

Six Months Ended December 31, 2021

GAAP-based net income, attributable to OpenText $ 220,213

8 unchanged sentences

Adjusted EBITDA $ 666,871

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures

for the six months ended December 31, 2020

(In thousands, except for per share data)

Six Months Ended December 31, 2020

GAAP-based Measures GAAP-based Measures

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

% of Total Revenue

Cost of revenues

Cloud services and subscriptions $ 230,506 $ (1,979) (1) $ 228,527

Customer support 58,862 (941) (1) 57,921

Professional service and other 93,200 (1,183) (1) 92,017

Amortization of acquired technology-based intangible assets 112,128 (112,128) (2) —

GAAP-based gross profit and gross margin (%) /

Non-GAAP-based gross profit and gross margin (%) 1,158,170 69.8% 116,231 (3) 1,274,401 76.8%

Operating expenses

Research and development 194,141 (5,049) (1) 189,092

Sales and marketing 280,297 (9,014) (1) 271,283

General and administrative 118,954 (8,096) (1) 110,858

Amortization of acquired customer-based intangible assets 109,919 (109,919) (2) —

Special charges (recoveries) (4,250) 4,250 (4) —

GAAP-based income from operations / Non-GAAP-based income from operations 416,826 244,059 (5) 660,885

Other income (expense), net 8,134 (8,134) (6) —

Provision for (recovery of) income taxes 310,303 (228,515) (7) 81,788

GAAP-based net income / Non-GAAP-based net income, attributable to OpenText 37,899 464,440 (8) 502,339

GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText $ 0.14 $ 1.70 (8) $ 1.84

(1) Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.

(3) GAAP-based and Non-GAAP-based gross profit stated in dollars and gross margin stated as a percentage of total revenue.

See note 18 "Special charges (recoveries)" to our Condensed Consolidated Financial Statements for more details.

(5) GAAP-based and Non-GAAP-based income from operations stated in dollars.

Other income (expense) also includes our share of income (losses) from our holdings in investments as a limited partner.

We do not actively trade equity securities in these privately held companies nor do we plan our ongoing operations based around any anticipated fundings or distributions from these investments.

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

(7) Adjustment relates to differences between the GAAP-based tax provision rate of approximately 89% and a Non-GAAP-based tax rate of approximately 14%;

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

Such excluded items include amortization, share-based compensation, special charges (recoveries) and other income (expense), net.

The GAAP-based tax provision rate for the six months ended December 31, 2020 includes an income tax provision charge from IRS settlements partially offset by a tax benefit from the release of unrecognized tax benefits due to the conclusion of relevant tax audits.

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

Six Months Ended December 31, 2020

Per share diluted

GAAP-based net income, attributable to OpenText $ 37,899 $ 0.14

Amortization 222,047 0.81

Share-based compensation 26,262 0.10

Special charges (recoveries) (4,250) (0.02)

Other (income) expense, net (8,134) (0.03)

GAAP-based provision for (recovery of) income taxes 310,303 1.14

Non-GAAP-based provision for income taxes (81,788) (0.30)

Non-GAAP-based net income, attributable to OpenText $ 502,339 $ 1.84

Reconciliation of Adjusted EBITDA

Six Months Ended December 31, 2020

GAAP-based net income, attributable to OpenText $ 37,899

Provision for (recovery of) income taxes 310,303

Interest and other related expense, net 76,684

Amortization of acquired technology-based intangible assets 112,128

Amortization of acquired customer-based intangible assets 109,919

Depreciation 42,283

Share-based compensation 26,262

Special charges (recoveries) (4,250)

Other (income) expense, net (8,134)

Adjusted EBITDA $ 703,094

LIQUIDITY AND CAPITAL RESOURCES

1 unchanged sentence

(In thousands)

As of September 30, 2021 Change

As of December 31, 2021 Change

increase (decrease) As of June 30, 2021

4 unchanged sentences

(1) Restricted cash is classified under the Prepaid expenses and other current assets and Other assets line items on the Condensed Consolidated Balance Sheets (see note 9 "Prepaid Expenses and Other Assets" to our Condensed Consolidated Financial Statements for more details).

