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Item 7. Management’s Discussion and Analysis

2024-08-01 compared with 2023-08-03 · 264 added, 509 removed, 818 unchanged (49% of the section changed)

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

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

(iii) our future business plans and operations, strategic goals and business planning process, including the Company’s business optimization plan announced in July 2024;

(iv) business trends;

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(xxi) potential legal and/or regulatory proceedings;

(xxii) acquisitions and their expected impact, including our ability to realize the benefits expected from the acquisitions and to successfully integrate the assets we acquire or utilize such assets to their full capacity, including in connection with the acquisition of Zix Corporation (Zix) and Micro Focus International Limited, formerly Micro Focus International plc, and its subsidiaries (Micro Focus) (see Note 19 “Acquisitions” to our Consolidated Financial Statements for more details);

(xxii) acquisitions and their expected impact, including our ability to realize the benefits expected from the acquisitions and to successfully integrate the assets we acquire or utilize such assets to their full capacity, including in connection with the acquisition of Micro Focus International Limited, formerly Micro Focus International plc, and its subsidiaries (Micro Focus) (see Note 19 “Acquisitions and Divestitures” to our Consolidated Financial Statements for more details);

(xxiii) tax audits;

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

(xxiv) the expected impact of the Russia-Ukraine and Israel-Hamas conflicts on our business;(xxv) expected costs of the restructuring and business optimization plans;

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

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

and (xxviii) other matters.

(xxviii) divestitures and their expected impact, including in connection with the AMC Divestiture (as defined below) (see Note 19 “Acquisitions and Divestitures” to our Consolidated Financial Statements for more details);

and (xxix) other matters.

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

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(ii) 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;

(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;

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

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

(xviii) increase in exposure to international business risks including the impact of geopolitical instability, political unrest, war and other global conflicts, and other geopolitical tensions, including the Russia-Ukraine and the Israel-Hamas conflicts, as we continue to increase our international operations;

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

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

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

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

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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All dollar and percentage comparisons made herein refer to the year ended June 30, 2024 compared with the year ended June 30, 2023, unless otherwise noted.

Please refer to Part II, Item 7 of our Annual Report on Form 10-K for Fiscal 2022 for a comparative discussion of our Fiscal 2022 financial results as compared to Fiscal 2021.

Refer to Part II, Item 7 of our Annual Report on Form 10-K for Fiscal 2023 for a comparative discussion of our Fiscal 2023 financial results as compared to Fiscal 2022.

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

To do this, we bring together our Content Cloud, Cybersecurity Cloud, Business Network Cloud, IT Operations Management Cloud, Application Automation Cloud and Analytics & AI Cloud.

To do this, we bring together our Content Cloud, Cybersecurity Cloud, Business Network Cloud, IT Operations Management Cloud, Application Automation Cloud and Analytics Cloud.

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

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

As of June 30, 2023, we employed a total of approximately 24,100 individuals, of which approximately 9,700 joined our workforce as part of the Micro Focus Acquisition.

As of June 30, 2024, we employed a total of approximately 22,900 individuals.

Of the total 22,900 individuals we employed as of June 30, 2024, 8,300 or 36% are in the Americas, 5,000 or 22% are in EMEA and 9,600 or 42% 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.

Period-over-period comparisons presented here are significantly impacted by our Micro Focus Acquisition.

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

Fiscal 2024 Summary:

During Fiscal 2024 (which includes the results of Micro Focus and the AMC Divestiture, which have an impact on period-over-period comparisons) we saw the following activity:

• Total revenue was $5,769.6 million, up 28.6% compared to the prior fiscal year;

up 32.2% after factoring in the unfavorable impact of $132.4 million of foreign exchange rate changes.

The Micro Focus Acquisition contributed $976.5 million of revenues.

up 27.7% after factoring in the favorable impact of $40.5 million of foreign exchange rate changes.

• Total annual recurring revenue, which we define as the sum of cloud services and subscriptions revenue and customer support revenue, was $4,533.8 million, up 25.4% compared to the prior fiscal year;

up 29.7% after factoring in the unfavorable impact of $102.4 million of foreign exchange rate changes.

up 24.6% after factoring in the favorable impact of $28.3 million of foreign exchange rate changes.

• Cloud services and subscriptions revenue was $1,820.5 million, up 7.1% compared to the prior fiscal year;

up 13.3% after factoring in the unfavorable impact of $38.6 million of foreign exchange rate changes.

up 6.8% after factoring in the favorable impact of $5.0 million of foreign exchange rate changes.

• GAAP-based gross margin was 72.6% compared to 70.6% in the prior fiscal year.

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• GAAP-based net income attributable to OpenText was $465.1 million compared to $150.4 million in the prior fiscal year.

The Micro Focus Acquisition contributed $94.7 million of GAAP-based net losses.

• Non-GAAP-based net income attributable to OpenText was $1,137.3 million compared to $890.7 million in the prior fiscal year.

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• Adjusted EBITDA, a non-GAAP measure, was $1,970.2 million compared to $1,472.9 million in the prior fiscal year.

• Operating cash flow was $779.2 million for the year ended June 30, 2023, compared to $981.8 million in the prior fiscal year, down 20.6%.

• Operating cash flow was $967.7 million for the year ended June 30, 2024, compared to $779.2 million in the prior fiscal year, up 24.2%.

• Cash and cash equivalents were $1,280.7 million as of June 30, 2024, compared to $1,231.6 million as of June 30, 2023.

• Acquired Micro Focus for total consideration of $6.2 billion, inclusive of Micro Focus’ cash, subject to final adjustments.

• In connection with the financing of the Micro Focus Acquisition, we drew down the entire $3.585 billion of the Acquisition Term Loan (as defined below), issued $1 billion of Senior Secured Notes 2027 (as defined below) and drew down $450 million under the Revolver (as defined below).

Subsequent to the closing of the Micro Focus Acquisition we repaid $175 million of the outstanding balance on the Revolver during the year ended June 30, 2023 and subsequently repaid $175 million on July 5, 2023.

• Enterprise cloud bookings were $701.4 million for the year ended June 30, 2024, compared to $527.7 million for the year ended June 30, 2023.

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

• On May 1, 2024, we completed the 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 the completion of the divestiture for up to 24 months.

• On May 6, 2024, we prepaid $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), representing all outstanding principal thereunder, and $1.06 billion of the aggregate principal amount outstanding under the Acquisition Term Loan (as defined below), using the net proceeds from the AMC Divestiture.

• During the year ended June 30, 2024, we repurchased and canceled 5,073,913 Common Shares for $152.3 million, inclusive of 2% Canadian excise taxes recorded (year ended June 30, 2023 and 2022— nil and 3,809,559 Common Shares for nil and $177.0 million, respectively).

• During the year ended June 30, 2024, we declared and paid cash dividends of $1.00 per Common Share in the aggregate amount of $267.4 million, an increase of 3% compared to the prior fiscal year (year ended June 30, 2023 and 2022—$0.9720 and $0.8836 per Common Share, respectively, in the aggregate amount of $259.5 million and $237.7 million, respectively).

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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Acquisition of Micro Focus

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

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

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

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

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

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

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

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

Impacts of Russia-Ukraine Conflict

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

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

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

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

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

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 impacts period-over-period comparability.

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

Divestiture of AMC Business

On May 1, 2024, we completed the sale of our AMC business to Rocket Software, Inc.

(Rocket Software) for $2.275 billion in cash before taxes, fees and other adjustments (the AMC Divestiture).

For Fiscal 2024, the results of the AMC business from July 1, 2023 through April 30, 2024 were recorded and presented within our Consolidated Financial Statements.

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

Other Acquisitions

On August 23, 2023, we acquired all of the equity interest in KineMatik Ltd.

(KineMatik), a provider of automated business process and project management solutions built on OpenText’s Content Server.

In accordance with ASC Topic 805, “Business Combinations”, this acquisition was accounted for as a business combination.

The results of operations of KineMatik have been consolidated with those of OpenText beginning August 24, 2023.

The results of KineMatik are not considered to be material to our business.

On May 22, 2024, we acquired Pillr, a cloud native, multi-tenant MDR platform from Novacoast, Inc.

for MSPs that includes powerful threat-hunting capabilities.

In accordance with ASC Topic 805, “Business Combinations”, this acquisition was accounted for as a business combination.

The results of operations of Pillr have been consolidated with those of OpenText beginning May 22, 2024.

The results of Pillr are not considered to be material to our business.

Impacts of Geopolitical Conflicts and Diplomatic Tensions

We continue to monitor the geopolitical conflicts and diplomatic tensions around the world, including the Russia-Ukraine and Israel-Hamas conflicts.

We have ceased all direct business in Russia and Belarus.

We continue to operate our Israeli-based business and support our employees in the region.

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, see Part I, Item 1A “Risk Factors” included in this Annual Report on Form 10-K.

