What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-03 compared with 2022-05-04 · 338 added, 497 removed, 719 unchanged (54% of the section changed)

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

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

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

(iv) business trends;

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

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

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

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

(x) declaration of quarterly dividends;

(xi) future tax rates;

(xii) the changing regulatory environment;

(xiii) annual recurring revenues;

(xiv) research and development and related expenditures;

(xv) our building, development and consolidation of our network infrastructure;

(xvi) competition and changes in the competitive landscape;

(xvii) our management and protection of intellectual property and other proprietary rights;

(xviii) existing and foreign sales and exchange rate fluctuations;

(xix) cyclical or seasonal aspects of our business;

(xx) capital expenditures;

(xxi) potential legal and/or regulatory proceedings;

(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;

(xxiv) the expected impact of our decision to cease all direct business in Russia and Belarus and with known Russian-owned companies;(xxv) expected costs of the restructuring plans;

and (xxvi) other matters.

(vii) our expectation to grow MSPs;

(viii) product and solution developments, enhancements and releases, the timing thereof and the customers targeted;

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

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

(xi) declaration of quarterly dividends;

(xii) future tax rates;

(xiii) the changing regulatory environment;

(xiv) annual recurring revenues;

(xv) research and development and related expenditures;

(xvi) our building, development and consolidation of our network infrastructure;

(xvii) competition and changes in the competitive landscape;

(xviii) our management and protection of intellectual property and other proprietary rights;

(xix) existing and foreign sales and exchange rate fluctuations;

(xx) cyclical or seasonal aspects of our business;

(xxi) capital expenditures;

(xxii) potential legal and/or regulatory proceedings;

(xxiii) acquisitions and their expected impact, including expectations regarding the financing of pending acquisitions, our ability to close on pending acquisitions and our ability to realize the benefits expected from the acquisitions and to successfully integrate the assets we acquire or utilize such assets to their full capacity, including in connection with the acquisition of Zix Corporation and the proposed Micro Focus Acquisition (see Note 19 “Acquisitions” to our Condensed Consolidated Financial Statements for more details);

(xxiv) tax audits;

(xxv) the expected impact of our decision to cease all direct business in Russia and Belarus and with known Russian-owned companies;(xxvi) expected costs of the restructuring plans;

(xxvii) targets regarding greenhouse gas emissions, waste diversion, energy consumption and Equity, Diversity and Inclusion (ED&I) initiatives;

and (xxviii) other matters.

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

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

(iii) the stability of general political, economic and market conditions;

(iv) our ability to manage inflation, including rising interest rates and increased labour costs associated with attracting and retaining employees;

(iii) the stability of general political, economic and market conditions, including any potential recession;

(iv) our ability to manage inflation, including increased labour costs associated with attracting and retaining employees and rising interest rates;

(v) our continued ability to manage certain foreign currency risk through hedging;

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The risks and uncertainties that may affect forward-looking statements include, but are not limited to:

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

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

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

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

(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 the impact of geopolitical instability, political unrest, war and other global conflicts, 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) adverse macroeconomic conditions, including inflation, disruptions in global supply chains and increased labour costs;

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

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

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

(i) those relating to the failure of the Micro Focus Acquisition to be consummated on these terms or at all for any reason;

(ii) those relating to the significant transaction costs incurred in connection with the Micro Focus Acquisition;

(iii) the inability to obtain required governmental and regulatory approvals for the Micro Focus Acquisition;

(iv) the inability of us to realize successfully any anticipated synergy benefits when the Micro Focus Acquisition is implemented;

(v) the actual and potential impacts of the use of cash and incurrence of indebtedness, including the granting of security interests related to such debt, in connection with financing of the Micro Focus Acquisition;

(vi) the actual and potential change in scope and size of our operations following the Micro Focus Acquisition;

(vii) the uncertainty around expectations related to Micro Focus’s business prospects;

(viii) actual and potential risks and uncertainties relating to the ultimate geographic spread of COVID-19, the severity of the disease and the duration of the COVID-19 pandemic and issues relating to the resurgence of COVID-19 and/

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or new strains of COVID-19, including potential material adverse effects on our business, operations and financial performance;

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

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

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

(xii) 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, (xiii) the potential for the incurrence of or assumption of debt in connection with acquisitions, its impact on future operations and on the ratings or outlooks of rating agencies on our outstanding debt securities, and the possibility of not being able to generate sufficient cash to service all indebtedness;

(xiv) 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;

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

(xvi) fluctuations in currency exchange rates (including as a result of the impact of any policy changes resulting from trade and tariff disputes) and the impact of mark-to-market valuation relating to associated derivatives;

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

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

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

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

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

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

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

(xxiv) increase in exposure to international business risks (including the impact of geopolitical instability, political unrest, war and other global conflicts, as we continue to increase our international operations;

(xxv) adverse macroeconomic conditions, including inflation, disruptions in global supply chains and increased labour costs;

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

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

and (xxviii) 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:

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

(vi) failure to comply with privacy laws and regulations that are extensive, open to various interpretations and complex to implement including General Data Protection Regulation (GDPR), California Consumer Privacy Act, 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);

(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, Connecticut Data Privacy Act, Utah Consumer Privacy Act, and Country by Country Reporting (including with respect to transferring personal data outside of the European Economic Area and the United Kingdom, as a result of the 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 (SCCs) are a valid transfer mechanism unless the country to which personal data is exported restricts the ability to comply with such Clauses (Schrems II), and with respect to the new SCCs published by the European Commission and the International Data Transfer Agreement and Addendum published by the United Kingdom’s Information Commissioner’s Office to meet the requirements of GDPR and Schrems II);

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

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

(xiv) failure to achieve our environmental goals on energy consumption, waste diversion and greenhouse gas emissions;

(xiv) failure to achieve our environmental goals on energy consumption, waste diversion and greenhouse gas emissions or our targets relating to ED&I initiatives;

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

Readers should carefully review Part II, Item 1A “Risk Factors” herein and the Company's Annual Report on Form 10-K, including Part I, Item 1A “Risk Factors” therein, Quarterly Reports on Form 10-Q, including Item 1A therein and other documents we file from time to time with the Securities and Exchange Commission (SEC) and other securities regulators.

and (xvi) the ability of the Company’s subsidiaries to make distributions to the Company.

Readers should carefully review Part II, Item 1A “Risk Factors” herein and the Company's Annual Report on Form 10-K, including Part I, Item 1A “Risk Factors” therein, Quarterly Report on Form 10-Q, including Item 1A therein and other documents we file from time to time with the Securities and Exchange Commission (SEC) and other securities regulators.

A number of factors may materially affect our business, financial condition, operating results and prospects.

These factors include but are not limited to those set forth in Part II, Item 1A “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q and in the Company's Annual Report on Form 10-K.

Any one of these factors, and other factors that we are unaware of, or currently deem immaterial, may cause our actual results to differ materially from recent results or from our anticipated future results.

Any one of these factors, and other factors that we are unaware of, or currently deem immaterial, may cause our actual results to differ materially from recent results or from our anticipated

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future results.

Readers are cautioned not to place undue reliance upon any such forward-looking statements, which speak only as of the date made.

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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 and nine months ended March 31, 2022 compared with the three and nine months ended March 31, 2021, unless otherwise noted.

All dollar and percentage comparisons made herein refer to the three months ended September 30, 2022 compared with the three months ended September 30, 2021, 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.

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

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

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

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

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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.

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

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

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

As of March 31, 2022, 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.

As of September 30, 2022, we employed a total of approximately 14,500 individuals, of which 6,900 or 48% are in the Americas, 2,720 or 19% are in EMEA and 4,880 or 34% 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.

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Quarterly Summary:

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

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

• Total revenue was $852.0 million, up 2.4% compared to the same period in the prior fiscal year;

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• GAAP-based gross margin was 69.7% compared to 69.0% in the same period in the prior fiscal year.

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• Non-GAAP-based gross margin was 75.2% compared to 75.7% in the same period in the prior fiscal year.

• GAAP-based net income attributable to OpenText was $74.7 million compared to $91.5 million in the same period in the prior fiscal year.

• GAAP-based net income (loss) attributable to OpenText was $(116.9) million compared to $131.9 million in the same period in the prior fiscal year, primarily due to $181.5 million unrealized losses on derivatives not designated as hedges.

• Non-GAAP-based net income attributable to OpenText was $206.8 million compared to $227.8 million in the same period in the prior fiscal year.

• GAAP-based earnings per share (EPS), diluted, was $0.28 compared to $0.33 in the same period in the prior fiscal year.

• GAAP-based earnings (loss) per share (EPS), diluted, was $(0.43) compared to $0.48 in the same period in the prior fiscal year.

• Non-GAAP-based EPS, diluted, was $0.77 compared to $0.83 in the same period in the prior fiscal year.

• Adjusted EBITDA was $304.0 million compared to $323.4 million in the same period in the prior fiscal year.

• Operating cash flow was $729.9 million for the nine months ended March 31, 2022 compared to $579.9 million in the same period in the prior fiscal year, up 25.9%.

• Cash and cash equivalents were $1,633.7 million as of March 31, 2022, compared to $1,607.3 million as of June 30, 2021.