Three Months Ended September 30,

Six Months Ended December 31,

(In thousands)

8 unchanged sentences

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

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

During the three months ended September 30, 2021, we made repayments of approximately $2 million related to amounts previously deferred.

As of September 30, 2021, we have remaining deferrals of $37 million which will become payable throughout Fiscal 2022 and Fiscal 2023.

As of December 31, 2021, we have recognized a provision of $28.0 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 deferred a total of approximately $99.0 million of tax payments under the CARES Act and other COVID-19 related tax relief programs in EMEA since our fourth quarter of Fiscal 2020.

During the six months ended December 31, 2021, we made repayments of approximately $9.0 million related to amounts previously deferred.

As of December 31, 2021, we have remaining deferrals of $30.0 million which will become payable throughout Fiscal 2022 and Fiscal 2023.

Cash flows provided by operating activities

1 unchanged sentence

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

(i) $62.9 million relating to accounts payable and accrued liabilities;

(ii) $6.3 million relating to prepaid expenses and other current assets;

(iii) $4.3 million relating to income taxes payable, net of receivables.

(i) $166.1 million relating to income taxes payable, net of receivables;

(ii) $72.1 million relating to accounts payable and accrued liabilities;

(iii) $32.1 million relating to deferred revenues;

(iv) $19.2 million relating to prepaid expenses and other current assets.

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

(i) $7.0 million relating to other assets;

(ii) $2.8 million relating to deferred revenues;

(iii) $2.6 million relating to contract assets;

(iv) $1.7 million relating to accounts receivable;

(v) $0.8 million relating to net operating lease assets and liabilities.

During the first quarter of Fiscal 2022 our days sales outstanding (DSO) was 40 days, compared to a DSO of 44 days during the first quarter of Fiscal 2021, largely as a result of strong improvement in collections efficiency.

The per day impact of our DSO in the first quarter of Fiscal 2022 and Fiscal 2021 on our cash flows was $9.2 million and $8.9 million, respectively.

(i) $23.5 million relating to net operating lease assets and liabilities;

(ii) $18.5 million relating to accounts receivable;

(iii) $18.4 million relating to other assets;

(iv) $1.5 million relating to contract assets.

During the second quarter of Fiscal 2022 our days sales outstanding (DSO) was 44 days, compared to a DSO of 47 days during the second quarter of Fiscal 2021, largely as a result of strong improvement in collections efficiency.

The per day impact

of our DSO in the second quarter of Fiscal 2022 and Fiscal 2021 on our cash flows was $9.7 million and $9.5 million, respectively.

In arriving at DSO, we exclude contract assets as these assets do not provide an unconditional right to the related consideration from the customer.

1 unchanged sentence

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

Cash flows used in investing activities increased by $8.9 million.

This was due to an increase in purchases of property and equipment of $11.4 million, partially offset by a $2.5 million reduction in cash used for other investing activities.

Cash flows used in investing activities increased by $871.9 million, primarily due to an increase in consideration paid for acquisitions during the first half of Fiscal 2022, which includes cash paid for the acquisitions of Zix of $837.6 million and Bricata of $17.9 million.

Cash flows provided by (used in) financing activities

1 unchanged sentence

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

Cash flows used in financing activities decreased by $49.7 million.

This is due to the net impact of the following activities:

(i) $41.9 million relating to the repurchase of Common Shares on the open market for potential reissuance under our stock compensation plans that occurred during Fiscal 2021 and did not reoccur in Fiscal 2022;

Cash flows provided by financing activities increased by $1.1 billion.

This is primarily due to the net impact of the following activities:

(i) $1.5 billion relating to proceeds from the issuance of Senior Notes 2031 and Senior Notes 2029 (both defined below), of which a portion of the net proceeds was used to redeem $850.0 million of our Senior Notes 2026 (as defined below);

(i) $22.3 million relating to less cash used in the repurchase of Common Shares on the open market for potential reissuance under our stock compensation plans;

(ii) $16.5 million higher proceeds from the issuance of Common Shares for the exercise of options and the OpenText Employee Stock Purchase Plan (ESPP).

The decreases in cash flows used in financing activities were partially offset by the following increases:

(i) $12.6 million relating to higher cash dividends paid to shareholders;

(ii) $0.4 million relating to a cash distribution to non-controlling interests holder.

