OPEN TEXT CORP 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations This Annual Report on Form 10-K, including this Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A), contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 21E of the U.S. Securities Exchange Act of 1934, as amended (the Exchange Act), and Section 27A of the U.S. Securities Act of 1933, as amended (the Securitie s Act ), and is subject to the safe harbors created by those sections. All statements other than statements of historical facts are statements that could be deemed forward-looking statements. When used in this report, the words “anticipates”, “expects”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “may”, “could”, “would”, “might”, “will” and other similar language, as they relate to Open Text Corporation (OpenText or the Company), are intended to identify forward-looking statements under applicable securities laws. Specific forward-looking statements in this report include, but are not limited to, statements regarding: (i) our focus in the fiscal years beginning July 1, 2024 and ending June 30, 2025 (Fiscal 2025) and July 1, 2025 and ending June 30, 2026 (Fiscal 2026) on growth in earnings and cash flows; (ii) creating value through investments in broader Information Management capabilities; (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; (v) distribution; (vi) the Company’s presence in the cloud and in growth markets; (vii) product and solution developments, enhancements and releases, the timing thereof and the customers targeted; (viii) the Company’s financial condition, results of operations and earnings; (ix) the basis for any future growth and for our financial performance; (x) declaration of quarterly dividends; (xi) future tax rates; (xii) the changing regulatory environment; (xiii) annual recurring revenues; (xiv) research and development and related expenditures; (xv) our building, development and consolidation of our network infrastructure; (xvi) competition and changes in the competitive landscape; (xvii) our management and protection of intellectual property and other proprietary rights; (xviii) existing and foreign sales and exchange rate fluctuations; (xix) cyclical or seasonal aspects of our business; (xx) capital expenditures; (xxi) potential legal and/or regulatory proceedings; (xxii) acquisitions and their expected impact, including our ability to 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 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; (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. Forward-looking statements reflect our current estimates, beliefs and assumptions, which are based on management’s perception of historic trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. The forward-looking statements contained in this report are based on certain assumptions including the following: (i) countries continuing to implement and enforce existing and additional customs and security regulations relating to the provision of electronic information for imports and exports; (ii) our continued operation of a secure and reliable business network; (iii) the stability of general political, economic and market conditions; (iv) our ability to manage inflation, including increased labour costs associated with attracting and retaining employees, and rising interest rates; (v) our continued ability to manage certain foreign currency risk through hedging; (vi) equity and debt markets continuing to provide us with access to capital; (vii) our continued ability to identify, source and finance attractive and executable business combination opportunities; (viii) our continued ability to avoid infringing third party intellectual property rights; and (ix) our ability to successfully implement our restructuring plans. Management’s estimates, beliefs and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events and, as such, are subject to change. We can give no assurance that such estimates, beliefs and assumptions will prove to be correct. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to differ materially from the anticipated results, performance or achievements expressed or implied by such forward-looking statements. The risks and uncertainties that may affect forward-looking statements include, but are not limited to: (i) our inability to realize successfully any anticipated synergy benefits from the acquisition of Micro Focus (Micro Focus Acquisition); (ii) the actual and potential impacts of the use of cash and incurrence of indebtedness, including the granting of security interests related to such debt; (iii) the change in scope and size of our operations as a result of the Micro Focus Acquisition and the 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 49 Table of Contents 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; (ix) the risks associated with bringing new products and services to market; (x) fluctuations in currency exchange rates (including as a result of the impact of any policy changes resulting from trade and tariff disputes) and the impact of mark-to-market valuation relating to associated derivatives; (xi) delays in the purchasing decisions of the Company’s customers; (xii) competition the Company faces in its industry and/or marketplace; (xiii) the final determination of litigation, tax audits (including tax examinations in Canada, the United States or elsewhere) and other legal proceedings; (xiv) potential exposure to greater than anticipated tax liabilities or expenses, including with respect to changes in Canadian, United States or international tax regimes; (xv) the possibility of technical, logistical or planning issues in connection with the deployment of the Company’s products or services; (xvi) the continuous commitment of the Company’s customers; (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, 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; (xx) inability to raise capital at all or on not unfavorable terms in the future; (xxi) downward pressure on our share price and dilutive effect of future sales or issuances of equity securities (including in connection with future acquisitions); (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: (i) the future performance, financial and otherwise, of the Company; (ii) the ability of the Company to bring new products and services to market and to increase sales; (iii) the strength of the Company’s product development pipeline; (iv) failure to secure and protect patents, trademarks and other proprietary rights; (v) infringement of third-party proprietary rights triggering indemnification obligations and resulting in significant expenses or restrictions on our ability to provide our products or services; (vi) failure to comply with privacy laws and regulations that are extensive, open to various interpretations and complex to implement; (vii) the Company’s growth and other profitability prospects; (viii) the estimated size and growth prospects of the Information Management market; (ix) the Company’s competitive position in the Information Management market and its ability to take advantage of future opportunities in this market; (x) the benefits of the Company’s products and services to be realized by customers; (xi) the demand for the Company’s products and services and the extent of deployment of the Company’s products and services in the Information Management marketplace; (xii) the Company’s financial condition and capital requirements; (xiii) system or network failures or information security, cybersecurity or other data breaches in connection with the Company’s offerings or the information technology systems used by the Company generally, the risk of which may be increased during times of natural disaster or pandemic due to remote working arrangements; (xiv) failure to achieve our environmental goals on energy consumption, waste diversion and greenhouse gas emissions or our targets relating to ED&I initiatives; (xv) failure to attract and retain key personnel to develop and effectively manage the Company’s business; and (xvi) the ability of the Company’s subsidiaries to make distributions to the Company. Readers should carefully review Part I, Item 1A “Risk Factors” and other documents we file from time to time with the Securities and Exchange Commission (SEC) and other securities regulators. A number of factors may materially affect our business, financial condition, operating results and prospects. These factors include but are not limited to those set forth in Part I, Item 1A “Risk Factors” and elsewhere in this Annual Report on Form 10-K. Any one of these factors, and other factors that we are unaware of, or currently deem immaterial, may cause our actual results to differ materially from recent results or from our anticipated future results. Readers are cautioned not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. Unless otherwise required by applicable securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The following MD&A is intended to help readers understand our results of operations and financial condition, and is provided as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and the accompanying Notes to our Consolidated Financial Statements under Part II, Item 8 of this Annual Report on Form 10-K. 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. 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. 50 Table of Contents EXECUTIVE OVERVIEW At OpenText, we believe information and knowledge make business and people better. We are an Information Management company that provides software and services that empower digital businesses of all sizes to become more intelligent, connected, secure and responsible. Our innovations maximize the strategic benefits of data and content for our customers, strengthening their productivity, growth and competitive advantage. Our comprehensive Information Management platform and services provide secure and scalable solutions for global companies, small and medium-sized businesses (SMBs), governments and consumers around the world. 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 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. We are fundamentally integrated into the parts of our customers’ businesses that matter, so they can securely manage the complexity of information flow end to end. Through automation and AI, we connect, synthesize and deliver information where it is needed to drive new efficiencies, experiences and insights. We make information more valuable by connecting it to digital business processes, enriching it with analytics, protecting and securing it throughout its entire lifecycle, and leveraging it to create engaging experiences for employees, suppliers, developers, partners, and customers. Our solutions range from connecting large digital supply chains to managing HR processes to driving better IT service management in manufacturing, retail and financial services. Our solutions also enable organizations and consumers to secure their information so that they can collaborate with confidence, stay ahead of the regulatory technology curve, identify threats on any endpoint or across their networks, enable privacy, leverage eDiscovery and digital forensics to defensibly investigate and collect evidence, and ensure business continuity in the event of a security incident. Our initial public offering was on the NASDAQ in 1996 and we were subsequently listed on the Toronto Stock Exchange (TSX) in 1998. Our ticker symbol on both the NASDAQ and the TSX is “OTEX.” 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. 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 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 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 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. • Non-GAAP-based gross margin was 77.3% compared to 76.1% in the prior fiscal year. • GAAP-based net income attributable to OpenText was $465.1 million compared to $150.4 million in the prior fiscal year. • Non-GAAP-based net income attributable to OpenText was $1,137.3 million compared to $890.7 million in the prior fiscal year. • GAAP-based earnings per share (EPS), diluted, was $1.71 compared to $0.56 in the prior fiscal year. • Non-GAAP-based EPS, diluted, was $4.17 compared to $3.29 in the prior fiscal year. • Adjusted EBITDA, a non-GAAP measure, was $1,970.2 million compared to $1,472.9 million in the prior fiscal year. 51 Table of Contents • 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. • 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. See “Acquisitions” below for the impact of acquisitions on the period-to-period comparability of results. Acquisitions As a result of the continually changing marketplace in which we operate, we regularly evaluate acquisition opportunities within our market and at any time may be in various stages of discussions with respect to such opportunities. 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. 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. 52 Table of Contents 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 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. Our Total Growth strategy is a durable model, that we believe will create both near and long-term shareholder value through organic and acquired growth, capital efficiency and profitability. We are committed to continuous innovation. Our investments in research and development (R&D) push product innovation, increasing the value of our offerings to our existing customer base and new customers, which includes Global 10,000 companies (G10K), SMBs and consumers. The G10K are the world’s largest companies, ranked by estimated total revenues, as well as the world's largest governments and global organizations. More valuable products, coupled with our established global partner program, lead to greater distribution and cross-selling opportunities which further help us to achieve organic growth. Over the last three fiscal years, we have invested a cumulative total of $2.01 billion in R&D or 14.7% of cumulative revenue for that three-year period. On an annual basis, we continue to target to spend 14% to 16% of revenues on R&D expense. With our innovation roadmap delivered, we believe we have fortified our support for customer choice: private cloud, public cloud, off-cloud, and API cloud. Looking ahead, the destination for innovation is cloud. Businesses of all sizes rely on a combination of public and private clouds, managed services and off-cloud solutions. As a result, we are committed to continue to modernize our technology infrastructure and leverage our existing investments in the OpenText Cloud and programs to help customers off-cloud. The combination of OpenText cloud-native applications and managed services, together with the scalability and performance of our partner public cloud providers, offer more secure, reliable and compliant solutions to customers wanting to deploy cloud-based Information Management applications. The OpenText Cloud is designed to build additional flexibility and scalability for our customers: becoming cloud-native, connecting anything, and extending capabilities with multi-tenant SaaS applications and services. 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. 53 Table of Contents 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 and Israel-Hamas conflicts on our business. See Part I, Item 1A, “Risk Factors” included within this Annual Report on Form 10-K. CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates, judgments and assumptions that affect the amounts reported in the Consolidated Financial Statements. These estimates, judgments and assumptions are evaluated on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe are reasonable at that time. Actual results may differ materially from those estimates. The policies listed below are areas that may contain key components of our results of operations and are based on complex rules requiring us to make judgments and estimates and consequently, we consider these to be our critical accounting policies. Some of these accounting policies involve complex situations and require a higher degree of judgment, either in the application and interpretation of existing accounting literature or in the development of estimates that affect our financial statements. The critical accounting policies which we believe are the most important to aid in fully understanding and evaluating our reported financial results include the following: (i) Revenue recognition, (ii) Goodwill, (iii) Acquired intangibles and (iv) Income taxes. 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 In accordance with Accounting Standards Codification (ASC) Topic 606 “Revenue from Contracts with Customers” (Topic 606), we account for a customer contract when we obtain written approval, the contract is committed, the rights of the parties, including the payment terms, are identified, the contract has commercial substance and consideration is probable of collection. Revenue is recognized when, or as, control of a promised product or service is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for our products and services (at its transaction price). Estimates of variable consideration and the determination of whether to include estimated amounts in the transaction price are based on readily available information, which may include historical, current and forecasted information, taking into consideration the type of customer, the type of transaction and specific facts and circumstances of each arrangement. We report revenue net of any revenue-based taxes assessed by governmental authorities that are imposed on and concurrent with specific revenue producing transactions. We have four revenue streams: cloud services and subscriptions, customer support, license and professional service and other. 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 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. Our cloud arrangements can be broadly categorized as “platform as a service” (PaaS), “software as a service” (SaaS), cloud subscriptions and managed services. PaaS/ SaaS/ Cloud Subscriptions (collectively referred to here as cloud-based solutions): We offer cloud-based solutions that provide customers the right to access our software through the internet. Our cloud-based solutions represent a series of distinct services that are substantially the same and have the same pattern of transfer to the customer. These services are made available to the customer continuously throughout the contractual period. However, the extent to which the customer uses the services may vary at the customer’s discretion. The payment for cloud-based solutions may be received either at inception of the arrangement, or over the term of the arrangement. These cloud-based solutions are considered to have a single performance obligation where the customer simultaneously receives and consumes the benefit, and as such we recognize revenue for these cloud-based solutions ratably over the term of the contractual agreement. For example, revenue related to cloud-based solutions that are provided on a usage basis, such as the number of users, is recognized based on a customer’s utilization of the services in a given period. Additionally, a software license is present in a cloud-based solutions arrangement if all of the following criteria are met: 54 Table of Contents (i) The customer has the contractual right to take possession of the software at any time without significant penalty; and (ii) It is feasible for the customer to host the software independent of us. In these cases where a software license is present in a cloud-based solutions arrangement it is assessed to determine if it is distinct from the cloud-based solutions arrangement. The revenue allocated to the distinct software license would be recognized at the point in time the software license is transferred to the customer, whereas the revenue allocated to the hosting performance obligation would be recognized ratably on a monthly basis over the contractual term unless evidence suggests that revenue is earned, or obligations are fulfilled in a different pattern over the contractual term of the arrangement. Managed services: We provide comprehensive B2B process outsourcing services for all day-to-day operations of a customers’ B2B integration program. Customers using these managed services are not permitted to take possession of our software and the contract is for a defined period, where customers pay a monthly or quarterly fee. Our performance obligation is satisfied as we provide services of operating and managing a customer’s electronic data interchange (EDI) environment. 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. 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 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. Progress for services that are contracted for a fixed price is generally measured based on hours incurred as a portion of total estimated hours. As a practical expedient, when we invoice a customer at an amount that corresponds directly with the value to the customer of our performance to date, we recognize revenue at that amount. Customer support revenue Customer support revenue is associated with perpetual, term license and off-cloud subscription arrangements. As customer support is not critical to the customers’ ability to derive benefit from their right to use our software, customer support is considered a distinct performance obligation when sold together in a bundled arrangement along with the software. Customer support consists primarily of technical support and the provision of unspecified updates and upgrades on a when-and-if-available basis. Customer support for perpetual licenses is renewable, generally on an annual basis, at the option of the customer. Customer support for term and subscription licenses is renewable concurrently with such licenses for the same duration of time. Payments for customer support are generally made at the inception of the contract term or in installments over the term of the maintenance period. Our customer support team is ready to provide these maintenance services, as needed, to the customer during the contract term. As the elements of customer support are delivered concurrently and have the same pattern of transfer, customer support is accounted for as a single performance obligation. The customer benefits evenly throughout the contract period from the guarantee that the customer support resources and personnel will be available to them, and that any unspecified upgrades or unspecified future products developed by us will be made available. Revenue for customer support is recognized ratably over the contract period based on the start and end dates of the maintenance term, in line with how we believe services are provided. License revenue Our license revenue can be broadly categorized as perpetual licenses, term licenses and subscription licenses, all of which are deployed on the customer’s premises (off-cloud). Perpetual licenses : We sell perpetual licenses which provide customers the right to use software for an indefinite period of time in exchange for a one-time license fee, which is generally paid at contract inception. Our perpetual licenses provide a right to use intellectual property (IP) that is functional in nature and have significant stand-alone functionality. Accordingly, for perpetual licenses of functional IP, revenue is recognized at the point-in-time when control has been transferred to the customer, which normally occurs once software activation keys have been made available for download. 55 Table of Contents Term licenses and Subscription licenses: We sell both term and subscription licenses which provide customers the right to use software for a specified period in exchange for a fee, which may be paid at contract inception or paid in installments over the period of the contract. Like perpetual licenses, both our term licenses and subscription licenses are functional IP that have significant stand-alone functionality. Accordingly, for both term and subscription licenses, revenue is recognized at the point-in-time when the customer is able to use and benefit from the software, which is normally once software activation keys have been made available for download at the commencement of the term. Professional service and other revenue 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 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. Payment for professional services is generally a fixed fee or a fee based on time and materials. Professional services can be arranged in the same contract as the software license or in a separate contract. As our professional services do not significantly change the functionality of the license and our customers can benefit from our professional services on their own or together with other readily available resources, we consider professional services distinct within the context of the contract. Professional service revenue is recognized over time as long as: (i) the customer simultaneously receives and consumes the benefits as we perform them, (ii) our performance creates or enhances an asset the customer controls as we perform and (iii) our performance does not create an asset with an alternative use, and we have the enforceable right to payment. If all the above criteria are met, we use an input-based measure of progress for recognizing professional service revenue. For example, we may consider total labour hours incurred compared to total expected labour hours. As a practical expedient, when we invoice a customer at an amount that corresponds directly with the value to the customer of our performance to date, we will recognize revenue at that amount. Material rights To the extent that we grant our customer an option to acquire additional products or services in one of our arrangements, we will account for the option as a distinct performance obligation in the contract only if the option provides a material right to the customer that the customer would not receive without entering into the contract. 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 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. Arrangements with multiple performance obligations Our contracts generally contain more than one of the products and services listed above. Determining whether goods and services are considered distinct performance obligations that should be accounted for separately or as a single performance obligation may require judgment, specifically when assessing whether both of the following two criteria are met: • the customer can benefit from the product or service either on its own or together with other resources that are readily available to the customer; and • our promise to transfer the product or service to the customer is separately identifiable from other promises in the contract. If these criteria are not met, we determine an appropriate measure of progress based on the nature of our overall promise for the single performance obligation. If these criteria are met, each product or service is separately accounted for as a distinct performance obligation and the total transaction price is allocated to each performance obligation on a relative standalone selling price (SSP) basis. Standalone selling price 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 can establish the SSP based on observable data. We typically 56 Table of Contents 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 regional-specific factors, competitive positioning, internal costs, profit objectives and pricing practices. Transaction Price Allocation In bundled arrangements, where we have more than one distinct performance obligation, we must allocate the transaction price to each performance obligation based on its relative SSP. However, in certain bundled arrangements, the SSP may not always be directly observable. For instance, in bundled arrangements with license and customer support, we allocate the transaction price between the license and customer support performance obligations using the residual approach because we have determined that the SSP for licenses in these arrangements are highly variable. We use the residual approach only for our license arrangements. When the SSP is observable but contractual pricing does not fall within our established SSP range, then an adjustment is required, and we will allocate the transaction price between license and customer support based on the relative SSP established for the respective performance obligations. When two or more contracts are entered into at or near the same time with the same customer, we evaluate the facts and circumstances associated with the negotiation of those contracts. Where the contracts are negotiated as a package, we will account for them as a single arrangement and allocate the consideration for the combined contracts among the performance obligations accordingly. We believe there are significant assumptions, judgments and estimates involved in the accounting for revenue recognition as discussed above and these assumptions, judgments and estimates could impact the timing of when revenue is recognized and could have a material impact on our Consolidated Financial Statements. Goodwill Goodwill represents the excess of the purchase price in a business combination over the fair value of net tangible and