What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-02 compared with 2024-02-01 · 269 added, 234 removed, 1064 unchanged (32% of the section changed)

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(xvii) integration of Micro Focus, resulting synergies and timing thereof;

(xxviii) divestitures and their expected impact, including in connection with the proposed divestiture of the AMC business (see Note 19 “Acquisitions and Divestitures” to our Condensed Consolidated Financial Statements for more details);

and (xxix) other matters.

(xxviii) divestitures and their expected impact, including in connection with the divestiture of the Application, Modernization and Connectivity (AMC) business (the AMC Divestiture) (see Note 19 “Acquisitions and Divestitures” to our Condensed Consolidated Financial Statements for more details);

(xxix) our intention to use the net proceeds of the AMC Divestiture to prepay certain debt and the timing thereof (see Note 25 “Subsequent Events” to our Condensed Consolidated Financial Statements for more details);

(xxx) expected size and timing of the Fiscal 2024 Repurchase Plan, including execution thereof;

and (xxxi) other matters.

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

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(viii) our continued ability to avoid infringing third party intellectual property rights;

(ix) our ability to successfully complete the proposed divestiture of the AMC business;

and (x) our ability to successfully implement our restructuring plans.

and (ix) our ability to successfully implement our restructuring plans.

Management’s estimates, beliefs and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events and, as such, are subject to change.

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(ii) the actual and potential impacts of the use of cash and incurrence of indebtedness, including the granting of security interests related to such debt;

(iii) the change in scope and size of our operations as a result of the Micro Focus Acquisition and the proposed divestiture of the AMC business;

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

(iii) the change in scope and size of our operations as a result of the Micro Focus Acquisition and the AMC Divestiture;

(iv) the uncertainty around expectations related to Micro Focus’

business prospects;

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

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

(vi) the possibility that we may be unable to successfully integrate the assets we acquire or fail to utilize such assets to their full capacity and not realize the benefits we expect from our acquired portfolios and businesses, including the acquisition of Micro Focus, (vii) the potential for the incurrence of or assumption of debt in connection with acquisitions, its impact on future operations and on the ratings or outlooks of rating agencies on our outstanding debt securities, and the possibility of not being able to generate sufficient cash to service all indebtedness;

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

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(xxii) potential changes in ratings or outlooks of rating agencies on our outstanding debt securities;

and (xxiii) risks related to the proposed divestiture of the AMC business and the impact of the divestiture on our remaining business.

and (xxiii) risks related to the AMC Divestiture and the impact of the divestiture on our remaining business.

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

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The following MD&A is intended to help readers understand our results of operations and financial condition, and is provided as a supplement to, and should be read in conjunction with, our Condensed Consolidated Financial Statements and the accompanying Notes to our Condensed Consolidated Financial Statements under Part I, Item 1 of this Quarterly Report on Form 10-Q.

All dollar and percentage comparisons made herein refer to the three and six months ended December 31, 2023 compared with the three and six months ended December 31, 2022, unless otherwise noted.

All dollar and percentage comparisons made herein refer to the three and nine months ended March 31, 2024 compared with the three and nine months ended March 31, 2023, unless otherwise noted.

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

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

As of December 31, 2023, we employed a total of approximately 23,600 individuals.

Of the total 23,600 individuals we employed as of December 31, 2023, 8,700 or 37% are in the Americas, 5,400 or 23% are in EMEA and 9,500 or 40% are in Asia Pacific.

As of March 31, 2024, we employed a total of approximately 23,700 individuals.

Of the total 23,700 individuals we employed as of March 31, 2024, 8,700 or 37% are in the Americas, 5,400 or 23% are in EMEA and 9,600 or 40% are in Asia Pacific.

Currently, we have employees in 44 countries enabling strong access to multiple talent pools while ensuring reach and proximity to our customers.

Please see “Results of Operations” below for our definitions of geographic regions.

See “Results of Operations” below for our definitions of geographic regions.

Quarterly Summary:

During the second quarter of Fiscal 2024 (which includes the results of Micro Focus, which has a significant impact on period-over-period comparisons) we saw the following activity:

During the third quarter of Fiscal 2024 (which includes the results of Micro Focus, which has an impact on period-over-period comparisons) we saw the following activity:

• Total revenue was $1,447.1 million, up 16.3% compared to the same period in the prior fiscal year;

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• Adjusted EBITDA, a non-GAAP measure, was $463.7 million compared to $365.1 million in the same period in the prior fiscal year.

• Operating cash flow was $397.8 million for the six months ended December 31, 2023 compared to $327.1 million in the same period in the prior fiscal year, up 21.6%.

• Cash and cash equivalents were $1,003.1 million as of December 31, 2023, compared to $1,231.6 million as of June 30, 2023.

• We entered into a definitive agreement to divest the AMC business to Rocket Software for consideration of $2.275 billion in cash, before taxes, fees and other adjustments, and subject to certain regulatory approvals and other customary closing conditions.

• We repaid the outstanding balance on the Revolver of $100 million and repaid $75 million drawn under on the Acquisition Term Loan.

Subsequent to the end of the second quarter, on January 22, 2024, we repaid an additional $175 million of the Acquisition Term Loan.

• Operating cash flow was $782.5 million for the nine months ended March 31, 2024 compared to $663.9 million in the same period in the prior fiscal year, up 17.9%.

• Cash and cash equivalents were $1,125.3 million as of March 31, 2024, compared to $1,231.6 million as of June 30, 2023.

• We repaid $175 million drawn under the Acquisition Term Loan in January 2024.

• Enterprise cloud bookings were $165.1 million, compared to $108.2 million in the same period in the prior fiscal year.

We define Enterprise cloud bookings as the total value from cloud services and subscription contracts entered into in the period that is new, committed and incremental to our existing contracts, entered into with our enterprise-based customers.

Following the end of the third quarter of Fiscal 2024, we saw the following activity:

• On May 1, 2024, we completed the previously announced sale of our AMC business to Rocket Software, for $2.275 billion in cash before taxes, fees and other adjustments.

As part of this sale, we have agreed to provide certain transition services to Rocket Software following completion of the divestiture for up to 24 months.

• On May 1, 2024, we provided notices to prepay $2.0 billion of our aggregate outstanding debt including an additional $1.06 billion on the Acquisition Term Loan and $940 million under Term Loan B using net proceeds from the AMC Divestiture.

We expect the prepayments to be made on or about May 6, 2024, at which point the remaining balance of the Acquisition Term Loan will be $2.23 billion and the Term Loan B will have been repaid in full.

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

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

The Micro Focus Acquisition has contributed to the growth in our revenues and significantly impacts period-over-period comparability.

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

Proposed Divestiture of AMC Business

On November 28, 2023, the Company entered into an agreement to sell its AMC business to Rocket Software, for $2.275 billion in cash before taxes, fees and other adjustments.

The transaction remains subject to certain regulatory approvals and other customary closing conditions and is expected to close in the fourth quarter of Fiscal 2024.

The Company determined that the assets and liabilities of the AMC business met the criteria for held for sale classification and the respective assets and liabilities have been reclassified to assets held for sale and liabilities held for sale reported in our Condensed Consolidated Balance Sheets as of December 31, 2023.

The Company has determined that the AMC business does not constitute a component, as its operations and cash flows can not be clearly distinguished from the rest of the Company’s operations and cash flows due to significant shared costs, therefore, the transaction does not meet the discontinued operations criteria, and the results of operations from the AMC business are presented within income from operations in our Condensed Consolidated Statements of Income.

The Company expects that the sale proceeds less costs to sell will exceed the preliminary estimate of the carrying value of the net assets for the AMC business.

The Micro Focus Acquisition has contributed to the growth in our revenues and impacts period-over-period comparability.

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

Divestiture of AMC Business

On May 1, 2024, the Company completed the previously announced sale of its AMC business to Rocket Software for $2.275 billion in cash before taxes, fees and other adjustments.

For the three and nine months ended March 31, 2024, the results of the AMC business were recorded and presented within our Condensed Consolidated Financial Statements.

See Note 25 “Subsequent Events” to our Condensed Consolidated Financial Statements for more details.

As of March 31, 2024, the Company determined that the assets and liabilities of the AMC business met the criteria for held for sale classification and the respective assets and liabilities have been reclassified to Assets held for sale and Liabilities held for sale reported in our Condensed Consolidated Balance Sheets.

The Company has determined that the AMC business does not constitute a component, as its operations and cash flows cannot be clearly distinguished from the rest of the Company’s operations and cash flows due to significant shared costs, therefore, the transaction does not meet the discontinued operations criteria, and the results of operations from the AMC business are presented within Income from operations in our Condensed Consolidated Statements of Income.

The Company expects that the sale proceeds less costs to sell will exceed the carrying value of the net assets for the AMC business.

The carrying value is subject to change based on developments leading up to the closing date.

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While our operations within these locations are not material and we do not expect these geopolitical conflicts to have a material adverse effect on our overall business, results of operations or financial condition, it is not possible to predict the broader consequences of these conflicts, including adverse effects on the global economy, on our business and operations as well as those of our customers, partners and third party service providers.