The increases in cash flows provided by financing activities were partially offset by the following decreases:

(i) $250.0 million relating to higher repayments of our long-term debt and Revolver (as defined below), which is inclusive of $850.0 million redemption of Senior Notes 2026 (as defined below) in the second quarter of Fiscal 2022, partially offset by $600.0 million repaid on amounts previously drawn on our Revolver in the second quarter of Fiscal 2021;

(ii) $91.0 million relating to the repurchase and cancellation of 1,809,559 Common Shares under our share repurchase plans authorized on both November 5, 2020 and November 4, 2021 (as discussed below);

(iii) $25.0 million relating to early call termination premium upon redemption of Senior Notes 2026 and $15.3 million relating to debt issuance costs for the issuance of Senior Notes 2031 and Senior Notes 2029;

(iv) $17.8 million relating to higher cash dividends paid to shareholders;

(v) $0.4 million relating to a cash distribution to non-controlling interests holder.

Cash Dividends

During the three months ended September 30, 2021, we declared and paid cash dividends of $0.2209 per Common Share in the aggregate amount of $59.9 million (three months ended September 30, 2020—$0.1746 per Common Share, in the aggregate amount of $47.3 million).

During the three and six months ended December 31, 2021, we declared and paid cash dividends of $0.2209 and $0.4418 per Common Share, respectively, in the aggregate amount of $59.7 million and $119.5 million, respectively (three and six months ended December 31, 2020—$0.2008 and $0.3754 per Common Share, respectively, in the aggregate amount of $54.5 million and $101.8 million, respectively).

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

3 unchanged sentences

Senior Notes 2031

On November 24, 2021, OpenText Holdings, Inc.

(OTHI), a wholly-owned indirect subsidiary of the Company, issued $650 million in aggregate principal amount of 4.125% Senior Notes due 2031 guaranteed by the Company (Senior Notes 2031)

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 non-U.S.

persons in offshore transactions pursuant to Regulation S under the Securities Act.

Senior Notes 2031 bear interest at a rate of 4.125% per annum, payable semi-annually in arrears on June 1 and December 1, commencing on June 1, 2022.

Senior Notes 2031 will mature on December 1, 2031, unless earlier redeemed, in accordance with their terms, or repurchased.

OTHI may redeem all or a portion of the Senior Notes 2031 at any time prior to December 1, 2026 at a redemption price equal to 100% of the principal amount of the Senior Notes 2031 plus an applicable premium, plus accrued and unpaid interest, if any, to the redemption date.

OTHI may also redeem up to 40% of the aggregate principal amount of the Senior Notes 2031, on one or more occasions, prior to December 1, 2024, using the net proceeds from certain qualified equity offerings at a redemption price of 104.125% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, subject to compliance with certain conditions.

OTHI may, on one or more occasions, redeem the Senior Notes 2031, in whole or in part, at any time on and after December 1, 2026 at the applicable redemption prices set forth in the indenture governing the Senior Notes 2031, dated as of November 24, 2021, among OTHI, the Company, the subsidiary guarantors party thereto, The Bank of New York Mellon, as U.S.

trustee, and BNY Trust Company of Canada, as Canadian trustee (the 2031 Indenture), plus accrued and unpaid interest, if any, to the redemption date.

If we experience one of the kinds of change of control triggering events specified in the 2031 Indenture, OTHI will be required to make an offer to repurchase the Senior Notes 2031 at a price equal to 101% of the principal amount of the Senior Notes 2031, plus accrued and unpaid interest, if any, to the date of purchase.

The 2031 Indenture contains covenants that limit OTHI, the Company and certain of the Company’s subsidiaries’ ability to, among other things:

(i) create certain liens and enter into sale and lease-back transactions;

(ii) in the case of our non-guarantor subsidiaries, create, assume, incur or guarantee additional indebtedness of OTHI, the Company or the guarantors without such subsidiary becoming a subsidiary guarantor of Senior Notes 2031;

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

These covenants are subject to a number of important limitations and exceptions as set forth in the 2031 Indenture.

The 2031 Indenture also provides for events of default, which, if any of them occurs, may permit or, in certain circumstances, require the principal, premium, if any, interest and any other monetary obligations on all the then-outstanding Senior Notes 2031 to be due and payable immediately.