Outlook for Fiscal 2025

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

With an emphasis on increasing recurring revenues and expanding profitability, we

believe our Total Growth strategy will ultimately drive cash flow growth, thus helping to fuel our innovation, broaden our go-to-market distribution and identify and execute strategic acquisitions.

With an emphasis on increasing recurring revenues and expanding profitability, we believe our Total Growth strategy will ultimately drive cash flow growth, thus helping to fuel our innovation, broaden our go-to-market distribution and identify and execute strategic acquisitions.

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

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becoming cloud-native, connecting anything, and extending capabilities 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 substantial assets and operations to our existing business.

During Fiscal 2023, we incurred significant transaction costs in connection with the Micro Focus Acquisition.

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

As part of the Micro Focus Acquisition, the Company made a strategic decision to implement a restructuring plan that impacted its global workforce and further reduce its 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 $135.0 million to $150.0 million, of which we incurred $72.3 million during Fiscal 2023.

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

See also Part I, Item 1A, “Risk Factors” included within this Annual Report on Form 10-K.

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

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, and the Russia-Ukraine conflict on our business.

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

For Fiscal 2024, the results of the AMC business from July 1, 2023 through April 30, 2024 were recorded and presented within our Consolidated Financial Statements.

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

During the fourth quarter of Fiscal 2024 we prepaid $2.0 billion of our aggregate outstanding principal balances, including $940 million under the Term Loan B (as defined below), representing all outstanding principal thereunder, and $1.06 billion under the Acquisition Term Loan (as defined below), using the net proceeds from the AMC Divestiture.

See Part I, Item 1A, “Risk Factors” included within this Annual Report on Form 10-K.

On July 3, 2024, the Company announced a business optimization plan which is intended to strategically align the Company’s workforce to support its growth and innovation plans.

The plan is expected to result in the reduction of approximately 1,200 positions across the Company, with an annualized cost savings of approximately $200.0 million, as well as the reinvestment of approximately $50.0 million annually for approximately 800 new roles in Sales, Professional Services and Engineering, resulting in a 1.7% net reduction of the Company’s workforce.

The Company expects to incur approximately $60.0 million in restructuring charges that will be substantially recognized in the first quarter of Fiscal 2025 and we expect the business optimization plan to be completed by the end of Fiscal 2025.

See Note 26 “Subsequent Events” to our Consolidated Financial Statements and Part I, Item 1A, “Risk Factors” included within this Annual Report on Form 10-K for more details.

See Part I, Item 1A, “Risk Factors” included within this Annual Report on Form 10-K.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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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 this Annual Report on Form 10-K.

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 this Annual Report on Form 10-K.

Revenue recognition

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Cloud services and subscriptions revenue

Cloud services and subscriptions revenue are from hosting arrangements where, in connection with the licensing of software, the end user does not take possession of the software, as well as from end-to-end fully outsourced business-to-business (B2B) integration solutions to our customers (collectively referred to as cloud arrangements).

Cloud services and subscriptions revenue are from hosting arrangements where, in connection with the licensing of software, the end user does not take possession of the software, as well as from end-to-end fully outsourced B2B integration solutions to our customers (collectively referred to as cloud arrangements).

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

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Revenue relating to these services is recognized using an output method based on the expected level of service we will provide over the term of the contract.

In connection with cloud subscription and managed service contracts, we often agree to perform a variety of services before the customer goes live, such as, converting and migrating customer data, building interfaces and providing training.

As part of cloud services and subscription revenues, in connection with cloud subscription and managed service contracts, we often agree to perform a variety of services before the customer goes live, such as, converting and migrating customer data, building interfaces and providing training.

These services are considered an outsourced suite of professional services which can involve certain project-based activities.

These services can be provided at the initiation of a contract, during the implementation or on an ongoing basis as part of the customer life cycle.

These services can be charged separately on a fixed fee, a time and materials basis, or the costs associated may be recovered as part of the ongoing cloud subscription or managed services fee.

These outsourced professional services are considered distinct from the ongoing hosting services and represent a separate performance obligation within our cloud subscription or managed services arrangements.

The obligation to provide outsourced professional services is satisfied over

time, with the customer simultaneously receiving and consuming the benefits as we satisfy our performance obligations.

These services can be charged separately on a fixed fee or a time and materials basis, or the costs associated may be recovered as part of the ongoing cloud subscription or managed services fee.

These outsourced professional services are considered to be distinct from the ongoing hosting services and represent a separate performance obligation within our cloud subscription or managed services arrangements.

The obligation to provide outsourced professional services is satisfied over time, with the customer simultaneously receiving and consuming the benefits as we satisfy our performance obligations.

For outsourced professional services, we recognize revenue by measuring progress toward the satisfaction of our performance obligation.

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Professional service and other revenue

Our professional services, when offered along with software licenses, consist primarily of technical and training services.

Our professional services, when offered along with software licenses, consist primarily of technical services and training services.

Technical services may include installation, customization, implementation or consulting services.

Training services may include access to online modules, or the delivery of a training package customized to the customer’s needs.

Training services may include access to online modules, or delivering a training package customized to the customer’s needs.

At the customer’s discretion, we may offer one, all, or a mix of these services.

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For example, if we give the customer an option to acquire additional goods or services in the future at a price that is significantly lower than the current price, this would be a material right as it allows the customer to, in effect, pay in advance for the option to purchase future products or services.

If a material right exists in one of our contracts, then revenue allocated to the option is deferred and we would recognize that deferred revenue only when those future products or services are transferred or when the option expires.

If a material right exists in one of our contracts, then revenue allocated to the option is deferred and we would recognize revenue only when those future products or services are transferred or when the option expires.

Based on history, our contracts do not typically contain material rights and when they do, the material right is not significant to our Consolidated Financial Statements.

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The SSP reflects the price we would charge for a specific product or service if it were sold separately in similar circumstances and to similar customers.

In most cases we are able to establish the SSP based on observable data.

We typically establish a narrow SSP range for our products and services and assess this range on a periodic basis or when material changes in facts and circumstances warrant a review.

In most cases we can establish the SSP based on observable data.

establish a narrow SSP range for our products and services and assess this range on a periodic basis or when material changes in facts and circumstances warrant a review.

If the SSP is not directly observable, then we estimate the amount using either the expected cost plus a margin or residual approach.

Estimating SSP requires judgment that could impact the amount and timing of revenue recognized.

SSP is a formal process whereby management considers multiple factors including, but not limited to, geographic or region-specific factors, competitive positioning, internal costs, profit objectives and pricing practices.

SSP is a formal process whereby management considers multiple factors including, but not limited to, geographic or regional-specific factors, competitive positioning, internal costs, profit objectives and pricing practices.

Transaction Price Allocation

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The tax position is derecognized when it is no longer more likely than not that the position will be sustained on audit.

On subsequent recognition and measurement, the maximum amount which is more likely than not to be recognized at each reporting date will represent the Company’s best

estimate, given the information available at the reporting date, although the outcome of the tax position is not absolute or final.

On subsequent recognition and measurement, the maximum amount which is more likely than not to be recognized at each reporting date will represent the Company’s best estimate, given the information available at the reporting date, although the outcome of the tax position is not absolute or final.

We recognize both accrued interest and penalties related to liabilities for income taxes within the “Provision for (recovery of) income taxes” line of our Consolidated Statements of Income.

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While we believe the assumptions and estimates that we have made are reasonable, such assumptions and estimates could have a material impact to our Consolidated Financial Statements upon ultimate resolution of the tax positions.

For additional details, please see Note 15 “Income Taxes” to the Consolidated Financial Statements included in this Annual Report on Form 10-K.

For additional details, see Note 15 “Income Taxes” to the Consolidated Financial Statements included in this Annual Report on Form 10-K.

RESULTS OF OPERATIONS

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

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

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

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

The comparability of our operating results for the year ended June 30, 2023 as compared to the year ended June 30, 2022 was impacted by the recent Micro Focus Acquisition.

Our total revenues increased by $991.1 million across all of our product types in the year ended June 30, 2023, relative to the year ended June 30, 2022, primarily due to revenue contributions from the Micro Focus Acquisition, offset by unfavorable impact of $132.4 million of foreign exchange rate changes.

The comparability of our operating results for the year ended June 30, 2024 as compared to the year ended June 30, 2023 was impacted by the Micro Focus Acquisition, the results of which were consolidated with those of OpenText beginning February 1, 2023 and the AMC Divestiture, the results of which were excluded from those of OpenText beginning May 1, 2024.

As such, consolidated operating results for the years ended June 30, 2023 and 2024 included five and twelve months, respectively, of Micro Focus operating results, which included five and ten months, respectively, of AMC business operating results.

Acquisition of Micro Focus

Our total revenues increased by $1,284.6 million across all of our product types in the year ended June 30, 2024, relative to the year ended June 30, 2023, primarily due to revenue contributions from the Micro Focus Acquisition, organic revenue growth, and a favorable impact of $40.5 million of foreign exchange rate changes.

