OpenText Reports First Quarter Fiscal Year 2025 Financial Results

   Total Revenues   

  (in millions)  

   Annual Recurring Revenues   

  (in millions)  

   Cloud Revenues   

  (in millions)  

  $1,269  

  $1,053  

  $457  

  (11.0) %  

  (8.4) %  

  +1.3 %  

  Annual Recurring Revenues represent 83% of Total Revenues  

  "In our first full quarter after the AMC divestiture, we delivered $1.27 billion in total revenues, 35% Adjusted EBITDA Margin, and our 15 ^th consecutive quarter of organic cloud revenue growth," said Mark J. Barrenechea, OpenText CEO & CTO. "Further, we remain on track to return record capital to shareholders in Fiscal 2025, of approximately $570 million, and the company has purchased and canceled 7.72 million shares over the last two quarters."  

  Mr. Barrenechea added: "OpenText continues to invest in the future of Information Management, and we look forward to showcasing our exciting innovation roadmap at our upcoming OpenText World User Conference in Las Vegas. We will be highlighting strong progress in our trusted Business Clouds, Business AI and Business Technology including Cyber Security."  

  Mark J. Barrenechea, OpenText CEO & CTO  

  "The strength of the OpenText operating model has resulted in strong margin performance this quarter. We continue to focus on driving operational efficiencies across the organization and we have a defined path in place for future margin and cash flow growth," said Madhu Ranganathan, OpenText President, CFO and leader of Corporate Development. "Based on this foundation of operational excellence we continue to invest in our growth and have the capital flexibility to deliver on our Fiscal 2025 Targets."  

  Madhu Ranganathan, OpenText President & CFO  

   ⁽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 condensed consolidated financial statements below.  

    Summary of Quarterly Results    

   (In millions, except per share data)   

   Q1 FY'25   

   Q1 FY'24   

   $ Change   

   % Change   

   Q1 FY'25
  in CC*   

   % Change
in CC*   

   Revenues:   

  Cloud services and subscriptions  

  $457  

  $451  

  $6  

  1.3 %  

  $459  

  1.7 %  

  Customer support  

  595  

  698  

  ($102)  

  (14.7) %  

  598  

  (14.3) %  

   Total annual recurring revenues**   

   $1,053   

   $1,149   

   ($96)   

   (8.4) %   

   $1,057   

   (8.0) %   

  License  

  126  

  173  

  ($47)  

  (27.3) %  

  126  

  (27.2) %  

  Professional service and other  

  91  

  104  

  ($13)  

  (12.5) %  

  91  

  (12.5) %  

   Total revenues   

   $1,269   

   $1,425   

   ($156)   

   (11.0) %   

   $1,273   

   (10.7) %   

  GAAP-based operating income  

  $206  

  $213  

  ($7)  

  (3.1) %  

  N/A  

  N/A  

  Non-GAAP-based operating income ⁽¹⁾  

  $412  

  $461  

  ($49)  

  (10.7) %  

  $410  

  (11.0) %  

  GAAP-based net income attributable to OpenText  

  $84  

  $81  

  $3  

  4.3 %  

  N/A  

  N/A  

  GAAP-based EPS, diluted  

  $0.32  

  $0.30  

  $0.02  

  6.7 %  

  N/A  

  N/A  

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

  $0.93  

  $1.01  

  ($0.08)  

  (7.9) %  

  $0.93  

  (7.9) %  

  Adjusted EBITDA ⁽¹⁾  

  $444  

  $495  

  ($51)  

  (10.3) %  

  $442  

  (10.6) %  

  Operating cash flows  

  ($78)  

  $47  

  ($125)  

  (265.1) %  

  N/A  

  N/A  

  Free cash flows ⁽¹⁾  

  ($117)  

  $10  

  ($127)  

  (1,322.3) %  

  N/A  

  N/A  

   ⁽¹⁾  

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

   ⁽²⁾  

  For periods prior to Fiscal 2025, this is reflective of the amount of net tax benefit arising from the internal reorganization assumed to be allocable to the period based on the forecasted utilization period. Please also see Note 14 to the Company's Fiscal 2018 Consolidated Financial Statements on Form 10-K.  

  Note: Items in tables may not add due to rounding. Percentages presented are calculated based on the underlying amounts.  

  *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'25   

   Q4 FY'24   

   Q1 FY'24   

   % Change   

   (Q1 FY'25 vs
Q4 FY'24)   

   % Change   

   (Q1 FY'25 vs
Q1 FY'24)   

  Revenue (millions)  

  $1,269  

  $1,362  

  $1,425  

  (6.8) %  

  (11.0) %  

  GAAP-based gross margin  

  71.7 %  

  72.5 %  

  71.4 %  

  (80)  

  bps  

  30  

  bps  

  Non-GAAP-based gross margin ⁽¹⁾  

  75.8 %  

  76.4 %  

  77.3 %  

  (60)  

  bps  

  (150)  

  bps  

  GAAP-based earnings (loss) per share, diluted  

  $0.32  

  $0.91  

  $0.30  

  (64.8) %  

  6.7 %  

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

  $0.93  

  $0.98  

  $1.01  

  (5.1) %  

  (7.9) %  

   ⁽¹⁾  

  Please see Note 2 "Use of Non-GAAP Financial Measures" to the condensed 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   

   CONDENSED CONSOLIDATED BALANCE SHEETS   

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

   September 30, 2024   

   June 30, 2024   

   ASSETS   

   (unaudited)   

  Cash and cash equivalents  

  $             1,000,219  

  $             1,280,662  

  Accounts receivable trade, net of allowance for credit losses of $14,509 as of  

  September 30, 2024 and $12,108 as of June 30, 2024  

  592,614  

  626,189  

  Contract assets  

  70,203  

  66,450  

  Income taxes recoverable  

  96,633  

  61,113  

  Prepaid expenses and other current assets  

  220,425  

  242,911  

  Total current assets  

  1,980,094  

  2,277,325  

  Property and equipment, net of accumulated depreciation of $768,438 as of  

  September 30, 2024 and $751,174 as of June 30, 2024  

  365,451  

  367,740  

  Operating lease right of use assets  

  219,514  

  219,774  

  Long-term contract assets  

  42,314  

  38,684  

  Goodwill  

  7,502,649  

  7,488,367  

  Acquired intangible assets  

  2,357,997  

  2,486,264  

  Deferred tax assets  

  954,813  

  932,657  

  Other assets  

  302,387  

  298,281  

  Long-term income taxes recoverable  

  54,072  

  96,615  

   Total assets   

  $          13,779,291  

  $          14,205,707  

   LIABILITIES AND SHAREHOLDERS' EQUITY   

  Current liabilities:  

  Accounts payable and accrued liabilities  

  $                862,973  

  $                931,116  

  Current portion of long-term debt  

  35,850  

  35,850  

  Operating lease liabilities  

  75,312  

  76,446  

  Deferred revenues  

  1,450,456  

  1,521,416  

  Income taxes payable  

  74,948  

  235,666  

  Total current liabilities  

  2,499,539  

  2,800,494  

  Long-term liabilities:  

  Accrued liabilities  

  45,197  

  46,483  

  Pension liability, net  

  133,666  

  127,255  

  Long-term debt  

  6,353,277  

  6,356,943  

  Long-term operating lease liabilities  

  213,400  

  218,174  

  Long-term deferred revenues  

  162,397  

  162,401  

  Long-term income taxes payable  

  99,286  

  145,644  

  Deferred tax liabilities  

  135,642  

  148,632  

  Total long-term liabilities  

  7,142,865  

  7,205,532  

  Shareholders' equity:  

  Share capital and additional paid-in capital  

  265,545,938 and 267,800,517 Common Shares issued and outstanding at  

  September 30, 2024 and June 30, 2024, respectively; authorized Common  

  Shares: unlimited  

  2,290,191  

  2,271,886  

  Accumulated other comprehensive income (loss)  

  (74,456)  

  (69,619)  

  Retained earnings  

  2,065,221  

  2,119,159  

  Treasury stock, at cost (3,899,507 and 3,135,980 shares at September 30, 2024  

  and June 30, 2024, respectively)  

  (145,646)  

  (123,268)  

  Total OpenText shareholders' equity  

  4,135,310  

  4,198,158  

  Non-controlling interests  

  1,577  

  1,523  

  Total shareholders' equity  

  4,136,887  

  4,199,681  

   Total liabilities and shareholders' equity   

  $          13,779,291  

  $          14,205,707  

   Open Text Corporation   

   CONDENSED CONSOLIDATED STATEMENTS OF INCOME   

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

   (unaudited)   

   Three Months Ended September 30,   

   2024   

   2023   

  Revenues:  

  Cloud services and subscriptions  

  $                457,024  

  $                451,014  

  Customer support  

  595,490  

  697,713  

  License  

  125,813  

  173,026  

  Professional service and other  

  90,678  

  103,676  

  Total revenues  

  1,269,005  

  1,425,429  

  Cost of revenues:  

  Cloud services and subscriptions  

  175,257  

  171,412  

  Customer support  

  62,574  

  75,014  

  License  

  6,657  

  3,839  

  Professional service and other  

  66,915  

  79,922  

  Amortization of acquired technology-based intangible assets  

  47,244  

  76,824  

  Total cost of revenues  

  358,647  

  407,011  

  Gross profit  

  910,358  

  1,018,418  

  Operating expenses:  

  Research and development  

  190,693  

  226,231  

  Sales and marketing  

  245,882  

  280,007  

  General and administrative  

  106,730  

  131,211  

  Depreciation  

  32,171  

  34,091  

  Amortization of acquired customer-based intangible assets  

  81,504  

  120,192  

  Special charges (recoveries)  

  47,136  

  13,794  

  Total operating expenses  

  704,116  

  805,526  

  Income from operations  

  206,242  

  212,892  

  Other income (expense), net  

  (35,655)  

  20,170  

  Interest and other related expense, net  

  (84,282)  

  (141,764)  

  Income before income taxes  

  86,305  

  91,298  

  Provision for income taxes  

  1,883  

  10,352  

  Net income for the period  

  $                  84,422  

  $                  80,946  

  Net (income) attributable to non-controlling interests  

  (54)  

  (45)  

  Net income attributable to OpenText  

  $                  84,368  

  $                  80,901  

  Earnings per share—basic attributable to OpenText  

  $                      0.32  

  $                      0.30  

  Earnings per share—diluted attributable to OpenText  

  $                      0.32  

  $                      0.30  

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

  267,400  

  271,178  

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

  267,821  

  271,902  

   Open Text Corporation   

   CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME   

   (In thousands of U.S. dollars)   

   (unaudited)   

   Three Months Ended September 30,   

   2024   

   2023   

  Net income for the period  

  $                  84,422  

  $                  80,946  

  Other comprehensive income (loss)—net of tax:  

  Net foreign currency translation adjustments  

  (5,190)  

  (14,583)  

  Unrealized gain (loss) on cash flow hedges:  

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

  654  

  (1,841)  

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

  262  

  9  

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

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

  248  

  (221)  

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

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

  (1,045)  

  (19)  

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

  234  

  189  

  Total other comprehensive loss net  

  (4,837)  

  (16,466)  

  Total comprehensive income  

  79,585  

  64,480  

  Comprehensive income attributable to non - controlling interests  

  (54)  

  (45)  

  Total comprehensive income attributable to OpenText  

  $                  79,531  

  $                  64,435  

   ^{______________________________}  

  (1)  Net of tax expense (recovery) of $236 and ($664) for the three months ended September 30, 2024 and 2023, respectively.  

  (2)  Net of tax expense (recovery) of $94 and $3 for the three months ended September 30, 2024 and 2023, respectively.  

  (3)  Net of tax expense (recovery) of $207 and ($59) for the three months ended September 30, 2024 and 2023, respectively.  

  (4)  Net of tax expense (recovery) of ($43) and $19 for the three months ended September 30, 2024 and 2023, respectively.  

  (5)  Net of tax expense (recovery) of $92 and $75 for the three months ended September 30, 2024 and 2023, respectively.  

   Open Text Corporation   

   CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY   

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

   (unaudited)   

   Three Months Ended September 30, 2024   

   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, 2024   

   267,801   

   $  2,271,886   

   (3,136)   

   ($123,268)   

   $  2,119,159   

   ($69,619)   

   $      1,523   

   $  4,199,681   

  Issuance of Common Shares  

  Under employee stock option plans  

  5  

  141  

  —  

  —  

  —  

  —  

  —  

  141  

  Under employee stock purchase plans  

  389  

  9,863  

  —  

  —  

  —  

  —  

  —  

  9,863  

  Share-based compensation  

  —  

  29,446  

  —  

  —  

  —  

  —  

  —  

  29,446  

  Purchase of treasury stock  

  —  

  —  

  (824)  

  (25,010)  

  —  

  —  

  —  

  (25,010)  

  Issuance of treasury stock  

  —  

  (1,930)  

  60  

  2,632  

  (702)  

  —  

  —  

  —  

  Repurchase of Common Shares  

  (2,649)  

  (19,215)  

  —  

  —  

  (67,266)  

  —  

  —  

  (86,481)  

  Dividends declared  

  ($0.2625 per Common Share)  

  —  

  —  

  —  

  —  

  (70,338)  

  —  

  —  

  (70,338)  

  Other comprehensive income (loss) - net  

  —  

  —  

  —  

  —  

  —  

  (4,837)  

  —  

  (4,837)  

  Net income for the period  

   —   

   —   

   —   

   —   

  84,368  

   —   

  54  

  84,422  

   Balance as of September 30, 2024   

   265,546   

   $  2,290,191   

   (3,900)   

   ($145,646)   

   $  2,065,221   

   ($74,456)   

   $      1,577   

   $  4,136,887   

   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 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   

   Open Text Corporation   

   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS   

   (In thousands of U.S. dollars)   

   (unaudited)   

   Three Months Ended September 30,   

   2024   

   2023   

  Cash flows from operating activities:  

  Net income  

  $                    84,422  

  $                    80,946  

  Adjustments to reconcile net income to net cash provided by operating activities:  

  Depreciation and amortization of intangible assets  

  160,919  

  231,107  

  Share-based compensation expense  

  29,558  

  37,095  

  Pension expense  

  3,463  

  3,171  

  Amortization of debt discount and issuance costs  

  5,296  

  5,496  

  Write-off of right of use assets  

  —  

  4,715  

  Loss on sale and write down of property and equipment, net  

  2  

  458  

  Deferred taxes  

  (42,150)  

  (88,630)  

  Share in net (income) loss of equity investees  

  (455)  

  9,696  

  Changes in financial instruments  

  24,935  

  (17,895)  

  Changes in operating assets and liabilities:  

  Accounts receivable  

  57,607  

  31,304  

  Contract assets  

  (33,849)  

  (22,566)  

  Prepaid expenses and other current assets  

  22,151  

  19,326  

  Income taxes  

  (193,509)  

  29,597  

  Accounts payable and accrued liabilities  

  (107,520)  

  (124,214)  

  Deferred revenue  

  (76,531)  

  (150,476)  

  Other assets  

  (4,742)  

  4,104  

  Operating lease assets and liabilities, net  

  (7,403)  

  (6,113)  

  Net cash provided by (used in) operating activities  

  (77,806)  

  47,121  

  Cash flows from investing activities:  

  Additions of property and equipment  

  (39,316)  

  (37,539)  

  Purchase of Micro Focus, net of cash acquired  

  —  

  (9,272)  

  Proceeds from net investment hedge derivative contracts  

  2,519  

  1,966  

  Other investing activities  

  357  

  (5,554)  

  Net cash used in investing activities  

  (36,440)  

  (50,399)  

  Cash flows from financing activities:  

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

  9,449  

  11,453  

  Repayment of long-term debt and Revolver  

  (8,963)  

  (186,463)  

  Net change in transition services agreement obligation  

  (4,295)  

  —  

  Debt issuance costs  

  —  

  (1,961)  

  Repurchase of Common Shares  

  (87,403)  

  —  

  Purchase of treasury stock  

  (25,000)  

  (53,085)  

  Payments of dividends to shareholders  

  (69,061)  

  (66,965)  

  Net cash used in financing activities  

  (185,273)  

  (297,021)  

  Foreign exchange gain (loss) on cash held in foreign currencies  

  19,136  

  (11,503)  

  Decrease in cash, cash equivalents and restricted cash during the period  

  (280,383)  

  (311,802)  

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

  1,282,793  

  1,233,952  

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

  $               1,002,410  

  $                  922,150  

   Open Text Corporation   

   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS   

   (In thousands of U.S. dollars)   

   (unaudited)   

   Reconciliation of cash, cash equivalents and restricted cash:   

   September 30, 2024   

   September 30, 2023   

  Cash and cash equivalents  

  $               1,000,219  

  $                  919,850  

  Restricted cash ⁽¹⁾  

  2,191  

  2,300  

  Total cash, cash equivalents and restricted cash  

  $               1,002,410  

  $                  922,150  

   ⁽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 condensed 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 condensed 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'25 targets and F'27 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, 2024    

    (In thousands, except for per share data)    

   Three Months Ended September 30, 2024   

   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  

  $  175,257  

  ($2,186)  

  (1)  

  $   173,071  

  Customer support  

  62,574  

  (1,342)  

  (1)  

  61,232  

  Professional service and other  

  66,915  

  (1,314)  

  (1)  

  65,601  

  Amortization of acquired technology-based intangible assets  

  47,244  

  (47,244)  

  (2)  

  —  

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

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

  910,358  

  71.7 %  

  52,086  

  (3)  

  962,444  

  75.8 %  

   Operating expenses   

  Research and development  

  190,693  

  (8,167)  

  (1)  

  182,526  

  Sales and marketing  

  245,882  

  (9,315)  

  (1)  

  236,567  

  General and administrative  

  106,730  

  (7,234)  

  (1)  

  99,496  

  Amortization of acquired customer-based intangible assets  

  81,504  

  (81,504)  

  (2)  

  —  

  Special charges (recoveries)  

  47,136  

  (47,136)  

  (4)  

  —  

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

   income from operations   

  206,242  

  205,442  

  (5)  

  411,684  

  Other income (expense), net  

  (35,655)  

  35,655  

  (6)  

  —  

  Provision for income taxes  

  1,883  

  76,693  

  (7)  

  78,576  

   GAAP-based net income / Non-GAAP-based net income,   

   attributable to OpenText   

  84,368  

  164,404  

  (8)  

  248,772  

   GAAP-based earnings per share / Non-GAAP-based earnings   

   per share-diluted,   attributable to OpenText   

  $         0.32  

  $          0.61  

  (8)  

  $          0.93  

  (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 2% and a Non-GAAP-based tax rate of approximately 24% ; 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. Beginning in Fiscal 2025, net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 have been fully utilized and are no longer included. In arriving at our Non-GAAP-based tax rate of approximately 24%, 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, 2024   

   Per share diluted   

  GAAP-based net income, attributable to OpenText  

  $                     84,368  

  $                          0.32  

  Add (deduct):  

  Amortization  

  128,748  

  0.47  

  Share-based compensation  

  29,558  

  0.11  

  Special charges (recoveries)  

  47,136  

  0.18  

  Other (income) expense, net  

  35,655  

  0.13  

  GAAP-based provision for income taxes  

  1,883  

  0.01  

  Non-GAAP-based provision for income taxes  

  (78,576)  

  (0.29)  

  Non-GAAP-based net income, attributable to OpenText  

  $                   248,772  

  $                          0.93  

   Reconciliation of Adjusted EBITDA   

   Three Months Ended September 30, 2024   

  GAAP-based net income, attributable to OpenText  

  $                                                          84,368  

  Add:  

  Provision for  income taxes  

  1,883  

  Interest and other related expense, net  

  84,282  

  Amortization of acquired technology-based intangible assets  

  47,244  

  Amortization of acquired customer-based intangible assets  

  81,504  

  Depreciation  

  32,171  

  Share-based compensation  

  29,558  

  Special charges (recoveries)  

  47,136  

  Other (income) expense, net  

  35,655  

  Adjusted EBITDA  

  $                                                       443,801  

  GAAP-based net income margin  

  6.6 %  

  Adjusted EBITDA margin  

  35.0 %  

   Reconciliation of Free cash flows   

   Three Months Ended September 30, 2024   

  GAAP-based cash flows provided by operating activities  

  ($77,806)  

  Add:  

  Capital expenditures ⁽¹⁾  

  (39,316)  

  Free cash flows  

  ($117,122)  

   ⁽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, 2024    

    (In thousands, except for per share data)    

   Three Months Ended June 30, 2024   

   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  

  $   175,799  

  ($2,966)  

  (1)  

  $   172,833  

  Customer support  

  69,706  

  (1,022)  

  (1)  

  68,684  

  Professional service and other  

  71,691  

  (1,202)  

  (1)  

  70,489  

  Amortization of acquired technology-based intangible assets  

  48,220  

  (48,220)  

  (2)  

  —  

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

   based gross profit and gross margin (%)   

  987,716  

  72.5 %  

  53,410  

  (3)  

  1,041,126  

  76.4 %  

   Operating expenses   

  Research and development  

  198,855  

  (5,312)  

  (1)  

  193,543  

  Sales and marketing  

  291,750  

  (9,278)  

  (1)  

  282,472  

  General and administrative  

  126,639  

  (6,987)  

  (1)  

  119,652  

  Amortization of acquired customer-based intangible assets  

  97,446  

  (97,446)  

  (2)  

  —  

  Special charges (recoveries)  

  47,784  

  (47,784)  

  (4)  

  —  

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

   income from operations   

  193,258  

  220,217  

  (5)  

  413,475  

  Other income (expense), net  

  397,055  

  (397,055)  

  (6)  

  —  

  Provision for income taxes  

  239,578  

  (196,036)  

  (7)  

  43,542  

   GAAP-based net income / Non-GAAP-based net income,   

   attributable to OpenText   

  248,229  

  19,198  

  (8)  

  267,427  

   GAAP-based earnings per share / Non-GAAP-based earnings   

   per share-diluted, attributable to OpenText   

  $          0.91  

  $          0.07  

  (8)  

  $          0.98  

  (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 49% and a Non-GAAP-based tax rate of approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-based net income. Such excluded items include amortization, share-based compensation, special charges (recoveries) and other income (expense), net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation allowance reserves and "book to return" adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period. In arriving at our Non-GAAP-based tax rate of approximately 14%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.  

  (8)  

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

   Three Months Ended June 30, 2024   

   Per share diluted   

  GAAP-based net income, attributable to OpenText  

  $                   248,229  

  $                          0.91  

  Add (deduct):  

  Amortization  

  145,666  

  0.54  

  Share-based compensation  

  26,767  

  0.10  

  Special charges (recoveries)  

  47,784  

  0.18  

  Other (income) expense, net  

  (397,055)  

  (1.47)  

  GAAP-based provision for income taxes  

  239,578  

  0.88  

  Non-GAAP-based provision for income taxes  

  (43,542)  

  (0.16)  

  Non-GAAP-based net income, attributable to OpenText  

  $                   267,427  

  $                          0.98  

   Reconciliation of Adjusted EBITDA   

   Three Months Ended June 30, 2024   

  GAAP-based net income, attributable to OpenText  

  $                                                     248,229  

  Add (deduct):  

  Provision for income taxes  

  239,578  

  Interest and other related expense, net  

  102,461  

  Amortization of acquired technology-based intangible assets  

  48,220  

  Amortization of acquired customer-based intangible assets  

  97,446  

  Depreciation  

  31,984  

  Share-based compensation  

  26,767  

  Special charges (recoveries)  

  47,784  

  Other (income) expense, net  

  (397,055)  

  Adjusted EBITDA  

  $                                                     445,414  

  GAAP-based net income margin  

  18.2 %  

  Adjusted EBITDA margin  

  32.7 %  

   Reconciliation of Free cash flows   

   Three Months Ended June 30, 2024   

  GAAP-based cash flows provided by operating activities  

  $                                                         185,220  

  Add:  

  Capital expenditures ⁽¹⁾  

  (39,979)  

  Free cash flows  

  $                                                         145,241  

   ⁽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, 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  

  226,231  

  (11,734)  

  (1)  

  214,497  

  Sales and marketing  

  280,007  

  (11,807)  

  (1)  

  268,200  

  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 net 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 (deduct):  

  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 (deduct):  

  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.  

  (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, 2024 and 2023:  

   Three Months Ended September 30, 2024   

   Three Months Ended September 30, 2023   

   Currencies   

   % of Revenue   

   % of Expenses   ⁽¹⁾    

   % of Revenue   

   % of Expenses   ⁽¹⁾    

  EURO  

  22 %  

  12 %  

  21 %  

  11 %  

  GBP  

  5 %  

  6 %  

  5 %  

  8 %  

  CAD  

  3 %  

  10 %  

  3 %  

  10 %  

  USD  

  59 %  

  49 %  

  60 %  

  50 %  

  Other  

  11 %  

  23 %  

  11 %  

  21 %  

  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).