For more information, please see Part I, Item 1A “Risk Factors” and Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for Fiscal 2023.

For more information, see Part I, Item 1A “Risk Factors” and Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for Fiscal 2023.

Outlook for Remainder of Fiscal 2024

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

The completion of the Micro Focus Acquisition during Fiscal 2023 has substantially expanded our scope and size by adding assets and operations to our existing business.

The completion of the Micro Focus Acquisition during Fiscal 2023 substantially expanded our scope and size by adding assets and operations to our existing business.

We have incurred and will continue to incur additional integration costs.

As part of the Micro Focus Acquisition, we made a strategic decision to implement a restructuring plan that impacted its global workforce and further reduced our real estate footprint around the world in an effort to further streamline our operations, consistent with previously announced cost synergies of $400 million (Micro Focus Acquisition Restructuring Plan).

The total size of the plan is expected to result in a reduction in the combined workforce of approximately 8%, or 2,000 employees, with an estimated cost of $160 million to $175 million, of which we have incurred $123.9 million as of December 31, 2023.

The total size of the plan is expected to result in a reduction in the combined workforce of approximately 8%, or 2,000 employees, with an estimated cost of $155 million to $170 million, of which we have incurred $133.5 million as of March 31, 2024.

We expect the Micro Focus Acquisition Restructuring Plan to be completed by the end of Fiscal 2024.

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The Micro Focus Acquisition has a significant impact on period-over-period comparability as more fully discussed below.

On November 28, 2023, the Company entered into an agreement to sell its AMC business to Rocket Software, for $2.275 billion in cash before taxes, fees and other adjustments.

The transaction remains subject to certain regulatory approvals and other customary closing conditions and is expected to close in the fourth quarter of Fiscal 2024.

We do not expect the divestiture to have a material impact to our Fiscal 2024 results.

On May 1, 2024, we completed the previously announced sale of the AMC business to Rocket Software, for $2.275 billion in cash before taxes, fees and other adjustments.

For the three and nine months ended March 31, 2024, the results of the AMC business were recorded and presented within our Condensed Consolidated Financial Statements.

See Note 25 “Subsequent Events” to our Condensed Consolidated Financial Statements for more details.

On May 1, 2024, we provided notices to prepay $2.0 billion of our aggregate outstanding debt including $940 million of the aggregate principal amounts outstanding under the Term Loan B (as defined below) and $1.06 billion of the outstanding balance on the Acquisition Term Loan (as defined below), using the net proceeds from the AMC Divestiture.

We do not expect the divestiture to have a material impact to our Fiscal 2024 operating results.

See Part II, Item 1A “Risk Factors” herein and Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for Fiscal 2023.

Due to the limited time since the transaction’s closing date and the size and complexity of the transaction, the Company has not completed the accounting for the business divestiture, including the determination of the gain or loss to be recognized in connection with its completion.

We will continue to closely monitor the potential impacts of inflation with respect to wages, services and goods, concerns regarding any potential recession, rising interest rates, financial market volatility, the Russia-Ukraine and Israel-Hamas conflicts and other geopolitical disputes on our business.

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(iv) Income taxes.

For a full discussion of all our accounting policies, please see Note 2 “Accounting Policies and Recent Accounting Pronouncements” to the Consolidated Financial Statements included in our Annual Report on Form 10-K for Fiscal 2023.

For a full discussion of all our accounting policies, see Note 2 “Accounting Policies and Recent Accounting Pronouncements” to the Consolidated Financial Statements included in our Annual Report on Form 10-K for Fiscal 2023.

RESULTS OF OPERATIONS

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

The comparability of our operating results for the three months ended December 31, 2023 as compared to the three months ended December 31, 2022 was impacted by the recent Micro Focus Acquisition.

Our total revenues increased by $637.4 million across all of our product types for the three months ended December 31, 2023, relative to the three months ended December 31, 2022, primarily due to revenue contributions from the Micro Focus Acquisition and a favorable impact of $25.6 million of foreign exchange rate changes.

Micro Focus contributed $601.4 million to our total revenues for the three months ended December 31, 2023, of which $369.5 million related to customer support revenues and $153.3 million related to license revenues.

Total cost of revenues increased by $144.1 million for the three months ended December 31, 2023, relative to the three months ended December 31, 2022, primarily from additional cost of revenues as a result of the Micro Focus Acquisition.

Micro Focus incurred $155.4 million of cost of revenues during the three months ended December 31, 2023.

Total operating expenses increased by $424.2 million for the three months ended December 31, 2023, relative to the three months ended December 31, 2022, primarily from additional operating expenses as a result of the Micro Focus Acquisition.

Micro Focus incurred $357.6 million of operating expenses during the three months ended December 31, 2023, of which $254.1 million was related to research and development, sales and marketing, and general and administrative expenses.

The comparability of our operating results for the six months ended December 31, 2023 as compared to the six months ended December 31, 2022 was impacted by the recent Micro Focus Acquisition.

Our total revenues increased by $1,210.8 million across all of our product types for the six months ended December 31, 2023 relative to the six months ended December 31, 2022, primarily due to revenue contributions from the Micro Focus Acquisition, and the favorable impact of $41.5 million of foreign exchange rate changes.

Micro Focus contributed $1,164.3 million to our total revenues for the six months ended December 31, 2023, of which $739.4 million related to customer support revenues and $268.8 million related to license revenues.

Total cost of revenues increased by $292.7 million for the six months ended December 31, 2023 relative to the six months ended December 31, 2022, primarily from additional cost of revenues as a result of the Micro Focus Acquisition.

Micro Focus incurred $313.5 million of cost of revenues for the six months ended December 31, 2023.

Total operating expenses increased by $782.4 million for the six months ended December 31, 2023, relative to the six months ended December 31, 2022, primarily from additional operating expenses as a result of the Micro Focus Acquisition.

Micro Focus incurred $708.5 million of operating expenses for the six months ended December 31, 2023, of which $522.1 million was related to research and development, sales and marketing, and general and administrative expenses.

The comparability of our operating results for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, was impacted by the Micro Focus Acquisition, the results of which were consolidated with those of Open Text beginning February 1, 2023.

As such, consolidated operating results for the three months ended March 31, 2023 and 2024 include two and three months, respectively, of Micro Focus operating results.

Our total revenues increased by $202.5 million across all of our product types for the three months ended March 31, 2024, relative to the three months ended March 31, 2023, primarily due to revenue contributions from the Micro Focus Acquisition and a favorable impact of $3.5 million of foreign exchange rate changes.

Micro Focus contributed $564.7 million to our total revenues for the three months ended March 31, 2024, of which $366.5 million related to customer support revenues and $117.6 million related to license revenues.

Micro Focus total revenues increased by $190.3 million during the three months ended March 31, 2024, as compared to the same period in the prior fiscal year.

Total cost of revenues increased by $21.6 million for the three months ended March 31, 2024, relative to the three months ended March 31, 2023, primarily from additional cost of revenues as a result of the Micro Focus Acquisition, partially offset by

reductions in amortization related to intangible assets associated with the AMC Divestiture and its held for sale classification.

Micro Focus incurred $140.4 million of cost of revenues during the three months ended March 31, 2024, an increase of $32.2 million as compared to the same period in the prior fiscal year.

Total operating expenses increased by $17.8 million for the three months ended March 31, 2024, relative to the three months ended March 31, 2023, primarily from additional operating expenses as a result of the Micro Focus Acquisition, partially offset by decreased acquisition related costs.

Micro Focus incurred $321.1 million of operating expenses during the three months ended March 31, 2024, of which $262.4 million was related to research and development, sales and marketing, and general and administrative expenses.

Micro Focus total operating expenses increased by $5.8 million during the three months ended March 31, 2024, of which $38.7 million was related to research and development, sales and marketing, and

general and administrative expenses, which were partly offset by decreased acquisition related costs, as compared to the same period in the prior fiscal year.

The comparability of our operating results for the nine months ended March 31, 2024, as compared to the nine months ended March 31, 2023, was impacted by the Micro Focus Acquisition, the results of which were consolidated with those of Open Text beginning February 1, 2023.

As such, consolidated operating results for the nine months ended March 31, 2023 and 2024 include two and nine months, respectively, of Micro Focus operating results.

Our total revenues increased by $1,413.3 million across all of our product types for the nine months ended March 31, 2024 relative to the nine months ended March 31, 2023, primarily due to revenue contributions from the Micro Focus Acquisition and the favorable impact of $45.0 million of foreign exchange rate changes.

Micro Focus contributed $1,729.0 million to our total revenues for the nine months ended March 31, 2024, of which $1,105.8 million related to customer support revenues and $386.4 million related to license revenues.

Micro Focus total revenues increased by $1,354.6 million during the nine months ended March 31, 2024, as compared to the same period in the prior fiscal year.

Total cost of revenues increased by $314.3 million for the nine months ended March 31, 2024 relative to the nine months ended March 31, 2023, primarily from additional cost of revenues as a result of the Micro Focus Acquisition.

Micro Focus incurred $454.0 million of cost of revenues for the nine months ended March 31, 2024, an increase of $345.8 million as compared to the same period in the prior fiscal year.

Total operating expenses increased by $800.1 million for the nine months ended March 31, 2024, relative to the nine months ended March 31, 2023, primarily from additional operating expenses as a result of the Micro Focus Acquisition.

Micro Focus incurred $1,029.6 million of operating expenses for the nine months ended March 31, 2024, of which $784.5 million was related to research and development, sales and marketing, and general and administrative expenses.

Micro Focus total operating expenses increased by $714.3 million during the nine months ended March 31, 2024, of which $560.8 million was related to research and development, sales and marketing, and general and administrative expenses, as compared to the same period in the prior fiscal year.

Summary of Results of Operations

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

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

(In thousands) 2024 Change

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

For the quarter ended December 31, 2023, our cloud renewal rate, excluding the impact of Carbonite, Zix and Micro Focus, decreased to 93% from 94% over the quarter ended December 31, 2022.

For the quarter ended March 31, 2024, our cloud renewal rate, excluding the impact of Carbonite, Zix and Micro Focus, decreased to 92% from 95% over the quarter ended March 31, 2023.

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

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

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

(In thousands) 2024 Change

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Asia Pacific 6.1 % 6.7 % 6.4 % 6.3 %

Three Months Ended December 31, 2023 Compared to Three Months Ended December 31, 2022

Cloud services and subscriptions revenues increased by $41.4 million or 10.1% during the three months ended December 31, 2023 as compared to the same period in the prior fiscal year;

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Cloud services and subscriptions revenues increased by $19.1 million or 4.4% during the three months ended March 31, 2024 as compared to the same period in the prior fiscal year;

up 4.4% after factoring in the favorable impact of $0.1 million of foreign exchange rate changes.

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

Geographically, the overall change was attributable to an increase in EMEA of $20.2 million, an increase in Americas of $17.7 million and an increase in Asia Pacific of $3.5 million.

There were 48 cloud services contracts greater than $1.0 million that closed during the second quarter of Fiscal 2024, compared to 23 contracts during the second quarter of Fiscal 2023.

Cost of Cloud services and subscriptions revenues increased by $45.8 million during the three months ended December 31, 2023 as compared to the same period in the prior fiscal year.

This was due to an increase in third-party network usage fees of $32.3 million and an increase in labour-related costs of $13.3 million both partially driven by incremental Cloud services and subscriptions cost of revenues from the Micro Focus Acquisition.

Geographically, the overall change was attributable to an increase in EMEA of $8.0 million, an increase in Americas of $12.1 million and a decrease in Asia Pacific of $1.0 million.

There were 28 cloud services contracts greater than $1.0 million that closed during the third quarter of Fiscal 2024, compared to 13 contracts during the third quarter of Fiscal 2023.

Cost of Cloud services and subscriptions revenues increased by $28.7 million during the three months ended March 31, 2024 as compared to the same period in the prior fiscal year.

This was due to an increase in third-party network usage fees of $25.3 million and an increase in labour-related costs of $3.9 million both partially driven by incremental Cloud services and subscriptions costs of revenues from the Micro Focus Acquisition.

Overall, the gross margin percentage on Cloud services and subscriptions revenues decreased to 59% from 64%.

Six Months Ended December 31, 2023 Compared to Six Months Ended December 31, 2022

Cloud services and subscriptions revenues increased by $87.8 million or 10.8% during the six months ended December 31, 2023 as compared to the same period in the prior fiscal year;

Nine Months Ended March 31, 2024 Compared to Nine Months Ended March 31, 2023

Cloud services and subscriptions revenues increased by $106.9 million or 8.6% during the nine months ended March 31, 2024 as compared to the same period in the prior fiscal year;

up 8.0% after factoring in the favorable impact of $6.5 million of foreign exchange rate changes.

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Geographically, the overall change was attributable to an increase in Americas of $56.6 million, an increase in EMEA of $43.0 million and an increase in Asia Pacific of $7.3 million.

There were 69 cloud services contracts greater than $1.0 million that closed during the first six months of Fiscal 2024, compared to 41 contracts during the first six months of Fiscal 2023.

Cost of Cloud services and subscriptions revenues increased by $85.4 million during the six months ended December 31, 2023 as compared to the same period in the prior fiscal year.

This was due to an increase in third-party network usage fees of $44.9 million and an increase in labour-related costs of $40.4 million both partially driven by incremental Cloud services and subscriptions costs of revenue from the Micro Focus Acquisition.

There were 97 cloud services contracts greater than $1.0 million that closed during the first nine months of Fiscal 2024, compared to 54 contracts during the first nine months of Fiscal 2023.

Cost of Cloud services and subscriptions revenues increased by $114.2 million during the nine months ended March 31, 2024 as compared to the same period in the prior fiscal year.

This was due to an increase in third-party network usage fees of $70.2 million and an increase in labour-related costs of $44.3 million both partially driven by incremental Cloud services and subscriptions costs of revenues from the Micro Focus Acquisition.

Overall, the gross margin percentage on Cloud services and subscriptions revenues decreased to 60% from 66%.

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

For the quarter ended December 31, 2023, our Customer support renewal rate remained stable at 95% compared to the quarter ended December 31, 2022, excluding the impact of Carbonite, Zix and Micro Focus.

For the quarter ended March 31, 2024, our Customer support renewal rate remained stable at 95% compared to the quarter ended March 31, 2023, excluding the impact of Carbonite, Zix and Micro Focus.

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

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

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

(In thousands) 2024 Change

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Asia Pacific 10.6 % 9.4 % 9.9 % 8.7 %

Three Months Ended December 31, 2023 Compared to Three Months Ended December 31, 2022

Customer support revenues increased by $379.3 million or 119.8% during the three months ended December 31, 2023 as compared to the same period in the prior fiscal year;

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Customer support revenues increased by $115.6 million or 20.1% during the three months ended March 31, 2024 as compared to the same period in the prior fiscal year;

up 19.6% after factoring in the favorable impact of $2.5 million of foreign exchange rate changes.

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Geographically, the overall change was attributable to an increase in Americas of $41.9 million, an increase in EMEA of $55.1 million and an increase in Asia Pacific of $18.6 million.

Cost of Customer support revenues increased by $44.8 million during the three months ended December 31, 2023 as compared to the same period in the prior fiscal year.

Cost of Customer support revenues increased by $7.6 million during the three months ended March 31, 2024 as compared to the same period in the prior fiscal year.

This was primarily due to an increase in labour-related costs of $8.2 million driven by incremental Customer support cost of revenues from the Micro Focus Acquisition over the comparative period.

Overall, the gross margin percentage on Customer support revenues decreased to 89% from 91%.

Six Months Ended December 31, 2023 Compared to Six Months Ended December 31, 2022

Customer support revenues increased by $759.6 million or 119.8% during the six months ended December 31, 2023 as compared to the same period in the prior fiscal year;

Overall, the gross margin percentage on Customer support revenues increased to 89% from 88%.

Nine Months Ended March 31, 2024 Compared to Nine Months Ended March 31, 2023

Customer support revenues increased by $875.2 million or 72.3% during the nine months ended March 31, 2024 as compared to the same period in the prior fiscal year;

up 70.3% after factoring in the favorable impact of $25.2 million of foreign exchange rate changes.

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Geographically, the overall change was attributable to an increase in Americas of $433.9 million, an increase in EMEA of $341.7 million and an increase in Asia Pacific of $99.6 million.

Cost of Customer support revenues increased by $92.4 million during the six months ended December 31, 2023 as compared to the same period in the prior fiscal year.

Cost of Customer support revenues increased by $100.0 million during the nine months ended March 31, 2024 as compared to the same period in the prior fiscal year.

This was primarily due to an increase in labour-related costs of $96.6

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

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

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

(In thousands) 2024 Change

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Asia Pacific 11.7 % 12.5 % 13.4 % 14.3 %

Three Months Ended December 31, 2023 Compared to Three Months Ended December 31, 2022

License revenues increased by $181.3 million or 167.9% during the three months ended December 31, 2023 as compared to the same period in the prior fiscal year;

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

License revenues increased by $60.6 million or 43.4% during the three months ended March 31, 2024 as compared to the same period in the prior fiscal year;

up 43.2% after factoring in the favorable impact of $0.3 million of foreign exchange rate changes.

1 unchanged sentence

Geographically, the overall change was attributable to an increase in Americas of $24.7 million, an increase in EMEA of $30.1 million and an increase in Asia Pacific of $5.8 million.

During the second quarter of Fiscal 2024, we closed 83 license contracts greater than $0.5 million, of which 35 contracts were greater than $1.0 million, contributing $147.7 million of License revenues.

This was compared to 38 license contracts greater than $0.5 million during the second quarter of Fiscal 2023, of which 15 contracts were greater than $1.0 million, contributing $43.0 million of License revenues.

Cost of License revenues increased by $2.1 million during the three months ended December 31, 2023 as compared to the same period in the prior fiscal year as a result of higher third-party technology costs primarily driven by incremental cost of License revenues from the Micro Focus Acquisition over the comparative period.

Overall, the gross margin percentage on License revenues increased to 98% from 96%.

Six Months Ended December 31, 2023 Compared to Six Months Ended December 31, 2022

License revenues increased by $291.8 million or 171.1% during the six months ended December 31, 2023 as compared to the same period in the prior fiscal year;

During the third quarter of Fiscal 2024, we closed 55 license contracts greater than $0.5 million, of which 23 contracts were greater than $1.0 million, contributing $92.3 million of License revenues.

This was compared to 42 license contracts greater than $0.5 million during the third quarter of Fiscal 2023, of which 22 contracts were greater than $1.0 million, contributing $58.6 million of License revenues.

Cost of License revenues increased by $2.9 million during the three months ended March 31, 2024 as compared to the same period in the prior fiscal year as a result of higher third-party technology costs primarily driven by incremental cost of License revenues from the Micro Focus Acquisition over the comparative period.

Overall, the gross margin percentage on License revenues remained stable at 97%, compared with the same period in the prior fiscal year.

Nine Months Ended March 31, 2024 Compared to Nine Months Ended March 31, 2023

License revenues increased by $352.4 million or 113.6% during the nine months ended March 31, 2024 as compared to the same period in the prior fiscal year;

up 110.9% after factoring in the favorable impact of $8.4 million of foreign exchange rate changes.

1 unchanged sentence

Geographically, the overall change was attributable to an increase in Americas of $160.6 million, an increase in EMEA of $148.0 million and an increase in Asia Pacific of $43.9 million.

During the first six months of Fiscal 2024, we closed 134 license contracts greater than $0.5 million, of which 56 contracts were greater than $1.0 million, contributing $211.6 million of License revenues.

This was compared to 60 license contracts greater than $0.5 million during the first six months of Fiscal 2023, of which 24 contracts were greater than $1.0 million, contributing $65.6 million of License revenues.

Cost of License revenues increased by $3.2 million during the six months ended December 31, 2023 as compared to the same period in the prior fiscal year as a result of lower third-party technology costs.

Overall, the gross margin percentage on License revenues increased to 98% from 96%.

During the first nine months of Fiscal 2024, we closed 189 license contracts greater than $0.5 million, of which 79 contracts were greater than $1.0 million, contributing $303.9 million of License revenues.

This was compared to 102 license contracts greater than $0.5 million during the first nine months of Fiscal 2023, of which 46 contracts were greater than $1.0 million, contributing $124.2 million of License revenues.

Cost of License revenues increased by $6.1 million during the nine months ended March 31, 2024 as compared to the same period in the prior fiscal year as a result of increased third-party technology costs.

Overall, the gross margin percentage on License revenues remained stable at 97%, compared with the same period in the prior fiscal year.

4) Professional Service and Other:

5 unchanged sentences

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

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

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

(In thousands) 2024 Change

13 unchanged sentences

Asia Pacific 12.8 % 14.2 % 12.5 % 13.2 %

Three Months Ended December 31, 2023 Compared to Three Months Ended December 31, 2022

Professional service and other revenues increased by $35.5 million or 55.2% during the three months ended December 31, 2023 as compared to the same period in the prior fiscal year;

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Professional service and other revenues increased by $7.2 million or 7.7% during the three months ended March 31, 2024 as compared to the same period in the prior fiscal year;

up 7.0% after factoring in the favorable impact of $0.6 million of foreign exchange rate changes.

The increase was primarily driven by incremental Professional service and other revenues from the Micro Focus Acquisition over the comparative period.

Geographically, the overall change was attributable to an increase in EMEA of $23.0 million, an increase in Americas of $8.4 million and an increase in Asia Pacific of $4.1 million.

Cost of Professional service and other revenues increased by $21.4 million during the three months ended December 31, 2023 as compared to the same period in the prior fiscal year.

This was due to an increase in labour-related costs of $22.1 million, primarily driven by incremental Professional service and other cost of revenues from the Micro Focus Acquisition over the comparative period, offset by a decrease in other miscellaneous costs of $0.7 million.

Geographically, the overall change was attributable to an increase in EMEA of $8.6 million, a decrease in Americas of $0.9 million and a decrease in Asia Pacific of $0.5 million.

Cost of Professional service and other revenues decreased by $3.1 million during the three months ended March 31, 2024 as compared to the same period in the prior fiscal year.

This was driven by a decrease in labour-related costs of $3.0 million.

Overall, the gross margin percentage on Professional service and other revenues increased to 25% from 16% in the same period in the prior fiscal year.

Six Months Ended December 31, 2023 Compared to Six Months Ended December 31, 2022

Professional service and other revenues increased by $71.7 million or 54.4% during the six months ended December 31, 2023 as compared to the same period in the prior fiscal year;

Nine Months Ended March 31, 2024 Compared to Nine Months Ended March 31, 2023

Professional service and other revenues increased by $78.8 million or 35.0% during the nine months ended March 31, 2024 as compared to the same period in the prior fiscal year;

up 32.8% after factoring in the favorable impact of $4.9 million of foreign exchange rate changes.

1 unchanged sentence

Geographically, the overall change was attributable to an increase in Americas of $14.9 million, an increase in Asia Pacific of $8.2 million and an increase in EMEA of $55.8 million.

Cost of Professional service and other revenues increased by $47.5 million during the six months ended December 31, 2023 as compared to the same period in the prior fiscal year.

Cost of Professional service and other revenues increased by $44.4 million during the nine months ended March 31, 2024 as compared to the same period in the prior fiscal year.

This was due to an increase in labour-related costs of $46.1 million primarily driven by incremental Professional service and other cost of revenues from the Micro Focus Acquisition over the comparative period, offset by a decrease in other miscellaneous costs of $1.7 million.

1 unchanged sentence

Amortization of Acquired Technology-based Intangible Assets

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

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

(In thousands) 2024 Change

2 unchanged sentences

Amortization of acquired technology-based intangible assets $ 48,094 $ (14,545) $ 62,639 $ 195,702 $ 49,563 $ 146,139

Amortization of acquired technology-based intangible assets increased during the three months ended December 31, 2023 by $29.9 million as compared to the same period in the prior fiscal year.

This was primarily due to amortization of newly acquired technology-based intangible assets from the Micro Focus Acquisition, partially offset by intangible assets from previous acquisitions becoming fully amortized.

Amortization of acquired technology-based intangible assets increased during the six months ended December 31, 2023 by $64.1 million as compared to the same period in the prior fiscal year.

This was primarily due to amortization of newly acquired customer-based intangible assets from the Micro Focus Acquisition, partially offset by intangible assets from previous acquisitions becoming fully amortized.

Amortization of acquired technology-based intangible assets decreased during the three months ended March 31, 2024 by $14.5 million as compared to the same period in the prior fiscal year.

This was primarily due to intangible assets from previous acquisitions becoming fully amortized and reduced amortization related to the AMC Divestiture’s held for sale classification, partially offset by amortization of newly acquired technology-based intangible assets from the Micro Focus Acquisition.

Amortization of acquired technology-based intangible assets increased during the nine months ended March 31, 2024 by $49.6 million as compared to the same period in the prior fiscal year.

Operating Expenses

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

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

(In thousands) 2024 Change

20 unchanged sentences

Three Months Ended

December 31, 2023 and 2022

March 31, 2024 and 2023

Change between

Six Months Ended

December 31, 2023 and 2022

Nine Months Ended

March 31, 2024 and 2023

(In thousands)

7 unchanged sentences

Total change in research and development expenses $ 23,291 $ 258,050

Research and development expenses increased by $110.5 million during the three months ended December 31, 2023 as compared to the same period in the prior fiscal year, primarily as a result of the Micro Focus Acquisition.

Research and development expenses increased by $23.3 million during the three months ended March 31, 2024 as compared to the same period in the prior fiscal year, primarily as a result of the Micro Focus Acquisition.

Payroll and payroll-related benefits, which is comprised of salaries, benefits and variable short-term incentives, increased by $13.4 million, facility-

related expenses increased by $22.2 million, contract labour and consulting increased by $5.1 million, and share-based compensation expense increased by $4.9 million.

Overall, our research and development expenses, as a percentage of total revenues, increased to 14% compared to the same period in the prior fiscal year at 12%.

Research and development expenses increased by $234.8 million during the six months ended December 31, 2023 as compared to the same period in the prior fiscal year, partially as a result of the Micro Focus Acquisition.

related expenses increased by $8.7 million and travel and communication increased by $1.1 million.

These increases were partially offset by a reduction in contract labour and consulting of $1.8 million.

Overall, our research and development expenses, as a percentage of total revenues, decreased to 16% compared to the same period in the prior fiscal year at 17%.

Research and development expenses increased by $258.1 million during the nine months ended March 31, 2024 as compared to the same period in the prior fiscal year, primarily as a result of the Micro Focus Acquisition.

Payroll and payroll-related benefits, which is comprised of salaries, benefits and variable short-term incentives, increased by $172.9 million, facility-related expenses increased by $56.1 million, contract labour and consulting increased by $9.0 million, and share-based compensation expense increased by $9.8 million.

Overall, our research and development expenses, as a percentage of total revenues, increased to 16% compared to the same period in the prior fiscal year at 14%.

Our research and development labour resources increased by 3,787 employees, from 4,275 employees at December 31, 2022 to 8,062 employees at December 31, 2023.

Our research and development labour resources decreased by 564 employees, from 8,544 employees at March 31, 2023 to 7,980 employees at March 31, 2024.

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

1 unchanged sentence

Three Months Ended

December 31, 2023 and 2022

March 31, 2024 and 2023

Change between

Six Months Ended

December 31, 2023 and 2022

Nine Months Ended

March 31, 2024 and 2023

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

9 unchanged sentences

Total change in sales and marketing expenses $ 25,236 $ 232,959

Sales and marketing expenses increased by $103.1 million during the three months ended December 31, 2023 as compared to the same period in the prior fiscal year, primarily as a result of the Micro Focus Acquisition.

Payroll and payroll-related benefits, which is comprised of salaries, benefits and variable short-term incentives, increased by $71.8 million, commissions increased by $10.0 million, facility-related expenses increased by $7.0 million, contract labour and consulting expenses increased by $4.2 million, share-based compensation expense increased by $3.8 million, and travel and communication expenses increased by $3.7 million.

Sales and marketing expenses increased by $25.2 million during the three months ended March 31, 2024 as compared to the same period in the prior fiscal year, primarily as a result of the Micro Focus Acquisition.

Payroll and payroll-related benefits, which is comprised of salaries, benefits and variable short-term incentives, increased by $17.7 million, credit loss expense increased by $4.8 million, commissions increased by $4.3 million and facility-related expenses increased by $1.5 million.

Overall, our sales and marketing expenses, as a percentage of total revenues, decreased to 20% compared to 22% in the same period in the prior fiscal year.

Sales and marketing expenses increased by $207.7 million during the six months ended December 31, 2023 as compared to the same period in the prior fiscal year, primarily as a result of the Micro Focus Acquisition.

Payroll and payroll-related benefits, which is comprised of salaries, benefits and variable short-term incentives, increased by $143.4 million, facility-related expenses increased by $16.6 million, commissions increased by $16.1 million, share-based compensation expense increased by $8.7 million, contract labour and consulting expenses increased by $8.6 million, travel and communication expenses increased by $7.1 million and marketing expenses increased by $6.9 million.

Sales and marketing expenses increased by $233.0 million during the nine months ended March 31, 2024 as compared to the same period in the prior fiscal year, primarily as a result of the Micro Focus Acquisition.

Payroll and payroll-related benefits, which is comprised of salaries, benefits and variable short-term incentives, increased by $161.0 million, commissions increased by $20.4 million, facility-related expenses increased by $18.1 million, share-based compensation expense increased by $9.1 million, contract labour and consulting expenses increased by $8.7 million, travel and communication expenses increased by $7.9 million and marketing expenses increased by $5.1 million.

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

Our sales and marketing labour resources increased by 1,858 employees, from 2,653 employees at December 31, 2022 to 4,511 employees at December 31, 2023.

Our sales and marketing labour resources decreased by 566 employees, from 5,086 employees at March 31, 2023 to 4,520 employees at March 31, 2024.

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

1 unchanged sentence

Three Months Ended

December 31, 2023 and 2022

March 31, 2024 and 2023

Change between

Six Months Ended

December 31, 2023 and 2022

Nine Months Ended

March 31, 2024 and 2023

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

6 unchanged sentences

Total change in general and administrative expenses $ 18,878 $ 167,675

General and administrative expenses increased by $95.7 million during the three months ended December 31, 2023 as compared to the same period in the prior fiscal year, primarily as a result of the Micro Focus Acquisition and other miscellaneous costs.

Other miscellaneous costs, which include professional fees such as legal, audit and tax related expenses, increased by $51.1 million primarily driven by costs related to IP, including the grant of certain IP rights and the resolution of certain historical IP related matters.

Payroll and payroll-related benefits, which is comprised of salaries, benefits and variable short-term incentives, increased by $31.2 million, contract labour and consulting expenses increased by $7.2 million, travel and communication expenses increased by $2.5 million and facility-related expenses increased by $2.3 million.

Overall, general and administrative expenses, as a percentage of total revenues, increased to 11% from 9% in the same period in the prior fiscal year.

General and administrative expenses increased by $148.8 million during the six months ended December 31, 2023 as compared to the same period in the prior fiscal year, primarily as a result of the Micro Focus Acquisition and other miscellaneous costs.

Payroll and payroll-related benefits, which is comprised of salaries, benefits and variable short-term incentives, increased by $62.3 million, other miscellaneous costs, which include professional fees such as legal, audit and tax related expenses, increased by $56.8 million primarily driven by costs related to IP, including the grant of certain IP rights and the resolution of certain historical IP related matters, contract labour and consulting expenses increased by $14.9 million, travel and communications expenses increased by $6.9 million, facility-related expenses increased by $4.3 million and share-based compensation expenses increased by $3.6 million.

General and administrative expenses increased by $18.9 million during the three months ended March 31, 2024 as compared to the same period in the prior fiscal year.

Other miscellaneous costs, which include professional fees such as legal, audit and tax related expenses, increased by $24.9 million primarily driven by increased costs related to IP, including the grant of certain IP rights and the resolution of certain historical IP related matters and higher professional fees.

These increases were partially offset by reductions in facility-related expenses of $3.9 million and travel and communication of $1.4 million.

Overall, general and administrative expenses, as a percentage of total revenues, remained stable at 10% compared to the same period in the prior fiscal year.

General and administrative expenses increased by $167.7 million during the nine months ended March 31, 2024 as compared to the same period in the prior fiscal year, driven by the Micro Focus Acquisition and other miscellaneous costs.

Other miscellaneous costs, which include professional fees such as legal, audit and tax related expenses, increased by $81.6 million primarily driven by increased costs related to IP, including the grant of certain IP rights and the resolution of certain historical IP related matters and higher professional fees.

Additionally, payroll and payroll-related benefits, which is comprised of salaries, benefits and variable short-term incentives, increased by $61.2 million, contract labour and consulting expenses increased by $15.8 million, travel and communication expenses increased by $5.4 million and share-based compensation expenses increased by $3.1 million.

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

Our general and administrative labour resources increased by 1,562 employees, from 1,866 employees at December 31, 2022 to 3,428 employees at December 31, 2023, primarily as a result of the Micro Focus Acquisition.

Our general and administrative labour resources decreased by 302 employees, from 3,816 employees at March 31, 2023 to 3,514 employees at March 31, 2024.

Depreciation expenses:

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

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

(In thousands) 2024 Change

2 unchanged sentences

Depreciation $ 32,109 $ 1,532 $ 30,577 $ 99,615 $ 23,006 $ 76,609

Depreciation expenses increased during the three and six months ended December 31, 2023 by $10.6 million and $21.5 million, respectively, compared to the same periods in the prior fiscal year, primarily as a result of the Micro Focus Acquisition.

Depreciation expenses, as a percentage of total revenue decreased for the three and six months ended December 31, 2023 at 2% compared to 3% for the same periods in the prior fiscal year.

Depreciation expenses increased during the three and nine months ended March 31, 2024 by $1.5 million and $23.0 million, respectively, compared to the same periods in the prior fiscal year, primarily as a result of the Micro Focus Acquisition.

Depreciation expenses, as a percentage of total revenue remained stable for the three and nine months ended March 31, 2024 at 2% compared to 2% for the same periods in the prior fiscal year.

Amortization of acquired customer-based intangible assets:

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

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

(In thousands) 2024 Change

2 unchanged sentences

Amortization of acquired customer-based intangible assets $ 100,841 $ 3,604 $ 97,237 $ 334,958 $ 129,837 $ 205,121

Amortization of acquired customer-based intangible assets increased during the three months ended December 31, 2023 by $60.5 million as compared to the same period in the prior fiscal year.

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

Amortization of acquired customer-based intangible assets increased during the six months ended December 31, 2023 by $126.2 million as compared to the same period in the prior fiscal year.

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

Amortization of acquired customer-based intangible assets increased during the three months ended March 31, 2024 by $3.6 million as compared to the same period in the prior fiscal year.

This was primarily related to amortization of newly acquired customer-based intangible assets from the Micro Focus Acquisition, partially offset by reduced amortization related to the AMC Divestiture’s held for sale classification in the current period.

Amortization of acquired customer-based intangible assets increased during the nine months ended March 31, 2024 by $129.8 million as compared to the same period in the prior fiscal year.