The Micro Focus Acquisition contributed $2,210.7 million to our total revenues during the year ended June 30, 2024, of which $1,414.5 million related to customer support revenues and $477.4 million related to license revenues.

Total cost of revenues increased by $254.4 million in the year ended June 30, 2023, relative to the year ended June 30, 2022, primarily from additional cost of revenues of $279.3 million as a result of the Micro Focus Acquisition.

Total operating expenses increased by $865.2 million in the year ended June 30, 2023, relative to the year ended June 30, 2022, primarily from additional operating expenses of $761.5 million as a result of the Micro Focus Acquisition, of which $550.4 million was related to research and development, sales and marketing, and general and administrative expenses.

Micro Focus total revenues increased by $1,234.1 million during the year ended June 30, 2024 as compared to the same period in the prior fiscal year.

Total cost of revenues increased by $262.0 million in the year ended June 30, 2024, relative to the year ended June 30, 2023, primarily from cost of revenues of $589.4 million as a result of the Micro Focus Acquisition, an increase of $310.1 million as compared to the same period in the prior fiscal year.

Total operating expenses increased by $651.8 million in the year ended June 30, 2024, relative to the year ended June 30, 2023, primarily from operating expenses of $1,325.5 million as a result of the Micro Focus Acquisition, an increase of $564.1 million as compared to the same period in the prior fiscal year.

Micro Focus research and development, sales and marketing, and general and administrative expenses were $1,009.8 million in the year ended June 30, 2024, an increase of $459.4 million as compared to the same period in the prior fiscal year.

The Micro Focus results described above include the results of the AMC business prior to the AMC Divestiture on May 1, 2024.

Divestiture of AMC Business

On May 1, 2024, the Company completed the sale of its AMC business to Rocket Software.

The AMC business was comprised of the legacy OpenText connectivity business and the legacy Micro Focus AMC business.

The Company’s Consolidated Financial Statements for the year ended June 30, 2024 include ten months of combined results for the AMC business.

The legacy Micro Focus AMC business operating results were consolidated with those of the Company’s beginning on February 1, 2023, as such, the Company’s Consolidated Financial Statements for the year ended June 30, 2023 reflects five months of legacy Micro Focus AMC business operating results and twelve months of legacy OpenText connectivity business operating results.

The AMC business contributed $441 million of revenue during the year ended June 30, 2024 of which $284 million related to customer support revenues and $139 million related to license revenues.

Total AMC revenues increased by $216 million for the year ended June 30, 2024, relative to the year ended June 30, 2023, primarily driven by increases in customer support and license revenues of $129 million and $77 million, respectively, due to the inclusion of ten months of operating results of the AMC business in Fiscal 2024 compared to five months of operating results in Fiscal 2023.

Transition Services Agreement

In connection with the AMC Divestiture, we entered into a Transition Service Agreement (TSA) with Rocket Software, whereby we will provide certain transition services to Rocket Software for up to 24 months from the closing date.

These transition service costs are reimbursable by Rocket Software.

For Fiscal 2024, we billed Rocket Software $11.5 million under the TSA.

The following table illustrates the financial statement impact of these TSA reimbursements, which have been recorded as an offset to the respective costs incurred, within our Consolidated Statements of Income.

Year Ended June 30,

(In thousands) 2024 2023 2022

Professional service and other cost of revenue $ 123 $ — $ —

Customer support cost of revenue 543 — —

Research and development 258 — —

Sales and marketing 1,009 — —

General and administrative 9,583 — —

Total $ 11,516 $ — $ —

Summary of Results of Operations

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(2) Americas consists of countries in North, Central and South America.

(3) EMEA primarily consists of countries in Europe, the Middle East and Africa.

(3) EMEA consists of countries in Europe, the Middle East and Africa.

(4) Asia Pacific primarily consists of Japan, Australia, China, Korea, Philippines, Singapore, India and New Zealand.

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

For the year ended June 30, 2023, our cloud renewal rate, excluding the impact of Carbonite, Zix and Micro Focus was approximately 94%, consistent with the year ended June 30, 2022.

For the year ended June 30, 2024, our cloud renewal rate, excluding the impact of Carbonite, Zix and Micro Focus, was approximately 92%, compared to approximately 94% for the year ended June 30, 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.

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Cloud services and subscriptions revenues increased by $120.1 million or 7.1% during the year ended June 30, 2024 as compared to the prior fiscal year;

up 13.3% after factoring in the unfavorable impact of $38.6 million of foreign exchange rate changes.

The increase was primarily driven by organic revenue growth, as well as partially driven by incremental revenues from the Micro Focus Acquisition over the comparative period.

up 6.8% after factoring in the favorable impact of $5.0 million of foreign exchange rate changes.

The increase was primarily driven by incremental revenues from the Micro Focus Acquisition and organic revenue growth over the comparative period.

Geographically, the overall change was attributable to an increase in Americas of $64.7 million, an increase in EMEA of $47.6 million and an increase in Asia Pacific of $7.8 million.

1 unchanged sentence

Cost of Cloud services and subscriptions revenues increased by $123.6 million during the year ended June 30, 2024 as compared to the prior fiscal year.

This was primarily due to an increase in labour-related costs of $40.0 million and an increase in third-party network usage fees of $37.8 million partially driven by incremental Cloud services and subscriptions cost of revenues from the Micro Focus Acquisition over the comparative period.

This was primarily due to an increase in third-party network usage fees of $79.2 million partially driven by incremental Cloud services and subscriptions cost of revenues from the Micro Focus Acquisition over the comparative period and an increase in labour-related costs of $44.8 million.

Overall, the gross margin percentage on Cloud services and subscriptions revenues decreased to 61% from 65%.

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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 year ended June 30, 2023, our Customer support renewal rate was approximately 95%, compared to approximately 94% for the year ended June 30, 2022, excluding the impact of Carbonite, Zix and Micro Focus.

For the year ended June 30, 2024,

our Customer support renewal rate, excluding the impact of Carbonite, Zix and Micro Focus, was approximately 95%, consistent with the year ended June 30, 2023.

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

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Customer support revenues increased by $798.3 million or 41.7% during the year ended June 30, 2024 as compared to the prior fiscal year;

up 48.7% after factoring in the unfavorable impact of $63.8 million of foreign exchange rate changes.

up 40.5% after factoring in the favorable impact of $23.3 million of foreign exchange rate changes.

The increase was primarily driven by incremental Customer support revenues from the Micro Focus Acquisition over the comparative period.

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This was primarily due to an increase in labour-related costs of $81.8 million and an increase in third-party network usage fees of $2.1 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%.

Overall, the gross margin percentage on Customer support revenues remained stable at approximately 89% compared to the prior fiscal year.

Our License revenue can be broadly categorized as perpetual licenses, term licenses and subscription licenses.

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License revenues increased by $295.1 million or 54.8% during the year ended June 30, 2024 as compared to the prior fiscal year;

up 55.0% after factoring in the unfavorable impact of $16.4 million of foreign exchange rate changes.

The increase was primarily driven by incremental License revenues from the Micro Focus Acquisition over the comparative period.

Geographically, the overall change was attributable to an increase in Americas of $107.1 million, an increase in EMEA of $37.9 million and an increase in Asia Pacific of $35.7 million.

up 53.3% after factoring in the favorable impact of $7.6 million of foreign exchange rate changes.

The increase was primarily driven by incremental License revenues from the Micro Focus Acquisition over the comparative period and License revenues relating to the grant of certain IP rights.

Geographically, the overall change was attributable to an increase in EMEA of $138.5 million, an increase in Americas of $109.3 million and an increase in Asia Pacific of $47.4 million.

During Fiscal 2024, we closed 239 license contracts greater than $0.5 million, of which 103 contracts were greater than $1.0 million, contributing $371.7 million of License revenues.

This was compared to 163 license contracts greater than $0.5 million during Fiscal 2023, of which 71 contracts were greater than $1.0 million, contributing $211.3 million of License revenues.

Cost of License revenues increased by $3.1 million during the year ended June 30, 2023 as compared to 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 97% from 96%.

Cost of License revenues increased by $9.0 million during the year ended June 30, 2024 as compared to the prior fiscal year as a result of increased third-party technology costs over the comparative period.

Overall, the gross margin percentage on License revenues remained stable at 97% as compared to the prior fiscal year.

4) Professional Service and Other:

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Professional service and other revenues increased by $71.1 million or 21.5% during the year ended June 30, 2024 as compared to the prior fiscal year;

up 27.7% after factoring in the unfavorable impact of $13.6 million of foreign exchange rate changes.

up 20.1% after factoring in the favorable impact of $4.7 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.

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Cost of Professional service and other revenues increased by $25.6 million during the year ended June 30, 2024 as compared to the prior fiscal year.

This was primarily due to an increase in labour-related costs of $58.1 million primarily driven by the incremental Professional service and other cost of revenues from the Micro Focus Acquisition over the comparative period.

Overall, the gross margin percentage on Professional service and other revenues decreased to 16% from 20%.