Senior Notes 2031 are guaranteed on a senior unsecured basis by the Company and the Company’s existing and future wholly-owned subsidiaries (other than OTHI) that borrow or guarantee the obligations under our existing senior credit facilities.

Senior Notes 2031 and the guarantees rank equally in right of payment with all of the Company’s, OTHI’s and the guarantors’ existing and future senior unsubordinated debt and will rank senior in right of payment to all of the Company’s, OTHI’s and the guarantors’ future subordinated debt.

Senior Notes 2031 and the guarantees will be effectively subordinated to all of the Company’s, OTHI’s and the guarantors’ existing and future secured debt, including the obligations under the senior credit facilities, to the extent of the value of the assets securing such secured debt.

The foregoing description of the 2031 Indenture does not purport to be complete and is qualified in its entirety by reference to the full text of the 2031 Indenture, which is filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on November 24, 2021.

Senior Notes 2030

On February 18, 2020 Open Text Holdings, Inc.

(OTHI), a wholly-owned indirect subsidiary of the Company, issued $900 million in aggregate principal amount of 4.125% Senior Notes due 2030 guaranteed by 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.

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.

We may redeem all or a portion of the Senior Notes 2030 at any time prior to February 15, 2025 at a redemption price equal to 100% of the principal amount of the Senior Notes 2030 plus an applicable premium, plus accrued and unpaid interest, if any, to the redemption date.

We may also redeem up to 40% of the aggregate principal amount of the Senior Notes 2030, on one or more occasions, prior to February 15, 2025, using the net proceeds from certain qualified equity offerings at a redemption price of 104.125% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, subject to compliance with certain conditions.

We may, on one or more occasions, redeem the Senior Notes 2030, in whole or in part, at any time on and after February 15, 2025 at the applicable redemption prices set forth in the indenture governing the Senior Notes 2030, dated as of February 18, 2020, among OTHI, the Company, the subsidiary guarantors party thereto, The Bank of New York Mellon, as U.S.

OTHI may redeem all or a portion of the Senior Notes 2030 at any time prior to February 15, 2025 at a redemption price equal to 100% of the principal amount of the Senior Notes 2030 plus an applicable premium, plus accrued and unpaid interest, if any, to the redemption date.

OTHI may also redeem up to 40% of the aggregate principal amount of the Senior Notes 2030, on one or more occasions, prior to February 15, 2025, using the net proceeds from certain qualified equity offerings at a redemption price of 104.125% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, subject to compliance with certain conditions.

OTHI may, on one or more occasions, redeem the Senior Notes 2030, in whole or in part, at any time on and after February 15, 2025 at the applicable redemption prices set forth in the indenture governing the Senior Notes 2030, dated as of February 18, 2020, among OTHI, the Company, the subsidiary guarantors party thereto, The Bank of New York Mellon, as U.S.

trustee, and BNY Trust Company of Canada, as Canadian trustee (the 2030 Indenture), plus accrued and unpaid interest, if any, to the redemption date.

If we experience one of the kinds of change of control triggering events specified in the 2030 Indenture, we will be required to make an offer to repurchase the Senior Notes 2030 at a price equal to 101% of the principal amount of the Senior Notes 2030, plus accrued and unpaid interest, if any, to the date of purchase.

If we experience one of the kinds of change of control triggering events specified in the 2030 Indenture, OTHI will be required to make an offer to repurchase the Senior Notes 2030 at a price equal to 101% of the principal amount of the Senior Notes 2030, plus accrued and unpaid interest, if any, to the date of purchase.

The 2030 Indenture contains covenants that limit the Company, OTHI and certain of the Company's subsidiaries’ ability to, among other things:

(i) create certain liens and enter into sale and lease-back transactions;

(ii) create, assume, incur or guarantee additional indebtedness of the Company, OTHI or certain of the Company's subsidiaries without such subsidiary becoming a subsidiary guarantor of Senior Notes 2030;

(ii) in the case of our non-guarantor subsidiaries, create, assume, incur or guarantee additional indebtedness of the Company, OTHI or the guarantors without such subsidiary becoming a subsidiary guarantor of Senior Notes 2030;

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

6 unchanged sentences

Senior Notes 2029

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.