• Operating cash flow was $132.0 million compared to $189.7 million in the same period in the prior fiscal year, down 30.4%.

• Cash and cash equivalents were $1,704.4 million as of September 30, 2022, compared to $1,693.7 million as of June 30, 2022.

• Enterprise cloud bookings were $111.7 million, an increase of approximately 37% over the same period in the prior fiscal year.

We define Enterprise cloud bookings as the total value from cloud services and subscription contracts entered into in the period that is new, committed and incremental to our existing contracts, excluding the impact of Carbonite and Zix.

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

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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.

Proposed Acquisition of Micro Focus

On August 25, 2022, we announced an agreement on the terms of an all-cash offer (through our wholly-owned subsidiary), to acquire the entire issued and to be issued share capital of Micro Focus, at a price of 532 pence per share, for a total purchase price of approximately $6.0 billion, inclusive of Micro Focus’ cash and debt.

The all-cash consideration for the Micro Focus Acquisition is expected to be funded by new debt, cash on hand and a draw on our Revolver.

Concurrent with the announcement of the Micro Focus Acquisition, the Company entered into the Acquisition Term Loan and Bridge Loan (see Note 11 “Long-Term Debt”) as well as certain derivative transactions (see Note 17 “Derivative Instruments and Hedging Activities”).

These derivative transactions were marked-to-market during the three months ended September 30, 2022, with the resulting unrealized gains (losses) on these derivatives recognized in Other Income (Expense) within our Condensed Consolidated Statements of Income.

On October 18, 2022 the shareholders of Micro Focus approved the all-cash offer.

The Micro Focus Acquisition is expected to close in the first quarter of calendar 2023, subject to the satisfaction (or, where applicable, waiver) of certain conditions.

Micro Focus’s leadership positions in key complementary markets will expand OpenText’s strategic presence in high value segments.

See Note 1 “Basis of Presentation” to our Condensed Consolidated Financial Statements for more details, and see Part II, Item 1A, “Risk Factors” included within this Quarterly Report on Form 10-Q.

Acquisition of Zix Corporation

On December 23, 2021, we acquired all of the equity interest in Zix Corporation (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 $894.5 million paid in cash, inclusive of $38.3 million of cash acquired and $18.6 million relating to the cash settlement of pre-acquisition vested share-based compensation that was previously accrued but since paid as of March 31, 2022.

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 $17.8 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.

We expect to continue to strategically acquire companies, products, services and technologies to augment our existing business.

Our acquisitions, particularly significant ones, can affect the period-to-period comparability of our results.

See Note 19 “Acquisitions” to our Condensed Consolidated Financial Statements for more details.

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Impacts of COVID-19

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

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

The extent of the adverse impact of the pandemic on the global economy and markets will continue to depend, in part, on the length and severity of the measures taken to limit the spread of the virus (including any current and/or new variants), the availability, effectiveness and use of treatments and vaccines (including the effectiveness of boosters) and, in part, on the size and effectiveness of the compensating measures taken by governments and on actual and potential resurgences.

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

We continue to conduct business with substantial modifications to employee travel and work locations and also virtualization of sales and marketing events, which we expect to remain in place throughout 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.

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

As previously disclosed, during the fourth quarter of Fiscal 2020, our Compensation Committee and Board approved certain compensation adjustments in order to preemptively mitigate the operational impacts of COVID-19.

These adjustments remained in effect until December 1, 2020, at which time all previously announced compensation adjustments were prospectively restored.

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

We continue to closely monitor the potential effects and impact of the spread of COVID-19 on our operations, businesses and financial performance, including liquidity and capital usage.

We have conducted business with modifications to employee travel and work locations and also virtualization of certain events, along with modified interactions with customers and suppliers, among other modifications.

In addition, we have implemented a Flex-Office program in which a majority of our employees work a portion of their time in the office and a portion remotely.

We will continue to actively monitor the impact of the COVID-19 pandemic on all aspects of our business and geographies, 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.

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

For more information, please see Part II, Item 1A “Risk Factors” included elsewhere within this Quarterly Report on Form 10-Q and Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for Fiscal 2022.

Impacts of Russia-Ukraine Conflict

We have ceased all direct business in Russia and Belarus and with known Russian-owned companies.

To support certain of our cloud customers headquartered in the United States or allied countries that rely on our network to manage their global business (including their business in Russia), we have nonetheless allowed these customers to continue to use our services to the extent that it can be done in strict compliance with all applicable sanctions and export controls.

However, we may adjust our business practices as required by applicable rules and regulations.

While we do not expect our decision to cease all direct business in Russia and Belarus and with known Russian-owned companies to have a material adverse effect on our overall business, results of operations or financial condition, it is not possible to predict the broader consequences of this conflict, including adverse effects on the global economy, on our business and operations as well as those of our customers, partners and third party service providers.

For more information, please see Part I, Item 1A “Risk Factors” included in our Annual Report on Form 10-K for Fiscal 2022.

Outlook for Remainder of Fiscal 2023

As an organization, we are committed to “Total Growth,” meaning we strive towards delivering value through organic growth initiatives, innovations and acquisitions, as well as financial performance.

With an emphasis on increasing recurring revenues and expanding our margins, we believe our Total Growth strategy will ultimately drive cash flow generation, thus helping to fuel our disciplined capital allocation approach and further our ability to deepen our account coverage and identify and execute strategic acquisitions.

With strategic acquisitions, we are better positioned to expand our sales coverage and product portfolio and improve our ability to innovate and grow organically, which helps us to meet our long-term growth targets.

We believe this “Total Growth” strategy is a durable model that will create shareholder value over both the near and long-term.

As an organization, we are committed to “Total Growth,” meaning we strive towards delivering value through organic initiatives, innovations and acquisitions, as well as financial performance.

With an emphasis on increasing recurring revenues and expanding our margins, we believe our Total Growth strategy will ultimately drive overall cash flow generation, thus helping to fuel our disciplined capital allocation approach and further our ability to deepen our account coverage and identify and execute strategic acquisitions.

With strategic acquisitions, we are well positioned to expand our product portfolio and improve our ability to innovate and grow organically, which will help us to meet our long-term growth targets.

We believe our Total Growth strategy is a durable model that will create both near and long-term shareholder value through organic and acquired growth, capital efficiency and profitability.

We are committed to continuous innovation.

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

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

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.

On a fiscal year-to-date basis, we have invested $321.5 million or 12.4% 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.

OpenText Anywhere is our commitment to enable organizations of all sizes to deploy our products in any combination of public and private clouds, managed services and off-cloud solutions.

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

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

The G10K are the world's largest companies, ranked by estimated total revenues, as well as the world's largest governments and organizations.

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

On a fiscal year-to-date basis, we have invested $110.2 million or 12.9% of revenue in R&D expense, in line with our target to spend 12% to 14% of revenues for R&D expense this fiscal year.

Looking ahead, the destination for innovation is hybrid-cloud.

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

As a result, we are committed to continue to modernize our technology infrastructure and leverage our existing investments in the OpenText Cloud and programs to help customers off-cloud.

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

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

We will continue to closely monitor the potential impacts of COVID-19, inflation with respect to wages, services and goods and the Russia-Ukraine conflict on our business.

We anticipate that we will complete the Micro Focus Acquisition in the first quarter of calendar year 2023, subject to the satisfaction (or, where applicable, waiver) of certain conditions.

The Micro Focus Acquisition will substantially expand our scope and size by adding substantial assets and operations to our existing business.

We have incurred and will continue to incur, transaction costs in connection with the Micro Focus Acquisition, including payment of certain fees and expenses to obtain financing for the Micro Focus Acquisition.

Concurrent with the announcement of the Micro Focus Acquisition, the Company entered into the Acquisition Term Loan and Bridge Loan (see Note 11 “Long-Term Debt”) as well as certain derivative

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transactions (see Note 17 “Derivative Instruments and Hedging Activities”).

We intend to reduce the commitments or borrowings under the Bridge Loan by accessing the debt capital markets directly or through certain affiliates prior to or following the closing of the Micro Focus Acquisition, but no assurance can be given that the Company will be able to do so.

Derivative transactions that were entered into were marked-to-market during the three months ended September 30, 2022, with the resulting unrealized gains (losses) on these derivatives recognized in Other Income (Expense) within our Condensed Consolidated Statements of Income (see Note 22 “Other Income (Expense), Net”).

We anticipate mark-to-market valuation adjustments to continue, based on market fluctuations, and will be recognized in Other Income (Expense) up to the completion of the Micro Focus Acquisition.

For the tax impact of the mark-to-market valuation adjustment (see Note 15 “Income Taxes”).

We anticipate we will also incur additional integration costs following the close of the Micro Focus Acquisition.

See also Part II, Item 1A, “Risk Factors” included within this Quarterly Report on Form 10-Q.

We will continue to closely monitor the potential impacts of COVID-19, inflation with respect to wages, services and goods, concerns regarding any potential recession, rising interest rates, financial market volatility, and the Russia-Ukraine conflict on our business.

We do not expect our decision to cease all direct business in Russia and Belarus and with known Russian-owned companies to have a material adverse effect on our overall business, results of operations or financial condition.