Special charges (recoveries):

3 unchanged sentences

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

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

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

(In thousands) 2024 Change

2 unchanged sentences

Special charges (recoveries) $ 19,561 $ (54,789) $ 74,350 $ 87,521 $ (11,416) $ 98,937

Special charges (recoveries) increased by $43.9 million during the three months ended December 31, 2023 as compared to the same period in the prior fiscal year.

Restructuring costs related to the Micro Focus Acquisition increased by $44.8 million and divestiture costs related to the proposed divestiture of the AMC business increased by $5.4 million, offset by acquisition related costs which decreased by $6.0 million, as compared to the same period in the prior fiscal year.

Special charges (recoveries) increased by $43.4 million during the six months ended December 31, 2023 as compared to the same period in the prior fiscal year.

Restructuring costs related to the Micro Focus Acquisition increased by $51.6 million, divestiture costs related to the proposed divestiture of the AMC business increased by $7.0 million and other miscellaneous charges increased by $1.6 million, offset by acquisition related costs which decreased by $9.5 million as compared to the same period in the prior fiscal year.

Special charges (recoveries) decreased by $54.8 million during the three months ended March 31, 2024 as compared to the same period in the prior fiscal year.

Acquisition related costs decreased by $34.1 million and other miscellaneous charges decreased by $27.6 million, which includes severance and other costs associated with the Micro Focus Acquisition.

These costs were partially offset by divestiture costs related to the AMC Divestiture, which increased by $7.3 million, as compared to the same period in the prior fiscal year.

Special charges (recoveries) decreased by $11.4 million during the nine months ended March 31, 2024 as compared to the same period in the prior fiscal year.

Acquisition related costs decreased by $43.6 million and other miscellaneous charges decreased by $26.0 million, which includes severance and other costs associated with the Micro Focus Acquisition.

These decreases were partially offset by increased restructuring costs related to the Micro Focus Acquisition of $50.0 million and increased divestiture costs of $14.3 million related to the AMC Divestiture, as compared to the same period in the prior fiscal year.

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

1 unchanged sentence

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

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

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

(In thousands) 2024 Change

2 unchanged sentences

Foreign exchange gains (losses) (1)

$ 3,806 $ (51,752) $ 55,558 $ (4,384) $ (58,641) $ 54,257

Unrealized gains (losses) on derivatives

1 unchanged sentence

16,671 119,384 (102,713) (3,551) 109,016 (112,567)

Realized gains on derivatives

not designated as hedges (3)

— (137,471) 137,471 — (137,471) 137,471

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

3 unchanged sentences

Other miscellaneous income (expense) 1,111 976 135 (913) (1,275) 362

(2,561) (2,663) 102 (2,024) (2,251) 227

Total other income (expense), net $ 9,950 $ (75,756) $ 85,706 $ (38,664) $ (98,488) $ 59,824

__________________________

(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” to our Condensed Consolidated Financial Statements for more details).

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

(3) Represents the realized 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” to our Condensed Consolidated Financial Statements 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.

1 unchanged sentence

(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 of $8.2 million related to unamortized debt issuance costs (see Note 11 “Long-Term Debt” to our Condensed Consolidated Financial Statements for more details).

(6) During the three and nine months ended March 31, 2024, we recognized a loss on debt extinguishment of $10.8 million related to the acceleration and recognition of unamortized debt discount and issuance costs resulting from the optional repayments of the Acquisition Term Loan in Fiscal 2024 (see Note 11 “Long-Term Debt” to our Condensed Consolidated Financial Statements for more details).

Interest and Other Related Expense, Net

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

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

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

(In thousands) 2024 Change

8 unchanged sentences

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

Provision for Income Taxes

Provision for (recovery of) Income Taxes

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

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

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

(In thousands) 2024 Change

2 unchanged sentences

Provision for (recovery of) income taxes $ 6,028 $ 18,448 $ (12,420) $ 24,434 $ (47,545) $ 71,979

The Company’s effective tax rate for the three months ended December 31, 2023 increased to a provision of 17.6% compared to a provision of 16.4% for the three months ended December 31, 2022.

The Company’s effective tax rate for the three months ended December 31, 2023, differs from the Canadian statutory rate of 26.5% primarily due to tax benefits related to foreign tax credits, research and development credits, partially offset by US Base Erosion and Anti-Abuse Tax (BEAT).

The Company’s effective tax rate for the three months ended December 31, 2022, differs from the Canadian statutory rate primarily due to tax benefits related to benefits of internal reorganizations partially offset by permanent items and uncertain tax positions.

The Company’s effective tax rate for the six months ended December 31, 2023 decreased to a provision of 13.4% compared to a provision of 37.3% for the six months ended December 31, 2022.

The Company’s effective tax rate for the six months ended December 31, 2023 differs from the Canadian statutory rate of 26.5% primarily due to tax benefits related to foreign tax credits and research and development credits, partially offset by US BEAT.

The Company’s effective tax rate for the

six months ended December 31, 2022, differs from the Canadian statutory rate primarily due to permanent items and uncertain tax positions, partially offset by research and development credits..

The Company’s effective tax rate for the three months ended March 31, 2024 increased to a provision of 5.8% compared to a provision of (27.5)% for the three months ended March 31, 2023.

The Company’s effective tax rate for the three months ended March 31, 2024, differs from the Canadian statutory rate of 26.5% primarily due to tax benefits related to change in

valuation allowance, foreign tax credits, and research and development credits, partially offset by U.S.

Base Erosion and Anti-Abuse Tax (BEAT), withholding taxes, and an increase to uncertain tax positions.

The Company’s effective tax rate for the three months ended March 31, 2023, differs from the Canadian statutory rate 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 were considered capital in nature for income tax purposes and 50% of realized gains were not taxable.

Other items impacting the rate included 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 nine months ended March 31, 2024 decreased to a provision of 10.1% compared to a provision of 26.5% for the nine months ended March 31, 2023.

The Company’s effective tax rate for the nine months ended March 31, 2024 differs from the Canadian statutory rate of 26.5% primarily due to tax benefits related to foreign tax credits, research and development credits, and a change in valuation allowance, partially offset by U.S.

BEAT and withholding taxes.

The Company’s effective tax rate for the nine months ended March 31, 2023, differs from the Canadian statutory rate 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 Inflation Reduction Act of 2022 (Inflation Reduction Act) and Creating Helpful Incentives to Produce Semiconductors (CHIPS) were signed into law in August 2022.

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We are currently evaluating the applicability and potential effects of the new law on our financial results for future periods.

For information on certain potential tax contingencies, including the Canada Revenue Agency matter, see Note 14 “Guarantees and Contingencies” and Note 15 “Income Taxes” to our Condensed Consolidated Financial Statements.

Please also see Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for Fiscal 2023.

Use of Non-GAAP Financial Measures

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

for the three months ended December 31, 2023

for the three months ended March 31, 2024

(In thousands, except for per share data)

Three Months Ended December 31, 2023

Three Months Ended March 31, 2024

GAAP-based Measures GAAP-based Measures

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

Three Months Ended December 31, 2023

Three Months Ended March 31, 2024

Per share diluted

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Reconciliation of Adjusted EBITDA

Three Months Ended December 31, 2023

Three Months Ended March 31, 2024

GAAP-based net income, attributable to OpenText

9 unchanged sentences

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

for the three months ended December 31, 2022

for the three months ended March 31, 2023

(In thousands, except for per share data)

Three Months Ended December 31, 2022

Three Months Ended March 31, 2023

GAAP-based Measures GAAP-based Measures

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Other income (expense), net 85,706 (85,706) (6) —

Provision for income taxes

Provision for (recovery of) income taxes

(12,420) 44,631 (7) 32,211

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

Three Months Ended December 31, 2022

Three Months Ended March 31, 2023

Per share diluted

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Other (income) expense, net (85,706) (0.32)

GAAP-based provision for income taxes

GAAP-based recovery of income taxes

(12,420) (0.04)

Non-GAAP-based provision for income taxes

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Reconciliation of Adjusted EBITDA

Three Months Ended December 31, 2022

Three Months Ended March 31, 2023

GAAP-based net income, attributable to OpenText

Provision for income taxes

Recovery of income taxes

Interest and other related expense, net 104,502

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

for the six months ended December 31, 2023

for the nine months ended March 31, 2024

(In thousands, except for per share data)

Six Months Ended December 31, 2023

Nine Months Ended March 31, 2024

GAAP-based Measures GAAP-based Measures

41 unchanged sentences

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

Six Months Ended December 31, 2023

Nine Months Ended March 31, 2024

Per share diluted

11 unchanged sentences

Reconciliation of Adjusted EBITDA

Six Months Ended December 31, 2023

Nine Months Ended March 31, 2024

GAAP-based net income, attributable to OpenText

9 unchanged sentences

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

for the six months ended December 31, 2022

for the nine months ended March 31, 2023

(In thousands, except for per share data)

Six Months Ended December 31, 2022

Nine Months Ended March 31, 2023

GAAP-based Measures GAAP-based Measures

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

Six Months Ended December 31, 2022

Nine Months Ended March 31, 2023

Per share diluted

11 unchanged sentences

Reconciliation of Adjusted EBITDA

Six Months Ended December 31, 2022

Nine Months Ended March 31, 2023

GAAP-based net income, attributable to OpenText

11 unchanged sentences

(In thousands)

As of December 31, 2023 Change

As of March 31, 2024 Change

increase (decrease) As of June 30, 2023

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

Six Months Ended December 31,

Nine Months Ended March 31,

(In thousands)

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

As of December 31, 2023, we have recognized a deferred income tax liability of $29.5 million (June 30, 2023—$28.3 million) on taxable temporary differences related to the undistributed earnings of certain non-United States subsidiaries and planned periodic repatriations from certain German subsidiaries, that will be subject to withholding taxes upon distribution.

