What changed in this filing

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Item 1. Financial Statements

2023-05-04 compared with 2023-02-02 · 465 added, 321 removed, 998 unchanged (44% of the section changed)

4 unchanged sentences

dollars, except share data)

December 31, 2022 June 30, 2022

March 31, 2023 June 30, 2022

ASSETS (unaudited)

Cash and cash equivalents $ 1,396,817 $ 1,693,741

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)

Accounts receivable trade, net of allowance for credit losses of $ 16,550 as of March 31, 2023

and $ 16,473 as of June 30, 2022 (Note 4)

676,280 426,652

54 unchanged sentences

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

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

270,479,181 and 269,522,639 Common Shares issued and outstanding at March 31, 2023

and June 30, 2022, respectively;

authorized Common Shares:

3 unchanged sentences

Retained earnings 2,163,338 2,160,069

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

Treasury stock, at cost ( 3,216,394 and 3,706,420 shares at March 31, 2023 and

June 30, 2022, respectively)

( 138,700 ) ( 159,966 )

7 unchanged sentences

See accompanying Notes to Condensed Consolidated Financial Statements

Table of Content s

OPEN TEXT CORPORATION

3 unchanged sentences

Three Months Ended

December 31, Six Months Ended

March 31, Nine Months Ended

2023 2022 2023 2022

29 unchanged sentences

Income before income taxes 45,193 115,763 271,230 418,781

Provision for income taxes (Note 15)

Provision for (recovery of) income taxes (Note 15)

( 12,420 ) 41,041 71,979 123,757

9 unchanged sentences

See accompanying Notes to Condensed Consolidated Financial Statements

Table of Content s

OPEN TEXT CORPORATION

2 unchanged sentences

Three Months Ended

December 31, Six Months Ended

March 31, Nine Months Ended

2023 2022 2023 2022

3 unchanged sentences

Unrealized gain (loss) on cash flow hedges:

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

Unrealized gain (loss) - net of tax expense (recovery) effect of $ 15 and $ 233 for the three months ended March 31, 2023 and 2022, respectively;

$( 844 ) and $( 158 ) for the nine months ended March 31, 2023 and 2022, respectively

38 648 ( 2,343 ) ( 334 )

(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

(Gain) loss reclassified into net income - net of tax (expense) recovery effect of $ 252 and $ 79 for the three months ended March 31, 2023 and 2022, respectively;

$ 861 and $( 24 ) for the nine months ended March 31, 2023 and 2022, respectively

699 219 2,388 ( 86 )

Unrealized gain (loss) on available-for-sale financial assets:

Unrealized gain (loss) - net of tax expense (recovery) effect of $ 238 and $ — for the three months ended March 31, 2023 and 2022, respectively;

$ 238 and $ — for the nine months ended March 31, 2023 and 2022, respectively

( 900 ) — ( 900 ) —

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

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

Actuarial gain (loss) - net of tax expense (recovery) effect of $( 892 ) and $( 579 ) for the three months ended March 31, 2023 and 2022, respectively;

$ 318 and $( 811 ) for the nine months ended March 31, 2023 and 2022, respectively

( 3,318 ) ( 2,033 ) 878 ( 4,517 )

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

Amortization of actuarial (gain) loss into net income - net of tax (expense) recovery effect of $ 25 and $ 66 for the three months ended March 31, 2023 and 2022, respectively;

$ 76 and $ 134 for the nine months ended March 31, 2023 and 2022, respectively

35 156 109 477

5 unchanged sentences

See accompanying Notes to Condensed Consolidated Financial Statements

Table of Content s

OPEN TEXT CORPORATION

2 unchanged sentences

dollars and shares)

Three Months Ended December 31, 2022

Three Months Ended March 31, 2023

Common Shares and Additional Paid in Capital Treasury Stock Retained

3 unchanged sentences

Shares Amount Shares Amount

Balance as of September 30, 2022

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

Issuance of Common Shares

Under employee stock option plans 16 479 — — — — — 479

Under employee stock purchase plans 228 5,776 — — — — — 5,776

6 unchanged sentences

Net income for the period — — — — 57,556 — 57 57,613

Balance as of December 31, 2022

Balance as of March 31, 2023

270,479 $ 2,130,343 ( 3,216 ) $ ( 138,700 ) $ 2,163,338 $ ( 33,114 ) $ 1,280 $ 4,123,147

Three Months Ended December 31, 2021

Three Months Ended March 31, 2022

Common Shares and Additional Paid in Capital Treasury Stock Retained

3 unchanged sentences

Shares Amount Shares Amount

Balance as of September 30, 2021

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

4 unchanged sentences

Purchase of treasury stock — — ( 1,300 ) ( 56,067 ) — — — ( 56,067 )

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

Repurchase of Common Shares ( 1,000 ) ( 6,381 ) — — ( 38,702 ) — — ( 45,083 )

4 unchanged sentences

Net income for the period — — — — 74,681 — 41 74,722

Balance as of December 31, 2021

Balance as of March 31, 2022

270,231 $ 2,010,146 ( 2,776 ) $ ( 124,033 ) $ 2,151,369 $ 17,266 $ 1,103 $ 4,055,851

Table of Content s

OPEN TEXT CORPORATION

2 unchanged sentences

dollars and shares)

Six Months Ended December 31, 2022

Nine Months Ended March 31, 2023

Common Shares and Additional Paid in Capital Treasury Stock Retained

15 unchanged sentences

Net income for the period — — — — 199,113 — 138 199,251

Balance as of December 31, 2022

Balance as of March 31, 2023

270,479 $ 2,130,343 ( 3,216 ) $ ( 138,700 ) $ 2,163,338 $ ( 33,114 ) $ 1,280 $ 4,123,147

Six Months Ended December 31, 2021

Nine Months Ended March 31, 2022

Common Shares and Additional Paid in Capital Treasury Stock Retained

18 unchanged sentences

Net income for the period — — — — 294,894 — 130 295,024

Balance as of December 31, 2021

Balance as of March 31, 2022

270,231 $ 2,010,146 ( 2,776 ) $ ( 124,033 ) $ 2,151,369 $ 17,266 $ 1,103 $ 4,055,851

See accompanying Notes to Condensed Consolidated Financial Statements

Table of Content s

OPEN TEXT CORPORATION

1 unchanged sentence

(In thousands of U.S.

Six Months Ended December 31,

Nine Months Ended March 31,

Cash flows from operating activities:

10 unchanged sentences

Share in net (income) loss of equity investees 11,547 ( 59,103 )

Unrealized loss on financial instruments 9,854 —

Changes in financial instruments 112,567 —

Changes in operating assets and liabilities:

10 unchanged sentences

Additions of property and equipment ( 99,772 ) ( 54,937 )

Purchase of Micro Focus, net of cash acquired ( 5,655,606 ) —

Purchase of Zix Corporation, net of cash acquired — ( 856,175 )

Purchase of Bricata Inc.

Realized gain on financial instruments 131,248 —

Other investing activities ( 873 ) ( 3,922 )

12 unchanged sentences

Payments of dividends to shareholders ( 194,481 ) ( 178,613 )

Other financing activities ( 2,193 ) —

Net cash provided by financing activities 4,662,276 266,062

3 unchanged sentences

Cash, cash equivalents and restricted cash at end of the period $ 1,399,720 $ 1,635,851

Table of Content s

OPEN TEXT CORPORATION

2 unchanged sentences

Reconciliation of cash, cash equivalents and restricted cash:

December 31, 2022 December 31, 2021

March 31, 2023 March 31, 2022

Cash and cash equivalents $ 1,396,817 $ 1,633,702

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 and Six Months Ended December 31, 2022

For the Three and Nine Months Ended March 31, 2023

(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 December 31, 2022, was 70 % owned by OpenText.