See Part II, Item 1A, "Risk Factors" included within this Quarterly Report on Form 10-Q.

See Part II, Item 1A, “Risk Factors” included within this Quarterly Report on Form 10-Q and Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for Fiscal 2022.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

12 unchanged sentences

For a full discussion of all our accounting policies, please see Note 2 “Accounting Policies and Recent Accounting Pronouncements” to the Consolidated Financial Statements included in our Annual Report on Form 10-K for Fiscal 2022.

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 March 31, 2022, 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.

Please also see “Risk Factors” included within Part II, Item 1A of this Quarterly Report on Form 10-Q and Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for Fiscal 2021.

RESULTS OF OPERATIONS

1 unchanged sentence

For each of the periods indicated below, we present our revenues by product type, revenues by major geography, cost of revenues by product type, total gross margin, total operating margin, gross margin by product type, and their corresponding percentage of total revenue.

In addition, we provide Non-GAAP measures for the periods discussed in order to provide additional information to investors that we believe will be useful as this presentation is in line with how our management assesses our Company's performance.

In addition, we provide Non-GAAP measures for the periods discussed to provide additional information to investors that we believe will be useful as this presentation aligns with how our management assesses our Company's performance.

See “Use of Non-GAAP Financial Measures” below for a reconciliation of GAAP-based measures to Non-GAAP-based measures.

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Summary of Results of Operations

Three Months Ended March 31, Nine Months Ended March 31,

Three Months Ended September 30,

(In thousands) 2022 Change

increase (decrease) 2021 2022 Change

increase (decrease) 2021

37 unchanged sentences

Asia Pacific (4)

7.7 % 8.0 % 8.1 % 8.2 %

Other Metrics:

2 unchanged sentences

75.2 % 75.7 %

Net income, attributable to OpenText $ 74,681 $ 91,490 $ 294,894 $ 129,389

GAAP-based EPS, diluted $ 0.28 $ 0.33 $ 1.08 $ 0.47

Net income (loss), attributable to OpenText $ (116,929) $ 131,915

GAAP-based EPS (loss), diluted $ (0.43) $ 0.48

Non-GAAP-based EPS, diluted (5)

2 unchanged sentences

$ 304,047 $ 323,353

_______________________________

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

3 unchanged sentences

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

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Revenues, Cost of Revenues and Gross Margin by Product Type

3 unchanged sentences

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

For the quarter ended March 31, 2022, our cloud renewal rate, excluding the impact of Carbonite Inc.

(Carbonite) and Zix, was approximately 93%, consistent with the quarter ended March 31, 2021.

For the quarter ended September 30, 2022, our cloud renewal rate, excluding the impact of Carbonite Inc.

(Carbonite) and Zix, increased to 94% from 93% over the quarter ended September 30, 2021.

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 March 31, Nine Months Ended March 31,

Three Months Ended September 30,

(In thousands) 2022 Change

increase (decrease) 2021 2022 Change

increase (decrease) 2021

11 unchanged sentences

Asia Pacific 6.1 % 7.2 %

Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

Cloud services and subscriptions revenues increased by $46.1 million or 13.0% during the three months ended March 31, 2022 as compared to the same period in the prior fiscal year;

Three Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021

Cloud services and subscriptions revenues increased by $48.1 million or 13.5% during the three months ended September 30, 2022 as compared to the same period in the prior fiscal year;

up 16.9% after factoring in the unfavorable impact of $12.1 million of foreign exchange rate changes.

1 unchanged sentence

Geographically, the overall change was attributable to an increase in Americas of $40.3 million and an increase in EMEA of $8.8 million, partially offset by a decrease in Asia Pacific of $1.0 million.

There were 21 cloud services contracts greater than $1.0 million that closed during the third quarter of Fiscal 2022, compared to 16 contracts during the third quarter of Fiscal 2021.

Cost of Cloud services and subscriptions revenues increased by $12.3 million during the three months ended March 31, 2022 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 $7.0 million and increase in labour-related costs of $4.7 million.

There were 18 cloud services contracts greater than $1.0 million that closed during the first quarter of Fiscal 2023, compared to 16 contracts during the first quarter of Fiscal 2022.

Cost of Cloud services and subscriptions revenues increased by $12.0 million during the three months ended September 30, 2022 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 $8.1 million.

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

Nine Months Ended March 31, 2022 Compared to Nine Months Ended March 31, 2021

Cloud services and subscriptions revenues increased by $76.1 million or 7.3% during the nine months ended March 31, 2022 as compared to the same period in the prior fiscal year;

up 7.4% after factoring in the unfavorable impact of $1.4 million of foreign exchange rate changes.

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

Geographically, the overall change was attributable to an increase in Americas of $64.8 million, an increase in EMEA of $8.9 million and an increase in Asia Pacific of $2.5 million.

There were 64 cloud services contracts greater than $1.0 million that closed during the first nine months of Fiscal 2022, compared to 37 contracts during the first nine months of Fiscal 2021.

Cost of Cloud services and subscriptions revenues increased by $23.7 million during the nine months ended March 31, 2022 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 $13.5 million, an increase in labour-related costs of $8.5 million and an increase in other miscellaneous costs of $1.7 million.

Overall, the gross margin percentage on Cloud services and subscriptions revenues remained stable at 66%.

2) Customer Support:

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

For the quarter ended March 31, 2022, our Customer support renewal rate was approximately 94%, consistent with the quarter ended March 31, 2021.

For the quarter ended September 30, 2022, our Customer support renewal rate increased to 95%, compared to 94% for the quarter ended September 30, 2021.

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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 March 31, Nine Months Ended March 31,

Three Months Ended September 30,

(In thousands) 2022 Change

increase (decrease) 2021 2022 Change

increase (decrease) 2021

11 unchanged sentences

Asia Pacific 8.2 % 8.7 %

Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

Customer support revenues decreased by $3.4 million or 1.0% during the three months ended March 31, 2022 as compared to the same period in the prior fiscal year;

Three Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021

Customer support revenues decreased by $17.9 million or 5.3% during the three months ended September 30, 2022 as compared to the same period in the prior fiscal year;

up 0.5% after factoring in the unfavorable impact of $19.5 million of foreign exchange rate changes.

Geographically, the overall change was attributable to a decrease in EMEA of $13.9 million, a decrease in Americas of $1.0 million and a decrease in Asia Pacific of $3.0 million.

Cost of Customer support revenues increased by $0.8 million during the three months ended March 31, 2022 as compared to the same period in the prior fiscal year.

This was primarily due to an increase in labour-related costs of $0.9 million.

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

Nine Months Ended March 31, 2022 Compared to Nine Months Ended March 31, 2021

Customer support revenues increased by $2.8 million or 0.3% during the nine months ended March 31, 2022 as compared to the same period in the prior fiscal year;

up 0.5% after factoring in the unfavorable impact of $2.3 million of foreign exchange rate changes.

Geographically, the overall change was attributable to an increase in EMEA of $4.0 million and an increase in Asia Pacific of $3.1 million, partially offset by a decrease in Americas of $4.3 million.

Cost of Customer support revenues increased by $1.1 million during the nine months ended March 31, 2022 as compared to the same period in the prior fiscal year.

This was primarily due to an increase in other miscellaneous costs of $1.0 million.

Cost of Customer support revenues decreased by $2.1 million during the three months ended September 30, 2022 as compared to the same period in the prior fiscal year.

This was primarily due to a decrease in labour-related costs of $2.3 million.

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

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

Three Months Ended March 31, Nine Months Ended March 31,

Three Months Ended September 30,

(In thousands) 2022 Change

increase (decrease) 2021 2022 Change

increase (decrease) 2021

11 unchanged sentences

Asia Pacific 11.0 % 8.0 %

Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

License revenues increased by $4.3 million or 5.7% during the three months ended March 31, 2022 as compared to the same period in the prior fiscal year;

up 8.4% after factoring in the unfavorable impact of $2.1 million of foreign exchange rate changes.

Geographically, the overall change was attributable to an increase in Americas of $11.3 million and an increase in Asia Pacific of $0.5 million, partially offset by a decrease in EMEA of $7.5 million.

During the third quarter of Fiscal 2022, we closed 32 license contracts greater than $0.5 million, of which 11 contracts were greater than $1.0 million, contributing $32.6 million of License revenues.

This was compared to 21 license contracts greater than $0.5 million during the third quarter of Fiscal 2021, of which 8 contracts were greater than $1.0 million, contributing $19.4 million of License revenues.

Cost of License revenues increased by $0.4 million during the three months ended March 31, 2022 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%.

Nine Months Ended March 31, 2022 Compared to Nine Months Ended March 31, 2021

License revenues increased by $11.5 million or 4.6% during the nine months ended March 31, 2022 as compared to the same period in the prior fiscal year;

up 5.4% after factoring in the unfavorable impact of $2.1 million of foreign exchange rate changes.

Geographically, the overall change was attributable to an increase in Americas of $18.8 million, partially offset by a decrease in EMEA of $5.1 million and a decrease in Asia Pacific of $2.1 million.

During the first nine months of Fiscal 2022, we closed 81 license contracts greater than $0.5 million, of which 35 contracts were greater than $1.0 million, contributing $94.9 million of License revenues.

