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.

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).