Cash flows provided by operating activitie s

Cash flows from operating activities increased by $70.6 million during the six months ended December 31, 2023, as compared to the same period in the prior fiscal year due to an increase in net income after the impact of non-cash items of $119.0 million partially offset by a decrease in changes from working capital of $48.4 million.

During the second quarter of Fiscal 2024 we had a days sales outstanding (DSO) of 47 days, compared to our DSO of 47 days during the second quarter of Fiscal 2023.

The per day impact of our DSO in the second quarter of Fiscal 2024 and Fiscal 2023 on our cash flows was $17.1 million and $10.0 million, respectively.

As of March 31, 2024, we have recognized a deferred income tax liability of $28.5 million (June 30, 2023—$28.3 million) on taxable temporary differences related to the undistributed earnings of certain non-United States subsidiaries and planned periodic repatriations from certain German subsidiaries, that will be subject to withholding taxes upon distribution.

Cash flows from operating activitie s

Cash flows from operating activities increased by $118.6 million during the nine months ended March 31, 2024, as compared to the same period in the prior fiscal year due to an increase in net income after the impact of non-cash items of $99.0 million and an increase in changes from working capital of $19.6 million.

During the third quarter of Fiscal 2024 we had a days sales outstanding (DSO) of 45 days, which remained stable as compared to our DSO of 45 days during the third quarter of Fiscal 2023.

The per day impact of our DSO in the third quarter of Fiscal 2024 and Fiscal 2023 on our cash flows was $16.1 million and $9.7 million, respectively primarily as a result of the Micro Focus Acquisition.

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

Cash flows used in investing activities

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

Cash flows used in investing activities increased by $27.5 million during the six months ended December 31, 2023, as compared to the same period in the prior fiscal year primarily due to higher additions to property and equipment and the increase in consideration paid during the first six months of Fiscal 2024 for acquisitions, which includes cash paid for the Micro Focus Acquisition of $9.3 million and other investing activities of $5.9 million.

Cash flows provided by (used in) financing activities

Cash flows from investing activities

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

Cash flows used in investing activities decreased by $5.5 billion during the nine months ended March 31, 2024, as compared to the same period in the prior fiscal year primarily due to the cash consideration paid for the Micro Focus Acquisition of $5.7 billion in the prior fiscal year, offset by higher additions to property and equipment during the first nine months of Fiscal 2024.

Cash flows from financing activities

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

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

Cash flows provided by financing activities decreased by $1.4 billion during the six months ended December 31, 2023 as compared to the same period in the prior fiscal year.

Cash flows provided by financing activities decreased by $5.4 billion during the nine months ended March 31, 2024 as compared to the same period in the prior fiscal year.

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

(i) $1.0 billion decrease in proceeds due to lower issuance of long-term debt and decreased draw down on the Revolver;

(i) $4.9 billion decrease in proceeds due to the issuance of long-term debt and draw down on the Revolver in the prior fiscal year;

(ii) $542.9 million increase in repayments of long-term debt and the Revolver;

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

(i) $13.5 million related to higher proceeds from the issuance of Common Shares for the exercise of options and the OpenText ESPP;

(ii) $8.9 million reduction in debt issuance costs.

(i) $74.4 million reduction in debt issuance costs;

(ii) $31.9 million related to higher proceeds from the issuance of Common Shares for the exercise of options and the OpenText ESPP.

Cash Dividends

During the three and six months ended December 31, 2023, we declared and paid cash dividends of $0.25 and $0.50 per Common Share, respectively, in the aggregate amount of $66.4 million and $133.4 million, respectively (three and six months ended December 31, 2022—$0.24299 and $0.48598 per Common Share, respectively, in the aggregate amount of $64.9 million and $129.6 million, respectively).

During the three and nine months ended March 31, 2024, we declared and paid cash dividends of $0.25 and $0.75 per Common Share, respectively, in the aggregate amount of $67.3 million and $200.7 million, respectively (three and nine months ended March 31, 2023—$0.24299 and $0.72897 per Common Share, respectively, in the aggregate amount of $64.9 million and $194.5 million, respectively).

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

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

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

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

Senior Notes 2030

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The foregoing description of the 2030 Indenture does not purport to be complete and is qualified in its entirety by reference to the full text of the 2030 Indenture, which is filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on February 18, 2020.

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

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

Senior Notes 2029

18 unchanged sentences

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

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

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

Senior Notes 2028

19 unchanged sentences

The foregoing description of the 2028 Indenture does not purport to be complete and is qualified in its entirety by reference to the full text of the 2028 Indenture, which is filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on February 18, 2020.

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

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

Senior Secured Fixed Rate Notes

18 unchanged sentences

The foregoing description of the 2027 Indenture does not purport to be complete and is qualified in its entirety by reference to the full text of the 2027 Indenture, which is filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on December 1, 2022.

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

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

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

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The interest on the current outstanding balance for Term Loan B is equal to 1.75% plus Adjusted Term SOFR (as defined in the Term Loan B).

As of December 31, 2023, the outstanding balance on the Term Loan B bears an interest rate of 7.20%.

As of March 31, 2024, the outstanding balance on the Term Loan B bears an interest rate of 7.18%.

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

2 unchanged sentences

Consolidated net leverage ratio is defined for this purpose as the proportion of our total debt reduced by unrestricted cash, including guarantees and letters of credit, over our trailing twelve months net income before interest, taxes, depreciation, amortization, restructuring, share-based compensation and other miscellaneous charges.

As of December 31, 2023, our consolidated net leverage ratio, as calculated in accordance with the applicable agreement, was 3.70:1.00.

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

As of March 31, 2024, our consolidated net leverage ratio, as calculated in accordance with the applicable agreement, was 3.82:1.00.

Following the end of the quarter, on May 1, 2024, we provided notices to prepay $2.0 billion of our aggregate outstanding debt including $940 million of the aggregate principal amount outstanding under Term Loan B, using the net proceeds from the AMC Divestiture.

We expect the prepayment to be made on or about May 6, 2024.

See Note 25 “Subsequent Events” to our Condensed Consolidated Financial Statements for more details.

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

On December 19, 2023, we amended our committed revolving credit facility (the Revolver) to, among other things, extend the maturity from October 31, 2024 to December 19, 2028, as well as to remove the 10-basis point credit spread adjustment for loans bearing interest based on the SOFR rate.

4 unchanged sentences

As of December 31, 2023, we had no outstanding balance under the Revolver (June 30, 2023—$275 million).

For the three and six months ended December 31, 2023, we recorded interest expense of $0.2 million and $2.2 million, respectively, relating to the Revolver (three and six months ended December 31, 2022—nil).

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

As of March 31, 2024, we had no outstanding balance under the Revolver (June 30, 2023—$275 million).

For the three and nine months ended March 31, 2024, we recorded interest expense of nil and $2.2 million, respectively, relating to the Revolver (three and nine months ended March 31, 2023—$5.0 million).

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

Acquisition Term Loan

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Borrowings under the Acquisition Term Loan currently bear a floating rate of interest equal to 2.75% plus Adjusted Term SOFR (as defined in the Acquisition Term Loan).

As of December 31, 2023, the outstanding balance on the Acquisition Term Loan bears an interest rate of 8.20%.

As of December 31, 2023, the Acquisition Term Loan bears an effective interest rate of 9.31%.

As of March 31, 2024, the outstanding balance on the Acquisition Term Loan bears an interest rate of 8.18%.

As of March 31, 2024, the Acquisition Term Loan bears an effective interest rate of 9.29%.

The effective interest rate includes interest expense of $219.5 million and amortization of debt discount and issuance costs of $14.5 million.

3 unchanged sentences

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, 2023, our consolidated net leverage ratio, as calculated in accordance with the applicable agreement, was 3.70:1:00.

As of March 31, 2024, our consolidated net leverage ratio, as calculated in accordance with the applicable agreement, was 3.82:1:00.

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.

For the three and six months ended December 31, 2023, we recorded interest expense of $73.1 million and $150.3 million, respectively, relating to the Acquisition Term Loan (three and six months ended December 31, 2022— nil).

Following the end of the quarter, on January 22, 2024, the Company repaid an additional $175 million drawn under the Acquisition Term Loan (see Note 25 “Subsequent Events” to our Condensed Consolidated Financial Statements for more details).

