What changed in this filing

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Item 1. Financial Statements

2023-02-02 compared with 2022-11-03 · 382 added, 269 removed, 937 unchanged (41% of the section changed)

4 unchanged sentences

dollars, except share data)

September 30, 2022 June 30, 2022

December 31, 2022 June 30, 2022

ASSETS (unaudited)

Cash and cash equivalents $ 2,820,927 $ 1,693,741

Accounts receivable trade, net of allowance for credit losses of $ 15,410 as of September 30, 2022 and $ 16,473 as of June 30, 2022 (Note 4)

Accounts receivable trade, net of allowance for credit losses of $ 17,089 as of December 31, 2022 and $ 16,473 as of June 30, 2022 (Note 4)

470,794 426,652

2 unchanged sentences

Income taxes recoverable (Note 15)

10,300 18,255

Prepaid expenses and other current assets (Note 9)

49 unchanged sentences

Share capital and additional paid-in capital (Note 13)

269,880,769 and 269,522,639 Common Shares issued and outstanding at September 30, 2022 and June 30, 2022, respectively;

270,235,234 and 269,522,639 Common Shares issued and outstanding at December 31, 2022 and June 30, 2022, respectively;

authorized Common Shares:

3 unchanged sentences

Retained earnings 2,171,236 2,160,069

Treasury stock, at cost ( 3,586,014 and 3,706,420 shares at September 30, 2022 and June 30, 2022, respectively)

Treasury stock, at cost ( 3,295,043 and 3,706,420 shares at December 31, 2022 and June 30, 2022, respectively)

( 142,126 ) ( 159,966 )

5 unchanged sentences

Related party transactions (Note 24)

Subsequent event (Note 25)

Subsequent events (Note 25)

See accompanying Notes to Condensed Consolidated Financial Statements

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OPEN TEXT CORPORATION

2 unchanged sentences

dollars, except share and per share data)

Three Months Ended September 30,

Three Months Ended

December 31, Six Months Ended

2022 2021 2022 2021

Revenues (Note 3):

21 unchanged sentences

Special charges (recoveries) (Note 18)

10,306 9,217 24,587 9,561

Total operating expenses 451,084 422,734 898,419 814,230

3 unchanged sentences

Interest and other related expense, net ( 38,715 ) ( 40,245 ) ( 79,097 ) ( 77,300 )

Income (loss) before income taxes ( 83,260 ) 175,416

Income before income taxes 309,297 127,602 226,037 303,018

Provision for income taxes (Note 15)

50,774 39,266 84,399 82,716

Net income (loss) for the period $ ( 116,885 ) $ 131,966

Net income for the period $ 258,523 $ 88,336 $ 141,638 $ 220,302

Net (income) loss attributable to non-controlling interests ( 37 ) ( 38 ) ( 81 ) ( 89 )

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

Earnings (loss) per share—basic attributable to OpenText (Note 23)

Net income attributable to OpenText $ 258,486 $ 88,298 $ 141,557 $ 220,213

Earnings per share—basic attributable to OpenText (Note 23)

$ 0.96 $ 0.32 $ 0.52 $ 0.81

Earnings (loss) per share—diluted attributable to OpenText (Note 23)

Earnings per share—diluted attributable to OpenText (Note 23)

$ 0.96 $ 0.32 $ 0.52 $ 0.81

2 unchanged sentences

See accompanying Notes to Condensed Consolidated Financial Statements

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OPEN TEXT CORPORATION

1 unchanged sentence

(In thousands of U.S.

Three Months Ended September 30,

Net income (loss) for the period $ ( 116,885 ) $ 131,966

Three Months Ended

December 31, Six Months Ended

2022 2021 2022 2021

Net income for the period $ 258,523 $ 88,336 $ 141,638 $ 220,302

Other comprehensive income (loss)—net of tax:

1 unchanged sentence

Unrealized gain (loss) on cash flow hedges:

Unrealized gain (loss) - net of tax expense (recovery) effect of ($ 1,206 ) and $( 391 ) for the three months ended September 30, 2022 and 2021, respectively

Unrealized gain (loss) - net of tax expense (recovery) effect of $ 347 and $ 37 for the three months ended December 31, 2022 and 2021, respectively;

($ 859 ) and $( 354 ) for the six months ended December 31, 2022 and 2021, respectively

959 104 ( 2,381 ) ( 982 )

(Gain) loss reclassified into net income - net of tax (expense) recovery effect of $ 212 and $( 103 ) for the three months ended September 30, 2022 and 2021, respectively

(Gain) loss reclassified into net income - net of tax (expense) recovery effect of $ 397 and $( 7 ) for the three months ended December 31, 2022 and 2021, respectively;

$ 609 and $( 110 ) for the six months ended December 31, 2022 and 2021, respectively

1,101 ( 18 ) 1,689 ( 305 )

Actuarial gain (loss) relating to defined benefit pension plans:

Actuarial gain (loss) - net of tax expense (recovery) effect of $ 1,104 and $( 232 ) for the three months ended September 30, 2022 and 2021, respectively

Actuarial gain (loss) - net of tax expense (recovery) effect of $ 106 and $( 104 ) for the three months ended December 31, 2022 and 2021, respectively;

$ 1,210 and $( 336 ) for the six months ended December 31, 2022 and 2021, respectively

32 ( 1,435 ) 4,196 ( 2,484 )

Amortization of actuarial (gain) loss into net income - net of tax (expense) recovery effect of $ 26 and $ 68 for the three months ended September 30, 2022 and 2021, respectively

Amortization of actuarial (gain) loss into net income - net of tax (expense) recovery effect of $ 25 and $ 67 for the three months ended December 31, 2022 and 2021, respectively;

$ 51 and $ 135 for the six months ended December 31, 2022 and 2021, respectively

37 159 74 321

Total other comprehensive income (loss) net, for the period 41,548 ( 22,537 ) 6,631 ( 34,889 )

Total comprehensive income (loss) ( 151,802 ) 119,614

Total comprehensive income 300,071 65,799 148,269 185,413

Comprehensive (income) loss attributable to non - controlling interests

( 37 ) ( 38 ) ( 81 ) ( 89 )

Total comprehensive income (loss) attributable to OpenText $ ( 151,846 ) $ 119,563

Total comprehensive income attributable to OpenText $ 300,034 $ 65,761 $ 148,188 $ 185,324

See accompanying Notes to Condensed Consolidated Financial Statements

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OPEN TEXT CORPORATION

2 unchanged sentences

dollars and shares)

Three Months Ended September 30, 2022

Three Months Ended December 31, 2022

Common Shares and Additional Paid in Capital Treasury Stock Retained

3 unchanged sentences

Shares Amount Shares Amount

Balance as of September 30, 2022

269,881 $ 2,067,881 ( 3,586 ) $ ( 154,792 ) $ 1,978,442 $ ( 42,576 ) $ 1,186 $ 3,850,141

Issuance of Common Shares

Under employee stock purchase plans 354 8,042 — — — — — 8,042

Share-based compensation — 28,822 — — — — — 28,822

Issuance of treasury stock — ( 12,666 ) 291 12,666 — — — —

Dividends declared

($ 0.24299 per Common Share)

— — — — ( 65,692 ) — — ( 65,692 )

Other comprehensive income (loss) - net — — — — — 41,548 — 41,548

Net income for the period — — — — 258,486 — 37 258,523

Balance as of December 31, 2022

270,235 $ 2,092,079 ( 3,295 ) $ ( 142,126 ) $ 2,171,236 $ ( 1,028 ) $ 1,223 $ 4,121,384

Three Months Ended December 31, 2021

Common Shares and Additional Paid in Capital Treasury Stock Retained

Earnings Accumulated Other

Comprehensive

Income Non-Controlling Interests Total

Shares Amount Shares Amount

Balance as of September 30, 2021

272,534 $ 1,991,719 ( 1,426 ) $ ( 63,477 ) $ 2,225,363 $ 53,886 $ 1,024 $ 4,208,515

Issuance of Common Shares

Under employee stock option plans 56 1,966 — — — — — 1,966

Under employee stock purchase plans 226 9,421 — — — — — 9,421

Share-based compensation — 14,409 — — — — — 14,409

Purchase of treasury stock — — ( 400 ) ( 19,593 ) — — — ( 19,593 )

Issuance of treasury stock — ( 15,104 ) 350 15,104 — — — —

Repurchase of Common Shares ( 1,810 ) ( 11,498 ) — — ( 79,536 ) — — ( 91,034 )

Dividends declared

($ 0.2209 per Common Share)

— — — — ( 59,658 ) — — ( 59,658 )

Other comprehensive income (loss) - net — — — — — ( 22,537 ) — ( 22,537 )

Net income for the period — — — — 88,298 — 38 88,336

Balance as of December 31, 2021

271,006 $ 1,990,913 ( 1,476 ) $ ( 67,966 ) $ 2,174,467 $ 31,349 $ 1,062 $ 4,129,825

OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands of U.S.

dollars and shares)

Six Months Ended December 31, 2022

Common Shares and Additional Paid in Capital Treasury Stock Retained

Earnings Accumulated Other

Comprehensive

Income Non-Controlling Interests Total

Shares Amount Shares Amount

Balance as of June 30, 2022

9 unchanged sentences

Other comprehensive income (loss) - net — — — — — 6,631 — 6,631

Net income (loss) for the period — — — — ( 116,929 ) — 44 ( 116,885 )

Balance as of September 30, 2022

Net income for the period — — — — 141,557 — 81 141,638

Balance as of December 31, 2022

270,235 $ 2,092,079 ( 3,295 ) $ ( 142,126 ) $ 2,171,236 $ ( 1,028 ) $ 1,223 $ 4,121,384

Three Months Ended September 30, 2021

Six Months Ended December 31, 2021

Common Shares and Additional Paid in Capital Treasury Stock Retained

9 unchanged sentences

Share-based compensation — 28,343 — — — — — 28,343

Purchase of treasury stock — — ( 400 ) ( 19,593 ) — — — ( 19,593 )

Issuance of treasury stock — ( 21,013 ) 492 21,013 — — — —

Repurchase of Common Shares ( 1,810 ) ( 11,498 ) — — ( 79,536 ) — — ( 91,034 )

Dividends declared

3 unchanged sentences

Distribution to non-controlling interest — 142 — — — — ( 538 ) ( 396 )

Net income (loss) for the period — — — — 131,915 — 51 131,966

Balance as of September 30, 2021

Net income for the period — — — — 220,213 — 89 220,302

Balance as of December 31, 2021

271,006 $ 1,990,913 ( 1,476 ) $ ( 67,966 ) $ 2,174,467 $ 31,349 $ 1,062 $ 4,129,825

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See accompanying Notes to Condensed Consolidated Financial Statements

OPEN TEXT CORPORATION

1 unchanged sentence

(In thousands of U.S.

Three Months Ended September 30,

Six Months Ended December 31,

Cash flows from operating activities:

Net income (loss) for the period $ ( 116,885 ) $ 131,966

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Net income for the period $ 141,638 $ 220,302

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization of intangible assets 237,416 253,483

3 unchanged sentences

Write-off of right of use assets 3,775 —

Loss on extinguishment of debt 8,131 27,413

Loss on sale and write down of property and equipment 121 38

1 unchanged sentence

Share in net (income) loss of equity investees 6,823 ( 31,357 )

Unrealized (gain) loss on financial instruments 181,461 —

Unrealized loss on financial instruments 9,854 —

Changes in operating assets and liabilities:

10 unchanged sentences

Additions of property and equipment ( 68,539 ) ( 37,347 )

Purchase of Zix Corporation, net of cash acquired — ( 837,573 )

Purchase of Bricata Inc.

Other investing activities ( 873 ) ( 3,271 )

1 unchanged sentence

Cash flows from financing activities:

Proceeds from issuance of Common Shares

from exercise of stock options and ESPP

Proceeds from issuance of Common Shares from exercise of

stock options and ESPP

15,773 45,688

Proceeds from long-term debt and Revolver 1,000,000 1,500,000

Repayment of long-term debt and Revolver ( 5,000 ) ( 855,000 )

Debt extinguishment costs — ( 24,969 )

Debt issuance costs ( 11,650 ) ( 15,347 )

Repurchase of Common Shares — ( 91,034 )

Purchase of treasury stock — ( 19,593 )

Distribution to non-controlling interest — ( 396 )

Payments of dividends to shareholders ( 129,562 ) ( 119,536 )

Net cash used in financing activities ( 57,161 ) ( 26,054 )

Net cash provided by financing activities 869,561 419,813

Foreign exchange gain (loss) on cash held in foreign currencies ( 271 ) ( 25,713 )

Increase in cash, cash equivalents and restricted cash during the period 10,372 127,922

Increase (decrease) in cash, cash equivalents and restricted cash during the period 1,127,007 ( 95,705 )

Cash, cash equivalents and restricted cash at beginning of the period 1,695,911 1,609,800

Cash, cash equivalents and restricted cash at end of the period $ 2,822,918 $ 1,514,095

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OPEN TEXT CORPORATION

2 unchanged sentences

Reconciliation of cash, cash equivalents and restricted cash:

September 30, 2022 September 30, 2021

December 31, 2022 December 31, 2021

Cash and cash equivalents $ 2,820,927 $ 1,511,792

5 unchanged sentences

See accompanying Notes to Condensed Consolidated Financial Statements

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OPEN TEXT CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended September 30, 2022

For the Three and Six Months Ended December 31, 2022

(Tabular amounts in thousands of U.S.

2 unchanged sentences

The accompanying Condensed Consolidated Financial Statements include the accounts of Open Text Corporation and our subsidiaries, collectively referred to as “OpenText” or the “Company.” We wholly own all of our subsidiaries with the exception of Open Text South Africa Proprietary Ltd.

(OT South Africa), which as of September 30, 2022, was 70 % owned by OpenText.

(OT South Africa), which as of December 31, 2022, was 70 % owned by OpenText.

All intercompany balances and transactions have been eliminated.

29 unchanged sentences

(i) revenue recognition, (ii) accounting for income taxes, (iii) testing of goodwill for impairment, (iv) the valuation of acquired intangible assets, (v) the valuation of long-lived assets, (vi) the recognition of contingencies, (vii) restructuring accruals, (viii) acquisition accruals and pre-acquisition contingencies, (ix) the valuation of stock options granted and obligations related to share-based payments, including the valuation of our long-term incentive plans, (x) the valuation of pension obligations, and (xi) the valuation of derivative instruments.

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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 International PLC (Micro Focus), for a total purchase price of approximately $ 6.0 billion, inclusive of Micro Focus’ cash and debt.

The all-cash consideration for the proposed acquisition of Micro Focus (Micro Focus Acquisition) is expected to be funded by new debt, cash on hand and a draw on our Revolver (defined below).

Concurrent with the announcement of the Micro Focus Acquisition, the Company entered into the Acquisition Term Loan and Bridge Loan (each as defined below) as well as certain derivative transactions.

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.

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.

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

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 International PLC (Micro Focus), for a total purchase price of approximately $ 5.8 billion, inclusive of Micro Focus’ cash and debt, subject to final adjustments.

Concurrent with the announcement of the acquisition of Micro Focus (Micro Focus Acquisition), the Company entered into the Acquisition Term Loan and Bridge Loan (each as defined below) as well as certain derivative transactions.

These derivative transactions were marked-to-market during the three and six months ended December 31, 2022, with the resulting unrealized gains (losses) on these derivatives recognized in Other Income (Expense) within our Condensed Consolidated Statements of Income.

On December 1, 2022, the Company issued and sold $ 1.0 billion in aggregate principal amount of 6.90 % Senior Secured Notes due 2027 (Senior Secured Notes 2027) and amended the Acquisition Term Loan to increase commitments to an aggregate principal amount of $ 3.585 billion.

In connection with the issuance of the Senior Secured Notes 2027 and increase in the Acquisition Term Loan, all remaining commitments under the Bridge Loan were reduced to zero and the Bridge Loan was terminated.

On January 31, 2023, we completed the Micro Focus Acquisition and repaid Micro Focus’ outstanding indebtedness.

In connection with the financing of the Micro Focus Acquisition, we drew down the entire amount of the Acquisition Term Loan, less original issuance discount and other fees, and drew down $ 450.0 million under the Revolver (as defined below).

We used proceeds from the issuance of the Senior Secured Notes 2027 and cash on hand to fund the remaining purchase price consideration.

The deal-contingent forward contracts and non-contingent forward contract, as described in Note 17 “Derivative Instruments and Hedging Activities,” entered into to hedge certain foreign currency obligations in relation to the Micro Focus Acquisition, are expected to be settled on February 9, 2023.

The following Notes include details related to the Micro Focus Acquisition:

Note 9 “Prepaid Expenses and Other Assets,” Note 10 “Accounts Payable and Accrued Liabilities,” Note 11 “Long-Term Debt,” Note 16 “Fair Value Measurement,” Note 17 “Derivative Instruments and Hedging Activities,” Note 19 “Acquisitions” and Note 22 “Other Income (Expense), Net.”

NOTE 2— RECENT ACCOUNTING PRONOUNCEMENTS

Accounting Pronouncements Adopted in Fiscal 2023

During the three months ended September 30, 2022, there have been no new Accounting Standards Updates (ASU) or changes in accounting pronouncements that have had a material impact to our reported financial position, results of operations or cash flows .

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During the three and six months ended December 31, 2022, there have been no new Accounting Standards Updates (ASU) or changes in accounting pronouncements that have had a material impact to our reported financial position, results of operations or cash flows .

NOTE 3— REVENUES

3 unchanged sentences

The following tables disaggregate our revenue by significant geographic area, based on the location of our direct end customer, by type of performance obligation and timing of revenue recognition for the periods indicated:

Three Months Ended September 30,

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

2022 2021 2022 2021

Total Revenues by Geography:

31 unchanged sentences

deferred revenues) for the periods indicated below were as follows:

As of September 30, 2022

As of December 31, 2022

As of June 30, 2022

6 unchanged sentences

We fulfill our obligations under a contract with a customer by transferring products and services in exchange for consideration from the customer.

During the three months ended September 30, 2022, we reclassified $ 8.9 million (three months ended September 30, 2021—$ 8.1 million) of contract assets to

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receivables as a result of the right to the transaction consideration becoming unconditional.

During the three months ended September 30, 2022 and 2021, respectively, there was no significant impairment loss recognized related to contract assets.

During the six months ended

December 31, 2022, we reclassified $ 20.2 million (six months ended December 31, 2021 — $ 18.3 million) of contract assets to receivables as a result of the right to the transaction consideration becoming unconditional.

During the three and six months ended December 31, 2022 and 2021, respectively, there was no significant impairment loss recognized related to contract assets.

We recognize deferred revenue when we have received consideration or an amount of consideration is due from the customer for future obligations to transfer products or services.

Our deferred revenues primarily relate to cloud services and customer support agreements which have been paid for by customers prior to the performance of those services.

The amount of revenue that was recognized during the three months ended September 30, 2022 that was included in the deferred revenue balances at June 30, 2022 was $ 373 million (three months ended September 30, 2021—$ 359 million).

The amount of revenue that was recognized during the six months ended December 31, 2022 that was included in the deferred revenue balances at June 30, 2022 was $ 658 million (six months ended December 31, 2021—$ 630 million).

Incremental Costs of Obtaining a Contract with a Customer

5 unchanged sentences

Impact of foreign exchange rate changes 123

Capitalized costs to obtain a contract as of September 30, 2022

During the three months ended September 30, 2022 and 2021, respectively, there was no significant impairment loss recognized related to capitalized costs to obtain a contract.

Capitalized costs to obtain a contract as of December 31, 2022

During the three and six months ended December 31, 2022 and 2021, respectively, there was no significant impairment loss recognized related to capitalized costs to obtain a contract.

Refer to Note 9 “Prepaid Expenses and Other Assets” for additional information on incremental costs of obtaining a contract.

Transaction Price Allocated to the Remaining Performance Obligations

As of September 30, 2022, approximately $ 1.5 billion of revenue is expected to be recognized from remaining performance obligations on existing contracts.

As of December 31, 2022, approximately $ 1.6 billion of revenue is expected to be recognized from remaining performance obligations on existing contracts.

We expect to recognize approximately 46 % of this amount over the next 12 months and the remaining balance substantially over the next three years thereafter.

5 unchanged sentences

Write-off / adjustments ( 324 )

Balance as of September 30, 2022

Included in accounts receivable are unbilled receivables in the amount of $ 51.0 million as of September 30, 2022 (June 30, 2022—$ 47.9 million).

As of September 30, 2022, we have an allowance for credit losses of $ 0.5 million for contract assets (June 30, 2022—$ 0.7 million).

Balance as of December 31, 2022

Included in accounts receivable are unbilled receivables in the amount of $ 61.4 million as of December 31, 2022 (June 30, 2022—$ 47.9 million).

As of December 31, 2022, we have an allowance for credit losses of $ 0.5 million for contract assets (June 30, 2022—$ 0.7 million).

For additional information on contract assets please see Note 3 “Revenues.”

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NOTE 5— PROPERTY AND EQUIPMENT

As of September 30, 2022

As of December 31, 2022

Cost Accumulated

Depreciation Net

Furniture, equipment and other $ 51,418 $ ( 39,485 ) $ 11,933

Computer hardware $ 359,023 $ ( 245,561 ) $ 113,462

3 unchanged sentences

Land and buildings 48,993 ( 17,222 ) 31,771

Furniture, equipment and other 52,482 ( 39,717 ) 12,765

Total $ 875,835 $ ( 625,129 ) $ 250,706

2 unchanged sentences

Depreciation Net

Furniture, equipment and other $ 52,381 $ ( 39,643 ) $ 12,738

Computer hardware $ 332,462 $ ( 226,341 ) $ 106,121

3 unchanged sentences

Land and buildings 49,011 ( 16,633 ) 32,378

Furniture, equipment and other 52,381 $ ( 39,643 ) 12,738

Total $ 832,740 $ ( 588,031 ) $ 244,709

6 unchanged sentences

The following illustrates the various components of operating lease costs for the period indicated:

Three Months Ended September 30,

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

2022 2021 2022 2021

Operating lease cost $ 13,991 $ 15,572 $ 28,302 $ 30,963

4 unchanged sentences

The weighted average remaining lease term and discount rate for the periods indicated below were as follows:

As of September 30, 2022 As of June 30, 2022

As of December 31, 2022 As of June 30, 2022

Weighted-average remaining lease term 5.73 years 6.13 years

Weighted-average discount rate 3.43 % 2.95 %

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Supplemental Cash Flow Information

1 unchanged sentence

Cash payments made for variable lease costs and short-term leases are not included in the measurement of operating lease liabilities, and, as such, are excluded from the amounts below:

Three Months Ended September 30,

Six Months Ended December 31,

Cash paid for amounts included in the measurement of operating lease liabilities $ 35,230 $ 35,046

Right of use assets obtained in exchange for new operating lease liabilities (1)

$ 25,061 $ 20,416

___________________________

(1) The six months ended December 31, 2021 excludes the impact of $ 9.7 million of right of use assets obtained through the acquisition of Zix Corporation.

See Note 19 "Acquisitions" for further details including the finalization of the purchase price allocation for the acquisition of Zix Corporation.

Maturity of Lease Liabilities

The following table presents the future minimum lease payments under our operating leases liabilities as of September 30, 2022:

The following table presents the future minimum lease payments under our operating leases liabilities as of December 31, 2022:

Fiscal years ending June 30,

2023 (nine months ended)

2023 (six months ended)

Thereafter 66,621

13 unchanged sentences

Impact of foreign exchange rate changes 605

Balance as of September 30, 2022

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Balance as of December 31, 2022

NOTE 8— ACQUIRED INTANGIBLE ASSETS

As of September 30, 2022

As of December 31, 2022

Cost Accumulated Amortization Net

7 unchanged sentences

Total $ 2,594,251 $ ( 1,519,043 ) $ 1,075,208

Where applicable, the above balances as of September 30, 2022 have been reduced to reflect the impact of intangible assets where the gross cost has become fully amortized during the three months ended September 30, 2022.

Where applicable, the above balances as of December 31, 2022 have been reduced to reflect the impact of intangible assets where the gross cost has become fully amortized during the six months ended December 31, 2022.

The impact of this resulted in a reduction of $ 119 million to technology assets and $ 64 million to customer assets.

3 unchanged sentences

Fiscal years ending June 30,

2023 (nine months ended)

2023 (six months ended)

2028 and Thereafter

Total $ 883,748

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NOTE 9— PREPAID EXPENSES AND OTHER ASSETS

Prepaid expenses and other current assets:

As of September 30, 2022 As of June 30, 2022

As of December 31, 2022 As of June 30, 2022

Deposits and restricted cash $ 2,607 $ 6,300

Capitalized costs to obtain a contract 29,421 27,077

Derivative asset 6,848 —

Short-term prepaid expenses and other current assets 92,296 87,175

1 unchanged sentence

Other assets:

As of September 30, 2022 As of June 30, 2022

As of December 31, 2022 As of June 30, 2022

Deposits and restricted cash $ 9,894 $ 6,462

6 unchanged sentences

Capitalized costs to obtain a contract relate to incremental costs of obtaining a contract, such as sales commissions, which are eligible for capitalization on contracts to the extent that such costs are expected to be recovered (see Note 3 “Revenues”).

Deferred debt issuance costs represents fees incurred related to the Acquisition Term Loan and Bridge Loan (each as defined below).

Derivative asset represents the assets related to the unrealized gains on our derivatives not designated as hedges related to the Micro Focus Acquisition (see Note 17 “Derivative Instruments and Hedging Activities”).

Deferred debt issuance costs represents fees incurred related to the Acquisition Term Loan.

See Note 11 “Long-Term Debt.”

3 unchanged sentences

Our share of net income or losses based on our interest in these investments, which approximates fair value and is subject to volatility based on market trends and business conditions, is recorded as a component of Other income (expense), net in our Condensed Consolidated Statements of Income (see Note 22 “Other Income (Expense), Net”).

During the three months ended September 30, 2022, our share of income (loss) from these investments was $( 6.5 ) million (three months ended September 30, 2021—$ 29.3 million).

During the three and six months ended December 31, 2022, our share of income (loss) from these investments was $( 0.3 ) million and $( 6.8 ) million, respectively (three and six months ended December 31, 2021—$ 2.0 million and $ 31.4 million, respectively).

Prepaid expenses and other assets, both short-term and long-term, include advance payments on licenses that are being amortized over the applicable terms of the licenses and other miscellaneous assets.

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NOTE 10— ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities:

As of September 30, 2022 As of June 30, 2022

As of December 31, 2022 As of June 30, 2022

Accounts payable—trade $ 96,007 $ 113,978

9 unchanged sentences

______________________________

(1) Represents the liability related to 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”).

(2) Represents deferred debt issuance costs related to the Acquisition Term Loan and Bridge Loan related to the proposed Micro Focus Acquisition (see Note 11 “Long-Term Debt”).

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

(2) Represents deferred debt issuance costs related to the Acquisition Term Loan in connection with the financing of the Micro Focus Acquisition (see Note 11 “Long-Term Debt”).

Long-term accrued liabilities:

As of September 30, 2022 As of June 30, 2022

As of December 31, 2022 As of June 30, 2022

Amounts payable in respect of restructuring and other special charges $ 4,454 $ 5,702

4 unchanged sentences

We are required to return certain of our leased facilities to their original state at the conclusion of our lease.

As of September 30, 2022, the present value of this obligation was $ 15.5 million (June 30, 2022—$ 15.8 million), with an undiscounted value of $ 16.2 million (June 30, 2022—$ 16.4 million).

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As of December 31, 2022, the present value of this obligation was $ 16.1 million (June 30, 2022—$ 15.8 million), with an undiscounted value of $ 16.7 million (June 30, 2022—$ 16.4 million).

NOTE 11— LONG-TERM DEBT

As of September 30, 2022 As of June 30, 2022

Senior Notes 2031 $ 650,000 $ 650,000

As of December 31, 2022 As of June 30, 2022

Senior Notes 2031 $ 650,000 $ 650,000

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Senior Notes 2028 900,000 900,000

Senior Secured Notes 2027 1,000,000 —

Term Loan B 952,500 957,500

Acquisition Term Loan — —

Bridge Loan — —

Total principal payments due 5,252,500 4,257,500

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____________________________

(1) As of September 30, 2022, there was an additional $ 47.0 million of deferred debt issuance costs related to the Acquisition Term Loan and Bridge Loan included in “Other assets” not included above.

(1) As of December 31, 2022, there was an additional $ 54.9 million of deferred debt issuance costs related to the Acquisition Term Loan included in “Other assets” not included above.

Senior Unsecured Fixed Rate Notes

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

For the three months ended September 30, 2022, we recorded interest expense of $ 6.7 million relating to Senior Notes 2031 (three months ended September 30, 2021— nil ).

For the three and six months ended December 31, 2022, we recorded interest expense of $ 6.7 million and $ 13.4 million, respectively, relating to Senior Notes 2031 (three and six months ended December 31, 2021 $ 2.7 million, respectively).

Senior Notes 2030

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Senior Notes 2030 will mature on February 15, 2030, unless earlier redeemed, in accordance with their terms, or repurchased.

For the three months ended September 30, 2022, we recorded interest expense of $ 9.3 million relating to Senior Notes 2030 (three months ended September 30, 2021—$ 9.3 million).

For the three and six months ended December 31, 2022, we recorded interest expense of $ 9.3 million and $ 18.6 million, respectively, relating to Senior Notes 2030 (three and six months ended December 31, 2021 $ 9.3 million and $ 18.6 million, respectively).

Senior Notes 2029

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

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certain non-U.S.

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

For the three months ended September 30, 2022, we recorded interest expense of $ 8.2 million relating to Senior Notes 2029 (three months ended September 30, 2021— nil ).

For the three and six months ended December 31, 2022, we recorded interest expense of $ 8.2 million and $ 16.4 million, respectively, relating to Senior Notes 2029 (three and six months ended December 31, 2021 $ 3.3 million, respectively).

Senior Notes 2028

On February 18, 2020, we issued $ 900 million in aggregate principal amount of 3.875 % Senior Notes due 2028 (Senior Notes 2028 and, together with the Senior Notes 2031, Senior Notes 2030 and Senior Notes 2029, the Senior Notes) in an unregistered offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act and to certain non-U.S.

On February 18, 2020, we issued $ 900 million in aggregate principal amount of 3.875 % Senior Notes due 2028 (Senior Notes 2028) in an unregistered offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act and to certain non-U.S.

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

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Senior Notes 2028 will mature on February 15, 2028, unless earlier redeemed, in accordance with their terms, or repurchased.

For the three months ended September 30, 2022, we recorded interest expense of $ 8.7 million relating to Senior Notes 2028 (three months ended September 30, 2021—$ 8.7 million).

For the three and six months ended December 31, 2022, we recorded interest expense of $ 8.7 million and $ 17.4 million, respectively, relating to Senior Notes 2028 (three and six months ended December 31, 2021—$ 8.7 million and $ 17.4 million, respectively).

Senior Notes 2026

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See Note 22 “Other Income (Expense), Net.”

For the three months ended September 30, 2022, we did not record any interest expense relating to Senior Notes 2026 (three months ended September 30, 2021—$ 12.5 million).

For the three and six months ended December 31, 2022, we did not record any interest expense relating to Senior Notes 2026 (three and six months ended December 31, 2021—$ 9.4 million and $ 21.9 million, respectively).

Senior Secured Fixed Rate Notes

Senior Secured Notes 2027

On December 1, 2022, we issued $ 1 billion in aggregate principal amount of 6.90 % Senior Secured Notes due 2027 (Senior Secured Notes 2027 and, together with the Senior Notes 2031, Senior Notes 2030, Senior Notes 2029 and Senior Notes 2028, the Senior Notes) in connection with the financing of the Micro Focus Acquisition in an unregistered offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act and to certain non-U.S.

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

Senior Secured Notes 2027 bear interest at a rate of 6.90 % per annum, payable semi-annually in arrears on June 1 and December 1, commencing on June 1, 2023.

Senior Secured Notes 2027 will mature on December 1, 2027, unless earlier redeemed (which would have occurred in accordance with the terms of the indenture, had we not completed the Micro Focus Acquisition (see Note 25 “Subsequent Events”)), in accordance with their terms, or repurchased.

The Senior Secured Notes 2027 are guaranteed on a senior secured basis by certain of the Company’s subsidiaries, and are secured with the same priority as the Company’s senior credit facilities.

The Senior Secured Notes 2027 and the related guarantees are effectively senior to all of the Company’s and the guarantors’ senior unsecured debt to the extent of the value of

the collateral (as defined in the indenture to the Senior Secured Notes 2027) and are structurally subordinated to all existing and future liabilities of each of the Company’s existing and future subsidiaries that do not guarantee the Senior Secured Notes 2027.

For the three and six months ended December 31, 2022, we recorded interest expense of $ 5.8 million, relating to Senior Secured Notes 2027 (three and six months ended December 31, 2021— nil ).

On May 30, 2018, we refinanced our existing term loan facility, by entering into a new $ 1 billion term loan facility (Term Loan B), whereby we borrowed $ 1 billion on that day and repaid in full the loans under our prior $ 800 million term loan facility originally entered into on January 16, 2014.

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

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 (as defined below), Acquisition Term Loan (as defined below) and Senior Secured Notes 2027.

Term Loan B has a seven-year term, maturing in May 2025, and repayments made under Term Loan B are equal to 0.25 % of the principal amount in equal quarterly installments for the life of Term Loan B, with the remainder due at maturity.

Borrowings under Term Loan B currently bear a floating rate of interest equal to 1.75 % plus LIBOR.

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

As of December 31, 2022, the outstanding balance on the Term Loan B bears an interest rate of 5.82 %.

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.

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

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For the three months ended September 30, 2022, we recorded interest expense of $ 9.7 million relating to Term Loan B (three months ended September 30, 2021—$ 4.6 million).

As of December 31, 2022, our consolidated net leverage ratio was 2.0 :1.

For the three and six months ended December 31, 2022, we recorded interest expense of $ 13.2 million and $ 22.9 million, respectively, relating to Term Loan B (three and six months ended December 31, 2021—$ 4.5 million and $ 9.1 million, respectively).

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

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

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 Senior Secured Notes 2027.

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

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

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

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

For the three and six months ended December 31, 2022, we did not record any interest expense relating to the Revolver (three and six months ended December 31, 2021— nil ).

On January 27, 2023, the Company drew down $ 450.0 million from the Revolver to finance the Micro Focus Acquisition.

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).

On December 1, 2022, we amended our first lien term loan facility (the Acquisition Term Loan), dated as of August 25, 2022, to increase the aggregate commitments under the senior secured delayed-draw term loan facility from an aggregate principal amount of $ 2.585 billion to an aggregate principal amount of $ 3.585 billion.

On January 31, 2023, the Company drew down the entire amount of the Acquisition Term Loan, less original issuance discount and other fees, of which the net proceeds were used 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.

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

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.

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 ).

On August 25, 2022, we entered into a bridge loan agreement (Bridge Loan) which provides for commitments of up to $ 2.0 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

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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 ).

As of December 31, 2022, our consolidated net leverage ratio was 2.0 :1.

The Acquisition Term Loan is unconditionally guaranteed by certain subsidiary guarantors, as defined in the Acquisition Term Loan, 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 Senior Secured Notes 2027.

As of December 31, 2022, we had no borrowings under the Acquisition Term Loan.

For the three and six months ended December 31, 2022, we did not record any interest expense relating to the Acquisition Term Loan (three and six months ended December 31, 2021— nil , respectively).

On August 25, 2022, we entered into a bridge loan agreement (Bridge Loan) which provided for commitments of up to $ 2.0 billion to finance a portion of the repayment of Micro Focus’ existing debt.

On December 1, 2022, we entered into an amendment to the Bridge Loan that reallocated commitments under the Bridge Loan to the Acquisition Term Loan.

In connection with the amendment to the Bridge Loan and the receipt of proceeds from the issuance of the Senior Secured Notes 2027, all remaining commitments under the Bridge Loan were reduced to zero and the Bridge Loan was terminated, which resulted in a loss on debt extinguishment of $ 8.1 million relating to unamortized debt issuance costs (see Note 22 “Other Income (Expense), Net” for more details) .

For the three and six months ended December 31, 2022, we did not have any borrowings or record any interest expense relating to the Bridge Loan (three and six months ended December 31, 2021— nil , respectively).

Debt Issuance Costs

Debt issuance costs relate primarily to costs incurred for the purpose of obtaining our credit facilities and issuing our Senior Notes and are being amortized through interest expense over the respective terms of the Senior Notes and Term Loan B, Revolver, Acquisition Term Loan and Bridge Loan using the effective interest method.

Additionally, as of September 30, 2022, we had $ 47.0 million in deferred debt issuance costs included in “Other Assets” (see Note 9 “Prepaid Expenses and Other Assets” for more details).

Debt issuance costs relate primarily to costs incurred for the purpose of obtaining our credit facilities and issuing our Senior Notes and are being amortized through interest expense over the respective terms of the Senior Notes, Term Loan B, and Acquisition Term Loan using the effective interest method and straight line method for the Revolver.

Additionally, as of December 31, 2022, we had $ 54.9 million in deferred debt issuance costs included in “Other Assets” (see Note 9 “Prepaid Expenses and Other Assets” for more details).

NOTE 12— PENSION PLANS AND OTHER POST RETIREMENT BENEFITS

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As part of our acquisition of GXS in Fiscal 2014, we assumed a primarily unfunded defined benefit pension plan covering substantially all of the GXS Philippines employees which provides for retirement, disability and survivors' benefits.

Benefits under the GXS PHP plan are generally based on a participant’s remuneration, years of eligible service and age at retirement.

under the GXS PHP plan are generally based on a participant’s remuneration, years of eligible service and age at retirement.

The net periodic cost of this pension plan is determined using the projected unit credit method and several actuarial assumptions, the most significant of which are the discount rate and estimated service costs.

Aside from an initial contribution which has a fair value of $( 0.03 ) million as of September 30, 2022, no additional contributions have been made since the inception of the plan.

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Aside from an initial contribution which has a fair value of $( 0.03 ) million as of December 31, 2022, no additional contributions have been made since the inception of the plan.

The following are details of net pension expense relating to the following pension plans:

Three Months Ended September 30,

Three Months Ended December 31,

Pension expense:

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Net pension expense $ 267 $ 139 $ 336 $ 742 $ 321 $ 125 $ 609 $ 1,055

Six Months Ended December 31,

Pension expense:

CDT GXS GER GXS PHP Total CDT GXS GER GXS PHP Total

Service cost $ 109 $ 52 $ 666 $ 827 $ 185 $ 85 $ 900 $ 1,170

Interest cost 405 248 310 963 221 157 293 671

Amortization of actuarial (gains) losses — ( 32 ) ( 94 ) ( 126 ) 246 12 ( 46 ) 212

Net pension expense $ 514 $ 268 $ 882 $ 1,664 $ 652 $ 254 $ 1,147 $ 2,053

Service-related net periodic pension costs are recorded within operating expense and all other non-service related net periodic pension costs are classified under “Interest and other related expense, net” on our Condensed Consolidated Statements of Income.

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Cash Dividends

For the three months ended September 30, 2022, pursuant to the Company’s dividend policy, we declared total non-cumulative dividends of $ 0.24299 per Common Share in the aggregate amount of $ 64.7 million which we paid during the same period (three months ended September 30, 2021—$ 0.2209 per Common Share in the aggregate amount of $ 59.9 million).

For the three and six months ended December 31, 2022, pursuant to the Company’s dividend policy, we declared total non-cumulative dividends of $ 0.24299 and $ 0.48598 per Common Share, respectively, in the aggregate amount of $ 64.9 million and $ 129.6 million, respectively, which we paid during the same period (three and six months ended December 31, 2021—$ 0.2209 and $ 0.4418 per Common Share, respectively, in the aggregate amount of $ 59.7 million and $ 119.5 million, respectively).

Share Capital

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From time to time we may provide funds to an independent agent to facilitate repurchases of our Common Shares in connection with the settlement of awards under the Long-Term Incentive Plans (LTIP) or other plans.

During the three months ended September 30, 2022 and 2021, we did not repurchase any Common Shares on the open market for potential settlement of awards under our LTIP or other plans as described below.

During the three months ended September 30, 2022, we delivered to eligible participants 120,406 Common Shares that were purchased in the open market in connection with the settlement of awards and other plans (three months ended September 30, 2021— 141,452 Common Shares).

During the three and six months ended December 31, 2022, we did not repurchase any Common Shares on the open market for potential settlement of awards under our LTIP or other plans as described below (three and six months ended December 31, 2021— 400,000 Common Shares, respectively, at a cost of $ 19.6 million, respectively).

During the three and six months ended December 31, 2022, we delivered to eligible participants 290,970 and 411,376 Common Shares, respectively, that were purchased in the open market in connection with the settlement of awards and other plans (three and six months ended December 31, 2021— 349,792 and 491,244 Common Shares, respectively).

Share Repurchase Plan

On November 4, 2021, the Board authorized a share repurchase plan (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.

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

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During the three and six months ended December 31, 2022, we did not repurchase and cancel any Common Shares (three and six months ended December 31, 2021— 1,809,559 Common Shares, respectively, for $ 91.0 million, respectively).

Share-Based Payments

Share-based compensation expense for the periods indicated below is detailed as follows:

Three Months Ended September 30,

Three Months Ended

December 31, Six Months Ended

2022 2021 2022 2021

Stock Options (issued under Stock Option Plans) $ 5,724 $ 4,748 $ 9,309 $ 9,015

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A summary of unrecognized compensation cost for unvested shared-based payment awards is as follows:

As of September 30, 2022

As of December 31, 2022

Unrecognized Compensation Cost Weighted Average Recognition Period (years)

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Stock Options

A summary of activity under our stock option plans for the three months ended September 30, 2022 is as follows:

A summary of activity under our stock option plans for the six months ended December 31, 2022 is as follows:

Options Weighted-

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Forfeited or expired ( 734,555 ) 43.54

Outstanding at September 30, 2022

Outstanding at December 31, 2022

12,303,677 $ 38.51 5.07 $ 6,857

Exercisable at September 30, 2022

Exercisable at December 31, 2022

3,645,950 $ 39.19 3.08 $ 16

As of September 30, 2022, 8,227,818 options to purchase Common Shares were available for issuance under our stock option plans.

As of December 31, 2022, 6,039,749 options to purchase Common Shares were available for issuance under our stock option plans.

We estimate the fair value of stock options using the Black-Scholes option-pricing model or, where appropriate, the Monte Carlo pricing model, consistent with the provisions of ASC Topic 718, “Compensation—Stock Compensation” (Topic 718) and SEC Staff Accounting Bulletin No.

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Estimates of fair value are not intended, however, to predict actual future events or the value ultimately realized by employees who receive equity awards.

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For the periods indicated, the weighted-average fair value of options and weighted-average assumptions estimated under the Black-Scholes option-pricing model were as follows:

Three Months Ended September 30,

Three Months Ended

December 31, Six Months Ended

2022 2021 2022 2021

Weighted–average fair value of options granted $ 5.77 $ 9.73 $ 6.40 $ 9.74

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Performance Options

During the three months ended September 30, 2022, we granted 1,000,000 performance options (during the three months ended September 30, 2021— nil ).

During the three and six months ended December 31, 2022, we granted zero and 1,000,000 performance options, respectively (during the three and six months ended December 31, 2021— nil , respectively).

For the period in which performance options were granted, the weighted-average fair value of performance options and weighted-average assumptions estimated under the Monte Carlo pricing model were as follows:

Three Months Ended September 30,

Six Months Ended December 31,

Weighted–average fair value of options granted $ 8.09

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The LTIP 2025 PSU and RSU awards are eligible to receive dividend equivalent units that vest under the same conditions as the underlying grants.

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Performance Share Units (Issued Under LTIP)

A summary of activity under our performance share units issued under the LTIP for the three months ended September 30, 2022 is as follows:

A summary of activity under our performance share units issued under the LTIP for the six months ended December 31, 2022 is as follows:

Units Weighted-Average

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533,694 54.56

( 224,593 ) 41.75

Forfeited or expired ( 70,006 ) 66.30

Outstanding at September 30, 2022

Outstanding at December 31, 2022

1,052,032 $ 61.64 2.27 $ 31,182

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For the periods indicated, the weighted-average fair value of PSUs issued under LTIP, and weighted-average assumptions estimated under the Monte Carlo pricing model were as follows:

Three Months Ended September 30,

Six Months Ended December 31,

Weighted–average fair value of performance share units granted $ 43.10 - $ 55.06

$ 69.78 - $ 75.15

Weighted-average assumptions used:

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Risk–free interest rate 3.13 % - 3.39 %

0.45 % - 0.71 %

Expected dividend yield — % 1.70 % - 1.80 %

Expected life (in years) 3.11 3.10

Forfeiture rate (based on historical rates) 7 % 7 %

Restricted Share Units (Issued Under LTIP)

A summary of activity under our RSUs issued under the LTIP for the three months ended September 30, 2022 is as follows:

A summary of activity under our RSUs issued under the LTIP for the six months ended December 31, 2022 is as follows:

Units Weighted-Average

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Granted 400,299 38.82

Vested ( 147,223 ) 36.83

Forfeited or expired ( 56,686 ) 45.30

Outstanding at September 30, 2022

Outstanding at December 31, 2022

808,133 $ 42.22 2.20 $ 23,953

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RSUs (other) vest over a specified contract date, typically two or three years from the respective date of grants.

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A summary of activity under our RSUs (other) issued for the three months ended September 30, 2022 is as follows:

A summary of activity under our RSUs (other) issued for the six months ended December 31, 2022 is as follows:

Units Weighted-Average

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2,593,707 $ 44.90 2.86 $ 98,146

Granted 1,479,192 28.27

Vested ( 120,406 ) 45.73

Forfeited or expired ( 156,133 ) 43.74

Outstanding at September 30, 2022

Outstanding at December 31, 2022

3,796,360 $ 38.60 2.65 $ 112,524

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No DSUs are payable by us until the director ceases to be a member of the Board.

A summary of activity under our deferred share units issued for the three months ended September 30, 2022 is as follows:

A summary of activity under our deferred share units issued for the six months ended December 31, 2022 is as follows:

Units Weighted-Average

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Granted 125,918 28.76

Outstanding at September 30, 2022 (1)

Outstanding at December 31, 2022 (2)

1,011,619 $ 29.82 0.85 $ 29,984

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(1) Includes 55,520 unvested DSUs.

(2) Includes 90,906 unvested DSUs.

Employee Stock Purchase Plan (ESPP)

Our ESPP offers employees the opportunity to purchase our Common Shares at a purchase price discount of 15 %.

During the three months ended September 30, 2022, 354,465 Common Shares were eligible for issuance to employees enrolled in the ESPP (three months ended September 30, 2021— 225,731 Common Shares).

During the three months ended September 30, 2022, cash in the amount of $ 8.0 million was received from employees relating to the ESPP (three months ended September 30, 2021—$ 9.4 million).

During the three and six months ended December 31, 2022, 227,885 and 582,350 Common Shares, respectively, were eligible for issuance to employees enrolled in the ESPP (three and six months ended December 31, 2021— 172,782 and 398,513 Common Shares, respectively).

During the three and six months ended December 31, 2022, cash in the amount of $ 5.8 million and $ 13.8 million, respectively was received from employees relating to the ESPP (three and six months ended December 31, 2021—$ 7.0 million and $ 16.4 million, respectively).

NOTE 14— GUARANTEES AND CONTINGENCIES

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Payments due between

Total October 1, 2022 -

Total January 1, 2023 -

June 30, 2023 July 1, 2023 -

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Please see Note 11 “Long-Term Debt” for more details.

The table above does not reflect amounts drawn on the Revolver or the Acquisition Term Loan related to the financing of the Micro Focus Acquisition subsequent to December 31, 2022.

(2) For contractual obligations relating to leases and purchase obligations accounted for under ASC Topic 842, please see Note 6 “Leases.”

Guarantees and Indemnifications

We have entered into customer agreements which may include provisions to indemnify our customers against third-party claims that our software products or services infringe certain third-party intellectual property rights and for liabilities related to

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a breach of our confidentiality obligations.

We have not made any material payments in relation to such indemnification provisions and have not accrued any liabilities related to these indemnification provisions in our Condensed Consolidated Financial Statements.

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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 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.

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 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.

Assuming the utilization of available tax attributes (further described below), we estimate our potential aggregate liability, as of December 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 $ 72 million.

As of December 31, 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 December 31, 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.

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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.

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 and the customary court process is ongoing.

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.

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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

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independent leading accounting and advisory firm that was used to support our original filing position.

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 a basis consistent with its proposal to reduce the available depreciable basis of assets in Canada.

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On August 1, 2019, prior to our acquisition of Carbonite, a purported stockholder of Carbonite filed a putative class action complaint against Carbonite, its former Chief Executive Officer, Mohamad S.

Ali, and its former Chief Financial Officer, Anthony Folger, in the United States District Court for the District of Massachusetts captioned Ruben A.

Ali, and its former Chief Financial Officer,

Anthony Folger, in the United States District Court for the District of Massachusetts captioned Ruben A.

Luna, Individually and on Behalf of All Others Similarly Situated v.

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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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loss is reasonably possible, an unfavorable outcome is not considered by management to be probable at this time and we remain unable to reasonably estimate a possible loss or range of loss associated with this litigation.

Although a loss is reasonably possible, an unfavorable outcome is not considered by management to be probable at this time and we remain unable to reasonably estimate a possible loss or range of loss associated with this litigation.

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

NOTE 15— INCOME TAXES

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 US Base Erosion and Anti-Abuse Tax (US BEAT).

As of September 30, 2022, the gross amount of unrecognized tax benefits accrued is $ 58.9 million, which is inclusive of interest and penalties accrued of $ 8.6 million (June 30, 2022 — $ 54.1 million and $ 8.4 million, respectively).

The Company’s effective tax rate for the three months ended December 31, 2022, was 16.4 %, compared to a provision of 30.8 % for the three months ended December 31, 2021.

The Company’s effective tax rate for the six months ended December 31, 2022, was 37.3 %, compared to a provision of 27.3 % for the six months ended December 31, 2021.

The Company’s effective tax rate for the three months ended December 31, 2022, differs from the Canadian statutory rate of 26.5 % primarily due to the pre-tax gain created by the mark-to-market valuation on the derivatives not designated as hedges that the Company entered into in connection with the financing of the Micro Focus Acquisition (see Note 17 “Derivative Instruments and Hedging Activities”).

The mark-to-market gains in the quarter are considered capital income for tax purposes and enabled us to recognize the capital losses in the prior quarter that were previously unrecognized.

The Company’s effective tax rate for the three months ended December 31, 2021, differs from the Canadian statutory rate primarily due to US BEAT, partially offset by research and development credits.

The Company’s effective tax rate for the six months ended December 31, 2022, differs from the Canadian statutory rate of 26.5 % primarily due to 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 six months ended December 31, 2021, differs from the Canadian statutory rate primarily due to US BEAT, partially offset by research and development credits.

As of December 31, 2022, the gross amount of unrecognized tax benefits accrued is $ 66.6 million, which is inclusive of interest and penalties accrued of $ 9.1 million (June 30, 2022 — $ 54.1 million and $ 8.4 million, respectively).

We believe that it is reasonably possible that the gross unrecognized tax benefit could decrease by $ 6.5 million in the next 12 months, relating primarily to the expiration of competent authority relief and tax years becoming statute barred for purposes of future tax examinations by local taxing jurisdictions.

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The earliest fiscal years open for examination for our major jurisdictions are 2012 for Canada, 2016 for the United States and 2016 for Germany.

As of December 31, 2021, the Fiscal 2015 and Fiscal 2016 tax years for Luxembourg became statute barred.

On a quarterly basis we assess the status of these examinations and the potential for adverse outcomes to determine the adequacy of the provision for income and other taxes.

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For more information relating to certain income tax audits, please refer to Note 14 “Guarantees and Contingencies.”

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.

As of December 31, 2022, we have recognized a provision of $ 21.8 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.

We have not provided for additional foreign withholding taxes or deferred income tax liabilities related to undistributed earnings of all other non-Canadian subsidiaries, since such earnings are considered permanently invested in those subsidiaries or are not subject to withholding taxes.

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In addition, the fair value of liabilities should include consideration of non-performance risk, including our own credit risk.

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In addition to defining fair value and addressing disclosure requirements, Topic 820 establishes a fair value hierarchy for valuation inputs.

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Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis:

Our financial assets and liabilities that are measured at fair value on a recurring basis consisted of the following types of instruments as of September 30, 2022 and June 30, 2022:

Fair Value Hierarchy September 30, 2022 June 30, 2022

Our financial assets and liabilities that are measured at fair value on a recurring basis consisted of the following types of instruments as of December 31, 2022 and June 30, 2022:

Fair Value Hierarchy December 31, 2022 June 30, 2022

Financial Assets (Liabilities):

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Changes in Level 3 Fair Value Measurements

The following tables provides a reconciliation of changes in the fair value of our Level 3 deal-contingent foreign currency forward contract between June 30, 2022 and September 30, 2022.

The following tables provides a reconciliation of changes in the fair value of our Level 3 deal-contingent foreign currency forward contract between June 30, 2022 and December 31, 2022.

Deal-contingent foreign currency forward contract

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Gain (loss) recognized in income 285

Balance as of September 30, 2022

$ ( 125,331 )

Balance as of December 31, 2022

Our valuation techniques used to measure the fair value of our Level 2 and Level 3 derivative instruments, the counterparties to which have high credit ratings, were derived from pricing models including discounted cash flow techniques, with all significant inputs derived from or corroborated by observable market data, as no quoted market prices exist for these instruments.

Our discounted cash flow techniques use observable market inputs, such as, where applicable, foreign currency spot and forward rates.

The valuation technique for our Level 3 derivative instrument utilizes management estimates related to the probability and timing of our proposed Micro Focus Acquisition that are unobservable, and are not deemed to be significant inputs for the overall valuation.

The valuation technique for our Level 3 derivative instrument utilizes management estimates related to the probability and timing of our Micro Focus Acquisition that are unobservable, and are not deemed to be significant inputs for the overall valuation.

Our cash and cash equivalents, along with our accounts receivable and accounts payable and accrued liabilities balances, are measured and recognized in our Condensed Consolidated Financial Statements at an amount that approximates the fair value (a Level 2 measurement) due to their short maturities.

The fair value of our Senior Notes is determined based on observable market prices and categorized as a Level 2 measurement.

As of September 30, 2022, the fair value was $ 2.6 billion (June 30, 2022—$ 2.8 billion).

As of December 31, 2022, the fair value was $ 3.7 billion (June 30, 2022—$ 2.8 billion).

The carrying value of our other long-term debt facilities approximates the fair value since the interest rate is at market.

Please see Note 11 “Long-Term Debt” for further details.

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If applicable, we will recognize transfers between levels within the fair value hierarchy at the end of the reporting period in which the actual event or change in circumstance occurs.

During the three months ended September 30, 2022 and 2021, respectively, we did not have any transfers between Level 1, Level 2 or Level 3.

During the three and six months ended December 31, 2022 and 2021, respectively, we did not have any transfers between Level 1, Level 2 or Level 3.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

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These assets and liabilities are recognized at fair value when they are deemed to be other-than-temporarily impaired.

During the three months ended September 30, 2022 and 2021, respectively, no indications of impairments were identified and therefore no fair value measurements were required.

During the three and six months ended December 31, 2022 and 2021, respectively, no indications of impairments were identified and therefore no fair value measurements were required.

NOTE 17— DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

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As the critical terms of the hedging instrument and of the entire hedged forecasted transaction are the same, in accordance with Topic 815, we have been able to conclude that changes in fair value or cash flows attributable to the risk being hedged are expected to completely offset at inception and on an ongoing basis.

Accordingly, quarterly unrealized gains or losses on the effective portion of these forward contracts have been included within “Other Comprehensive Income (Loss) - net.” As of September 30, 2022, the fair value of the contracts is recorded within “Accounts payable and accrued liabilities” and represents the net loss before tax effect that is expected to be reclassified from accumulated other comprehensive income (loss) into earnings with the next twelve months.

As of September 30, 2022, the notional amount of forward contracts we held to sell U.S.

Accordingly, quarterly unrealized gains or losses on the effective portion of these forward contracts have been included within “Other Comprehensive Income (Loss) - net.” As of December 31, 2022, the fair value of the contracts is recorded within “Accounts payable and accrued liabilities” and represents the net loss before tax effect that is expected to be reclassified from accumulated other comprehensive income (loss) into earnings with the next twelve months.

As of December 31, 2022, the notional amount of forward contracts we held to sell U.S.

dollars in exchange for Canadian dollars was $ 87.6 million (June 30, 2022—$ 66.5 million).

Non-designated Hedges

In connection with the Micro Focus Acquisition, in August 2022, the Company entered into certain derivative transactions to meet certain foreign currency obligations under UK cash confirmation requirements related to the purchase price of the proposed Micro Focus Acquisition, mitigate the risk of foreign currency appreciation in the GBP denominated purchase price and mitigate the risk of foreign currency appreciation in the EUR denominated existing debt held by Micro Focus.

In connection with the Micro Focus Acquisition, in August 2022, the Company entered into certain derivative transactions to meet certain foreign currency obligations under UK cash confirmation requirements related to the purchase price of the Micro Focus Acquisition, mitigate the risk of foreign currency appreciation in the GBP denominated purchase price and mitigate the risk of foreign currency appreciation in the EUR denominated existing debt held by Micro Focus.

The Company entered into the following derivatives:

(i) three deal-contingent forward contracts, (ii) a non-contingent forward contract, and (iii) EUR/USD cross currency swaps.

The deal-contingent forward contracts have an aggregate notional amount of £ 1.475 billion, and settlement is contingent upon closing the Micro Focus Acquisition.

The deal-contingent forward contracts have an aggregate notional amount of £ 1.475 billion.

The non-contingent forward contract has a notional amount of £ 350 million.

The cross currency swaps are comprised of a 5 year EUR/USD cross currency swap with a notional amount of € 690 million and a 7 year EUR/USD cross currency swap with a notional amount of € 690 million.

These instruments were entered into as economic hedges to mitigate foreign currency risks associated with the proposed Micro Focus Acquisition.

These instruments were entered into as economic hedges to mitigate foreign currency risks associated with the Micro Focus Acquisition.

The instruments do not qualify for hedge accounting at inception.

Derivative financial instruments that do not apply hedge accounting are recognized on the Condensed Consolidated Balance Sheets as either assets or liabilities.

As of September 30, 2022, the forward contracts and the foreign currency swaps are in a net liability position and are classified within “Accounts payable and accrued liabilities.” The forward contracts and cross currency swaps are measured at fair value with changes to fair value being recognized in the Condensed Consolidated Statements of Income within “Other income (expense), net.”

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As of December 31, 2022, the forward contracts are in a net asset position and are classified within “Prepaid expenses and other current assets” and the cross currency swaps are in a net liability position and are classified within “Accounts payable and accrued liabilities.” The forward contracts and cross currency swaps are measured at fair value with changes to fair value being recognized in the Condensed Consolidated Statements of Income within “Other income (expense), net.”

Fair Value of Derivative Instruments and Effect of Derivative Instruments on Financial Performance

The fair values of outstanding derivative instruments are as follows:

September 30, 2022 As of

December 31, 2022 As of

June 30, 2022

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Derivatives not designated as hedges:

Deal-contingent forward contracts Accounts payable and accrued liabilities — ( 125,331 ) — —

Non-contingent forward contract Accounts payable and accrued liabilities — ( 26,203 ) — —

Deal-contingent forward contracts Prepaid expenses and other current assets 285 — — —

Non-contingent forward contract Prepaid expenses and other current assets 6,563 — — —

Cross currency swap contracts Accounts payable and accrued liabilities — ( 16,702 ) — —

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The effects of gains (losses) from derivative instruments on our Condensed Consolidated Statements of Income is as follows:

Three Months Ended September 30,

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

Instrument Income Statement Location 2022 2021 2022 2021

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The effects of the cash flow hedges on our Condensed Consolidated Statements of Comprehensive Income:

Three Months Ended September 30,

Three Months Ended December 31, Six Months Ended

Condensed Consolidated Statements of Income and Condensed Consolidated Statements of Comprehensive Income Location

2022 2021 2022 2021

Gain (loss) recognized in OCI (loss) on derivatives (effective portion) Unrealized gain (loss) on cash flow hedges $ 1,306 $ 141 $ ( 3,240 ) $ ( 1,336 )

Gain (loss) reclassified from AOCI into income

(effective portion)

Operating expenses $ ( 800 ) $ 390

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Gain (loss) reclassified from AOCI into income (effective portion) Operating expenses $ ( 1,498 ) $ 25 $ ( 2,298 ) $ 415

NOTE 18— SPECIAL CHARGES (RECOVERIES)

Special charges (recoveries) include costs and recoveries that relate to certain restructuring initiatives that we have undertaken from time to time under our various restructuring plans, as well as acquisition-related costs and other charges.

Three Months Ended September 30,

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

2022 2021 2022 2021

Fiscal 2022 Restructuring Plan $ 1,991 $ — $ 8,101 $ —

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On a quarterly basis, we conduct an evaluation of the related liabilities and expenses and revise our assumptions and estimates as appropriate.

During the three months ended September 30, 2022, we recognized costs of $ 3.8 million related to abandoned office space that have been early terminated or assigned to a third party, of which $ 2.9 million was related to the write-off of right of use assets.

As of September 30, 2022, we expect total costs to be incurred in connection with the Fiscal 2022 Restructuring Plan to be approximately $ 40.0 million to $ 45.0 million, of which $ 31.9 million has been recorded within “Special charges (recoveries)” to date.

A reconciliation of the beginning and ending restructuring liability, which is included within “Accounts payable and accrued liabilities” in our Condensed Consolidated Balance Sheets, for the three months ended September 30, 2022 is shown below.

During the three and six months ended December 31, 2022, we recognized costs of $ 0.5 million and $ 4.3 million respectively related to abandoned office space that have been early terminated or assigned to a third party, of which $ 1 million and $ 3.9 million were related to the write-off of right of use assets.

As of December 31, 2022, we expect total costs to be incurred in connection with the Fiscal 2022 Restructuring Plan to be approximately $ 35.0 million to $ 40.0 million, of which $ 33.9 million has been recorded within “Special charges (recoveries)” to date.

Fiscal 2022 Restructuring Plan Workforce reduction Facility charges Total

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Foreign exchange and other non-cash adjustments ( 30 ) ( 99 ) ( 129 )

Balance payable as of September 30, 2022

Balance payable as of December 31, 2022

$ 1,429 $ 4,765 $ 6,194

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Acquisition-related costs, recorded within “Special charges (recoveries)” include direct costs of potential and completed acquisitions.

Acquisition-related costs for the three months ended September 30, 2022 were $ 4.6 million (three months ended September 30, 2021—$ 0.7 million).

Acquisition-related costs for the three and six months ended December 31, 2022 were $ 6.0 million and $ 10.6 million, respectively (three and six months ended December 31, 2021—$ 3.9 million and $ 4.7 million, respectively).

Other charges (recoveries)

For the three months ended September 30, 2022, “Other charges” includes $ 3.6 million, related to pre-acquisition equity incentives of Zix Corporation (Zix), which upon acquisition were replaced by equivalent value cash settlements (see Note 19 “Acquisitions”) and $ 0.5 million related to other miscellaneous charges.

For the three months ended September 30, 2021, “Other charges” includes $ 0.2 million related to other miscellaneous charges.

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For the three and six months ended December 31, 2022, “Other charges (recoveries)” includes $ 3.6 million and $ 7.2 million, respectively, related to pre-acquisition equity incentives of Zix Corporation (Zix), which upon acquisition were replaced by equivalent value cash settlements (see Note 19 “Acquisitions”) and $( 0.7 ) million and $( 0.2 ) million, respectively, related to other miscellaneous charges (recoveries).

For the three and six months ended December 31, 2021, “Other charges” includes $ 2.0 million, respectively, related to Zix pre-acquisition equity incentives, which upon acquisition were replaced by equivalent value cash settlements (see Note 19 “Acquisitions”) and $ 3.7 million and $ 3.9 million, respectively, related to other miscellaneous charges.

NOTE 19— ACQUISITIONS

Fiscal 2023 Acquisitions

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.

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 International PLC (Micro Focus), for a total purchase price of approximately $ 5.8 billion, inclusive of Micro Focus’ cash and debt, subject to final adjustments.

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 (see Note 22 “Other Income (Expense), Net”).

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.

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

Acquisition-related costs for Micro Focus included in “Special Charges (Recoveries)” in the Condensed Consolidated Financial Statements for the three months ended September 30, 2022 were $ 4.4 million.

On December 1, 2022, the Company issued and sold $ 1 billion in aggregate principal amount of 6.90 % Senior Secured Notes 2027 and amended the Acquisition Term Loan to increase commitments to an aggregate principal amount of $ 3.585 billion.

On January 31, 2023, we completed the Micro Focus Acquisition and repaid Micro Focus’ outstanding indebtedness.

We used proceeds from the issuance of the Senior Secured Notes 2027 and cash on hand to fund the remaining purchase price consideration.

Acquisition-related costs for Micro Focus included in “Special Charges (Recoveries)” in the Condensed Consolidated Financial Statements for the three and six months ended December 31, 2022 were $ 5.9 million and $ 10.3 million.

Fiscal 2022 Acquisitions

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

Preliminary Purchase Price Allocation

The recognized amounts of identifiable assets acquired and liabilities assumed, based on their preliminary fair values as of December 23, 2021, are set forth below:

Purchase Price Allocation

The recognized amounts of identifiable assets acquired and liabilities assumed, based on their fair values as of December 23, 2021, are set forth below:

Current assets (inclusive of cash acquired of $ 38.3 million)

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The gross amount receivable was $ 32.6 million, of which $ 6.6 million is expected to be uncollectible.

Acquisition-related costs for Zix included in “Special Charges (Recoveries)” in the Condensed Consolidated Financial Statements for the three months ended September 30, 2022 were $ 0.2 million.

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Pre-acquisition equity incentives of $ 26.4 million were replaced upon acquisition by equivalent value cash settlements to be settled in accordance with the original vesting dates, primarily over the next two years .

Of these equity incentives, $ 3.6 million for the three months ended September 30, 2022 were included in “Special Charges (Recoveries).”

The finalization of the above purchase price allocation is pending the finalization of the valuation of fair value for the assets acquired and liabilities assumed, including intangible assets and taxation-related balances as well as for potential unrecorded liabilities.

We expect to finalize this determination during our quarter ending December 31, 2022.

Acquisition-related costs for Zix included in “Special Charges (Recoveries)” in the Condensed Consolidated Financial Statements for the three and six months ended December 31, 2022 were nil and $ 0.2 million, respectively.

Of these equity incentives, $ 3.6 million and $ 7.2 million, respectively, for the three and six months ended December 31, 2022 were included in “Special Charges (Recoveries).”

The finalization of the purchase price allocation during the three months ended December 31, 2022 did not result in any significant changes to the preliminary amounts previously disclosed.

Acquisition of Bricata Inc.

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NOTE 20— ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Three Months Ended December 31, 2022

Foreign Currency Translation Adjustments Cash Flow Hedges Defined Benefit Pension Plans Accumulated Other Comprehensive Income (Loss)

Balance as of September 30, 2022

$ ( 39,682 ) $ ( 3,408 ) $ 514 $ ( 42,576 )

Other comprehensive income (loss) before reclassifications, net of tax 39,419 959 32 40,410

Amounts reclassified into net income, net of tax — 1,101 37 1,138

Total other comprehensive income (loss) net, for the period 39,419 2,060 69 41,548

Balance as of December 31, 2022

$ ( 263 ) $ ( 1,348 ) $ 583 $ ( 1,028 )

Six Months Ended December 31, 2022

Foreign Currency Translation Adjustments Cash Flow Hedges Defined Benefit Pension Plans Accumulated Other Comprehensive Income (Loss)

Balance as of June 30, 2022

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Total other comprehensive income (loss) net, for the period 3,053 ( 692 ) 4,270 6,631

Balance as of December 31, 2022

$ ( 263 ) $ ( 1,348 ) $ 583 $ ( 1,028 )

Three Months Ended December 31, 2021

Foreign Currency Translation Adjustments Cash Flow Hedges Defined Benefit Pension Plans Accumulated Other Comprehensive Income (Loss)

Balance as of September 30, 2021

$ 65,316 $ ( 543 ) $ ( 10,887 ) $ 53,886

Other comprehensive income (loss) before reclassifications, net of tax ( 21,347 ) 104 ( 1,435 ) ( 22,678 )

Amounts reclassified into net income, net of tax — ( 18 ) 159 141

Total other comprehensive income (loss) net, for the period ( 21,347 ) 86 ( 1,276 ) ( 22,537 )

Balance as of December 31, 2021

$ 43,969 $ ( 457 ) $ ( 12,163 ) $ 31,349

Six Months Ended December 31, 2021

Foreign Currency Translation Adjustments Cash Flow Hedges Defined Benefit Pension Plans Accumulated Other Comprehensive Income (Loss)

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Total other comprehensive income (loss) net, for the period ( 31,439 ) ( 1,287 ) ( 2,163 ) ( 34,889 )

Balance as of September 30, 2021

Balance as of December 31, 2021

$ 43,969 $ ( 457 ) $ ( 12,163 ) $ 31,349

NOTE 21— SUPPLEMENTAL CASH FLOW DISCLOSURES

Three Months Ended September 30,

Six Months Ended

Cash paid during the period for interest $ 92,016 $ 73,389

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Cash paid during the period for income taxes $ 91,444 $ 60,293

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NOTE 22— OTHER INCOME (EXPENSE), NET

Three Months Ended September 30,

Three Months Ended

December 31, Six Months Ended

2022 2021 2022 2021

Foreign exchange gains (losses) $ 60 $ 192 $ ( 1,301 ) $ 543

Unrealized losses on derivatives not designated as hedges (1)

Unrealized gains (losses) on derivatives

not designated as hedges (1)

171,607 — ( 9,854 ) —

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

OpenText share in net income of equity investees (2)

( 289 ) 2,042 ( 6,823 ) 31,357

Loss on debt extinguishment (3) (4)

( 8,131 ) ( 27,413 ) ( 8,131 ) ( 27,413 )

Other miscellaneous income (expense) 102 142 227 258

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____________________________________

(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).

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

(2) Represents our share in net income (losses) 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” for more details).

NOTE 23— EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share are computed by dividing net income (loss) attributable to OpenText, by the weighted average number of Common Shares outstanding during the period.

Diluted earnings (loss) per share are computed by dividing net income (loss) attributable to OpenText, by the shares used in the calculation of basic earnings (loss) per share plus the dilutive effect of Common Share equivalents, such as stock options, using the treasury stock method.

Common Share equivalents are excluded from the computation of diluted earnings (loss) per share if their effect is anti-dilutive.

For periods in which we incur a net loss, our outstanding Common Share equivalents are not included in the calculation of diluted loss per share as their effect is anti-dilutive.

Three Months Ended September 30,

Basic earnings (loss) per share

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

Basic earnings (loss) per share attributable to OpenText $ ( 0.43 ) $ 0.48

Diluted earnings (loss) per share

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

Diluted earnings (loss) per share attributable to OpenText $ ( 0.43 ) $ 0.48

Weighted-average number of shares outstanding (in '000's)

(3) On December 1, 2022, we amended the Acquisition Term Loan and Bridge Loan to reallocate commitments under the Bridge Loan to the Acquisition Term Loan and terminated all remaining commitments under the Bridge Loan which resulted in a loss on debt extinguishment of $ 8.1 million related to unamortized debt issuance costs (see Note 11 “Long-Term Debt” for more details).

(4) 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” for more details).

NOTE 23— EARNINGS PER SHARE

Basic earnings per share are computed by dividing net income attributable to OpenText, by the weighted average number of Common Shares outstanding during the period.

Diluted earnings per share are computed by dividing net income attributable to OpenText, by the shares used in the calculation of basic earnings per share plus the dilutive effect of Common Share equivalents, such as stock options, using the treasury stock method.

Common Share equivalents are excluded from the computation of diluted earnings per share if their effect is anti-dilutive.

Three Months Ended

December 31, Six Months Ended

2022 2021 2022 2021

Basic earnings per share

Net income attributable to OpenText $ 258,486 $ 88,298 $ 141,557 $ 220,213

Basic earnings per share attributable to OpenText $ 0.96 $ 0.32 $ 0.52 $ 0.81

Diluted earnings per share

Net income attributable to OpenText $ 258,486 $ 88,298 $ 141,557 $ 220,213

Diluted earnings per share attributable to OpenText $ 0.96 $ 0.32 $ 0.52 $ 0.81

Weighted-average number of shares outstanding

Basic 270,189 272,112 269,997 272,078

3 unchanged sentences

11,462 3,108 10,331 2,845

(1) Represents options to purchase Common Shares excluded from the calculation of diluted earnings (loss) per share because the exercise price of the stock options was greater than or equal to the average price of the Common Shares during the period or the inclusion of the potential dilutive options to purchase Common Shares results in anti-dilution due to the net loss for the period .

Table of C ontents

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(1) Represents options to purchase Common Shares excluded from the calculation of diluted earnings per share because the exercise price of the stock options was greater than or equal to the average price of the Common Shares during the period.

NOTE 24— RELATED PARTY TRANSACTIONS

6 unchanged sentences

and if applicable, the availability of other sources of comparable services or products.

During the three months ended September 30, 2022, Mr.

Stephen Sadler, a member of the Board of Directors, earned $ 7 thousand (three months ended September 30, 2021 — $ 4 thousand) in consulting fees from OpenText for assistance with acquisition-related business activities.

During the six months ended December 31, 2022, Mr.

Stephen Sadler, a member of the Board of Directors, earned $ 7 thousand (six months ended December 31, 2021 — $ 0.4 million) in consulting fees from OpenText for assistance with acquisition-related business activities.

Sadler abstained from voting on all transactions from which he would potentially derive consulting fees.

1 unchanged sentence

Cash Dividends

As part of our quarterly, non-cumulative cash dividend program, we declared, on November 2, 2022, a dividend of $ 0.24299 per Common Share.

The record date for this dividend is December 2, 2022 and the payment date is December 22, 2022.

As part of our quarterly, non-cumulative cash dividend program, we declared, on February 1, 2023, a dividend of $ 0.24299 per Common Share.

The record date for this dividend is March 3, 2023 and the payment date is March 23, 2023.

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

Table of C ontents

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 International PLC (Micro Focus), for a total purchase price of approximately $ 5.8 billion, inclusive of Micro Focus’ cash and debt, subject to final adjustments.

On January 31, 2023, we completed the Micro Focus Acquisition and repaid Micro Focus’ outstanding indebtedness.

We used proceeds from the issuance of the Senior Secured Notes 2027 and cash on hand to fund the remaining purchase price consideration.

In accordance with Topic 805, the Micro Focus Acquisition will be accounted for as a business combination.

The major classes of assets acquired through the Micro Focus Acquisition include, current assets, non-current tangible assets, intangible technology assets and intangible customer assets, as well as certain liabilities assumed.

Due to the limited time since the acquisition date and the size and complexity of the transaction, the accounting for the business combination is not yet complete.

The Company is not able to provide the allocation of consideration paid to the assets acquired or liabilities assumed.

As such, it is impractical for the Company to present pro forma and comparative statements as of the date of this filing and such statements will be included in a subsequent Form 8-K.

The results of operations of Micro Focus will be consolidated with those of OpenText beginning in the third quarter of Fiscal 2023.

Refer to the Notes which include details related to the Micro Focus Acquisition:

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 1. Financial Statements