This was compared to 72 license contracts greater than $0.5 million during the first nine months of Fiscal 2021, of which 23 contracts were greater than $1.0 million, contributing $66.9 million of License revenues.

Cost of License revenues increased by $1.3 million during the nine months ended March 31, 2022 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%.

Three Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021

License revenues decreased by $11.0 million or 14.9% during the three months ended September 30, 2022 as compared to the same period in the prior fiscal year;

down 9.7% after factoring in the unfavorable impact of $3.8 million of foreign exchange rate changes.

Geographically, the overall change was attributable to a decrease in Americas of $5.2 million and a decrease in EMEA of $6.8 million, partially offset by an increase in Asia Pacific of $1.0 million.

During the first quarter of Fiscal 2023, we closed 22 license contracts greater than $0.5 million, of which 9 contracts were greater than $1.0 million, contributing $22.6 million of License revenues.

This was compared to 17 license contracts greater

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than $0.5 million during the first quarter of Fiscal 2022, of which 9 contracts were greater than $1.0 million, contributing $20.9 million of License revenues.

Cost of License revenues decreased by $1.2 million during the three months ended September 30, 2022 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 96% from 95%.

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 March 31, Nine Months Ended March 31,

Three Months Ended September 30,

(In thousands) 2022 Change

increase (decrease) 2021 2022 Change

increase (decrease) 2021

11 unchanged sentences

Asia Pacific 12.3 % 11.0 %

Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

Professional service and other revenues increased by $2.3 million or 3.6% during the three months ended March 31, 2022 as compared to the same period in the prior fiscal year;

up 6.4% after factoring in the unfavorable impact of $1.9 million of foreign exchange rate changes.

Geographically, the overall change was attributable to an increase in Americas of $3.2 million and increase in Asia Pacific of $1.2 million, partially offset by a decrease in EMEA of $2.1 million.

Cost of Professional service and other revenues increased by $6.4 million during the three months ended March 31, 2022 as compared to the same period in the prior fiscal year.

This was primarily due to an increase in labour-related costs of $5.7 million and an increase in other miscellaneous costs of $0.7 million.

Overall, the gross margin percentage on Professional service and other revenues decreased to 16% from 22%.

Nine Months Ended March 31, 2022 Compared to Nine Months Ended March 31, 2021

Professional service and other revenues increased by $8.4 million or 4.3% during the nine months ended March 31, 2022 as compared to the same period in the prior fiscal year;

Three Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021

Professional service and other revenues increased by $0.5 million or 0.8% during the three months ended September 30, 2022 as compared to the same period in the prior fiscal year;

up 7.2% after factoring in the unfavorable impact of $4.3 million of foreign exchange rate changes.

Geographically, the overall change was attributable to an increase in Americas of $3.3 million, an increase in Asia Pacific of $3.1 million and an increase in EMEA of $2.0 million.

Cost of Professional service and other revenues increased by $17.9 million during the nine months ended March 31, 2022 as compared to the same period in the prior fiscal year.

This was primarily due to an increase in labour-related costs of $17.6 million and an increase in other miscellaneous costs of $0.3 million.

Geographically, the overall change was attributable to an increase in Americas of $4.0 million and an increase in Asia Pacific of $0.9 million, offset by a decrease in EMEA of $4.4 million.

Cost of Professional service and other revenues increased by $2.1 million during the three months ended September 30, 2022 as compared to the same period in the prior fiscal year.

This was primarily due to an increase in labour-related costs of $1.3 million.

Overall, the gross margin percentage on Professional service and other revenues decreased to 20% from 23%.

Amortization of Acquired Technology-based Intangible Assets

Three Months Ended March 31, Nine Months Ended March 31,

Three Months Ended September 30,

(In thousands) 2022 Change

increase (decrease) 2021 2022 Change

increase (decrease) 2021

Amortization of acquired technology-based intangible assets $ 42,637 $ (10,530) $ 53,167

Amortization of acquired technology-based intangible assets decreased during the three months ended March 31, 2022 by $6.9 million as compared to the same period in the prior fiscal year.

This was due to a reduction of $10.7 million relating to intangible assets from previous acquisitions becoming fully amortized, partially offset by an increase of $3.8 million relating to amortization of newly acquired customer-based intangible assets from recent acquisitions.

Amortization of acquired technology-based intangible assets decreased during the nine months ended March 31, 2022 by $13.2 million as compared to the same period in the prior fiscal year.

This was due to a reduction of $17.3 million relating to intangible assets from previous acquisitions becoming fully amortized, partially offset by an increase of $4.1 million relating to amortization of newly acquired customer-based intangible assets from recent acquisitions.

Amortization of acquired technology-based intangible assets decreased during the three months ended September 30, 2022 by $10.5 million 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.

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Operating Expenses

Three Months Ended March 31, Nine Months Ended March 31,

Three Months Ended September 30,

(In thousands) 2022 Change

increase (decrease) 2021 2022 Change

increase (decrease) 2021

17 unchanged sentences

Change between Three Months Ended

March 31, 2022 and 2021 Change between Nine Months Ended

March 31, 2022 and 2021

September 30, 2022 and 2021

(In thousands)

increase (decrease) increase (decrease)

increase (decrease)

Payroll and payroll-related benefits $ 2,698

5 unchanged sentences

Total change in research and development expenses $ 10,033

Research and development expenses increased by $7.7 million during the three months ended March 31, 2022 as compared to the same period in the prior fiscal year, primarily as a result of recent acquisitions.

Payroll and payroll-related benefits, which is comprised of salaries, benefits and variable short-term incentives, increased by $5.6 million.

Additionally, share-based compensation expense increased by $2.2 million and contract labour and consulting increased by $1.4 million.

These increases were partially offset by reductions in facility-related expenses of $1.8 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 13%.

Research and development expenses increased by $17.3 million during the nine months ended March 31, 2022 as compared to the same period in the prior fiscal year, partially as a result of recent acquisitions.

Payroll and payroll-related benefits, which is comprised of salaries, benefits and variable short-term incentives, increased by $20.2 million, including the impact of the compensation restoration discussed under “Impacts of COVID-19” above.

Additionally, share-based compensation expense increased by $2.7 million, contract labour and consulting increased by $1.3 million and other miscellaneous costs increased by $0.7 million.

These increases were partially offset by reductions in facility-related expenses of $7.6 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 213 employees, from 4,178 employees at March 31, 2021 to 4,391 employees at March 31, 2022.

Research and development expenses increased by $10.0 million during the three months ended September 30, 2022 as compared to the same period in the prior fiscal year, primarily as a result of recent acquisitions.

Payroll and payroll-related benefits, which is comprised of salaries, benefits and variable short-term incentives, increased by $2.7 million, share-based compensation expense increased by $3.9 million and facility-related expenses increased by $1.6 million.

Overall, our research and development expenses, as a percentage of total revenues, increased to 13% compared to the same period in the prior fiscal year at 12%.

Our research and development labour resources increased by 111 employees, from 4,182 employees at September 30, 2021 to 4,293 employees at September 30, 2022.

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

Change between Three Months Ended

March 31, 2022 and 2021 Change between Nine Months Ended

March 31, 2022 and 2021

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

September 30, 2022 and 2021

(In thousands) increase (decrease)

Payroll and payroll-related benefits $ 5,225

8 unchanged sentences

Total change in sales and marketing expenses $ 20,930

Sales and marketing expenses increased by $22.3 million during the three months ended March 31, 2022 as compared to the same period in the prior fiscal year, partially as a result of recent acquisitions.

Payroll and payroll-related benefits, which is comprised of salaries, benefits and variable short-term incentives, increased by $13.8 million.

Additionally, marketing expenses increased by $4.1 million, commissions increased by $3.8 million, other miscellaneous costs increased by $1.7 million, share-based compensation expense increased by $1.2 million and travel and communication expenses increased by $1.1 million.

These increases were partially offset by reductions in credit loss expense of $2.4 million and reductions in facility-related expenses of $0.7 million.

Overall, our sales and marketing expenses, as a percentage of total revenues, increased to 21% from 19% in the same period in the prior fiscal year.

Sales and marketing expenses increased by $52.1 million during the nine months ended March 31, 2022 as compared to the same period in the prior fiscal year, partially as a result of recent acquisitions.

Payroll and payroll-related benefits, which is comprised of salaries, benefits and variable short-term incentives, increased by $37.9 million, including the impact of the compensation restoration discussed under “Impacts of COVID-19” above.

Additionally, commissions increased by $10.6 million, marketing expenses increased by $8.4 million, other miscellaneous costs increased by $2.6 million, travel and communication expenses increased by $1.9 million and share-based compensation expense increased by $1.8 million.

These increases were partially offset by reductions in credit loss expense of $7.6 million and reductions in facility-related expenses of $3.7 million.

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

Our sales and marketing labour resources increased by 322 employees, from 2,448 employees at March 31, 2021 to 2,770 employees at March 31, 2022.

Sales and marketing expenses increased by $20.9 million during the three months ended September 30, 2022 as compared to the same period in the prior fiscal year, partially as a result of recent acquisitions.