On November 24, 2021, we issued $850 million in aggregate principal amount of 3.875% Senior Notes due 2029 (Senior Notes 2029) in an unregistered offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act and to certain non-U.S.

persons in offshore transactions pursuant to Regulation S under the Securities Act.

Senior Notes 2029 bear interest at a rate of 3.875% per annum, payable semi-annually in arrears on June 1 and December 1, commencing on June 1, 2022.

Senior Notes 2029 will mature on December 1, 2029, unless earlier redeemed, in accordance with their terms, or repurchased.

We may redeem all or a portion of the Senior Notes 2029 at any time prior to December 1, 2024 at a redemption price equal to 100% of the principal amount of the Senior Notes 2029 plus an applicable premium, plus accrued and unpaid interest, if any, to the redemption date.

We may also redeem up to 40% of the aggregate principal amount of the Senior Notes 2029, on one or more occasions, prior to December 1, 2024, using the net proceeds from certain qualified equity offerings at a redemption price of 103.875% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, subject to compliance with certain conditions.

We may, on one or more occasions, redeem the Senior Notes 2029, in whole or in part, at any time on and after December 1, 2024 at the applicable redemption prices set forth in the indenture governing the Senior Notes 2029, dated as of November 24, 2021, among the Company, the subsidiary guarantors party thereto, The Bank of New York Mellon, as U.S.

trustee, and BNY Trust Company of Canada, as Canadian trustee (the 2029 Indenture), plus accrued and unpaid interest, if any, to the redemption date.

If we experience one of the kinds of change of control triggering events specified in the 2029 Indenture, we will be required to make an offer to repurchase the Senior Notes 2029 at a price equal to 101% of the principal amount of the Senior Notes 2029, plus accrued and unpaid interest, if any, to the date of purchase.

The 2029 Indenture contains covenants that limit our and certain of our subsidiaries’ ability to, among other things:

(i) create certain liens and enter into sale and lease-back transactions;

(ii) in the case of our non-guarantor subsidiaries, create, assume, incur or guarantee additional indebtedness of the Company or the guarantors without such subsidiary becoming a subsidiary guarantor of Senior Notes 2029;

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

These covenants are subject to a number of important limitations and exceptions as set forth in the 2029 Indenture.

The 2029 Indenture also provides for events of default, which, if any of them occurs, may permit or, in certain circumstances, require the principal, premium, if any, interest and any other monetary obligations on all the then-outstanding Senior Notes 2029 to be due and payable immediately.

Senior Notes 2029 are guaranteed on a senior unsecured basis by our existing and future wholly-owned subsidiaries that borrow or guarantee the obligations under our existing senior credit facilities.

Senior Notes 2029 and the guarantees rank equally in right of payment with all of our and our guarantors’ existing and future senior unsubordinated debt and will rank senior in right of payment to all of our and our guarantors’ future subordinated debt.

Senior Notes 2029 and the guarantees will

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

The foregoing description of the 2029 Indenture does not purport to be complete and is qualified in its entirety by reference to the full text of the 2029 Indenture, which is filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on November 24, 2021.

Senior Notes 2028

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.

7 unchanged sentences

(i) create certain liens and enter into sale and lease-back transactions;

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

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

12 unchanged sentences

The outstanding aggregate principal amount of Senior Notes 2026, after taking into consideration the additional issuance, is $850 million.

We may redeem all or a portion of the Senior Notes 2026 at any time prior to June 1, 2021 at a redemption price equal to 100% of the principal amount of Senior Notes 2026 plus an applicable premium, plus accrued and unpaid interest, if any, to the redemption date.

We may also, on one or more occasions, redeem Senior Notes 2026, in whole or in part, at any time on and after June 1, 2021 at the applicable redemption prices set forth in the indenture governing the Senior Notes 2026, dated as of May 31, 2016, among the Company, the subsidiary guarantors party thereto, The Bank of New York Mellon, as U.S.

trustee, and BNY Trust Company of Canada, as Canadian trustee (the 2026 Indenture), plus accrued and unpaid interest, if any, to the redemption date.

If we experience one of the kinds of changes of control triggering events specified in the 2026 Indenture, we will be required to make an offer to repurchase Senior Notes 2026 at a price equal to 101% of the principal amount of Senior Notes 2026, plus accrued and unpaid interest, if any, to the date of purchase.

The 2026 Indenture contains covenants that limit our and certain of our subsidiaries’ ability to, among other things:

(i) create certain liens and enter into sale and lease-back transactions;

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

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

These covenants are subject to a number of important limitations and exceptions as set forth in the 2026 Indenture.

The 2026 Indenture also provides for events of default, which, if any of them occurs, may permit or, in certain circumstances, require the principal, premium, if any, interest and any other monetary obligations on all the then-outstanding notes to be due and payable immediately.

Senior Notes 2026 are guaranteed on a senior unsecured basis by our existing and future wholly-owned subsidiaries that borrow or guarantee the obligations under our existing senior credit facilities.

Senior Notes 2026 and the guarantees rank equally in right of payment with all of our and our guarantors’ existing and future senior unsubordinated debt and will rank senior in right of payment to all of our and our guarantors’ future subordinated debt.

Senior Notes 2026 and the guarantees will be effectively subordinated to all of our and our guarantors’ existing and future secured debt, including the obligations under the senior credit facilities, to the extent of the value of the assets securing such secured debt.

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

On December 9, 2021, we redeemed Senior Notes 2026 in full at a price equal to 102.9375% of the principal amount plus accrued and unpaid interest to, but excluding, the redemption date.

A portion of the net proceeds from the offerings of Senior Notes 2029 and Senior Notes 2031 was used to redeem Senior Notes 2026.

Upon redemption, Senior Notes 2026 were cancelled and any obligation thereunder was extinguished.

The resulting loss of $27.4 million, consisting of $25.0 million relating to the early termination call premium, $6.2 million relating to unamortized debt issuance costs and ($3.8) million relating to unamortized premium, has been recorded as a component of Other income (expense), net in our Condensed Consolidated Statements of Income (Loss).

See note 22 "Other Income (Expense), Net" to our Condensed Consolidated Financial Statements.

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

3 unchanged sentences

Borrowings under Term Loan B bear interest at a rate per annum equal to an applicable margin plus, at the borrower’s option, either (1) the Eurodollar rate for the interest period relevant to such borrowing or (2) an ABR rate.

The applicable margin for borrowings under Term Loan B is 1.75%, with respect to LIBOR advances and 0.75%, with respect to ABR

The applicable margin for borrowings under Term Loan B is 1.75%, with respect to LIBOR advances and 0.75%, with respect to ABR advances.

The interest on the current outstanding balance for Term Loan B is equal to 1.75% plus LIBOR (subject to a 0.00% floor).

As of September 30, 2021, the outstanding balance on the Term Loan B bears an interest rate of 1.84%.

As of December 31, 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.

3 unchanged sentences

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.

As of December 31, 2021, our consolidated net leverage ratio was 2.0:1.

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.

5 unchanged sentences

As of September 30, 2021, we had no outstanding balance under the Revolver (June 30, 2021—nil).

As of December 31, 2021, we had no outstanding balance under the Revolver (June 30, 2021—nil).

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

Shelf Registration Statement

On November 29, 2019, we filed a universal shelf registration statement on Form S-3 with the SEC, which became effective automatically (the Shelf Registration Statement).

On December 6, 2021, we filed a universal shelf registration statement on Form S-3 with the SEC, which became effective automatically (the Shelf Registration Statement).

The Shelf Registration Statement allows for primary and secondary offerings from time to time of equity, debt and other securities, including Common Shares, Preference Shares, debt securities, depositary shares, warrants, purchase contracts, units and subscription receipts.

A base shelf short-form prospectus qualifying the distribution of such securities was concurrently filed with Canadian securities regulators on November 29, 2019.

A short-form base shelf prospectus qualifying the distribution of such securities was concurrently filed with Canadian securities regulators on December 6, 2021.

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

Share Repurchase Plan / Normal Course Issuer Bid

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

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

The Repurchase Plan will be effected in accordance with Rule 10b-18 under the Exchange Act (Rule 10b-18).

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

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

During the 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 on the NASDAQ Global Select Market, the Toronto Stock Exchange (as part of a NCIB) 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").

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

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

The Repurchase Plan was effected in accordance with Rule 10b-18 under the Exchange Act (Rule 10b-18).

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

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

On November 4, 2021, the Board authorized a share repurchase plan, pursuant to which we may purchase in open market transactions, from time to time over the 12 month period commencing November 12, 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 NCIB) 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").

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.

Purchases made under the Renewed Repurchase Plan are be 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.

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 have been and will be cancelled.

During the three and six months ended December 31, 2021, we repurchased and cancelled 1,809,559 Common Shares, respectively, for $91.0 million, respectively (three and six months ended December 31, 2020—nil, respectively).

Share repurchases during the three and six months ended December 31, 2021 were completed under the share repurchase plans authorized on both November 5, 2020 and November 4, 2021.

Normal Course Issuer Bid

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

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

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

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

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

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

The TSX has approved the Company's notice of intention to commence the Renewed NCIB pursuant to which the Company may purchase Common Shares over the TSX for the period commencing November 12, 2021 until November 11, 2022 in accordance with the TSX's normal course issuer bid rules, including that such purchases are to be made at prevailing market prices or as otherwise permitted.

Under the rules of the TSX, the maximum number of Common Shares that may be purchased in this period is 13,638,008 (representing 5% of the Company’s issued and outstanding Common Shares as of October 31, 2021), and the maximum number of Common Shares that may be purchased on a single day is 112,590 Common Shares, which is 25% of 450,361 (the average daily trading volume for the Common Shares on the TSX for the six months ended October 31, 2021), subject to certain exceptions for block purchases, subject in any case to the volume and other limitations under Rule 10b-18.

As of September 30, 2021, our total unfunded pension plan obligations were $77.6 million, of which $2.6 million is payable within the next twelve months.

The TSX approved the Company's notice of intention to commence the Renewed NCIB pursuant to which the Company may purchase Common Shares over the TSX for the period commencing November 12, 2021 until November 11, 2022 in accordance with the TSX's normal course issuer bid rules, including that such purchases are to be made at prevailing market prices or as otherwise permitted.

Under the rules of the TSX, the maximum number of Common Shares that may be purchased

in this period is 13,638,008 (representing 5% of the Company’s issued and outstanding Common Shares as of October 31, 2021), and the maximum number of Common Shares that may be purchased on a single day is 112,590 Common Shares, which is 25% of 450,361 (the average daily trading volume for the Common Shares on the TSX for the six months ended October 31, 2021), subject to certain exceptions for block purchases, subject in any case to the volume and other limitations under Rule 10b-18.

As of December 31, 2021, our total unfunded pension plan obligations were $77.6 million, of which $2.6 million is payable within the next twelve months.

We expect to be able to make the long-term and short-term payments related to these obligations in the normal course of operations.

3 unchanged sentences

CDT GXS GER GXS PHP

2022 (nine months ended) $ 650 $ 781 $ 25

2022 (six months ended) $ 418 $ 502 $ 8

2023 912 993 255

6 unchanged sentences

Commitments and Contractual Obligations

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

As of December 31, 2021, 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 -

Total January 1, 2022 -

June 30, 2022 July 1, 2022 -

20 unchanged sentences

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

1 unchanged sentence

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.

Assuming the utilization of available tax attributes (further described below), we estimate our potential aggregate liability, as of December 31, 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 $73 million.

As of December 31, 2021, we have provisionally paid approximately $33 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 December 31, 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.

4 unchanged sentences

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 CRA has also been 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.

1 unchanged sentence

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 have made extensive submissions in support of our position.

CRA’s 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 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.

Despite our submissions, on February 1, 2022, we were notified that the CRA issued a notice of reassessment in respect of Fiscal 2017 on the basis of its position set forth in the Proposal Letter.

If 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.

22 unchanged sentences

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.

On December 21, 2021, the First Circuit issued a decision reversing and remanding the Securities Actions to the district court for further proceedings.

The defendants remain confident in their position, believe the Securities Actions are without merit, and will continue to vigorously defend the matter.

Carbonite vs Realtime Data

18 unchanged sentences

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 order before staying the case pending the appeal in the related case.

District Court for the District of Massachusetts recently issued a claim construction order.

We anticipate motion practice based upon the result of that order.

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

4 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis