OPEN TEXT CORP 10-Q

Item 3. Quantitative and Qualitative Disclosures About Market Risk We are primarily exposed to market risks associated with fluctuations in interest rates on our Revolver, Acquisition Term Loan and foreign currency exchange rates. Interest rate risk Our exposure to interest rate fluctuations relates primarily to our Revolver and Acquisition Term Loan. As of March 31, 2025, we had an outstanding balance of $2.2 billion under the Acquisition Term Loan. Borrowings under the Acquisition Term Loan bear a floating interest rate of 1.75% plus Term SOFR (as defined in the Acquisition Term Loan). As of March 31, 2025, an adverse change of 100 basis points on the interest rate would have the effect of increasing our annual interest payment on the Acquisition Term Loan by approximately $21.9 million, assuming that the loan balance as of March 31, 2025 is outstanding for the entire period (June 30, 2024—$22.2 million). For more information regarding the impact of SOFR, see “Stress in the global financial system may adversely affect our finances and operations” included within Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for Fiscal 2024. Foreign currency risk Foreign currency transaction risk We transact business in various foreign currencies. Our foreign currency exposures typically arise from intercompany fees, intercompany loans and other intercompany transactions that are expected to be cash settled in the near term and are transacted in non-functional currency. We expect that we will continue to realize gains or losses with respect to our foreign 72 Table of Contents currency exposures. Our ultimate realized gain or loss with respect to foreign currency exposures will generally depend on the size and type of cross-currency transactions that we enter into, the currency exchange rates associated with these exposures and changes in those rates. We have hedged certain of our Canadian dollar foreign currency exposures relating to our payroll expenses in Canada. Based on the CAD foreign exchange forward contracts outstanding as of March 31, 2025, a one cent change in the Canadian dollar to U.S. dollar exchange rate would have caused a change of $0.7 million in the mark-to-market valuation on our existing foreign exchange forward contracts (June 30, 2024—$0.7 million). Additionally, in connection with the Micro Focus Acquisition, in August 2022, we entered into certain derivative transactions to meet certain foreign currency obligations related to the purchase price of the Micro Focus Acquisition, mitigate the risk of foreign currency appreciation in the GBP denominated purchase price and mitigate the risk of foreign currency appreciation in the EUR denominated existing debt held by Micro Focus. We entered into the following derivatives: (i) three deal-contingent forward contracts, (ii) a non-contingent forward contract, and (iii) EUR/USD cross currency swaps. These instruments were entered into as economic hedges to mitigate foreign currency risks associated with the Micro Focus Acquisition. In connection with the closing of the Micro Focus Acquisition the deal-contingent forward and non-deal contingent forward contracts were settled and we designated the 7-year EUR/USD cross currency swaps as net investment hedges. Based on the 5-year EUR/USD cross currency swaps outstanding as of March 31, 2025, a one cent change in the Euro to U.S. dollar forward exchange rate would have caused a change of $5.8 million in the mark-to-market valuation on our existing cross currency swap (June 30, 2024—$7.2 million). Based on the 7-year EUR/USD cross currency swaps outstanding as of March 31, 2025, a one cent change in the Euro to U.S. dollar forward exchange rate would have caused a change of $7.6 million in the mark-to-market valuation on our existing cross currency swaps (June 30, 2024—$7.6 million). Foreign currency translation risk Our reporting currency is the U.S. dollar. Fluctuations in foreign currencies impact the amount of total assets and liabilities that we report for our foreign subsidiaries upon the translation of these amounts into U.S. dollars. In particular, the amount of cash and cash equivalents that we report in U.S. dollars for a significant portion of the cash held by these subsidiaries is subject to translation variance caused by changes in foreign currency exchange rates as of the end of each respective reporting period (the offset to which is recorded to Accumulated other comprehensive income (loss) on our Condensed Consolidated Balance Sheets). The following table shows our cash and cash equivalents denominated in certain major foreign currencies as of March 31, 2025 (equivalent in U.S. dollar): (In thousands) U.S. Dollar Equivalent at March 31, 2025 U.S. Dollar Equivalent at June 30, 2024 Euro $ 172,707 $ 168,212 British Pound 185,936 57,290 Indian Rupee 119,928 73,955 Swiss Franc 31,411 52,070 Other foreign currencies 135,785 170,175 Total cash and cash equivalents denominated in foreign currencies 645,767 521,702 U.S. Dollar 632,183 758,960 Total cash and cash equivalents $ 1,277,950 $ 1,280,662 If overall foreign currency exchange rates in comparison to the U.S. dollar uniformly weakened by 10%, the amount of cash and cash equivalents we would report in equivalent U.S. dollars would decrease by $64.6 million (June 30, 2024—$52.2 million), assuming we have not entered into any derivatives discussed above under “Foreign Currency Transaction Risk.”