OTEX Open Text Corporation

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

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).