Payroll and payroll-related benefits, which is comprised of salaries, benefits and variable short-term incentives, increased by $5.2 million, commissions increased by $4.4 million, marketing expenses increased by $2.6 million, share-based compensation expense increased by $2.2 million, other miscellaneous costs increased by $1.9 million, credit loss expense increased by $1.8 million and travel and communication expenses increased by $1.7 million.

Overall, our sales and marketing expenses, as a percentage of total revenues, increased to 20% compared to the same period in the prior fiscal year at 18%.

Our sales and marketing labour resources increased by 100 employees, from 2,556 employees at September 30, 2021 to 2,656 employees at September 30, 2022.

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

March 31, 2022 and 2021 Change between Nine Months Ended

March 31, 2022 and 2021

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

September 30, 2022 and 2021

(In thousands) increase (decrease)

Payroll and payroll-related benefits $ 2,048

5 unchanged sentences

Total change in general and administrative expenses $ 6,597

General and administrative expenses increased by $16.6 million during the three months ended March 31, 2022 as compared to the same period in the prior fiscal year, partially as a result of recent acquisitions.

General and administrative expenses increased by $6.6 million during the three months ended September 30, 2022 as compared to the same period in the prior fiscal year, partially as a result of recent acquisitions.

Payroll and payroll-related benefits, which is comprised of salaries, benefits and variable short-term incentives, increased by $2.0 million.

Additionally,

contract labour and consulting increased by $2.0 million and travel and communication expenses increased by $1.4 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 $1.1 million.

Overall, general and administrative expenses, as a percentage of total revenues, increased to 10% from 9% in the same period in the prior fiscal year.

General and administrative expenses increased by $40.6 million during the nine months ended March 31, 2022 as compared to the same period in the prior fiscal year, partially as a result of recent acquisitions.

Payroll and payroll-related benefits, which is comprised of salaries, benefits and variable short-term incentives, increased by $36.0 million, including the impact of the compensation restoration discussed under “Impacts of COVID-19” above.

Additionally, contract labour and consulting increased by $5.1 million, travel and communication expenses increased by $3.6 million and share-based compensation expense 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 $4.7 million.

Overall, general and administrative expenses, as a percentage of total revenues, increased to 9% from 8% in the same period in the prior fiscal year.

Our general and administrative labour resources increased by 129 employees, from 1,851 employees at March 31, 2021 to 1,980 employees at March 31, 2022.

Additionally, share-based compensation expense increased by $1.3 million, other miscellaneous costs, which include professional fees such as legal, audit and tax related expenses increased by $1.3 million, travel and communication expenses increased by $1.0 million and facility-related expenses increased by $0.8 million.

Overall, general and administrative expenses, as a percentage of total revenues, remained stable at 9%.

Our general and administrative labour resources decreased by 48 employees, from 1,912 employees at September 30, 2021 to 1,864 employees at September 30, 2022.

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Depreciation expenses:

Three Months Ended March 31, Nine Months Ended March 31,

Three Months Ended September 30,

(In thousands) 2022 Change

increase (decrease) 2021 2022 Change

increase (decrease) 2021

Depreciation $ 23,174 $ 1,788 $ 21,386

Depreciation expenses increased during the three and nine months ended March 31, 2022 by $0.4 million and $1.3 million, respectively, compared to the same periods in the prior fiscal year.

Depreciation expenses, as a percentage of total revenue remained stable for the three and nine months ended March 31, 2022 at 3%, respectively, compared to the same periods in the prior fiscal year.

Depreciation expenses increased during the three months ended September 30, 2022 by $1.8 million compared to the same periods in the prior fiscal year.

Depreciation expenses as a percentage of total revenue remained stable for the three months ended September 30, 2022 at 3% compared to the same periods in the prior fiscal year.

Amortization of acquired customer-based intangible assets:

Three Months Ended March 31, Nine Months Ended March 31,

Three Months Ended September 30,

(In thousands) 2022 Change

increase (decrease) 2021 2022 Change

increase (decrease) 2021

Amortization of acquired customer-based intangible assets $ 54,438 $ 2,554 $ 51,884

Amortization of acquired customer-based intangible assets increased during the three months ended March 31, 2022 by $2.1 million as compared to the same period in the prior fiscal year.

This was due to an increase of $4.3 million relating to amortization of newly acquired customer-based intangible assets from recent acquisitions, partially offset by a reduction of $2.2 million relating to intangible assets from previous acquisitions becoming fully amortized.

Amortization of acquired customer-based intangible assets decreased during the nine months ended March 31, 2022 by $3.3 million as compared to the same period in the prior fiscal year.

This was due to a reduction of $8.3 million relating to intangible assets from previous acquisitions becoming fully amortized, partially offset by an increase of $5.0 million relating to amortization of newly acquired customer-based intangible assets from recent acquisitions.

Amortization of acquired customer-based intangible assets increased during the three months ended September 30, 2022 by $2.6 million as compared to the same period in the prior fiscal year.

This was primarily related to amortization of newly acquired customer-based intangible assets from recent acquisitions over the prior fiscal year.

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 March 31, Nine Months Ended March 31,

Three Months Ended September 30,

(In thousands) 2022 Change

increase (decrease) 2021 2022 Change

increase (decrease) 2021

Special charges (recoveries) $ 14,281 $ 13,937 $ 344

Special charges (recoveries) increased by $8.2 million during the three months ended March 31, 2022 over the comparative period.

Restructuring activities increased by $0.5 million during the three months ended March 31, 2022 primarily related to the Fiscal 2022 Restructuring Plan.

Additionally, other miscellaneous charges increased by $9.5 million, primarily driven by 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.

These increases were partially offset by a reduction in acquisition related costs of $1.8 million.

Special charges (recoveries) increased by $22.0 million during the nine months ended March 31, 2022 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 $6.0 million, primarily related to the Fiscal 2022 Restructuring Plan, COVID-19 Restructuring Plan and Fiscal 2020 Restructuring Plan.

Additionally, acquisition related costs increased by $1.4 million and other miscellaneous charges increased by $14.6 million, primarily driven by 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 $13.9 million during the three months ended September 30, 2022 over the comparative period.

Restructuring activities increased by $6.1 million during the three months ended September 30, 2022 primarily related to the Fiscal 2022 Restructuring Plan.

Additionally, acquisition related costs increased by $3.9 million, primarily due to the Micro Focus Acquisition and other miscellaneous charges increased by $3.8 million, primarily driven by pre-acquisition equity incentives of Zix, 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.

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

Three Months Ended March 31, Nine Months Ended March 31,

Three Months Ended September 30,

(In thousands) 2022 Change

increase (decrease) 2021 2022 Change

increase (decrease) 2021

1 unchanged sentence

$ (1,361) $ (1,712) $ 351

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

Unrealized losses on derivatives not designated as hedges (1)

(181,461) $ (181,461) —

Loss on debt extinguishment (2)

OpenText share in net income (loss) of equity investees (2)

(6,534) (35,849) 29,315

1 unchanged sentence

Total other income (expense), net $ (189,231) $ (219,013) $ 29,782

(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.

__________________________

(1) Represents the unrealized losses on our derivatives not designated as hedges related to the proposed Micro Focus Acquisition (see Note 17 “Derivative Instruments and Hedging Activities” for more details).

(2) Represents our share in net income (loss) 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).

Table of C ontents

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 March 31, Nine Months Ended March 31,

Three Months Ended September 30,

(In thousands) 2022 Change

increase (decrease) 2021 2022 Change

increase (decrease) 2021

4 unchanged sentences

Total interest and other related expense, net $ 40,382 $ 3,327 $ 37,055

__________________________

(1) For more details see Note 11 “Long-Term Debt” to our Condensed Consolidated Financial Statements.

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

Three Months Ended March 31, Nine Months Ended March 31,

Three Months Ended September 30,

(In thousands) 2022 Change

increase (decrease) 2021 2022 Change

increase (decrease) 2021

Provision for income taxes $ 33,625 $ (9,825) $ 43,450

The effective tax rate increased to a provision of 35.5% for the three months ended March 31, 2022, compared to a provision of 25.8% for the three months ended March 31, 2021.

Tax expense increased from $31.8 million during the three months ended March 31, 2021 to $41.0 million during the three months ended March 31, 2022.

This was primarily due to (i) an increase of $10.6 million related to the US Base Erosion and Anti-Abuse Tax (US BEAT) and (ii) an increase of $4.4 million relating to tax impacts of legal entity rationalization.

These were partially offset by (i) a net decrease of $2.9 million related to Foreign Accrual Property Income and (ii) a net increase of $2.1 million benefit related to the 50% exclusion on gains in certain investment funds in which we are a limited partner.

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

The effective tax rate decreased to a provision of 29.6% for the nine months ended March 31, 2022, compared to a provision of 72.5% for the nine months ended March 31, 2021.

Tax expense decreased from $342.1 million during the nine months ended March 31, 2021 to $123.8 million during the nine months ended March 31, 2022.

This was primarily due to (i) a decrease of $300.6 million related to Internal Revenue Service (IRS) settlements in Fiscal 2021, (ii) a decrease of $11.3 million related to differences in tax filings, (iii) a net decrease of $5.9 million for related Subpart F and (iv) an increase of $5.2 million benefit related to the 50% exclusion on gains in certain investment funds in which we are a limited partner.

These were partially offset by (i) an increase of $90.6 million for changes in unrecognized tax benefits, (ii) a net increase of $17.0 million related to internal reorganizations and (iii) a decrease of $4.4 million in share-based compensation benefits.

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

The Company’s effective tax rate for the three months ended September 30, 2022 was (40.4)%, compared to a provision of 24.8% for the three months ended September 30, 2021.

The Company’s effective tax rate for the three months ended September 30, 2022 differs from the Canadian statutory rate of 26.5% primarily due to the pre-tax loss created by the mark-to-market valuation on the derivatives not designated as hedges that the Company entered into in connection with the proposed Micro Focus Acquisition, and the inability to recognize a majority of the mark-to-market losses for tax purposes (see Note 17 “Derivative Instruments and Hedging Activities”).

The mark-to-market losses are considered capital losses for tax purposes and require capital income to be recognized.

Therefore we recorded a valuation allowance on the portion of the losses that are not supportable by capital gains.

Other items impacting the rate include provision to return adjustments, a net increase in uncertain tax positions, and permanent items such as disallowed stock-based compensation and foreign passive income inclusion, partially offset by research and development credits.

The Company’s effective tax rate for the three months ended September 30, 2021 differs from the Canadian statutory rate primarily due to research and development credits, partially offset by the US Base Erosion and Anti-Abuse Tax (US BEAT).

Additionally, the provision from the Tax Cuts and Jobs Act of 2017 that requires capitalization and amortization of research and development costs is effective starting Fiscal 2023.

If not deferred, modified or repealed, this provision may materially increase future cash taxes.

The Inflation Reduction Act and CHIPS and Science Act were signed into law in August 2022.

The Inflation Reduction Act introduced new provisions, including a 15% corporate alternative minimum tax for certain large corporations that have at least an average of $1 billion adjusted financial statement income over a consecutive three-tax-year period.

The corporate minimum tax will be effective for Fiscal 2024.

We are currently evaluating the applicability and the effect of the new law to our financial results.

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.

Please also see Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for Fiscal 2022.

Table of C ontents

Use of Non-GAAP Financial Measures

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GAAP measures with certain Non-GAAP measures defined below.

Non-GAAP-based net income and Non-GAAP-based EPS, attributable to OpenText, 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 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.

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GAAP-based financial measures to Non-GAAP-based financial measures for the following periods presented.

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

for the three months ended March 31, 2022

(In thousands, except for per share data)

Three Months Ended March 31, 2022

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 $ 136,020 $ (1,268) (1) $ 134,752

Customer support 31,763 (501) (1) 31,262

Professional service and other 56,693 (907) (1) 55,786

Amortization of acquired technology-based intangible assets 46,564 (46,564) (2) —

GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%) 608,047 68.9% 49,240 (3) 657,287 74.5%

Operating expenses

Research and development 117,730 (4,350) (1) 113,380

Sales and marketing 180,955 (5,761) (1) 175,194

General and administrative 88,137 (3,961) (1) 84,176

Amortization of acquired customer-based intangible assets 56,215 (56,215) (2) —

Special charges (recoveries) 11,031 (11,031) (4) —

GAAP-based income from operations / Non-GAAP-based income from operations 131,609 130,558 (5) 262,167

Other income (expense), net 24,392 (24,392) (6) —

Provision for income taxes 41,041 (9,971) (7) 31,070

GAAP-based net income / Non-GAAP-based net income, attributable to OpenText 74,681 116,137 (8) 190,818

GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText $ 0.28 $ 0.42 (8) $ 0.70

(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 35% and a Non-GAAP-based tax rate of approximately 14%;

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

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.

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

Three Months Ended March 31, 2022

Per share diluted

GAAP-based net income, attributable to OpenText $ 74,681 $ 0.28

Amortization 102,779 0.38

Share-based compensation 16,748 0.06

Special charges (recoveries) 11,031 0.04

Other (income) expense, net (24,392) (0.09)

GAAP-based provision for income taxes 41,041 0.15

Non-GAAP-based provision for income taxes (31,070) (0.12)

Non-GAAP-based net income, attributable to OpenText $ 190,818 $ 0.70

Reconciliation of Adjusted EBITDA

Three Months Ended March 31, 2022

GAAP-based net income, attributable to OpenText $ 74,681

Provision for income taxes 41,041

Interest and other related expense, net 40,238

Amortization of acquired technology-based intangible assets 46,564

Amortization of acquired customer-based intangible assets 56,215

Depreciation 22,370

Share-based compensation 16,748

Special charges (recoveries) 11,031

Other (income) expense, net (24,392)

Adjusted EBITDA $ 284,496

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

for the three months ended March 31, 2021

(In thousands, except for per share data)

Three Months Ended March 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 $ 123,729 $ (505) (1) $ 123,224

Customer support 30,953 (464) (1) 30,489

Professional service and other 50,321 (684) (1) 49,637

Amortization of acquired technology-based intangible assets 53,453 (53,453) (2) —

GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%) 571,665 68.6% 55,106 (3) 626,771 75.2%

Operating expenses

Research and development 110,071 (2,146) (1) 107,925

Sales and marketing 158,687 (4,580) (1) 154,107

General and administrative 71,548 (3,978) (1) 67,570

Amortization of acquired customer-based intangible assets 54,156 (54,156) (2) —

Special charges (recoveries) 2,846 (2,846) (4) —

GAAP-based income from operations / Non-GAAP-based income from operations 152,396 122,812 (5) 275,208

Other income (expense), net 8,283 (8,283) (6) —

Provision for income taxes 31,818 1,485 (7) 33,303

GAAP-based net income / Non-GAAP-based net income, attributable to OpenText 91,490 113,044 (8) 204,534

GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText $ 0.33 $ 0.42 (8) $ 0.75

(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 26% 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.

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

Three Months Ended March 31, 2021

Per share diluted

GAAP-based net income, attributable to OpenText $ 91,490 $ 0.33

Amortization 107,609 0.39

Share-based compensation 12,357 0.05

Special charges (recoveries) 2,846 0.01

Other (income) expense, net (8,283) (0.03)

GAAP-based provision for income taxes 31,818 0.12

Non-GAAP-based provision for income taxes (33,303) (0.12)

Non-GAAP-based net income, attributable to OpenText $ 204,534 $ 0.75

Reconciliation of Adjusted EBITDA

Three Months Ended March 31, 2021

GAAP-based net income, attributable to OpenText $ 91,490

Provision for income taxes 31,818

Interest and other related expense, net 37,333

Amortization of acquired technology-based intangible assets 53,453

Amortization of acquired customer-based intangible assets 54,156

Depreciation 21,961

Share-based compensation 12,357

Special charges (recoveries) 2,846

Other (income) expense, net (8,283)

Adjusted EBITDA $ 297,131

Table of C ontents

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

for the nine months ended March 31, 2022

for the three months ended September 30, 2022

(In thousands, except for per share data)

Nine Months Ended March 31, 2022

Three Months Ended September 30, 2022

GAAP-based Measures GAAP-based Measures

16 unchanged sentences

Provision for income taxes 33,625 50 (7) 33,675

GAAP-based net income / Non-GAAP-based net income, attributable to OpenText 294,894 365,821 (8) 660,715

GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText $ 1.08 $ 1.35 (8) $ 2.43

GAAP-based net income (loss) / Non-GAAP-based net income, attributable to OpenText (116,929) 323,745 (8) 206,816

GAAP-based earnings (loss) per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText $ (0.43) $ 1.20 (8) $ 0.77

_________________________________

(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.

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

Other income (expense) also includes unrealized gains (losses) on our derivatives which are not designated as hedges, that are related to the financing of the Micro Focus Acquisition.

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

(7) Adjustment relates to differences between the GAAP-based tax provision rate of approximately (40)% 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.

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

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

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

Nine Months Ended March 31, 2022

Table of C ontents

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

Three Months Ended September 30, 2022

Per share diluted

GAAP-based net income, attributable to OpenText $ 294,894 $ 1.08

GAAP-based net income (loss), attributable to OpenText $ (116,929) $ (0.43)

Amortization 97,075 0.36

6 unchanged sentences

Reconciliation of Adjusted EBITDA

Nine Months Ended March 31, 2022

GAAP-based net income, attributable to OpenText $ 294,894

Three Months Ended September 30, 2022

GAAP-based net income (loss), attributable to OpenText $ (116,929)

Provision for income taxes 33,625

7 unchanged sentences

Adjusted EBITDA $ 304,047

Table of C ontents

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

for the nine months ended March 31, 2021

for the three months ended September 30, 2021

(In thousands, except for per share data)

Nine Months Ended March 31, 2021

Three Months Ended September 30, 2021

GAAP-based Measures GAAP-based Measures

18 unchanged sentences

GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText $ 0.48 $ 0.35 (8) $ 0.83

_________________________________________

(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.

14 unchanged sentences

The GAAP-based tax provision rate for the nine months ended March 31, 2021 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 that was recognized during the three months ended December 31, 2020.