This was due to an increase in labour-related costs of $28.2 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 $2.6 million.

Overall, the gross margin percentage on Professional service and other revenues increased to 25% from 16%.

Amortization of Acquired Technology-based Intangible Assets

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Amortization of acquired technology-based intangible assets increased during the year ended June 30, 2024 by $20.7 million as compared to the prior fiscal year.

This was due to an increase of $91.2 million relating to amortization of newly acquired technology-based intangible assets from the Micro Focus Acquisition, partly offset by a reduction of $68.8 million related to technology-based intangible assets from previous acquisitions becoming fully amortized.

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 and reduced amortization related to the AMC Divestiture.

Operating Expenses

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Research and development expenses increased by $213.3 million during the year ended June 30, 2024 as compared to 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 $152.9 million, facility-related expenses increased by $45.8 million, share-based compensation expense increased by $22.0 million and contract labour and consulting increased by $14.7 million.

Overall, our research and development expenses, as a percentage of total revenues, increased to 15% compared to the prior fiscal year at 13%.

Our research and development labour resources increased by 3,953 employees, from 4,326 employees at June 30, 2022 to 8,279 employees at June 30, 2023.

Payroll and payroll-related benefits, which is comprised of salaries, benefits and variable short-term incentives, increased by $145.8 million, facility-related expenses increased by $50.2 million and contract labour and consulting increased by $6.2 million.

Overall, our research and development expenses, as a percentage of total revenues, remained stable compared to the prior fiscal year at 15%.

Our research and development labour resources decreased by 532 employees, from 8,279 employees at June 30, 2023 to 7,747 employees at June 30, 2024.

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

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Sales and marketing expenses increased by $185.1 million during the year ended June 30, 2024 as compared to 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 $136.3 million, commissions increased by $38.1 million, marketing expenses increased by $29.1 million, facility-related expenses increased by $23.2 million, share-based compensation expense increased by $19.1 million and travel and communication expenses increased by $13.3 million.

Overall, our sales and marketing expenses, as a percentage of total revenues, increased to 21% compared to the prior fiscal year at 19%.

Our sales and marketing labour resources increased by 2,105 employees, from 2,710 employees at June 30, 2022 to 4,815 employees at June 30, 2023.

Payroll and payroll-related benefits, which is comprised of salaries, benefits and variable short-term incentives, increased by $145.7 million, facility-related expenses increased by $13.1 million, contract labour and consulting expenses increased by $8.7 million, commissions increased by $7.7 million, credit loss expenses increased by $7.7 million and travel and communication expenses increased by $7.5 million.

Overall, our sales and marketing expenses, as a percentage of total revenues, decreased to 20% compared to the prior fiscal year at 21%.

Our sales and marketing labour resources decreased by 597 employees, from 4,815 employees at June 30, 2023 to 4,218 employees at June 30, 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.

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Total change in general and administrative expenses $ 157,448 $ 102,505

General and administrative expenses increased by $102.5 million during the year ended June 30, 2023 as compared to 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 $50.7 million, contract labour and consulting increased by $15.8 million, other miscellaneous costs, which include professional fees such as legal, audit, and tax related expenses increased by $13.6 million, share-based compensation expense increased by $9.9 million and travel and communication expenses increased by $9.1 million.

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

Our general and administrative labour resources increased by 1,425 employees, from 1,971 employees at June 30, 2022 to 3,396 employees at June 30, 2023, primarily as a result of the Micro Focus Acquisition.

General and administrative expenses increased by $157.4 million during the year ended June 30, 2024 as compared to the prior fiscal year, partially 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 $93.9 million partially 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 $48.9 million, contract labour and consulting increased by $4.9 million, facility-related expenses increased by $4.9 million, and travel and communication expenses increased by $3.7 million.

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

Our general and administrative labour resources increased by 25 employees, from 3,396 employees at June 30, 2023 to 3,421 employees at June 30, 2024.

Depreciation expenses:

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Amortization of acquired customer-based intangible assets increased during the year ended June 30, 2024 by $106.0 million as compared to the prior fiscal year.

This was due to an increase of $111.2 million relating to amortization of newly acquired customer-based intangible assets from the Micro Focus Acquisition, partly offset by a reduction of $9.8 million related to customer-based intangible assets from previous acquisitions becoming fully amortized.

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

Special charges (recoveries):

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Special charges (recoveries) $ 135,305 $ (33,854) $ 169,159 $ 122,286 $ 46,873

Special charges (recoveries) increased by $122.3 million during the year ended June 30, 2023 as compared to the prior fiscal year.

Restructuring activities increased by $55.5 million driven by the Micro Focus Restructuring Plan, acquisition related costs increased by $42.1 million primarily due to the Micro Focus Acquisition and other miscellaneous charges increased by $24.7 million, primarily driven by severance charges related to the Micro Focus Acquisition.

Special charges (recoveries) decreased by $33.9 million during the year ended June 30, 2024 as compared to the prior fiscal year.

Acquisition related costs decreased by $46.9 million, other miscellaneous charges decreased by $30.2 million, which includes severance and other costs associated with the Micro Focus Acquisition and costs related to restructuring activities decreased by $3.4 million.

These decreases were partially offset by increased divestiture costs of $46.6 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 Consolidated Financial Statements.

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$ 1,202 $ (55,397) $ 56,599 $ 59,269 $ (2,670)

Unrealized losses on derivatives not designated as hedges (2)

Unrealized gains (losses) on derivatives not designated as hedges (2)

3,116 131,957 (128,841) (128,841) —

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(56,393) (48,241) (8,152) 19,261 (27,413)

Gain on AMC Divestiture (8)

429,102 429,102 — — —

Other miscellaneous income (expense) (442) (911) 469 (30) 499

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______________________

(1) The year ended June 30, 2023 includes a foreign exchange gain of $36.6 million resulting from the delayed payment of a portion of the purchase consideration, settled on February 9, 2023, related to the Micro Focus Acquisition (see Note 19 “Acquisitions” to our Consolidated Financial Statements for more details).

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

(3) Represents the realized gains 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 Consolidated Financial Statements for more details).

(1) The year ended June 30, 2023 includes a foreign exchange gain of $36.6 million resulting from the delayed payment of a portion of the purchase consideration, settled on February 9, 2023, related to the Micro Focus Acquisition (see Note 19 “Acquisitions and Divestitures” to our Consolidated Financial Statements for more details).

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

(3) Represents the realized gains on our derivatives not designated as hedges (see Note 17 “Derivative Instruments and Hedging Activities” to our Consolidated Financial Statements for more details).

(4) Represents our share in net income (loss) of equity investees, which approximates fair value and subject to volatility based on market trends and business conditions, based on our interest in certain investment funds in which we are a limited partner.

Our interests in each of these investees range from 4% to below 20% and these investments are accounted for using the equity method (see Note 9 “Prepaid Expenses and Other Assets” to our Consolidated Financial Statements for more details).

(5) During the year ended June 30, 2024, we recognized a loss on debt extinguishment of $56.4 million related to the acceleration and recognition of unamortized debt discount and issuance costs resulting from the optional repayments and prepayments of the Acquisition Term Loan (as defined below) and Term Loan B (as defined below) in Fiscal 2024.

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

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

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

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

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

(8) On May 1, 2024, the Company completed the sale of its AMC business, which resulted in a gain on disposition (see Note 19 “Acquisitions and Divestitures” to our Consolidated Financial Statements for more details).

Interest and Other Related Expense, Net

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The effective tax rate increased to a provision of 36.2% for the year ended June 30, 2024, compared to a provision of 32.0% for the year ended June 30, 2023.

Tax expense decreased from $118.8 million during the year ended June 30, 2022 to $70.8 million during the year ended June 30, 2023.

The increase in the effective tax rate was driven by increases in withholding taxes, changes in valuation allowance, permanent differences related to foreign source income inclusions, and the impact of

internal reorganizations, partially offset by lower pretax income, tax credits and permanent adjustments related to the preferential tax treatment of the mark-to-market gains on derivatives.

The tax rate for the year ended June 30, 2022 varied from the statutory rate due favorable permanent adjustments related to excess share-based compensation deductions, tax credits, and the reduction in the accrual on unremitted foreign earnings, partially offset by the impact of internal reorganizations and an increase in unrecognized tax benefits.

Beginning July 1, 2022, as a result of the Tax Cuts and Jobs Act of 2017 (“Tax Act”), our research and development expenditures are now being capitalized and amortized.

For fiscal year 2023, the new regulations resulted in incremental cash tax payments of approximately $68 million.

The actual impact on future cash flows from operations will primarily depend on if or when this legislation is deferred, modified, or repealed by the U.S.

Congress and the amount of R&D expenditures paid or incurred in those respective years.

We estimate the largest potential impact will be related to Fiscal 2023 cash flows fro m operations and that the impact in future years should gradually decrease over the respective amortization periods.

The Inflation Reduction Act and Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act (the Inflation Reduction Act) were signed into law in August 2022.

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

The corporate minimum tax will be effective for Fiscal 2024.

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

Tax expense increased from $70.8 million during the year ended June 30, 2023 to $264.0 million during the year ended June 30, 2024.

The increase in the effective tax rate was driven by an increase in valuation allowance, the impact of internal reorganizations and the AMC Divestiture, and U.S.

Base Erosion and Anti-Abuse Tax (BEAT), partially offset by tax credits and change in undistributed earnings.

The tax rate for the year ended June 30, 2023 varied from the statutory rate due to withholding taxes, changes in valuation allowance, permanent differences related to foreign source income inclusions, and the impact of internal reorganizations, partially offset by tax credits and permanent differences related to preferential tax treatment of the mark-to-market gains on derivatives.

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

Please also see Part I, Item 1A, “Risk Factors” within this Annual Report on Form 10-K.

Also see Part I, Item 1A, “Risk Factors” within this Annual Report on Form 10-K.

LIQUIDITY AND CAPITAL RESOURCES

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$ 967,691 $ 188,486 $ 779,205 $ (202,605) $ 981,810

Cash used in investing activities

Cash provided by (used in) investing activities

$ 2,055,317 $ 7,706,737 $ (5,651,420) $ (4,680,461) $ (970,959)

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As of June 30, 2024, we have recognized a provision of $15.9 million (June 30, 2023—$28.3 million) in respect of deferred income tax liabilities for temporary differences related to the undistributed earnings of certain non-United States subsidiaries and planned periodic repatriations from certain German subsidiaries, that will be subject to withholding taxes upon distribution.

Cash flows provided by operating activities

Cash flows from operating activities decreased by $202.6 million during the year ended June 30, 2023, as compared to the same period in the prior fiscal year due to a decrease in net changes from working capital of $255.8 million, partially offset by an increase in net income after the impact of non-cash items of $53.2 million.

Cash flows from operating activities

Cash flows from operating activities increased by $188.5 million during the year ended June 30, 2024, as compared to the same period in the prior fiscal year due to an increase in net changes from working capital of $198.8 million, offset by a decrease in net income after the impact of non-cash items of $10.4 million.

During the fourth quarter of Fiscal 2024 we had a days sales outstanding (DSO) of 43 days, compared to our DSO of 41 days during the fourth quarter of Fiscal 2023.

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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 $4.68 billion during the year ended June 30, 2023, as compared to the same period in the prior fiscal year primarily due to consideration paid for acquisitions during Fiscal 2023, which includes cash paid for the Micro Focus Acquisition of $5.658 billion, as compared to the cash paid during Fiscal 2022 for the acquisition of Zix of $856.2 million and the acquisition of Bricata Inc.

of $17.8 million.

Cash flows provided by (used in) financing activities

Cash flows from investing activities

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

Cash flows from investing activities increased by $7.71 billion during the year ended June 30, 2024, as compared to the same period in the prior fiscal year primarily due to cash consideration received from the AMC Divestiture during Fiscal 2024 of $2.23 billion, as compared to the cash paid during Fiscal 2023 for the Micro Focus Acquisition of $5.66 billion.

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 increased by $4.265 billion during the year ended June 30, 2023 as compared to the same period in the prior fiscal year.

Cash flows from financing activities decreased by $7.4 billion during the year ended June 30, 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) $3.427 billion increase in proceeds from the issuance of long-term debt and draw down on the Revolver;

(ii) $657.1 million decrease in repayments of long-term debt and Revolver;

(iii) $266.7 million related to less cash used in the repurchases of Common Shares and treasury stock;

(iv) $25.0 million relating to early call termination premium upon redemption of Senior Notes 2026 in Fiscal 2022 that did not occur in Fiscal 2023.

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

(i) $60.7 million increase in debt issuance costs;

(ii) $27.9 million related to lower proceeds from the issuance of Common Shares for the exercise of options and the OpenText ESPP;

(iii) $21.9 million related to higher cash dividends paid to shareholders.

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

(ii) $2.4 billion increase in prepayments and repayments of long-term debt and the Revolver;

(iii) $181.2 million related to an increase in cash used in the repurchases of Common Shares and treasury stock;

(iv) $7.8 million related to higher cash dividends paid to shareholders.

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

(i) $74.1 million reduction in debt issuance costs;

(ii) $27.6 million related to higher proceeds from the issuance of Common Shares from the exercise of options and the ESPP;

(i) $15.3 million due to net change in Transition Services Agreement (TSA) obligation driven by cash collections on behalf of Rocket Software related to certain transition services performed by the Company related to the divested AMC business.

Cash Dividends

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

See Item 5 “Dividend Policy” included in this Annual Report on Form 10-K for more information.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters — Dividend Policy included in this Annual Report on Form 10-K for more information.

Long-term Debt and Credit Facilities

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Senior Notes 2031

On November 24, 2021, OpenText Holdings, Inc.

On November 24, 2021, Open Text Holdings, Inc.

(OTHI), a wholly-owned indirect subsidiary of the Company, issued $650 million in aggregate principal amount of 4.125% senior notes due 2031 guaranteed by the Company (Senior Notes 2031) in an unregistered offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (Securities Act), and to certain non-U.S.

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

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

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

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

On July 1, 2024, OTHI merged with and into Open Text Inc.

(OTI), a wholly-owned indirect subsidiary of the Company.

As a result of the merger, OTI assumed all rights and obligations of OTHI concerning the Senior Notes 2031, effective July 1, 2024.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Senior Notes 2030

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

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

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

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

On July 1, 2024, as a result of the merger of OTHI with and into OTI, OTI assumed all rights and obligations of OTHI concerning the Senior Notes 2030, effective July 1, 2024.

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

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

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

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

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

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

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

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

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

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

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

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

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The 2030 Indenture also provides for events of default, which, if any of them occurs, may permit or, in certain circumstances, require the principal, premium, if any, interest and any other monetary obligations on all the then-outstanding Senior Notes 2030 to be due and payable immediately.

Senior Notes 2030 are guaranteed on a senior unsecured basis by the Company and the Company’s existing and future wholly-owned subsidiaries (other than OTHI) that borrow or guarantee the obligations under our senior credit facilities.

Senior Notes 2030 and the guarantees rank equally in right of payment with all of the Company, OTHI and the guarantors’ existing and future senior unsubordinated debt and will rank senior in right of payment to all of the Company, OTHI and the guarantors’ future subordinated debt.

Senior Notes 2030 and the guarantees will be effectively subordinated to all of the Company, OTHI

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

Senior Notes 2030 are guaranteed on a senior unsecured basis by the Company and the Company’s existing and future wholly-owned subsidiaries (other than OTI) that borrow or guarantee the obligations under our senior credit facilities.

Senior Notes 2030 and the guarantees rank equally in right of payment with all of the Company, OTI and the guarantors’ existing and future senior unsubordinated debt and will rank senior in right of payment to all of the Company, OTI and the guarantors’ future subordinated debt.

Senior Notes 2030 and the guarantees will be effectively subordinated to all of the Company, OTI and the guarantors’ existing and future secured debt, including the obligations under the senior credit facilities, to the extent of the value of the assets securing such secured debt.

The foregoing description of the 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 Consolidated Financial Statements.

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

Senior Notes 2029

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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 Consolidated Financial Statements.

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

Senior Notes 2028

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

We may redeem all or a portion of the Senior Notes 2028 at any time prior to February 15, 2023 at a redemption price equal to 100% of the principal amount of the Senior Notes 2028 plus an applicable premium, plus accrued and unpaid interest, if any, to the redemption date.

We may also redeem up to 40% of the aggregate principal amount of the Senior Notes 2028, on one or more occasions, prior to February 15, 2023, using the net proceeds from certain qualified equity offerings at a redemption price of 103.875% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, subject to compliance with certain conditions.

We may, on one or more occasions, redeem the Senior Notes 2028, in whole or in part, at any time on and after February 15, 2023 at the applicable redemption prices set forth in the indenture governing the Senior Notes 2028, dated as of February 18, 2020, among the Company, the subsidiary guarantors party thereto, The Bank of New York Mellon, as U.S.

We may, on one or more occasions, redeem the Senior Notes 2028, in whole or in part, at the applicable redemption prices set forth in the indenture governing the Senior Notes 2028, dated as of February 18, 2020, among the Company, the subsidiary guarantors party thereto, The Bank of New York Mellon, as U.S.

trustee, and BNY Trust Company of Canada, as Canadian trustee (the 2028 Indenture), plus accrued and unpaid interest, if any, to the redemption date.

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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 Consolidated Financial Statements.

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

Senior Notes 2026

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

The resulting loss of $27.4 million, consisting of $25.0 million

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

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

See Note 23 “Other Income (Expense), Net” to our Consolidated Financial Statements.

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

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

Senior Secured Fixed Rate Notes

Senior Secured Notes 2027

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

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

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

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We may redeem all or a portion of the Senior Secured Notes 2027 at any time prior to November 1, 2027 at a redemption price equal to the greater of (a) 100% of the principal amount of the Senior Secured Notes 2027 to be redeemed and (b) the net present value of the remaining scheduled payments of principal and interest thereon discounted to the Par Call Date less interest accrued to the date of redemption, plus accrued and unpaid interest to, but excluding, the redemption date.

On or after the Par Call Date (as defined in the 2027 Indenture), the Company may redeem the Senior Secured Notes 2027, in whole or in part, at any time and from time to time, at a redemption price equal to 100% of the principal amount of the Senior Secured Notes 2027 being redeemed plus accrued and unpaid interest thereon to the redemption date.

On or after the Par Call Date (as defined in the 2027 Indenture, as defined below), the Company may redeem the Senior Secured Notes 2027, in whole or in part, at any time and from time to time, at a redemption price equal to 100% of the principal amount of the Senior Secured Notes 2027 being redeemed plus accrued and unpaid interest thereon to the redemption date.

If we experience one of the kinds of change of control triggering events specified in the indenture governing the Senior Secured Notes 2027 dated as of December 1, 2022, among the Company, the subsidiary guarantors party thereto, The Bank of New York Mellon, as U.S.

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The Senior Secured Notes 2027 and the related guarantees are effectively senior to all of the Company’s and the guarantors’ senior unsecured debt to the extent of the value of the Collateral (as defined in the 2027 Indenture) and are structurally subordinated to all existing and future liabilities of each of the Company’s existing and future subsidiaries that do not guarantee the Senior Secured Notes 2027.

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 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.

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

Borrowings under Term Loan B are secured by a first charge over substantially all of our assets on a pari passu basis with the Revolver, the Acquisition Term Loan and Senior Secured Notes 2027.

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

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

On May 30, 2018, we entered into a credit facility, which provides for a $1 billion term loan facility (Term Loan B) and we borrowed under the facility 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.

On June 6, 2023, we amended the Term Loan B to replace the LIBOR benchmark rate applicable to borrowings under Term Loan B with a SOFR benchmark rate.

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

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

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

As of June 30, 2023, the outstanding balance on the Term Loan B bears an interest rate of 6.90%.

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.

Consolidated senior secured 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, that is secured by our or any of our subsidiaries’ assets, over our trailing twelve months net income before interest, taxes, depreciation, amortization, restructuring, share-based compensation and other miscellaneous charges.

Under Term Loan B, we must maintain a “consolidated net leverage” ratio of no more than 4.00:1.00 at the end of each financial quarter.

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 June 30, 2023, our consolidated net leverage ratio, as calculated in accordance with the applicable agreement, was 3.49:1.00.

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

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

Borrowings under the Revolver are secured by a first charge over substantially all of our assets, on a pari passu basis with Term Loan B, the Acquisition Term Loan and Senior Secured Notes 2027.

On May 6, 2024, we used a portion of the net proceeds from the AMC Divestiture to prepay in full the aggregate principal balance of $940 million outstanding under Term Loan B, at which point all remaining commitments under Term Loan B were reduced to zero and Term Loan B was terminated, which resulted in a loss on debt extinguishment of $1.8 million relating to unamortized debt issuance costs (see Note 23 “Other Income (Expense), Net” for more details) .

As of June 30, 2024, we had no outstanding balance under the Term Loan B (June 30, 2023—$947.5 million).

For further details relating to our debt, see Note 11 “Long-Term Debt” to our 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, and to remove the 10-basis point credit spread adjustment for loans bearing interest based on the SOFR rate.

Borrowings under the Revolver are secured by a first charge over substantially all of our assets, on a pari passu basis with the Acquisition Term Loan (as defined below) and Senior Secured Notes 2027.

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

On June 6, 2023, we amended the Revolver to replace the LIBOR benchmark rate applicable to borrowings with a SOFR benchmark rate.

Borrowings under the Revolver currently bear interest per annum at a floating rate of interest equal to Term SOFR plus the SOFR Adjustment (as defined in the Revolver) and a fixed margin dependent on our consolidated net leverage ratio ranging from 1.25% to 1.75%.

Borrowings under the Revolver currently bear interest per annum at a floating rate of interest equal to Term SOFR (as defined in the Revolver) and a fixed margin dependent on our consolidated net leverage ratio ranging from 1.25% to 1.75%.

Under the Revolver, we must maintain a “consolidated net leverage” ratio of no more than 4.50:1.00 at the end of each financial quarter.

As of June 30, 2023, we had $275 million outstanding balance under the Revolver (June 30, 2022—nil).

For the year ended June 30, 2023, we recorded interest expense of $10.1 million relating to the Revolver (June 30, 2022—nil).

In July 2023, the Company subsequently repaid $175 million drawn under the Revolver.

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

As of June 30, 2024, our consolidated net leverage ratio, as calculated in accordance with the applicable agreement, was 2.32:1.00.

As of June 30, 2024, we had no outstanding balance under the Revolver (June 30, 2023—$275.0 million).

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

Acquisition Term Loan

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

During the third quarter of Fiscal 2023, the Company drew down $3.585 billion, net of original issuance discount of 3% and other fees, of which the net proceeds were used to fund the Micro Focus Acquisition (see Note 19 “Acquisitions” to our Consolidated Financial Statements for more details).

During the third quarter of Fiscal 2023, the Company drew down $3.585 billion from the Acquisition Term Loan, net of original issuance discount of 3% and other fees (see Note 19 “Acquisitions and Divestitures” for more details).

On August 14, 2023, we amended the Acquisition Term Loan, to reduce the applicable interest rate margin by 0.75% over the remaining term of the Acquisition Term Loan.

On May 15, 2024, we further amended the Acquisition Term Loan, to reduce the applicable interest rate margin by 0.5% and remove the 10-basis point credit spread adjustment for loans bearing interest based on the SOFR rate.

Both of the above reductions in interest rate margin on the Acquisition Term Loan resulting from the amendments were accounted for by the Company as debt modifications.

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

Borrowings under the Acquisition Term Loan currently bear a floating rate of interest equal to Term SOFR plus the SOFR Adjustment (as defined in the Acquisition Term Loan) and applicable margin of 3.50%.

Borrowings under the Acquisition Term Loan currently bear a floating rate of interest equal to Term SOFR plus an applicable margin of 2.25%.

As of June 30, 2024, the outstanding balance on the Acquisition Term Loan bears an interest rate of 7.58%.

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As of June 30, 2024, our consolidated net leverage ratio, as calculated in accordance with the applicable agreement, was 2.32:1.00.

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 year ended June 30, 2023, we recorded interest expense of $125.7 million, relating to the Acquisition Term Loan (year ended June 30, 2022— nil).

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

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

On October 20, 2023 and January 22, 2024, the Company made prepayments of $75 million and $175 million, respectively, on the Acquisition Term Loan using cash on hand.

On May 6, 2024, the Company used a portion of the net

proceeds from the AMC Divestiture to prepay $1.06 billion of the outstanding principal balance of the Acquisition Term Loan.

As a result of these prepayments in Fiscal 2024, the Company recognized a loss on debt extinguishment of $54.6 million relating to unamortized debt issuance costs (see Note 23 “Other Income (Expense), Net” to our Consolidated Financial Statements for more details) .

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

In connection with the amendment to the Bridge Loan and the receipt of proceeds from the issuance of the Senior Secured Notes 2027, all remaining commitments under the Bridge Loan were reduced to zero and the Bridge Loan was terminated, which resulted in a loss on debt extinguishment of $8.2 million relating to unamortized debt issuance costs (see Note 22 “Other Income (Expense), Net” to our Consolidated Financial Statements for more details).

As of June 30, 2023, we had no borrowings under the Bridge Loan.

For the year ended June 30, 2023, 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 Consolidated Financial Statements.

In connection with the amendment to the Bridge Loan and the receipt of proceeds from the issuance of the Senior Secured Notes 2027, all remaining commitments under the Bridge Loan were reduced to zero and the Bridge Loan was terminated, which resulted in a loss on debt extinguishment of $8.2 million relating to unamortized debt issuance costs (see Note 23 “Other Income (Expense), Net” for more details).

For the year ended June 30, 2024, we did not have any borrowings or record any interest expense relating to the Bridge Loan (year ended June 30, 2023—nil).

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

Shelf Registration Statement

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

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

As the Company qualifies as a “well-known seasoned issuer” in Canada, a short-form base shelf prospectus qualifying the distribution of such securities was concurrently filed with Canadian securities regulators on December 15, 2023.

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

Share Repurchase Plan / Normal Course Issuer Bid

On November 5, 2020, the Board authorized a share repurchase plan (the Fiscal 2021 Repurchase Plan), pursuant to which we were authorized to purchase in open market transactions, from time to time over the 12 month period commencing November 12, 2020, up to an aggregate of $350 million of our Common Shares on the NASDAQ Global Select Market, the TSX and/or other exchanges and alternative trading systems in Canada and/or the United States, if eligible, subject to applicable law and stock exchange rules.

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.

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

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

Purchases made under the Fiscal 2021 Repurchase Plan were subject to a limit of 13,618,774 shares (representing 5% of the Company’s issued and outstanding Common Shares as of November 4, 2020).

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

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.

On April 30, 2024, the Board authorized a share repurchase plan (the Fiscal 2024 Repurchase Plan), pursuant to which we could 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.

During the year ended June 30, 2024, we repurchased and canceled 5,073,913 Common Shares for $150.0 million (year ended June 30, 2023 and 2022— nil and 3,809,559 Common Shares for nil and $177.0 million, respectively).

The Fiscal 2024 Repurchase Plan was effected in accordance with Rule 10b-18.

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

During the year ended June 30, 2023, we did not repurchase and cancel any Common Shares (year ended June 30, 2022 and 2021— 3,809,559 and 2,500,000 Common Shares for $177.0 million and $119.1 million, respectively).

On July 31, 2024, in order to align its share repurchase plan to its fiscal year, the Board approved the early termination of the Fiscal 2024 Repurchase Plan and authorized a new share repurchase plan (the Fiscal 2025 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 August 7, 2024 until August 6, 2025, if considered advisable, up to an aggregate of $300 million of its common shares on the TSX (as part of a Fiscal 2025 NCIB, defined below), NASDAQ and/or alternative trading systems in Canada and/or the United States, if eligible, subject to applicable law and stock exchange rules.

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

The Fiscal 2025 Repurchase Plan will be effected in accordance with Rule 10b-18.

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 Company established 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.

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 could 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 could have been 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.

On July 31, 2024, the Company voluntarily terminated the Fiscal 2024 NCIB and established a new normal course issuer bid (the Fiscal 2025 NCIB) in order to provide it with a means to execute purchases over the TSX as part of the overall Fiscal 2025 Repurchase Plan.The TSX approved the Company’s notice of intention to commence the Fiscal 2025 NCIB, pursuant to which the Company may purchase Common Shares over the TSX for the period commencing on August 7, 2024 until August 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 21,179,064 (representing 10% of the Company’s public float (calculated in accordance with TSX rules) as of July 24, 2024, less the 5,073,913 Common Shares purchased under the Fiscal 2024 Repurchase Plan), and the maximum number of Common Shares that can be purchased on a single day is 138,175 Common Shares, which was 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

As of June 30, 2024, our total unfunded pension plan obligations were $132.1 million, of which $4.8 million is payable within the next twelve months.

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$ 8,420,561 $ 406,261 $ 804,257 $ 2,555,304 $ 4,654,739

Operating lease obligations (2)

411,394 105,685 144,062 90,267 71,380

Finance lease obligations (3)

11,482 5,712 5,311 459 —

Purchase obligations for contracts not accounted for as lease obligations (2)

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$ 8,761,326 $ 587,264 $ 964,019 $ 2,555,304 $ 4,654,739

______________________

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

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

(3) Represents the undiscounted future minimum lease payments under our financing 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 Consolidated Financial Statements for more details.

See Note 11 “Long-Term Debt” to our Consolidated Financial Statements.

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

Guarantees and Indemnifications

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Contingencies

As part of its ongoing audit of our Canadian tax returns, the 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.

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 June 30, 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 $80 million.

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

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

The CRA has audited Fiscal 2017, Fiscal 2018 and Fiscal 2019 on a basis that we strongly disagree with and are contesting.

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

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

CRA’s position for Fiscal 2017 and Fiscal 2018 relies in significant part on the application of its positions regarding our transfer pricing methodology that are the basis for its reassessment of our fiscal years 2012 to 2016 described above, and that we believe are without merit.

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

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

CRA’s position for Fiscal 2017 through Fiscal 2019 relies in significant part on the application of its positions regarding our transfer pricing methodology that are the basis for its reassessment of our fiscal years 2012 to 2016 described above, and that we believe are without merit.

Other aspects of CRA’s position for Fiscal 2017 through Fiscal 2019 conflict with the expert valuation prepared by the independent leading accounting and advisory firm that was used to support our original filing position.

The CRA issued notices of reassessment in respect of Fiscal 2017, Fiscal 2018 and Fiscal 2019 on a basis consistent with its proposal to reduce the available depreciable basis of assets in Canada.

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

On December 11, 2023, we filed a notice of objection regarding Fiscal 2019.

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

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

income realization in Canada.

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

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

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

We strongly disagree with the CRA’s position for Fiscal 2017 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;

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 2025 while the matter is in dispute.

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

The CRA is auditing Fiscal 2019, and may reassess Fiscal 2019 on a similar basis as Fiscal 2017 and Fiscal 2018.

The CRA is also in preliminary stages of auditing Fiscal 2020.

Carbonite Class Action Complaint

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

On August 1, 2019, prior to our acquisition of Carbonite Inc.

(Carbonite), a purported stockholder of Carbonite filed a putative class action complaint against Carbonite, its former Chief Executive Officer, Mohamad S.

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

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

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

On November 20, 2020, the lead plaintiff filed a notice of appeal to the United States Court of

Appeals for the First Circuit.

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

The parties have completed discovery and defendants have filed a motion for summary judgment.

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

Carbonite vs Realtime Data

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

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

Carbonite, Inc.

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

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

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

On December 19, 2017, the U.S.

District Court for the Eastern District of Texas transferred the case to the U.S.

District Court for the District of Massachusetts (No.

1:17-cv-12499).

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

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

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

Patent & Trademark Office Patent Trial and Appeal Board invalidated certain claims of that patent, including certain claims that had been asserted against Carbonite.

The parties then jointly stipulated to dismiss that patent from this action.

On August 23, 2021, in one of the suits against other companies, the District of Delaware (No.

1:17-cv-800), held all of the patents asserted against Carbonite to be invalid.

Realtime Data has appealed that decision to the U.S.

Court of Appeals for the Federal Circuit.

We continue to vigorously defend the matter, and the U.S.

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

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

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

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.

On February 1, 2024, the court issued a preliminary approval order and on May 15, 2024, the court issued a final approval order for the settlement and dismissal of the case with prejudice.

The settlement was substantially paid from insurance coverage, with any remaining amount not covered by insurance being immaterial to the Company.

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

Other Matters

Please also see Part I, Item 1A, “Risk Factors” in this Annual Report on Form 10-K for Fiscal 2023, as well as Note 15 “Income Taxes” to the Consolidated Financial Statements included in this Annual Report on Form 10-K related to certain historical matters arising prior to the Micro Focus Acquisition.

Also see Part I, Item 1A, “Risk Factors” in this Annual Report on Form 10-K for Fiscal 2024, as well as Note 15 “Income Taxes” to the Consolidated Financial Statements included in this Annual Report on Form 10-K related to certain historical matters arising prior to the Micro Focus Acquisition.

Off-Balance Sheet Arrangements

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

Use of Non-GAAP Financial Measures

In addition to reporting financial results in accordance with U.S.

GAAP, the Company provides certain financial measures that are not in accordance with U.S.

GAAP (Non-GAAP).

These Non-GAAP financial measures have certain limitations in that they do not have a standardized meaning and thus the Company’s definition may be different from similar Non-GAAP financial measures used by other companies and/or analysts and may differ from period to period.

Thus, it may be more difficult to compare the Company’s financial performance to that of other companies.

However, the Company’s management compensates for these limitations by providing the relevant disclosure of the items excluded in the calculation of these Non-GAAP financial measures both in its reconciliation to the U.S.

GAAP financial measures and its Consolidated Financial Statements, all of which should be considered when evaluating the Company’s results.

The Company uses these Non-GAAP financial measures to supplement the information provided in its Consolidated Financial Statements, which are presented in accordance with U.S.

The presentation of Non-GAAP financial measures is not meant to be a substitute for financial measures presented in accordance with U.S.

GAAP, but rather should be evaluated in conjunction with and as a supplement to such U.S.

GAAP measures.

OpenText strongly encourages investors to review its financial information in its entirety and not to rely on a single financial measure.

The Company therefore believes that despite these limitations, it is appropriate to supplement the disclosure of the U.S.

GAAP measures with certain Non-GAAP measures defined below.

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

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

Non-GAAP-based gross margin is calculated as Non-GAAP-based gross profit expressed as a percentage of total revenue.

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

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

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

The use of the term “non-operational charge” is defined for this purpose as an expense that does not impact the ongoing operating decisions taken by the Company’s management.

These items are excluded based upon the way the Company’s management evaluates the performance of the Company’s business for use in the Company’s internal reports and are not excluded in the sense that they may be used under U.S.

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

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

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

Therefore, the Company believes that the exclusion of these special charges (recoveries) will also better aid readers of financial statements in the understanding and comparability of the Company’s operating results and underlying operational trends.

In summary, the Company believes the provision of supplemental Non-GAAP measures allow investors to evaluate the operational and financial performance of the Company’s core business using the same evaluation measures that management uses, and is therefore a useful indication of OpenText’s performance or expected performance of future operations and facilitates period-to-period comparison of operating performance (although prior performance is not necessarily indicative of future performance).

As a result, the Company considers it appropriate and reasonable to provide, in addition to U.S.

GAAP measures, supplementary Non-GAAP financial measures that exclude certain items from the presentation of its financial results.

The following charts provide unaudited reconciliations of U.S.

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

The Micro Focus Acquisition significantly impacts period-over-period comparability.

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

for the year ended June 30, 2023

(In thousands, except for per share data)

Year Ended June 30, 2023

GAAP-based Measures GAAP-based Measures

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

% of Total Revenue

Cost of revenues

Cloud services and subscriptions $ 590,165 $ (10,664) (1) $ 579,501

Customer support 209,705 (3,627) (1) 206,078

Professional service and other 276,888 (6,998) (1) 269,890

Amortization of acquired technology-based intangible assets 223,184 (223,184) (2) —

GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%) 3,168,393 70.6% 244,473 (3) 3,412,866 76.1%

Operating expenses

Research and development 680,587 (39,065) (1) 641,522

Sales and marketing 948,598 (41,710) (1) 906,888

General and administrative 419,590 (28,238) (1) 391,352

Amortization of acquired customer-based intangible assets 326,406 (326,406) (2) —

Special charges (recoveries) 169,159 (169,159) (4) —

GAAP-based income from operations / Non-GAAP-based income from operations

516,292 849,051 (5) 1,365,343

Other income (expense), net 34,469 (34,469) (6) —

Provision for income taxes

70,767 74,261 (7) 145,028

GAAP-based net income / Non-GAAP-based net income, attributable to OpenText

150,379 740,321 (8) 890,700

GAAP-based EPS / Non-GAAP-based EPS-diluted, attributable to OpenText $ 0.56 $ 2.73 (8) $ 3.29

__________________________

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

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

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

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

See Note 18 “Special Charges (Recoveries)” to our Consolidated Financial Statements for more details.

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

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

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

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

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

Other income (expense) also includes unrealized and realized gains (losses) on our derivatives which are not designated as hedges.

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

(7) Adjustment relates to differences between the GAAP-based tax provision rate of approximately 32% and a Non-GAAP-based tax rate of approximately 14%;

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

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

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

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

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

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

Year Ended June 30, 2023

Per share diluted

GAAP-based net income, attributable to OpenText

$ 150,379 $ 0.56

Amortization 549,590 2.03

Share-based compensation 130,302 0.48

Special charges (recoveries) 169,159 0.63

Other (income) expense, net (34,469) (0.13)

GAAP-based provision for income taxes

Non-GAAP-based recovery of income taxes

(145,028) (0.54)

Non-GAAP-based net income, attributable to OpenText

$ 890,700 $ 3.29

Reconciliation of Adjusted EBITDA

Year Ended June 30, 2023

GAAP-based net income, attributable to OpenText

Provision for income taxes

Interest and other related expense, net 329,428

Amortization of acquired technology-based intangible assets 223,184

Amortization of acquired customer-based intangible assets 326,406

Depreciation 107,761

Share-based compensation 130,302

Special charges (recoveries) 169,159

Other (income) expense, net (34,469)

Adjusted EBITDA $ 1,472,917

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

for the year ended June 30, 2022

(In thousands, except for per share data)

Year Ended June 30, 2022

GAAP-based Measures GAAP-based Measures

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

% of Total Revenue

Cost of revenues

Cloud services and subscriptions $ 511,713 $ (5,285) (1) $ 506,428

Customer support 121,485 (2,399) (1) 119,086

Professional service and other 216,895 (3,740) (1) 213,155

Amortization of acquired technology-based intangible assets 198,607 (198,607) (2) —

GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%) 2,431,643 69.6% 210,031 (3) 2,641,674 75.6%

Operating expenses

Research and development 440,448 (17,122) (1) 423,326

Sales and marketing 677,118 (22,628) (1) 654,490

General and administrative 317,085 (18,382) (1) 298,703

Amortization of acquired customer-based intangible assets 217,105 (217,105) (2) —

Special charges (recoveries) 46,873 (46,873) (4) —

GAAP-based income from operations / Non-GAAP-based income from operations

644,773 532,141 (5) 1,176,914

Other income (expense), net 29,118 (29,118) (6) —

Provision for income taxes

118,752 23,913 (7) 142,665

GAAP-based net income / Non-GAAP-based net income, attributable to OpenText

397,090 479,110 (8) 876,200

GAAP-based EPS / Non-GAAP-based EPS-diluted, attributable to OpenText $ 1.46 $ 1.76 (8) $ 3.22

__________________________

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

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

See Note 18 “Special Charges (Recoveries)” to our Consolidated Financial Statements for more details.

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

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

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

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

(7) Adjustment relates to differences between the GAAP-based tax provision rate of approximately 23% and a Non-GAAP-based tax rate of approximately 14%;

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

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

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

Year Ended June 30, 2022

Per share diluted

GAAP-based net income, attributable to OpenText

$ 397,090 $ 1.46

Amortization 415,712 1.52

Share-based compensation 69,556 0.26

Special charges (recoveries) 46,873 0.17

Other (income) expense, net (29,118) (0.11)

GAAP-based provision for income taxes

Non-GAAP-based recovery of income taxes

(142,665) (0.52)

Non-GAAP-based net income, attributable to OpenText

$ 876,200 $ 3.22

Reconciliation of Adjusted EBITDA

Year Ended June 30, 2022

GAAP-based net income, attributable to OpenText

Provision for income taxes

Interest and other related expense, net 157,880

Amortization of acquired technology-based intangible assets 198,607

Amortization of acquired customer-based intangible assets 217,105

Depreciation 88,241

Share-based compensation 69,556

Special charges (recoveries) 46,873

Other (income) expense, net (29,118)

Adjusted EBITDA $ 1,264,986

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

for the year ended June 30, 2021

(In thousands, except for per share data)

Year Ended June 30, 2021

GAAP-based Measures GAAP-based Measures

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

% of Total Revenue

Cost of revenues

Cloud services and subscriptions $ 481,818 $ (3,419) (1) $ 478,399

Customer support 122,753 (1,910) (1) 120,843

Professional service and other 197,183 (2,565) (1) 194,618

Amortization of acquired technology-based intangible assets 218,796 (218,796) (2) —

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

Non-GAAP-based gross profit and gross margin (%) 2,351,649 69.4% 226,690 (3) 2,578,339 76.1%

Operating expenses

Research and development 421,447 (9,859) (1) 411,588

Sales and marketing 622,221 (18,312) (1) 603,909

General and administrative 263,521 (15,904) (1) 247,617

Amortization of acquired customer-based intangible assets 216,544 (216,544) (2) —

Special charges (recoveries) 1,748 (1,748) (4) —

GAAP-based income from operations / Non-GAAP-based income from operations

740,903 489,057 (5) 1,229,960

Other income (expense), net 61,434 (61,434) (6) —

Provision for income taxes

339,906 (188,931) (7) 150,975

GAAP-based net income / Non-GAAP-based net income, attributable to OpenText

310,672 616,554 (8) 927,226

GAAP-based EPS/ Non-GAAP-based EPS-diluted, attributable to OpenText $ 1.14 $ 2.25 (8) $ 3.39

__________________________

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

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

See Note 18 “Special Charges (Recoveries)” to our Consolidated Financial Statements for more details.

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

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

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

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

(7) Adjustment relates to differences between the GAAP-based tax provision rate of approximately 52% and a Non-GAAP-based tax rate of approximately 14%;

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

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

The GAAP-based tax provision rate for the year ended June 30, 2021 includes an income tax provision charge from IRS settlements partially offset by a tax benefit from the release of unrecognized tax benefits due to the conclusion of relevant tax audits that was recognized during the second quarter of Fiscal 2021.

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

Year Ended June 30, 2021

Per share diluted

GAAP-based net income, attributable to OpenText

$ 310,672 $ 1.14

Amortization 435,340 1.59

Share-based compensation 51,969 0.19

Special charges (recoveries) 1,748 0.01

Other (income) expense, net (61,434) (0.22)

GAAP-based provision for income taxes

Non-GAAP-based recovery of income taxes

(150,975) (0.55)

Non-GAAP-based net income, attributable to OpenText

$ 927,226 $ 3.39

Reconciliation of Adjusted EBITDA

Year Ended June 30, 2021

GAAP-based net income, attributable to OpenText

Provision for income taxes

Interest and other related expense, net 151,567

Amortization of acquired technology-based intangible assets 218,796

Amortization of acquired customer-based intangible assets 216,544

Depreciation 85,265

Share-based compensation 51,969

Special charges (recoveries) 1,748

Other (income) expense, net (61,434)

Adjusted EBITDA $ 1,315,033

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-K

Item 7. Management’s Discussion and Analysis