For the three and nine months ended March 31, 2024, we recorded interest expense of $69.2 million and $219.5 million, respectively, relating to the Acquisition Term Loan (three and nine months ended March 31, 2023— $48.1 million).

Following the end of the quarter, on May 1, 2024, we provided notices to prepay $2.0 billion of our aggregate outstanding debt including an additional$1.06 billion drawn under the Acquisition Term Loan using net proceeds from the AMC Divestiture.

We expect the prepayment to be made on or about May 6, 2024, at which point the Term Loan B will have been repaid in full.

See Note 25 “Subsequent Events” to our Condensed Consolidated Financial Statements for more details.

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

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

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

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

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

connection with the amendment to the Bridge Loan and the receipt of proceeds from the issuance of the Senior Secured Notes 2027, all remaining commitments under the Bridge Loan were reduced to zero and the Bridge Loan was terminated, which resulted in a loss on debt extinguishment of $8.1 million relating to unamortized debt issuance costs in the second quarter of Fiscal 2023.

As of December 31, 2023, we had no borrowings under the Bridge Loan.

For the three and six months ended December 31, 2023, we did not record any interest expense relating to the Bridge Loan.

In connection with the amendment to the Bridge Loan and the receipt of proceeds from the issuance of the Senior Secured Notes 2027, all remaining commitments under the Bridge Loan were reduced to zero and the Bridge Loan was terminated, which resulted in a loss on debt extinguishment of $8.2 million relating to unamortized debt issuance costs in the second quarter of Fiscal 2023.

As of March 31, 2024, we had no borrowings under the Bridge Loan.

For the three and nine months ended March 31, 2024, we did not record any interest expense relating to the Bridge Loan.

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

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

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

Shelf Registration Statement

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Share Repurchase Plan / Normal Course Issuer Bid

On November 4, 2021, the Board authorized a share repurchase plan (the Fiscal 2022 Repurchase Plan), pursuant to which we were authorized to purchase in open market transactions, from time to time over the 12 month period commencing November 12, 2021, up to an aggregate of $350 million of our Common Shares on the NASDAQ Global Select Market, the TSX (as part of a Fiscal 2022 Normal Course Issuer Bid (NCIB)) and/or other exchanges and alternative trading systems in Canada and/or the United States, if eligible, subject to applicable law and stock exchange rules.

On November 4, 2021, the Board authorized a share repurchase plan (the Fiscal 2022 Repurchase Plan), pursuant to which we were authorized to purchase in open market transactions, from time to time over the 12 month period commencing November 12, 2021, up to an aggregate of $350 million of our Common Shares on the NASDAQ Global Select Market, the TSX (as part of a Fiscal 2022 Normal Course Issuer Bid, defined below) and/or other exchanges and alternative trading systems in Canada and/or the United States, if eligible, subject to applicable law and stock exchange rules.

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

The Fiscal 2022 Repurchase Plan was effected in accordance with Rule 10b-18.

The Fiscal 2022 Repurchase Plan was effected in accordance with Rule 10b-18 under the Exchange Act.

All Common Shares purchased by us pursuant to the Fiscal 2022 Repurchase Plan were cancelled.

During the three and six months ended December 31, 2023 and 2022, we did not repurchase and cancel any Common Shares.

During the three and nine months ended March 31, 2024 and 2023, we did not repurchase and cancel any Common Shares.

On April 30, 2024, the Board authorized a share repurchase plan (the Fiscal 2024 Repurchase Plan), pursuant to which we may purchase for cancellation, in open market transactions from time to time over the 12 month period commencing on May 7, 2024 until May 6, 2025, up to an aggregate of $250 million of our Common Shares on the NASDAQ Global Select Market, the TSX (as part of a Fiscal 2024 NCIB, defined below) and/or other exchanges and alternative trading systems in Canada and/or the United States, if eligible, subject to applicable law and stock exchange rules.

Normal Course Issuer Bid

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

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

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

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

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

Under the rules of the TSX, the maximum number of Common Shares

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

Following the expiration of the Fiscal 2022 NCIB, the Company does not currently have any NCIB in place.

The Company established a Normal Course Issuer Bid (the Fiscal 2022 NCIB) in order to provide it with a means to execute purchases over the TSX as part of the overall Fiscal 2022 Repurchase Plan.

at prevailing market prices or as otherwise permitted.

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

On April 30, 2024, the Company established a Normal Course Issuer Bid (the Fiscal 2024 NCIB) in order to provide it with a means to execute purchases over the TSX as part of the overall Fiscal 2024 Repurchase Plan.

The TSX approved the Company’s notice of intention to commence the Fiscal 2024 NCIB, pursuant to which the Company may purchase Common Shares over the TSX for the period commencing on May 7, 2024 until May 6, 2025 in accordance with the TSX's normal course issuer bid rules, including that such purchases were to be made at prevailing market prices or as otherwise permitted.

Under the rules of the TSX, the maximum number of Common Shares that may be purchased in this period is 13,643,472 (representing 5% of the Company’s issued and outstanding Common Shares as of April 26, 2024), and the maximum number of Common Shares that could be purchased on a single day was 138,175 Common Shares, which is 25% of 552,700 (the average daily trading volume for the Common Shares on the TSX for the six months ended March 31, 2024), subject to certain exceptions for block purchases, and subject in any case to the volume and other limitations under Rule 10b-18 under the Exchange Act.

Commitments and Contractual Obligations

As of December 31, 2023, we have entered into the following contractual obligations with minimum payments for the indicated fiscal periods as follows:

As of March 31, 2024, we have entered into the following contractual obligations with minimum payments for the indicated fiscal periods as follows:

Payments due between

(In thousands)

Total January 1, 2024 - June 30, 2024 July 1, 2024 - June 30, 2026 July 1, 2026 - June 30, 2028 July 1, 2028 and beyond

Total April 1, 2024 - June 30, 2024 July 1, 2024 - June 30, 2026 July 1, 2026 - June 30, 2028 July 1, 2028 and beyond

Long-term debt obligations (1)

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

Please see Note 11 “Long-Term Debt” to our Condensed Consolidated Financial Statements for more details.

See Note 11 “Long-Term Debt” to our Condensed Consolidated Financial Statements for more details.

(2) Represents the undiscounted future minimum lease payments under our operating leases liabilities and excludes sublease income expected to be received under our various sublease agreements with third parties.

Please see Note 6 “Leases” to our Condensed Consolidated Financial Statements for more details.

See Note 6 “Leases” to our Condensed Consolidated Financial Statements for more details.

(3) Represents the undiscounted future minimum lease payments under our finance leases liabilities and excludes sublease income expected to be received under our various sublease agreements with third parties.

Please see Note 6 “Leases” to our Condensed Consolidated Financial Statements for more details.

See Note 6 “Leases” to our Condensed Consolidated Financial Statements for more details.

Guarantees and Indemnifications

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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, 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 $79 million.

As of December 31, 2023, we have provisionally paid approximately $33 million in order to fully preserve our rights to object to the CRA's audit positions, being the minimum payment required under Canadian legislation while the matter is in dispute.

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

Assuming the utilization of available tax attributes (further described below), we estimate our potential aggregate liability, as of March 31, 2024, 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 $79 million.

As of March 31, 2024, we have provisionally paid approximately $33 million in order to fully preserve our rights to object to the CRA's audit positions, being the minimum payment required under Canadian legislation while the matter is in dispute.

This amount is recorded within Long-term income taxes recoverable on the Condensed Consolidated Balance Sheets as of March 31, 2024.

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

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We strongly disagree with the CRA’s position for Fiscal 2017 through Fiscal 2019 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 through Fiscal 2019 due to the utilization of available tax attributes;

We are not required to provisionally pay any cash amounts to the CRA as a result

of the reassessment in respect of Fiscal 2017 through Fiscal 2019 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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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.

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

The complaint generally alleges that the defendants made materially false and misleading statements in connection with Carbonite’s Server Backup VM Edition, and seeks, among other things, the designation of the action as a class action, an award of unspecified compensatory damages, costs and expenses, including counsel fees and expert fees, and other relief as the court deems appropriate.

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On July 14, 2023, the district court certified the lead plaintiff’s proposed class, following which the defendants filed a motion for class decertification.

On January 31, 2024 the parties filed a motion for preliminary approval of a settlement to fully resolve the litigation.

The proposed settlement is subject to the court’s approvals and, if approved, will be substantially paid from insurance coverage, with any remaining amount not covered by insurance expected to be immaterial to the Company.

On January 31, 2024 the parties filed a motion for preliminary approval of a settlement to fully resolve the litigation and, on February 1, 2024, the court issued a preliminary approval order.

The proposed settlement is subject to the court’s final approval and, if approved, will be substantially paid from insurance coverage, with any remaining amount not covered by insurance being immaterial to the Company.

All defendants have denied, and continue to deny, the merit of the claims alleged in the case and the settlement does not reflect any admission of fault, wrongdoing, or liability as to any defendant.

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Other Matters

Please see Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for Fiscal 2023.

See Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for Fiscal 2023.

Off-Balance Sheet Arrangements

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis