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What changed in OPEN TEXT CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of OPEN TEXT CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+614 added−541 removedSource: 10-K (2023-08-03) vs 10-K (2022-08-05)

Top changes in OPEN TEXT CORP's 2023 10-K

614 paragraphs added · 541 removed · 432 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

86 edited+36 added−25 removed59 unchanged
Biggest changeHuman Capital Our Global Footprint Our ability to attract, retain and engage a diverse workforce committed to innovation, operational excellence and the OpenText mission and values across our global footprint is a cornerstone to our success. 14 As of June 30, 2022, we employed a total of approximately 14,800 individuals, of which 7,150 or 49% are in the Americas, 2,720 or 18% are in EMEA and 4,930 or 33% are in Asia Pacific.
Biggest changeWe may also target future acquisitions to expand or add functionality and capabilities to our existing portfolio of solutions, as well as add new solutions to our portfolio. 16 Table of Contents Human Capital Our Global Footprint Our ability to attract, retain and engage a diverse workforce committed to innovation, operational excellence and the OpenText mission and values across our global footprint is a cornerstone to our success.
With Webroot Endpoint Protection, Webroot Domain Name System (DNS) protection, Email Security by Zix, Security Awareness Training and MDR/Threat Hunting, our security solutions are directed to the SMB and consumers segments. We serve SMB together with our network of Managed Service Providers (MSPs) who help deploy OpenText solutions at scale.
With Webroot Endpoint Protection, Webroot Domain Name System (DNS) protection, Email Security by Zix, Security Awareness Training, MDR and Threat Hunting, our security solutions are directed to the SMB and consumers segments. We serve SMB together with our network of Managed Service Providers (MSPs) who help deploy OpenText solutions at scale.
With strategic acquisitions, we are well positioned to expand our product portfolio and improve our ability to innovate and grow organically, which helps us to meet our long-term growth targets. We believe our Total Growth strategy is a durable model, that we believe will create both near and long-term shareholder value through organic and acquired growth, capital efficiency and profitability.
With strategic acquisitions, we are well positioned to expand our product portfolio and improve our ability to innovate and grow organically, which helps us to meet our long-term growth targets. Our Total Growth strategy is a durable model, that we believe will create both near and long-term shareholder value through organic and acquired growth, capital efficiency and profitability.
Throughout the phases of the pandemic, employee communication and listening strategies increased, including supplemental surveys ranging from topics of well-being, feedback from new hires on the quality of their onboarding and office re-opening plans. Environmental, Social and Corporate Governance The OpenText Zero-In Initiative is our commitment to our global impact goals and initiatives related to ESG.
Throughout the phases of the global health pandemic, employee communication and listening strategies increased, including supplemental surveys ranging from topics of well-being, feedback from new hires on the quality of their onboarding and office re-opening plans. Environmental, Social and Corporate Governance The OpenText Zero-In Initiative is our commitment to our global impact goals and initiatives related to ESG.
We expect to continue to pursue strategic acquisitions to strengthen our service offerings in the Information Management market. Considering the continually evolving marketplace in which we operate, we regularly evaluate acquisition opportunities within the Information Management market and at any time may be in various stages of discussions with respect to such opportunities.
Selectively Pursue Acquisitions. We expect to continue to pursue strategic acquisitions to strengthen our service offerings in the Information Management market. Considering the continually evolving marketplace in which we operate, we regularly evaluate acquisition opportunities within the Information Management market and at any time may be in various stages of discussions with respect to such opportunities.
All statements made in any of our securities filings, including all forward-looking statements or information, are made as of the date of the document in which the statement is included, and we do not assume or undertake any obligation to update any of those statements or documents unless we are required to do so by applicable law. 17
All statements made in any of our securities filings, including all forward-looking statements or information, are made as of the date of the document in which the statement is included, and we do not assume or undertake any obligation to update any of those statements or documents unless we are required to do so by applicable law.
To achieve these objectives, we have made and expect to continue to make investments in research and development, through internal and third-party development activities, third-party licensing agreements and potentially 12 through technology acquisitions. We expect a significant amount of our future R&D investment will be in cloud-based technologies.
To achieve these objectives, we have made and expect to continue to make investments in research and development, through internal and third-party development activities, third-party licensing agreements and potentially through technology acquisitions. We expect a significant amount of our future R&D investment will be in cloud-based technologies.
The Experience Cloud platform includes a range of solutions from Customer Experience Management (CXM), Web Content Management (WCM), Digital Asset Management (DAM), Customer Analytics, AI & Insights, Digital Fax, Omnichannel Communications, Secure Messaging, Voice of Customer (VoC), as well as customer journey, testing and segmentation.
The Experience Cloud platform includes a range of solutions from Customer Experience Management (CXM), Web Content Management (WCM), Digital Asset Management (DAM), Customer Analytics, AI & Insights, eDiscovery, Digital Fax, Omnichannel Communications, Secure Messaging, Voice of Customer (VoC), as well as customer journey, testing and segmentation.
Our Information Management solutions are designed to help organizations extract value from their information, secure that information and meet the growing list of privacy and compliance requirements. OpenText helps customers improve efficiencies, redefine business models and transform industries.
Our Information Management solutions are designed to help organizations extract value and insights from their information, secure that information and meet the growing list of privacy and compliance requirements. OpenText helps customers improve efficiencies, redefine business models and transform industries.
We expect to continue to acquire strategically, to integrate and innovate, and to deepen and strengthen our intelligent information platform for customers. We regularly evaluate acquisition opportunities and at any time may be at various stages of discussion with respect to such opportunities.
We expect to continue to acquire strategically, to integrate and innovate, and to deepen and strengthen our intelligent information platform for customers. We regularly evaluate acquisition and divestiture opportunities and at any time may be at various stages of discussion with respect to such opportunities.
Our impact teams are leading global initiatives with local impact which include: • Awareness and Training: For employees and managers on matters such as inclusive leadership practices and diversity awareness; • Recruiting: Platforms that are inclusive, diverse slates for key leadership roles and an increased focus on virtual work opportunities to widen recruiting talent and diversity; • Advancement: Internal career building opportunities, mentoring and networks; • Advocacy: Employee affinity groups, including “Black Employee Empowerment” and “Women in Technology”, fostering sponsorship, community and career conversations; and • Civic Action: Focusing an ED&I lens on community outreach and engagement.
Our impact teams are leading global initiatives with local impact which include: • Awareness and Training: For employees and managers on matters such as inclusive leadership practices and diversity awareness; • Recruiting: Platforms that are inclusive, diverse slates for key leadership roles and an increased focus on virtual work opportunities to widen recruiting talent and diversity; • Advancement: Internal career building opportunities, mentoring and networks; • Advocacy: Employee affinity groups, including “Black Employee Empowerment” and “Women in Technology,” fostering sponsorship, community and career conversations; and • Civic Action: Focusing an ED&I lens on community outreach and engagement.
Broaden Global Presence . As customers become increasingly multi-national and as international markets continue to adopt Information Management solutions, we plan to further grow our brand, presence and partner networks in these new markets. We are focused on using our direct sales for targeting existing G10K customers and plan to address new geographies and SMB customers, jointly with our partners.
As customers become increasingly multi-national and as international markets continue to adopt Information Management solutions, we plan to further grow our brand, presence and partner networks in these new markets. We are focused on using our direct sales for targeting existing G10K customers and plan to address new geographies and SMB customers, jointly with our partners.
Cloud Services and Subscriptions Cloud services and subscriptions revenues consist of (i) SaaS offerings, (ii) APIs and data services, (iii) hosted services and (iv) managed service arrangements. These offerings allow customers to transmit a variety of content between various mediums and to securely manage enterprise information without the commitment of investing in related hardware infrastructure.
Cloud Services and Subscriptions Cloud services and subscriptions revenues consist of (i) software as a service (SaaS) offerings, (ii) APIs and data services, (iii) hosted services and (iv) managed service arrangements. These offerings allow customers to transmit a variety of content between various mediums and to securely manage enterprise information without the commitment of investing in related hardware infrastructure.
Currently, we have employees in 35 countries enabling strong access to multiple talent pools while ensuring reach and proximity to our customers. Please see “Results of Operations” included in Item 7 of this Annual Report on Form 10-K for our definitions of geographic regions.
Currently, we have employees in 45 countries enabling strong access to multiple talent pools while ensuring reach and proximity to our customers. Please see “Results of Operations” included in Item 7 of this Annual Report on Form 10-K for our definitions of geographic regions.
Our solutions manage the lifecycle, distribution, use and analysis of information across the organization, from capture through to archiving and disposition.
Our solutions manage the lifecycle, distribution, use and analysis of information across the organization, from capture through archiving and disposition.
Our Content Services solutions enable customers to capture data from paper, electronic files and other sources and transform it into digital content delivered directly into content management solutions and business processes. Our customers can protect critical historical information within a secure, centralized archiving solution.
Our Content Services solutions enable customers to capture data from paper, electronic files and other sources and transform it into digital content delivered directly into content management solutions, business processes and analytic applications. Our customers can protect critical historical information within a secure, centralized archiving solution.
With a multi-layered security approach, we have a wide range of OpenText Security Solutions that power and protect at the data management layer, at the infrastructure and application layers, and at the edge, offering insights and threat intelligence across it all.
With a multi-layered security approach, we have a wide range of OpenText Cybersecurity solutions that power and protect at the data management layer, at the infrastructure and application layers, at the code, and at the edge, offering insights and threat intelligence across it all.
Our Cloud Managed Services offering provides customers with a single point of contact and a single service level agreement for OpenText solutions managed in our partner’s clouds. Our Strategy Growth As an organization, we are committed to “Total Growth”, meaning we strive towards delivering value through organic initiatives, innovations and acquisitions, as well as financial performance.
Our Cloud Managed Services offering provides customers with a single point of contact and a single service level agreement for OpenText solutions managed in our partner’s clouds. Our Strategy Growth As an organization, we are committed to “Total Growth”, meaning we strive towards delivering value through organic initiatives, innovations and acquisitions.
Our Digital Experience solutions create, manage, track and optimize omnichannel interactions throughout the customer journey, from acquisition to retention, and integrate with systems of record including Salesforce® and SAP®. The OpenText Digital Experience platform enables businesses to gain insights into their customer interactions and optimize them to improve customer lifetime value.
Our Digital Experience solutions create, manage, track and optimize omnichannel interactions throughout the customer journey, from acquisition to retention, and integrate with systems of record including Salesforce® and SAP®. The OpenText Digital Experience platform enables businesses to gain insights into their 8 Table of Contents customer interactions and optimize them to improve customer lifetime value.
The decision by a customer to license our software products often involves a comprehensive implementation process across the customer’s network or networks and the licensing and implementation of our software products may entail a significant commitment of resources by prospective customers. Professional Service and Other We provide consulting and learning services to customers.
The decision by a customer to license our software products often involves a comprehensive implementation process across the customer’s network or networks and the licensing and implementation of our software products may entail a significant commitment of resources by prospective customers. 12 Table of Contents Professional Service and Other We provide consulting and learning services to customers.
Lastly, OpenText Security solutions help secure operations using solutions with threat intelligence. Threat monitoring with BrightCloud, remote endpoint protection and automated cloud backup and recovery work together to protect employees and customer data while allowing organizations to prepare for, respond to and recover quickly from cyber-attacks.
OpenText Cybersecurity solutions help secure operations using solutions with threat intelligence. Threat monitoring with BrightCloud, remote endpoint protection and automated cloud backup and recovery work together to protect employees and customer data while allowing organizations to prepare for, respond to and recover quickly from cyber-attacks.
Our annual Career Week event focuses on career development planning and honing manager skills in developing teams. 16 We offer an annual education reimbursement program to all employees globally. This program aligns with our commitment to support internal development, equal opportunity and mobility across all of our geographies, regardless of an employee’s role, function or location.
Our annual Career Week event focuses on career development planning and honing manager skills in developing teams. 18 Table of Contents We offer an annual education reimbursement program to all employees globally. This program aligns with our commitment to support internal development, equal opportunity and mobility across all of our geographies, regardless of an employee’s role, function or location.
We enable supply chain optimization, digital business integration, data management, messaging, security, communications and secure data exchange across an increasingly complex network of off-cloud and cloud applications, connected devices, systems and people.
We enable supply chain optimization, digital business integration, data management, messaging, security, communications and secure data exchange across an increasingly complex network of off-cloud and cloud applications, 9 Table of Contents connected devices, systems and people.
Our Business Network manages data within the organization and outside the firewall, connecting people, systems and Internet of Things (IoT) devices at a global scale for those seeking to digitize and automate their procure-to-pay and order-to-cash processes. For our customers, this delivers streamlined connectivity, secure collaboration and real-time business intelligence in a single, unified platform.
Our Business Network manages data within the organization and outside the firewall, connecting people, systems and Internet of Things (IoT) devices at a global scale for those seeking to digitize and automate their procure-to-pay and order-to-cash processes. For our customers, our Business Network Cloud offerings deliver streamlined connectivity, secure collaboration and real-time business intelligence in a single, unified platform.
We remain a value oriented and disciplined acquirer, having efficiently deployed $6.5 billion on acquisitions over the last 10 fiscal years. Mergers and acquisitions are one of our leading growth drivers. We look for companies that are situated within our total addressable markets.
We remain a value oriented and disciplined acquirer, having efficiently deployed $13.4 billion on acquisitions over the last 10 fiscal years. Mergers and acquisitions are one of our leading growth drivers. We look for companies that are situated within our total addressable markets.
Our products are available in cloud, off-cloud, private cloud, public cloud and application programming interface (API) cloud, or any combination thereof, and we are ready to support the customer’s preferred delivery channel. In providing choice and flexibility, we strive to maximize the lifetime value of the relationship with our customers and support their information-led transformation journey.
Our products are available in private cloud, public cloud, off-cloud and application programming interface (API) cloud, or any combination thereof, to support the customer’s preferred deployment option. In providing choice and flexibility, we strive to maximize the lifetime value of the relationship with our customers and support their information-led transformation journey.
Externally, we promote sustainable consumption by developing and promoting environmentally sound technologies to support our customers’ digital transformations, including transitioning to the cloud environment. Internally, we continue to develop, implement and manage company-wide environmental initiatives.
Externally, we promote sustainable 17 Table of Contents consumption by developing and promoting environmentally sound technologies to support our customers’ digital transformations, including transitioning to the cloud environment. Internally, we continue to develop, implement and manage company-wide environmental initiatives.
The approximate composition of our employee base is as follows: (i) 2,700 employees in sales and marketing, (ii) 4,300 employees in product development, (iii) 3,300 employees in cloud services, (iv) 1,500 employees in professional services, (v) 1,000 employees in customer support and (vi) 2,000 employees in general and administrative roles. We believe that relations with our employees are strong.
The approximate composition of our employee base is as follows: (i) 4,800 employees in sales and marketing, (ii) 8,300 employees in product development, (iii) 3,700 employees in cloud services, (iv) 2,200 employees in professional services, (v) 1,700 employees in customer support and (vi) 3,400 employees in general and administrative roles. We believe that relations with our employees are strong.
These include the most prominent organizations in enterprise software, hardware and public cloud, with whom we work to enhance the value of customer investments. They include: • SAP SE (SAP) : We are SAP’s partner for content services.
These include the most prominent organizations in enterprise software, hardware and public cloud, with whom we work to enhance the value of customer investments. They include: • SAP SE (SAP) : We partner with SAP on content services.
Our AI and analytics capabilities within Content Services leverages structured or unstructured data to help organizations improve decision-making, gain operational efficiencies and increase visibility through interactive dashboards, reports and data visualizations.
Our AI and analytics capabilities within Content Cloud leverage structured or unstructured data to help organizations improve decision-making, gain operational efficiencies and increase visibility through interactive dashboards, reports and data visualizations.
Through our OpenText customer support programs, customers receive access to software and security upgrades, a knowledge base, discussion boards, product information and an online mechanism to post and review “trouble tickets.” Additionally, our customer support teams handle questions on the use, configuration and functionality of OpenText products and help identify software issues, develop solutions and document enhancement requests for consideration in future product releases. 10 License License revenues consist of fees earned from the licensing of software products to our customers.
Through our OpenText customer support programs, customers receive access to software and security upgrades, a knowledge base, discussion boards, product information and an online mechanism to post and review “trouble tickets.” Additionally, our customer support teams handle questions on the use, configuration and functionality of OpenText products and help identify software issues, develop solutions and document enhancement requests for consideration in future product releases.
International Markets We provide our product offerings worldwide. Our geographic coverage allows us to draw on business and technical expertise from a geographically diverse workforce, providing greater stability to our operations and revenue streams by diversifying our portfolio to better mitigate against the risks of a single geographically focused business. There are inherent risks to conducting operations internationally.
Our geographic coverage allows us to draw on business and technical expertise from a geographically diverse workforce, providing greater stability to our operations and revenue streams by diversifying our portfolio to better mitigate against the risks of a single geographically focused business. There are inherent risks to conducting operations internationally.
Except for the documents specifically incorporated by reference into this Annual Report, information contained on our website is not incorporated by reference in this Annual Report on Form 10-K and should not be considered to be a part of this Annual Report.
Our website is included in this Annual Report on Form 10-K as an inactive textual reference only. Except for the documents specifically incorporated by reference into this Annual Report, information contained on our website is not incorporated by reference in this Annual Report on Form 10-K and should not be considered to be a part of this Annual Report.
Partners and Alliances We are committed to establishing relationships with the best resellers and technology and service providers to ensure customer success. Together as partners, we fulfill key market objectives to drive new business, establish a competitive advantage and create demonstrable business value. We have a number of strategic partnerships that contribute to our success.
Partners and Alliances We are committed to establishing relationships with the best resellers and technology and service providers to ensure customer success. Together as partners, we fulfill key market objectives to drive new business, establish a competitive advantage and create demonstrable business value.
Deliver Organic Growth. We are focused on investing and delivering on future organic growth. The Information Management market is large and is expected to continue to grow and we expect cloud to be our leading growth driver. We have multiple initiatives that are designed to deliver organic growth.
Deliver Organic Growth. We are focused on investing and delivering on organic growth. The Information Management market is large and is expected to continue to grow and we expect cloud to be our leading growth driver.
OpenText APIs empower developers to focus on code-based innovation with a single, secure, infrastructure agnostic platform, freely available technical documentation and an open and engaged developer community to share knowledge and best practices to solve problems and create new solutions.
OpenText APIs empower developers to focus on code-based innovation with a single, secure, infrastructure agnostic platform, freely available technical documentation and an open and engaged developer community to share knowledge and best practices to solve problems and create new solutions. Our innovation roadmap includes APIs as a deployment option for all new products.
OpenText Cloud Editions is designed to build additional flexibility and scalability for our customers: becoming cloud-native, connecting anything and extending capabilities quickly with multi-tenant SaaS applications and services. Deepen Existing Customer Footprint .
OpenText Cloud Editions is designed to build additional flexibility and scalability for our customers: becoming cloud-native, connecting anything and extending capabilities quickly with multi-tenant SaaS applications and services. Invest in AI.
We help customers re-engineer processes and quickly adapt to complex needs to deliver seamless customer and employee experiences. We speed up the development of case- and process-driven applications with low-code, drag-and-drop components, reusable building blocks and pre-built accelerators to build and deploy solutions more easily.
Application Automation Cloud The OpenText Application Automation Cloud focuses on helping customers re-engineer processes and quickly adapt to complex needs to deliver seamless customer and employee applications. Our cloud ready solutions speed up the development of case and process-driven applications with low-code, drag-and-drop components, reusable building blocks and pre-built accelerators to build and deploy solutions more easily.
Below is a listing of our Information Management solutions. Content Cloud Our Content Cloud empowers customers to master modern work through robust content management, improved integrations and intelligent automation. It connects content to the digital business eliminating silos and providing convenient, secure and compliant remote access to both structured and unstructured data - boosting productivity and reducing risk.