(OT South Africa), which as of March 31, 2023, was 70 % owned by OpenText.

All intercompany balances and transactions have been eliminated.

20 unchanged sentences

dollars and are prepared in accordance with United States generally accepted accounting principles (U.S.

The information furnished reflects all adjustments necessary for a fair presentation of the results for the periods presented.

The information furnished reflects all adjustments necessary for a fair presentation of the results for the periods presented and includes the consolidated financial results of Micro Focus International Limited, formerly Micro Focus International plc, and its subsidiaries (Micro Focus), with effect from February 1, 2023 (see below and Note 19 “Acquisitions”).

Use of estimates

6 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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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”, Note 22 “Other Income (Expense), Net,” and Note 25 “Subsequent Events.”

On January 31, 2023, we acquired all of the issued and to be issued share capital of Micro Focus (the Micro Focus Acquisition) for a total purchase price of $ 6.2 billion, inclusive of Micro Focus’ cash and repayment of Micro Focus’ outstanding indebtedness, subject to final adjustments.

In connection with the financing of the Micro Focus Acquisition, concurrent with the announcement of the acquisition on August 25, 2022, the Company entered into the Acquisition Term Loan and Bridge Loan (each as defined below) as well as certain derivative transactions.

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), amended the Acquisition Term Loan and terminated the Bridge Loan.

On January 31, 2023, we drew down the entire aggregate principal amount of $ 3.585 billion of the Acquisition Term Loan, net of original issuance discount and other fees, and drew down $ 450 million under the Revolver (as defined below).

We used these proceeds and cash on hand to fund the purchase price consideration and repayment of Micro Focus’ outstanding indebtedness.

In conjunction with the closing of the Micro Focus Acquisition, the deal-contingent forward contracts and non-contingent forward contract, as described in Note 17 “Derivative Instruments and Hedging Activities,” were settled.

NOTE 2— RECENT ACCOUNTING PRONOUNCEMENTS

Accounting Pronouncements Adopted in Fiscal 2023

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 .

During the three and nine months ended March 31, 2023, 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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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 December 31, Six Months Ended December 31,

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

2023 2022 2023 2022

30 unchanged sentences

Contract assets are reclassified to accounts receivable when the rights become unconditional.

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The balance for our contract assets and contract liabilities (i.e.

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

As of December 31, 2022

As of March 31, 2023 (1)

As of June 30, 2022

4 unchanged sentences

Long-term deferred revenues $ 240,357 $ 91,144

______________________

(1) As of March 31, 2023, the deferred revenue and contract assets balances related to the Micro Focus Acquisition are $ 992.8 million and $ 83.1 million, respectively.

The difference in the opening and closing balances of our contract assets and deferred revenues primarily results from the timing difference between our performance and the customer’s payments.

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

During the 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.

During the nine months ended March 31, 2023, we reclassified $ 37.7 million (nine months ended March 31, 2022 — $ 26.6 million) of contract assets to receivables as a result of the right to the transaction consideration becoming unconditional.

During the three and nine months ended March 31, 2023 and 2022, 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 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).

The amount of revenue that was recognized during the nine months ended March 31, 2023 that was included in the deferred revenue balances at June 30, 2022 was $ 813 million (nine months ended March 31, 2022—$ 775 million).

Incremental Costs of Obtaining a Contract with a Customer

5 unchanged sentences

Impact of foreign exchange rate changes 233

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.

Capitalized costs to obtain a contract as of March 31, 2023

During the three and nine months ended March 31, 2023 and 2022, 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 December 31, 2022, approximately $ 1.6 billion of revenue is expected to be recognized from remaining performance obligations on existing contracts.

As of March 31, 2023, approximately $ 2.5 billion of revenue is expected to be recognized from remaining performance obligations on existing contracts.

We expect to recognize approximately 47 % of this amount over the next 12 months and the remaining balance substantially over the next three years thereafter.

We apply the practical expedient and do not disclose performance obligations that have original expected durations of one year or less.

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NOTE 4— ALLOWANCE FOR CREDIT LOSSES

3 unchanged sentences

Write-off / adjustments 635

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).

Balance as of March 31, 2023

Included in accounts receivable are unbilled receivables in the amount of $ 72.2 million as of March 31, 2023 (June 30, 2022—$ 47.9 million).

As of March 31, 2023, we have an allowance for credit losses of $ 0.4 million for contract assets (June 30, 2022—$ 0.7 million).

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

NOTE 5— PROPERTY AND EQUIPMENT

As of December 31, 2022

As of March 31, 2023

Cost Accumulated

21 unchanged sentences

Additionally, the land upon which our headquarters in Waterloo, Ontario, Canada is located is leased from the University of Waterloo for a period of 49 years beginning in December 2005, with an option to renew for an additional term of 49 years.

Leases with an initial term of 12 months or less are not recorded on our Condensed Consolidated Balance Sheets and we do not have any material finance leases.

Lease Costs and Other Information

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

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

Leases with an initial term of 12 months or less are not recorded on our Condensed Consolidated Balance Sheets.

As part of the Micro Focus Acquisition, we acquired $ 164.4 million of operating lease liabilities along with the respective right of use assets and $ 12.9 million of finance lease liabilities along with the respective finance lease receivable.

The finance lease liabilities are comprised of equipment lease arrangements with an average duration of 4 to 5 years of which all are currently being sublet.

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The following illustrates the Condensed Consolidated Balance Sheets information related to leases:

As of March 31, 2023 As of June 30, 2022

Operating Leases Balance Sheet Location

Operating lease right of use assets Operating lease right of use assets $ 297,640 $ 198,132

Operating lease liabilities (current) Operating lease liabilities $ 94,015 $ 56,380

Operating lease liabilities (noncurrent) Long-term operating lease liabilities 286,025 198,695

Total operating lease liabilities $ 380,040 $ 255,075

Finance Leases

Finance lease receivables (current) Prepaid expenses and other current assets $ 4,589 $ —

Finance lease receivables (noncurrent) Other assets 6,705 —

Total finance lease receivables $ 11,294 $ —

Finance lease liabilities (current) Accounts payable and accrued liabilities $ 5,362 $ —

Finance lease liabilities (noncurrent) Accrued liabilities 6,739 —

Total finance lease liabilities $ 12,101 $ —

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

As of March 31, 2023 As of June 30, 2022

Weighted-average remaining lease term

Operating leases 5.78 years 6.13 years

Finance leases 2.59 years 0 years

Weighted-average discount rate

Operating leases 4.42 % 2.95 %

Finance leases 5.62 % —

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

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

2023 2022 2023 2022

4 unchanged sentences

Total lease cost $ 20,805 $ 14,185 $ 45,048 $ 42,764

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

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 %

Supplemental Cash Flow Information

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The following table presents supplemental information relating to cash flows arising from lease transactions.

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:

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)

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

Nine Months Ended March 31,

Cash paid for amounts included in the measurement of lease liabilities:

Operating leases $ 62,282 $ 53,200

Finance leases $ 989 $ —

Right of use assets obtained in exchange for new lease liabilities:

Operating leases (1) (2)

$ 28,579 $ 24,880

______________________

(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.

(1) The nine months ended March 31, 2023 excludes the impact of $ 129.3 million of right of use assets obtained through the Micro Focus Acquisition.

See Note 19 “Acquisitions” for further details including the finalization of the purchase price allocation for the Micro Focus Acquisition.

(2) The nine months ended March 31, 2022 excludes the impact of $ 8.1 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 December 31, 2022:

Fiscal years ending June 30,

2023 (six months ended)

The following table presents the future minimum lease payments under our leases liabilities as of March 31, 2023:

Fiscal years ending June 30, Operating Leases Finance Leases

2023 (three months ended)

$ 28,363 $ 1,475

104,554 5,720

Thereafter 107,344 —

2 unchanged sentences

Total $ 380,040 $ 12,101

Current operating lease liabilities $ 58,299

Non-current operating lease liabilities 188,809

Total $ 247,108

Operating lease maturity amounts included in the table above do not include sublease income expected to be received under our various sublease agreements with third parties.

4 unchanged sentences

Balance as of June 30, 2022

Acquisition of Micro Focus (Note 19)

Acquisition of Zix Corporation (Note 19)

Impact of foreign exchange rate changes ( 8,063 )

Balance as of December 31, 2022

Balance as of March 31, 2023

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NOTE 8— ACQUIRED INTANGIBLE ASSETS

As of December 31, 2022

As of March 31, 2023

Cost Accumulated Amortization Net

7 unchanged sentences

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

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.

Where applicable, the above balances as of March 31, 2023 have been reduced to reflect the impact of intangible assets where the gross cost has become fully amortized during the nine months ended March 31, 2023.

The impact of this resulted in a reduction of $ 578 million to technology assets and $ 64 million to customer assets.

The balances as of March 31, 2023 include $ 1.4 billion of intangible technology assets and $ 2.1 billion of intangible customer assets acquired through the Micro Focus Acquisition.

See Note 19 “Acquisitions” for further details including the finalization of the purchase price allocation for the Micro Focus Acquisition.

The weighted average amortization periods for acquired technology and customer intangible assets are approximately six years and eight years , respectively.

2 unchanged sentences

Fiscal years ending June 30,

2023 (six months ended)

2023 (three months ended)

2028 and Thereafter

Total $ 4,221,885

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NOTE 9— PREPAID EXPENSES AND OTHER ASSETS

Prepaid expenses and other current assets:

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

As of March 31, 2023 As of June 30, 2022

Deposits and restricted cash $ 2,858 $ 6,300

Capitalized costs to obtain a contract 38,898 27,077

Derivative asset 6,848 —

Short-term prepaid expenses and other current assets 208,905 87,175

1 unchanged sentence

Other assets:

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

As of March 31, 2023 As of June 30, 2022

Deposits and restricted cash $ 21,662 $ 6,462

Capitalized costs to obtain a contract 55,308 55,484

Deferred debt issuance costs 54,917 —

Investments 159,503 173,205

Available-for-sale financial assets 39,313 —

Long-term prepaid expenses and other long-term assets 67,891 21,836

2 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”).

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.”

Investments relate to certain investment funds in which we are a limited partner.

2 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 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).

During the three and nine months ended March 31, 2023, our share of income (loss) from these investments was $( 4.7 ) million and $( 11.5 ) million, respectively (three and nine months ended March 31, 2022—$ 27.7 million and $ 59.1 million, respectively).

As part of the Micro Focus Acquisition, we acquired the rights to certain available-for-sale financial assets.

A portion of the available-for-sale financial assets relate to contractual arrangements under insurance policies held by the Company with guaranteed interest rates that are utilized to meet certain pension and post retirement obligations but do not meet the definition of a plan asset.

The remaining portion of available-for-sale financial assets are primarily comprised of various debt and equity funds, which are valued utilizing market quotes provided by our third-party custodian.

These arrangements are treated as available-for-sale financial assets measured at fair value quarterly (see Note 16 “Fair Value Measurement”) with unrealized gains and losses recorded within “Other Comprehensive Income (Loss) Net” (see Note 20 “Accumulated Other Comprehensive Income (Loss)”).

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 December 31, 2022 As of June 30, 2022

As of March 31, 2023 As of June 30, 2022

Accounts payable—trade $ 179,807 $ 113,978

3 unchanged sentences

Derivative liability (1)

Deferred debt issuance costs (2)

Accrued interest on Senior Notes 37,563 31,813

Accrued interest on long-term debt 52,069 31,813

Amounts payable in respect of restructuring and other special charges 4,257 3,589

2 unchanged sentences

______________________

(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”).

(1) Represents the liability related to our derivative instrument activity (see Note 17 “Derivative Instruments and Hedging Activities”).

Long-term accrued liabilities:

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

As of March 31, 2023 As of June 30, 2022

Amounts payable in respect of restructuring and other special charges $ 8,719 $ 5,702

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

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).

As of March 31, 2023, the present value of this obligation was $ 28.5 million (June 30, 2022—$ 15.8 million), with an undiscounted value of $ 31.7 million (June 30, 2022—$ 16.4 million).

As of March 31, 2023, the present value of this obligation and the undiscounted value related to the Micro Focus Acquisition was $ 12.4 million and $ 15.1 million, respectively.

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NOTE 11— LONG-TERM DEBT

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

As of March 31, 2023 As of June 30, 2022

Senior Notes 2031 $ 650,000 $ 650,000

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Acquisition Term Loan 3,576,038 —

Revolver 450,000 —

Total principal payments due 9,276,038 4,257,500

Discount on Acquisition Term Loan ( 105,529 ) —

Debt issuance costs (1)

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Term Loan B 10,000 10,000

Acquisition Term Loan 35,850 —

Revolver 450,000 —

Total current portion of long-term debt 495,850 10,000

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______________________

(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.

(1) During three and nine months ended March 31, 2023, we recorded $ 8.5 million and $ 78.0 million of debt issuance costs, respectively, relating to the issuance of Senior Secured Notes 2027 and Acquisition Term Loan.

Additionally, upon closing of the Micro Focus Acquisition, all deferred debt issuance costs related to the Acquisition Term Loan previously included in “Other assets” have been reclassified to debt issuance costs.

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 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).

For the three and nine months ended March 31, 2023, we recorded interest expense of $ 6.7 million and $ 20.1 million, respectively, relating to Senior Notes 2031 (three and nine months ended March 31, 2022 $ 6.7 million and $ 9.4 million, respectively).

Senior Notes 2030

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

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

Senior Notes 2030 bear interest at a rate of

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4.125 % per annum, payable semi-annually in arrears on February 15 and August 15, commencing on August 15, 2020.

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

For the three 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).

For the three and nine months ended March 31, 2023, we recorded interest expense of $ 9.3 million and $ 27.9 million, respectively, relating to Senior Notes 2030 (three and nine months ended March 31, 2022—$ 9.3 million and $ 27.9 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

certain non-U.S.

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

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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 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).

For the three and nine months ended March 31, 2023, we recorded interest expense of $ 8.2 million and $ 24.6 million, respectively, relating to Senior Notes 2029 (three and nine months ended March 31, 2022—$ 8.2 million and $ 11.5 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) 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, and together with the Senior Notes 2031, Senior Notes 2030, Senior Notes 2029 and Senior Notes 2027, 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.

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 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).

For the three and nine months ended March 31, 2023, we recorded interest expense of $ 8.7 million and $ 26.1 million, respectively, relating to Senior Notes 2028 (three and nine months ended March 31, 2022—$ 8.7 million and $ 26.1 million, respectively).

Senior Notes 2026

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

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).

For the three and nine months ended March 31, 2023, we did not record any interest expense relating to Senior Notes 2026 (three and nine months ended March 31, 2022— nil 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.

On December 1, 2022, we issued $ 1 billion in aggregate principal amount of Senior Secured Notes 2027 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

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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.

Senior Secured Notes 2027 will mature on December 1, 2027, unless earlier redeemed, 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 ).

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 nine months ended March 31, 2023, we recorded interest expense of $ 17.3 million and $ 23.1 million, relating to Senior Secured Notes 2027 (three and nine months ended March 31, 2022— 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.

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

Borrowings under Term Loan B currently bear a floating rate of interest equal to 1.75 % plus London Interbank Offered Rate (LIBOR).

As of March 31, 2023, the outstanding balance on the Term Loan B bears an interest rate of 6.38 %.

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 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).

As of March 31, 2023, our consolidated net leverage ratio, as calculated in accordance with the applicable agreement, was 3.3 :1.

For the three and nine months ended March 31, 2023, we recorded interest expense of $ 15.0 million and $ 37.9 million, respectively, relating to Term Loan B (three and nine months ended March 31, 2022—$ 4.5 million and $ 13.6 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.

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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.

During the third quarter of Fiscal 2023, the Company drew down $ 450.0 million from the Revolver to partially fund the Micro Focus Acquisition, and as of March 31, 2023, $ 450 million remains outstanding (June 30, 2022— nil ).

In April 2023, the Company paid $ 175 million drawn under the Revolver.

For the three and nine months ended March 31, 2023, we recorded interest expense of $ 5.0 million, respectively, relating to the Revolver (three and nine months ended March 31, 2022— nil ).

Acquisition Term Loan

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).

During the third quarter of Fiscal 2023,

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the Company drew down $ 3.585 billion from the Acquisition Term Loan, net of original issuance discount of 3 % and other fees (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.

Borrowings under the Acquisition Term Loan currently bear a floating rate of interest equal to 3.5 % plus Term Secured Overnight Financing Rate (SOFR) and the SOFR adjustment.

As of March 31, 2023, the outstanding balance on the Acquisition Term Loan bears an interest rate of 8.22 %.

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.

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

As of March 31, 2023, our consolidated net leverage ratio, as calculated in accordance with the applicable agreement, was 3.3 :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).

For the three and nine months ended March 31, 2023, we recorded interest expense of $ 48.1 million, respectively, relating to the Acquisition Term Loan (three and nine months ended March 31, 2022— 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.

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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 $ 8.2 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).

For the three and nine months ended March 31, 2023, we did not have any borrowings or record any interest expense relating to the Bridge Loan (three and nine months ended March 31, 2022— 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, 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).

Additionally, upon drawing on the Acquisition Term Loan, all deferred debt issuance costs previously included in “Other Assets” were reclassified to debt issuance costs.

NOTE 12— PENSION PLANS AND OTHER POST RETIREMENT BENEFITS

Defined Benefit Plans

CDT sponsors an unfunded defined benefit pension plan covering substantially all CDT employees (CDT plan) which provides for old age, disability and survivors’ benefits.

Benefits under the CDT plan are generally based on age at retirement, years of service and the employee’s annual earnings.

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

No contributions have been made since the inception of the plan.

As part of our acquisition of GXS Group, Inc.

(GXS) in Fiscal 2014, we assumed an unfunded defined benefit pension plan covering certain German employees which provides for old age, disability and survivors' benefits.

The GXS GER plan has been closed to new participants since 2006.

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

No contributions have been made since the inception of the plan.

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

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

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 December 31,

Pension expense:

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

Service cost $ 57 $ 27 $ 315 $ 399 $ 91 $ 42 $ 472 $ 605

Interest cost 210 129 161 500 109 77 160 346

Amortization of actuarial (gains) losses — ( 17 ) ( 140 ) ( 157 ) 121 6 ( 23 ) 104

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

Six Months Ended December 31,

The Company has 44 pension and other post retirement plans in multiple countries, including 31 defined benefit and other post retirement benefit plans which were assumed as part of the Micro Focus Acquisition (see Note 19 “Acquisitions” for more details).

All of our pension and other post retirement plans are located outside of Canada and the United States.

The plans are primarily located in Germany, which make up approximately 71 % of the total net benefit pension obligations.

Defined Benefit and Other Post Retirement Benefit Plans

Our defined benefit pension plans include a mix of final salary type plans which provide for retirement, old age, disability and survivor’s benefits.

Final salary pension plans provide benefits to members either in the form of a lump sum payment or a guaranteed level of pension payable for life in the case of retirement, disability and death.

Benefits under our final salary type plans are generally based on the participant’s age, compensation and years of service as well as the social security ceiling and

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other factors.

Many of these plans are closed to new members.

The net periodic costs of these plans are determined using the projected unit credit method and several actuarial assumptions, the most significant of which are the discount rate and estimated service costs.

Other post retirement plans include statutory plans that offer termination, indemnity or other end of service benefits.

Many of these plans were assumed through our acquisitions or are required by local regulatory and statutory requirements.

All of our defined benefit and other post retirement plans are included in the aggregate projected benefit obligation within “Pension liability” on our Condensed Consolidated Balance Sheets.

As part of the Micro Focus Acquisition (see Note 19 “Acquisitions” for more details), we assumed a total of 31 defined benefit plans, all located outside of Canada and the United States.

As of March 31, 2023, these assumed plans carried a net liability of $ 50 million and are funded at 74 % of the defined benefit obligations.

Plan assets that partially fund these assumed defined benefit obligations are primarily classified within Level 1 and Level 2 of the fair value hierarchy and consist primarily of investments in equity and debt funds.

As of March 31, 2023, the fair value of these acquired plan assets was $ 141 million.

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

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

2023 2022 2023 2022

Pension expense:

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

Service cost $ 2,084 $ 1,139 $ 4,191 $ 2,910

Interest cost 2,208 564 4,210 1,466

Expected return of plan assets ( 1,946 ) ( 52 ) ( 2,780 ) ( 160 )

Amortization of actuarial (gains) losses 60 222 185 678

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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.

Other plans include defined benefit pension plans that are offered or statutorily required by certain of our foreign subsidiaries.

Many of these plans were assumed through our acquisitions or are required by local regulatory requirements.

These other plans are primarily unfunded, with the aggregate projected benefit obligation included in our pension liability.

The Company does not intend to make cash contributions to the above plans unless required by local regulatory or statutory requirements.

Additionally, the Company does not expect to make significant cash contributions to its pension and other post retirement plans in Fiscal 2023.

NOTE 13— SHARE CAPITAL, OPTION PLANS AND SHARE-BASED PAYMENTS

Cash Dividends

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).

For the three and nine months ended March 31, 2023, pursuant to the Company’s dividend policy, we declared total non-cumulative dividends of $ 0.24299 and $ 0.72897 per Common Share, respectively, in the aggregate amount of $ 64.9 million and $ 194.5 million, respectively, which we paid during the same period (three and nine months ended March 31, 2022—$ 0.2209 and $ 0.6627 per Common Share, respectively, in the aggregate amount of $ 59.1 million and $ 178.6 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 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).

During the three and nine months ended March 31, 2023, 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 nine months ended March 31, 2022— 1,300,000 and 1,700,000 Common Shares, respectively, at a cost of $ 56.1 million and $ 75.7 million, respectively).

During the three and nine months ended March 31, 2023, we delivered to eligible participants 78,650 and 490,026 Common Shares, respectively, that were purchased in the open market in connection with the settlement of awards and other plans (three and nine months ended March 31, 2022— nil and 491,244 Common Shares, respectively).

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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 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).

During the three and nine months ended March 31, 2023, we did not repurchase and cancel any Common Shares (three and nine months ended March 31, 2022— 1,000,000 and 2,809,559 Common Shares, respectively, for $ 45.1 million and $ 136.1 million, respectively).

Share-Based Payments

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Three Months Ended

December 31, Six Months Ended

March 31, Nine Months Ended

2023 2022 2023 2022

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

As of December 31, 2022

As of March 31, 2023

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 six months ended December 31, 2022 is as follows:

A summary of activity under our stock option plans for the nine months ended March 31, 2023 is as follows:

Options Weighted-

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Forfeited or expired ( 885,678 ) 43.98

Outstanding at December 31, 2022

Outstanding at March 31, 2023

12,646,492 $ 38.28 4.91 $ 44,333

Exercisable at December 31, 2022

Exercisable at March 31, 2023

3,959,892 $ 39.63 3.03 $ 7,242

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

As of March 31, 2023, 5,680,872 options to purchase Common Shares were available for issuance under our stock option plans.

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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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Three Months Ended

December 31, Six Months Ended

March 31, Nine Months Ended

2023 2022 2023 2022

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Performance Options

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).

During the three and nine months ended March 31, 2023, we granted zero and 1,000,000 performance options, respectively (during the three and nine months ended March 31, 2022— 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:

Six Months Ended December 31,

Nine Months Ended March 31,

Weighted–average fair value of options granted $ 8.09

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Stock options granted under the LTIP have been measured using the Black-Scholes option-pricing model, consistent with Topic 718.

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Grants made in Fiscal 2023 under the LTIP (collectively referred to as LTIP 2025), consisting of PSUs and RSUs, took effect in Fiscal 2023 starting on August 8, 2022.

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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 six months ended December 31, 2022 is as follows:

A summary of activity under our performance share units issued under the LTIP for the nine months ended March 31, 2023 is as follows:

Units Weighted-Average

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Forfeited or expired ( 93,529 ) 63.94

Outstanding at December 31, 2022

Outstanding at March 31, 2023

1,031,831 $ 61.65 2.01 $ 39,777

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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:

Six Months Ended December 31,

Nine Months Ended March 31,

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

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Restricted Share Units (Issued Under LTIP)

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

A summary of activity under our RSUs issued under the LTIP for the nine months ended March 31, 2023 is as follows:

Units Weighted-Average

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Forfeited or expired ( 80,209 ) 43.82

Outstanding at December 31, 2022

Outstanding at March 31, 2023

787,063 $ 42.13 1.94 $ 30,341

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

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

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A summary of activity under our RSUs (other) issued for the nine months ended March 31, 2023 is as follows:

Units Weighted-Average

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Forfeited or expired ( 219,978 ) 41.03

Outstanding at December 31, 2022

Outstanding at March 31, 2023

5,657,177 $ 35.89 2.20 $ 218,084

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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 six months ended December 31, 2022 is as follows:

During the three and nine months ended March 31, 2023, we settled 30,273 DSUs, respectively, at a cost of $ 1.1 million, respectively, (three and nine months ended March 31, 2022— nil DSUs, respectively, at a cost of nil , respectively).

A summary of activity under our deferred share units issued for the nine months ended March 31, 2023 is as follows:

Units Weighted-Average

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Granted 132,827 29.19

Outstanding at December 31, 2022 (2)

Settled ( 30,273 ) $ 40.46

Outstanding at March 31, 2023 (2)

988,255 $ 29.55 0.61 $ 38,097

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

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).

During the three and nine months ended March 31, 2023, 266,297 and 848,647 Common Shares, respectively, were eligible for issuance to employees enrolled in the ESPP (three and nine months ended March 31, 2022— 246,473 and 644,986 Common Shares, respectively).

During the three and nine months ended March 31, 2023, cash in the amount of $ 8.7 million and $ 22.5 million, respectively was received from employees relating to the ESPP (three and nine months ended March 31, 2022—$ 8.9 million and $ 25.3 million, respectively).

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NOTE 14— GUARANTEES AND CONTINGENCIES

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Payments due between

Total January 1, 2023 -

June 30, 2023 July 1, 2023 -

June 30, 2025 July 1, 2025 -

June 30, 2027 July 1, 2027

Total April 1, 2023 - June 30, 2023 July 1, 2023 - June 30, 2025 July 1, 2025 - June 30, 2027 July 1, 2027 and beyond

Long-term debt obligations (1)

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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.”

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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.

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.

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

Contingencies

As part of its ongoing audit of our Canadian tax returns, the Canada Revenue Agency (CRA) has disputed our transfer pricing methodology used for certain intercompany transactions with our international subsidiaries and has issued notices of reassessment for Fiscal 2012, Fiscal 2013, Fiscal 2014, Fiscal 2015 and Fiscal 2016.

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

Assuming the utilization of available tax attributes (further described below), we estimate our potential aggregate liability, as of March 31, 2023, in connection with the CRA's reassessments for Fiscal 2012, Fiscal 2013, Fiscal 2014, Fiscal 2015 and Fiscal 2016, to be limited to penalties, interest and provincial taxes that may be due of approximately $ 73 million.

As of March 31, 2023, 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

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payment required under Canadian legislation while the matter is in dispute.

This amount is recorded within “Long-term income taxes recoverable” on the Condensed Consolidated Balance Sheets as of March 31, 2023.

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

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

The CRA has audited Fiscal 2017 and Fiscal 2018 on a basis that we strongly disagree with and are contesting.

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

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

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

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

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

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

CRA’s position for Fiscal 2017 and Fiscal 2018 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 and Fiscal 2018 conflict with the expert valuation prepared by the independent leading accounting and advisory firm that was used to support our original filing position.

The CRA issued notices of reassessment in respect of Fiscal 2017 and Fiscal 2018 on a basis consistent with its proposal to reduce the available depreciable basis of assets in Canada.

On April 19, 2022, we filed our notice of objection regarding the reassessment in respect of Fiscal 2017 and on March 15, 2023, we filed our notice of objection regarding the reassessment in respect of Fiscal 2018.

If we are ultimately unsuccessful in defending our position, the estimated impact of the proposed adjustment could result in us recording an income tax expense, with no immediate cash payment, to reduce the stated value of our deferred tax assets of up to approximately $ 470 million.

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

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

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

We strongly disagree with the CRA’s position for Fiscal 2017 and Fiscal 2018 and intend to vigorously defend our original filing position.

We are not required to provisionally pay any cash amounts to the CRA as a result of the reassessment in respect of Fiscal 2017 and Fiscal 2018 due to the utilization of available tax attributes;

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

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

The CRA is currently in preliminary stages of auditing Fiscal 2018 and Fiscal 2019.

The CRA is currently in preliminary stages of auditing Fiscal 2019.

Carbonite Class Action Complaint

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

Ali, and its former Chief Financial Officer,

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

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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Ali, and Anthony Folger (No.

1:19-cv-11662-LTS).

1:19-cv-11662-LTS) (the Luna Complaint).

The complaint alleges violations of the federal securities laws under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder.

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

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

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

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

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

On October 22, 2020, the district court granted with prejudice the

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defendants’ motion to dismiss the Securities Actions.

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

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

The parties are engaged in discovery.

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

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On February 27, 2017, before our acquisition of Carbonite, a non-practicing entity named Realtime Data LLC (Realtime Data) filed a lawsuit against Carbonite in the U.S.

District Court for the Eastern District of Texas “Realtime Data LLC v.

District Court for the Eastern District of Texas captioned Realtime Data LLC v.

Carbonite, Inc.

et al (No 6:17-cv-00121-RWS-JDL).” Therein, it alleged that certain of Carbonite’s cloud storage services infringe upon certain patents held by Realtime Data.

et al (No 6:17-cv-00121-RWS-JDL).

Therein, it alleged that certain of Carbonite’s cloud storage services infringe upon certain patents held by Realtime Data.

Realtime Data’s complaint against Carbonite sought damages in an unspecified amount and injunctive relief.

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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.

Other Matters

Please see Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for Fiscal 2022, Part II, Item 1A “Risk Factors” included elsewhere within this Quarterly Report on Form 10-Q as well as Micro Focus’ Audited Consolidated Financial Statements for the years ended October 31, 2022 and 2021, included in our Form 8-K/A filed on April 10, 2023, related to certain historical matters arising prior to the Micro Focus Acquisition.

NOTE 15— INCOME TAXES

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.

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 and amending a prior year return to reduce the prior year US Base Erosion and Anti-Abuse Tax (BEAT).

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.

The Company’s effective tax rate for the three months ended March 31, 2023, was ( 27.5 )%, compared to a provision of 35.5 % for the three months ended March 31, 2022.

The Company’s effective tax rate for the nine months ended March 31, 2023, was 26.5 %, compared to a provision of 29.6 % for the nine months ended March 31, 2022.

The Company’s effective tax rate for the three months ended March 31, 2023, differs from the Canadian statutory rate of 26.5 % primarily due to tax benefits related to the internal reorganization and a 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 Micro Focus Acquisition (see Note 17 “Derivative Instruments and Hedging Activities” to our Condensed Consolidated Financial Statements).

The mark-to-market gains in the quarter are considered capital in nature for income tax purposes and 50% of realized gains are not taxable.

Other items impacting the rate include permanent items such as disallowed stock-based compensation and foreign income inclusions, offset by research and development credits, foreign tax credits and a net decrease in uncertain tax positions.

The Company’s effective tax rate for the three months ended March 31, 2022 differs from the Canadian statutory rate primarily due to US Base Erosion and Anti-Abuse Tax (BEAT), partially offset by research and development credits and tax benefits related to stock-based compensation deductions.

The Company’s effective tax rate for the nine months ended March 31, 2023, differs from the Canadian statutory rate of 26.5 % primarily due to a net increase in uncertain tax positions, US BEAT and permanent items such as disallowed stock-based compensation and foreign passive income inclusion, partially offset by research and development credits, foreign tax credits, 50% non-taxable portion of capital gains on mark-to-market derivatives not designated as a hedge and tax benefits of internal reorganizations.

The Company’s effective tax rate for the nine months ended March 31, 2022, differs from the Canadian statutory rate primarily due to US BEAT, partially offset by research and development credits.

As of March 31, 2023, the gross amount of unrecognized tax benefits accrued is $ 134.9 million, which is inclusive of interest and penalties accrued of $ 15.6 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 $ 12.9 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

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examinations by local taxing jurisdictions.

The unrecognized tax benefit balance significantly increased from the prior quarter due to the Micro Focus Acquisition and the assumption of Micro Focus’ unrecognized tax benefits through purchase accounting.

We are subject to income tax audits in all major taxing jurisdictions in which we operate, and remain subject to income tax audits by applicable tax authorities for a certain length of time following the tax year to which those tax filings relate.

We currently have income tax audits open in Canada, the United States, Germany and other immaterial jurisdictions.

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

We currently have income tax audits open in Canada, the United States, United Kingdom, Germany and other immaterial jurisdictions.

The earliest fiscal years open for examination for our major jurisdictions are 2012 for Canada, 2016 for the United States, 2015 for the United Kingdom and 2016 for Germany.

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 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.

As of March 31, 2023, we have recognized a provision of $ 18.6 million (June 30, 2022—$ 15.1 million) in respect of 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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The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models and similar techniques.

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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 December 31, 2022 and June 30, 2022:

Fair Value Hierarchy December 31, 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 March 31, 2023 and June 30, 2022:

Fair Value Hierarchy March 31, 2023 June 30, 2022

Financial Assets (Liabilities):

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Level 2 $ ( 830 ) $ ( 892 )

Net investment hedge (Note 17)

Level 2 $ ( 66,601 ) $ —

Not Designated as Hedging Instruments

Deal-contingent forward contracts (Note 17)

Cross currency swap contract (Note 17)

Level 2 $ ( 57,061 ) $ —

Non-contingent forward contract (Note 17)

Available-for-sale financial assets (Note 9)

Level 2 $ 15,100 $ —

Cross currency swap contract (Note 17)

Available-for-sale financial assets (Note 9)

Level 3 $ 24,213 $ —

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 December 31, 2022.

Deal-contingent foreign currency forward contract

The following table provides a reconciliation of changes in the fair value of our Level 3 deal-contingent foreign currency forward contracts and available-for-sale financial assets between June 30, 2022 and March 31, 2023.

Deal-contingent foreign currency forward contracts Available-for-sale

financial assets

Balance as of June 30, 2022

Gain (loss) recognized in income 9,354 ( 205 )

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.

Purchases — 24,418

Settlements ( 9,354 ) —

Balance as of March 31, 2023

Our valuation techniques used to measure the fair value of our Level 2 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 Micro Focus Acquisition that are unobservable, and are not deemed to be significant inputs for the overall valuation.

As part of the Micro Focus Acquisition, we acquired the rights to certain available-for-sale financial assets which are classified as Level 2 and Level 3.

Our Level 2 available-for-sale financial assets are comprised primarily of various debt and equity funds, which are valued utilizing market quotes provided by our third-party custodian.

Our Level 3 available-for-sale financial assets are comprised of insurance contracts which are valued by an external insurance expert by applying a discount rate to the future cash flows and taking into account the fixed interest rate, mortality rates and term of the insurance contracts.

Please see Note 9 “Prepaid Expenses and Other Assets” for further details.

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

As of March 31, 2023, the fair value was $ 3.9 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.

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

During the three and nine months ended March 31, 2023 and 2022, respectively, we did not have any transfers between Level 1, Level 2 or Level 3.

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

During the three and nine months ended March 31, 2023 and 2022, respectively, no indications of impairments were identified and therefore no fair value measurements were required.

NOTE 17— DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Non-designated Hedges

In connection with the Micro Focus Acquisition, in August 2022, we 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.

We 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 had an aggregate notional amount of £ 1.475 billion.

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

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

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

The instruments did not initially qualify for hedge accounting at the time they were entered into.

In connection with the closing of the Micro Focus Acquisition, the deal-contingent forward and non-deal contingent forward contracts were settled and we designated the 7 -year EUR/USD cross currency swaps as net investment hedges (see further details below).

The 5 -year EUR/USD cross currency swaps are non-designated and are measured at fair value with changes to fair value being recognized in the Condensed Consolidated Statements of Income within “Other income (expense), net.”

Net Investment Hedge

During the third quarter of Fiscal 2023, the Company designated the € 690 million of 7 -year EUR/USD cross currency swaps as net investment hedges in accordance with “Derivatives and Hedging” (Topic 815).

The Company utilizes the designated cross currency swaps to protect our EUR-denominated operations against exchange rate fluctuations.

The Company assesses the hedge effectiveness of its net investment hedges on a quarterly basis utilizing a method based on the changes in spot price.

As such, for derivative instruments designated as net investment hedges, changes in fair value of the designated hedging instruments attributable to fluctuations in the foreign currency spot exchange rates are initially recorded as a component of currency translation adjustments included within Condensed Consolidated Statements of Comprehensive Income until the hedged foreign operations are either sold or substantially liquidated.

In accordance with Topic 815 certain components of the designated cross currency swaps relating to counterparty credit risk and forward exchange rates were excluded from the above effectiveness assessment.

The fair value of these excluded components will be amortized over the life of the hedging instruments within “Interest and other related expense, net” within the Condensed Consolidated Statements of Income.

Additionally, we will record the cash flows related to the periodic interest settlements on the 7 -year EUR/USD cross currency swaps within the investing activities section of the Condensed Consolidated Statements of Cash Flows.

Any gains or losses recognized upon settlement of the cross currency swaps will be recorded within the investing activities section of the Condensed Consolidated Statements of Cash Flows.

Cash Flow Hedge

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We do not use foreign currency forward contracts for speculative purposes.

We have designated these transactions as cash flow hedges of forecasted transactions under ASC Topic 815 “Derivatives and Hedging” (Topic 815).

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

Accordingly, quarterly unrealized gains or losses on the effective portion of these forward contracts have been included within “Other Comprehensive Income (Loss) - net.” 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.

We have designated these transactions as cash flow hedges of forecasted transactions under Topic 815.

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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 March 31, 2023, 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 March 31, 2023, the notional amount of forward contracts we held to sell U.S.

dollars in exchange for Canadian dollars was $ 93.4 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 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.

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 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 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:

December 31, 2022 As of

March 31, 2023 As of

June 30, 2022

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Cash flow hedge Accounts payable and accrued liabilities $ — $ ( 830 ) $ — $ ( 892 )

Net investment hedge Accounts payable and accrued liabilities — ( 66,601 ) — —

Total derivatives designated as hedges:

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Derivatives not designated as hedges:

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 — ( 57,061 ) — —

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Total derivatives $ — $ ( 124,492 ) $ — $ ( 892 )

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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 December 31, Six Months Ended December 31,

Three Months Ended

March 31, Nine Months Ended

Instrument Income Statement Location 2023 2022 2023 2022

Derivatives designated as hedges:

Cash flow hedges Operating expenses $ ( 1,498 ) $ 25 $ ( 2,298 ) $ 415

Cash flow hedge Operating expenses $ ( 951 ) $ ( 298 ) $ ( 3,249 ) $ 117

Net investment hedge Interest and other related expense, net 491 — 491 —

Derivatives not designated as hedges:

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Cross currency swap contracts Other income (expense), net 23,197 — 6,495 —

Cross currency swap contracts Interest and other related expense, net 627 — 627 —

Total $ 34,925 $ ( 298 ) $ 22,773 $ 117

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

Three Months Ended December 31, Six Months Ended

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

Three Months Ended

March 31, Nine Months Ended

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

2023 2022 2023 2022

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 $ ( 1,498 ) $ 25 $ ( 2,298 ) $ 415

Gain (loss) recognized in OCI (loss) on cash flow hedge (effective portion) Unrealized gain (loss) on cash flow hedge $ 53 $ 881 $ ( 3,187 ) $ ( 455 )

Gain (loss) recognized in OCI (loss) on net investment hedge (effective portion) Net foreign currency translation adjustment $ ( 11,093 ) $ — $ ( 11,093 ) $ —

Gain (loss) reclassified from AOCI into income (effective portion) - cash flow hedge Operating expenses $ ( 951 ) $ ( 298 ) $ ( 3,249 ) $ 117

Gain (loss) reclassified from AOCI into income (excluded from effectiveness testing) - net investment hedge Interest and other related expense, net $ 187 $ — $ 187 $ —

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 December 31, Six Months Ended December 31,

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

2023 2022 2023 2022

Micro Focus Acquisition Restructuring Plan $ 11,173 $ — $ 11,173 $ —

Fiscal 2022 Restructuring Plan ( 868 ) 464 7,233 464

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Total $ 74,350 $ 11,031 $ 98,937 $ 20,592

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Micro Focus Acquisition Restructuring Plan

During the third quarter of Fiscal 2023, as part of the Micro Focus Acquisition, we made a strategic decision to implement restructuring activities to reduce our overall workforce and further reduce our real estate footprint around the world (Micro Focus Acquisition Restructuring Plan).

The Micro Focus Acquisition Restructuring Plan charges relate to facility costs and workforce reductions.

Facility costs will include the accelerated amortization associated with the abandonment of right of use assets, the write-off of fixed assets and other related variable lease and exit costs.

These charges require management to make certain judgments and estimates regarding the amount and timing of restructuring charges or recoveries.

Our estimated liability could change subsequent to its recognition, requiring adjustments to the expense and the liability recorded.

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

During the three and nine months ended March 31, 2023, we recognized costs of $ 9.5 million related to abandoned office spaces that have been early terminated or assigned to a third party, of which $ 3.3 million were related to the write-off of right of use assets, and $ 1.7 million in charges associated with the write off of fixed assets as part of the Micro Focus Acquisition Restructuring Plan.

As of March 31, 2023, we expect total costs to be incurred in connection with the Micro Focus Acquisition Restructuring Plan to be approximately $ 135.0 million to $ 150.0 million, of which $ 11.2 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 nine months ended March 31, 2023 is shown below.

Micro Focus Acquisition Restructuring Plan Workforce reduction Facility charges Total

Balance payable as of June 30, 2022

Accruals and adjustments — 6,116 6,116

Cash payments — ( 18 ) ( 18 )

Foreign exchange and other non-cash adjustments — 456 456

Balance payable as of March 31, 2023

$ — $ 6,554 $ 6,554

Fiscal 2022 Restructuring Plan

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The Fiscal 2022 Restructuring Plan charges will relate to facility costs and workforce reductions.

Facility costs will include the accelerated amortization associated with the abandonment of ROU assets, the write-off of fixed assets and other related variable lease and exit costs.

Facility costs will include the accelerated amortization associated with the abandonment of right of use assets, the write-off of fixed assets and other related variable lease and exit costs.

These charges require management to make certain judgments and estimates regarding the amount and timing of restructuring charges or recoveries.

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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 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.

During the three and nine months ended March 31, 2023, we recognized costs (recoveries) of $( 0.9 ) million and $ 3.4 million, respectively, related to abandoned office space that have been early terminated or assigned to a third party, of which nil and $ 3.9 million, respectively, were related to the write-off of right of use assets.

Since the inception of the Fiscal 2022 Restructuring Plan, $ 33.0 million has been recorded within “Special charges (recoveries)” to date.

We do not expect to incur any further significant charges relating to the Fiscal 2022 Restructuring Plan.

Fiscal 2022 Restructuring Plan Workforce reduction Facility charges Total

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Foreign exchange and other non-cash adjustments ( 25 ) ( 193 ) ( 218 )

Balance payable as of December 31, 2022

Balance payable as of March 31, 2023

$ 790 $ 3,560 $ 4,350

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Acquisition-related costs

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

Acquisition-related costs for the three 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).

Acquisition-related costs for the three and nine months ended March 31, 2023 were $ 34.8 million and $ 45.4 million, respectively (three and nine months ended March 31, 2022—$ 1.3 million and $ 6.0 million, respectively).

Other charges (recoveries)

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.

For the three months ended March 31, 2023, “Other charges (recoveries)” includes $ 21.4 million of severance charges and $ 7.5 million of other miscellaneous charges, both associated with the Micro Focus Acquisition, and $ 0.8 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”).

For the nine months ended March 31, 2023, “Other charges (recoveries)” includes $ 21.4 million of severance charges and $ 7.5 million of other miscellaneous charges, both associated with the Micro Focus Acquisition, $ 8.0 million related to pre-acquisition equity incentives of Zix, which upon acquisition were replaced by equivalent value cash settlements and $( 0.2 ) million related to other Zix miscellaneous charges (recoveries).

For the three and nine months ended March 31, 2022, “Other charges” includes $ 9.6 million and $ 11.6 million, respectively, related to Zix pre-acquisition equity incentives, which upon acquisition were replaced by equivalent value cash settlements (see Note 19 “Acquisitions”) and $ 0.1 million and $ 4.1 million, respectively, related to other miscellaneous charges.

NOTE 19— ACQUISITIONS

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Acquisition of Micro Focus

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”).

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

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.

On January 31, 2023, we acquired all of the issued and to be issued share capital of Micro Focus for a total purchase price of $ 6.2 billion, inclusive of Micro Focus’ cash and repayment of Micro Focus’ outstanding indebtedness, subject to final adjustments.

On December 1, 2022, the Company issued and sold $ 1.0 billion in aggregate principal amount of 6.90 % Senior Secured Notes due 2027, amended the Acquisition Term Loan and terminated the Bridge Loan.

We used these proceeds and cash on hand to fund the purchase price consideration and repayment of Micro Focus’ outstanding indebtedness.

The results of operations of Micro Focus have been consolidated with those of OpenText beginning February 1, 2023.

Preliminary Purchase Price Allocation

The recognized amounts of identifiable assets acquired and liabilities assumed, based on their fair values as of January 31, 2023, are set forth below:

Current assets (inclusive of cash acquired of $ 542.2 million)

Non-current tangible assets 440,771

Intangible customer assets 2,117,600

Intangible technology assets 1,380,600

Liabilities assumed ( 2,430,783 )

Total identifiable net assets 2,739,907

Goodwill 3,507,075

Net assets acquired $ 6,246,982

The goodwill of $ 3.5 billion is primarily attributable to the synergies expected to arise after the acquisition.

There is $ 67.3 million of goodwill that is deductible for tax purposes.

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The fair value of current assets acquired includes accounts receivable with a fair value of $ 398.3 million.

The gross amount receivable was $ 409.1 million of which $ 10.8 million of this receivable was expected to be uncollectible.

Acquisition-related costs for Micro Focus included in “Special Charges (Recoveries)” in the Condensed Consolidated Financial Statements for the three and nine months ended March 31, 2023 were $ 34.8 million and $ 45.1 million, respectively.

A settlement related to Micro Focus’ securities litigation that was agreed to prior to the Micro Focus Acquisition has been accrued as part of the liabilities assumed.

This settlement, which is subject to final court approval, will be fully paid from insurance coverage, and therefore a receivable has been recognized as part of the assets acquired.

During the third quarter of Fiscal 2023, payment was made into escrow by insurers, and therefore both the associated receivable and liability are no longer included on the Condensed Consolidated Balance Sheets as of March 31, 2023.

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 on or before our quarter ending March 31, 2024.

The amount of Micro Focus’ revenues and net loss included in our Condensed Consolidated Statements of Income for the three and nine months ended March 31, 2023 is set forth below:

February 1, 2023 – March 31, 2023

Revenues $ 374,414

______________________

(1) Net loss for the three and nine months ended includes one-time fees of approximately $ 39.9 million, respectively, on account of special charges and $ 43.6 million, respectively, of amortization charges relating to intangible assets.

The unaudited pro forma revenues and net income of the combined entity for the three and nine months ended March 31, 2023 and 2022, respectively, had the Micro Focus Acquisition been consummated on July 1, 2021, are set forth below:

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

Supplemental Unaudited Pro Forma Information 2023 2022 2023 2022

Revenues $ 1,456,893 $ 1,480,505 $ 4,442,276 $ 4,729,591

Net income (loss) (1)

( 853 ) ( 44,366 ) ( 450,690 ) 105,286

Net income (loss) attributable to OpenText (1)

( 910 ) ( 44,407 ) ( 450,828 ) 105,156

______________________

(1) Included in the pro forma net loss for the nine months ended March 31, 2023, is a $ 448.2 million goodwill impairment recorded by Micro Focus in its pre-acquisition historical results as a result of the Company’s offer to acquire Micro Focus at a price of 532 pence per share.

The unaudited pro forma financial information in the table above is presented for information purposes only and is not indicative of the results of operations that would have been achieved if the Micro Focus Acquisition had taken place at the beginning of the periods presented or the results that may be realized in the future.

Fiscal 2022 Acquisitions

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

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Purchase Price Allocation

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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 and six months ended December 31, 2022 were nil and $ 0.2 million, respectively.

Acquisition-related costs for Zix included in “Special Charges (Recoveries)” in the Condensed Consolidated Financial Statements for the three and nine months ended March 31, 2023 were nil and $ 0.2 million, respectively.

Pre-acquisition equity incentives of $ 25.8 million were replaced upon acquisition by equivalent value cash settlements to be settled in accordance with the original vesting dates, primarily over the two years after the date of the acquisition.

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.

Of these equity incentives, $ 0.8 million and $ 8.0 million, respectively, for the three and nine months ended March 31, 2023 were included in “Special Charges (Recoveries).”

The finalization of the purchase price allocation during the quarter 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

Three Months Ended March 31, 2023

Foreign Currency Translation Adjustments (1)

Cash Flow Hedges Available-for-Sale Financial Assets Defined Benefit Pension Plans Accumulated Other Comprehensive Income (Loss)

Balance as of December 31, 2022

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

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Total other comprehensive income (loss) net, for the period ( 28,640 ) 737 ( 900 ) ( 3,283 ) ( 32,086 )

Balance as of December 31, 2022

Balance as of March 31, 2023

$ ( 28,903 ) $ ( 611 ) $ ( 900 ) $ ( 2,700 ) $ ( 33,114 )

Six Months Ended December 31, 2022

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

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Nine Months Ended March 31, 2023

Foreign Currency Translation Adjustments (1)

Cash Flow Hedges Available-for-Sale Investments 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 ( 25,587 ) 45 ( 900 ) 987 ( 25,455 )

Balance as of December 31, 2022

Balance as of March 31, 2023

$ ( 28,903 ) $ ( 611 ) $ ( 900 ) $ ( 2,700 ) $ ( 33,114 )

Three Months Ended December 31, 2021

______________________

(1) The amount of foreign currency translation recognized in other comprehensive income during the three and nine months ended March 31, 2023 included net gains (losses) relating to our net investment hedges of $( 11.1 ) million respectively, as further discussed in Note 17 “Derivative Instruments and Hedging Activities.”

Three Months Ended March 31, 2022

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

Balance as of September 30, 2021

Balance as of December 31, 2021

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

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Total other comprehensive income (loss) net, for the period ( 13,073 ) 867 ( 1,877 ) ( 14,083 )

Balance as of December 31, 2021

Balance as of March 31, 2022

$ 30,896 $ 410 $ ( 14,040 ) $ 17,266

Six Months Ended December 31, 2021

Nine Months Ended March 31, 2022

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 ( 44,512 ) ( 420 ) ( 4,040 ) ( 48,972 )

Balance as of December 31, 2021

Balance as of March 31, 2022

$ 30,896 $ 410 $ ( 14,040 ) $ 17,266

NOTE 21— SUPPLEMENTAL CASH FLOW DISCLOSURES

Six Months Ended

Nine Months Ended March 31,

Cash paid during the period for interest $ 196,238 $ 115,097

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Cash paid during the period for income taxes $ 122,991 $ 88,259

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NOTE 22— OTHER INCOME (EXPENSE), NET

Three Months Ended

December 31, Six Months Ended

March 31, Nine Months Ended

2023 2022 2023 2022

Foreign exchange gains (losses) (1)

$ 55,558 $ ( 3,443 ) $ 54,257 $ ( 2,900 )

Unrealized gains (losses) on derivatives

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( 102,713 ) — ( 112,567 ) —

OpenText share in net income of equity investees (2)

Realized gains (losses) on derivatives

not designated as hedges (3)

137,471 — 137,471 —

OpenText share in net income (loss) of equity investees (4)

( 4,724 ) 27,746 ( 11,547 ) 59,103

Loss on debt extinguishment (5) (6)

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______________________

(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).

(1) The three and nine months ended March 31, 2023 includes a foreign exchange gain of $ 36.6 million resulting from the delayed payment of a portion of the purchase consideration, settled on February 9th, 2023, related to the Micro Focus Acquisition (see Note 19 “Acquisitions” for more details).

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

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

(4) 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).

(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).

(5) 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 related to unamortized debt issuance costs (see Note 11 “Long-Term Debt” for more details).

(6) 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).

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NOTE 23— EARNINGS PER SHARE

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Three Months Ended

December 31, Six Months Ended

March 31, Nine Months Ended

2023 2022 2023 2022

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

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.

During the nine months ended March 31, 2023, Mr.

Stephen Sadler, a member of the Board of Directors, earned $ 0.3 million (nine months ended March 31, 2022 — $ 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.

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Cash Dividends

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.

As part of our quarterly, non-cumulative cash dividend program, we declared, on May 2, 2023, a dividend of $ 0.24299 per Common Share.

The record date for this dividend is June 2, 2023 and the payment date is June 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.

Acquisition of Micro Focus

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:

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

Revolver Repayment

Following the end of the quarter, in April 2023 we repaid $ 175 million of the $ 450 million outstanding balance on the Revolver using cash on hand.

As of April 30, 2023, we had a balance of $ 275 million outstanding on our Revolver.

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

What changed 10-Q

Item 1. Financial Statements