intangible assets acquired. The carrying amount of goodwill is periodically reviewed for impairment (at a minimum annually) and whenever events or changes in circumstances indicate that the carrying value of this asset may not be recoverable. Our operations are analyzed by management and our chief operating decision maker (CODM) as being part of a single industry segment: the design, development, marketing and sales of Information Management software and solutions. Therefore, our goodwill impairment assessment is based on the allocation of goodwill to a single reporting unit. We perform a qualitative assessment to test our reporting unit’s goodwill for impairment. Based on our qualitative assessment, if we determine that the fair value of our reporting unit is more likely than not (i.e., a likelihood of more than 50 percent) to be less than its carrying amount, the quantitative assessment of the impairment test is performed. In the quantitative assessment, we compare the fair value of our reporting unit to its carrying value. If the fair value of the reporting unit exceeds its carrying value, goodwill is not considered impaired, and we are not required to perform further testing. If the carrying value of the net assets of our reporting unit exceeds its fair value, then an impairment loss equal to the difference, but not exceeding the total carrying value of goodwill allocated to the reporting unit, would be recorded. Our annual impairment analysis of goodwill was performed as of April 1, 2024. Our qualitative assessment indicated that there were no indications of impairment and therefore there was no impairment of goodwill required to be recorded for Fiscal 2024 (no impairments were recorded for Fiscal 2023 and Fiscal 2022, respectively). Acquired intangibles In accordance with business combinations accounting, we allocate the purchase price of acquired companies to the tangible and intangible assets acquired and the liabilities assumed based on their estimated fair values. Such valuations may require management to make significant estimates and assumptions, especially with respect to intangible assets. Acquired intangible assets typically consist of acquired technology and customer relationships. In valuing our acquired intangible assets, we may make assumptions and estimates based in part on information obtained from the management of the acquired company, which may make our assumptions and estimates inherently uncertain. Examples of critical estimates we may make in valuing certain of the intangible assets that we acquire include, but are not limited to: • future expected cash flows of our individual revenue streams; • historical and expected customer attrition rates and anticipated growth in revenue from acquired customers; 57 Table of Contents • the expected use of the acquired assets; and • discount rates. As a result of the judgments that need to be made, we obtain the assistance of independent valuation firms. We complete these assessments as soon as practical after the closing dates. Any excess of the purchase price over the estimated fair values of the identifiable net assets acquired is recorded as goodwill. Although we believe the assumptions and estimates of fair value we have made in the past have been reasonable and appropriate, they are based in part on historical experience and information obtained from the management of the acquired companies and are inherently uncertain and subject to refinement. Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill, if the changes are related to conditions that existed at the time of the acquisition. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments, based on events that occurred subsequent to the acquisition date, are recorded in our Consolidated Statements of Income. Income taxes We account for income taxes in accordance with ASC Topic 740, “Income Taxes” (Topic 740). We account for our uncertain tax provisions by using a two-step approach. The first step is to evaluate the tax position for recognition by determining if the weight of the available evidence indicates it is more likely than not, based solely on the technical merits, that the position will be sustained on audit, including the resolution of related appeals or litigation processes, if any. The second step is to measure the appropriate amount of the benefit to recognize. The amount of benefit to recognize is measured as the maximum amount which is more likely than not to be realized. 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. 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. Deferred tax assets and liabilities arise from temporary differences between the tax bases of assets and liabilities and their reported amounts in the Consolidated Financial Statements that will result in taxable or deductible amounts in future years. These temporary differences are measured using enacted tax rates. A valuation allowance is recorded to reduce deferred tax assets to the extent that we consider it is more likely than not that a deferred tax asset will not be realized. In determining the valuation allowance, we consider factors such as the reversal of deferred income tax liabilities, projected taxable income and the character of income tax assets and tax planning strategies. A change to these factors could impact the estimated valuation allowance and income tax expense. The Company’s tax positions are subject to audit by local taxing authorities across multiple global subsidiaries and the resolution of such audits may span multiple years. Since tax law is complex and often subject to varied interpretations, it is uncertain whether some of the Company’s tax positions will be sustained upon audit. Our assumptions, judgments and estimates relative to the current provision for income taxes considers current tax laws, our interpretations of current tax laws and possible outcomes of current and future audits conducted by domestic and foreign tax authorities. 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, see Note 15 “Income Taxes” to the Consolidated Financial Statements included in this Annual Report on Form 10-K. RESULTS OF OPERATIONS The following tables provide a detailed analysis of our results of operations and financial condition. 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 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. 58 Table of Contents 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. 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 $ — $ — 59 Table of Contents Summary of Results of Operations Year Ended June 30, (In thousands) 2024 Change increase (decrease) 2023 Change increase (decrease) 2022 Total Revenues by Product Type: Cloud services and subscriptions $ 1,820,524 $ 120,091 $ 1,700,433 $ 165,416 $ 1,535,017 Customer support 2,713,297 798,277 1,915,020 584,055 1,330,965 License 834,162 295,136 539,026 180,675 358,351 Professional service and other 401,594 71,093 330,501 60,990 269,511 Total revenues 5,769,577 1,284,597 4,484,980 991,136 3,493,844 Total Cost of Revenues 1,578,549 261,962 1,316,587 254,386 1,062,201 Total GAAP-based Gross Profit 4,191,028 1,022,635 3,168,393 736,750 2,431,643 Total GAAP-based Gross Margin % 72.6 % 70.6 % 69.6 % Total GAAP-based Operating Expenses 3,303,943 651,842 2,652,101 865,231 1,786,870 Total GAAP-based Income from Operations $ 887,085 $ 370,793 $ 516,292 $ (128,481) $ 644,773 % Revenues by Product Type: Cloud services and subscriptions 31.6 % 37.9 % 43.9 % Customer support 47.0 % 42.7 % 38.1 % License 14.5 % 12.0 % 10.3 % Professional service and other 6.9 % 7.4 % 7.7 % Total Cost of Revenues by Product Type: Cloud services and subscriptions $ 713,759 $ 123,594 $ 590,165 $ 78,452 $ 511,713 Customer support 292,733 83,028 209,705 88,220 121,485 License 25,608 8,963 16,645 3,144 13,501 Professional service and other 302,527 25,639 276,888 59,993 216,895 Amortization of acquired technology-based intangible assets 243,922 20,738 223,184 24,577 198,607 Total cost of revenues $ 1,578,549 $ 261,962 $ 1,316,587 $ 254,386 $ 1,062,201 % GAAP-based Gross Margin by Product Type: Cloud services and subscriptions 60.8 % 65.3 % 66.7 % Customer support 89.2 % 89.0 % 90.9 % License 96.9 % 96.9 % 96.2 % Professional service and other 24.7 % 16.2 % 19.5 % Total Revenues by Geography: (1) Americas (2) $ 3,341,881 $ 556,878 $ 2,785,003 $ 597,374 $ 2,187,629 EMEA (3) 1,878,470 568,454 1,310,016 283,815 1,026,201 Asia Pacific (4) 549,226 159,265 389,961 109,947 280,014 Total revenues $ 5,769,577 $ 1,284,597 $ 4,484,980 $ 991,136 $ 3,493,844 % Revenues by Geography: Americas (2) 57.9 % 62.1 % 62.6 % EMEA (3) 32.6 % 29.2 % 29.4 % Asia Pacific (4) 9.5 % 8.7 % 8.0 % Other Metrics: GAAP-based gross margin 72.6 % 70.6 % 69.6 % Non-GAAP-based gross margin (5) 77.3 % 76.1 % 75.6 % Net income, attributable to OpenText $ 465,090 $ 150,379 $ 397,090 GAAP-based EPS, diluted $ 1.71 $ 0.56 $ 1.46 Non-GAAP-based EPS, diluted (5) $ 4.17 $ 3.29 $ 3.22 Adjusted EBITDA (5) $ 1,970,200 $ 1,472,917 $ 1,264,986 ______________________ (1) Total revenues by geography are determined based on the location of our direct end customer. (2) Americas consists of countries in North, Central and South America. (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. 60 Table of Contents (5) See “Use of Non-GAAP Financial Measures” (discussed later in this MD&A) for definitions and reconciliations of GAAP-based measures to Non-GAAP-based measures. Revenues, Cost of Revenues and Gross Margin by Product Type 1) Cloud Services and Subscriptions: Cloud services and subscriptions revenues 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 via an identified line. Our cloud arrangements can be broadly categorized as PaaS, SaaS, cloud subscriptions and managed services. 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. Year Ended June 30, (In thousands) 2024 Change increase (decrease) 2023 Change increase (decrease) 2022 Cloud Services and Subscriptions: Americas $ 1,352,431 $ 64,700 $ 1,287,731 $ 131,813 $ 1,155,918 EMEA 352,867 47,574 305,293 30,469 274,824 Asia Pacific 115,226 7,817 107,409 3,134 104,275 Total Cloud Services and Subscriptions Revenues 1,820,524 120,091 1,700,433 165,416 1,535,017 Cost of Cloud Services and Subscriptions Revenues 713,759 123,594 590,165 78,452 511,713 GAAP-based Cloud Services and Subscriptions Gross Profit $ 1,106,765 $ (3,503) $ 1,110,268 $ 86,964 $ 1,023,304 GAAP-based Cloud Services and Subscriptions Gross Margin % 60.8 % 65.3 % 66.7 % % Cloud Services and Subscriptions Revenues by Geography: Americas 74.3 % 75.7 % 75.3 % EMEA 19.4 % 18.0 % 17.9 % Asia Pacific 6.3 % 6.3 % 6.8 % 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 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. There were 129 cloud services contracts greater than $1.0 million that closed during Fiscal 2024, compared to 89 contracts during Fiscal 2023. 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 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%. 2) Customer Support: Customer support revenues consist of revenues from our customer support and maintenance agreements. These agreements allow our customers to receive technical support, enhancements and upgrades to new versions of our software products when available. Customer support revenues are generated from support and maintenance relating to current year sales of software products and from the renewal of existing maintenance agreements for software licenses sold in prior periods. Therefore, changes in Customer support revenues do not always correlate directly to the changes in license revenues from period to period. The terms of support and maintenance agreements are typically twelve months, and are renewable, generally on an annual basis, at the option of the customer. 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, 2024, 61 Table of Contents 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. Year Ended June 30, (In thousands) 2024 Change increase (decrease) 2023 Change increase (decrease) 2022 Customer Support Revenues: Americas $ 1,454,071 $ 372,879 $ 1,081,192 $ 337,718 $ 743,474 EMEA 991,781 329,180 662,601 186,915 475,686 Asia Pacific 267,445 96,218 171,227 59,422 111,805 Total Customer Support Revenues 2,713,297 798,277 1,915,020 584,055 1,330,965 Cost of Customer Support Revenues 292,733 83,028 209,705 88,220 121,485 GAAP-based Customer Support Gross Profit $ 2,420,564 $ 715,249 $ 1,705,315 $ 495,835 $ 1,209,480 GAAP-based Customer Support Gross Margin % 89.2 % 89.0 % 90.9 % % Customer Support Revenues by Geography: Americas 53.6 % 56.5 % 55.9 % EMEA 36.6 % 34.6 % 35.7 % Asia Pacific 9.8 % 8.9 % 8.4 % 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 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. Geographically, the overall change was attributable to an increase in Americas of $372.9 million, an increase in EMEA of $329.2 million and an increase in Asia Pacific of $96.2 million. Cost of Customer support revenues increased by $83.0 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 $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 remained stable at approximately 89% compared to the prior fiscal year. 3) License: Our License revenue can be broadly categorized as perpetual licenses, term licenses and subscription licenses. Our License revenues are impacted by the strength of general economic and industry conditions, the competitive strength of our software products and our acquisitions. Cost of License revenues consists primarily of royalties payable to third parties. Year Ended June 30, (In thousands) 2024 Change increase (decrease) 2023 Change increase (decrease) 2022 License Revenues: Americas $ 380,100 $ 109,291 $ 270,809 $ 107,090 $ 163,719 EMEA 338,097 138,470 199,627 37,892 161,735 Asia Pacific 115,965 47,375 68,590 35,693 32,897 Total License Revenues 834,162 295,136 539,026 180,675 358,351 Cost of License Revenues 25,608 8,963 16,645 3,144 13,501 GAAP-based License Gross Profit $ 808,554 $ 286,173 $ 522,381 $ 177,531 $ 344,850 GAAP-based License Gross Margin % 96.9 % 96.9 % 96.2 % % License Revenues by Geography: Americas 45.6 % 50.2 % 45.7 % EMEA 40.5 % 37.0 % 45.1 % Asia Pacific 13.9 % 12.8 % 9.2 % 62 Table of Contents 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 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 $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: Professional service and other revenues consist of revenues from consulting contracts and contracts to provide implementation, training and integration services (professional services). Other revenues consist of hardware revenues, which are included within the “Professional service and other” category because they are relatively immaterial to our service revenues. Professional services are typically performed after the purchase of new software licenses. Professional service and other revenues can vary from period to period based on the type of engagements as well as those implementations that are assumed by our partner network. Cost of Professional service and other revenues consists primarily of the costs of providing integration, configuration and training with respect to our various software products. The most significant components of these costs are personnel-related expenses, travel costs and third-party subcontracting. Year Ended June 30, (In thousands) 2024 Change increase (decrease) 2023 Change increase (decrease) 2022 Professional Service and Other Revenues: Americas $ 155,279 $ 10,008 $ 145,271 $ 20,753 $ 124,518 EMEA 195,725 53,230 142,495 28,539 113,956 Asia Pacific 50,590 7,855 42,735 11,698 31,037 Total Professional Service and Other Revenues 401,594 71,093 330,501 60,990 269,511 Cost of Professional Service and Other Revenues 302,527 25,639 276,888 59,993 216,895 GAAP-based Professional Service and Other Gross Profit $ 99,067 $ 45,454 $ 53,613 $ 997 $ 52,616 GAAP-based Professional Service and Other Gross Margin % 24.7 % 16.2 % 19.5 % % Professional Service and Other Revenues by Geography: Americas 38.7 % 44.0 % 46.2 % EMEA 48.7 % 43.1 % 42.3 % Asia Pacific 12.6 % 12.9 % 11.5 % 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 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. Geographically, the overall change was attributable to an increase in EMEA of $53.2 million, an increase in Americas of $10.0 million and an increase in Asia Pacific of $7.9 million. 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 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%. 63 Table of Contents Amortization of Acquired Technology-based Intangible Assets Year Ended June 30, (In thousands) 2024 Change increase (decrease) 2023 Change increase (decrease) 2022 Amortization of acquired technology-based intangible assets $ 243,922 $ 20,738 $ 223,184 $ 24,577 $ 198,607 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 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 Year Ended June 30, (In thousands) 2024 Change increase (decrease) 2023 Change increase (decrease) 2022 Research and development $ 893,932 $ 213,345 $ 680,587 $ 240,139 $ 440,448 Sales and marketing 1,133,665 185,067 948,598 271,480 677,118 General and administrative 577,038 157,448 419,590 102,505 317,085 Depreciation 131,599 23,838 107,761 19,520 88,241 Amortization of acquired customer-based intangible assets 432,404 105,998 326,406 109,301 217,105 Special charges (recoveries) 135,305 (33,854) 169,159 122,286 46,873 Total operating expenses $ 3,303,943 $ 651,842 $ 2,652,101 $ 865,231 $ 1,786,870 % of Total Revenues: Research and development 15.5 % 15.2 % 12.6 % Sales and marketing 19.6 % 21.2 % 19.4 % General and administrative 10.0 % 9.4 % 9.1 % Depreciation 2.3 % 2.4 % 2.5 % Amortization of acquired customer-based intangible assets 7.5 % 7.3 % 6.2 % Special charges (recoveries) 2.3 % 3.8 % 1.3 % Research and development expenses consist primarily of payroll and payroll-related benefits expenses, contracted research and development expenses and facility costs. Research and development enables organic growth and improves product stability and functionality, and accordingly, we dedicate extensive efforts to update and upgrade our product offerings. The primary drivers are typically software upgrades and development. Change between Fiscal Years increase (decrease) (In thousands) 2024 and 2023 2023 and 2022 Payroll and payroll-related benefits $ 145,763 $ 152,915 Contract labour and consulting 6,178 14,660 Share-based compensation 1,526 21,964 Travel and communication 3,127 1,363 Facilities 50,225 45,791 Other miscellaneous 6,526 3,446 Total change in research and development expenses $ 213,345 $ 240,139 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 $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. 64 Table of Contents Sales and marketing expenses consist primarily of personnel expenses and costs associated with advertising, marketing events and trade shows. Change between Fiscal Years increase (decrease) (In thousands) 2024 and 2023 2023 and 2022 Payroll and payroll-related benefits $ 145,731 $ 136,300 Commissions 7,665 38,142 Contract labour and consulting 8,712 7,670 Share-based compensation 4,862 19,081 Travel and communication 7,466 13,347 Marketing expenses (4,708) 29,076 Facilities 13,100 23,168 Credit loss expense (recovery) 7,693 (94) Other miscellaneous (5,454) 4,790 Total change in sales and marketing expenses $ 185,067 $ 271,480 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 $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. Change between Fiscal Years increase (decrease) (In thousands) 2024 and 2023 2023 and 2022 Payroll and payroll-related benefits 48,909 $ 50,695 Contract labour and consulting 4,856 15,827 Share-based compensation 1,212 9,856 Travel and communication 3,708 9,106 Facilities 4,852 3,393 Other miscellaneous 93,911 13,628 Total change in general and administrative expenses $ 157,448 $ 102,505 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. 65 Table of Contents Depreciation expenses: Year Ended June 30, (In thousands) 2024 Change increase (decrease) 2023 Change increase (decrease) 2022 Depreciation $ 131,599 $ 23,838 $ 107,761 $ 19,520 $ 88,241 Depreciation expenses increased during the year ended June 30, 2024 by $23.8 million compared to the prior fiscal year, primarily as a result of the Micro Focus Acquisition. Depreciation expenses as a percentage of total revenue remained stable for the year ended June 30, 2024 at 2% compared to the prior fiscal year. Amortization of acquired customer-based intangible assets: Year Ended June 30, (In thousands) 2024 Change increase (decrease) 2023 Change increase (decrease) 2022 Amortization of acquired customer-based intangible assets $ 432,404 $ 105,998 $ 326,406 $ 109,301 $ 217,105 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 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): Special charges (recoveries) typically relate to amounts that we expect to pay in connection with restructuring plans, acquisition-related costs and other similar charges and recoveries. Generally, we implement such plans in the context of integrating acquired entities with existing OpenText operations and most recently in response to our return to office planning. Actions related to such restructuring plans are typically completed within a period of one year. In certain limited situations, if the planned activity does not need to be implemented, or an expense lower than anticipated is paid out, we record a recovery of the originally recorded expense to Special charges (recoveries). Year Ended June 30, (In thousands) 2024 Change increase (decrease) 2023 Change increase (decrease) 2022 Special charges (recoveries) $ 135,305 $ (33,854) $ 169,159 $ 122,286 $ 46,873 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. 66 Table of Contents Other Income (Expense), Net The components of other income (expense), net were as follows: Year Ended June 30, (In thousands) 2024 Change increase (decrease) 2023 Change increase (decrease) 2022 Foreign exchange gains (losses) (1) $ 1,202 $ (55,397) $ 56,599 $ 59,269 $ (2,670) Unrealized gains (losses) on derivatives not designated as hedges (2) 3,116 131,957 (128,841) (128,841) — Realized gains on derivatives not designated as hedges (3) — (137,471) 137,471 137,471 — OpenText share in net income (loss) of equity investees (4) (18,194) 4,883 (23,077) (81,779) 58,702 Loss on debt extinguishment (5)(6)(7) (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 Total other income (expense), net $ 358,391 $ 323,922 $ 34,469 $ 5,351 $ 29,118 ______________________ (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). (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 Interest and other related expense, net is primarily comprised of interest paid and accrued on our debt facilities, offset by interest income earned on our cash and cash equivalents. Year Ended June 30, (In thousands) 2024 Change increase (decrease) 2023 Change increase (decrease) 2022 Interest expense related to total outstanding debt (1) $ 535,932 $ 172,300 $ 363,632 $ 212,063 $ 151,569 Interest income (49,136) 4,350 (53,486) (48,849) (4,637) Other miscellaneous expense (2) 29,384 10,102 19,282 8,334 10,948 Total interest and other related expense, net $ 516,180 $ 186,752 $ 329,428 $ 171,548 $ 157,880 ______________________ (1) For more details see Note 11 “Long-Term Debt” to our Consolidated Financial Statements. (2) Other miscellaneous expense primarily consists of the amortization of debt discount and the debt issuance costs. For more details see Note 11 “Long-Term Debt” to our Consolidated Financial Statements. 67 Table of Contents Provision for (recovery of) Income Taxes We operate in several tax jurisdictions and are exposed to various foreign tax rates. Year Ended June 30, (In thousands) 2024 Change increase (decrease) 2023 Change increase (decrease) 2022 Provision for (recovery of) income taxes $ 264,012 $ 193,245 $ 70,767 $ (47,985) $ 118,752 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 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. Also see Part I, Item 1A, “Risk Factors” within this Annual Report on Form 10-K. 68 Table of Contents LIQUIDITY AND CAPITAL RESOURCES The following tables set forth changes in cash flows from operating, investing and financing activities for the periods indicated: (In thousands) As of June 30, 2024 Change increase (decrease) As of June 30, 2023 Change increase (decrease) As of June 30, 2022 Cash and cash equivalents $ 1,280,662 $ 49,037 $ 1,231,625 $ (462,116) $ 1,693,741 Restricted cash (1) 2,131 (196) 2,327 157 2,170 Total cash, cash equivalents and restricted cash $ 1,282,793 $ 48,841 $ 1,233,952 $ (461,959) $ 1,695,911 ______________________ (1) Restricted cash is classified under the Prepaid expenses and other current assets and Other assets line items on the Consolidated Balance Sheets (see Note 9 “Prepaid Expenses and Other Assets” to our Consolidated Financial Statements for more details). Year Ended June 30, (In thousands) 2024 Change 2023 Change 2022 Cash provided by operating activities $ 967,691 $ 188,486 $ 779,205 $ (202,605) $ 981,810 Cash provided by (used in) investing activities $ 2,055,317 $ 7,706,737 $ (5,651,420) $ (4,680,461) $ (970,959) Cash provided by (used in) financing activities $ (2,961,904) $ (7,364,957) $ 4,403,053 $ 4,264,597 $ 138,456 Cash and cash equivalents Cash and cash equivalents primarily consist of balances with banks as well as deposits with original maturities of 90 days or less. We continue to anticipate that our cash and cash equivalents, as well as available credit facilities, will be sufficient to fund our anticipated cash requirements for working capital, contractual commitments, capital expenditures, dividends and operating needs for the next twelve months. Any further material or acquisition-related activities may require additional sources of financing and would be subject to the financial covenants established under our credit facilities. For more details, see “Long-term Debt and Credit Facilities” below. 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 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. The per day impact of our DSO in the fourth quarter of Fiscal 2024 and Fiscal 2023 on our cash flows was $14.7 million and $16.6 million, respectively. In arriving at DSO, we exclude contract assets as these assets do not provide an unconditional right to the related consideration from the customer. 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. 69 Table of Contents 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 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) $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; and (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; and (ii) $27.6 million related to higher proceeds from the issuance of Common Shares from the exercise of options and the ESPP; and (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 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 (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). 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. 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 Senior Unsecured Fixed Rate Notes Senior Notes 2031 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. persons in offshore transactions pursuant to Regulation S under the Securities Act. Senior Notes 2031 bear interest at a rate of 4.125% per annum, payable semi-annually in arrears on June 1 and December 1, commencing on June 1, 2022. Senior Notes 2031 will mature on December 1, 2031, unless earlier redeemed, in accordance with their terms, or repurchased. 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. 70 Table of Contents 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 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. These covenants are subject to a number of important limitations and exceptions as set forth in the 2031 Indenture. 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 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, see Note 11 “Long-Term Debt” to our Consolidated Financial Statements. Senior Notes 2030 On February 18, 2020 OTHI, a wholly-owned indirect subsidiary of the Company, issued $900 million in aggregate principal amount of 4.125% senior notes due 2030 guaranteed by the Company (Senior Notes 2030) in an unregistered offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act, and to certain non-U.S. persons in offshore transactions pursuant to Regulation S under the Securities Act. Senior Notes 2030 bear interest at a rate of 4.125% per annum, payable semi-annually in arrears on February 15 and August 15, commencing on August 15, 2020. Senior Notes 2030 will mature on February 15, 2030, unless earlier redeemed, in accordance with their terms, or repurchased. 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, 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, 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. These covenants are subject to a number of important limitations and exceptions as set forth in the 2030 Indenture. 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. 71 Table of Contents 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, see Note 11 “Long-Term Debt” to our Consolidated Financial Statements. Senior Notes 2029 On November 24, 2021, we issued $850 million in aggregate principal amount of 3.875% senior notes due 2029 (Senior Notes 2029) in an unregistered offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act and to certain non-U.S. persons in offshore transactions pursuant to Regulation S under the Securities Act. Senior Notes 2029 bear interest at a rate of 3.875% per annum, payable semi-annually in arrears on June 1 and December 1, commencing on June 1, 2022. Senior Notes 2029 will mature on December 1, 2029, unless earlier redeemed, in accordance with their terms, or repurchased. We may redeem all or a portion of the Senior Notes 2029 at any time prior to December 1, 2024 at a redemption price equal to 100% of the principal amount of the Senior Notes 2029 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 2029, on one or more occasions, prior to December 1, 2024, using the net proceeds from certain qualified equity offerings at a redemption price of 103.875% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, subject to compliance with certain conditions. We may, on one or more occasions, redeem the Senior Notes 2029, in whole or in part, at any time on and after December 1, 2024 at the applicable redemption prices set forth in the indenture governing the Senior Notes 2029, dated as of November 24, 2021, among the Company, the subsidiary guarantors party thereto, The Bank of New York Mellon, as U.S. trustee, and BNY Trust Company of Canada, as Canadian trustee (the 2029 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 2029 Indenture, we will be required to make an offer to repurchase the Senior Notes 2029 at a price equal to 101% of the principal amount of the Senior Notes 2029, plus accrued and unpaid interest, if any, to the date of purchase. The 2029 Indenture contains covenants that limit our and certain of our 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 or the guarantors without such subsidiary becoming a subsidiary guarantor of Senior Notes 2029; 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. These covenants are subject to a number of important limitations and exceptions as set forth in the 2029 Indenture. The 2029 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 2029 to be due and payable immediately. Senior Notes 2029 are guaranteed on a senior unsecured basis by our existing and future wholly-owned subsidiaries that borrow or guarantee the obligations under our senior credit facilities. Senior Notes 2029 and the guarantees rank equally in right of payment with all of our and our guarantors’ existing and future senior unsubordinated debt and will rank senior in right of payment to all of our and our guarantors’ future subordinated debt. Senior Notes 2029 and the guarantees will be effectively subordinated to all of our and our guarantors’ existing and future secured debt, including the obligations under the senior credit facilities, to the extent of the value of the assets securing such secured debt. 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, see Note 11 “Long-Term Debt” to our Consolidated Financial Statements. 72 Table of Contents Senior Notes 2028 On February 18, 2020 we issued $900 million in aggregate principal amount of 3.875% senior notes due 2028 (Senior Notes 2028) in an unregistered offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act and to certain non-U.S. persons in offshore transactions pursuant to Regulation S under the Securities Act. Senior Notes 2028 bear interest at a rate of 3.875% per annum, payable semi-annually in arrears on February 15 and August 15, commencing on August 15, 2020. Senior Notes 2028 will mature on February 15, 2028, unless earlier redeemed, in accordance with their terms, or repurchased. 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. If we experience one of the kinds of change of control triggering events specified in the 2028 Indenture, we will be required to make an offer to repurchase the Senior Notes 2028 at a price equal to 101% of the principal amount of the Senior Notes 2028, plus accrued and unpaid interest, if any, to the date of purchase. The 2028 Indenture contains covenants that limit our and certain of our 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 or the guarantors without such subsidiary becoming a subsidiary guarantor of Senior Notes 2028; 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. These covenants are subject to a number of important limitations and exceptions as set forth in the 2028 Indenture. The 2028 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 2028 to be due and payable immediately. Senior Notes 2028 are guaranteed on a senior unsecured basis by our existing and future wholly-owned subsidiaries that borrow or guarantee the obligations under our senior credit facilities. Senior Notes 2028 and the guarantees rank equally in right of payment with all of our and our guarantors’ existing and future senior unsubordinated debt and will rank senior in right of payment to all of our and our guarantors’ future subordinated debt. Senior Notes 2028 and the guarantees will be effectively subordinated to all of our and our guarantors’ existing and future secured debt, including the obligations under the senior credit facilities, to the extent of the value of the assets securing such secured debt. The foregoing description of the 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, see Note 11 “Long-Term Debt” to our Consolidated Financial Statements. Senior Notes 2026 On May 31, 2016 we issued $600 million in aggregate principal amount of 5.875% senior notes due 2026 (Senior Notes 2026) in an unregistered offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act, and to certain persons in offshore transactions pursuant to Regulation S under the Securities Act. Senior Notes 2026 had interest at a rate of 5.875% per annum, payable semi-annually in arrears on June 1 and December 1, commencing on December 1, 2016. Senior Notes 2026 would have matured on June 1, 2026. On December 20, 2016, we issued an additional $250 million in aggregate principal amount by reopening our Senior Notes 2026 at an issue price of 102.75%. The additional notes had identical terms, were fungible with and were a part of a single series with the previously issued $600 million aggregate principal amount of Senior Notes 2026. The outstanding aggregate principal amount of Senior Notes 2026, after taking into consideration the additional issuance, was $850 million as of December 9, 2021. On December 9, 2021, we redeemed Senior Notes 2026 in full at a price equal to 102.9375% of the principal amount plus accrued and unpaid interest to, but excluding, the redemption date. A portion of the net proceeds from the offerings of Senior Notes 2029 and Senior Notes 2031 was used to redeem Senior Notes 2026. 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. See Note 23 “Other Income (Expense), Net” to our Consolidated Financial Statements. For further details relating to our debt, see Note 11 “Long-Term Debt” to our Consolidated Financial Statements. 73 Table of Contents 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 due 2027 (Senior Secured Notes 2027, and together with the Senior Notes 2031, Senior Notes 2030, Senior Notes 2029, and Senior Notes 2028, the Senior Notes) in connection with the financing of the Micro Focus Acquisition in an unregistered offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act and to certain non-U.S. persons in offshore transactions pursuant to Regulation S under the Securities Act. Senior Secured Notes 2027 bear interest at a rate of 6.90% per annum, payable semi-annually in arrears on June 1 and December 1, commencing on June 1, 2023. Senior Secured Notes 2027 will mature on December 1, 2027, unless earlier redeemed, in accordance with their terms, or repurchased. 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, 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. trustee, and BNY Trust Company of Canada, as Canadian trustee (the 2027 Indenture), we will be required to make an offer to repurchase the Senior Secured Notes 2027 at a price equal to 101% of the principal amount of the Senior Secured Notes 2027, plus accrued and unpaid interest, if any, to the date of purchase. The 2027 Indenture contains covenants that limit our 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) create, assume, incur or guarantee additional indebtedness of the Company or certain of the Company’s subsidiaries without such subsidiary becoming a subsidiary guarantor of the Senior Secured Notes 2027; and (iii) consolidate, amalgamate or merge with, or convey, transfer, lease or otherwise dispose of the Company’s property and assets substantially as an entirety to, another person. These covenants are subject to a number of important limitations and exceptions as set forth in the 2027 Indenture. The 2027 Indenture also provides for certain 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 Secured Notes 2027 to be due and payable immediately. The Senior Secured Notes 2027 are guaranteed on a senior secured basis by certain of the Company’s subsidiaries and are secured with the same priority as the Company’s senior credit facilities. The Senior Secured Notes 2027 and the related guarantees are effectively senior to all of the Company’s and the guarantors’ senior unsecured debt to the extent of the value of the Collateral (as defined in the 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. For further details relating to our debt, see Note 11 “Long-Term Debt” to our Consolidated Financial Statements. Term Loan B 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. 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). 74 Table of Contents For further details relating to our debt, see Note 11 “Long-Term Debt” to our Consolidated Financial Statements. Revolver 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 (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. 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, 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 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 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%. As of June 30, 2024, the Acquisition Term Loan bears an effective interest rate of 8.67%. The effective interest rate includes interest expense of $272.5 million and amortization of debt discount and issuance costs of $18.3 million. The Acquisition Term Loan has incremental facility capacity of (i) $250 million plus (ii) additional amounts, subject to meeting a “consolidated senior secured net leverage” ratio not exceeding 2.75:1.00, in each case subject to certain conditions. Consolidated senior secured net leverage ratio is defined for this purpose as the proportion of the Company’s total debt reduced by unrestricted cash, including guarantees and letters of credit, that is secured by the Company’s or any of the Company’s subsidiaries’ assets, over the Company’s trailing four financial quarter net income before interest, taxes, depreciation, amortization, restructuring, share-based compensation and other miscellaneous charges. Under the Acquisition Term Loan, we must maintain a “consolidated net leverage” ratio of no more than 4.50:1.00 at the end of each financial quarter. Consolidated net leverage ratio is defined for this purpose as the proportion of the Company’s total debt reduced by unrestricted cash, including guarantees and letters of credit, over the Company’s trailing four financial quarter net income before interest, taxes, depreciation, amortization, restructuring, share-based compensation and other miscellaneous charges as defined in the Acquisition Term Loan. As of 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 and the Senior Secured Notes 2027. 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 75 Table of Contents 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. Bridge Loan 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 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 On December 15, 2023, we filed a universal shelf registration statement on Form S-3 with the SEC, which became effective automatically (the Shelf Registration Statement). 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. 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 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. All Common Shares purchased by us pursuant to the Fiscal 2022 Repurchase Plan were cancelled. 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. 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. 76 Table of Contents Normal Course Issuer Bid 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 Pensions 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. We expect to be able to make the long-term and short-term payments related to these obligations in the normal course of operations. Anticipated pension payments under our defined benefit plans for the fiscal years indicated below are as follows: Fiscal years ending June 30, 2025 $ 18,425 2026 14,087 2027 16,443 2028 18,112 2029 19,805 2030 to 2034 115,117 Total $ 201,989 For a detailed discussion on pensions, see Note 12 “Pension Plans and Other Post Retirement Benefits” to our Consolidated Financial Statements. 77 Table of Contents Commitments and Contractual Obligations As of June 30, 2024, we have entered into the following contractual obligations with minimum payments for the indicated fiscal periods as follows: Payments due between Total July 1, 2024 - June 30, 2025 July 1, 2025 - June 30, 2027 July 1, 2027 - June 30, 2029 July 1, 2029 and beyond Long-term debt obligations (1) $ 8,420,561 $ 406,261 $ 804,257 $ 2,555,304 $ 4,654,739 Purchase obligations for contracts not accounted for as lease obligations (2) 340,765 181,003 159,762 — — $ 8,761,326 $ 587,264 $ 964,019 $ 2,555,304 $ 4,654,739 ______________________ (1) Includes interest up to maturity and principal payments. 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 We have entered into customer agreements which may include provisions to indemnify our customers against third party claims that our software products or services infringe certain third-party intellectual property rights and for liabilities related to a breach of our confidentiality obligations. We have not made any material payments in relation to such indemnification provisions and have not accrued any liabilities related to these indemnification provisions in our Consolidated Financial Statements. Occasionally, we enter into financial guarantees with third parties in the ordinary course of our business, including, among others, guarantees relating to taxes and letters of credit on behalf of parties with whom we conduct business. Such agreements have not had a material effect on our results of operations, financial position or cash flows. Litigation We are currently involved in various claims and legal proceedings. Quarterly, we review the status of each significant legal matter and evaluate such matters to determine how they should be treated for accounting and disclosure purposes in accordance with the requirements of ASC Topic 450-20 “Loss Contingencies” (Topic 450-20). Specifically, this evaluation process includes the centralized tracking and itemization of the status of all our disputes and litigation items, discussing the nature of any litigation and claim, including any dispute or claim that is reasonably likely to result in litigation, with relevant internal and external counsel, and assessing the progress of each matter in light of its merits and our experience with similar proceedings under similar circumstances. If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated, we accrue a liability for the estimated loss in accordance with Topic 450-20. As of the date of this Annual Report on Form 10-K, the aggregate of such accrued liabilities was not material to our consolidated financial position or results of operations and we do not believe as of the date of this filing that it is reasonably possible that a loss exceeding the amounts already recognized will be incurred that would be material to our consolidated financial position or results of operations. As described more fully below, we are unable at this time to estimate a possible loss or range of losses in respect of certain disclosed matters. Contingencies CRA Matter 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. As of June 30, 2024, we have provisionally paid approximately $33 million in order to fully preserve our rights to object to the CRA’s audit positions, being the minimum payment required under Canadian legislation while the matter is in dispute. This amount is recorded within Long-term income taxes recoverable on the Consolidated Balance Sheets as of June 30, 2024. 78 Table of Contents The notices of reassessment for Fiscal 2012, Fiscal 2013, Fiscal 2014, Fiscal 2015 and Fiscal 2016 would, as drafted, increase our taxable income by approximately $90 million to $100 million for each of those years, as well as impose a 10% penalty on the proposed adjustment to income. Audits by the CRA of our tax returns for fiscal years prior to Fiscal 2012 have been completed with no reassessment of our income tax liability. We strongly disagree with the CRA's positions and believe the reassessments of Fiscal 2012, Fiscal 2013, Fiscal 2014, Fiscal 2015 and Fiscal 2016 (including any penalties) are without merit, and we are continuing to contest these reassessments. On June 30, 2022, we filed a notice of appeal with the Tax Court of Canada seeking to reverse all such reassessments (including penalties) in full and the customary court process is ongoing. Even if we are unsuccessful in challenging the CRA's reassessments to increase our taxable income for Fiscal 2012, Fiscal 2013, Fiscal 2014, Fiscal 2015 and Fiscal 2016, we have elective deductions available for those years (including carry-backs from later years) that would offset such increased amounts so that no additional cash tax would be payable, exclusive of any assessed penalties and interest, as described above. 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 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 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. We will continue to vigorously contest the adjustments to our taxable income and any penalty and interest assessments, as well as any reduction to the basis of our depreciable property. We are confident that our original tax filing positions were appropriate. 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 also in preliminary stages of auditing Fiscal 2020. Carbonite Class Action Complaint 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. Luna, Individually and on Behalf of All Others Similarly Situated v. Carbonite, Inc., Mohamad S. Ali, and Anthony Folger (No. 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 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. On August 23, 2019, a nearly identical complaint was filed in the same court captioned William Feng, Individually and on Behalf of All Others Similarly Situated v. Carbonite, Inc., Mohamad S. Ali, and Anthony Folger (No. 1:19- cv-11808-LTS) (together with the Luna Complaint, the Securities Actions). On November 21, 2019, the district court consolidated the Securities Actions, appointed a lead plaintiff, and designated a lead counsel. On January 15, 2020, the lead plaintiff filed a consolidated amended complaint generally making the same allegations and seeking the same relief as the complaint filed on August 1, 2019. The defendants moved to dismiss the Securities Actions on March 10, 2020. 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 79 Table of Contents 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. 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 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.