Table of C ontents

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

Nine Months Ended March 31, 2021

Three Months Ended September 30, 2021

Per share diluted

8 unchanged sentences

Reconciliation of Adjusted EBITDA

Nine Months Ended March 31, 2021

Three Months Ended September 30, 2021

GAAP-based net income, attributable to OpenText $ 131,915

8 unchanged sentences

Adjusted EBITDA $ 323,353

Table of C ontents

LIQUIDITY AND CAPITAL RESOURCES

1 unchanged sentence

(In thousands)

As of March 31, 2022 Change

As of September 30, 2022 Change

increase (decrease) As of June 30, 2022

3 unchanged sentences

Total cash, cash equivalents and restricted cash $ 1,706,283 $ 10,372 $ 1,695,911

__________________________

(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).

Nine Months Ended March 31,

Three Months Ended September 30,

(In thousands)

2 unchanged sentences

Cash used in investing activities $ (36,324) $ (9,908) $ (26,416)

Cash provided by (used in) financing activities $ 266,062 $ 1,048,917 $ (782,855)

Cash used in financing activities $ (57,161) $ (31,107) $ (26,054)

Cash and cash equivalents

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

As of March 31, 2022, we have recognized a provision of $29.2 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 $99.0 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 nine months ended March 31, 2022, we made repayments of approximately $9.0 million related to amounts previously deferred.

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

As of September 30, 2022, we have recognized a provision of $20.7 million (June 30, 2022—$19.9 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.

Cash flows provided by operating activities

Cash flows from operating activities increased by $149.9 million, due to an increase in net income after the impact of non-cash items of $106.4 million and an increase in changes from working capital of $43.5 million.

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

(i) $106.3 million relating to income taxes payable, net of receivables;

(ii) $26.8 million relating to net operating lease assets and liabilities;

(iii) $15.8 million relating to other assets;

(iv) $1.8 million relating to contract assets.

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

(i) $38.4 million relating to accounts payable and accrued liabilities;

(ii) $37.0 million relating to deferred revenues;

(iii) $18.6 million relating to accounts receivable;

(iv) $13.2 million relating to prepaid expenses and other current assets.

During the third quarter of Fiscal 2022 our days sales outstanding (DSO) of 44 days remained stable compared to our DSO during the third quarter of Fiscal 2021.

The per day impact of our DSO in the third quarter of Fiscal 2022 and Fiscal 2021

on our cash flows was $9.8 million and $9.3 million, respectively.

Cash flows from operating activities decreased by $57.7 million, due to a decrease in net income after the impact of non-cash items of $60.8 million, and an increase in changes from working capital of $3.2 million.

During the first quarter of Fiscal 2023 our days sales outstanding (DSO) of 40 days remained stable compared to our DSO during the first quarter of Fiscal 2022.

The per day impact of our DSO in the first quarter of Fiscal 2023 and Fiscal 2022 on our cash flows was $9.5 million and $9.2 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 $894.7 million, primarily due to an increase in consideration paid for acquisitions during the first nine months of Fiscal 2022, which includes cash paid for the acquisitions of Zix of $856.2 million and Bricata of $17.9 million.

Cash flows provided by (used in) financing activities

Our cash flows from financing activities generally consist of long-term debt financing and amounts received from stock options exercised by our employees.

Cash flows used in investing activities increased by $9.9 million, primarily due to an increase in purchases of property and equipment of $9.6 million.

Cash flows used in financing activities

Our cash flows from financing activities generally consist of long-term debt financing and amounts received from stock options exercised by our employees and Employee Stock Purchase Plan (ESPP) purchases by our employees.

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

Cash flows provided by financing activities increased by $1.0 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);

(ii) $10.7 million higher proceeds from the issuance of Common Shares for the exercise of options and the OpenText Employee Stock Purchase Plan (ESPP).

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) during our 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) $136.1 million relating to the repurchase and cancellation of 2,809,559 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 $17.2 million relating to debt issuance costs for the issuance of Senior Notes 2031 and Senior Notes 2029;

(iv) $22.3 million relating to higher cash dividends paid to shareholders;

(v) $10.8 million relating to more cash used in the repurchase of Common Shares on the open market for potential reissuance under our Long-Term Incentive Plans (LTIP) or other stock compensation plans;

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

Cash Dividends

During the three and nine months ended March 31, 2022, we declared and paid cash dividends of $0.2209 and $0.6627 per Common Share, respectively, in the aggregate amount of $59.1 million and $178.6 million, respectively (three and nine months ended March 31, 2021—$0.2008 and $0.5762 per Common Share, respectively, in the aggregate amount of $54.5 million and $156.3 million, respectively).

Table of C ontents

Cash flows used in financing activities increased by $31.1 million.

This is primarily due to higher cash dividends paid to shareholders by $4.8 million and lower proceeds from the issuance of Common Shares on the exercise of options and the ESPP by $26.7 million.

During the three months ended September 30, 2022, we declared and paid cash dividends of $0.24299 per Common Share in the aggregate amount of $64.7 million (three months ended September 30, 2021—$0.2209 per Common Share in the aggregate amount of $59.9 million).

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

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On 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.

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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.

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Senior Notes 2030

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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.

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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.

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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.

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.

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

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

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

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senior in right of payment to all of our and our guarantors’ future subordinated debt.

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

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On May 31, 2016 we issued $600 million in aggregate principal amount of 5.875% Senior Notes due 2026 (Senior Notes 2026) in an unregistered offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act, and to certain persons in offshore transactions pursuant to Regulation S under the Securities Act.

Senior Notes 2026 bear interest at a rate of 5.875% per annum, payable semi-annually in arrears on June 1 and December 1, commencing on December 1, 2016.

Senior Notes 2026 would have matured on June 1, 2026, unless earlier redeemed, in accordance with their terms, or repurchased.

Senior Notes 2026 had interest at a rate of 5.875% per annum, payable semi-annually in arrears on June 1 and December 1, commencing on December 1, 2016.

Senior Notes 2026 would have matured on June 1, 2026.

On December 20, 2016, we issued an additional $250 million in aggregate principal amount by reopening our Senior Notes 2026 at an issue price of 102.75%.

The additional notes have identical terms, are fungible with and are a part of a single series with the previously issued $600 million aggregate principal amount of Senior Notes 2026.

The additional notes had identical terms, were fungible with and were a part of a single series with the previously issued $600 million aggregate principal amount of Senior Notes 2026.

The outstanding aggregate principal amount of Senior Notes 2026, after taking into consideration the additional issuance, was $850 million as of December 9, 2021.

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Repayments made under Term Loan B are equal to 0.25% of the principal amount in equal quarterly installments for the life of Term Loan B, with the remainder due at maturity.

Borrowings under Term Loan B are secured by a first charge over substantially all of our assets on a pari passu basis with the Revolver.

Borrowings under Term Loan B are secured by a first charge over substantially all of our assets on a pari passu basis with the Revolver, the Acquisition Term Loan and Bridge Loan.

Term Loan B has a seven-year term, maturing in May 2025.

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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 March 31, 2022, the outstanding balance on the Term Loan B bears an interest rate of 1.96%.

For more information regarding the impact of LIBOR, see “Stress in the global financial system may adversely affect our finances and operations in ways that may be hard to predict or to defend against” included within Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for Fiscal 2021.

As of September 30, 2022, the outstanding balance on the Term Loan B bears an interest rate of 4.27%.

For more information regarding the impact and discontinuance 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 2022.

Term Loan B has incremental facility capacity of (i) $250 million plus (ii) additional amounts, subject to meeting a “consolidated senior secured net leverage” ratio not exceeding 2.75:1.00, in each case subject to certain conditions.

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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 March 31, 2022, our consolidated net leverage ratio was 1.9:1.

As of September 30, 2022, our consolidated net leverage ratio was 2.1:1.

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On October 31, 2019, we amended our committed revolving credit facility (the Revolver) to increase the total commitments under the Revolver from $450 million to $750 million as well as to extend the maturity from May 5, 2022 to October 31, 2024.

Borrowings under the Revolver are secured by a first charge over substantially all of our assets, on a pari passu basis with Term Loan B.

Borrowings under the Revolver are secured by a first charge over substantially all of our assets, on a pari passu basis with Term Loan B, the Acquisition Term Loan and Bridge Loan.

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

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

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

As of March 31, 2022, we had no outstanding balance under the Revolver (June 30, 2021—nil).

As of September 30, 2022, we had no outstanding balance under the Revolver (June 30, 2022—nil).

Acquisition Term Loan

On August 25, 2022, we entered into a first lien term loan facility (the Acquisition Term Loan) which provides for a senior secured delayed-draw term loan facility in an aggregate principal amount of $2.585 billion.

The proceeds of the Acquisition Term Loan, if drawn, will be used solely by the Company to finance the Micro Focus Acquisition (see Note 19 — “Acquisitions” for more details).

The Acquisition Term Loan has a seven-year term from the date of funding, and repayments under the Acquisition Term Loan are equal to 0.25% of the principal amount in equal quarterly installments for the life of the Acquisition Term Loan, with the remainder due at maturity.

