OpenText Reports First Quarter Fiscal Year 2024 Financial Results

   Total Revenues   

  (in millions)  

   Annual Recurring Revenues   

  (in millions)  

   Cloud Revenues   

  (in millions)  

   Reported   

   Constant
Currency   

   Reported   

   Constant
Currency   

   Reported   

   Constant
Currency   

  $1,425  

  $1,410  

  $1,149  

  $1,137  

  $451  

  $449  

  +67.3 %  

  +65.4 %  

  +59.1 %  

  +57.5 %  

  +11.5 %  

  +10.9 %  

  Annual Recurring Revenues represent 81% of Total Revenues  

   ⁽¹⁾  

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

   ⁽²⁾  

  Please see Note 2 "Use of Non-GAAP Financial Measures" to the consolidated financial statements below.  

    Summary of Quarterly Results    

   (In millions, except per share data)   

   Q1 FY'24   

   Q1 FY'23   

   $ Change   

   % Change   

   Q1 FY'24
  in CC*   

   % Change
in CC*   

   Revenues:   

  Cloud services and subscriptions  

  $451.0  

  $404.7  

  $46.4  

  11.5 %  

  $448.6  

  10.9 %  

  Customer support  

  697.7  

  317.4  

  $380.4  

  119.9 %  

  688.5  

  116.9 %  

   Total annual recurring revenues**   

   $1,148.7   

   $722.0   

   $426.7   

   59.1 %   

   $1,137.0   

   57.5 %   

  License  

  173.0  

  62.5  

  $110.5  

  176.6 %  

  170.7  

  172.8 %  

  Professional service and other  

  103.7  

  67.5  

  $36.2  

  53.6 %  

  101.8  

  50.9 %  

   Total revenues   

   $1,425.4   

   $852.0   

   $573.4   

   67.3 %   

   $1,409.5   

   65.4 %   

  GAAP-based operating income  

  $212.9  

  $146.4  

  $66.5  

  45.5 %  

  N/A  

  N/A  

  Non-GAAP-based operating income ⁽¹⁾  

  $460.8  

  $280.9  

  $179.9  

  64.0 %  

  $447.4  

  59.3 %  

  GAAP-based net income (loss) attributable to OpenText  

  $80.9  

  ($116.9)  

  $197.8  

  169.2 %  

  N/A  

  N/A  

  GAAP-based EPS, diluted  

  $0.30  

  ($0.43)  

  $0.73  

  169.8 %  

  N/A  

  N/A  

  Non-GAAP-based EPS, diluted ⁽¹⁾⁽²⁾  

  $1.01  

  $0.77  

  $0.24  

  31.2 %  

  $0.97  

  26.0 %  

  Adjusted EBITDA ⁽¹⁾  

  $494.8  

  $304.0  

  $190.8  

  62.8 %  

  $481.0  

  58.2 %  

  Operating cash flows  

  $47.1  

  $132.0  

  ($84.8)  

  (64.3) %  

  N/A  

  N/A  

  Free cash flows ⁽¹⁾  

  $9.6  

  $95.6  

  ($86.1)  

  (90.0) %  

  N/A  

  N/A  

   ⁽¹⁾  

  Please see Note 2 "Use of Non-GAAP Financial Measures" to the consolidated financial statements below.  

   ⁽²⁾  

  Please also see Note 14 to the Company's Fiscal 2018 Consolidated Financial Statements on Form 10-K. Reflective of the amount of net tax benefit arising from the internal reorganization assumed to be allocable to the current period based on the forecasted utilization period.  

  Note: Individual line items in tables may be adjusted by non-material amounts to enable totals to align to published financial statements.  

  *CC: Constant currency for this purpose is defined as the current period reported revenues/expenses/earnings represented at the prior comparative period's foreign exchange rate.  

  **Annual recurring revenue is defined as the sum of Cloud services and subscriptions revenue and Customer support revenue.  

    Summary of Quarterly Results    

   Q1 FY'24   

   Q4 FY'23   

   Q1 FY'23   

   % Change   

   (Q1 FY'24 vs
Q4 FY'23)   

   % Change   

   (Q1 FY'24 vs
Q1 FY'23)   

  Revenue (millions)  

  $1,425.4  

  $1,490.8  

  $852.0  

  (4.4) %  

  67.3 %  

  GAAP-based gross margin  

  71.4 %  

  71.4 %  

  69.7 %  

  —  

  bps  

  170  

  bps  

  Non-GAAP-based gross margin ⁽¹⁾  

  77.3 %  

  76.9 %  

  75.2 %  

  40  

  bps  

  210  

  bps  

  GAAP-based earnings (loss) per share, diluted  

  $0.30  

  ($0.18)  

  ($0.43)  

  266.7 %  

  169.8 %  

  Non-GAAP-based EPS, diluted ⁽¹⁾⁽²⁾  

  $1.01  

  $0.91  

  $0.77  

  11.0 %  

  31.2 %  

   ⁽¹⁾  

  Please see Note 2 "Use of Non-GAAP Financial Measures" to the consolidated financial statements below.  

   ⁽²⁾  

  Please also see Note 14 to the Company's Fiscal 2018 Consolidated Financial Statements on Form 10-K. Reflective of the amount of net tax benefit arising from the internal reorganization assumed to be allocable to the current period based on the forecasted utilization period.  

   OPEN TEXT CORPORATION   

   CONSOLIDATED BALANCE SHEETS   

   (In thousands of U.S. dollars, except share data)   

   September 30, 2023   

   June 30, 2023   

   ASSETS   

  Cash and cash equivalents  

  $                919,850  

  $             1,231,625  

  Accounts receivable trade, net of allowance for credit losses of $11,501 as of September 30, 2023 and $13,828 as of June 30, 2023  

  676,594  

  682,517  

  Contract assets  

  78,562  

  71,196  

  Income taxes recoverable  

  70,179  

  68,161  

  Prepaid expenses and other current assets  

  199,917  

  221,732  

  Total current assets  

  1,945,102  

  2,275,231  

  Property and equipment  

  361,612  

  356,904  

  Operating lease right of use assets  

  266,053  

  285,723  

  Long-term contract assets  

  54,448  

  64,553  

  Goodwill  

  8,618,765  

  8,662,603  

  Acquired intangible assets  

  3,888,217  

  4,080,879  

  Deferred tax assets  

  996,514  

  926,719  

  Other assets  

  328,972  

  342,318  

  Long-term income taxes recoverable  

  94,193  

  94,270  

   Total assets   

  $          16,553,876  

  $          17,089,200  

   LIABILITIES AND SHAREHOLDERS' EQUITY   

  Current liabilities:  

  Accounts payable and accrued liabilities  

  $                836,042  

  $                996,261  

  Current portion of long-term debt  

  145,850  

  320,850  

  Operating lease liabilities  

  90,418  

  91,425  

  Deferred revenues  

  1,596,321  

  1,721,781  

  Income taxes payable  

  153,396  

  89,297  

  Total current liabilities  

  2,822,027  

  3,219,614  

  Long-term liabilities:  

  Accrued liabilities  

  49,333  

  51,961  

  Pension liability  

  125,616  

  126,312  

  Long-term debt  

  8,554,569  

  8,562,096  

  Long-term operating lease liabilities  

  252,629  

  271,579  

  Long-term deferred revenues  

  197,112  

  217,771  

  Long-term income taxes payable  

  148,822  

  193,808  

  Deferred tax liabilities  

  389,510  

  423,955  

  Total long-term liabilities  

  9,717,591  

  9,847,482  

  Shareholders' equity:  

  Share capital and additional paid-in capital  

  271,227,929   and 270,902,571 Common Shares issued and outstanding at September 30, 2023 and June 30, 2023, respectively; authorized Common Shares: unlimited  

  2,216,921  

  2,176,947  

  Accumulated other comprehensive income (loss)  

  (70,025)  

  (53,559)  

  Retained earnings  

  2,062,107  

  2,048,984  

  Treasury stock, at cost (4,753,281 and 3,536,375 shares at September 30, 2023 and June 30, 2023, respectively)  

  (196,119)  

  (151,597)  

  Total OpenText shareholders' equity  

  4,012,884  

  4,020,775  

  Non-controlling interests  

  1,374  

  1,329  

  Total shareholders' equity  

  4,014,258  

  4,022,104  

   Total liabilities and shareholders' equity   

  $          16,553,876  

  $          17,089,200  

   OPEN TEXT CORPORATION   

   CONSOLIDATED STATEMENTS OF INCOME   

   (In thousands of U.S. dollars, except share and per share data)   

   (unaudited)   

   Three Months Ended September 30,   

   2023   

   2022   

  Revenues:  

  Cloud services and subscriptions  

  $                451,014  

  $                404,651  

  Customer support  

  697,713  

  317,351  

  License  

  173,026  

  62,548  

  Professional service and other  

  103,676  

  67,486  

  Total revenues  

  1,425,429  

  852,036  

  Cost of revenues:  

  Cloud services and subscriptions  

  171,412  

  131,799  

  Customer support  

  75,014  

  27,354  

  License  

  3,839  

  2,758  

  Professional service and other  

  79,922  

  53,800  

  Amortization of acquired technology-based intangible assets  

  76,824  

  42,637  

  Total cost of revenues  

  407,011  

  258,348  

  Gross profit  

  1,018,418  

  593,688  

  Operating expenses:  

  Research and development  

  234,437  

  110,198  

  Sales and marketing  

  271,801  

  167,170  

  General and administrative  

  131,211  

  78,074  

  Depreciation  

  34,091  

  23,174  

  Amortization of acquired customer-based intangible assets  

  120,192  

  54,438  

  Special charges (recoveries)  

  13,794  

  14,281  

  Total operating expenses  

  805,526  

  447,335  

  Income   from operations  

  212,892  

  146,353  

  Other income (expense), net  

  20,170  

  (189,231)  

  Interest and other related expense, net  

  (141,764)  

  (40,382)  

  Income (loss)   before income taxes  

  91,298  

  (83,260)  

  Provision for   income taxes  

  10,352  

  33,625  

  Net income (loss) for the period  

  $                  80,946  

  $              (116,885)  

  Net (income) attributable to non-controlling interests  

  (45)  

  (44)  

  Net income (loss) attributable to OpenText  

  $                  80,901  

  $              (116,929)  

  Earnings (loss) per share—basic attributable to OpenText  

  $                       0.30  

  $                     (0.43)  

  Earnings (loss) per share—diluted attributable to OpenText  

  $                       0.30  

  $                     (0.43)  

  Weighted average number of Common Shares outstanding—basic (in ' 000's)  

  271,178  

  269,804  

  Weighted average number of Common Shares outstanding—diluted (in ' 000's)  

  271,902  

  269,804  

   OPEN TEXT CORPORATION   

   CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME   

   (In thousands of U.S. dollars)   

   (unaudited)   

   Three Months Ended September 30,   

   2023   

   2022   

  Net income (loss) for the period  

  $                  80,946  

  $              (116,885)  

  Other comprehensive income (loss)—net of tax:  

  Net foreign currency translation adjustments  

  (14,583)  

  (36,366)  

  Unrealized gain (loss) on cash flow hedges:  

  Unrealized gain (loss) - net of tax ⁽¹⁾  

  (1,841)  

  (3,340)  

  (Gain) loss reclassified into net income - net of tax ⁽²⁾  

  9  

  588  

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

  Unrealized gain (loss) - net of tax ⁽³⁾  

  (221)  

  —  

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

  Actuarial gain (loss) - net of tax ⁽⁴⁾  

  (19)  

  4,164  

  Amortization of actuarial (gain) loss into net income - net of tax ⁽⁵⁾  

  189  

  37  

  Total other comprehensive loss net  

  (16,466)  

  (34,917)  

  Total comprehensive income (loss)  

  64,480  

  (151,802)  

  Comprehensive income attributable to non - controlling interests  

  (45)  

  (44)  

  Total comprehensive income (loss) attributable to OpenText  

  $                  64,435  

  $              (151,846)  

  (1)  

  Net of tax expense (recovery) of ($664) and $(1,206) for the three months ended September 30, 2023 and 2022, respectively.  

  (2)  

  Net of tax expense (recovery) of $3 and $212 for the three months ended September 30, 2023 and 2022, respectively.  

  (3)  

  Net of tax expense (recovery) of $59 and $— for the three months ended September 30, 2023 and 2022, respectively.  

  (4)  

  Net of tax expense (recovery) of $19 and $1,104 for the three months ended September 30, 2023 and 2022, respectively.  

  (5)  

  Net of tax expense (recovery) of $75 and $26 for the three months ended September 30, 2023 and 2022, respectively.  

   OPEN TEXT CORPORATION   

   CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY   

   (In thousands of U.S. dollars and shares)   

   (unaudited)   

   Three Months Ended September 30, 2023   

   Common Shares and
Additional Paid in Capital   

   Treasury Stock   

   Retained   

   Earnings   

   Accumulated
Other   

   Comprehensive   

   Income   

   Non-
Controlling
Interests   

   Total   

   Shares   

   Amount   

   Shares   

   Amount   

   Balance as of June 30, 2023   

   270,903   

   $  2,176,947   

   (3,536)   

   $  (151,597)   

   $  2,048,984   

   $        (53,559)   

   $      1,329   

   $  4,022,104   

  Issuance of Common Shares  

  Under employee stock option plans  

  85  

  2,892  

  —  

  —  

  —  

  —  

  —  

  2,892  

  Under employee stock purchase plans  

  240  

  8,641  

  —  

  —  

  —  

  —  

  —  

  8,641  

  Share-based compensation  

  —  

  37,004  

  —  

  —  

  —  

  —  

  —  

  37,004  

  Purchase of treasury stock  

  —  

  —  

  (1,400)  

  (53,085)  

  —  

  —  

  —  

  (53,085)  

  Issuance of treasury stock  

  —  

  (8,563)  

  183  

  8,563  

  —  

  —  

  —  

  —  

  Dividends declared  

  ($0.25 per Common Share)  

  —  

  —  

  —  

  —  

  (67,778)  

  —  

  —  

  (67,778)  

  Other comprehensive income (loss) - net  

  —  

  —  

  —  

  —  

  —  

  (16,466)  

  —  

  (16,466)  

  Net income (loss) for the period  

   —   

   —   

   —   

   —   

  80,901  

   —   

  45  

  80,946  

   Balance as of September 30, 2023   

   271,228   

   2,216,921   

   (4,753)   

   (196,119)   

   2,062,107   

   (70,025)   

   1,374   

   4,014,258   

   Three Months Ended September 30, 2022   

   Common Shares and
Additional Paid in Capital   

   Treasury Stock   

   Retained   

   Earnings   

   Accumulated
Other   

   Comprehensive   

   Income   

   Non-
Controlling
Interests   

   Total   

   Shares   

   Amount   

   Shares   

   Amount   

   Balance as of June 30, 2022   

   269,523   

   $  2,038,674   

   (3,706)   

   $ (159,966)   

   $  2,160,069   

   $          (7,659)   

   $      1,142   

   $  4,032,260   

  Issuance of Common Shares:  

  Under employee stock option plans  

  72  

  1,994  

  —  

  —  

  —  

  —  

  —  

  1,994  

  Under employee stock purchase plans  

  286  

  9,179  

  —  

  —  

  —  

  —  

  —  

  9,179  

  Share-based compensation  

  —  

  23,208  

  —  

  —  

  —  

  —  

  —  

  23,208  

  Issuance of treasury stock  

  —  

  (5,174)  

  120  

  5,174  

  —  

  —  

  —  

  —  

  Dividends declared  

  ($0.24299 per Common Share)  

  —  

  —  

  —  

  —  

  (64,698)  

  —  

  —  

  (64,698)  

  Other comprehensive income (loss) - net  

  —  

  —  

  —  

  —  

  —  

  (34,917)  

  —  

  (34,917)  

  Net income (loss) for the period  

  —  

  —  

  —  

  —  

  (116,929)  

  —  

  44  

  (116,885)  

   Balance as of September 30, 2022   

   269,881   

   2,067,881   

   (3,586)   

   (154,792)   

   1,978,442   

   (42,576)   

   1,186   

   3,850,141   

   OPEN TEXT CORPORATION   

   CONSOLIDATED STATEMENTS OF CASH FLOWS   

   (In thousands of U.S. dollars)   

   (unaudited)   

   Three Months Ended September 30,   

   2023   

   2022   

  Cash flows from operating activities:  

  Net income (loss) for the period  

  $                    80,946  

  $                (116,885)  

  Adjustments to reconcile net income (loss) to net cash provided by operating activities:  

  Depreciation and amortization of intangible assets  

  231,107  

  120,249  

  Share-based compensation expense  

  37,095  

  23,208  

  Pension expense  

  3,171  

  1,387  

  Amortization of debt discount and issuance costs  

  5,496  

  1,480  

  Write-off of right of use assets  

  4,715  

  2,827  

  Loss on sale and write down of property and equipment  

  458  

  —  

  Deferred taxes  

  (88,630)  

  (20,667)  

  Share in net loss of equity investees  

  9,696  

  6,534  

  Changes in financial instruments  

  (17,895)  

  181,461  

  Changes in operating assets and liabilities:  

  Accounts receivable  

  31,304  

  59,494  

  Contract assets  

  (22,566)  

  (9,054)  

  Prepaid expenses and other current assets  

  19,326  

  (2,934)  

  Income taxes  

  29,597  

  15,834  

  Accounts payable and accrued liabilities  

  (124,214)  

  (27,179)  

  Deferred revenue  

  (150,476)  

  (53,779)  

  Other assets  

  4,104  

  (47,749)  

  Operating lease assets and liabilities, net  

  (6,113)  

  (2,268)  

  Net cash provided by operating activities  

  47,121  

  131,959  

  Cash flows from investing activities:  

  Additions of property and equipment  

  (37,539)  

  (36,324)  

  Micro Focus acquisition  

  (9,272)  

  —  

  Proceeds from net investment hedge derivative contracts  

  1,966  

  —  

  Other investing activities  

  (5,554)  

  —  

  Net cash used in investing activities  

  (50,399)  

  (36,324)  

  Cash flows from financing activities:  

  Proceeds from issuance of Common Shares from exercise of stock options and ESPP  

  11,453  

  10,037  

  Repayment of long-term debt and Revolver  

  (186,463)  

  (2,500)  

  Debt issuance costs  

  (1,961)  

  —  

  Purchase of treasury stock  

  (53,085)  

  —  

  Payments of dividends to shareholders  

  (66,965)  

  (64,698)  

  Net cash used in financing activities  

  (297,021)  

  (57,161)  

  Foreign exchange loss on cash held in foreign currencies  

  (11,503)  

  (28,102)  

  Increase (decrease)   in cash, cash equivalents and restricted cash during the period  

  (311,802)  

  10,372  

  Cash, cash equivalents and restricted cash at beginning of the period  

  1,233,952  

  1,695,911  

  Cash, cash equivalents and restricted cash at end of the period  

  $                  922,150  

  $               1,706,283  

   OPEN TEXT CORPORATION   

   CONSOLIDATED STATEMENTS OF CASH FLOWS   

   (In thousands of U.S. dollars)   

   (unaudited)   

   Reconciliation of cash, cash equivalents and restricted cash:   

   September 30, 2023   

   September 30, 2022   

  Cash and cash equivalents  

  $                  919,850  

  $               1,704,385  

  Restricted cash ⁽¹⁾  

  2,300  

  1,898  

  Total cash, cash equivalents and restricted cash  

  $                  922,150  

  $               1,706,283  

   ⁽¹⁾ Restricted cash is classified under the Prepaid expenses and other current assets and Other assets line items on the Consolidated Balance Sheets.  

    Notes    

  (1)  

  All dollar amounts in this press release are in U.S. Dollars unless otherwise indicated.  

  (2)  

  Use of Non-GAAP Financial Measures: In addition to reporting financial results in accordance with U.S. GAAP, the Company provides certain financial measures that are not in accordance with U.S. GAAP (Non-GAAP). These Non-GAAP financial measures have certain limitations in that they do not have a standardized meaning and thus the Company's definition may be different from similar Non-GAAP financial measures used by other companies and/or analysts and may differ from period to period. Thus it may be more difficult to compare the Company's financial performance to that of other companies. However, the Company's management compensates for these limitations by providing the relevant disclosure of the items excluded in the calculation of these Non-GAAP financial measures both in its reconciliation to the U.S. GAAP financial measures and its Consolidated Financial Statements, all of which should be considered when evaluating the Company's results.  

  The Company uses these Non-GAAP financial measures to supplement the information provided in its Consolidated Financial Statements, which are presented in accordance with U.S. GAAP. The presentation of Non-GAAP financial measures is not meant to be a substitute for financial measures presented in accordance with U.S. GAAP, but rather should be evaluated in conjunction with and as a supplement to such U.S. GAAP measures. OpenText strongly encourages investors to review its financial information in its entirety and not to rely on a single financial measure. The Company therefore believes that despite these limitations, it is appropriate to supplement the disclosure of the U.S. GAAP measures with certain Non-GAAP measures defined below.  

  Non-GAAP-based net income and Non-GAAP-based EPS, attributable to OpenText, are consistently calculated as GAAP-based net income (loss) or earnings (loss) per share, attributable to OpenText, on a diluted basis, excluding the effects of the amortization of acquired intangible assets, other income (expense), share-based compensation, and special charges (recoveries), all net of tax and any tax benefits/expense items unrelated to current period income, as further described in the tables below. Non-GAAP-based gross profit is the arithmetical sum of GAAP-based gross profit and the amortization of acquired technology-based intangible assets and share-based compensation within cost of sales. Non-GAAP-based gross margin is calculated as Non-GAAP-based gross profit expressed as a percentage of total revenue. Non-GAAP-based income from operations is calculated as GAAP-based income from operations, excluding the amortization of acquired intangible assets, special charges (recoveries), and share-based compensation expense.  

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

  The Company's management believes that the presentation of the above defined Non-GAAP financial measures provides useful information to investors because they portray the financial results of the Company before the impact of certain non-operational charges. The use of the term "non-operational charge" is defined for this purpose as an expense that does not impact the ongoing operating decisions taken by the Company's management. These items are excluded based upon the way the Company's management evaluates the performance of the Company's business for use in the Company's internal reports and are not excluded in the sense that they may be used under U.S. GAAP.  

  The Company does not acquire businesses on a predictable cycle, and therefore believes that the presentation of Non-GAAP measures, which in certain cases adjust for the impact of amortization of intangible assets and the related tax effects that are primarily related to acquisitions, will provide readers of financial statements with a more consistent basis for comparison across accounting periods and be more useful in helping readers understand the Company's operating results and underlying operational trends. Additionally, the Company has engaged in various restructuring activities over the past several years, primarily due to acquisitions and in response to our return to office planning, that have resulted in costs associated with reductions in headcount, consolidation of leased facilities and related costs, all which are recorded under the Company's "Special charges (recoveries)" caption on the Consolidated Statements of Income. Each restructuring activity is a discrete event based on a unique set of business objectives or circumstances, and each differs in terms of its operational implementation, business impact and scope, and the size of each restructuring plan can vary significantly from period to period. Therefore, the Company believes that the exclusion of these special charges (recoveries) will also better aid readers of financial statements in the understanding and comparability of the Company's operating results and underlying operational trends.  

  In summary, the Company believes the provision of supplemental Non-GAAP measures allow investors to evaluate the operational and financial performance of the Company's core business using the same evaluation measures that management uses, and is therefore a useful indication of OpenText's performance or expected performance of future operations and facilitates period-to-period comparison of operating performance (although prior performance is not necessarily indicative of future performance). As a result, the Company considers it appropriate and reasonable to provide, in addition to U.S. GAAP measures, supplementary Non-GAAP financial measures that exclude certain items from the presentation of its financial results. Information reconciling certain forward-looking GAAP measures to non-GAAP measures related to F'24 targets and F'26 aspirations, including A-EBITDA is not available without unreasonable effort due to high variability, complexity and uncertainty with respect to forecasting and quantifying certain amounts that are necessary for such reconciliations.  

  The following charts provide unaudited reconciliations of U.S. GAAP-based financial measures to Non-GAAP-based financial measures for the following periods presented. The Micro Focus Acquisition significantly impacts period-over-period comparability.  

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

    for the three months ended September 30, 2023    

    (In thousands, except for per share data)    

   Three Months Ended September 30, 2023   

   GAAP-based
Measures   

   GAAP-based
Measures   

   % of Total
Revenue   

   Adjustments   

   Note   

   Non-GAAP-
based
Measures   

   Non-GAAP-
based
Measures   

   % of Total
Revenue   

   Cost of revenues   

  Cloud services and subscriptions  

  $  171,412  

  $     (2,991)  

  (1)  

  $   168,421  

  Customer support  

  75,014  

  (1,058)  

  (1)  

  73,956  

  Professional service and other  

  79,922  

  (1,882)  

  (1)  

  78,040  

  Amortization of acquired technology-based intangible assets  

  76,824  

  (76,824)  

  (2)  

  —  

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

  1,018,418  

  71.4 %  

  82,755  

  (3)  

  1,101,173  

  77.3 %  

   Operating expenses   

  Research and development  

  234,437  

  (11,734)  

  (1)  

  222,703  

  Sales and marketing  

  271,801  

  (11,807)  

  (1)  

  259,994  

  General and administrative  

  131,211  

  (7,623)  

  (1)  

  123,588  

  Amortization of acquired customer-based intangible assets  

  120,192  

  (120,192)  

  (2)  

  —  

  Special charges (recoveries)  

  13,794  

  (13,794)  

  (4)  

  —  

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

  212,892  

  247,905  

  (5)  

  460,797  

  Other income (expense), net  

  20,170  

  (20,170)  

  (6)  

  —  

  Provision for   income taxes  

  10,352  

  34,313  

  (7)  

  44,665  

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

  80,901  

  193,422  

  (8)  

  274,323  

   GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText   

  $         0.30  

  $          0.71  

  (8)  

  $          1.01  

  (1)  

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

  (2)  

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

  (3)  

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

  (4)  

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

  (5)  

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

  (6)  

  Adjustment relates to the exclusion of other income (expense) from our Non-GAAP-based operating expenses as other income (expense) generally relates to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results. Other income (expense) also includes our share of income (losses) from our holdings in investments as a limited partner. We do not actively trade equity securities in these privately held companies nor do we plan our ongoing operations based around any anticipated fundings or distributions from these investments. We exclude gains and losses on these investments as we do not believe they are reflective of our ongoing business and operating results. Other income (expense) also includes unrealized and realized gains (losses) on our derivatives which are not designated as hedges. We exclude gains and losses on these derivatives as we do not believe they are reflective of our ongoing business and operating results.  

  (7)  

  Adjustment relates to differences between the GAAP-based tax provision rate of approximately 11% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based net income. Such excluded items include amortization, share-based compensation, special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves and "book to return" adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately  14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.  

  (8)  

  Reconciliation of GAAP-based income to Non-GAAP-based net income:  

   Three Months Ended September 30, 2023   

   Per share diluted   

  GAAP-based net income, attributable to OpenText  

  $                     80,901  

  $                          0.30  

  Add:  

  Amortization  

  197,016  

  0.72  

  Share-based compensation  

  37,095  

  0.14  

  Special charges (recoveries)  

  13,794  

  0.05  

  Other (income) expense, net  

  (20,170)  

  (0.08)  

  GAAP-based provision for income taxes  

  10,352  

  0.04  

  Non-GAAP-based provision for income taxes  

  (44,665)  

  (0.16)  

  Non-GAAP-based net income, attributable to OpenText  

  $                   274,323  

  $                          1.01  

   Reconciliation of Adjusted EBITDA   

   Three Months Ended September 30, 2023   

  GAAP-based net income, attributable to OpenText  

  $                                                          80,901  

  Add:  

  Provision for   income taxes  

  10,352  

  Interest and other related expense, net  

  141,764  

  Amortization of acquired technology-based intangible assets  

  76,824  

  Amortization of acquired customer-based intangible assets  

  120,192  

  Depreciation  

  34,091  

  Share-based compensation  

  37,095  

  Special charges (recoveries)  

  13,794  

  Other (income) expense, net  

  (20,170)  

  Adjusted EBITDA  

  $                                                       494,843  

  GAAP-based net income margin  

  5.7 %  

  Adjusted EBITDA margin  

  34.7 %  

   Reconciliation of Free cash flows   

   Three Months Ended September 30, 2023   

  GAAP-based cash flows provided by operating activities  

  $                                                           47,121  

  Add:  

  Capital expenditures ⁽¹⁾  

  (37,539)  

  Free cash flows  

  $                                                             9,582  

   ⁽¹⁾ Defined as "Additions of property and equipment" in the Consolidated Statements of Cash Flows.  

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

    for the three months ended June 30, 2023    

    (In thousands, except for per share data)    

   Three Months Ended June 30, 2023   

   GAAP-based   

   Measures   

   GAAP-based
Measures   

   % of Total
Revenue   

   Adjustments   

   Note   

   Non-GAAP-
based   

   Measures   

   Non-GAAP-
based
Measures   

   % of Total
Revenue   

   Cost of revenues   

  Cloud services and subscriptions  

  $   166,394  

  $     (2,876)  

  (1)  

  $   163,518  

  Customer support  

  86,695  

  (1,213)  

  (1)  

  85,482  

  Professional service and other  

  90,498  

  (1,826)  

  (1)  

  88,672  

  Amortization of acquired technology-based intangible assets  

  77,045  

  (77,045)  

  (2)  

  —  

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

  1,064,014  

  71.4 %  

  82,960  

  (3)  

  1,146,974  

  76.9 %  

   Operating expenses   

  Research and development  

  249,958  

  (13,584)  

  (1)  

  236,374  

  Sales and marketing  

  333,244  

  (13,467)  

  (1)  

  319,777  

  General and administrative  

  136,866  

  (8,938)  

  (1)  

  127,928  

  Amortization of acquired customer-based intangible assets  

  121,285  

  (121,285)  

  (2)  

  —  

  Special charges (recoveries)  

  70,222  

  (70,222)  

  (4)  

  —  

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

  121,287  

  310,456  

  (5)  

  431,743  

  Other income (expense), net  

  (25,355)  

  25,355  

  (6)  

  —  

  Provision for (recovery of)   income taxes  

  (1,212)  

  41,240  

  (7)  

  40,028  

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

  (48,734)  

  294,571  

  (8)  

  245,837  

   GAAP-based earnings (loss) per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText   

  $        (0.18)  

  $          1.09  

  (8)  

  $          0.91  

  (1)  

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

  (2)  

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

  (3)  

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

  (4)  

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

  (5)  

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

  (6)  

  Adjustment relates to the exclusion of other income (expense) from our Non-GAAP-based operating expenses as other income (expense) generally relates to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results. Other income (expense) also includes our share of income (losses) from our holdings in investments as a limited partner. We do not actively trade equity securities in these privately held companies nor do we plan our ongoing operations based around any anticipated fundings or distributions from these investments. We exclude gains and losses on these investments as we do not believe they are reflective of our ongoing business and operating results. Other income (expense) also includes unrealized gains (losses) on our derivatives which are not designated as hedges. We exclude gains and losses on these derivatives as we do not believe they are reflective on our ongoing business and operating results.  

  (7)  

  Adjustment relates to differences between the GAAP-based tax provision rate of approximately 2% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded items include amortization, share-based compensation, special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves, and "book to return" adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately 14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.  

  (8)  

  Reconciliation of GAAP-based net loss to Non-GAAP-based net income:  

   Three Months Ended June 30, 2023   

   Per share diluted   

  GAAP-based net loss, attributable to OpenText  

  $                   (48,734)  

  $                        (0.18)  

  Add:  

  Amortization  

  198,330  

  0.73  

  Share-based compensation  

  41,904  

  0.15  

  Special charges (recoveries)  

  70,222  

  0.26  

  Other (income) expense, net  

  25,355  

  0.10  

  GAAP-based recovery of income taxes  

  (1,212)  

  —  

  Non-GAAP-based provision for income taxes  

  (40,028)  

  (0.15)  

  Non-GAAP-based net income, attributable to OpenText  

  $                   245,837  

  $                          0.91  

   Reconciliation of Adjusted EBITDA   

   Three Months Ended June 30, 2023   

  GAAP-based net loss, attributable to OpenText  

  $                                                      (48,734)  

  Add:  

  Recovery of   income taxes  

  (1,212)  

  Interest and other related expense, net  

  145,829  

  Amortization of acquired technology-based intangible assets  

  77,045  

  Amortization of acquired customer-based intangible assets  

  121,285  

  Depreciation  

  31,152  

  Share-based compensation  

  41,904  

  Special charges (recoveries)  

  70,222  

  Other (income) expense, net  

  25,355  

  Adjusted EBITDA  

  $                                                      462,846  

  GAAP-based net loss margin  

  (3.3) %  

  Adjusted EBITDA margin  

  31.0 %  

   Reconciliation of Free cash flows   

   Three Months Ended June 30, 2023   

  GAAP-based cash flows provided by operating activities  

  $                                                         115,301  

  Add:  

  Capital expenditures ⁽¹⁾  

  (24,060)  

  Free cash flows  

  $                                                           91,241  

   ⁽¹⁾ Defined as "Additions of property and equipment" in the Consolidated Statements of Cash Flows.  

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

    for the three months ended September 30, 2022    

    (In thousands, except for per share data)    

   Three Months Ended September 30, 2022   

   GAAP-based   

   Measures   

   GAAP-based
Measures   

   % of Total
Revenue   

   Adjustments   

   Note   

   Non-GAAP-
based   

   Measures   

   Non-GAAP-
based
Measures   

   % of Total
Revenue   

   Cost of revenues   

  Cloud services and subscriptions  

  $   131,799  

  $     (2,033)  

  (1)  

  $   129,766  

  Customer support  

  27,354  

  (567)  

  (1)  

  26,787  

  Professional service and other  

  53,800  

  (1,525)  

  (1)  

  52,275  

  Amortization of acquired technology-based intangible assets  

  42,637  

  (42,637)  

  (2)  

  —  

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

  593,688  

  69.7 %  

  46,762  

  (3)  

  640,450  

  75.2 %  

   Operating expenses   

  Research and development  

  110,198  

  (6,854)  

  (1)  

  103,344  

  Sales and marketing  

  167,170  

  (6,859)  

  (1)  

  160,311  

  General and administrative  

  78,074  

  (5,370)  

  (1)  

  72,704  

  Amortization of acquired customer-based intangible assets  

  54,438  

  (54,438)  

  (2)  

  —  

  Special charges (recoveries)  

  14,281  

  (14,281)  

  (4)  

  —  

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

  146,353  

  134,564  

  (5)  

  280,917  

  Other income (expense), net  

  (189,231)  

  189,231  

  (6)  

  —  

  Provision for   income taxes  

  33,625  

  50  

  (7)  

  33,675  

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

  (116,929)  

  323,745  

  (8)  

  206,816  

   GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText   

  $        (0.43)  

  $          1.20  

  (8)  

  $          0.77  

  (1)  

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

  (2)  

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

  (3)  

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

  (4)  

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

  (5)  

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

  (6)  

  Adjustment relates to the exclusion of other income (expense) from our Non-GAAP-based operating expenses as other income (expense) generally relates to the transactional impact of foreign exchange and is generally not indicative or related to continuing operations and is therefore excluded from our internal analysis of operating results. Other income (expense) also includes our share of income (losses) from our holdings in investments as a limited partner. We do not actively trade equity securities in these privately held companies nor do we plan our ongoing operations based around any anticipated fundings or distributions from these investments. We exclude gains and losses on these investments as we do not believe they are reflective of our ongoing business and operating results.  

  (7)  

  Adjustment relates to differences between the GAAP-based tax provision rate of approximately 40% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded items include amortization, share-based compensation, special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves, and "book to return" adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately 14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.  

  (8)  

  Reconciliation of GAAP-based net loss to Non-GAAP-based net income:  

   Three Months Ended September 30, 2022   

   Per share diluted   

  GAAP-based net loss, attributable to OpenText  

  $                 (116,929)  

  $                        (0.43)  

  Add:  

  Amortization  

  97,075  

  0.36  

  Share-based compensation  

  23,208  

  0.09  

  Special charges (recoveries)  

  14,281  

  0.05  

  Other (income) expense, net  

  189,231  

  0.70  

  GAAP-based provision for income taxes  

  33,625  

  0.12  

  Non-GAAP-based provision for income taxes  

  (33,675)  

  (0.12)  

  Non-GAAP-based net income, attributable to OpenText  

  $                   206,816  

  $                          0.77  

   Reconciliation of Adjusted EBITDA   

   Three Months Ended September 30, 2022   

  GAAP-based net loss, attributable to OpenText  

  $                                                    (116,929)  

  Add:  

  Provision for   income taxes  

  33,625  

  Interest and other related expense, net  

  40,382  

  Amortization of acquired technology-based intangible assets  

  42,637  

  Amortization of acquired customer-based intangible assets  

  54,438  

  Depreciation  

  23,174  

  Share-based compensation  

  23,208  

  Special charges (recoveries)  

  14,281  

  Other (income) expense, net  

  189,231  

  Adjusted EBITDA  

  $                                                      304,047  

  GAAP-based net loss margin  

  (13.7) %  

  Adjusted EBITDA margin  

  35.7 %  

   Reconciliation of Free cash flows   

   Three Months Ended September 30, 2022   

  GAAP-based cash flows provided by operating activities  

  $                                                         131,959  

  Add:  

  Capital expenditures ⁽¹⁾  

  (36,324)  

  Free cash flows  

  $                                                           95,635  

   ⁽¹⁾ Defined as "Additions of property and equipment" in the Consolidated Statements of Cash Flows.  

  (3)  

  The following tables provide a composition of our major currencies for revenue and expenses, expressed as a percentage, for the three months ended September 30, 2023 and 2022:  

   Three Months Ended September 30, 2023   

   Three Months Ended September 30, 2022   

   Currencies   

   % of Revenue   

   % of Expenses ⁽¹⁾   

   % of Revenue   

   % of Expenses ⁽¹⁾   

  EURO  

  21 %  

  11 %  

  20 %  

  11 %  

  GBP  

  5 %  

  8 %  

  4 %  

  5 %  

  CAD  

  3 %  

  10 %  

  3 %  

  14 %  

  USD  

  60 %  

  50 %  

  65 %  

  55 %  

  Other  

  11 %  

  21 %  

  8 %  

  15 %  

  Total  

  100 %  

  100 %  

  100 %  

  100 %  

   ⁽¹⁾  

  Expenses include all cost of revenues and operating expenses included within the Consolidated Statements of Income, except for amortization of intangible assets, share-based compensation and special charges (recoveries).