Content Cloud Our Content Cloud empowers customers to gain an information advantage through robust content management, improved integrations and intelligent automation. It connects content to the digital business eliminating silos and providing convenient, secure and compliant remote access to both structured and unstructured data, boosting productivity and insights and reducing risk.
We currently have over 22,000 MSPs in our network and it is expected to grow. This is a key go-to-market channel for us as MSPs act as an intermediary between the solutions vendors like OpenText and the SMB market. An MSP specializes in their local market and provides managed services to their clients.
We currently have over 22,000 MSPs in our network which provide a key go-to-market channel for us as MSPs act as intermediaries between the solutions vendors like OpenText and the SMB market. An MSP specializes in their local market and provides managed services to their clients. International Markets We provide our product offerings worldwide.
Our license revenues are impacted by the strength of general economic and industry conditions, the competitive strength of our software products and our acquisitions.
License License revenues consist of fees earned from the licensing of software products to our customers. Our license revenues are impacted by the strength of general economic and industry conditions, the competitive strength of our software products and our acquisitions.
With the acquisition of Zix Corporation (Zix) in 2021, we extended our partnership with Microsoft by becoming one of their nine authorized Cloud Solutions Providers in the North American market. • Oracle Corporation (Oracle): We develop innovative solutions for Oracle applications that enhance the experience and productivity of users working with these tools. 11 • Salesforce.com Corporation (Salesforce) : The company-to-company partnership between OpenText and Salesforce is focused on growing a full portfolio of Information Management solutions to complement the Salesforce ecosystem by uniting the structured and unstructured information experience.
With the acquisition of Zix Corporation (Zix) in 2021, we extended our partnership with Microsoft by becoming one of their nine authorized Cloud Solutions Providers in the North American market. • Oracle Corporation (Oracle) : We develop innovative solutions for Oracle applications that enhance the experience and productivity of users working with these tools. • Salesforce.com Corporation (Salesforce) : The company-to-company partnership between OpenText and Salesforce is focused on growing a full portfolio of Information Management solutions to complement the Salesforce ecosystem by uniting the structured and unstructured information experience. 13 Table of Contents • DXC Technology Company (DXC) : We partner with DXC to deliver mission critical IT services to global companies including testing solutions, application development and IT operations management for the optimization and modernization of data centers.
See “We have implemented a Flex-Office program, which will subject us to certain operational challenges and risks” in Part I, Item 1A “Risk Factors” included elsewhere within this Annual Report on Form 10-K.
Our past experiences continue to inform our future workplace standards and practices. See “We have a Flex-Office program, which subjects us to certain operational challenges and risks” in Part I, Item 1A “Risk Factors” included elsewhere within this Annual Report on Form 10-K.
Our Global Partner Program offers five distinct programs: Referral, Reseller, Services, Technology and Support. This creates an extended organization to develop technologies, repeatable service offerings and solutions that enhance the way our customers maximize their investment in our products and services.
Our OpenText Partner Network offers five distinct programs: Strategic Partners, Global Systems Integrators, Resellers, Technology and Managed Service Providers. This creates an extended organization to develop technologies, repeatable service offerings and solutions that enhance the way our customers maximize their investment in our products and services.
Our Products and Services We have a complete and integrated portfolio of Information Management solutions delivered at scale to meet the demands and needs of a global market.
Our Products and Services We leverage a common set of technologies, processes and systems to deliver our complete and integrated portfolio of Information Management solutions at scale to meet the demands and needs of a global market.
Our primary competitor is International Business Machines Corporation (IBM), with numerous other software vendors competing with us in the Information Management sector, such as Hyland Software Inc., Datto Holding Corp., Quadient SA, Veeva Systems Inc., SPS Commerce Inc., Box Inc., CrowdStrike Holdings Inc. and Adobe Inc. In certain markets, OpenText competes with Oracle and Microsoft, who are also our partners.
Our primary competitor is International Business Machines Corporation (IBM), with numerous other software vendors competing with us in the Information Management sector, such as Box Inc., Hyland Software Inc., Alfresco Software Inc., ServiceNow Inc., Atlassian Corp., Splunk Inc., Gen Digital Inc. and Adobe Inc. In certain markets, OpenText competes with Oracle and Microsoft, who are also our partners.
(Carbonite), a leading provider of cloud-based subscription backup, disaster recovery and endpoint security to SMB, consumers and a wide variety of partners, for $1.4 billion. • O n December 2, 2019, we acquired certain assets and certain liabilities of Dynamic Solutions Group (The Fax Guys) for $5.1 million. • O n January 31, 2019, we acquired Catalyst, a leading provider of eDiscovery that designs, develops and supports market-leading cloud eDiscovery software, for $71.4 million. • On December 17, 2018, we acquired Liaison, a leading provider of cloud-based business to business integration, for $310.6 million. • O n February 14, 2018, we acquired Hightail, a leading cloud service for file sharing and creative collaboration, for $20.5 million. • On September 14, 2017, we acquired Guidance, a leading provider of forensic security solutions, for $240.5 million. • On July 26, 2017, we acquired Covisint, a leading cloud platform for building Identity Access Management, Automotive and IoT applications, for $102.8 million.
(Carbonite), a leading provider of cloud-based subscription backup, disaster recovery and endpoint security to SMB, consumers and a wide variety of partners, for $1.4 billion. • O n December 2, 2019, we acquired certain assets and certain liabilities of Dynamic Solutions Group (The Fax Guys) for $5.1 million. • O n January 31, 2019, we acquired Catalyst, a leading provider of eDiscovery that designs, develops and supports market-leading cloud eDiscovery software, for $71.4 million. • On December 17, 2018, we acquired Liaison, a leading provider of cloud-based business to business integration, for $310.6 million.
Acquisitions During the Last Five Fiscal Years We regularly evaluate acquisition opportunities within the Information Management market and at any time may be in various stages of discussions with respect to such opportunities.
We expect to continue to invest in R&D to maintain and improve our products and services offerings. 14 Table of Contents Acquisitions During the Last Five Fiscal Years We regularly evaluate acquisition opportunities within the Information Management market and at any time may be in various stages of discussions with respect to such opportunities.
By connecting unstructured content with structured data workflows, our Content Services allow users to have the content they need, when they need it, reducing errors, driving greater business insight and increasing efficiency.
By connecting unstructured content with structured data workflows, our Content Services allow users to have the content they need, when they need it, reducing errors, driving greater business insight and increasing efficiency. Also within Content Cloud, our Experience Cloud powers smarter experiences that drive revenue growth and customer loyalty.
Below is a summary of certain significant acquisitions we have made over the last five fiscal years. • On December 23, 2021, we acquired Zix, a leader in SaaS based email encryption, threat protection and compliance cloud solutions for SMBs, for $894.5 million. • On November 24, 2021, we acquired all of the equity interest in Bricata Inc.
Below is a summary of certain significant acquisitions we have made over the last five fiscal years. • On January 31, 2023, we acquired Micro Focus, a leading provider of mission-critical software technology and services that help customers accelerate digital transformations, for $6.2 billion (the Micro Focus Acquisition). • On December 23, 2021, we acquired Zix, a leader in SaaS based email encryption, threat protection and compliance cloud solutions for SMBs, for $894.5 million. • On November 24, 2021, we acquired all of the equity interest in Bricata Inc.
Through the Global Partner Program, we are extending market coverage, building stronger relationships and providing customers with a more complete local ecosystem of partners to meet their needs. Each distinct program is focused to provide valuable business benefits to the joint relationship. Global Systems Integrators (GSIs) provide customers with digital transformational services around OpenText technologies.
Through the OpenText Partner Network, we are extending market coverage, building stronger relationships and providing customers with a more complete local ecosystem of partners to meet their needs. Each distinct program is focused to provide valuable business benefits to the joint relationship. We have a number of strategic partnerships that contribute to our success.
Our API solutions help developers accelerate new product development, utilize fewer resources and reduce time to delivery for their projects. With our Developer Cloud's language-neutral protocols and cloud API services, our customers can reduce infrastructure spend, improve time-to-market and minimize the time and effort required to add new capabilities.
With our Developer Cloud’s language-neutral protocols and cloud API services, our customers can reduce infrastructure spend, improve time-to-market and minimize the time and effort required to add new capabilities.
Our R&D expenses were $440.4 million for Fiscal 2022, $421.4 million for Fiscal 2021 and $370.4 million for Fiscal 2020. We believe our spending on research and development is an appropriate balance between managing our organic growth and results of operations. We expect to continue to invest in R&D to maintain and improve our products and services offerings.
Our R&D expenses were $680.6 million for Fiscal 2023, $440.4 million for Fiscal 2022 and $421.4 million for Fiscal 2021. We believe our spending on research and development is an appropriate balance between managing our organic growth and results of operations.
With Carbonite Endpoint, Carbonite Server, Carbonite Cloud-to-Cloud Backup and Information Archiving, we help ensure customers have visibility across all endpoints, devices and networks, for proactive discovery of sensitive data, identification of threats and sound data collection for investigation. At the infrastructure and application layer, OpenText Security Solutions help detect issues and respond and remediate threats.
At the data layer, OpenText Cybersecurity helps customers be cyber-resilient with uninterrupted access and protection of business data against cyber threats. With Carbonite Endpoint, Carbonite Server, Carbonite Cloud-to-Cloud Backup and Information Archiving, we help ensure customers have visibility across all endpoints, devices and networks, for proactive discovery of sensitive data, identification of threats and sound data collection for investigation.
We are guiding our customers along their cloud journey, investing in our mid-market channel and deepening our relationships with our partners and hyperscalers. As customers move more into the cloud, it will facilitate cross-sell and upsell opportunities across the product portfolio and geographies. Selectively Pursue Acquisitions.
We have multiple initiatives that are designed to deliver organic growth including; guiding our customers along their cloud journey, investing in our mid-market channel and deepening our relationships with our partners and hyperscalers. As customers move into the cloud, it will facilitate cross-sell and upsell opportunities across the product portfolio and geographies. Execute on Deleveraging Goals.
Our solutions support composite AI for improved accuracy, and we help customers turn repositories of information into clean and integrated “data lakes” that can be mined by AI to extract useful knowledge and insight for our customers. Our automation solutions enable organizations to transform into intelligent, secure and connected digital, data-driven businesses.
Our Magellan, Vertica, and IDOL solutions support composite AI for improved accuracy, and we help customers turn repositories of operational and experience information into clean and integrated “data lakes” that can be mined by AI to extract useful knowledge and insight for our customers.
The Business Network Cloud can be accessed through our new multi-tenant, self-service Foundation offering or as a managed service to simplify the inherent complexities of business-to-business (B2B) data exchange.
The Business Network Cloud can be accessed through our new multi-tenant, self-service Foundation offering or as a managed service to simplify the inherent complexities of business-to-business (B2B) data exchange. OpenText’s Business Network Cloud offers insights that help drive operational efficiencies, accelerate time to transaction and improve customer satisfaction.
OpenText Revenues Our business consists of four revenue streams: cloud services and subscriptions, customer support, license and professional service and other. For information regarding our revenues by significant geographic area for Fiscal 2022, Fiscal 2021 and Fiscal 2020, please see Note 20 “Segment Information” to the Consolidated Financial Statements included in this Annual Report on Form 10-K.
For information regarding our revenues by significant geographic area for Fiscal 2023, Fiscal 2022 and Fiscal 2021, please see Note 20 “Segment Information” to the Consolidated Financial Statements included in this Annual Report on Form 10-K.
As a result, we are committed to continue to modernize our technology infrastructure and leverage existing investments in the OpenText Cloud. The combination of OpenText cloud-native applications and managed services, together with the scalability and performance of our partner public cloud providers, offer more secure, reliable and compliant solutions to customers wanting to deploy cloud-based Information Management applications.
The combination of 15 Table of Contents OpenText cloud-native applications and managed services, together with the scalability and performance of our partner public cloud providers, offer more secure, reliable and compliant solutions to customers wanting to deploy cloud-based Information Management applications.
They are trained and certified on OpenText solutions and enhance the value of our offerings by providing technical credibility and complementary services to customers. Our GSIs include Accenture plc, ATOS International S.A.S., Capgemini Technology Services SAS, Cognizant Technology Solutions U.S. Corp., Deloitte Consulting LLP and Tata Consultancy Services (TCS).
Global Systems Integrators (GSIs) provide customers with digital transformational services around OpenText technologies. They are trained and certified on OpenText solutions and enhance the value of our offerings by providing technical credibility and complementary services to customers. Our GSIs include DXC, Accenture plc, Capgemini Technology Services SAS, Deloitte Consulting LLP, Hewlett Packard Enterprises and Tata Consultancy Services (TCS).
We plan to continue to pursue acquisitions that complement our existing business, represent a strong strategic fit and are consistent with our overall growth strategy and disciplined financial management. We may also target future acquisitions to expand or add functionality and capabilities to our existing portfolio of solutions, as well as add new solutions to our portfolio.
We plan to continue to pursue acquisitions that complement our existing business, represent a strong strategic fit and are consistent with our overall growth strategy and disciplined financial management.
While we believe our intellectual property is valuable and our ability to maintain and protect our intellectual property rights is important to our success, we also believe that our business as a whole is not materially dependent on any particular patent, trademark, license, or other intellectual property right. 13 For more information on the risks related to our intellectual property rights, see “Risk Factors” included in Item 1A of this Annual Report on Form 10-K.
While we believe our intellectual property is valuable and our ability to maintain and protect our intellectual property rights is important to our success, we also believe that our business as a whole is not materially dependent on any particular patent, trademark, license, or other intellectual property right.
With an emphasis on increasing recurring revenues and expanding our margins, we believe our Total Growth strategy will ultimately drive overall cash flow generation, thus helping to fuel our disciplined capital allocation approach and further our ability to deepen our account coverage and identify and execute strategic acquisitions.
With an emphasis on increasing recurring revenues and expanding profitability, we believe our Total Growth strategy will ultimately drive cash flow growth, thus helping to fuel our innovation, broaden our go-to-market distribution and identify and execute strategic acquisitions.
Moreover, our professional services team works with customers to simplify complex interactions among people, content, transactions and workflows across multiple systems of record to support a diverse range of use cases. Business Network Cloud Our Business Network Cloud provides a foundation for digital supply chains and secure e-commerce ecosystems.
The Application Automation Cloud provides performance to functional testing, and lifecycle management of applications with improved visibility. Moreover, our professional services team works with customers to simplify complex interactions among people, content, transactions and workflows across multiple systems of record to support a diverse range of use cases.
Customer support is typically renewed on an annual basis and historically customer support revenues have been a significant portion of our total revenue.
Customer Support The first year of our customer support offering is usually purchased by customers together with the license of our Information Management software products. Customer support is typically renewed on an annual basis and historically customer support revenues have been a significant portion of our total revenue.
In addition, the OpenText Navigator Fund identifies and addresses key needs in our communities. We launched the Navigator Internship Program to create pathways to digital jobs for Indigenous and under-represented minority students.
In addition, we launched the Navigator Internship Program to create pathways to digital jobs for Indigenous and under-represented minority students. To operate long-term, we need to ensure that our local communities and the natural environment are thriving.
Security Cloud Our security solutions provide organizations with capabilities to protect, prevent, detect, respond and quickly recover from threats across endpoints, network, applications, IT infrastructure and data – all with AI-led threat intelligence. At the data layer, OpenText Security Solutions help customers be cyber-resilient with uninterrupted access and protection of business data against cyber threats.
Cybersecurity Cloud Our Cybersecurity solutions provide organizations with capabilities to protect, prevent, detect, respond and quickly recover from threats across endpoints, network, applications, IT infrastructure and data, all with AI-led threat intelligence. OpenText Cybersecurity aims to protect critical information and processes through threat intelligence, forensics, identity, encryption, and cloud-based application security.
Looking Towards the Future In Fiscal 2023 we intend to continue to implement strategies that are designed to: Broaden Our Information Management Reach into the G10K. As technologies and customers become more sophisticated, we intend to be a leader in expanding the definition of traditional market sectors.
Broaden Our Information Management Reach into the G10K. As technologies and customers become more sophisticated, we intend to be a leader in expanding the definition of traditional market sectors. We continue to expand our direct sales coverage of the G10K as we focus on connecting this marquee customer base to our information platform. Deepen Existing Customer Footprint .
We are committed to continuous innovation. Our investments in R&D push product innovation, increasing the value of our offerings to our installed customer base, which includes Global 10,000 companies (G10K), SMB and consumers. The G10K are the world's largest companies, ranked by estimated total revenues, as well as the world's largest governments and organizations.
Our investments in research and development (R&D) push product innovation, increasing the value of our offerings to our installed customer base and to new customers, which include Global 10,000 companies (G10K), SMBs and consumers.
Business Overview and Strategy About OpenText At OpenText, we believe information and knowledge make business and people better. We are an Information Management company that provides software and services that empower digital businesses of all sizes to become more intelligent, secure and connected.
Business Overview and Strategy About OpenText OpenText is an Information Management company that provides software and services that empower digital businesses of all sizes to become more intelligent, connected, secure and responsible. The comprehensive OpenText Information Management platform and services provide secure and scalable solutions for global enterprises, SMBs, governments and consumers around the world.
Our solutions also enable organizations and consumers to secure their information so that they can collaborate with confidence, stay ahead of the regulatory technology curve and identify threats on any endpoint or across their networks.
Our solutions connect large digital supply chains, IT service management ecosystems, application development and delivery workflows, and processes in many industries including manufacturing, retail and financial services. Our solutions also enable organizations and consumers to secure their information so that they can collaborate with confidence, stay ahead of the regulatory technology curve and identify threats across their endpoints and networks.
Moreover, our eDiscovery capabilities provide forensics and unstructured data analytics for searching and investigating organizational data to manage legal obligations and risks. For highly regulated organizations, these machine learning capabilities help drive compliance and timely response in complex situations. At the edge, we help customers protect endpoints, virtual machine platforms and browsers from rising cyber-attacks.
OpenText delivers services, combining front-line experience with automation, AI technology and OpenText software to help organizations detect threats in real time. Moreover, our eDiscovery capabilities provide forensics and unstructured data analytics for searching and investigating data to manage legal obligations and organizational risks. For highly regulated organizations, these machine learning capabilities help drive compliance and timely responses in complex situations.
Organizations can gain an information advantage and quickly turn ideas into solutions with OpenText APIs to build, integrate and customize Information Management applications. Developers choose from a rich set of Information 8 Management services to manage information from any source, for any use case, including capture, archive, digital signature, workflow and case management.
Organizations can gain an information advantage and quickly turn ideas into solutions with OpenText APIs to build, integrate and customize Information Management applications.
On an annual basis, we target to spend 12% to 14% of revenues for R&D expense. As a global leader in Information Management, we know customers need an integrated set of cloud products, solutions and services as a foundation for efficiency and growth.
As a global leader in Information Management, we know customers need an integrated set of cloud products, solutions and services as a foundation for efficiency and growth. The cloud is a strategic business imperative that drives customers’ investment in product innovation, business agility, operational efficiency and cost management.
This includes maturing our public cloud and API offerings, driving deep integrations through co-innovations with partners and investing to meet new compliance standards. Security is fundamentally built into all OpenText Information Management software. Our platform offers multi-level, multi-role and multi-context security. Information is secured at the database level, by user-enrolled security, context rights and time-based security.
This includes enhancing the capabilities and deployment options of the acquired Micro Focus products, growing our public cloud and API offerings, driving deep integrations through co-innovations with partners, integrating security, analytics and AI solutions throughout our offerings and investing to meet new compliance standards. Our platform offers multi-level, multi-role and multi-context security.
For additional details on our acquisitions, please see “Acquisitions During the Last Five Fiscal Years”, elsewhere in Item 1 of this Annual Report on Form 10-K. 9 In March 2020, COVID-19 was characterized as a pandemic by the World Health Organization.
For additional details on our acquisitions, please see “Acquisitions During the Last Five Fiscal Years”, elsewhere in Item 1 of this Annual Report on Form 10-K. OpenText Revenues Our business consists of four revenue streams: cloud services and subscriptions, customer support, license and professional service and other.
We continue to expand our direct sales coverage of the G10K as we focus on connecting this marquee customer base to our information platform. Invest in the Cloud. Today, the destination for innovation is indisputably the cloud. Businesses of all sizes rely on a combination of APIs, public and private clouds, managed services and off-cloud solutions.
Businesses of all sizes rely on a combination of APIs, public and private clouds, managed services and off-cloud solutions. As a result, we are committed to continue to modernize our technology infrastructure and leverage existing investments in the OpenText Cloud.
Our architectural approach is one that puts at the forefront the ability for customers to have the flexibility and customization they need in a hybrid multi-cloud world. Our innovation roadmap is focused on investing a significant amount of our research and development (R&D) in cloud capabilities.
Our solutions are marketed and delivered on the OpenText Cloud Platform, which supports customer deployments from private cloud to public cloud to off-cloud to API. Our architectural approach puts at the forefront the ability for customers to have the flexibility and customization they need in a hybrid multi-cloud world.
In July 2022, we implemented our Flex-Office program in which a majority of our employees work a portion of their time in the office and a portion remotely. We continue to invest in software and hardware along with office redesign to support a flexible workforce where teams can collaborate and be productive.
Project Shield worked alongside our internal teams to launch our flexible approach to return to the office. We continue to invest in software and hardware along with office redesign to support a flexible workforce where teams can collaborate and be productive. Using our offices in a purposeful way drives innovation, creativity and teamwork.
Our principal office is located at 275 Frank Tompa Drive, Waterloo, Ontario, Canada N2L 0A1, and our telephone number at that location is (519) 888-7111. Our internet address is www.opentext.com. Our website is included in this Annual Report on Form 10-K as an inactive textual reference only.
These compliance programs ensure that we operate our business with integrity, following standard business ethics across the globe. Available Information OpenText Corporation was incorporated on June 26, 1991. Our principal office is located at 275 Frank Tompa Drive, Waterloo, Ontario, Canada N2L 0A1, and our telephone number at that location is (519) 888-7111. Our internet address is www.opentext.com.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAlthough we cannot be certain of the degree and scope of operational and integration problems that may arise, the difficulties and risks associated with the integration of acquired businesses may include, among others: • the increased scope and complexity of our operations; 28 • coordinating geographically separate organizations, operations, relationships and facilities; • integrating (i) personnel with diverse business backgrounds, corporate cultures and management philosophies, and (ii) the standards, policies and compensation structures, as well as the complex systems, technology, networks and other assets, of the businesses; • preserving important strategic and customer relationships; • retention of key employees; • the possibility that we may have failed to discover obligations of acquired businesses or risks associated with those businesses during our due diligence investigations as part of the acquisition, which we, as a successor owner, may be responsible for or subject to; and • provisions in contracts with third parties that may limit flexibility to take certain actions.
Biggest changeAlthough we cannot be certain of the degree and scope of operational and integration problems that may arise, the difficulties and risks associated with the integration of acquired businesses, which may be complex and time-consuming, may include, among others: • the increased scope and complexity of our operations; • coordinating geographically separate organizations, operations, relationships and facilities, including coordinating and integrating (i) independent research and development and engineering teams across technologies and product platforms to enhance product development while reducing costs and (ii) sales and marketing efforts to effectively position the combined company’s capabilities and the direction of product development; • integrating (i) personnel with diverse business backgrounds, corporate cultures and management philosophies, and (ii) the standards, policies and compensation structures, as well as the complex systems, technology, networks and other assets, of the businesses; • successfully managing relationships with our strategic partners and combined supplier and customer base; • implementing expected cost synergies of the acquisitions, including expected cost synergies of $400 million relating to the Micro Focus Acquisition; • retention of key employees; • the diversion of management attention from other important business objectives; • the possibility that we may have failed to discover obligations of acquired businesses or risks associated with those businesses during our due diligence investigations as part of the acquisition, which we, as a successor owner, may be responsible for or subject to; and 30 Table of Contents • provisions in contracts with third parties that may limit flexibility to take certain actions.
To support certain of our cloud customers headquartered in the United States or allied countries that rely on our network to manage their global business (including their business in Russia), we have allowed nonetheless these customers to continue to use our services to the extent that it can be done in strict compliance with all applicable sanctions and export controls.
To support certain of our cloud customers headquartered in the United States or allied countries that rely on our network to manage their global business (including their business in Russia), we have nonetheless allowed these customers to continue to use our services to the extent that it can be done in strict compliance with all applicable sanctions and export controls.
See “Changes in the market price of our Common Shares and credit ratings of our outstanding debt securities could lead to losses for shareholders and debt holders.” The Company has disclosed the OpenText Zero-In Initiative, where we have committed to: (1) science-based GHG emissions target of 50% reduction by 2030, and net zero GHG emissions by 2040; (2) zero waste from operations by 2030; and 27 (3) by 2030, a majority ethnically diverse staff, with 50/50 representation in key roles and 40% women in leadership positions at all management levels.
See “Changes in the market price of our Common Shares and credit ratings of our outstanding debt securities could lead to losses for shareholders and debt holders.” The Company has disclosed the OpenText Zero-In Initiative, where we have committed to: (1) science-based GHG emissions target of 50% reduction by 2030, and net zero GHG emissions by 2040; (2) zero waste from operations by 2030; and (3) by 2030, a majority ethnically diverse staff, with 50/50 representation in key roles and 40% women in leadership positions at all management levels.
These restrictive covenants include certain limitations on our ability to make investments, loans and acquisitions, incur additional debt, incur liens and encumbrances, consolidate, amalgamate or merge with any other person, dispose of assets, make certain restricted payments, including a limit on dividends on equity securities or payments to redeem, repurchase or retire equity securities or other indebtedness, engage in transactions with affiliates, materially alter the business we conduct, and enter into 33 certain restrictive agreements.
These restrictive covenants include certain limitations on our ability to make investments, loans and acquisitions, incur additional debt, incur liens and encumbrances, consolidate, amalgamate or merge with any other person, dispose of assets, make certain restricted payments, including a limit on dividends on equity securities or payments to redeem, repurchase or retire equity securities or other indebtedness, engage in transactions with affiliates, materially alter the business we conduct, and enter into certain restrictive agreements.
We actively manage a broad range of ESG matters and annually publish a Corporate Citizenship Report regarding our policies and practices on a variety of ESG matters, including our: governance framework; community involvement; ED&I initiatives; employee health and safety; targets regarding greenhouse gas emissions, waste diversion and energy consumption; and practices relating to data privacy and information security.
We actively manage a broad range of CSR and ESG matters and annually publish a Corporate Citizenship Report regarding our policies and practices on a variety of CSR and ESG matters, including our: governance framework; community involvement; ED&I initiatives; employee health and safety; targets regarding greenhouse gas emissions, waste diversion and energy consumption; and practices relating to data privacy and information security.
Any infringement claims and related litigation could be time-consuming and disruptive to our ability to generate 19 revenues or enter into new market opportunities and may result in significantly increased costs as a result of our defense against those claims or our attempt to license the intellectual property rights or rework our products to avoid infringement of third-party rights.
Any infringement claims and related litigation could be time-consuming and disruptive to our ability to generate revenues or enter into new market opportunities and may result in significantly increased costs as a result of our defense against those claims or our attempt to license the intellectual property rights or rework our products to avoid infringement of third-party rights.
Our existing customers might cancel contracts with us, fail to renew contracts on their renewal dates and/or fail to purchase additional services and products, and we may be unable to attract new customers, which could materially adversely affect our operating results We depend on our installed customer base for a significant portion of our revenues.
Our existing customers might cancel contracts with us, fail to renew contracts on their renewal dates and/or fail to purchase additional services and products, and we may be unable to attract new customers, which could adversely affect our operating results We depend on our installed customer base for a significant portion of our revenues.
Although we believe that the Internet will continue to provide opportunities to expand the use of our products and services, we cannot guarantee that our efforts to capitalize on these opportunities will be successful or that 20 increased usage of the Internet for business integration products and services, increased competition or heightened regulation will not adversely affect our business, results of operations and financial condition.
Although we believe that the Internet will continue to provide opportunities to expand the use of our products and services, we cannot guarantee that our efforts to capitalize on these opportunities will be successful or that increased usage of the Internet for business integration products and services, increased competition or heightened regulation will not adversely affect our business, results of operations and financial condition.
Our failure to comply with any of the covenants that are included in Term Loan B and the Revolver could result in a default under the terms thereof, which could permit the lenders thereunder to declare all or part of any outstanding borrowings to be immediately due and payable.
Our failure to comply with any of the covenants that are included in the Acquisition Term Loan, Term Loan B and Revolver could result in a default under the terms thereof, which could permit the lenders thereunder to declare all or part of any outstanding borrowings to be immediately due and payable.
These events may also impact our decision or limit our ability to conduct business in certain areas or with certain entities. For example, in response to the Russia-Ukraine conflict, we have ceased all direct business in Russia and Belarus and with known Russian-owned companies.
These events may also impact our decision or limit our ability to conduct business in certain areas or with certain entities. For example, in response to the Russia-Ukraine conflict, we ceased all direct business in Russia and Belarus and with known Russian-owned companies.
CRA’s position for Fiscal 2017 relies in significant part on the application of its positions regarding our transfer pricing methodology that are the basis for its reassessment of our fiscal years 2012 to 2016 described above, and that we believe are without merit.
CRA’s position for Fiscal 2017 and Fiscal 2018 relies in significant part on the application of its positions regarding our transfer pricing methodology that are the basis for its reassessment of our fiscal years 2012 to 2016 described above, and that we believe are without merit.
Our approach to and disclosure of ESG matters may result in increased attention from our shareholders, customers, employees, partners and suppliers, and such key relationships may not be satisfied with our approach to ESG as compared to their expectations and standards, which continue to evolve.
Our approach to and disclosure of CSR and ESG matters may result in increased attention from our shareholders, customers, employees, partners and suppliers, and such key relationships may not be satisfied with our approach to CSR and ESG as compared to their expectations and standards, which continue to evolve.
Depending upon the nature and scale of the business acquired, the implementation of our disclosure controls and procedures as well as the implementation of our internal controls over financial reporting at an acquired company may be a lengthy process and may divert our attention from other 29 business operations.
Depending upon the nature and scale of the business acquired, the implementation of our disclosure controls and procedures as well as the implementation of our internal controls over financial reporting at an acquired company may be a lengthy process and may divert our attention from other business operations.
Term Loan B and the Revolver includes a financial covenant relating to a maximum consolidated net leverage ratio, which could restrict our operations, particularly our ability to respond to changes in our business or to take specified actions.
The Acquisition Term Loan, Term Loan B and Revolver includes a financial covenant relating to a maximum consolidated net leverage ratio, which could restrict our operations, particularly our ability to respond to changes in our business or to take specified actions.
Any of these events, or any other events caused by turmoil in world financial markets, may have a material adverse effect on our business, operating results and financial condition. 37 Item 1B. Unresolved Staff Comments None.
Any of these events, or any other events caused by turmoil in world financial markets, may have a material adverse effect on our business, operating results and financial condition. Item 1B. Unresolved Staff Comments None.
We have experienced attempts by third parties to identify and exploit product and services vulnerabilities, penetrate or bypass our security measures and gain unauthorized access to our or our customers’ or service providers’ cloud offerings and other products and systems.
We have experienced attempts by third parties to identify and exploit product and services vulnerabilities, penetrate or bypass our security measures and gain unauthorized access to our or our customers’ or service providers’ cloud offerings and other products, systems or solutions.
The terms of Term Loan B and the Revolver include customary restrictive covenants that impose operating and financial restrictions on us, including restrictions on our ability to take actions that could be in our best interests.
The terms of the Acquisition Term Loan, Term Loan B and Revolver include customary restrictive covenants that impose operating and financial restrictions on us, including restrictions on our ability to take actions that could be in our best interests.
Certain economies have experienced periods of downturn as a result of a multitude of factors, including, but not limited to, turmoil in the credit and financial markets, concerns regarding the stability and viability of major financial institutions, declines in gross domestic product, increases in unemployment, volatility in commodity prices and worldwide stock markets, excessive government debt, disruptions to global trade or tariffs, inflation, higher interest rates and risks of recession.
Certain economies have experienced periods of downturn as a result of a multitude of factors, including, but not limited to, turmoil in the credit and financial markets, concerns regarding the stability and viability of major financial institutions, declines in gross domestic product, increases in unemployment, volatility in commodity prices and worldwide stock markets, excessive government debt, disruptions to global trade or tariffs, inflation, higher interest rates and risks of recession and global health pandemics.
The proliferation of such laws within the jurisdictions in which we operate may result in conflicting and contradictory requirements, particularly in relation to evolving technologies such as cloud computing.
The proliferation of such laws within the jurisdictions in which we operate may result in conflicting and contradictory requirements, particularly in relation to evolving technologies such as cloud computing and AI.
As a result, we expect to continue to be subject to the challenges and risks of having a remote work environment, as well as new operational challenges and risks from having a flexible workforce.
As a result, we continue to be subject to the challenges and risks of having a remote work environment, as well as new operational challenges and risks from having a flexible workforce.
While the Court of Justice of the European Union upheld the adequacy of the old standard contractual clauses (SCCs), a standard form of contract approved by the European Commission as an adequate personal data transfer mechanism, it made clear that reliance on them alone may not necessarily be sufficient in all circumstances.
While the Court of Justice of the EU upheld the adequacy of the old standard contractual clauses (SCCs), a standard form of contract approved by the European Commission as an adequate personal data transfer mechanism, it made clear that reliance on them alone may not necessarily be sufficient in all circumstances.
The GDPR provides that supervisory authorities in the EU and the United Kingdom may impose administrative fines for certain infringements of the GDPR of up to EUR 20,000,000 under the EU GDPR (or GBP 17,500,000 under the UK GDPR), or 4% of an undertaking’s total, worldwide, annual turnover of the preceding financial year, whichever is higher.
The GDPR provides that supervisory authorities in the EU and the UK may impose administrative fines for certain infringements of the GDPR of up to EUR 20,000,000 under the EU GDPR (or GBP 17,500,000 under the UK GDPR), or 4% of an undertaking’s total, worldwide, annual turnover of the preceding financial year, whichever is higher.
An adverse outcome of these ongoing audits could have a material adverse effect on our financial position and results of operations As part of its ongoing audit of our Canadian tax returns, the Canada Revenue Agency (CRA) has disputed our transfer pricing methodology used for certain intercompany transactions with our international subsidiaries and has issued notices of reassessment for Fiscal 2012, Fiscal 2013, Fiscal 2014, Fiscal 2015 and Fiscal 2016.
An adverse outcome of these ongoing audits could have a material adverse effect on our financial position and results of operations As part of its ongoing audit of our Canadian tax returns, the CRA has disputed our transfer pricing methodology used for certain intercompany transactions with our international subsidiaries and has issued notices of reassessment for Fiscal 2012, Fiscal 2013, Fiscal 2014, Fiscal 2015 and Fiscal 2016.
Business disruptions, including those arising from disasters or other catastrophic events, may adversely affect our operations Our business and operations are highly automated, and a disruption or failure of our systems may delay our ability to complete sales and to provide services.
Business disruptions, including those arising from disasters, pandemics or catastrophic events, may adversely affect our operations Our business and operations are highly automated, and a disruption or failure of our systems may delay our ability to complete sales and to provide services.
Moreover, the interpretation and application of many existing or recently enacted privacy and data protection laws and regulations in the EU, United Kingdom, the U.S. and elsewhere are uncertain and fluid, and it is possible that such laws and regulations may be interpreted or applied in a manner that is inconsistent with our existing data management practices or the features of our products and services.
Moreover, the interpretation and application of many existing or recently enacted privacy and data protection laws and regulations in the EU, UK, the U.S. and elsewhere are uncertain and fluid, and it is possible that such laws and regulations may be interpreted or applied in a manner that is inconsistent with our existing data management practices or the features of our products and services.
The risks discussed above would be increased to the extent that we engage in acquisitions that involve the incurrence of material additional debt, or the acquisition of businesses with material debt, and such incurrences or acquisitions could potentially negatively impact the ratings or outlook of the rating agencies on our outstanding debt securities and the market price of our common shares.
The risks discussed above would be increased to the extent that we engage in additional acquisitions that involve the incurrence of material additional debt, or the acquisition of businesses with material debt, and such incurrences or acquisitions 37 Table of Contents could potentially negatively impact the ratings or outlook of the rating agencies on our outstanding debt securities and the market price of our common shares.
In addition, increased competition and our transition from perpetual license sales to subscription-based business model could put significant pricing pressures on our products, which could negatively impact our margins and profitability.
In addition, increased competition and transitioning from perpetual license sales to subscription-based business model could put significant pricing pressures on our products, which could negatively impact our margins and profitability.
Outside of the U.S., the EU and the United Kingdom, many jurisdictions have adopted or are adopting new data privacy laws that may impose further onerous compliance requirements, such as data localization, which prohibits companies from storing and/or processing outside the jurisdiction data relating to resident individuals.
Outside of the U.S., the EU and the UK, many jurisdictions have adopted or are adopting new data privacy laws that may impose further onerous compliance requirements, such as data localization, which prohibits companies from storing and/or processing outside the jurisdiction data relating to resident individuals.
The CRA has also audited Fiscal 2017 on a basis that we strongly disagree with and are contesting. The focus of the CRA audit has been the valuation of certain intellectual property and goodwill when one of our subsidiaries continued into Canada 30 from Luxembourg in July 2016.
The CRA has audited Fiscal 2017 and Fiscal 2018 on a basis that we strongly disagree with and are contesting. The focus of the CRA audit has been the valuation of certain intellectual property and goodwill when one of our subsidiaries continued into Canada from Luxembourg in July 2016.
While we use derivative financial instruments to attempt to reduce our net exposure to currency exchange rate fluctuations, fluctuations in foreign currency exchange rates, particularly the strengthening of the U.S. dollar against major currencies or the currencies of large developing countries, could materially affect our financial results.
While we use derivative financial instruments to attempt to reduce our net exposure to currency exchange rate fluctuations, fluctuations in foreign currency exchange rates, particularly the strengthening of the U.S. dollar against major currencies or the currencies of large developing 36 Table of Contents countries, could materially affect our financial results.
As of June 30, 2022, we have provisionally paid approximately $34 million in order to fully preserve our rights to object to the CRA's audit positions, being the minimum payment required under Canadian legislation while the matter is in dispute. This amount is recorded within “Long-term income taxes recoverable” on the Consolidated Balance Sheets as of June 30, 2022.
As of June 30, 2023, we have provisionally paid approximately $33 million in order to fully preserve our rights to object to the CRA’s audit positions, being the minimum payment required under Canadian legislation while the matter is in dispute. This amount is recorded within “Long-term income taxes recoverable” on the Consolidated Balance Sheets as of June 30, 2023.
Such licenses may not be available, or they may not be available on commercially reasonable terms. In addition, as we continue to develop software products and expand our portfolio using new technology and innovation, our exposure to threats of infringement may increase.
Such licenses 21 Table of Contents may not be available, or they may not be available on commercially reasonable terms. In addition, as we continue to develop software products and expand our portfolio using new technology and innovation, our exposure to threats of infringement may increase.
Laws and regulations relating to the solicitation, collection, processing or use of personal or consumer information could affect our customers’ ability to use and share data, potentially reducing demand for Internet-based solutions and restricting our ability to store, process, analyze and share data through the Internet.
Laws and regulations relating to the solicitation, 22 Table of Contents collection, processing or use of personal or consumer information could affect our customers’ ability to use and share data, potentially reducing demand for Internet-based solutions and restricting our ability to store, process, analyze and share data through the Internet.
While we do not expect our decision to cease all direct business in Russia and Belarus and with known Russian-owned companies to have a material adverse effect on our overall business, results of operations or financial condition, it is not possible to predict the broader consequences of this conflict or other conflicts, which could include sanctions, embargoes, regional instability, changes to regional trade ecosystems, geopolitical shifts and adverse effects on the global economy, on our business and operations as well as those of our customers, partners and third party service providers.
While our decision to cease all direct business in Russia and Belarus and with known Russian-owned companies has not had and is not expected to have a material adverse effect on our overall business, results of operations or financial condition, it is not possible to predict the broader consequences of this conflict or other conflicts, which could include sanctions, embargoes, regional instability, changes to regional trade ecosystems, geopolitical shifts and adverse effects on the global economy, on our business and operations as well as those of our customers, partners and third party service providers.
Assuming the utilization of available tax attributes (further described below), we estimate our potential aggregate liability, as of June 30, 2022, in connection with the CRA's reassessments for Fiscal 2012, Fiscal 2013, Fiscal 2014, Fiscal 2015 and Fiscal 2016, to be limited to penalties, interest and provincial taxes that may be due of approximately $75 million.
Assuming the utilization of available tax attributes (further described below), we estimate our potential aggregate liability, as of June 30, 2023, in connection with the CRA’s reassessments for Fiscal 2012, Fiscal 2013, Fiscal 2014, Fiscal 2015 and Fiscal 2016, to be limited to penalties, interest and provincial taxes that may be due of approximately $76 million.
Our international operations expose us to business, political and economic risks that could cause our operating results to suffer We intend to continue to make efforts to increase our international operations and anticipate that international sales will continue to account for a significant portion of our revenues.
Our international operations expose us to business, political and economic risks that could cause our operating results to suffer We have significantly increased, and intend to continue to make efforts to increase, our international operations and anticipate that international sales will continue to account for a significant portion of our revenues.
We may be unable to successfully integrate acquired businesses or do so within the intended timeframes, which could have an adverse effect on our financial condition, results of operations and business prospects Our ability to realize the anticipated benefits of acquired businesses will depend, in part, on our ability to successfully and efficiently integrate acquired businesses and operations with our own.
We may be unable to successfully integrate acquired businesses or do so within the intended timeframes, which could have an adverse effect on our financial condition, results of operations and business prospects Our ability to realize the anticipated benefits of acquired businesses, including the Micro Focus Acquisition, will depend, in part, on our ability to successfully and efficiently integrate acquired businesses and operations with our own.
Unfavorable publicity regarding our privacy practices could damage our reputation, harm our ability to keep existing customers or attract new customers or otherwise adversely affect our business, assets, revenue and brands. 32 Certain of our products may be perceived as, or determined by the courts to be, a violation of privacy rights and related laws.
Unfavorable publicity regarding our privacy practices could damage our reputation, harm our ability to keep existing customers or attract new customers or otherwise adversely affect our business, assets, revenue and brands. 35 Table of Contents Certain of our products may be perceived as, or determined by the courts to be, a violation of privacy rights and related laws.
Risks associated with the evolving use of the Internet, including changing standards, competition and regulation and associated compliance efforts, may adversely impact our business The use of the Internet as a vehicle for electronic data interchange (EDI) and related services currently raises numerous issues, including those relating to reliability, data security, data integrity and rapidly evolving standards.
Risks associated with the evolving use of the Internet, including changing standards, competition and regulation and associated compliance efforts, may adversely impact our business The use of the Internet as a vehicle for electronic data interchange (EDI) and related services continues to raise numerous issues, including those relating to reliability, data security, data integrity and rapidly evolving standards.
Some of our operations are subject to the EU’s General Data Protection Regulation (the EU GDPR), which took effect from May 25, 2018, the General Data Protection Regulation as it forms part of retained EU law in the United Kingdom by virtue of the European Union (Withdrawal) Act 2018 and as amended by the Data Protection, Privacy and Electronic Communications (Amendments etc) (EU Exit) Regulations 2019 (SI 2019/419) (the UK GDPR, and together with the EU GDPR, the GDPR), and the UK Data Protection Act 2018.
Some of our operations are subject to the EU’s General Data Protection Regulation (the EU GDPR), which took effect from May 25, 2018, the General Data Protection Regulation as it forms part of retained EU law in the UK by virtue of the 34 Table of Contents European Union (Withdrawal) Act 2018 and as amended by the Data Protection, Privacy and Electronic Communications (Amendments etc.) (EU Exit) Regulations 2019 (SI 2019/419) (the UK GDPR, and together with the EU GDPR, the GDPR), and the UK Data Protection Act 2018.
Although we believe our estimates are reasonable, the ultimate outcome with respect to the taxes we owe may differ from the amounts recorded in our financial statements, and this difference may materially affect our financial position and financial results in the period or periods for which such determination is made.
Although we believe our estimates are reasonable, the ultimate 32 Table of Contents outcome with respect to the taxes we owe may differ from the amounts recorded in our financial statements, and this difference may materially affect our financial position and financial results in the period or periods for which such determination is made.
The failure to meet the challenges involved in the integration process and to realize the anticipated benefits of any acquisition could cause an interruption of, or loss of momentum in, our operations and could adversely affect our business, financial condition and results of operations.
The failure to meet the challenges involved in the integration process and to realize the anticipated benefits of our acquisitions could cause an interruption of, or loss of momentum in, our operations and could adversely affect our business, financial condition and results of operations.
Additionally, international earnings may be subject to taxation by more than one jurisdiction, which may materially adversely affect our effective tax rate. Also, international expansion may be difficult, time consuming and costly. These risks and their potential impacts may be exacerbated by the ongoing COVID-19 pandemic and the Russia-Ukraine conflict.
Additionally, international earnings may be subject to taxation by more than one jurisdiction, which may materially adversely affect our effective tax rate. Also, international expansion may be difficult, time consuming and costly. These risks and their potential impacts may be exacerbated by the Russia-Ukraine conflict.
We could lose market share if our current or prospective competitors: (i) develop technologies that are perceived to be substantially equivalent or superior to our technologies; (ii) introduce new competitive products or services; (iii) add new functionality to existing products and services; (iv) acquire competitive products and services; (v) reduce prices; or (vi) form strategic alliances or cooperative relationships with other companies.
We could lose market share if our current or prospective competitors: (i) develop technologies that are perceived to be substantially equivalent or superior to our technologies; (ii) introduce new competitive products or services; (iii) add new functionality to existing products and services, including through new and emerging AI applications; (iv) acquire competitive products and services; (v) reduce prices; or (vi) form strategic alliances or cooperative relationships with other companies.
Recently, the COVID-19 pandemic, the Russia-Ukraine conflict, the inflationary environment, as well as any policy changes resulting from trade and tariff disputes, have raised additional concerns regarding economic uncertainties. Moreover, any instability in the global economy affects countries in different ways, at different times and with varying severity, which makes the impact to our business complex and unpredictable.
Recently, the Russia-Ukraine conflict, the inflationary environment and policy changes resulting from trade and tariff disputes have raised additional concerns regarding economic uncertainties. Moreover, any instability in the global economy affects countries in different ways, at different times and with varying severity, which makes the impact to our business complex and unpredictable.
For more information regarding the impact of COVID-19 on our cybersecurity, see “Business disruptions, including those arising from disasters or other catastrophic events, may adversely affect our operations.” 26 We must continue to manage our internal resources during periods of company growth, or our operating results could be adversely affected The Information Management market in which we compete continues to evolve at a rapid pace.
For more information regarding the impact of business disruptions on our cybersecurity, see “Business disruptions, including those arising from disasters, pandemics or catastrophic events, may adversely affect our operations.” We must continue to manage our internal resources during periods of company growth, or our operating results could be adversely affected The information management market in which we compete continues to evolve at a rapid pace.
However, as the situation develops and the regulatory environment continues to evolve, we may adjust our business practices as required by applicable rules and regulations. Our compliance with sanctions and export controls could impact the fulfillment of certain contracts with customers and partners doing business in these affected areas and future revenue streams from impacted parties and certain countries.
However, as the situation continues and the regulatory environment further evolves, we may adjust our business practices as required by applicable rules and regulations. Our compliance with sanctions and export controls could impact the fulfillment of certain contracts with customers and partners doing business in these affected areas and future revenue streams from impacted parties and certain countries.
Business disruptions can be caused by several factors, including climate change, natural disasters, terrorist attacks, power loss, telecommunications and system failures, computer viruses, physical attacks and cyber-attacks.
Business disruptions can be caused by several factors, including climate change, natural disasters, global health pandemics, terrorist attacks, power loss, telecommunications and system failures, computer viruses, physical attacks and cyber-attacks.
As part of the ongoing audit of our Canadian tax returns by the Canada Revenue Agency (CRA), we have received notices of, and are appealing, reassessments for Fiscal 2012, Fiscal 2013, Fiscal 2014, Fiscal 2015 and Fiscal 2016, and the CRA is auditing Fiscal 2017.
As part of the ongoing audit of our Canadian tax returns by the Canada Revenue Agency (CRA), we have received notices of, and are appealing, reassessments for Fiscal 2012, Fiscal 2013, Fiscal 2014, Fiscal 2015 and Fiscal 2016, and the CRA has audited Fiscal 2017 and Fiscal 2018 and is auditing Fiscal 2019.
Breaches in security could result in a negative impact for us and for our customers, adversely affecting our and our customers' businesses, assets, revenues, brands and reputations and resulting in penalties, fines, litigation, regulatory proceedings, regulatory investigations, increase insurance premiums, remediation efforts, indemnification expenditures, lost revenues and/or other potential liabilities, in each case depending on the nature of the information disclosed.
Failures and breaches in security could result in a negative impact for us and for our customers, adversely affecting our and our customers’ businesses, assets, revenues, brands and reputations, disrupting our operations and resulting in penalties, fines, litigation, regulatory proceedings, regulatory investigations, increase insurance premiums, remediation efforts, indemnification expenditures, reputational harm, negative publicity, lost revenues and/or other potential liabilities, in each case depending on the nature of the information disclosed.
We may fail to realize all of the anticipated benefits of any acquisitions, including our acquisition of Zix, or those benefits may take longer to realize than expected We may be required to devote significant management attention and resources to integrating the business practices and operations of our acquisitions, including the acquisition of Zix.
We may fail to realize all of the anticipated benefits of our acquisitions, including the Micro Focus Acquisition, or those benefits may take longer to realize than expected We may be required to devote significant management attention and resources to integrating the business practices and operations of our acquisitions, including the acquisition of Micro Focus.
These risks to our business may increase as we expand the number of web-based and cloud-based products and services we offer and as we increase the number of countries in which we operate.
These risks to our business may increase as we expand the number of web-based and cloud-based products, systems and solutions we offer and as we increase the number of countries in which we operate.
Risks Related to Ownership of our Common Stock Our revenues and operating results are likely to fluctuate, which could materially impact the market price of our Common Shares We experience significant fluctuations in revenues and operating results caused by many factors, including: • Impact of the ongoing COVID-19 pandemic and actual or potential resurgences on our business and on general economic and business conditions, including any potential recession; • Changes in the demand for our software products and services and for the products and services of our competitors; • The introduction or enhancement of software products and services by us and by our competitors; • Market acceptance of our software products, enhancements and/or services; • Delays in the introduction of software products, enhancements and/or services by us or by our competitors; • Customer order deferrals in anticipation of upgrades and new software products; • Changes in the lengths of sales cycles; • Changes in our pricing policies or those of our competitors; • Delays in software product implementation with customers; • Change in the mix of distribution channels through which our software products are licensed; • Change in the mix of software products and services sold; • Change in the mix of international and North American revenues; • Changes in foreign currency exchange rates, LIBOR and other applicable interest rates (including the expected replacement of LIBOR as a benchmark rate); • Fluctuations in the value of our investments related to certain investment funds in which we are a limited partner: 34 • Acquisitions and the integration of acquired businesses; • Restructuring charges taken in connection with any completed acquisition or otherwise; • Outcome and impact of tax audits and other contingencies; • Investor perception of our Company; • Changes in earnings estimates by securities analysts and our ability to meet those estimates; • Changes in laws and regulations affecting our business, including data privacy and cybersecurity laws and regulations; • Changes in general economic and business conditions, including the impact of the COVID-19 pandemic and the resulting direct and indirect supply chain disruptions and global micro-chip shortages; and • Changes in general political developments, international trade policies and policies taken to stimulate or to preserve national economies.
Risks Related to Ownership of our Common Stock Our revenues and operating results are likely to fluctuate, which could materially impact the market price of our Common Shares We experience significant fluctuations in revenues and operating results caused by many factors, including: • Changes in the demand for our software products and services and for the products and services of our competitors; • The introduction or enhancement of software products and services by us and by our competitors; • Market acceptance of our software products, enhancements and/or services; • Delays in the introduction of software products, enhancements and/or services by us or by our competitors; • Customer order deferrals in anticipation of upgrades and new software products; • Changes in the lengths of sales cycles; • Changes in our pricing policies or those of our competitors; • Delays in software product implementation with customers; • Change in the mix of distribution channels through which our software products are licensed; • Change in the mix of software products and services sold; • Change in the mix of international and North American revenues; • Changes in foreign currency exchange rates and applicable interest rates; • Fluctuations in the value of our investments related to certain investment funds in which we are a limited partner: • Acquisitions and the integration of acquired businesses; • Restructuring charges taken in connection with any completed acquisition or otherwise; • Outcome and impact of tax audits and other contingencies; • Investor perception of our Company; • Changes in earnings estimates by securities analysts and our ability to meet those estimates; • Changes in laws and regulations affecting our business, including data privacy and cybersecurity laws and regulations; • Changes in general economic and business conditions, including the impact of any potential recession, or direct and indirect supply chain disruptions and shortages; and • Changes in general political developments, international trade policies and policies taken to stimulate or to preserve national economies.
If our products or systems, or the products or systems of third-party service providers on whom we rely, are attacked or accessed by unauthorized parties, it could lead to major disruption or denial of service and access to or loss, modification or theft of our and our customers' data, which may require us to spend material resources on correcting the breach and indemnifying the relevant parties and/or on litigation, regulatory investigations, regulatory proceedings, increased insurance premiums, lost revenues, penalties, fines and/or other potential liabilities.
If our products, systems or solutions, or the products, systems or solutions of third-party service providers on whom we rely or may rely in the future, are attacked or accessed by unauthorized parties, it could lead to major disruption or denial of service and access to or loss, modification or theft of our and our customers’ data, which may require us to spend material financial or other resources on correcting the breach and indemnifying the relevant parties and/or on litigation, regulatory investigations, regulatory proceedings, increased insurance premiums, lost revenues, penalties, reputational harm, negative publicity, fines and/or other potential liabilities.
For example, with the recent acquisition of Zix, we extended our partnership with Microsoft by becoming one of their nine authorized Cloud Solutions Providers in North America.
For example, with our acquisition of Zix, we extended our partnership with Microsoft by becoming one of their authorized Cloud Solutions Providers in North America.
Although we monitor our networks and continue to enhance our security protections, hackers are increasingly more sophisticated and aggressive, and our efforts may be inadequate to prevent all incidents of data breach or theft.
Although we monitor our networks and continue to enhance our security protections, hackers are increasingly more sophisticated and aggressive and change tactics frequently, and our efforts may be inadequate to prevent or mitigate all incidents of data breach or theft.
If we fail to meet our ESG targets or other ESG criteria set by third parties on a timely basis, or at all, or fail to respond to any perceived ESG concerns, our business activities, financial performance and reputation may be adversely affected.
If we fail to meet our ESG targets or other ESG criteria set by third parties on a timely basis, or at all, or fail to respond to any perceived ESG concerns, or regulators disagree with our procedures or standards, our business activities, financial performance and reputation may be adversely affected.
These third-party software licenses may not continue to be available to us on commercially reasonable terms and the related software may not continue to be appropriately supported, maintained or enhanced by the licensors.
These third-party software licenses may not continue to be available to us on commercially reasonable terms and the related software may not 24 Table of Contents continue to be appropriately supported, maintained or enhanced by the licensors.
In addition, certain courts or regulatory authorities could determine that the use of our software solutions or other products is a violation of privacy laws, particularly in jurisdictions outside of the United States.
In addition, certain courts or regulatory authorities could determine that the use of our software solutions or other products is a violation of privacy laws, particularly in jurisdictions outside of the U.S.
See “The COVID-19 pandemic has and may continue to further negatively affect our business, operations and financial performance” and “Geopolitical instability, political unrest, war and other global conflicts, including the Russia-Ukraine conflict, has affected and may continue to affect our business” As a result, if revenues from international operations do not offset the expenses of establishing and maintaining international operations, our business, operating results and financial condition will suffer.
See “Geopolitical instability, political unrest, war and other global conflicts, including the Russia-Ukraine conflict, has affected and may continue to affect our business” As a result, if revenues from international operations do not offset the expenses of establishing and maintaining international operations, our business, operating results and financial condition will suffer.
If we lose the services of our executive officers or other key employees or if we are not able to attract or retain top employees, our business could be significantly harmed Our performance is substantially dependent on the performance of our executive officers and key employees and there is a risk that we could lose their services, including due to the illness of executive officers and key employees from COVID-19.
If we lose the services of our executive officers or other key employees or if we are not able to attract or retain top employees, our business could be significantly harmed Our performance is substantially dependent on the performance of our executive officers and key employees and there is a risk that we could lose their services.
At the same time, the United Kingdom’s Information Commissioner’s Office released two new agreements governing international data transfers out of the United Kingdom that can be used from March 21, 2022: the International Data Transfer Agreement (IDTA) and the Data Transfer Addendum (Addendum).
At the same time, the UK’s Information Commissioner’s Office released two new agreements governing international data transfers out of the UK that can be used from March 21, 2022: the International Data Transfer Agreement (IDTA) and the Data Transfer Addendum (Addendum).
These risks and their potential impacts may be exacerbated by the ongoing COVID-19 pandemic, the Russia-Ukraine conflict and any policy changes, including those resulting from trade and tariff disputes.
These risks and their potential impacts may be exacerbated by the Russia-Ukraine conflict and any policy changes, including those resulting from trade and tariff disputes.
As of June 30, 2022, we also have $900 million in aggregate principal amount of 3.875% Senior Notes due 2028 (Senior Notes 2028), $850 million in aggregate principal amount of 3.875% Senior Notes due 2029 (Senior Notes 2029), $900 million in aggregate principal amount of 4.125% Senior Notes due 2030 (Senior Notes 2030) and $650 million in aggregate principal amount of our 4.125% senior unsecured notes due 2031 (Senior Notes 2031 and, together with the Senior Notes 2028, Senior Notes 2029 and Senior Notes 2030, the Senior Notes) outstanding, respectively issued in private placements to qualified institutional buyers pursuant to Rule 144A under the Securities Act and to certain persons in offshore transactions pursuant to Regulation S under the Securities Act.
As of June 30, 2023, we also have $1.0 billion in aggregate principal amount of 6.90% Senior Secured Notes due 2027 (Senior Secured Notes 2027), $900 million in aggregate principal amount of 3.875% Senior Notes due 2028 (Senior Notes 2028), $850 million in aggregate principal amount of 3.875% Senior Notes due 2029 (Senior Notes 2029), $900 million in aggregate principal amount of 4.125% Senior Notes due 2030 (Senior Notes 2030) and $650 million in aggregate principal amount of our 4.125% senior unsecured notes due 2031 (Senior Notes 2031 and, together with the Senior Secured Notes due 2027, Senior Notes 2028, Senior Notes 2029 and Senior Notes 2030, the Senior Notes) outstanding, respectively issued in private placements to qualified institutional buyers pursuant to Rule 144A under the Securities Act and to certain persons in offshore transactions pursuant to Regulation S under the Securities Act.
For more information on our COVID-19 Restructuring Plan and our Fiscal 2022 Restructuring Plan, see Note 18 “Special Charges (Recoveries)” to our Consolidated Financial Statements included in this Annual Report on Form 10-K.
For more information on our Micro Focus Acquisition Restructuring Plan and our Fiscal 2022 Restructuring Plan, see Note 18 “Special Charges (Recoveries)” to our Consolidated Financial Statements included in this Annual Report on Form 10-K.
In addition, the GDPR restricts transfers of personal data outside of the European Economical Area (EEA) and the United Kingdom to third countries deemed to lack adequate privacy protections unless an appropriate safeguard is implemented.
In addition, the GDPR restricts transfers of personal data outside of the European Economic Area (EEA) and the UK to third countries deemed to lack adequate privacy protections unless an appropriate safeguard is implemented.
Similarly, volatility in the market price of our Common Shares due to seemingly unrelated financial developments, such as a recession, inflation or an economic slowdown in the United States or internationally, could hurt our ability to raise capital for the financing of acquisitions or other reasons.
Similarly, volatility in the market price of our Common Shares due to seemingly unrelated financial developments, such as a recession, inflation or an economic slowdown in the U.S. or internationally, could 40 Table of Contents hurt our ability to raise capital for the financing of acquisitions or other reasons.
While our controls prior to the onset of the COVID-19 pandemic were not specifically designed to operate in a home environment, we believe that established internal controls over financial reporting continue to address all identified risk areas. The transition to a flexible workforce may also subject us to other operational challenges and risks.
While our controls were not specifically designed to operate in a home environment, we believe that established internal controls over financial reporting continue to address all identified risk areas. 27 Table of Contents The transition to a flexible workforce may also subject us to other operational challenges and risks.
Significant international sales may also expose us to greater risk from political and economic instability, unexpected changes in Canadian, United States or other governmental policies concerning import and export of goods and technology, regulatory requirements, tariffs and other trade barriers.
Significant international sales may also expose us to 39 Table of Contents greater risk from political and economic instability, unexpected changes in Canadian, U.S. or other governmental policies concerning import and export of goods and technology, regulatory requirements, tariffs and other trade barriers.
As of June 30, 2022, our credit facilities consisted of a $1.0 billion term loan facility (Term Loan B) and a $750 million committed revolving credit facility (the Revolver).
As of June 30, 2023, our credit facilities consisted of a $3.585 billion term loan (Acquisition Term Loan), $1.0 billion term loan facility (Term Loan B) and a $750 million committed revolving credit facility (the Revolver).
On June 30, 2022, we filed a notice of appeal with the Tax Court of Canada seeking to reverse all such reassessments (including any penalties) in full.
On June 30, 2022, we filed a notice of appeal with the Tax Court of Canada seeking to reverse all such reassessments (including penalties) in full and the customary court process is ongoing.
We strongly disagree with the CRA’s position for Fiscal 2017 and intend to vigorously defend our original filing position, We are not required to provisionally pay any cash amounts to the CRA as a result of the reassessment in respect of Fiscal 2017 due to the utilization of available tax attributes; however, to the extent the CRA reassesses subsequent fiscal years on a similar basis, we expect to make certain minimum payments required under Canadian legislation, which may need to be provisionally made starting in Fiscal 2024 while the matter is in dispute.
We are not required to provisionally pay any cash amounts to the CRA as a result of the reassessment in respect of Fiscal 2017 and Fiscal 2018 due to the utilization of available tax attributes; however, to the extent the CRA reassesses subsequent fiscal years on a similar basis, we expect to make certain minimum payments required under Canadian legislation, which may need to be provisionally made starting in Fiscal 2024 while the matter is in dispute.
Further, as part of our return to office planning, during the third quarter of Fiscal 2022, we made a strategic decision to implement restructuring activities to streamline our operations and further reduce our real estate footprint around the world (Fiscal 2022 Restructuring Plan).
For example, during the third quarter of Fiscal 2022, we made a strategic decision to implement restructuring activities to streamline our operations and further reduce our real estate footprint around the world (Fiscal 2022 Restructuring Plan).
Accordingly, as of the date of this Annual Report on Form 10-K, we have not recorded any accruals in respect of these reassessments or proposed reassessment in our Consolidated Financial Statements. The CRA is currently in preliminary stages of auditing Fiscal 2018 and Fiscal 2019.
Accordingly, as of the date of this Annual Report on Form 10-K, we have not recorded any accruals in respect of these reassessments or proposed reassessment in our Consolidated Financial Statements. The CRA is auditing Fiscal 2019, and may reassess Fiscal 2019 on a similar basis as Fiscal 2017 and Fiscal 2018.
For further details on these and other tax audits to which we are subject, see Note 14 “Guarantees and Contingencies” and Note 15 “Income Taxes” to the Consolidated Financial Statements included in this Annual Report on Form 10-K.
The CRA is also in preliminary stages of auditing Fiscal 2020. For further details on these and other tax audits to which we are subject, see Note 14 “Guarantees and Contingencies” and Note 15 “Income Taxes” to the Consolidated Financial Statements included in this Annual Report on Form 10-K.
Furthermore, it is possible that the risk of cyber-attacks and other data security breaches or thefts to us or our customers may increase due to global geo-political uncertainty.
Furthermore, it is possible that the risk of cyber-attacks and other data security breaches or thefts to us or our customers may increase due to global geo-political uncertainty, in particular such as the ongoing Russia-Ukraine conflict.
On April 19, 2022, we filed our notice of objection regarding the reassessment in respect of Fiscal 2017.
On April 19, 2022, we filed our notice of objection regarding the reassessment in respect of Fiscal 2017 and on March 15, 2023, we filed our notice of objection regarding the reassessment in respect of Fiscal 2018.
Privacy Shield Framework, there is potential uncertainty with respect to the legality of certain transfers of personal data from the European Economic Area (EEA) and the United Kingdom to so-called “third countries” outside the EEA, including the U.S. and Canada.
(Meta) regarding Meta’s transfers of personal data to the U.S., there is potential uncertainty with respect to the legality of certain transfers of personal data from the European Economic Area (EEA) and the UK to so-called “third countries” outside the EEA, including the U.S. and Canada.
We may fail to achieve our financial forecasts due to inaccurate sales forecasts or other factors Our revenues and particularly our new software license revenues are difficult to forecast, and, as a result, our quarterly operating results can fluctuate substantially. Sales forecasts may be particularly inaccurate or unpredictable given the 35 extraordinary nature of the COVID-19 pandemic.
We may fail to achieve our financial forecasts due to inaccurate sales forecasts or other factors Our revenues and particularly our new software license revenues are difficult to forecast, and, as a result, our quarterly operating results can fluctuate substantially. Sales forecasts may be particularly inaccurate or unpredictable given general economic and market factors.
For example, material increases in LIBOR or other applicable interest rate benchmarks may increase the interest expense for our credit facilities such as our Term Loan B and the Revolver that have variable rates of interest, some of which use LIBOR as a benchmark.
For example, material increases in applicable interest rate benchmarks may increase the interest expense for our credit facilities such as the Acquisition Term Loan, Term Loan B and Revolver that have variable rates of interest.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOwned Facilities Waterloo, Ontario, Canada Our headquarters is located in Waterloo, Ontario, Canada, and it consists of approximately 232,000 square feet. The land upon which the buildings stand is leased from the University of Waterloo for a period of 49 years beginning in December 2005, with an option to renew for an additional term of 49 years.
Biggest changeThe land upon which the buildings stand is leased from the University of Waterloo for a period of 49 years beginning in December 2005, with an option to renew for an additional term of 49 years.
(3) Asia Pacific primarily consists of Japan, Australia, China, Korea, Philippines, Thailand, Singapore and India. Included in the total approximate square footage of leased facilities is approximately 1.9 million square feet of operational space and approximately 0.5 million square feet of vacated space which has either been sublet or is being actively marketed for sublease or disposition.
(3) Asia Pacific primarily consists of Japan, Australia, China, Korea, Philippines, Thailand, Singapore and India. Included in the total approximate square footage of leased facilities is approximately 3.2 million square feet of operational space and approximately 0.8 million square feet of vacated space which has either been sublet or is being actively marketed for sublease or disposition.
Leased Facilities The following table sets forth the location and approximate square footage of our leased facilities as of June 30, 2022: Square Footage Americas (1) 1,278,000 EMEA (2) 464,000 Asia Pacific (3) 694,000 Total 2,436,000 _____________________ (1) Americas consists of countries in North, Central and South America. (2) EMEA consists of countries in Europe, the Middle East and Africa.
Leased Facilities The following table sets forth the location and approximate square footage of our leased facilities as of June 30, 2023: Square Footage Americas (1) 1,775,462 EMEA (2) 846,494 Asia Pacific (3) 1,369,962 Total 3,991,918 _____________________ (1) Americas consists of countries in North, Central and South America. (2) EMEA consists of countries in Europe, the Middle East and Africa.
Item 2. Properties Our properties consist of owned and leased office facilities for sales, support, research and development, consulting and administrative personnel, totaling approximately 0.3 million square feet of owned facilities and approximately 2.4 million square feet of leased facilities.
Item 2. Properties Our properties consist of owned and leased office facilities for sales, support, research and development, consulting and administrative personnel, totaling approximately 0.4 million square feet of owned facilities and approximately 4.0 million square feet of leased facilities. Owned Facilities Our headquarters is located in Waterloo, Ontario, Canada, and it consists of approximately 232,000 square feet.
Removed
Brook Park, Ohio, United States We also own a building, along with its land, located in Brook Park, Ohio, that consists of approximately 104,000 square feet. This building is used primarily as a data center.
Added
Certain of the Company’s subsidiaries also own buildings in the United States, United Kingdom and South Africa that total approximately 207,000 square feet as of June 30, 2023. These facilities are primarily used as data centers, warehouses and office space by the Company and its subsidiaries.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeFor more information regarding litigation and the status of certain regulatory and tax proceedings, please refer to Part I, Item 1A “Risk Factors” and to Note 14 “Guarantees and Contingencies” to our Consolidated Financial Statements included in this Annual Report on Form 10-K. Item 4. Mine Safety Disclosures Not applicable. 38 Part II
Biggest changeFor more information regarding litigation and the status of certain regulatory and tax proceedings, please refer to Part I, Item 1A “Risk Factors” and to Note 14 “Guarantees and Contingencies” to our Consolidated Financial Statements included in this Annual Report on Form 10-K. 41 Table of Contents

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePeriod (a) Total Number of Shares (or Units) Purchased (b) Average Price Paid per Share (or Unit) (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Number of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs 04/01/22 to 04/30/22 — — — — 05/01/22 to 05/31/22 — — — — 06/01/22 to 06/30/22 1,000,000 $ 40.87 1,000,000 9,950,924 Total 1,000,000 $ 40.87 1,000,000 9,950,924 Stock Performance Graph and Cumulative Total Return The following graph compares the five-year period ending June 30, 2022, the yearly percentage change in the cumulative total shareholder return on our Common Shares with the cumulative total return on: • an index of companies in the software application industry (S&P North American Technology-Software Index); • the NASDAQ Composite Index; and • the S&P/TSX Composite Index.
Biggest changeStock Performance Graph and Cumulative Total Return The following graph compares the five-year period ending June 30, 2023, the yearly percentage change in the cumulative total shareholder return on our Common Shares with the cumulative total return on: • an index of companies in the software application industry (S&P North American Technology-Software Index); • the NASDAQ Composite Index; and • the S&P/TSX Composite Index.
Under the rules of the TSX, the maximum number of Common Shares that may be purchased in this period was 13,618,774 (representing 5% of the Company’s issued and outstanding Common Shares as of November 4, 2020), and the maximum number of Common Shares that may be purchased on a single day was 143,424 Common Shares, which was 25% of 573,699 (the average daily trading volume for the Common Shares on the TSX for the six months ended October 31, 2020), subject to certain exceptions for block purchases, subject in any case to the volume and other limitations under Rule 10b-18.
Under the rules of the TSX, the maximum number of Common Shares that could be purchased in this period was 13,618,774 (representing 5% of the Company’s issued and outstanding Common Shares as of November 4, 2020), and the maximum number of Common Shares that could be purchased on a single day was 143,424 Common Shares, which was 25% of 573,699 (the average daily trading volume for the Common Shares on the TSX for the six months ended October 31, 2020), subject to certain exceptions for block purchases, subject in any case to the volume and other limitations under Rule 10b-18.
Share Repurchase Plan / Normal Course Issuer Bid On November 5, 2020, the Board authorized a share repurchase plan, pursuant to which we were authorized to purchase in open market transactions, from time to time over the 12 month period commencing November 12, 2020, up to an aggregate of $350 million of our Common Shares on the NASDAQ Global Select Market, the TSX and/or other exchanges and alternative trading systems in Canada and/or the United States, if eligible, subject to applicable law and stock exchange rules (the “Fiscal 2021 Repurchase Plan”).
Share Repurchase Plan / Normal Course Issuer Bid On November 5, 2020, the Board authorized a share repurchase plan (the Fiscal 2021 Repurchase Plan), pursuant to which we were authorized to purchase in open market transactions, from time to time over the 12 month period commencing November 12, 2020, up to an aggregate of $350 million of our Common Shares on the NASDAQ Global Select Market, the TSX and/or other exchanges and alternative trading systems in Canada and/or the United States, if eligible, subject to applicable law and stock exchange rules.
Under the rules of the TSX, the maximum number of Common Shares that may be purchased in this period is 13,638,008 (representing 5% of the Company’s issued and outstanding Common Shares as of October 31, 2021), and the maximum number of Common Shares that may be purchased on a single day is 112,590 Common Shares, which is 25% of 450,361 (the average daily trading volume for the Common Shares on the TSX for the six months ended October 31, 2021), subject to certain exceptions for block purchases, subject in any case to the volume and other limitations under Rule 10b-18.
Under the rules of the TSX, the maximum number of Common Shares that could be purchased in this period was 13,638,008 (representing 5% of the Company’s issued and outstanding Common Shares as of October 31, 2021), and the maximum number of Common Shares that could be purchased on a single day was 112,590 Common Shares, which is 25% of 450,361 (the average daily trading volume for the Common Shares on the TSX for the six months ended October 31, 2021), subject to certain exceptions for block purchases, subject in any case to the volume and other limitations under Rule 10b-18.
In addition, based on a review of the Company’s audited consolidated financial statements and its current expectations regarding the value and nature of its assets and the sources and nature of its income, the Company does not anticipate being treated as a PFIC for the 2023 taxable year.
In addition, based on a review of the Company’s audited consolidated financial statements and its current expectations regarding the value and nature of its assets and the sources and nature of its income, the Company does not anticipate being treated as a PFIC for the 2024 taxable year.
The graph illustrates the cumulative return on a $100 investment in our Common Shares made on June 30, 2017, as compared with the cumulative return on a $100 investment in the S&P North American Technology-Software Index, the NASDAQ Composite Index and the S&P/TSX Composite Index (the Indices) made on the same day.
The graph illustrates the cumulative return on a $100 investment in our Common Shares made on June 30, 2018, as compared with the cumulative return on a $100 investment in the S&P North American Technology-Software Index, the NASDAQ Composite Index and the S&P/TSX Composite Index (the Indices) made on the same day.
Based on audited consolidated financial statements, we believe that the Company was not treated as a PFIC for U.S. federal income tax purposes with respect to its 2021 or 2022 taxable years.
Based on audited consolidated financial statements, we believe that the Company was not treated as a PFIC for U.S. federal income tax purposes with respect to its 2022 or 2023 taxable years.
Registered shareholders should have completed the Declaration of Eligibility for Benefits (Reduced Tax) under a Tax Treaty for a Non-Resident Person and returned it to our transfer agent, ComputerShare Investor Services Inc. 41 United States Tax Matters U.S. residents The following discussion summarizes certain U.S. federal income tax considerations relevant to an investment in the Common Shares by a U.S. holder.
Registered shareholders should have completed the Declaration of Eligibility for Benefits (Reduced Tax) under a Tax Treaty for a Non-Resident Person and returned it to our transfer agent, ComputerShare Investor Services Inc. 45 Table of Contents United States Tax Matters U.S. residents The following discussion summarizes certain U.S. federal income tax considerations relevant to an investment in the Common Shares by a U.S. holder.
Alternatively, the U.S. holder may deduct such Canadian income taxes from its U.S. federal taxable income, provided that the U.S. holder elects to deduct rather than credit all foreign income taxes for the relevant taxable year. 42 For purposes of determining a U.S. holder’s U.S. foreign tax credit limitation, dividends paid by the Company generally will be treated as “passive category” income from sources outside the United States.
Alternatively, the U.S. holder may deduct such Canadian income taxes from its U.S. federal taxable income, provided that the U.S. holder elects to deduct rather than credit all foreign income taxes for the relevant taxable year. 46 Table of Contents For purposes of determining a U.S. holder’s U.S. foreign tax credit limitation, dividends paid by the Company generally will be treated as “passive category” income from sources outside the United States.
The price that we will pay for Common Shares in open market transactions was the market price at the time of purchase or such other price as was permitted by applicable law or stock exchange rules. The Fiscal 2021 Repurchase Plan was effected in accordance with Rule 10b-18 under the Exchange Act.
The price that we were authorized to pay for Common Shares in open market transactions was the market price at the time of purchase or such other price as was permitted by applicable law or stock exchange rules. The Fiscal 2021 Repurchase Plan was effected in accordance with Rule 10b-18 under the Exchange Act (Rule 10b-18).
The TSX approved the Company's notice of intention to commence the Fiscal 2022 NCIB pursuant to which the Company may purchase Common Shares over the TSX for the period commencing November 12, 2021 until November 11, 2022 in accordance with the TSX's normal course issuer bid rules, including that such purchases are to be made at prevailing market prices or as otherwise permitted.
The TSX approved the Company’s notice of intention to commence the Fiscal 2022 NCIB pursuant to which the Company was authorized to purchase Common Shares over the TSX for the period commencing November 12, 2021 until November 11, 2022 in accordance with the TSX’s normal course issuer bid rules, including that such purchases were to be made at prevailing market prices or as otherwise permitted.
The amount of any backup withholding will be allowed as a credit against the U.S. holder’s U.S. federal income tax liability and may entitle the U.S. holder to a refund, provided that certain required information is timely furnished to the IRS. Item 6. [Reserved] 43
The amount of any backup withholding will be allowed as a credit against the U.S. holder’s U.S. federal income tax liability and may entitle the U.S. holder to a refund, provided that certain required information is timely furnished to the IRS. Item 6. [Reserved] 47 Table of Contents
On November 4, 2021, the Board authorized a share repurchase plan, pursuant to which we may purchase in open market transactions, from time to time over the 12 month period commencing November 12, 2021, up to an aggregate of $350 million of our Common Shares on the NASDAQ Global Select Market, the TSX (as part of a NCIB as defined below) and/or other exchanges and alternative trading systems in Canada and/or the United States, if eligible, subject to applicable law and stock exchange rules (the “Fiscal 2022 Repurchase Plan”).
On November 4, 2021, the Board authorized a share repurchase plan (the Fiscal 2022 Repurchase Plan), pursuant to which we were authorized to purchase in open market transactions, from time to time over the 12 month period commencing November 12, 2021, up to an aggregate of $350 million of our Common Shares on the NASDAQ Global Select Market, the TSX (as part of a Fiscal 2022 Normal Course Issuer Bid (NCIB)) and/or other exchanges and alternative trading systems in Canada and/or the United States, if eligible, subject to applicable law and stock exchange rules.
The Company renewed its Normal Course Issuer Bid (the Fiscal 2022 NCIB) in order to provide it with a means to execute purchases over the TSX as part of the Fiscal 2022 Repurchase Plan.
The Company renewed the NCIB in Fiscal 2022 in order to provide it with a means to execute purchases over the TSX as part of the overall Fiscal 2022 Repurchase Plan.
During the year ended June 30, 2022, we repurchased and cancelled 3,809,559 Common Shares for $177.0 million under the Fiscal 2021 Repurchase Plan and Fiscal 2022 Repurchase Plan. 39 Normal Course Issuer Bid The Company established its Normal Course Issuer Bid (the Fiscal 2021 NCIB) in order to provide it with a means to execute purchases over the TSX as part of the Fiscal 2021 Repurchase Plan.
During the year ended June 30, 2023, we did not repurchase any Common Shares under the Fiscal 2021 Repurchase Plan or the Fiscal 2022 Repurchase Plan (year ended June 30, 2022—3,809,559 Common Shares for $177.0 million). 43 Table of Contents Normal Course Issuer Bid The Company established the Fiscal 2021 NCIB in order to provide it with a means to execute purchases over the TSX as part of the overall Fiscal 2021 Repurchase Plan.
On June 30, 2022, the closing price of our Common Shares on the NASDAQ was $37.84 per share, and on the TSX was Canadian $48.69 per share. As at June 30, 2022, we had 346 shareholders of record holding our Common Shares of which 295 were U.S. shareholders. Unregistered Sales of Equity Securities None.
On June 30, 2023, the closing price of our Common Shares on the NASDAQ was $41.55 per share, and on the TSX was Canadian $55.10 per share. As at June 30, 2023, we had 342 shareholders of record holding our Common Shares of which 292 were U.S. shareholders. Unregistered Sales of Equity Securities None.
The graph lines merely connect measurement dates and do not reflect fluctuations between those dates. 40 The chart below provides information with respect to the value of $100 invested on June 30, 2017 in our Common Shares as well as in the other Indices, assuming dividend reinvestment when applicable: June 30, 2017 June 30, 2018 June 30, 2019 June 30, 2020 June 30, 2021 June 30, 2022 Open Text Corporation $ 100.00 $ 113.40 $ 135.00 $ 141.56 $ 172.20 $ 130.75 S&P North American Technology-Software Index $ 100.00 $ 134.09 $ 161.76 $ 210.05 $ 287.99 $ 201.88 NASDAQ Composite $ 100.00 $ 123.60 $ 133.22 $ 169.11 $ 245.60 $ 188.07 S&P/TSX Composite $ 100.00 $ 109.10 $ 113.78 $ 107.05 $ 157.25 $ 145.81 To the extent that this Annual Report on Form 10-K has been or will be specifically incorporated by reference into any filing by us under the Securities Act or the Exchange Act, the foregoing “Stock Performance Graph and Cumulative Total Return” shall not be deemed to be “soliciting materials” or to be so incorporated, unless specifically otherwise provided in any such filing.
The graph lines merely connect measurement dates and do not reflect fluctuations between those dates. 44 Table of Contents The chart below provides information with respect to the value of $100 invested on June 30, 2018 in our Common Shares as well as in the other Indices, assuming dividend reinvestment when applicable: June 30, 2018 June 30, 2019 June 30, 2020 June 30, 2021 June 30, 2022 June 30, 2023 Open Text Corporation $ 100.00 $ 119.04 $ 124.83 $ 151.85 $ 115.29 $ 130.34 S&P North American Technology-Software Index $ 100.00 $ 120.63 $ 156.65 $ 214.77 $ 150.56 $ 195.95 NASDAQ Composite $ 100.00 $ 107.78 $ 136.82 $ 198.71 $ 152.16 $ 191.93 S&P/TSX Composite $ 100.00 $ 104.29 $ 98.12 $ 144.14 $ 133.65 $ 143.78 To the extent that this Annual Report on Form 10-K has been or will be specifically incorporated by reference into any filing by us under the Securities Act or the Exchange Act, the foregoing “Stock Performance Graph and Cumulative Total Return” shall not be deemed to be “soliciting materials” or to be so incorporated, unless specifically otherwise provided in any such filing.
All Common Shares purchased by us pursuant to the Repurchase Plan have been and will be cancelled.
All Common Shares purchased by us pursuant to the Fiscal 2022 Repurchase Plan were cancelled.
The price that we have paid and will pay for Common Shares in open market transactions has been and will be the market price at the time of purchase or such other price as may be permitted by applicable law or stock exchange rules.
The price that we paid for Common Shares in open market transactions was the market price at the time of purchase or such other price as was permitted by applicable law or stock exchange rules. The Fiscal 2022 Repurchase Plan was effected in accordance with Rule 10b-18.
Stock Purchases During the three months ended June 30, 2022, we made the following repurchases under the Fiscal 2022 Repurchase Plan.
Stock Purchases No shares were repurchased during the three months ended June 30, 2023.
Removed
The Fiscal 2022 Repurchase Plan has been and will be effected in accordance with Rule 10b-18 under the Exchange Act. Purchases made under the Fiscal 2022 Repurchase Plan are subject to a limit of 13,638,008 shares (representing 5% of the Company’s issued and outstanding Common Shares as of October 31, 2021).

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

182 edited+81 added−43 removed197 unchanged
Biggest changeThe GAAP-based tax provision rate for the year ended June 30, 2021 includes an income tax provision charge from IRS settlements partially offset by a tax benefit from the release of unrecognized tax benefits due to the conclusion of relevant tax audits that was recognized during the second quarter of Fiscal 2021. 65 (8) Reconciliation of GAAP-based net income to Non-GAAP-based net income: Year Ended June 30, 2021 Per share diluted GAAP-based net income, attributable to OpenText $ 310,672 $ 1.14 Add: Amortization 435,340 1.59 Share-based compensation 51,969 0.19 Special charges (recoveries) 1,748 0.01 Other (income) expense, net (61,434) (0.22) GAAP-based provision for income taxes 339,906 1.23 Non-GAAP-based provision for income taxes (150,975) (0.55) Non-GAAP-based net income, attributable to OpenText $ 927,226 $ 3.39 Reconciliation of Adjusted EBITDA Year Ended June 30, 2021 GAAP-based net income, attributable to OpenText $ 310,672 Add: Provision for income taxes 339,906 Interest and other related expense, net 151,567 Amortization of acquired technology-based intangible assets 218,796 Amortization of acquired customer-based intangible assets 216,544 Depreciation 85,265 Share-based compensation 51,969 Special charges (recoveries) 1,748 Other (income) expense, net (61,434) Adjusted EBITDA $ 1,315,033 66 Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the year ended June 30, 2020 (In thousands, except for per share data) Year Ended June 30, 2020 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 $ 449,940 $ (1,642) (1) $ 448,298 Customer support 123,894 (1,207) (1) 122,687 Professional service and other 212,903 (1,294) (1) 211,609 Amortization of acquired technology-based intangible assets 205,717 (205,717) (2) — GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%) 2,105,961 67.7% (209,860) (3) 2,315,821 74.5% Operating expenses Research and development 370,411 (5,309) (1) 365,102 Sales and marketing 585,044 (9,335) (1) 575,709 General and administrative 237,532 (10,745) (1) 226,787 Amortization of acquired customer-based intangible assets 219,559 (219,559) (2) — Special charges (recoveries) 100,428 (100,428) (4) — GAAP-based income from operations / Non-GAAP-based income from operations 503,529 555,236 (5) 1,058,765 Other income (expense), net (11,946) 11,946 (6) — Provision for (recovery of) income taxes 110,837 16,897 (7) 127,734 GAAP-based net income / Non-GAAP-based net income, attributable to OpenText 234,225 550,285 (8) 784,510 GAAP-based EPS/ Non-GAAP-based EPS-diluted, attributable to OpenText $ 0.86 $ 2.03 (8) $ 2.89 _________________________________________ (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.
Biggest changeThe GAAP-based tax provision rate for the year ended June 30, 2021 includes an income tax provision charge from IRS settlements partially offset by a tax benefit from the release of unrecognized tax benefits due to the conclusion of relevant tax audits that was recognized during the second quarter of Fiscal 2021. 85 Table of Contents (8) Reconciliation of GAAP-based net income to Non-GAAP-based net income: Year Ended June 30, 2021 Per share diluted GAAP-based net income, attributable to OpenText $ 310,672 $ 1.14 Add: Amortization 435,340 1.59 Share-based compensation 51,969 0.19 Special charges (recoveries) 1,748 0.01 Other (income) expense, net (61,434) (0.22) GAAP-based provision for income taxes 339,906 1.23 Non-GAAP-based recovery of income taxes (150,975) (0.55) Non-GAAP-based net income, attributable to OpenText $ 927,226 $ 3.39 Reconciliation of Adjusted EBITDA Year Ended June 30, 2021 GAAP-based net income, attributable to OpenText $ 310,672 Add: Provision for income taxes 339,906 Interest and other related expense, net 151,567 Amortization of acquired technology-based intangible assets 218,796 Amortization of acquired customer-based intangible assets 216,544 Depreciation 85,265 Share-based compensation 51,969 Special charges (recoveries) 1,748 Other (income) expense, net (61,434) Adjusted EBITDA $ 1,315,033
With strategic acquisitions, we are well positioned to expand our product portfolio and improve our ability to innovate and grow organically, which helps us to meet our long-term growth targets. We believe our Total Growth strategy is a durable model, that we believe will create both near and long-term shareholder value through organic and acquired growth, capital efficiency and profitability.
With strategic acquisitions, we are well positioned to expand our product portfolio and improve our ability to innovate and grow organically, which helps us to meet our long-term growth targets. Our Total Growth strategy is a durable model, that we believe will create both near and long-term shareholder value through organic and acquired growth, capital efficiency and profitability.
(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.
(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.
(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.
See Note 18 “Special Charges (Recoveries)” to our Consolidated Financial Statements for more details. (5) GAAP-based and Non-GAAP-based income from operations stated in dollars.
See Note 18 “Special Charges (Recoveries)” to our Consolidated Financial Statements for more details. (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.
(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.
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.
We exclude gains and losses on these investments as we do not believe they are reflective of our ongoing business and operating results.
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.
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.
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.
(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.
(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.
(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.
(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.
(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.
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.
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.
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.
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.
Senior Notes 2031 are guaranteed on a senior unsecured basis by the Company and the Company’s existing and future wholly-owned subsidiaries (other than OTHI) that borrow or guarantee the obligations under our existing senior credit facilities.
Senior Notes 2031 are guaranteed on a senior unsecured basis by the Company and the Company’s existing and future wholly-owned subsidiaries (other than OTHI) that borrow or guarantee the obligations under our senior credit facilities.
Senior Notes 2030 are guaranteed on a senior unsecured basis by the Company and the Company's existing and future wholly-owned subsidiaries (other than OTHI) that borrow or guarantee the obligations under our existing senior credit facilities.
Senior Notes 2030 are guaranteed on a senior unsecured basis by the Company and the Company’s existing and future wholly-owned subsidiaries (other than OTHI) that borrow or guarantee the obligations under our senior credit facilities.
Senior Notes 2029 are guaranteed on a senior unsecured basis by our existing and future wholly-owned subsidiaries that borrow or guarantee the obligations under our existing senior credit facilities.
Senior Notes 2029 are guaranteed on a senior unsecured basis by our existing and future wholly-owned subsidiaries that borrow or guarantee the obligations under our senior credit facilities.
Senior Notes 2028 are guaranteed on a senior unsecured basis by our existing and future wholly-owned subsidiaries that borrow or guarantee the obligations under our existing senior credit facilities.
Senior Notes 2028 are guaranteed on a senior unsecured basis by our existing and future wholly-owned subsidiaries that borrow or guarantee the obligations under our senior credit facilities.
The Company renewed the Fiscal 2022 NCIB in order to provide it with a means to execute purchases over the TSX as part of the overall Fiscal 2022 Repurchase Plan.
The Company renewed the NCIB in Fiscal 2022 in order to provide it with a means to execute purchases over the TSX as part of the overall Fiscal 2022 Repurchase Plan.
Share Repurchase Plan / Normal Course Issuer Bid On November 5, 2020, the Board authorized the Fiscal 2021 Repurchase Plan, pursuant to which we were authorized to purchase in open market transactions, from time to time over the 12 month period commencing November 12, 2020, up to an aggregate of $350 million of our Common Shares on the NASDAQ Global Select Market, the TSX and/or other exchanges and alternative trading systems in Canada and/or the United States, if eligible, subject to applicable law and stock exchange rules.
Share Repurchase Plan / Normal Course Issuer Bid On November 5, 2020, the Board authorized a share repurchase plan (the Fiscal 2021 Repurchase Plan), pursuant to which we were authorized to purchase in open market transactions, from time to time over the 12 month period commencing November 12, 2020, up to an aggregate of $350 million of our Common Shares on the NASDAQ Global Select Market, the TSX and/or other exchanges and alternative trading systems in Canada and/or the United States, if eligible, subject to applicable law and stock exchange rules.
Non-GAAP-based net income and Non-GAAP-based EPS, attributable to OpenText, are consistently calculated as GAAP-based net income or earnings 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 net income and Non-GAAP-based EPS, attributable to OpenText, are consistently calculated as GAAP-based net income 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.
The Shelf Registration Statement allows for primary and secondary 74 offerings from time to time of equity, debt and other securities, including Common Shares, Preference Shares, debt securities, depositary shares, warrants, purchase contracts, units and subscription receipts. A short-form base shelf prospectus qualifying the distribution of such securities was concurrently filed with Canadian securities regulators on December 6, 2021.
The Shelf Registration Statement allows for primary and secondary offerings from time to time of equity, debt and other securities, including Common Shares, Preference Shares, debt securities, depositary shares, warrants, purchase contracts, units and subscription receipts. A short-form base shelf prospectus qualifying the distribution of such securities was concurrently filed with Canadian securities regulators on December 6, 2021.
Additionally, a software license is present in a cloud-based solutions arrangement if all of the following criteria are met: (i) The customer has the contractual right to take possession of the software at any time without significant penalty; and 49 (ii) It is feasible for the customer to host the software independent of us.
Additionally, a software license is present in a cloud-based solutions arrangement if all of the following criteria are met: (i) The customer has the contractual right to take possession of the software at any time without significant penalty; and (ii) It is feasible for the customer to host the software independent of us.
Estimating SSP requires judgment that could impact the amount and timing of revenue recognized. SSP is a formal 51 process whereby management considers multiple factors including, but not limited to, geographic or region-specific factors, competitive positioning, internal costs, profit objectives and pricing practices.
Estimating SSP requires judgment that could impact the amount and timing of revenue recognized. SSP is a formal process whereby management considers multiple factors including, but not limited to, geographic or region-specific factors, competitive positioning, internal costs, profit objectives and pricing practices.
We are an Information Management company that provides software and services that empower digital businesses of all sizes to become more intelligent, secure and connected. Our innovations maximize the strategic benefits of data and content for our customers, strengthening their productivity, growth and competitive advantage.
We are an Information Management company that provides software and services that empower digital businesses of all sizes to become more intelligent, connected, secure and responsible. Our innovations maximize the strategic benefits of data and content for our customers, strengthening their productivity, growth and competitive advantage.
Senior Notes 2031 bear interest at a rate 70 of 4.125% per annum, payable semi-annually in arrears on June 1 and December 1, commencing on June 1, 2022. Senior Notes 2031 will mature on December 1, 2031, unless earlier redeemed, in accordance with their terms, or repurchased.
Senior Notes 2031 bear interest at a rate of 4.125% per annum, payable semi-annually in arrears on June 1 and December 1, commencing on June 1, 2022. Senior Notes 2031 will mature on December 1, 2031, unless earlier redeemed, in accordance with their terms, or repurchased.
Cloud services and subscriptions revenue Cloud services and subscriptions revenue are from hosting arrangements where, in connection with the licensing of software, the end user does not take possession of the software, as well as from end-to-end fully outsourced B2B integration solutions to our customers (collectively referred to as cloud arrangements).
Cloud services and subscriptions revenue Cloud services and subscriptions revenue are from hosting arrangements where, in connection with the licensing of software, the end user does not take possession of the software, as well as from end-to-end fully outsourced business-to-business (B2B) integration solutions to our customers (collectively referred to as cloud arrangements).
Accordingly, for both term and subscription licenses, revenue 50 is recognized at the point-in-time when the customer is able to use and benefit from the software, which is normally once software activation keys have been made available for download at the commencement of the term.
Accordingly, for both term and subscription licenses, revenue is recognized at the point-in-time when the customer is able to use and benefit from the software, which is normally once software activation keys have been made available for download at the commencement of the term.
CRA’s position for Fiscal 2017 relies in significant part on the application of its positions regarding our transfer pricing methodology that are the basis for its reassessment of our fiscal years 2012 to 2016 described above, and that we believe are without merit.
CRA’s position for Fiscal 2017 and Fiscal 2018 relies in significant part on the application of its positions regarding our transfer pricing methodology that are the basis for its reassessment of our fiscal years 2012 to 2016 described above, and that we believe are without merit.
Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) is consistently calculated as GAAP-based net income, attributable to OpenText, excluding interest income (expense), provision for income taxes, depreciation and amortization of acquired intangible assets, other income (expense), share-based compensation and special charges (recoveries).
Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) is consistently calculated as GAAP-based net income, 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).
The forward-looking statements contained in this report are based on certain assumptions including the following: (i) countries continuing to implement and enforce existing and additional customs and security regulations relating to the provision of electronic information for imports and exports; (ii) our continued operation of a secure and reliable business network; (iii) the stability of general political, economic and market conditions, including any potential recession; (iv) our ability to manage inflation, including increased labour costs associated with attracting and retaining employees, and rising interest rates; (v) our continued ability to manage certain foreign currency risk through hedging; (vi) equity and debt markets continuing to provide us with access to capital; (vii) our continued ability to identify, source and finance attractive and executable business combination opportunities; (viii) our continued ability to avoid infringing third party intellectual property rights; and (ix) our ability to successfully implement our restructuring plans.
The forward-looking statements contained in this report are based on certain assumptions including the following: (i) countries continuing to implement and enforce existing and additional customs and security regulations relating to the provision of electronic information for imports and exports; (ii) our continued operation of a secure and reliable business network; (iii) the stability of general political, economic and market conditions; (iv) our ability to manage inflation, including increased labour costs associated with attracting and retaining employees, and rising interest rates; (v) our continued ability to manage certain foreign currency risk through hedging; (vi) equity and debt markets continuing to provide us with access to capital; (vii) our continued ability to identify, source and finance attractive and executable business combination opportunities; (viii) our continued ability to avoid infringing third party intellectual property rights; and (ix) our ability to successfully implement our restructuring plans.
The 2031 Indenture contains covenants that limit OTHI, the Company and certain of the Company’s subsidiaries’ ability to, among other things: (i) create certain liens and enter into sale and lease-back transactions; (ii) in the case of our non-guarantor subsidiaries, create, assume, incur or guarantee additional indebtedness of OTHI, the Company or the guarantors without such subsidiary becoming a subsidiary guarantor of Senior Notes 2031; and (iii) consolidate, amalgamate or merge with, or convey, transfer, lease or otherwise dispose of its property and assets substantially as an entirety to, another person.
The 2030 Indenture contains covenants that limit the Company, OTHI and certain of the Company’s subsidiaries’ ability to, among other things: (i) create certain liens and enter into sale and lease-back transactions; (ii) in the case of our non-guarantor subsidiaries, create, assume, incur or guarantee additional indebtedness of the Company, OTHI or the guarantors without such subsidiary becoming a subsidiary guarantor of Senior Notes 2030; and (iii) consolidate, amalgamate or merge with, or convey, transfer, lease or otherwise dispose of its property and assets substantially as an entirety to, another person.
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. 63 (8) Reconciliation of GAAP-based net income to Non-GAAP-based net income: Year Ended June 30, 2022 Per share diluted GAAP-based net income, attributable to OpenText $ 397,090 $ 1.46 Add: Amortization 415,712 1.52 Share-based compensation 69,556 0.26 Special charges (recoveries) 46,873 0.17 Other (income) expense, net (29,118) (0.11) GAAP-based provision for income taxes 118,752 0.44 Non-GAAP-based provision for income taxes (142,665) (0.52) Non-GAAP-based net income, attributable to OpenText $ 876,200 $ 3.22 Reconciliation of Adjusted EBITDA Year Ended June 30, 2022 GAAP-based net income, attributable to OpenText $ 397,090 Add: Provision for income taxes 118,752 Interest and other related expense, net 157,880 Amortization of acquired technology-based intangible assets 198,607 Amortization of acquired customer-based intangible assets 217,105 Depreciation 88,241 Share-based compensation 69,556 Special charges (recoveries) 46,873 Other (income) expense, net (29,118) Adjusted EBITDA $ 1,264,986 64 Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the year ended June 30, 2021 (In thousands, except for per share data) Year Ended June 30, 2021 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 $ 481,818 $ (3,419) (1) $ 478,399 Customer support 122,753 (1,910) (1) 120,843 Professional service and other 197,183 (2,565) (1) 194,618 Amortization of acquired technology-based intangible assets 218,796 (218,796) (2) — GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%) 2,351,649 69.4% 226,690 (3) 2,578,339 76.1% Operating expenses Research and development 421,447 (9,859) (1) 411,588 Sales and marketing 622,221 (18,312) (1) 603,909 General and administrative 263,521 (15,904) (1) 247,617 Amortization of acquired customer-based intangible assets 216,544 (216,544) (2) — Special charges (recoveries) 1,748 (1,748) (4) — GAAP-based income from operations / Non-GAAP-based income from operations 740,903 489,057 (5) 1,229,960 Other income (expense), net 61,434 (61,434) (6) — Provision for income taxes 339,906 (188,931) (7) 150,975 GAAP-based net income / Non-GAAP-based net income, attributable to OpenText 310,672 616,554 (8) 927,226 GAAP-based EPS / Non-GAAP-based EPS-diluted, attributable to OpenText $ 1.14 $ 2.25 (8) $ 3.39 _________________________________________ (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.
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. 83 Table of Contents (8) Reconciliation of GAAP-based net income to Non-GAAP-based net income: Year Ended June 30, 2022 Per share diluted GAAP-based net income, attributable to OpenText $ 397,090 $ 1.46 Add: Amortization 415,712 1.52 Share-based compensation 69,556 0.26 Special charges (recoveries) 46,873 0.17 Other (income) expense, net (29,118) (0.11) GAAP-based provision for income taxes 118,752 0.44 Non-GAAP-based recovery of income taxes (142,665) (0.52) Non-GAAP-based net income, attributable to OpenText $ 876,200 $ 3.22 Reconciliation of Adjusted EBITDA Year Ended June 30, 2022 GAAP-based net income, attributable to OpenText $ 397,090 Add: Provision for income taxes 118,752 Interest and other related expense, net 157,880 Amortization of acquired technology-based intangible assets 198,607 Amortization of acquired customer-based intangible assets 217,105 Depreciation 88,241 Share-based compensation 69,556 Special charges (recoveries) 46,873 Other (income) expense, net (29,118) Adjusted EBITDA $ 1,264,986 84 Table of Contents Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the year ended June 30, 2021 (In thousands, except for per share data) Year Ended June 30, 2021 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 $ 481,818 $ (3,419) (1) $ 478,399 Customer support 122,753 (1,910) (1) 120,843 Professional service and other 197,183 (2,565) (1) 194,618 Amortization of acquired technology-based intangible assets 218,796 (218,796) (2) — GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross profit and gross margin (%) 2,351,649 69.4% 226,690 (3) 2,578,339 76.1% Operating expenses Research and development 421,447 (9,859) (1) 411,588 Sales and marketing 622,221 (18,312) (1) 603,909 General and administrative 263,521 (15,904) (1) 247,617 Amortization of acquired customer-based intangible assets 216,544 (216,544) (2) — Special charges (recoveries) 1,748 (1,748) (4) — GAAP-based income from operations / Non-GAAP-based income from operations 740,903 489,057 (5) 1,229,960 Other income (expense), net 61,434 (61,434) (6) — Provision for income taxes 339,906 (188,931) (7) 150,975 GAAP-based net income / Non-GAAP-based net income, attributable to OpenText 310,672 616,554 (8) 927,226 GAAP-based EPS/ Non-GAAP-based EPS-diluted, attributable to OpenText $ 1.14 $ 2.25 (8) $ 3.39 __________________________ (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.
A portion of the net proceeds from the offerings of Senior 73 Notes 2029 and Senior Notes 2031 was used to redeem Senior Notes 2026. Upon redemption, Senior Notes 2026 were cancelled, and any obligation thereunder was extinguished.
A portion of the net proceeds from the offerings of Senior Notes 2029 and Senior Notes 2031 was used to redeem Senior Notes 2026. Upon redemption, Senior Notes 2026 were cancelled, and any obligation thereunder was extinguished.
We base our estimates on historical experience and on various other 48 assumptions that we believe are reasonable at that time. Actual results may differ materially from those estimates.
We base our estimates on historical experience and on various other assumptions that we believe are reasonable at that time. Actual results may differ materially from those estimates.
Under Term Loan B, we must maintain a “consolidated net leverage” ratio of no more than 4:1 at the end of each financial quarter.
Under Term Loan B, we must maintain a “consolidated net leverage” ratio of no more than 4.00:1.00 at the end of each financial quarter.
Under the Revolver, we must maintain a “consolidated net leverage” ratio of no more than 4:1 at the end of each financial quarter.
Under the Revolver, we must maintain a “consolidated net leverage” ratio of no more than 4.00:1.00 at the end of each financial quarter.
All dollar and percentage comparisons made herein refer to the year ended June 30, 2022 compared with the year ended June 30, 2021, unless otherwise noted. Please refer to Part II, Item 7 of our Annual Report on Form 10-K for Fiscal 2021 for a comparative discussion of our Fiscal 2021 financial results as compared to Fiscal 2020.
All dollar and percentage comparisons made herein refer to the year ended June 30, 2023 compared with the year ended June 30, 2022, unless otherwise noted. Please refer to Part II, Item 7 of our Annual Report on Form 10-K for Fiscal 2022 for a comparative discussion of our Fiscal 2022 financial results as compared to Fiscal 2021.
If we experience one of the kinds of change of control triggering events specified in the 2031 Indenture, OTHI will be required to make an offer to repurchase the Senior Notes 2031 at a price equal to 101% of the principal amount of the Senior Notes 2031, plus accrued and unpaid interest, if any, to the date of purchase.
If we experience one of the kinds of change of control triggering events specified in the 2030 Indenture, OTHI will be required to make an offer to repurchase the Senior Notes 2030 at a price equal to 101% of the principal amount of the Senior Notes 2030, plus accrued and unpaid interest, if any, to the date of purchase.
Senior Notes 2026 On May 31, 2016 we issued $600 million in aggregate principal amount of 5.875% Senior Notes due 2026 (Senior Notes 2026) in an unregistered offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act, and to certain non-U.S. persons in offshore transactions pursuant to Regulation S under the Securities Act.
Senior Notes 2026 On May 31, 2016 we issued $600 million in aggregate principal amount of 5.875% Senior Notes due 2026 (Senior Notes 2026) in an unregistered offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act, and to certain persons in offshore transactions pursuant to Regulation S under the Securities Act.
The CRA has also audited Fiscal 2017 on a basis that we strongly disagree with and are contesting. The focus of the CRA audit has been the valuation of certain intellectual property and goodwill when one of our subsidiaries continued into Canada from Luxembourg in July 2016.
The CRA has audited Fiscal 2017 and Fiscal 2018 on a basis that we strongly disagree with and are contesting. The focus of the CRA audit has been the valuation of certain intellectual property and goodwill when one of our subsidiaries continued into Canada from Luxembourg in July 2016.
If the carrying value of the net assets of our reporting unit exceeds its fair value, then an impairment loss equal to the difference, but not exceeding the total carrying value of goodwill allocated to the reporting unit, would be recorded. Our annual impairment analysis of goodwill was performed as of April 1, 2022.
If the carrying value of the net assets of our reporting unit exceeds its fair value, then an impairment loss equal to the difference, but not exceeding the total carrying value of goodwill allocated to the reporting unit, would be recorded. Our annual impairment analysis of goodwill was performed as of April 1, 2023.
District Court for the Eastern District of Texas “Realtime Data LLC v. Carbonite, Inc. et al (No 6:17-cv-00121-RWS-JDL).” Therein, it alleged that certain of Carbonite’s cloud storage services infringe upon certain patents held by Realtime Data. Realtime Data’s complaint against Carbonite sought damages in an unspecified amount and injunctive relief. On December 19, 2017, the U.S.
District Court for the Eastern District of Texas captioned Realtime Data LLC v. Carbonite, Inc. et al (No 6:17-cv-00121-RWS-JDL). Therein, it alleged that certain of Carbonite’s cloud storage services infringe upon certain patents held by Realtime Data. Realtime Data’s complaint against Carbonite sought damages in an unspecified amount and injunctive relief. On December 19, 2017, the U.S.
If we experience one of the kinds of change of control triggering events specified in the 2030 Indenture, OTHI will be required to make an offer to repurchase the Senior Notes 2030 at a price equal to 101% of the principal amount of the Senior Notes 2030, plus accrued and unpaid interest, if any, to the date of purchase. 71 The 2030 Indenture contains covenants that limit the Company, OTHI and certain of the Company's subsidiaries’ ability to, among other things: (i) create certain liens and enter into sale and lease-back transactions; (ii) in the case of our non-guarantor subsidiaries, create, assume, incur or guarantee additional indebtedness of the Company, OTHI or the guarantors without such subsidiary becoming a subsidiary guarantor of Senior Notes 2030; and (iii) consolidate, amalgamate or merge with, or convey, transfer, lease or otherwise dispose of its property and assets substantially as an entirety to, another person.
If we experience one of the kinds of change of control triggering events specified in the 2031 Indenture, OTHI will be required to make an offer to repurchase the Senior Notes 2031 at a price equal to 101% of the principal amount of the Senior Notes 2031, plus accrued and unpaid interest, if any, to the date of purchase. 68 Table of Contents The 2031 Indenture contains covenants that limit OTHI, the Company and certain of the Company’s subsidiaries’ ability to, among other things: (i) create certain liens and enter into sale and lease-back transactions; (ii) in the case of our non-guarantor subsidiaries, create, assume, incur or guarantee additional indebtedness of OTHI, the Company or the guarantors without such subsidiary becoming a subsidiary guarantor of Senior Notes 2031; and (iii) consolidate, amalgamate or merge with, or convey, transfer, lease or otherwise dispose of its property and assets substantially as an entirety to, another person.
(OTHI), a wholly-owned indirect subsidiary of the Company, issued $650 million in aggregate principal amount of 4.125% Senior Notes due 2031 guaranteed by the Company (Senior Notes 2031) in an unregistered offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act, and to certain non-U.S. persons in offshore transactions pursuant to Regulation S under the Securities Act.
(OTHI), a wholly-owned indirect subsidiary of the Company, issued $650 million in aggregate principal amount of 4.125% Senior Notes due 2031 guaranteed by the Company (Senior Notes 2031) in an unregistered offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (Securities Act), and to certain non-U.S. persons in offshore transactions pursuant to Regulation S under the Securities Act.
The applicable margin for borrowings under Term Loan B is 1.75%, with respect to LIBOR advances and 0.75%, with respect to ABR advances. The interest on the current outstanding balance for Term Loan B is equal to 1.75% plus LIBOR (subject to a 0.00% floor).
The applicable margin for borrowings under Term Loan B is 1.75%, with respect to SOFR advances and 0.75%, with respect to ABR advances. The interest on the current outstanding balance for Term Loan B is equal to 1.75% plus SOFR (subject to a 0.00% floor).
Such agreements have not had a material effect on our results of operations, financial position or cash flows. 76 Litigation We are currently involved in various claims and legal proceedings.
Such agreements have not had a material effect on our results of operations, financial position or cash flows. 76 Table of Contents Litigation We are currently involved in various claims and legal proceedings.
(5) See “Use of Non-GAAP Financial Measures” (discussed later in this MD&A) for definitions and reconciliations of GAAP-based measures to Non-GAAP-based measures . 54 Revenues, Cost of Revenues and Gross Margin by Product Type 1) Cloud Services and Subscriptions: Cloud services and subscriptions revenues are from hosting arrangements where in connection with the licensing of software, the end user does not take possession of the software, as well as from end-to-end fully outsourced B2B integration solutions to our customers (collectively referred to as cloud arrangements).
(5) See “Use of Non-GAAP Financial Measures” (discussed later in this MD&A) for definitions and reconciliations of GAAP-based measures to Non-GAAP-based measures . 58 Table of Contents Revenues, Cost of Revenues and Gross Margin by Product Type 1) Cloud Services and Subscriptions: Cloud services and subscriptions revenues are from hosting arrangements where in connection with the licensing of software, the end user does not take possession of the software, as well as from end-to-end fully outsourced B2B integration solutions to our customers (collectively referred to as cloud arrangements).
The resulting loss of $27.4 million, consisting of $25.0 million relating to the early termination call premium, $6.2 million relating to unamortized debt issuance costs and ($3.8) million relating to unamortized premium, has been recorded as a component of Other income (expense), net in our Consolidated Statements of Income.
The resulting loss of $27.4 million, consisting of $25.0 million 71 Table of Contents relating to the early termination call premium, $6.2 million relating to unamortized debt issuance costs and $(3.8) million relating to unamortized premium, has been recorded as a component of Other income (expense), net in our Consolidated Statements of Income.
Our qualitative assessment indicated that there were no indications of impairment and therefore there was no impairment of goodwill required to be recorded for Fiscal 2022 (no impairments were recorded for Fiscal 2021 and Fiscal 2020, respectively).
Our qualitative assessment indicated that there were no indications of impairment and therefore there was no impairment of goodwill required to be recorded for Fiscal 2023 (no impairments were recorded for Fiscal 2022 and Fiscal 2021, respectively).
On subsequent recognition and measurement, the maximum amount which is more likely than not to be recognized at each reporting date will represent the Company's best estimate, given the information available at the reporting date, although the outcome of the tax position is not absolute or final.
On subsequent recognition and measurement, the maximum amount which is more likely than not to be recognized at each reporting date will represent the Company’s best 56 Table of Contents estimate, given the information available at the reporting date, although the outcome of the tax position is not absolute or final.
Contingencies CRA Matter As part of its ongoing audit of our Canadian tax returns, the Canada Revenue Agency (CRA) has disputed our transfer pricing methodology used for certain intercompany transactions with our international subsidiaries and has issued notices of reassessment for Fiscal 2012, Fiscal 2013, Fiscal 2014, Fiscal 2015 and Fiscal 2016.
Contingencies CRA Matter As part of its ongoing audit of our Canadian tax returns, the CRA has disputed our transfer pricing methodology used for certain intercompany transactions with our international subsidiaries and has issued notices of reassessment for Fiscal 2012, Fiscal 2013, Fiscal 2014, Fiscal 2015 and Fiscal 2016.
(OTHI), a wholly-owned indirect subsidiary of the Company, issued $900 million in aggregate principal amount of 4.125% Senior Notes due 2030 guaranteed by the Company (Senior Notes 2030) in an unregistered offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act, and to certain non-U.S. persons in offshore transactions pursuant to Regulation S under the Securities Act.
Senior Notes 2030 On February 18, 2020 OTHI, a wholly-owned indirect subsidiary of the Company, issued $900 million in aggregate principal amount of 4.125% Senior Notes due 2030 guaranteed by the Company (Senior Notes 2030) in an unregistered offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act, and to certain non-U.S. persons in offshore transactions pursuant to Regulation S under the Securities Act.
As of June 30, 2022, we have provisionally paid approximately $34 million in order to fully preserve our rights to object to the CRA's audit positions, being the minimum payment required under Canadian legislation while the matter is in dispute. This amount is recorded within “Long-term income taxes recoverable” on the Consolidated Balance Sheets as of June 30, 2022.
As of June 30, 2023, we have provisionally paid approximately $33 million in order to fully preserve our rights to object to the CRA’s audit positions, being the minimum payment required under Canadian legislation while the matter is in dispute. This amount is recorded within “Long-term income taxes recoverable” on the Consolidated Balance Sheets as of June 30, 2023.
While we believe the assumptions and estimates that we have made are reasonable, such assumptions and estimates could have a material impact to our Consolidated Financial Statements upon ultimate resolution of the tax positions. For additional details, please see Note 15 "Income Taxes" to the Consolidated Financial Statements included in this Annual Report on Form 10-K.
While we believe the assumptions and estimates that we have made are reasonable, such assumptions and estimates could have a material impact to our Consolidated Financial Statements upon ultimate resolution of the tax positions. For additional details, please see Note 15 “Income Taxes” to the Consolidated Financial Statements included in this Annual Report on Form 10-K.
Assuming the utilization of available tax attributes (further described below), we estimate our potential aggregate liability, as of June 30, 2022, in connection with the CRA's reassessments for Fiscal 2012, Fiscal 2013, Fiscal 2014, Fiscal 2015 and Fiscal 2016, to be limited to penalties, interest and provincial taxes that may be due of approximately $75 million.
Assuming the utilization of available tax attributes (further described below), we estimate our potential aggregate liability, as of June 30, 2023, in connection with the CRA’s reassessments for Fiscal 2012, Fiscal 2013, Fiscal 2014, Fiscal 2015 and Fiscal 2016, to be limited to penalties, interest and provincial taxes that may be due of approximately $76 million.
On August 23, 2019, a nearly identical complaint was filed in the same court captioned William Feng, Individually and on Behalf of All Others Similarly Situated v. Carbonite, Inc., Mohamad S. Ali, and Anthony Folger (No. 1:19- cv-11808-LTS) (together with the Luna Complaint, the “Securities Actions”).
On August 23, 2019, a nearly identical complaint was filed in the same court captioned William Feng, Individually and on Behalf of All Others Similarly Situated v. Carbonite, Inc., Mohamad S. Ali, and Anthony Folger (No. 1:19- cv-11808-LTS) (together with the Luna Complaint, the Securities Actions).
These outsourced professional services are considered distinct from the ongoing hosting services and represent a separate performance obligation within our cloud subscription or managed services arrangements. The obligation to provide outsourced professional services is satisfied over time, with the customer simultaneously receiving and consuming the benefits as we satisfy our performance obligations.
These outsourced professional services are considered distinct from the ongoing hosting services and represent a separate performance obligation within our cloud subscription or managed services arrangements. The obligation to provide outsourced professional services is satisfied over 53 Table of Contents time, with the customer simultaneously receiving and consuming the benefits as we satisfy our performance obligations.
We exclude gains and losses on these investments as we do not believe they are reflective of our ongoing business and operating results.
We exclude gains and losses on these derivatives as we do not believe they are reflective of our ongoing business and operating results.
Senior Notes 2030 and the guarantees will be effectively subordinated to all of the Company, OTHI and the guarantors’ existing and future secured debt, including the obligations under the senior credit facilities, to the extent of the value of the assets securing such secured debt.
Senior Notes 2030 and the guarantees will be effectively subordinated to all of the Company, OTHI 69 Table of Contents and the guarantors’ existing and future secured debt, including the obligations under the senior credit facilities, to the extent of the value of the assets securing such secured debt.
The TSX approved the Company's notice of intention to commence the Fiscal 2022 NCIB pursuant to which the Company may purchase Common Shares over the TSX for the period commencing November 12, 2021 until November 11, 2022 in accordance with the TSX's normal course issuer bid rules, including that such purchases are to be made at prevailing market prices or as otherwise permitted.
The TSX approved the Company’s notice of intention to commence the Fiscal 2022 NCIB pursuant to which the Company was authorized to purchase Common Shares over the TSX for the period commencing November 12, 2021 until November 11, 2022 in accordance with the TSX’s normal course issuer bid rules, including that such purchases were to be made at prevailing market prices or as otherwise permitted.
On December 20, 2016, we issued an additional $250 million in aggregate principal amount by reopening our Senior Notes 2026 at an issue price of 102.75%. The additional notes have identical terms, are fungible with and are a part of a single series with the previously issued $600 million aggregate principal amount of Senior Notes 2026.
On December 20, 2016, we issued an additional $250 million in aggregate principal amount by reopening our Senior Notes 2026 at an issue price of 102.75%. The additional notes had identical terms, were fungible with and were a part of a single series with the previously issued $600 million aggregate principal amount of Senior Notes 2026.
Overall, the gross margin percentage on Cloud services and subscriptions revenues increased to 67% from 66%. 2) Customer Support: Customer support revenues consist of revenues from our customer support and maintenance agreements. These agreements allow our customers to receive technical support, enhancements and upgrades to new versions of our software products when available.
Overall, the gross margin percentage on Cloud services and subscriptions revenues decreased to 65% from 67%. 2) Customer Support: Customer support revenues consist of revenues from our customer support and maintenance agreements. These agreements allow our customers to receive technical support, enhancements and upgrades to new versions of our software products when available.
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. The following charts provide unaudited reconciliations of U.S.
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. The following charts provide unaudited reconciliations of U.S. GAAP-based financial measures to Non-GAAP-based financial measures for the following periods presented.
For more information, please see Part I, Item 1A “Risk Factors” included in this Annual Report on Form 10-K. Outlook for Fiscal 2023 As an organization, we are committed to “Total Growth”, meaning we strive towards delivering value through organic initiatives, innovations and acquisitions, as well as financial performance.
For more information, please see Part I, Item 1A “Risk Factors” included in this Annual Report on Form 10-K. Outlook for Fiscal 2024 As an organization, we are committed to “Total Growth”, meaning we strive towards delivering value through organic initiatives, innovations and acquisitions.
The price that we were authorized to pay for Common Shares in open market transactions was the market price at the time of purchase or such other price as was permitted by applicable law or stock exchange rules. The Fiscal 2021 Repurchase Plan was effected in accordance with Rule 10b-18 under the Exchange Act (Rule 10b-18).
The price that we were authorized to pay for Common Shares in open market transactions was the market price at the time of purchase or such other price as was permitted by applicable law or stock exchange rules. 74 Table of Contents The Fiscal 2021 Repurchase Plan was effected in accordance with Rule 10b-18.
See Note 18 "Special Charges (Recoveries)" to our Consolidated Financial Statements for more details. (5) GAAP-based and Non-GAAP-based income from operations stated in dollars.
See Note 18 “Special Charges (Recoveries)” to our Consolidated Financial Statements for more details. (5) GAAP-based and Non-GAAP-based income from operations stated in dollars.
We will continue to closely monitor the potential impacts of COVID-19, inflation with respect to wages, services and goods, concerns regarding any potential recession, rising interest rates, financial market volatility, and the Russia-Ukraine conflict on our business. See Part I, Item 1A, "Risk Factors" included within this Annual Report on Form 10-K.
We will continue to closely monitor the potential impacts of inflation with respect to wages, services and goods, concerns regarding any potential recession, rising interest rates, financial market volatility, and the Russia-Ukraine conflict on our business. See Part I, Item 1A, “Risk Factors” included within this Annual Report on Form 10-K.
Specific forward-looking statements in this report include, but are not limited to, statements regarding: (i) our focus in the fiscal year beginning July 1, 2022 and ending June 30, 2023 (Fiscal 2023) and July 1, 2023 and ending June 30, 2024 (Fiscal 2024) on growth in earnings and cash flows; (ii) creating value through investments in broader Information Management capabilities; (iii) our future business plans and business planning process; (iv) business trends; (v) distribution; (vi) the Company’s presence in the cloud and in growth markets; (vii) our expectation to grow MSPs; (viii) product and solution developments, enhancements and releases, the timing thereof and the customers targeted; (ix) the Company’s financial condition, results of operations and earnings; (x) the basis for any future growth and for our financial performance; (xi) declaration of quarterly dividends; (xii) future tax rates; (xiii) the changing regulatory environment; (xiv) annual recurring revenues; (xv) research and development and related expenditures; (xvi) our building, development and consolidation of our network infrastructure; (xvii) competition and changes in the competitive landscape; (xviii) our management and protection of intellectual property and other proprietary rights; (xix) existing and foreign sales and exchange rate fluctuations; (xx) cyclical or seasonal aspects of our business; (xxi) capital expenditures; (xxii) potential legal and/or regulatory proceedings; (xxiii) acquisitions and their expected impact, including our ability to successfully integrate the assets we acquire or utilize such assets to their full capacity, including those acquired in connection with the acquisition of Zix Corporation (see Note 19 “Acquisitions” to our Consolidated Financial Statements for more details); (xxiv) tax audits; (xxv) the expected impact of our decision to cease all direct business in Russia and Belarus and with known Russian-owned companies;(xxvi) expected costs of the restructuring plans; (xxvii) targets regarding greenhouse gas emissions, waste diversion, energy consumption and ED&I initiatives; and (xxviii) other matters.
Specific forward-looking statements in this report include, but are not limited to, statements regarding: (i) our focus in the fiscal years beginning July 1, 2023 and ending June 30, 2024 (Fiscal 2024) and July 1, 2024 and ending June 30, 2025 (Fiscal 2025) on growth in earnings and cash flows; (ii) creating value through investments in broader Information Management capabilities; (iii) our future business plans and operations, and business planning process; (iv) business trends; (v) distribution; (vi) the Company’s presence in the cloud and in growth markets; (vii) product and solution developments, enhancements and releases, the timing thereof and the customers targeted; (viii) the Company’s financial condition, results of operations and earnings; (ix) the basis for any future growth and for our financial performance; (x) declaration of quarterly dividends; (xi) future tax rates; (xii) the changing regulatory environment; (xiii) annual recurring revenues; (xiv) research and development and related expenditures; (xv) our building, development and consolidation of our network infrastructure; (xvi) competition and changes in the competitive landscape; (xvii) our management and protection of intellectual property and other proprietary rights; (xviii) existing and foreign sales and exchange rate fluctuations; (xix) cyclical or seasonal aspects of our business; (xx) capital expenditures; (xxi) potential legal and/or regulatory proceedings; (xxii) acquisitions and their expected impact, including our ability to realize the benefits expected from the acquisitions and to successfully integrate the assets we acquire or utilize such assets to their full capacity, including in connection with the acquisition of Zix Corporation (Zix) and Micro Focus International Limited, formerly Micro Focus International plc, and its subsidiaries (Micro Focus) (see Note 19 “Acquisitions” to our Consolidated Financial Statements for more details); (xxiii) tax audits; (xxiv) the expected impact of our decision to cease all direct business in Russia and Belarus and with known Russian-owned companies;(xxv) expected costs of the restructuring plans; (xxvi) targets regarding greenhouse gas emissions, waste diversion, energy consumption and Equity, Diversity and Inclusion (ED&I) initiatives; (xvii) integration of Micro Focus, resulting synergies and timing thereof; and (xxviii) other matters.
We recognize both accrued interest and penalties related to liabilities for income taxes within the "Provision for (recovery of) income taxes" line of our Consolidated Statements of Income.
We recognize both accrued interest and penalties related to liabilities for income taxes within the “Provision for (recovery of) income taxes” line of our Consolidated Statements of Income.
(2) On December 9, 2021, we redeemed Senior Notes 2026 in full, which resulted in a loss on debt extinguishment of $27.4 million.
(6) On December 9, 2021, we redeemed the Senior Notes 2026 in full, which resulted in a loss on debt extinguishment of $27.4 million.
On November 4, 2021, the Board authorized the Fiscal 2022 Repurchase Plan, pursuant to which we may purchase in open market transactions, from time to time over the 12 month period commencing November 12, 2021, up to an aggregate of $350 million of our Common Shares on the NASDAQ Global Select Market, the Toronto Stock Exchange (as part of a Fiscal 2022 NCIB) and/or other exchanges and alternative trading systems in Canada and/or the United States, if eligible, subject to applicable law and stock exchange rules.
On November 4, 2021, the Board authorized a share repurchase plan (the Fiscal 2022 Repurchase Plan), pursuant to which we were authorized to purchase in open market transactions, from time to time over the 12 month period commencing November 12, 2021, up to an aggregate of $350 million of our Common Shares on the NASDAQ Global Select Market, the TSX (as part of a Fiscal 2022 Normal Course Issuer Bid (NCIB)) and/or other exchanges and alternative trading systems in Canada and/or the United States, if eligible, subject to applicable law and stock exchange rules.
We define Enterprise cloud bookings as the total value from cloud services and subscription contracts entered into in the fiscal year that are new, committed and incremental to our existing contracts, excluding the impact of Carbonite and Zix. See “Use of Non-GAAP Financial Measures” below for definitions and reconciliations of GAAP-based measures to Non-GAAP-based measures.
We define Enterprise cloud bookings as the total value from cloud services and subscription contracts entered into in the fiscal year that are new, committed and incremental to our existing contracts, entered into with our enterprise-based customers. See “Use of Non-GAAP Financial Measures” below for definitions and reconciliations of GAAP-based measures to Non-GAAP-based measures.
The software application resides on our hardware or that of a third party, and the customer accesses and uses the software on an as-needed basis. Our cloud arrangements can be broadly categorized as "platform as a service" (PaaS), "software as a service" (SaaS), cloud subscriptions and managed services.
The software application resides on our hardware or that of a third party, and the customer accesses and uses the software on an as-needed basis. Our cloud arrangements can be broadly categorized as “platform as a service” (PaaS), “software as a service” (SaaS), cloud subscriptions and managed services.
Borrowings under the Revolver are secured by a first charge over substantially all of our assets, on a pari passu basis with Term Loan B. The Revolver has no fixed repayment date prior to the end of the term.
Borrowings under the Revolver are secured by a first charge over substantially all of our assets, on a pari passu basis with Term Loan B, the Acquisition Term Loan and Senior Secured Notes 2027. The Revolver has no fixed repayment date prior to the end of the term.
Where we say “we”, “us”, “our”, “OpenText” or “the Company”, we mean Open Text Corporation or Open Text Corporation and its subsidiaries, as applicable. 45 EXECUTIVE OVERVIEW At OpenText, we believe information and knowledge make business and people better.
Where we say “we”, “us”, “our”, “OpenText” or “the Company”, we mean Open Text Corporation or Open Text Corporation and its subsidiaries, as applicable. 49 Table of Contents EXECUTIVE OVERVIEW At OpenText, we believe information and knowledge make business and people better.
Consolidated net leverage ratio is defined for this purpose as the proportion of our total debt reduced by unrestricted cash, including guarantees and letters of credit, over our trailing twelve months net income before interest, taxes, depreciation, amortization, restructuring, share-based compensation and other miscellaneous charges. As of June 30, 2022, our consolidated net leverage ratio was 2.0:1.
Consolidated net leverage ratio is defined for this purpose as the proportion of our total debt reduced by unrestricted cash, including guarantees and letters of credit, over our trailing twelve months net income before interest, taxes, depreciation, amortization, restructuring, share-based compensation and other miscellaneous charges.
Overall, the gross margin percentage on Customer support revenues remained stable at 91%. 3) License: Our License revenue can be broadly categorized as perpetual licenses, term licenses and subscription licenses. Our License revenues are impacted by the strength of general economic and industry conditions, the competitive strength of our software products and our acquisitions.
Overall, the gross margin percentage on Customer support revenues decreased to 89% from 91%. 3) License: Our License revenue can be broadly categorized as perpetual licenses, term licenses and subscription licenses. Our License revenues are impacted by the strength of general economic and industry conditions, the competitive strength of our software products and our acquisitions.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

11 edited+7 added−1 removed3 unchanged
Biggest changeAs of June 30, 2022, with no outstanding balance on the Revolver, an adverse change of one percent on the interest rate would have no effect on our annual interest payment (June 30, 2021—nil).
Biggest changeAs of June 30, 2023, an adverse change of 100 basis points on the interest rate would have the effect of increasing our annual interest payment on the Acquisition Term Loan by approximately $35.7 million, assuming that the loan balance as of June 30, 2023 is outstanding for the entire period (June 30, 2022—nil).
Additionally, we have hedged certain of our Canadian dollar foreign currency exposures relating to our payroll expenses in Canada.
We have hedged certain of our Canadian dollar foreign currency exposures relating to our payroll expenses in Canada.
Based on the foreign exchange forward contracts outstanding as of June 30, 2022, a one cent change in the Canadian dollar to U.S. dollar exchange rate would have caused a change of $0.5 million in the mark to market on our existing foreign exchange forward contracts (June 30, 2021—$0.7 million).
Based on the CAD foreign exchange forward contracts outstanding as of June 30, 2023, a one cent change in the Canadian dollar to U.S. dollar exchange rate would have caused a change of $0.7 million in the mark-to-market valuation on our existing foreign exchange forward contracts (June 30, 2022—$0.5 million).
Item 7A. Quantitative and Qualitative Disclosures About Market Risk We are primarily exposed to market risks associated with fluctuations in interest rates on our term loans, revolving loans and foreign currency exchange rates. Interest rate risk Our exposure to interest rate fluctuations relate primarily to our Term Loan B and the Revolver.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk We are primarily exposed to market risks associated with fluctuations in interest rates on our term loans, revolving loans and foreign currency exchange rates. Interest rate risk Our exposure to interest rate fluctuations relates primarily to our Term Loan B, Revolver and Acquisition Term Loan.
Foreign currency translation risk Our reporting currency is the U.S. dollar. Fluctuations in foreign currencies impact the amount of total assets and liabilities that we report for our foreign subsidiaries upon the translation of these amounts into U.S. dollars.
Fluctuations in foreign currencies impact the amount of total assets and liabilities that we report for our foreign subsidiaries upon the translation of these amounts into U.S. dollars.
As of June 30, 2022, an adverse change of one percent on the interest rate would have the effect of increasing our annual interest payment on Term Loan B by approximately $9.6 million, assuming that the loan balance as of June 30, 2022 is outstanding for the entire period (June 30, 2021—$9.7 million).
As of June 30, 2023, an adverse change of 100 basis points on the interest rate would have the effect of increasing our annual interest payment on Term Loan B by approximately $9.5 million, assuming that the loan balance as of June 30, 2023 is outstanding for the entire period (June 30, 2022—$9.6 million).
In particular, the amount of cash and cash equivalents that we report in U.S. dollars for a significant portion of the cash held by these subsidiaries is subject to translation variance caused by changes in foreign currency exchange rates as of the end of each respective reporting period (the offset to which is recorded to accumulated other comprehensive income (loss) on our Consolidated Balance Sheets). 79 The following table shows our cash and cash equivalents denominated in certain major foreign currencies as of June 30, 2022 (equivalent in U.S. dollar): (In thousands) U.S.
In particular, the amount of cash and cash equivalents that we report in U.S. dollars for a significant portion of the cash held by these subsidiaries is subject to translation variance caused by changes in foreign currency exchange rates as of the end of each respective reporting period (the offset to which is recorded to accumulated other comprehensive income (loss) on our Consolidated Balance Sheets).
Dollar 1,204,801 996,781 Total cash and cash equivalents $ 1,693,741 $ 1,607,306 If overall foreign currency exchange rates in comparison to the U.S. dollar uniformly weakened by 10%, the amount of cash and cash equivalents we would report in equivalent U.S. dollars would decrease by $48.9 million (June 30, 2021—$61.1 million), assuming we have not entered into any derivatives discussed above under “Foreign Currency Transaction Risk.” Item 8.
Dollar 633,251 1,204,801 Total cash and cash equivalents $ 1,231,625 $ 1,693,741 If overall foreign currency exchange rates in comparison to the U.S. dollar uniformly weakened by 10%, the amount of 87 Table of Contents cash and cash equivalents we would report in equivalent U.S. dollars would decrease by $59.8 million (June 30, 2022—$48.9 million), assuming we have not entered into any derivatives discussed above under “Foreign Currency Transaction Risk.” Item 8.
As of June 30, 2022, we had no outstanding balance under the Revolver. Borrowings under the Revolver bear interest per annum at a floating rate of LIBOR plus a fixed rate that is dependent on our consolidated net leverage ratio ranging from 1.25% to 1.75%.
As of June 30, 2023, we had an outstanding balance of $275 million under the Revolver. Borrowings under the Revolver currently bear interest per annum at a floating rate of interest equal to Term SOFR plus the SOFR Adjustment (as defined in the Revolver) and a fixed margin dependent on our consolidated net leverage ratio ranging from 1.25% to 1.75%.
As of June 30, 2022, we had an outstanding balance of $957.5 million on Term Loan B. Term Loan B bears a floating interest rate of 1.75% plus LIBOR.
As of June 30, 2023, we had an outstanding balance of $947.5 million on the Term Loan B. Borrowings under the Term Loan B currently bear a floating rate of interest equal to Term SOFR plus the SOFR Adjustment (as defined in the Term Loan B) and applicable margin of 1.75%.
Dollar Equivalent at June 30, 2022 U.S. Dollar Equivalent at June 30, 2021 Euro $ 254,546 $ 331,974 British Pound 44,020 78,140 Canadian Dollar 14,640 26,632 Swiss Franc 48,674 44,900 Other foreign currencies 127,060 128,879 Total cash and cash equivalents denominated in foreign currencies 488,940 610,525 U.S.
Dollar Equivalent at June 30, 2022 Euro $ 200,282 $ 254,546 British Pound 69,108 44,020 Indian Rupee 57,199 38,247 Swiss Franc 53,122 48,674 Other foreign currencies 218,663 103,453 Total cash and cash equivalents denominated in foreign currencies 598,374 488,940 U.S.
Removed
For more information regarding the impact and discontinuance of LIBOR, see “Stress in the global financial system may adversely affect our finances and operations in ways that may be hard to predict or to defend against” included within Part I, Item 1A, “Risk Factors” on this Annual Report on Form 10-K.
Added
As of June 30, 2023, an adverse change of 100 basis points on the interest rate would have the effect of increasing our annual interest payment on the Revolver by approximately $2.8 million, assuming the loan balance as of June 30, 2023 is outstanding for the entire period (June 30, 2022—nil). 86 Table of Contents As of June 30, 2023, we had an outstanding balance of $3.6 billion under the Acquisition Term Loan.
Added
Borrowings under the Acquisition Term Loan currently bear a floating rate of interest equal to Term SOFR plus the SOFR Adjustment (as defined in the Acquisition Term Loan) and applicable margin of 3.50%.
Added
Additionally, in connection with the Micro Focus Acquisition, in August 2022, we entered into certain derivative transactions to meet certain foreign currency obligations related to the purchase price of the Micro Focus Acquisition, mitigate the risk of foreign currency appreciation in the GBP denominated purchase price and mitigate the risk of foreign currency appreciation in the EUR denominated existing debt held by Micro Focus.
Added
We entered into the following derivatives: (i) three deal-contingent forward contracts, (ii) a non-contingent forward contract, and (iii) EUR/USD cross currency swaps. In connection with the closing of the Micro Focus Acquisition the deal-contingent forward and non-deal contingent forward contracts were settled and we designated the 7-year EUR/USD cross currency swaps as net investment hedges.
Added
Based on the 5-year EUR/USD cross currency swaps outstanding as of June 30, 2023, a one cent change in the Euro to U.S. dollar forward exchange rate would have caused a change of $7.3 million in the mark-to-market valuation on our existing cross currency swap (June 30, 2022—nil).
Added
Based on the 7-year EUR/USD cross currency swaps outstanding as of June 30, 2023, a one cent change in the Euro to U.S. dollar forward exchange rate would have caused a change of $7.8 million in the mark-to-market valuation on our existing cross currency swaps (June 30, 2022—nil). Foreign currency translation risk Our reporting currency is the U.S. dollar.
Added
The following table shows our cash and cash equivalents denominated in certain major foreign currencies as of June 30, 2023 (equivalent in U.S. dollar): (In thousands) U.S. Dollar Equivalent at June 30, 2023 U.S.

Other OTEX 10-K year-over-year comparisons