Borrowings under the Acquisition Term Loan will bear interest at rates as specified in the Acquisition Term Loan Agreement.

The Acquisition Term Loan has incremental facility capacity of (i) $250 million plus (ii) additional amounts, subject to meeting a “consolidated senior secured net leverage” ratio not exceeding 2.75:1.00, in each case subject to certain conditions.

Consolidated senior secured net leverage ratio is defined for this purpose as the proportion of the Company’s total debt reduced by unrestricted cash, including guarantees and letters of credit, that is secured by the Company’s or any of the Company’s subsidiaries’ assets, over the Company’s trailing four financial quarter net income before interest, taxes, depreciation, amortization, restructuring, share-based compensation and other miscellaneous charges.

Under the Acquisition Term Loan, we must maintain a “consolidated net leverage” ratio of no more than 4.5:1.00 at the end of each financial quarter.

Consolidated net leverage ratio is defined for this purpose as the proportion of the Company’s total debt reduced by unrestricted cash, including guarantees and letters of credit, over the Company’s trailing four financial quarter net income before interest, taxes, depreciation, amortization, restructuring, share-based compensation and other miscellaneous charges as defined in the Acquisition Term Loan Agreement.

As of September 30, 2022, our consolidated net leverage ratio was 2.1:1.

The Acquisition Term Loan is unconditionally guaranteed by certain subsidiary guarantors, as defined in the Acquisition Term Loan Agreement, and is secured by a first charge on substantially all of the assets of the Company and the subsidiary guarantors on a pari passu basis with the Revolver, Term Loan B and the Bridge Loan.

Certain adjustments may be made to the applicable margin and other terms of the Acquisition Term Loan in limited circumstances where necessary to achieve successful syndication.

As of September 30, 2022, we had no borrowings under the Acquisition Term Loan.

For the three months ended September 30, 2022, we did not record any interest expense relating to the Acquisition Term Loan (three months ended September 30, 2021—nil).

The foregoing description of the Acquisition Term Loan does not purport to be complete and is qualified in its entirety by reference to the full text of the Acquisition Term Loan, which is filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on August 25, 2022.

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On August 25, 2022, we entered into a bridge loan agreement (Bridge Loan) which provides for commitments of up to $2 billion to finance a portion of the repayment of Micro Focus’ existing debt.

The Bridge Loan has a one-year term from the initial date of funding, with an extension mechanism pursuant to which such borrowings would convert into secured financing maturing five years from the initial funding date.

Borrowings under the Bridge Loan would bear interest at rates as specified in the Bridge Loan Agreement, subject to a total cap.

The Bridge Loan is unconditionally guaranteed by certain subsidiary guarantors, as defined in the Bridge Loan Agreement, and is secured by a first charge on substantially all of the assets of the Company and the subsidiary guarantors on a pari passu basis with the Revolver, Term Loan B and Acquisition Term Loan.

The Company intends to reduce commitments or the borrowings under the Bridge Loan by accessing the debt capital markets directly or through certain affiliates prior to or following the closing of the Micro Focus Acquisition, but no assurance can be given that the Company will be able to do so.

The Company expects that such debt to also be secured.

As of September 30, 2022, we had no borrowings under the Bridge Loan.

For the three months ended September 30, 2022, we did not record any interest expense relating to the Bridge Loan (three months ended September 30, 2021—nil).

The foregoing description of the Bridge Loan does not purport to be complete and is qualified in its entirety by reference to the full text of the Bridge Loan, which is filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on August 25, 2022.

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

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Share Repurchase Plan / Normal Course Issuer Bid

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”).

On November 5, 2020, the Board authorized a share repurchase plan (the Fiscal 2021 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 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 as defined below) 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 Fiscal 2021 Repurchase Plan was effected in accordance with Rule 10b-18 under the Exchange Act (Rule 10b-18).

Purchases made under the Fiscal 2021 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 Fiscal 2021 Repurchase Plan were cancelled.

On November 4, 2021, the Board authorized a share repurchase plan (the Fiscal 2022 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 TSX (as part of a Fiscal 2022 Normal-Course Issuer Bid (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 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 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 nine months ended March 31, 2022, we repurchased and cancelled 1,000,000 and 2,809,559 Common Shares, respectively, for $45.1 million and $136.1 million, respectively (three and nine months ended March 31, 2021—nil, respectively).

Share repurchases during the three and nine months ended March 31, 2022 were completed under our share repurchase plans authorized on both November 5, 2020 and November 4, 2021.

The Fiscal 2022 Repurchase Plan has been and will be effected in accordance with Rule 10b-18.

Purchases made under the Fiscal 2022 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 Fiscal 2022 Repurchase Plan have been and will be cancelled.

During the three months ended September 30, 2022 and 2021, we did not repurchase and cancel any Common Shares.

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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 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.

The Company established the Fiscal 2021 NCIB in order to provide it with a means to execute purchases over the TSX as part of the overall Fiscal 2021 Repurchase Plan.

The TSX approved the Company’s notice of intention to commence the Fiscal 2021 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 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 March 31, 2022, our total unfunded pension plan obligations were $78.9 million, of which $2.5 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.

Our anticipated payments under our most significant plans, Open Text Document Technologies GmbH (CDT), GXS GmbH (GXS GER), GXS Philippines, Inc.

(GXS PHP), for the fiscal years indicated below are as follows:

Fiscal years ending June 30,

CDT GXS GER GXS PHP

2022 (three months ended) $ 203 $ 244 $ —

2023 886 965 116

2024 959 966 130

2025 1,002 989 175

2026 1,036 977 287

2027 to 2031 5,997 4,743 2,894

Total $ 10,083 $ 8,884 $ 3,602

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

The Company renewed the Fiscal 2022 NCIB in order to provide it with a means to execute purchases over the TSX as part of the overall Fiscal 2022 Repurchase Plan.

The TSX approved the Company's notice of intention to commence the Fiscal 2022 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.

Commitments and Contractual Obligations

As of March 31, 2022, we have entered into the following contractual obligations with minimum payments for the indicated fiscal periods as follows:

As of September 30, 2022, we have entered into the following contractual obligations with minimum payments for the indicated fiscal periods as follows:

Payments due between

Total April 1, 2022 -

(In thousands)

Total October 1, 2022 -

June 30, 2023 July 1, 2023 -

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$ 5,710,263 $ 220,526 $ 1,436,695 $ 338,448 $ 3,714,594

__________________________

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

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Such agreements have not had a material effect on our results of operations, financial position or cash flows.

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We are currently involved in various claims and legal proceedings.

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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.

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

Contingencies

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 March 31, 2022, 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 $75 million.

As of March 31, 2022, we have provisionally paid approximately $34 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 March 31, 2022.

Assuming the utilization of available tax attributes (further described below), we estimate our potential aggregate liability, as of September 30, 2022, 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 $70 million.

As of September 30, 2022, we have provisionally paid approximately $32 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, 2022.

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

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

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

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

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

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

On June 30, 2022, we filed a notice of appeal with the Tax Court of Canada seeking to reverse all such reassessments (including penalties) in full.

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 has also been auditing Fiscal 2017 on a basis that we strongly disagree with and will vigorously contest.

The CRA has audited Fiscal 2017 on a basis that we strongly disagree with and are contesting.

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

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

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

We 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.

On January 27, 2022, the CRA issued a notice of reassessment in respect of Fiscal 2017 on the basis of its position set forth in the Proposal Letter.

On January 27, 2022, the CRA issued a notice of reassessment in respect of Fiscal 2017 on a basis consistent with its proposal to reduce the available depreciable basis of assets in Canada.

On April 19, 2022, we filed our notice of objection regarding the reassessment in respect of Fiscal 2017.

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.

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

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

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

We are not required to provisionally pay any cash amounts to the CRA as a result of the reassessment in respect of Fiscal 2017 due to the

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utilization of available tax attributes;

however, to the extent the CRA reassesses subsequent fiscal years on a similar basis, we expect to make certain minimum payments required under Canadian legislation, which may need to be provisionally made starting in Fiscal 2024 while the matter is in dispute.

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

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

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1:19- cv-11808-LTS) (together with the Luna Complaint, the “Securities Actions”).

On November 21, 2019, the court consolidated the Securities Actions, appointed a lead plaintiff, and designated a lead counsel.

On November 21, 2019, the district court consolidated the Securities Actions, appointed a lead plaintiff, and designated a lead counsel.

On January 15, 2020, the lead plaintiff filed a consolidated amended complaint generally making the same allegations and seeking the same relief as the complaint filed on August 1, 2019.

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

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

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

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

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Realtime Data has also filed numerous other patent suits on the same asserted patents against other companies.

After a stay pending appeal in one of those suits, on January 21, 2021, the Court held a hearing to construe the claims of the asserted patents.

After a stay pending appeal in one of those suits, on January 21, 2021, the district court held a hearing to construe the claims of the asserted patents.

As to the fourth patent asserted against Carbonite, on September 24, 2019, the U.S.

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District Court for the District of Massachusetts has 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.

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We do not enter into off-balance sheet financing as a matter of practice, except for guarantees relating to taxes and letters of credit on behalf of parties with whom we conduct business.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis