Annual Report 2023
OpenText Annual Shareholder Letter
Dear Shareholder,
I am filled with an unprecedented sense of optimism regarding the future of OpenText. In Fiscal 2023 we saw strong demand,
took market share from competitors, and fortified an increased customer commitment to our cloud platform. Our technology
and expertise remain highly relevant and we are unwavering in our mission to empower organizations of all sizes to achieve
the Information Advantage. Our innovation in creating the OpenText Cloud, large data sets for customers and Cloud Editions
automation, will drive the next generation opportunity in AI, which we call opentext.ai.
Our comprehensive products, go-to-market strategies, and exceptional employees position us strongly for sustained growth
and profitability. We are consistently generating value through the OpenText Business System of Total Growth.
In January 2023 we acquired Micro Focus International Limited, formerly Micro Focus International plc (Micro Focus), a leading
provider of mission-critical software technology that helps customers accelerate their digital transformation. The acquisition
is the largest in OpenText’s history. OpenText powers and protects information to elevate every person and every organization
to be their best. Our progress in Fiscal 2023 has been exceptional and this directly reflects the unwavering dedication and
expertise of our 24,000+ employees. It's an incredibly exciting time for us.
In Fiscal 2023, factoring in the acquisition of Micro Focus, we delivered an impressive 32.2% revenue growth in constant
currency (CC)(1), including positive organic growth. We surpassed $3.6 billion in Annual Recurring Revenue (ARR)(2), setting a
record for the Company.
Record Fiscal 2023 Financial Results
• Revenue was a record $4.48 billion, up 28.4% as reported and 32.2% in constant currency
• Cloud revenue was a record of $1.7 billion, an increase of 10.8% as reported and 13.3% in constant currency
• Enterprise cloud bookings(3) were $528 million
• ARR was a record $3.6 billion, up 26.2% as reported and 29.7% in constant currency or 81% of total revenue
• Cloud and off-cloud renewal rates(4) of 94% and 95% respectively
• GAAP-based net income of $150 million, GAAP-based net income margin of 3.4%
• A-EBITDA(5) of $1.5 billion for an upper quartile margin(5) of 32.8%
• Operating cash flows of $779 million
• Free cash flows(5) of $655 million or 15% of total revenue
• We returned approximately $260 million to shareholders via dividends
• We ended the year with $1.2 billion of cash and a net leverage ratio of 3.5x
Paths to Growth
Our go-to-market strategy prioritizes marquee customer segments, including the Global 10,000 enterprises, key government
entities, and technologically adept small and medium-sized businesses (SMBs). Our primary focus lies in leveraging our in-depth
understanding of our customers and introducing new applications to effectively handle their evolving information workloads.
Our solutions can be deployed either off-cloud, within the OpenText Cloud, in the public cloud, in hybrid environments, or in
other clouds. Through our Global Partner Program, we expand our market reach, cultivate stronger relationships, and offer
enterprise customers a comprehensive local ecosystem of partners to meet their diverse requirements.
We achieve this through collaborations with our Hyperscaler Partners, namely Google Cloud Platform (GCP), Amazon Web
Services (AWS), and Microsoft Azure. The fusion of OpenText's cloud-native applications and managed services, coupled with
the scalability and performance of our public cloud providers, delivers secure, reliable, and compliant solutions for customers.
Our alliances with our Hyperscaler Partners as well as esteemed companies such as SAP SE, Oracle Corporation,
Salesforce.com, and others to unlock greater distribution channels and cross-selling opportunities, facilitating organic growth.
Our Global System Integrators (GSIs), which include Accenture plc, Capgemini Technology Services SAS, Deloitte Consulting
LLP, DXC, Hewlett Packard Enterprises and Tata Consultancy Services (TCS), provide customers with transformative digital
services centered around OpenText technologies. Our Partner Program empowered 22,000+ Managed Service Providers
(MSPs) to deploy OpenText solutions at scale, and we rely on them as a vital channel to expand our cloud-based cybersecurity,
threat intelligence, backup, and recovery solutions tailored to the SMB&C markets.
Micro Focus Acquisition
On January 31, 2023, OpenText acquired Micro Focus for an approximate total purchase price of US$6.2 billion. The acquisition
of Micro Focus has significantly broadened our mission and effectively doubles the size of OpenText, with minimal overlap
in the product portfolios of the two companies. Our Total Addressable Market (TAM) has now expanded into mission critical
domains such as Enterprise Security, IT Operations Management, Application Automation, as well as enhancing our Developer
and AI solutions. Overall, we now cater to a vast Information Management market estimated at more than $200 billion(6) and we
are excited to provide expanded offerings to support our customer’s growing needs to digitize and work smarter.
The acquisition was funded by a combination of cash and debt. Approximately half of our total debt is at fixed interest rates,
with a weighted average interest rate of 6.6%. We are committed to paying down our debt principal every quarter to bring our
net leverage ratio(7) to an internal target of below 3.0 times by the end of Fiscal 2025 or sooner.
Micro Focus deepens our international presence, especially in Europe. It has also brought in an amazing pool of talent,
marquee customers and great products. The integration of Micro Focus is ahead of schedule, and it has already exceeded our
expectations.
Global Leader in Information Management
The world is multi-cloud, in fact, it is an internet of Clouds, and Information Management is the interconnect for the internet
of Clouds. OpenText Cloud offerings allow customers to leverage our full cloud suites seamlessly.
OpenText’s Six Business Cloud Offerings
• Content Management Cloud: Our Content Management Cloud enables organizations to protect and manage
information in public, private or hybrid deployments at scale. We connect unstructured content with structured data
workflows to deliver content to users accurately, securely, and effectively. Within Content, our Experience Cloud can
evaluate and deliver highly personalized content and engagements along a continuous customer journey at every
point of interaction.
• Business Network Cloud (BN): Our Business Network Cloud Trading Grid connects businesses, financial institutions,
and government organizations worldwide to provide a foundation for digital supply chains and secure e-commerce
ecosystems. Organizations can build global and sustainable supply chains, rapidly onboard new trading partners,
comply with regional mandates, provide effective electronic invoicing, and remove information silos across
ecosystems and the extended enterprise.
• Cybersecurity Cloud: Our Cybersecurity Cloud offers solutions from threat prevention to detection and response,
data management to investigation and compliance. Our Cybersecurity Cloud protects critical information and
processes at scale, combining front-line experience with automation to help organizations detect threats in real time.
• Analytics and AI Cloud: Our Analytics & AI solutions bring artificial intelligence with practical usage to provide
organizations with actionable insights and automation. It leverages a comprehensive set of data analytics software,
such as text mining, natural language processing, and machine learning, to identify patterns, risks and trends for
predictive process automation and accelerated decision making. AI enabled tools will accelerate how customers can
manage and control cloud costs and carbon footprints across multiple environments.
• Application Automation Cloud: Our Application Automation Cloud provides performance to functional testing, and
Application Lifecycle Management (ALM) with improved visibility. With our Application Automation Cloud, customers
can innovate faster, with lower risk, by transforming their core business applications, processes, and infrastructure—
from mainframe to cloud.
•
IT Operations Management Cloud (ITOM): We help customers increase service levels and deliver better experiences
through a more holistic management of assets and applications across all types of infrastructures and environments.
Project Titanium & Titanium X
In Fiscal 2023 we completed our investment in the Project Titanium innovation framework, that evolves our already robust
capabilities and accelerate customer adoption of the cloud. With the successful completion of Project Titanium, we have
unlocked new growth opportunities in Software-as-a-Service (SaaS) and Application Programming Interface (APIs).
In April 2023, we announced Titanium X, which includes an accelerated roadmap to bring all Micro Focus products onto the
cloud. Project Titanium X positions us strongly to support organizations in their digital transformations and enable them to
harness the immense value of AI in the next generation. Over the next two years, we intend to strategically invest approximately
US$2.5 billion in R&D, cloud operations and innovation, including Titanium X.
Data is one of the most strategic assets for an organization. OpenText™ AI Cloud solutions
help organizations monetize that asset by delivering the strategic insights employees
and customers need to make every decision data-driven and predict and act on business
opportunities. Customers can leverage AI to gain the full strategic value of their data faster
and from across diverse sources.
The Artificial Intelligence (AI) Opportunity
The Internet changed everything. With AI, everything must change. AI is real, it is here and it is truly transformative. The
rapid advancement in AI is expected to radically change business functions within small businesses to the world’s largest
organizations. As a leader in Information Management, OpenText can compete to win in all categories of AI: Complex Knowledge
Processing, Robotics, Learning, Large Language Models (LLM) and Language Processing, Generative AI, and Quantum.
We recently introduced OpenText Aviator™. Over the coming months, we intend to roll-out automation and AI capabilities for our
Business Clouds including Content, Experience, Business Network, Application Automation, and IT Operations Management.
We’ve also announced the Private Cloud Aviator for our 3,000+ customers where they can set up their own private LLM
instance. OpenText is going to play to win in every AI category and every product line is going to have a set of Generative AI
and LLM capabilities.
• 98 of Top 100 companies are OpenText customers
•
120K+ customers in 180 countries
• $12 Trillion+ in annual commerce on our network
•
1.1 Million+ connected Trading Partners
• Over one-third of our employees are dedicated to R&D
Helping Customers Win
Customer focus is deeply embedded in the OpenText culture. Like other premier technology companies, we are managing
through the uneven macro environment. This demands every company to think innovatively about their business with a
proactive lens.
OpenText recognizes a significant opportunity to assist organizations of all scales in leveraging information technology to
overcome present-day challenges, strengthen their positions, and outperform their competitors. We take great pride in that
OpenText has been instrumental in helping our customers remain adaptable, responsive, and resilient in times of uncertainty.
We maximize customer satisfaction by leveraging the OpenText L.O.V.E.™ framework (Land, Operate, Value, Expand), to ensure
there are faster and fewer handoffs across cloud on-boarding, delivery, support, renewals, and expansion. We would like to
highlight the following customer achievements:
• BNP Paribas, a European multinational provider of banking and financial services, has opted to move their
subsidiaries to a SaaS deployment model on the OpenText ValueEdge platform.
• CNA Insurance is one of the largest U.S. commercial property and casualty insurance companies, providing a broad
range of standard and specialized insurance products and services for businesses and professionals in the U.S.,
Canada, and Europe. OpenText will provide leading-edge content services capabilities.
• Daikin Applied designs and manufactures advanced commercial and industrial HVAC systems for customers
around the world. They have selected the OpenText Business Network Cloud Enterprise to onboard trading partners
electronically for a more seamless process.
• Elevance Health is the largest for-profit managed health care company in the Blue Cross Blue Shield Association.
OpenText’s Exstream Cloud Native will help them create, deliver, and manage all member communications, providing
scalability, ease-of-use, and multi-channel delivery.
• The Federal Emergency Management Agency (FEMA) is an agency of the United States Department of Homeland
Security. Its mission is to help people before, during, and after disasters. FEMA have opted for OpenText’s Fortify
Scan Central SAST & DAST to align with their Zero Trust framework, which needed to consolidate five solutions into
a centralized platform where they can automate, manage, and track security vulnerabilities.
•
ID Logistics is one of the largest international contract logistics groups based in France, characterized by offerings
involving a high level of technology and a sustainable approach. With OpenText as a key partner, ID Logistics will
continue to increase their customers satisfaction and growth through improving service quality, making data exchange
with partners and customers more reliable and outsourcing flows to increase the added value of their employees.
Corporate Citizenship
Fiscal 2023 was a year of volatility and the future depends on our collective ability to address the pressing challenges of our
time. It is crucial that we embrace innovation, sustainability, and inclusivity as we imagine how people and organizations can
build a better future. Last year we announced our OpenText Zero-In Initiative, the guiding framework for all our Environmental,
Social and Governance (ESG) efforts. Our framework is based on three pillars that focus on measurable, values-driven goals
under the pillars of Zero Footprint, Zero Barriers and Zero Compromise.
In the 2023 Corporate Citizenship Report (https://www.opentext.com/about/corporate-citizenship), we are excited to share
OpenText’s progress, initiatives, and commitments to making a positive impact on our environment, empowering diverse voices,
and upholding the highest standards of integrity.
• Zero Footprint: OpenText embraces the opportunity to reduce our footprint in every possible way, and help our
customers do the same. We are committing to a science-based emissions target of 50% reduction by 2030, and
net-zero by 2040, and zero operational waste by 2030. The goal is to eliminate emissions to the greatest extent
possible, send no waste to landfills, incinerators, or oceans, and promote a circular economy, where resources are put
back into the system to be used over again.
• Zero Barriers: Our goal is to have a majority ethnically diverse workforce by 2030. We have committed to a 50/50
gender parity within key roles by 2030, and 40% women in leadership positions at all management levels, because
for consistent equity, we must create a culture that values differences starting with a top-down approach.
• Zero Compromise: We intend to reach our Zero Footprint and Zero Barriers goals with the same values-based
approach that we bring to work every day – with zero compromise. It is about elevating our people and our
organization, and zeroing-in on what matters most. We are committed to transparency and holding ourselves
accountable to our ESG goals and continuing to foster our culture of Technology for the Good.
In Summary
As we springboard into fiscal 2024, our goal is to expand our business, gain market share, and consistently deliver excellent
profitability and substantial value for our shareholders. Having completed our initial integration of Micro Focus operations
ahead of schedule, we fully expect the momentum of OpenText to continue into our next fiscal year and expect to remain on
track to meeting our near-term and long-term financial and operating goals.
OpenText holds a distinctive position as a leader in Information Management and our comprehensive range of products powers
and protects information to elevate every person and every organization to be their best. AI is expected to be a growth driver
for OpenText and will shape our future. Customers trust OpenText with their data and we are going to play to win in every AI
category.
I would like to thank our employees, our customers, our partners and our shareholders for their continued trust and confidence
in OpenText.
May the one that brings peace – bring peace for all.
Mark J. Barrenechea
OpenText CEO & CTO
1. Constant currency for this purpose is defined as the current period reported revenues/expenses/earnings represented at the prior comparative period's
foreign exchange rate.
2. Annual recurring revenue (ARR) as a % of total revenues and is defined as the sum of cloud services and subscriptions revenue and customer support
revenue.
3. 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.
4. Renewal rate excludes Carbonite, Zix and Micro Focus.
5. Please refer to “Use of Non-GAAP Financial Measures” at the end of this presentation and “Reconciliation of selected GAAP-based measures to Non-
GAAP-based measures” included within our current and historical filings on Forms 10-Q, 10-K and 8-K.
6. Estimates based on market reports from independent industry analysis firms including Gartner and IDC.
7. Consolidated Net Leverage Ratio (pro forma) is calculated using bank covenant methodology.
Cautionary Statement Regarding Forward-Looking Statements
Certain statements in this press release, including statements about the focus of Open Text Corporation (“OpenText” or
“the Company”) on growth, future cloud growth and market share gains, future organic growth initiatives and deployment
of capital, intention to maintain a dividend program, including any targeted annualized dividend, the associated benefits of
the Micro Focus acquisition, future tax rates, new platform and product offerings and associated benefits to customers, our
announcement of opentext.ai and OpenText Aviator™, including our AI strategy, vision and initial AI products, scaling OpenText,
and other matters, which may contain words such as “anticipates”, “expects”, “intends”, “plans”, “believes”, “seeks”, “estimates”,
“may”, “could”, “would”, “might”, “will” and variations of these words or similar expressions are intended to identify forward-
looking statements or information under applicable securities laws (forward-looking statements). In addition, any statements
or information that refer to expectations, beliefs, plans, projections, objectives, performance or other characterizations of
future events or circumstances, including any underlying assumptions, are forward-looking statements, and based on our
current expectations, forecasts and projections about the operating environment, economies and markets in which we operate.
Forward-looking statements reflect our current estimates, beliefs and assumptions, which are based on management's
perception of historic trends, current conditions and expected future developments, as well as other factors it believes are
appropriate in the circumstances, such as certain assumptions about the economy, as well as market, financial and operational
assumptions. Management's estimates, beliefs and assumptions are inherently subject to significant business, economic,
competitive and other uncertainties and contingencies regarding future events and, as such, are subject to change. We can
give no assurance that such estimates, beliefs and assumptions will prove to be correct. Future declarations of dividends are
also subject to the final determination and discretion of the Board of Directors, and an annualized dividend payout has not
been approved or declared by the Board. Forward-looking statements involve known and unknown risks and uncertainties
such as those relating to: all statements regarding the expected future financial position, results of operations, cash flows,
dividends, financing plans, business strategy, budgets, capital expenditures, competitive positions, growth opportunities, plans
and objectives of management, including any anticipated synergy benefits; our ability to integrate successfully Micro Focus’
operations and programs, including incurring unanticipated costs, delays or difficulties; and our ability to develop, protect and
maintain our intellectual property and proprietary technology and to operate without infringing on the proprietary rights of
others. For additional information with respect to risks and other factors which could occur, see the Company's Annual Report
on Form 10-K, Quarterly Report on Form 10-Q and other securities filings with the Securities and Exchange Commission (SEC)
and other securities regulators. Readers are cautioned not to place undue reliance upon any such forward-looking statements,
which speak only as of the date made. Unless otherwise required by applicable securities laws, the Company disclaims any
intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future
events or otherwise. Further, readers should note that we may announce information using our website, press releases,
securities law filings, public conference calls, webcasts and the social media channels identified on the Investors section of our
website (https://investors.opentext.com). Such social media channels may include the Company's or our CEO's blog, Twitter
account or LinkedIn account. The information posted through such channels may be material. Accordingly, readers should
monitor such channels in addition to our other forms of communication.
Notes
All dollar amounts in this press release are in U.S. Dollars unless otherwise indicated.
Use of Non-GAAP Financial Measures: In addition to reporting financial results in accordance with U.S. GAAP, the Company
provides certain financial measures that are not in accordance with U.S. GAAP (Non-GAAP). These Non-GAAP financial
measures have certain limitations in that they do not have a standardized meaning and thus the Company's definition may be
different from similar Non-GAAP financial measures used by other companies and/or analysts and may differ from period to
period. Thus it may be more difficult to compare the Company's financial performance to that of other companies. However,
the Company's management compensates for these limitations by providing the relevant disclosure of the items excluded in
the calculation of these Non-GAAP financial measures both in its reconciliation to the U.S. GAAP financial measures and its
Consolidated Financial Statements, all of which should be considered when evaluating the Company's results.
The Company uses these Non-GAAP financial measures to supplement the information provided in its Consolidated Financial
Statements, which are presented in accordance with U.S. GAAP. The presentation of Non-GAAP financial measures is not
meant to be a substitute for financial measures presented in accordance with U.S. GAAP, but rather should be evaluated in
conjunction with and as a supplement to such U.S. GAAP measures. OpenText strongly encourages investors to review its
financial information in its entirety and not to rely on a single financial measure. The Company therefore believes that despite
these limitations, it is appropriate to supplement the disclosure of the U.S. GAAP measures with certain Non-GAAP measures
defined below.
Non-GAAP-based net income and Non-GAAP-based EPS, attributable to OpenText, are consistently calculated as GAAP-
based net income (loss) or earnings (loss) per share, attributable to OpenText, on a diluted basis, excluding the effects of
the amortization of acquired intangible assets, other income (expense), share-based compensation, and special charges
(recoveries), all net of tax and any tax benefits/expense items unrelated to current period income, as further described in
the tables below. Non-GAAP-based gross profit is the arithmetical sum of GAAP-based gross profit and the amortization of
acquired technology-based intangible assets and share-based compensation within cost of sales. Non-GAAP-based gross
margin is calculated as Non-GAAP-based gross profit expressed as a percentage of total revenue. Non-GAAP-based income
from operations is calculated as GAAP-based income from operations, excluding the amortization of acquired intangible assets,
special charges (recoveries), and share-based compensation expense.
Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) is consistently calculated as GAAP-
based net income (loss), attributable to OpenText, excluding interest income (expense), provision for (recovery of) income
taxes, depreciation and amortization of acquired intangible assets, other income (expense), share-based compensation and
special charges (recoveries). Adjusted EBITDA margin is calculated as adjusted EBITDA expressed as a percentage of total
revenue.
The Company's management believes that the presentation of the above defined Non-GAAP financial measures provides
useful information to investors because they portray the financial results of the Company before the impact of certain non-
operational charges. The use of the term “non-operational charge” is defined for this purpose as an expense that does not
impact the ongoing operating decisions taken by the Company's management. These items are excluded based upon the way
the Company's management evaluates the performance of the Company's business for use in the Company's internal reports
and are not excluded in the sense that they may be used under U.S. GAAP.
The Company does not acquire businesses on a predictable cycle, and therefore believes that the presentation of Non-GAAP
measures, which in certain cases adjust for the impact of amortization of intangible assets and the related tax effects that
are primarily related to acquisitions, will provide readers of financial statements with a more consistent basis for comparison
across accounting periods and be more useful in helping readers understand the Company’s operating results and underlying
operational trends. Additionally, the Company has engaged in various restructuring activities over the past several years,
primarily due to acquisitions and most recently in response to our return to office planning, that have resulted in costs
associated with reductions in headcount, consolidation of leased facilities and related costs, all which are recorded under the
Company’s “Special charges (recoveries)” caption on the Consolidated Statements of Income. Each restructuring activity is
a discrete event based on a unique set of business objectives or circumstances, and each differs in terms of its operational
implementation, business impact and scope, and the size of each restructuring plan can vary significantly from period to period.
Therefore, the Company believes that the exclusion of these special charges (recoveries) will also better aid readers of financial
statements in the understanding and comparability of the Company's operating results and underlying operational trends.
In summary, the Company believes the provision of supplemental Non-GAAP measures allow investors to evaluate the
operational and financial performance of the Company's core business using the same evaluation measures that management
uses, and is therefore a useful indication of OpenText's performance or expected performance of future operations and
facilitates period-to-period comparison of operating performance (although prior performance is not necessarily indicative
of future performance). As a result, the Company considers it appropriate and reasonable to provide, in addition to U.S. GAAP
measures, supplementary Non-GAAP financial measures that exclude certain items from the presentation of its financial
results. Information reconciling certain forward-looking GAAP measures to non-GAAP measures related to F’24 targets and
F’26 aspirations, including A-EBITDA, is not available without unreasonable effort due to high variability, complexity and
uncertainty with respect to forecasting and quantifying certain amounts that are necessary for such reconciliations.
The following charts provide unaudited reconciliations of U.S. GAAP-based financial measures to Non-GAAP-based financial
measures for the following periods presented. The Micro Focus Acquisition significantly impacts period-over-period
comparability.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
______________________
FORM 10-K
______________________
☒
☐
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2023.
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 0-27544
______________________________________
OPEN TEXT CORPORATION
(Exact name of Registrant as specified in its charter)
______________________
Canada
98-0154400
(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification No.)
275 Frank Tompa Drive,
Waterloo, Ontario
Canada
(Address of principal executive offices)
N2L 0A1
(Zip code)
Registrant’s telephone number, including area code: (519) 888-7111
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common stock without par value
Trading Symbol(s)
OTEX
Name of each exchange on which registered
NASDAQ Global Select Market
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
______________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company”
in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new
or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the
filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received
by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the registrant’s Common Shares held by non-affiliates, based on the closing price of the Common Shares as reported by the
NASDAQ Global Select Market (“NASDAQ”) on December 31, 2022, the end of the registrant’s most recently completed second fiscal quarter, was
approximately $7.8 billion. As of July 28, 2023, there were 271,186,620 outstanding Common Shares of the registrant.
None.
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Business
Item 1.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4. Mine Safety Disclosures
Properties
Legal Proceedings
OPEN TEXT CORPORATION
TABLE OF CONTENTS
Part I
Part II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Reserved
Item 6.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Item 8.
Item 9.
Item 9A. Controls and Procedures
Item 9B. Other Information
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Part III
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
Item 15. Exhibits and Financial Statement Schedules
Item 16. Form 10-K Summary
Signatures
Part IV
2
Part I
Forward-Looking Statements
This Annual Report on Form 10-K contains forward-looking statements or information (forward-looking statements)
within the meaning of the Private Securities Litigation Reform Act of 1995, Section 21E of the U.S. Securities Exchange Act of
1934, as amended (the Exchange Act), Section 27A of the U.S. Securities Act of 1933, as amended (the Securities Act), and
other applicable securities laws of the United States and Canada, and is subject to the safe harbors created by those provisions.
Words such as “anticipates”, “expects”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “may”, “could”, “would”, “might”,
“will” and variations of these words or similar expressions are intended to identify forward-looking statements. In addition, any
statements or information that refer to expectations, beliefs, plans, projections, objectives, performance or other
characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements, and
based on our current expectations, forecasts and projections about the operating environment, economies and markets in which
we operate. Forward-looking statements reflect our current estimates, beliefs and assumptions, which are based on
management’s perception of historic trends, current conditions and expected future developments, as well as other factors it
believes are appropriate in the circumstances. 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, as well as our ability to continue to successfully integrate
any such opportunities, including in accordance with the expected timeframe and/or cost budget for such integration; (viii) our
continued ability to avoid infringing third party intellectual property rights; and (ix) our ability to successfully implement our
restructuring plans. Management’s estimates, beliefs and assumptions are inherently subject to significant business, economic,
competitive and other uncertainties and contingencies regarding future events and, as such, are subject to change. We can give
no assurance that such estimates, beliefs and assumptions will prove to be correct.
These forward-looking statements involve known and unknown risks as well as uncertainties, which include (i) the
impact of the Russia-Ukraine conflict on our business, including our decision to cease all direct business in Russia and Belarus
and with known Russian-owned companies; and (ii) those discussed herein and in the Notes to Consolidated Financial
Statements for the year ended June 30, 2023, which are set forth in Part II, Item 8 of this Annual Report on Form 10-K. The
actual results that we achieve may differ materially from any forward-looking statements, which reflect management's current
expectations and projections about future results only as of the date hereof. We undertake no obligation to revise or publicly
release the results of any revisions to these forward-looking statements. A number of factors may materially affect our business,
financial condition, operating results and prospects. These factors include, but are not limited to, those set forth in Part I,
Item 1A “Risk Factors”, and forward-looking statements set forth in Part II, Item 7 “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and elsewhere in this Annual Report on Form 10-K as well as other documents
we file from time to time with the United States Securities and Exchange Commission (the SEC) and Canadian securities
regulators. Any one of these factors may cause our actual results to differ materially from recent results or from our anticipated
future results. You should not rely too heavily on the forward-looking statements contained in this Annual Report on Form 10-
K because these forward-looking statements are relevant only as of the date they were made.
3
The following Fiscal Year terms are used throughout this Annual Report on Form 10-K:
Fiscal Year
Beginning Date
Fiscal 2025
Fiscal 2024
Fiscal 2023
Fiscal 2022
Fiscal 2021
Fiscal 2020
Fiscal 2019
Fiscal 2018
Fiscal 2017
Fiscal 2016
Fiscal 2015
Fiscal 2014
Fiscal 2013
Fiscal 2012
July 1, 2024
July 1, 2023
July 1, 2022
July 1, 2021
July 1, 2020
July 1, 2019
July 1, 2018
July 1, 2017
July 1, 2016
July 1, 2015
July 1, 2014
July 1, 2013
July 1, 2012
July 1, 2011
Ending Date
June 30, 2025
June 30, 2024
June 30, 2023
June 30, 2022
June 30, 2021
June 30, 2020
June 30, 2019
June 30, 2018
June 30, 2017
June 30, 2016
June 30, 2015
June 30, 2014
June 30, 2013
June 30, 2012
Our Consolidated Financial Statements are presented in U.S. dollars and, unless otherwise indicated, all amounts included
in this Annual Report on Form 10-K are expressed in thousands of U.S. dollars. References herein to the “Company”,
“OpenText”, “we” or “us” refer to Open Text Corporation and, unless context requires otherwise, its subsidiaries.
4
Summary of Risk Factors
The following is a summary of material risks described below in Part I, Item 1A “Risk Factors” in this Annual Report on
Form 10-K. The following summary should not be considered an exhaustive summary of the material risks facing us, is not
necessarily presented in order of importance, and it should be read in conjunction with the “Risk Factors” section and other
information contained in this Annual Report on Form 10-K.
Risks Related to our Business and Industry
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
If we do not continue to develop technologically advanced products that successfully integrate with the software
products and enhancements used by our customers, future revenues and our operating results may be negatively affected
Product development is a long, expensive and uncertain process, and we may terminate one or more of our development
programs
Our investment in our current research and development efforts may not provide a sufficient or timely return
If our software products and services do not gain market acceptance, our operating results may be negatively affected
Failure to protect our intellectual property could harm our ability to compete effectively
Other companies may claim that we infringe their intellectual property, which could materially increase costs and
materially harm our ability to generate future revenues and profits
Our software products and services may contain defects that could harm our reputation, be costly to correct, delay
revenues and expose us to litigation
Our software products rely on the stability of infrastructure software that, if not stable, could negatively impact the
effectiveness of our products, resulting in harm to our reputation and business
Risks associated with the evolving use of the Internet, including changing standards, competition and regulation and
associated compliance efforts, may adversely impact our business
Business disruptions, including those arising from disasters, pandemics or catastrophic events, may adversely affect our
operations
Unauthorized disclosures, cyber-attacks, breaches of data security and other information technology risks may adversely
affect our operations
Our success depends on our relationships with strategic partners, distributors and third-party service providers and any
reduction in the sales efforts by distributors, cooperative efforts from our partners or service from third party providers
could materially impact our revenues
The loss of licenses to resell or use third-party software or the lack of support or enhancement of such software could
adversely affect our business
Current and future competitors could have a significant impact on our ability to generate future revenues and profits
The length of our sales cycle can fluctuate significantly which could result in significant fluctuations in revenues being
recognized from quarter to quarter
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
Consolidation in the industry, particularly by large, well-capitalized companies, could place pressure on our operating
margins which could, in turn, have a material adverse effect on our business
• We may be unable to maintain or expand our base of small and medium-sized businesses (SMBs) and consumer
•
•
•
customers, which could adversely affect our anticipated future growth and operating results
Our sales to government clients expose us to business volatility and risks, including government budgeting cycles and
appropriations, early termination, audits, investigations, sanctions and penalties
Geopolitical instability, political unrest, war and other global conflicts, including the Russia-Ukraine conflict, has
affected and may continue to affect our business
The restructuring of certain of our operations may be ineffective, may adversely affect our business and our finances, and
we may incur additional restructuring charges in connection with such actions
• We have a Flex-Office program, which subjects us to certain operational challenges and risks
• We must continue to manage our internal resources during periods of company growth, or our operating results could be
adversely affected
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 compensation structure may hinder our efforts to attract and retain vital employees
•
•
5
•
Increased attention from shareholders, customers and other key relationships regarding our corporate social
responsibility (CSR) and environmental, social and corporate governance (ESG) practices could impact our business
activities, financial performance and reputation
Risks Related to Acquisitions
Acquisitions, investments, joint ventures and other business initiatives may negatively affect our operating results
•
• We may fail to realize all of the anticipated benefits of our acquisitions, including the Micro Focus Acquisition (as
defined below), or those benefits may take longer to realize than expected
• 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
As a result of the Micro Focus Acquisition, the scope and size of our operations and business has substantially changed
and will result in certain incremental risks to us. We cannot provide assurance that our expansion in scope and size will
be successful
• We incurred significant transaction costs in connection with the Micro Focus Acquisition, and could incur unanticipated
•
•
•
costs during the integration of Micro Focus that could adversely affect our results of operations
Loss of key personnel could impair the integration of acquired businesses, lead to loss of customers and a decline in
revenues, or otherwise could have an adverse effect on our operations
Businesses we acquire may have disclosure controls and procedures and internal controls over financial reporting,
cybersecurity and compliance with data privacy laws that are weaker than or otherwise not in conformity with ours
Pro forma financial information may not be indicative of our financial condition or results following the Micro Focus
Acquisition
Risks Related to Laws and Regulatory Compliance
•
•
•
•
•
Our provision for income taxes and effective income tax rate may vary significantly and may adversely affect our results
of operations and cash resources
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. An adverse outcome of these ongoing
audits could have a material adverse effect on our financial position and results of operations
Risks associated with data privacy issues, including evolving laws and regulations and associated compliance efforts,
may adversely impact our business
Certain of our products may be perceived as, or determined by the courts to be, a violation of privacy rights and related
laws. Any such perception or determination could adversely affect our revenues and results of operations
Artificial Intelligence (AI) and other machine learning technology is being integrated into some of our products, systems
or solutions, which could present risks and challenges to our business
Risks Related to our Financial Condition
• We may not generate sufficient cash flow to satisfy our unfunded pension obligations
•
Fluctuations in foreign currency exchange rates could materially affect our financial results
Our indebtedness could limit our operations and opportunities
•
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
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
General Risks
Unexpected events may materially harm our ability to align when we incur expenses with when we recognize revenues
•
• We may fail to achieve our financial forecasts due to inaccurate sales forecasts or other factors
Our international operations expose us to business, political and economic risks
•
• We may become involved in litigation that may materially adversely affect us
•
The declaration, payment and amount of dividends will be made at the discretion of our Board of Directors and will
depend on a number of factors
Our operating results could be adversely affected by any weakening of economic conditions
Stress in the global financial system may adversely affect our finances and operations
•
•
6
Item 1. Business
Incorporated in 1991, OpenText has grown to be a leader in Information Management offering a comprehensive line
of Information Management products and services that power and protect businesses of all sizes. OpenText’s Information
Management solutions manage the creation, capture, use, analysis and lifecycle of structured and unstructured data. 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.
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.
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. With critical tools and services for connecting and classifying data,
OpenText accelerates customers’ ability to deploy Artificial Intelligence (AI), automate work, and strengthen
productivity. The benefits of interconnected information enable customers to enhance real-time decision-making, meet
new compliance standards, manage across multi-cloud environments, and stay cyber resilient with secure data. With rising
compliance standards for data management, security, environmental, sustainability, and inclusion factors, OpenText
empowers customers with foresight and trust.
Our products are fundamentally integrated into the operations and existing software systems of our customers’
businesses, so customers can securely manage the complexity of information flow end-to-end. Through automation and
AI, we connect, synthesize and deliver information when and where needed to drive new efficiencies, experiences and
insights. We make information more valuable by connecting it to digital business processes, enriching it with insights,
protecting and securing it throughout its entire lifecycle and leveraging it to create engaging digital experiences. 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. 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 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. Our R&D leverages our existing investments in the OpenText Cloud with the aim of ensuring that all our
cloud products provide our customers with insights, meet compliance regulations and provide a seamless experience
across our portfolio. Businesses of all sizes rely on a combination of public and private clouds, managed cloud services
and off-cloud solutions. Looking ahead, the destination for our customers is hybrid and multi-cloud and our innovation
roadmap is designed to provide flexibility in all environments. On January 31, 2023, we completed the acquisition of all
of the outstanding ordinary shares of Micro Focus International Limited, formerly Micro Focus International plc (Micro
Focus), a leading provider of mission-critical software technology and services that help customers accelerate digital
transformation.
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 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. The OpenText Cloud is a comprehensive
Information Management platform consisting of six business clouds: our Content Cloud, Cybersecurity Cloud,
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Application Automation Cloud, Business Network Cloud, IT Operations Management Cloud and Analytics & AI Cloud.
In addition to our six business clouds, we have the Developers Cloud to help unleash developer creativity.
With embedded AI and analytics, our solutions improve business insight, employee productivity, customer
experiences, asset utilization, collaboration, supply chain efficiency and risk management. Our innovation roadmap is
focused on investing a significant amount of our R&D in cloud and AI capabilities. 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. Information is secured at the data level, by user-enrolled security, context rights and time-based security.
We also provide encryption at rest for document-level security. Below is a listing of our Information Management
solutions.
For the year ended June 30, 2023, total revenues is comprised of 45% from Content Cloud, 20% from Cybersecurity
Cloud, 15% from Business Network Cloud, 10% from Application Automation Cloud, 5% from IT Operations
Management Cloud and 5% from Analytics & AI Cloud, with revenues from Business Network Cloud and Cybersecurity
Cloud primarily derived from Cloud revenues, and the remaining primarily derived from Customer support revenues.
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. Our solutions manage the lifecycle, distribution, use and analysis of information across the
organization, from capture through archiving and disposition.
Our Content Services solutions range from content collaboration and intelligent capture to records management,
collaboration, e-signatures and archiving, and are available off-cloud, on a cloud provider of the customer’s choice, as a
subscription in the OpenText Cloud, in a hybrid environment or as a managed service. 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. OpenText Content Services adhere to
the Content Management Interoperability Services (CMIS) standard and support a broad range of operating systems,
databases, application servers and applications.
Our Content Services integrate with the applications that manage critical business processes, such as SAP®
S/4HANA, SAP® SuccessFactors®, Salesforce®, Microsoft® Office 365® and other software systems and applications,
establishing the foundation for intelligent business process and content workflow automation. 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. 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
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customer interactions and optimize them to improve customer lifetime value. The platform includes solutions and
extensions that deliver highly personalized content and engagements along a continuous customer journey. With AI-
powered analytics, the Experience Cloud can evaluate and deliver optimized user experiences at scale to ensure every
point of interaction, whether physical or digital, on any device, is engaging and personalized.
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.
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.
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.
At the infrastructure and application layer, OpenText Cybersecurity solutions help detect issues and respond to and
remediate threats. Our full suite of capabilities includes Application Security (Fortify), Identity and Access Management
(NetIQ), Email Encryption (Voltage), Security Information and Event Management (SIEM with ArcSight), Endpoint
Detection Response (EDR), Network Detection Response (NDR), Managed Detection and Response (MDR) and Digital
Forensics & Incident Response. 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. From threat prevention to detection and response, data management to
investigation and compliance, OpenText Cybersecurity offers solutions to keep business operations in a trusted state
across endpoints, networks, clouds, email, webservers, firewalls and logs.
At the edge, we help customers protect endpoints, virtual machine platforms and browsers from rising cyber-
attacks. 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.
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. OpenText Cybersecurity products help find information, to effectively conduct investigations, manage risk
and respond to incidents.
Business Network Cloud
Our Business Network Cloud provides a foundation for digital supply chains and secure e-commerce ecosystems.
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. Organizations of all sizes can build
global and sustainable supply chains, rapidly onboard new trading partners, comply with regional mandates, assess their
credit quality and ethics scores, provide electronic invoicing and remove information silos across ecosystems and the
extended enterprise.
The foundation of our Business Network Cloud is our Trading Grid, which connects businesses, trading partners,
transportation and logistics companies, financial institutions and government organizations globally. OpenText offers a
range of application-to-application, IoT, identity and access management, active applications and industry specific
applications.
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,
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connected devices, systems and people. 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.
IT Operations Management Cloud
Our IT Operations Management Cloud helps customers increase service levels and deliver better experiences
through a more holistic management of IT assets and applications across all types of infrastructures and environments.
Within IT operations management, we power IT service management for automation and advancement of IT support and
asset management (SMAX). We enable customers with better AI operations management with the capabilities of network
operations management (NOM) and connected data management and observability (OpsBridge). We help customers
manage vulnerabilities and deployment of patches within their IT landscape through server and network automation.
Lastly, with the power of our universal discovery and automation tools that can manage distributed landscapes, we help
customers better manage cloud costs and carbon footprints.
As OpenText integrates the Micro Focus portfolio, we expect that new innovations will drive the combination of
IT service management and enterprise content management to enable IT service agents with the right content and insights.
Bringing the AI operations portfolio onto the OpenText private cloud is anticipated to allow customers to take advantage
of the discovery capabilities on top of a private network and within private data. AI enabled tools are expected to
accelerate how customers can manage and control cloud costs and carbon footprints across multiple environments.
OpenText solutions are built on the integrated, AI-based OPTIC Platform to ensure IT efficiency and performance.
Analytics & AI Cloud
OpenText Analytics & AI Cloud solutions bring artificial intelligence with practical usage to provide organizations
with actionable insights and better automation. We help organizations overcome enterprise data challenges through
visualizations, advanced natural language processing and natural language understanding and integrated computer vision
capabilities. With an open architecture, Analytics & AI can integrate with external AI services, such as Google Cloud or
Azure.
Our Analytics & AI solutions feature capabilities from data analytics (Vertica) to insights from new unstructured
data types (IDOL) to visualization that can be applied to key processes (Magellan, LegalTech). Our solutions help
organizations process data of all types from anywhere, at any speed, and transforms data into insights that can be used in
workflows through applications. These capabilities can be consumed as a full stack analytics engine or as API
components embedded in other custom OEM solutions.
In addition, we have embedded AI data analytics in all our major offerings. Information management in the cloud,
secure and intelligent and at scale; customers will benefit from our enhanced offerings.
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. It leverages a comprehensive set of data analytics software, such as text
mining, natural language processing, interactive visualizations and machine learning, to identify patterns, relationships,
risks and trends that are used for predictive process automation and accelerated decision making. 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.
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. 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.
Within our applications automation space, we help customers move workloads into the cloud by integrating
customer applications they have on mainframes and older infrastructures. From mainframe development tools to host
connectivity, our products deliver value managing a fast-paced and ever-changing IT landscape. Customers can innovate
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faster, with lower risk, by transforming their core business applications, processes, and infrastructure—from mainframe to
cloud.
Developers Cloud
Developers can access API, cloud services and software development kits (SDK) from our six business cloud
offerings, through the OpenText Developer Cloud, making it faster and easier to build, extend and customize Information
Management applications. Our solutions help R&D teams engage with our community of developers to innovate and build
custom applications. 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.
The OpenText Developer Cloud delivers a broad and deep set of Information Management capability for
organizations to extend their existing OpenText implementations or include our capabilities into their own custom
solutions, such as for customer, supplier and partner collaboration. The Developer Cloud also includes IoT and threat
intelligence capabilities for organizations to dynamically integrate multi-tiered supply chain communities and build
solutions for greater efficiency, agility and new value-added services. Data security is embedded throughout our offerings
so the developer can focus on building differentiated user experiences.
Organizations can gain an information advantage and quickly turn ideas into solutions with OpenText APIs to build,
integrate and customize Information Management applications. 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.
Services
OpenText provides a range of customer solutions through professional and managed services, whether off-cloud, in
the OpenText Cloud, in hybrid scenarios or other clouds, including our partners: Google Cloud Platform, Amazon Web
Services (AWS) and Microsoft Azure. Our team provides full advisory, implementation, migration, operation and support
services for our Information Management solutions to meet the needs of our customers. Cloud Managed Services aims to
help keep customers current on the latest technology and to meet complex requirements, all with reduced burden on
information technology staff and ensure optimal application management by trusted experts.
With OpenText Managed Services, organizations can focus resources on their core business priorities with the
knowledge that their infrastructure, applications, integrations and upgrades are all managed, monitored and optimized for
security, performance and compliance. 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. 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. 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.
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. We are
committed to continuing our investment in the OpenText Cloud to better suit the evolving needs of our customers.
We are committed to continuous innovation. Over the last three fiscal years, we have invested a cumulative total of
$1.5 billion in R&D or 13.6% of cumulative revenue for that three-year period. On an annual basis, we continue to target
to spend 14% to 16% of revenues on R&D expense. With our innovation roadmap delivered, we believe we have fortified
our support for customer choice: private cloud, public cloud, off-cloud, and API cloud.
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Our investments in R&D push product innovation, increasing the value of our offerings to our installed customer
base and new customers, which includes G10K, enterprise companies, public sector agencies, mid-market companies,
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. More valuable products, coupled with our established global partner
program, lead to greater distribution and cross-selling opportunities which further help us to achieve organic growth.
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.
We have developed a philosophy, the OpenText Business System, that is designed to create value by leveraging a
clear set of operational mandates for integrating newly acquired companies and assets. We see our ability to successfully
integrate acquired companies and assets into our business as a strength and pursuing strategic acquisitions is an important
aspect to our Total Growth strategy. 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. 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. 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.
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.
OpenText expects the cloud to be our largest driver of growth. Supported by a global, scalable and secure
infrastructure, OpenText Cloud Editions includes a foundational platform of technology services, and packaged business
applications for industry and business processes. Managed services provide an end-to-end fully outsourced B2B
integration solution to our customers, including program implementation, operational management and customer support.
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. 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.
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. 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.
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Professional Service and Other
We provide consulting and learning services to customers. Generally, these services relate to the implementation,
training and integration of our licensed product offerings into the customer’s systems.
Our consulting services help customers build solutions that enable them to leverage their investments in our
technology and in existing enterprise systems. The implementation of these services can range from simple modifications
to meet specific departmental needs to enterprise applications that integrate with multiple existing systems.
Our learning services consultants analyze our customers’ education and training needs, focusing on key learning
outcomes and timelines, with a view to creating an appropriate education plan for the employees of our customers who
work with our products. Education plans are designed to be flexible and can be applied to any phase of implementation:
pilot, roll-out, upgrade or refresher. OpenText learning services employ a blended approach by combining mentoring,
instructor-led courses, webinars, eLearning and focused workshops.
Marketing and Sales
Customers
Our customer base consists of G10K organizations, enterprise companies, public sector agencies, mid-market
companies, SMB and direct consumers.
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.
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. 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. 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:
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SAP SE (SAP): We partner with SAP on content services. The OpenText Suite for SAP solutions provides key
business content within the context of SAP business processes providing enhanced efficiencies, reduced risk
and better experiences for customers, employees and partners - accessible anywhere and anytime and available
on and off-cloud.
Google Cloud: We work together with Google Cloud to deploy our Information Management solutions on the
Google Cloud Platform. This includes a containerized application architecture for flexible cloud or hybrid
deployment models. Deploying our solutions on the Google Cloud Platform allows our customers to scale their
deployments as their businesses demand. We offer our solutions as a managed service and selected products as
a SaaS offering.
Amazon Web Services (AWS): Our collaboration offers businesses the opportunity to consume our Information
Management solutions as fully managed services on AWS for cost savings, increased performance, scalability
and security.
Microsoft Corporation (Microsoft): Together with Microsoft, we enable customers to connect all aspects of
their content infrastructure, integrating these into business processes and enable collaboration, management
and governance on the most valuable asset - information. 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.
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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.
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).
Our partner program also enables MSPs, resellers, distributors and network and security vendors to grow through
cloud-based cybersecurity, threat intelligence and backup and recovery solutions aimed at the SMB and consumer
markets. We provide the industry-specific tools, services, training, integrations, certifications and platforms our partners
need to ensure trust and reliability with their customer base.
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 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. For more information about these risks, see “Risk
Factors” included in Item 1A of this Annual Report on Form 10-K.
Competition
The market for our products and services is highly competitive, subject to rapid technological change and shifting
customer needs and economic pressures. We compete with multiple companies, some that have single or narrow solutions
and some that have a range of information management solutions, like us. 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. In addition, we also face competition from systems integrators that configure hardware and software
into customized systems. Additionally, new competitors or alliances among existing competitors may emerge and could
rapidly acquire additional market share. We expect that competition will increase because of ongoing software industry
consolidation.
We believe that certain competitive factors affect the market for our software products and services, which may
include: (i) vendor and product reputation; (ii) product quality, performance and price; (iii) the availability of software
products on multiple platforms; (iv) product scalability; (v) product integration with other enterprise applications;
(vi) software functionality and features; (vii) software ease of use; (viii) the quality of professional services, customer
support services and training; and (ix) the ability to address specific customer business problems. We believe the relative
importance of each of these factors depends upon the concerns and needs of each specific customer.
Research and Development
The industry in which we compete is subject to rapid technological developments, evolving industry standards,
changes in customer requirements and competitive new products and features. As a result, our success, in part, depends on
our ability to continually enhance our existing products in a timely and efficient manner and to develop and introduce new
products that meet customer needs while reducing total cost of ownership.
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.
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. We expect to continue to invest in R&D to maintain and improve our products
and services offerings.
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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.
Below is a summary of certain significant acquisitions we have made over the last five fiscal years.
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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. (Bricata) for $17.8 million.
On March 9, 2020, we acquired XMedius, a provider of secure information exchange and unified
communication solutions, for $73.5 million.
On December 24, 2019, we acquired Carbonite Inc. (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.
On December 2, 2019, we acquired certain assets and certain liabilities of Dynamic Solutions Group (The Fax
Guys) for $5.1 million.
On 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.
We believe our acquisitions support our long-term strategy for growth, strengthen our competitive position, expand
our customer base and provide greater scale to accelerate innovation, grow our earnings and provide superior shareholder
value. We expect to continue to strategically acquire companies, products, services and technologies to augment our
existing business.
Intellectual Property Rights
Our success and ability to compete depends in part on our ability to develop, protect and maintain our intellectual
property and proprietary technology and to operate without infringing on the proprietary rights of others. Our software
products are generally licensed to our customers on a non-exclusive basis for internal use in a customer’s organization.
We also grant rights to our intellectual property to third parties that allow them to market certain of our products on a non-
exclusive or limited-scope exclusive basis for a particular application of the product(s) or to a particular geographic area.
We rely on a combination of copyright, patent, trademark and trade secret laws, non-disclosure agreements and
other contractual provisions to establish and maintain our proprietary rights. We have obtained or applied for trademark
registration for corporate and strategic product names in selected major markets. We have a number of U.S. and foreign
patents and pending applications, including patents and rights to patent applications acquired through strategic
transactions, which relate to various aspects of our products and technology. The duration of our patents is determined by
the laws of the country of issuance and is typically 20 years from the date of filing of the patent application resulting in
the patent. From time to time, we may enforce our intellectual property rights through litigation in line with our strategic
and business objectives. 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.
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.
Looking Towards the Future
In Fiscal 2024 we intend to continue to implement strategies that are designed to:
Invest in Innovation. We believe we are well-positioned to develop additional innovative solutions to address the
evolving market. We plan to continue investing in technology innovation by funding internal development, acquiring
complementary technologies and collaborating with third parties.
Invest in the Cloud. Today, the destination for innovation is the cloud. 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. The combination of
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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. 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 believe that customers are seeking practical AI and OpenText is in a strong position to help
customers discover the most prevailing use cases that leverage an interconnected source of all data types (content,
business network, customer experience, IT service management, application development, asset management, IoT, etc.).
We believe one of the greatest opportunities is to help customers leverage their operational and experience data with
generative AI to discover new insights for efficiency and competitive advantages. We strive to co-innovate with
customers by taking the proven concept of machine learning and applying it to their organizational needs.
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.
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 believe one of our greatest opportunities is to sell newly developed or
acquired technologies to our existing customer base, and cross-sell historical OpenText products to newly acquired
customers. We have significant expertise in a number of industry sectors and aim to increase our customer penetration
based on our strong credentials. We are particularly focused on circumstances where the customer is looking to
consolidate multiple vendors with solutions from a single source while addressing a broader spectrum of business
problems or equally new or existing customers looking to take a more holistic approach to digital transformation.
Invest in Technology Leadership. We believe we are well-positioned to develop additional innovative solutions to
address the evolving market. We plan to continue investing in technology innovation by funding internal development,
acquiring complementary technologies and collaborating with third-parties.
Deepen Strategic Partnerships. OpenText is committed culturally, programmatically and strategically to be a
partner-embracing company. Our partnerships with companies such as SAP SE, Google Cloud, AWS, Microsoft
Corporation, Oracle Corporation, Salesforce.com Corporation and others serve as examples of how we are working
together with our partners to create next-generation Information Management solutions and deliver them to market. We
will continue to look for ways to create more customer value from our strategic partnerships.
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. 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. As part of the Micro Focus Acquisition, the Company announced an initiative to
deleverage our balance sheet through the repayment of outstanding debt instruments utilizing the free cash flows
generated from our combined operations. We intend to maintain our dividend during our deleveraging initiatives which is
aimed at enhancing our continued commitment to returning value to our shareholders.
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. 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.
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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.
As of June 30, 2023, we employed a total of approximately 24,100 individuals, of which approximately 9,700 joined
our workforce as part of the Micro Focus Acquisition. Of the total 24,100 individuals we employed as of June 30, 2023,
9,050 or 38% are in the Americas, 5,750 or 24% are in EMEA and 9,300 or 38% are in Asia Pacific. 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.
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. In certain jurisdictions, where it is customary to do so, a
“Workers’ Council” or professional union represents our employees.
Employee Safety and Remote Work
The OpenText COVID-19 pandemic response program, Project Shield, evolved in Fiscal 2023 with the global lifting
of COVID-19 safety restrictions. While active, Project Shield kept teams informed with comprehensive resources and
current COVID-19 information, including a dedicated platform with helpful health and safety protocols for our employees
returning to the office.
As of January 2023, all office-based employees were granted the flexibility to work from home up to 40% of their
time. 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 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.
Employee Engagement
We regularly conduct employee research to understand perceptions in the areas of engagement, company strategy,
personal impact, manager effectiveness, recognition, career development and equity, diversity and inclusion. Participation
level and engagement have remained high. 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
believe the future of growth is sustainable and inclusive, and we commit to zero footprint, zero barriers and achieving our
commitments with zero compromise through our purposeful goals to achieve net-zero greenhouse gas (GHG) emissions
by 2040, zero waste from operations by 2030 and to be majority ethnically diverse among employees by 2030 with equal
gender representation in key roles and 40% women in leadership positions at all management levels.
Our charitable giving program supports activities at the local and global level, focused on education, innovation,
disaster relief and the health and welfare of children and families. We also provide employees three paid days off to
volunteer and make an impact to the causes that matter most to them. 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. We
are committed to mitigating any adverse environmental impacts of our business activities, which at a minimum means
abiding by all environmental laws, regulations and standards that apply to us. Our Environmental Policy articulates our
commitment to measuring and managing our environmental impact. We integrate the consideration of environmental
concerns and impacts into our everyday decision making and business activities. Externally, we promote sustainable
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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.
See “Increased attention from shareholders, customers and other key relationships regarding our CSR and ESG
practices could impact our business activities, financial performance and reputation” in Part I, Item 1A “Risk Factors”
included elsewhere within this Annual Report on Form 10-K.
Equity, Diversity and Inclusion (ED&I)
We are passionate about creating an inclusive environment where skilled and diverse employees thrive, deliver
compelling innovations to our customers and provide shareholder value. We are committed to increasing equity in
opportunity for all employees regardless of race, gender, sexual orientation, religion or other differences.
At OpenText, we have established a global Equity, Diversity and Inclusion steering committee to guide ED&I
programs. We bring our ambition to life through impact teams made of employees who come together to recommend
policies, programs and initiatives across a range of topics.
Our impact teams are leading global initiatives with local impact which include:
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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.
Compensation and Benefits
Our compensation philosophy is based on a set of principles that align with business strategy, reflect business and
individual performance levels, consider market conditions to ensure competitiveness, demonstrate internal pay equity for
similar roles and reflect the impact that economic conditions have on pay programs.
Our compensation and benefit programs are regularly reviewed through an executive-sponsored governance process.
Across the Company, we offer a wide variety of retirement and group benefits including medical, life and disability,
which are designed to protect employees and their dependents against financial hardship due to illness or injury. Programs
are designed to recognize the diversity of our work force and a range of well-being needs. We also have regional
Employee Assistance Programs in many countries that provide 24/7 confidential counselling, support and access to
resources for employees and their families. The OpenText Employee Stock Purchase Plan (ESPP) is a global benefit
program that allows all eligible employees to purchase OpenText shares at a 15% discount and provides the opportunity
for employees to strengthen their ownership in the Company while enjoying the benefits of potential share price
appreciation.
Internal equity is a cornerstone of our goals. Our pay programs are carefully designed and governed, from hiring
practices to consistency in progression rates for common roles. In designing variable pay for performance awards, we
focus only on measurable outcomes rather than subjective measures. This ensures true equity in opportunity and awards
tied to business results.
Employee Education, Training and Compliance
We know that employees join OpenText for continuous learning, experience and credentials to shape their careers.
Our strategies focus on ensuring strong technical credentials, building capabilities, new skills sets and a high duty of care
in ensuring ethical, secure and compliant practices. All employees have internal access to certification on OpenText and
partner products.
Leaders and managers play a key role in the engagement of employees. From a focus on high quality interviewing
and onboarding of new hires to the importance of career development planning, we foster a culture and value proposition
of career development. Internal applications to job postings are highly encouraged. Our annual Career Week event focuses
on career development planning and honing manager skills in developing teams.
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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 have designed the education reimbursement program to meet the needs of all
personalized development goals through programs that range from technical to business skills.
As part of our commitment to the highest standards of conduct, all employees and contractors participate in an
annual formal Compliance and Data Security Training, including Code of Business Conduct and Ethics, Responsible
Business Practices, Data Protection, Global Data Privacy Practices, Protecting Information and Preventing Sexual
Harassment Training. 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. 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.
Access to our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and
amendments to these reports filed with or furnished to the SEC may be obtained free of charge through the Investors
section of our website at investors.opentext.com as soon as is reasonably practical after we electronically file or furnish
these reports. In addition, our filings with the SEC may be accessed through the SEC’s website at www.sec.gov and our
filings with the Canadian Securities Administrators (CSA) may be accessed through the CSA’s System for Electronic
Document Analysis and Retrieval (SEDAR) at www.sedar.com. The SEC and SEDAR websites are included in this
Annual Report on Form 10-K as inactive textual references only. Except for the documents specifically incorporated by
reference into this Annual Report, information contained on the SEC or SEDAR websites 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. 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.
Investors should note that we may announce information using our website, press releases, securities law filings,
public conference calls, webcasts and the social media channels identified on the Investors section of our website (https://
investors.opentext.com). Such social media channels may include the Company’s or our CEO’s blog, Twitter account or
LinkedIn account. The information posted through such channels may be material. Accordingly, investors should monitor
such channels in addition to our other forms of communication. Unless otherwise specified, such information is not
incorporated into, or deemed to be a part of, our Annual Report on Form 10-K or in any other report or document we file
with the SEC under the Securities Act, the Exchange Act or under applicable Canadian securities laws.
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Item 1A. Risk Factors
The following important factors could cause our actual business and financial results to differ materially from our current
expectations, estimates, forecasts and projections. These forward-looking statements contained in this Annual Report on Form
10-K or made elsewhere by management from time to time are subject to important risks, uncertainties and assumptions which
are difficult to predict. The risks and uncertainties described below are not the only risks and uncertainties facing us.
Additional risks not currently known to us or that we currently believe are immaterial may also impair our operating results,
financial condition and liquidity. Our business is also subject to general risks and uncertainties that affect many other
companies. The risks discussed below are not necessarily presented in order of importance or probability of occurrence.
You should read these risk factors in conjunction with the section entitled “Forward-Looking Statements” in Part I of this
Annual Report on Form 10-K, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in
Part II, Item 7 of this Annual Report on Form 10-K and our consolidated financial statements and related notes in Part II, Item
8 of this Annual Report on Form 10-K.
Risks Related to our Business and Industry
If we do not continue to develop technologically advanced products that successfully integrate with the software products
and enhancements used by our customers, future revenues and our operating results may be negatively affected
Our success depends upon our ability to design, develop, test, market, license, sell and support new software products and
services and enhancements of current products and services on a timely basis in response to both competitive threats and
marketplace demands. The software industry is increasingly focused on cloud computing, mobility, social media, SaaS and
artificial intelligence, among other continually evolving shifts. In addition, our software products, services and enhancements
must remain compatible with standard platforms and file formats. Often, we must integrate software licensed or acquired from
third parties with our proprietary software to create new products or improve our existing products. If we are unable to achieve
a successful integration with third party software, we may not be successful in developing and marketing our new software
products, services and enhancements. If we are unable to successfully integrate third party software to develop new software
products, services and enhancements to existing software products and services, or to complete the development of new
software products and services which we license or acquire from third parties, our operating results will be materially adversely
affected. In addition, if the integrated or new products or enhancements do not achieve acceptance by the marketplace, our
operating results will be materially adversely affected. Moreover, if new industry standards emerge that we do not anticipate or
adapt to, or, if alternatives to our services and solutions are developed by our competitors in times of rapid technological
change, our software products and services could be rendered less competitive or obsolete, causing us to lose market share and,
as a result, harm our business and operating results and our ability to compete in the marketplace.
Product development is a long, expensive and uncertain process, and we may terminate one or more of our development
programs
We may determine that certain software product candidates or programs do not have sufficient potential to warrant the
continued allocation of resources. Accordingly, we may elect to terminate one or more of our programs for such product
candidates. If we terminate a software product in development in which we have invested significant resources, our prospects
may suffer, as we will have expended resources on a project that does not provide a return on our investment, and may have
missed the opportunity to have allocated those resources to potentially more productive uses, which may negatively impact our
business, operating results and financial condition.
Our investment in our current research and development efforts may not provide a sufficient or timely return
The development of information management software products is a costly, complex and time-consuming process, and the
investment in information management software product development often involves a long wait until a return is achieved on
such an investment. We are making, and will continue to make, significant investments in software research and development
and related product and service opportunities. Investments in new technology and processes are inherently speculative.
Commercial success depends on many factors, including the degree of innovation of the software products and services
developed through our research and development efforts, sufficient support from our strategic partners and effective distribution
and marketing. Accelerated software product introductions and short product life cycles require high levels of expenditures for
research and development and the potential introduction of government regulation, including that related to the use of AI, may
increase the costs of research and development. These expenditures may adversely affect our operating results if they are not
offset by corresponding revenue increases. We believe that we must continue to dedicate a significant amount of resources to
our research and development efforts in order to maintain our competitive position. However, significant revenues from new
software product and service investments may not be achieved for a number of years, if at all. Moreover, new software products
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and services may not be profitable, and even if they are profitable, operating margins for new software products and services
may not be as high as the margins we have experienced for our current or historical software products and services.
If our software products and services do not gain market acceptance, our operating results may be negatively affected
We intend to pursue our strategy of being a market leading consolidator for cloud-based information management
solutions. We intend to grow the capabilities of our information management software offerings through our proprietary
research and the development of new software product and service offerings, as well as through acquisitions. It is important to
our success that we continue to enhance our software products and services in response to customer demand and to seek to set
the standard for information management capabilities. The primary market for our software products and services is rapidly
evolving, and the level of acceptance of products and services that have been released recently, or that are planned for future
release to the marketplace, is not certain. If the markets for our software products and services fail to develop, develop more
slowly than expected or become subject to increased competition, our business may suffer. As a result, we may be unable to: (i)
successfully market our current products and services; (ii) develop new software products and services and enhancements to
current software products and services; (iii) complete customer implementations on a timely basis; or (iv) complete software
products and services currently under development. 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. If our software products and services are not accepted by our customers or by other
businesses in the marketplace, our business, operating results and financial condition will be materially adversely affected.
Failure to protect our intellectual property could harm our ability to compete effectively
We are highly dependent on our ability to protect our proprietary technology. We rely on a combination of copyright,
patent, trademark and trade secret laws, as well as non-disclosure agreements and other contractual provisions, to establish and
maintain our proprietary rights. We intend to protect our intellectual property rights vigorously; however, there can be no
assurance that these measures will, in all cases, be successful, and these measures can be costly and/or subject us to
counterclaims, including challenges to the validity and enforceability of our intellectual property rights. Enforcement of our
intellectual property rights may be difficult, particularly in some countries outside of North America in which we seek to
market our software products and services. While Canadian and U.S. copyright laws, international conventions and
international treaties may provide meaningful protection against unauthorized duplication of software, the laws of some foreign
jurisdictions may not protect proprietary rights to the same extent as the laws of Canada or the United States. The absence of
internationally harmonized intellectual property laws makes it more difficult to ensure consistent protection of our proprietary
rights. Software piracy has been, and is expected to be, a persistent problem for the software industry, and piracy of our
software products represents a loss of revenue to us. Where applicable, certain of our license arrangements have required us to
make a limited confidential disclosure of portions of the source code for our software products, or to place such source code
into escrow for the protection of another party. Despite the precautions we have taken, unauthorized third parties, including our
competitors, may be able to copy certain portions of our software products or reverse engineer or obtain and use information
that we regard as proprietary. Our competitive position may be adversely affected by our possible inability to effectively protect
our intellectual property. In addition, certain of our products contain open source software. Licensees of open source software
may be required to make public certain source code, to license proprietary software for free or to permit others to create
derivative works of proprietary software. While we monitor and control the use of open source software in our products and in
any third party software that is incorporated into our products, and try to ensure that no open source software is used in such a
way that negatively affects our proprietary software, there can be no guarantee that such use does not occur inadvertently,
which in turn, could harm our intellectual property position and have a material adverse effect on our business, results of
operations and financial condition. Further, any undetected errors or defects in open source software could prevent the
deployment or impair the functionality of our software products, delay the introduction of new solutions, or render our software
more vulnerable to breaches or security attacks.
Other companies may claim that we infringe their intellectual property, which could materially increase costs and materially
harm our ability to generate future revenues and profits
Claims of infringement (including misappropriation and/or other intellectual property violation) are common in the
software industry and increasing as related legal protections, including copyrights and patents, are applied to software products.
Although most of our technology is proprietary in nature, we do include certain third party and open source software in our
software products. In the case of third-party software, we believe this software is licensed from the entity holding the
intellectual property rights. While we believe that we have secured proper licenses for all material third-party intellectual
property that is integrated into our products in a manner that requires a license, third parties have and may continue to assert
infringement claims against us in the future. In particular, our efforts to protect our intellectual property through patent
litigation may result in counterclaims of patent infringement by counterparties in such suits. Any such assertion, regardless of
merit, may result in litigation or require us to obtain a license for the intellectual property rights of third parties. Such licenses
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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. 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. Typically, our agreements with our partners and customers contain provisions that require us to indemnify them for
damages sustained by them as a result of any infringement claims involving our products. Any of the foregoing infringement
claims and related litigation could have a material adverse impact on our business and operating results as well as on our ability
to generate future revenues and profits.
Our software products and services may contain defects that could harm our reputation, be costly to correct, delay revenues
and expose us to litigation
Our software products and services are highly complex and sophisticated and, from time to time, may contain design
defects, software errors, hardware failures or other computer system failures that are difficult to detect and correct. Errors,
defects and/or other failures may be found in new software products or services or improvements to existing products or
services after delivery to our customers, including as a result of the introduction of new and emerging technologies such as AI.
If these defects, errors and/or other failures are discovered, we may not be able to successfully correct them in a timely manner.
In addition, despite the extensive tests we conduct on all our software products or services, we may not be able to fully simulate
the environment in which our products or services will operate and, as a result, we may be unable to adequately detect the
design defects or software or hardware errors that may become apparent only after the products are installed in an end-user’s
network, and only after users have transitioned to our services. The occurrence of errors, defects and/or other failures in our
software products or services could result in the delay or the denial of market acceptance of our products and alleviating such
errors, defects and/or other failures may require us to make significant expenditure of our resources. Customers often use our
services and solutions for critical business processes and, as a result, any defect or disruption in our solutions, any data breaches
or misappropriation of proprietary information or any error in execution, including human error or intentional third-party
activity such as denial of service attacks or hacking, may cause customers to reconsider renewing their contracts with us. The
errors in or failure of our software products and services could also result in us losing customer transaction documents and other
customer files, causing significant customer dissatisfaction and possibly giving rise to claims for monetary damages. The harm
to our reputation resulting from product and service errors, defects and/or other failures may be material. Since we regularly
provide a warranty with our software products, the financial impact of fulfilling warranty obligations may be significant in the
future. Our agreements with our strategic partners and end-users typically contain provisions designed to limit our exposure to
claims. These agreements regularly contain terms such as the exclusion of all implied warranties and the limitation of the
availability of consequential or incidental damages. However, such provisions may not effectively protect us against claims and
the attendant liabilities and costs associated with such claims. Any claims for actual or alleged losses to our customers’
businesses may require us to spend significant time and money in litigation or arbitration or to pay significant sums in
settlements or damages. Defending a lawsuit, regardless of merit, can be costly and would divert management’s attention and
resources. Although we maintain errors and omissions insurance coverage and comprehensive liability insurance coverage, such
coverage may not be adequate to cover all such claims. Accordingly, any such claim could negatively affect our business,
operating results or financial condition.
Our software products rely on the stability of infrastructure software that, if not stable, could negatively impact the
effectiveness of our products, resulting in harm to our reputation and business
Our development of Internet and intranet applications depends on the stability, functionality and scalability of the
infrastructure software of the underlying intranet, such as the infrastructure software produced by Hewlett-Packard, Oracle,
Microsoft and others. If weaknesses in such infrastructure software exist, we may not be able to correct or compensate for such
weaknesses. If we are unable to address weaknesses resulting from problems in the infrastructure software such that our
software products do not meet customer needs or expectations, our reputation, and consequently, our business, may be
significantly harmed.
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. New competitors,
including media, software vendors and telecommunications companies, offer products and services that utilize the Internet in
competition with our products and services, which may be less expensive or process transactions and data faster and more
efficiently. Internet-based commerce is subject to increasing regulation by Canadian, U.S. federal and state and foreign
governments, including in the areas of data privacy and breaches and taxation. Laws and regulations relating to the solicitation,
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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. 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.
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. 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. A major disaster or other catastrophic event that results in the destruction or disruption of
any of our critical business or information technology systems, including our cloud services, could severely affect our ability to
conduct normal business operations. We operate data centers in various locations around the world and although we have
redundancy capability built into our disaster recovery plan, we cannot ensure that our systems and data centers will remain fully
operational during and immediately after a disaster or disruption. We also rely on third parties that provide critical services in
our operations and despite our diligence around their disaster recovery processes, we cannot provide assurances as to whether
these third-party service providers can maintain operations during a disaster or disruption. Global climate change may also
aggravate natural disasters and increase severe weather events that affect our business operations, thereby compelling us to
build additional resiliency in order to mitigate their impact. Further, in the event of any future global health pandemic, certain
measures or restrictions may be imposed or recommended by governments, public institutions and other organizations, which
could disrupt economic activity and result in reduced commercial and consumer confidence and spending, increased
unemployment, closure or restricted operating conditions for businesses, inflation, volatility in the global economy, instability
in the credit and financial markets, labour shortages and disruption in supply chains. Any business disruption could negatively
affect our business, operating results or financial condition.
Unauthorized disclosures, cyber-attacks, breaches of data security and other information technology risks may adversely
affect our operations
Most of the jurisdictions in which we operate have laws and regulations relating to data privacy, security and protection of
information. We have certain measures to protect our information systems against unauthorized access and disclosure of
personal information and of our confidential information and confidential information belonging to our customers. We have
policies and procedures in place dealing with data security and records retention. These measures and policies may change over
time as laws and regulations regarding data privacy, security and protection of information change. However, there is no
assurance that the security measures we have put in place will be effective in every case, and our response process to incidents
may not be adequate, may fail to accurately assess the severity of an incident, may not be fast enough to prevent or limit harm,
or may fail to sufficiently remediate an incident. 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. Security breaches could also affect our
relations with our customers, damage our reputation and harm our ability to keep existing customers and to attract new
customers. Some jurisdictions, including all U.S. states and the European Union (EU), have enacted laws requiring companies
to notify individuals of data security breaches involving certain types of personal data, and in some cases our agreements with
certain customers require us to notify them in the event of a data security incident. Such mandatory disclosures could lead to
negative publicity and may cause our current and prospective customers to lose confidence in the effectiveness of our data
security measures. These circumstances could also result in adverse impact on the market price of our Common Shares. 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.
In particular, we are increasingly relying on virtual environments and communications systems, which have been in recent
years and may be in the future subjected to third-party vulnerabilities and security risks of increasing frequency, scope and
potential harm. Malicious hackers may attempt to gain access to our network or data centers; steal proprietary information
related to our business, products, systems, solutions, employees and customers; interrupt our systems and services or those of
our customers or others; or attempt to exploit any vulnerabilities in our products, systems or solutions, and such acts may go
undetected. Increased information technology security threats and more sophisticated cybercrimes and cyberattacks, including
computer viruses and other malicious codes, ransomware, unauthorized access attempts, denial-of-service attacks, phishing,
social engineering, hacking, and other types of attacks, pose a risk to the security and availability of our information technology
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systems, networks, products, solutions and services, including those that are managed, hosted, provided, or used by third parties
(and which may not provide the same level of information security as our own products, systems or solutions), as well as the
confidentiality, availability and integrity of our data and the data of our customers, partners, consumers, employees,
stockholders, suppliers and others. 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. A series of issues may also be determined to be material at a later date
in the aggregate, even if they may not be material individually at the time of their occurrence. 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.
In addition, if data security is compromised, this could materially and adversely affect our operating results given that we
have customers that use our systems to store and exchange large volumes of proprietary and confidential information and the
security and reliability of our services are of significant importance to these customers. 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. We
may experience future security issues, whether due to human error or misconduct, system errors or vulnerabilities in our or our
third-party service providers’ products, systems or solutions. 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. If third-party service providers
fail to implement adequate data security practices or otherwise suffer a security breach, our or our customer’s data may be
improperly accessed, disclosed, used or otherwise lost, which could lead to reputational, business, operating and financial
harms. Our efforts to protect against cyber-attacks and data breaches, including increased risks associated with work from home
measures, may not be sufficient to prevent or mitigate such incidents, which could have material adverse effects on our
reputation, business, operating results and financial condition.
Our success depends on our relationships with strategic partners, distributors and third-party service providers and any
reduction in the sales efforts by distributors, cooperative efforts from our partners or service from third party providers
could materially impact our revenues
We rely on close cooperation with strategic partners for sales and software product development as well as for the
optimization of opportunities that arise in our competitive environment. A portion of our license revenues is derived from the
licensing of our software products through third parties. Also, a portion of our service revenues may be impacted by the level of
service provided by third party service providers relating to Internet, telecommunications and power services. Our success will
depend, in part, upon our ability to maintain access to and grow existing channels of distribution and to gain access to new
channels if and when they develop. We may not be able to retain a sufficient number of our existing distributors or develop a
sufficient number of future distributors. Distributors may also give higher priority to the licensing or sale of software products
and services other than ours (which could include competitors’ products and services) or may not devote sufficient resources to
marketing our software products and services. The performance of third party distributors and third party service providers is
largely outside of our control, and we are unable to predict the extent to which these distributors and service providers will be
successful in either marketing and licensing or selling our software products and services or providing adequate Internet,
telecommunication and power services so that disruptions and outages are not experienced by our customers. A reduction in
strategic partner cooperation or sales efforts, a decline in the number of distributors, a decision by our distributors to
discontinue the licensing of our software products or a decline or disruption in third party services could cause users and the
general public to perceive our software products and services as inferior and could materially reduce our revenues. In addition,
our financial results could be materially adversely affected if the financial condition of our distributors or third-party service
providers were to weaken. Some of our distributors and third-party service providers may have insufficient financial resources
and may not be able to withstand changes in business conditions, including economic weakness, industry consolidation and
market trends.
The loss of licenses to resell or use third-party software or the lack of support or enhancement of such software could
adversely affect our business
We currently depend upon a limited number of third-party software products. If such software products were not
available, we might experience delays or increased costs in the development of our own software products. For a limited
number of our product modules, we rely on software products that we license from third parties, including software that is
integrated with internally developed software and which is used in our products to perform key functions. These third-party
software licenses may not continue to be available to us on commercially reasonable terms and the related software may not
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continue to be appropriately supported, maintained or enhanced by the licensors. The loss by us of the license to use, or the
inability by licensors to support, maintain or enhance any such software, could result in increased costs, lost revenues or delays
until equivalent software is internally developed or licensed from another third party and integrated with our software. Such
increased costs, lost revenues or delays could adversely affect our business. 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. If
our key partners were to terminate our relationship, make an adverse change in their reseller program, change their product
offerings or experience a major cyber-attack or similar event, it could reduce our revenues and adversely affect our business.
Current and future competitors could have a significant impact on our ability to generate future revenues and profits
The markets for our software products and services are intensely competitive and are subject to rapid technological
change and other pressures created by changes in our industry. The convergence of many technologies has resulted in
unforeseen competitors arising from companies that were traditionally not viewed as threats to our market position. We expect
competition to increase and intensify in the future as the pace of technological change and adaptation quickens and as additional
companies enter our markets, including those competitors who offer solutions similar to ours, but offer it through a different
form of delivery. Numerous releases of competitive products have occurred in recent history and are expected to continue in the
future. We may not be able to compete effectively with current competitors and potential entrants into our marketplace. 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. If other businesses
were to engage in aggressive pricing policies with respect to competing products, or if the dynamics in our marketplace resulted
in increasing bargaining power by the consumers of our software products and services, we would need to lower the prices we
charge for the products and services we offer. This could result in lower revenues or reduced margins, either of which may
materially adversely affect our business and operating results. Moreover, our competitors may affect our business by entering
into exclusive arrangements with our existing or potential customers, distributors or third-party service providers. Additionally,
if prospective consumers choose methods of information management delivery different from that which we offer, our business
and operating results could also be materially adversely affected.
The length of our sales cycle can fluctuate significantly which could result in significant fluctuations in revenues being
recognized from quarter to quarter
The decision by a customer to license our software products or purchase our services often involves a comprehensive
implementation process across the customer’s network or networks. As a result, the licensing and implementation of our
software products and any related services may entail a significant commitment of resources by prospective customers,
accompanied by the attendant risks and delays frequently associated with significant technology implementation projects. Given
the significant investment and commitment of resources required by an organization to implement our software products, our
sales cycle may be longer compared to other companies within our own industry, as well as companies in other industries. Also,
because of changes in customer spending habits, it may be difficult for us to budget, forecast and allocate our resources
properly. In weak economic environments, such as a recession or slowdown, it is not uncommon to see reduced information
technology spending. It may take several months, or even several quarters, for marketing opportunities to materialize, especially
following a prolonged period of weak economic environment. If a customer’s decision to license our software or purchase our
services is delayed or if the implementation of these software products takes longer than originally anticipated, the date on
which we may recognize revenues from these licenses or sales would be delayed. Such delays and fluctuations could cause our
revenues to be lower than expected in a particular period and we may not be able to adjust our costs quickly enough to offset
such lower revenues, potentially negatively impacting our business, operating results and financial condition.
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. We have significant contracts with
our license customers for ongoing support and maintenance, as well as significant service contracts that provide recurring
services revenues to us. In addition, our installed customer base has historically generated additional new license and services
revenues for us. Service contracts are generally renewable at a customer’s option and/or subject to cancellation rights, and there
are generally no mandatory payment obligations or obligations to license additional software or subscribe for additional
services.
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If our customers cancel or fail to renew their service contracts or fail to purchase additional services or products, then our
revenues could decrease, and our operating results could be materially adversely affected. Factors influencing such contract
terminations and failure to purchase additional services or products could include changes in the financial circumstances of our
customers, including as a result of any potential recession, dissatisfaction with our products or services, our retirement or lack
of support for our legacy products and services, our customers selecting or building alternate technologies to replace our
products or services, the cost of our products and services as compared to the cost of products and services offered by our
competitors, acceptance of future price increases by us, including due to inflationary pressures, our ability to attract, hire and
maintain qualified personnel to meet customer needs, consolidating activities in the market, changes in our customers’ business
or in regulation impacting our customers’ business that may no longer necessitate the use of our products or services, general
economic or market conditions, or other reasons. Further, our customers could delay or terminate implementations or use of our
services and products or be reluctant to migrate to new products. Such customers will not generate the revenues we may have
expected within the anticipated timelines, or at all, and may be less likely to invest in additional services or products from us in
the future. We may not be able to adjust our expense levels quickly enough to account for any such revenue losses.
Consolidation in the industry, particularly by large, well-capitalized companies, could place pressure on our operating
margins which could, in turn, have a material adverse effect on our business
Acquisitions by large, well-capitalized technology companies have changed the marketplace for our software products and
services by replacing competitors that are comparable in size to our Company with companies that have more resources at their
disposal to compete with us in the marketplace. In addition, other large corporations with considerable financial resources either
have products and/or services that compete with our software products and services or have the ability to encroach on our
competitive position within our marketplace. These companies have considerable financial resources, channel influence and
broad geographic reach; thus, they can engage in competition with our software products and services on the basis of price,
marketing, services or support. They also have the ability to introduce items that compete with our maturing software products
and services. The threat posed by larger competitors and their ability to use their better economies of scale to sell competing
products and/or services at a lower cost may materially reduce the profit margins we earn on the software products and services
we provide to the marketplace. Any material reduction in our profit margin may have a material adverse effect on the operations
or finances of our business, which could hinder our ability to raise capital in the public markets at opportune times for strategic
acquisitions or for general operational purposes, which may then, in turn, prevent effective strategic growth or improved
economies of scale or put us at a disadvantage to our better capitalized competitors.
We may be unable to maintain or expand our base of SMB and consumer customers, which could adversely affect our
anticipated future growth and operating results
With the acquisitions of Carbonite and Zix, we have expanded our presence in the SMB market as well as the consumer
market. Expanding in this market may require substantial resources and increased marketing efforts, different to what we are
accustomed to historically. If we are unable to market and sell our solutions to the SMB market and consumers with
competitive pricing and in a cost-effective manner, it may harm our ability to grow our revenues and adversely affect our
anticipated future growth and operating results. In addition, SMBs frequently have limited budgets and are more likely to be
significantly affected by economic downturns than larger, more established companies. As such, SMBs may choose to spend
funds on items other than our solutions, particularly during difficult economic times, which may hurt our projected revenues,
business financial condition and results of operations.
Our sales to government clients expose us to business volatility and risks, including government budgeting cycles and
appropriations, early termination, audits, investigations, sanctions and penalties
We derive revenues from contracts with U.S. and Canadian federal, state, provincial and local governments and other
foreign governments and their respective agencies, which may terminate most of these contracts at any time, without cause.
There is increased pressure on governments and their agencies, both domestically and internationally, to reduce spending.
Further, our U.S. federal government contracts are subject to the approval of appropriations made by the U.S. Congress to fund
the expenditures under these contracts. Similarly, our contracts with U.S. state and local governments, Canadian federal,
provincial and local governments and other foreign governments and their agencies are generally subject to government funding
authorizations. Additionally, government contracts are generally subject to audits and investigations that could result in various
civil and criminal penalties and administrative sanctions, including termination of contracts, refund of a portion of fees
received, forfeiture of profits, suspension of payments, fines and suspensions or debarment from future government business.
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Geopolitical instability, political unrest, war and other global conflicts, including the Russia-Ukraine conflict, has affected
and may continue to affect our business
Geopolitical instability, political unrest, war and other global conflicts may result in adverse effects on macroeconomic
conditions, including volatility in financial markets, adverse changes in trade policies, inflation, higher interest rates, direct and
indirect supply chain disruptions, increased cybersecurity threats and fluctuations in foreign currency. 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.
Sanctions and export controls have also been imposed by the United States, Canada and other countries in connection with
Russia’s military actions in Ukraine, including restrictions on selling or exporting goods, services or technology to certain
regions, and travel bans and asset freezes impacting political, military, business and financial organizations and individuals in
or connected with Russia. 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. 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. 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.
The restructuring of certain of our operations may be ineffective, may adversely affect our business and our finances, and
we may incur additional restructuring charges in connection with such actions
We often undertake initiatives to restructure or streamline our operations, particularly during the period post-acquisition,
such as the Micro Focus Acquisition Restructuring Plan (as defined below). We may incur costs associated with implementing
a restructuring initiative beyond the amount contemplated when we first developed the initiative, and these increased costs may
be substantial. Additionally, such costs would adversely impact our results of operations for the periods in which those
adjustments are made. We will continue to evaluate our operations and may propose future restructuring actions as a result of
changes in the marketplace, including the exit from less profitable operations, the decision to terminate products or services that
are not valued by our customers or adjusting our workforce. Any failure to successfully execute these initiatives on a timely
basis may have a material adverse effect on our business, operating results and financial condition.
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). Such
steps to reduce costs, and further changes we may make in the future, may negatively impact our business, operations and
financial performance in a manner that is difficult to predict.
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.
We have a Flex-Office program, which subjects us to certain operational challenges and risks
In July 2022, we implemented a Flex-Office program in which a majority of our employees work a portion of their time in
the office and a portion remotely. 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.
For example, employing a remote work environment could affect employee productivity, including due to a lower level of
employee oversight, health conditions or illnesses, disruptions due to caregiving or childcare obligations or slower or unreliable
Internet access. OpenText systems, client, vendor and/or borrower data may be subject to additional risks presented by
increased cyber-attacks and phishing activities targeting employees, vendors, third party service providers and counterparties in
transactions, the possibility of attacks on OpenText systems or systems of employees working remotely as well as by decreased
physical supervision. In addition, we may rely, in part, on third-party service providers to assist us in managing monitoring and
otherwise carrying out aspects of our business and operations. Such events may result in a period of business disruption or
reduced operations, which could materially affect our business, financial condition and results of operations. 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.
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The transition to a flexible workforce may also subject us to other operational challenges and risks. For example, our shift
to a Flex-Office program may adversely affect our ability to recruit and retain personnel who prefer a fully remote or fully in-
person work environment. Operating our business with both remote and in-person workers, or workers who work on flexible
schedules, could have a negative impact on our corporate culture, decrease the ability of our employees to collaborate and
communicate effectively, decrease innovation and productivity, or negatively affect employee morale. In addition, we have
incurred costs related to our return to office planning and the transition to a flexible workforce, including due to reducing our
real estate footprint around the world. If we are unable to effectively continue the transition to a flexible workforce, manage the
cybersecurity and other risks of remote work, and maintain our corporate culture and employee morale, our financial condition
and operating results may be adversely impacted.
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. We have grown
significantly through acquisitions, including through the Micro Focus Acquisition, and, in conjunction with our plan to de-lever,
may continue to review acquisition opportunities as a means of increasing the size and scope of our business. Our growth,
coupled with the rapid evolution of our markets, has placed, and will continue to place, significant strains on our administrative
and operational resources and increased demands on our internal systems, procedures and controls. Our administrative
infrastructure, systems, procedures and controls may not adequately support our operations. In addition, our management may
not be able to achieve the rapid, effective execution of the product and business initiatives necessary to successfully implement
our operational and competitive strategy. If we are unable to manage growth effectively, our operating results will likely suffer,
which may, in turn, adversely affect our business.
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. We do not maintain “key person” life insurance policies on any of our employees. Our
success is also highly dependent on our continuing ability to identify, hire, train, retain and motivate highly qualified
management, technical, sales and marketing personnel. In particular, the recruitment and retention of top research developers
and experienced salespeople, particularly those with specialized knowledge, remains critical to our success, including providing
consistent and uninterrupted service to our customers. Competition for such people is intense, substantial and continuous, and
we may not be able to attract, integrate or retain highly qualified technical, sales or managerial personnel in the future. In our
effort to attract and retain critical personnel, and in responding to inflationary wage pressure, we may experience increased
compensation costs that are not offset by either improved productivity or higher prices for our software products or services. In
addition, the loss of the services of any of our executive officers or other key employees could significantly harm our business,
operating results and financial condition.
Our compensation structure may hinder our efforts to attract and retain vital employees
A portion of our total compensation program for our executive officers and key personnel includes the award of options to
buy our Common Shares. If the market price of our Common Shares performs poorly, such performance may adversely affect
our ability to retain or attract critical personnel. In addition, any changes made to our stock option policies, or to any other of
our compensation practices, which are made necessary by governmental regulations or competitive pressures, could adversely
affect our ability to retain and motivate existing personnel and recruit new personnel. For example, any limit to total
compensation that may be prescribed by the government or applicable regulatory authorities or any significant increases in
personal income tax levels levied in countries where we have a significant operational presence may hurt our ability to attract or
retain our executive officers or other employees whose efforts are vital to our success. Additionally, payments under our long-
term incentive plans (the details of which are described in Item 11 of this Annual Report on Form 10-K) are dependent to a
significant extent upon the future performance of our Company both in absolute terms and in comparison to similarly situated
companies. Any failure to achieve the targets set under our long-term incentive plan could significantly reduce or eliminate
payments made under this plan, which may, in turn, materially and adversely affect our ability to retain the key personnel paid
under this plan.
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Increased attention from shareholders, customers and other key relationships regarding our CSR and ESG practices could
impact our business activities, financial performance and reputation
Shareholders, customers and other key relationships are placing a greater emphasis on CSR and ESG factors when
evaluating companies for business and investment opportunities. 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. 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. Additionally, third-party organizations
evaluate our approach to CSR and ESG, and an unfavorable rating on CSR or ESG from such organizations could lead to
negative investor sentiment and reduced demand for our securities and damage to our reputation, as well as damage to our
relationships with shareholders, customers, employees, partners and suppliers, which could have adverse effects on our
reputation, business, operating results and financial condition. 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. Achieving our targets and ongoing compliance with evolving laws and regulatory requirements may
cause us to reconfigure facilities and operations or adjust our existing processes. This could result in significant unexpected
expenses, changes in our relationships with certain strategic partners, distributors and third-party service providers, loss of
revenue and business disruption. We may not meet our goals in the manner or on such a timeline as initially contemplated, or at
all, which would have adverse effects on our reputation, business, operating results and financial condition.
Further, we may incur additional costs and require additional resources to be able to collect reliable emissions and
waste data (in part, due to unavailable third-party data or inconsistent industry standards on the measurement of certain data),
measure our performance against our targets and adjust our disclosure in line with market expectations. We may also incur
additional compliance costs under evolving ESG-related regulations across the world, including in the EU, the U.S. and
Canada. 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.
Risks Related to Acquisitions
Acquisitions, investments, joint ventures and other business initiatives may negatively affect our operating results
The growth of our Company through the successful acquisition and integration of complementary businesses is a critical
component of our corporate strategy. As a result of the continually evolving marketplace in which we operate, we regularly
evaluate acquisition opportunities and at any time may be in various stages of discussions with respect to such opportunities.
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 to add new solutions to our
portfolio. We may also consider, from time to time, opportunities to engage in joint ventures or other business collaborations
with third parties to address particular market segments. These activities create risks such as: (i) the need to integrate and
manage the businesses and products acquired with our own business and products; (ii) additional demands on our resources,
systems, procedures and controls; (iii) disruption of our ongoing business; and (iv) diversion of management’s attention from
other business concerns. Moreover, these transactions could involve: (i) substantial investment of funds or financings by
issuance of debt or equity or equity-related securities; (ii) substantial investment with respect to technology transfers and
operational integration; and (iii) the acquisition or disposition of product lines or businesses. Also, such activities could result in
charges and expenses and have the potential to either dilute the interests of existing shareholders or result in the issuance or
assumption of debt, which could have a negative impact on the credit ratings of our outstanding debt securities or the market
price of our Common Shares. Such acquisitions, investments, joint ventures or other business collaborations may involve
significant commitments of financial and other resources of our Company. Any such activity may not be successful in
generating revenues, income or other returns to us, and the resources committed to such activities will not be available to us for
other purposes. In addition, while we conduct due diligence prior to consummating an acquisition, joint venture or business
collaboration, such diligence may not identify all material issues associated with such activities and we may be exposed to
additional risk due to such acquisition, joint venture or business collaboration. We may also experience unanticipated
difficulties identifying suitable or attractive acquisition candidates that are available for purchase at reasonable prices. Even if
we are able to identify such candidates, we may be unable to consummate an acquisition on suitable terms or in the face of
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competition from other bidders. Moreover, if we are unable to access capital markets on acceptable terms or at all, we may not
be able to consummate acquisitions, or may have to do so on the basis of a less than optimal capital structure. Our inability (i)
to take advantage of growth opportunities for our business or for our products and services, or (ii) to address risks associated
with acquisitions or investments in businesses, may negatively affect our operating results and financial condition. Additionally,
any impairment of goodwill or other intangible assets acquired in an acquisition or in an investment, or charges associated with
any acquisition or investment activity, may materially adversely impact our results of operations and financial condition which,
in turn, may have a material adverse effect on the market price of our Common Shares or credit ratings of our outstanding debt
securities.
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. As we integrate our acquisitions, we may experience
disruptions to our business and, if implemented ineffectively, it could restrict the realization of the full expected benefits. 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.
The anticipated benefits we expect from having consummated the Micro Focus Acquisition are, necessarily, based on
projections and assumptions about our combined business with Micro Focus, which may not materialize as expected or which
may prove to be inaccurate. Our business and results of operations could be adversely affected if we are unable to realize the
anticipated benefits from the Micro Focus Acquisition on a timely basis or at all, including realizing the anticipated synergies
from the Micro Focus Acquisition in the anticipated amounts or at all and within the anticipated timeframes or cost
expectations, including implementing the Micro Focus Acquisition Restructuring Plan. Achieving the benefits of the Micro
Focus Acquisition will depend, in part, on our ability to integrate the business and operations of Micro Focus successfully and
efficiently with our business. See “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.”
Many of these factors will be outside of our control and any one of them could result in increased costs, including
restructuring charges, decreases in the amount of expected revenues and diversion of management’s time and energy, which
could adversely affect our business, financial condition and results of operations.
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. The integration
of acquired businesses with our existing business will be complex, costly and time-consuming, and may result in additional
demands on our resources, systems, procedures and controls, disruption of our ongoing business and diversion of
management’s attention from other business concerns. Although 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:
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•
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•
•
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•
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
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•
provisions in contracts with third parties that may limit flexibility to take certain actions.
As a result of these difficulties and risks, we may not accomplish the integration of acquired businesses smoothly,
successfully or within our budgetary expectations and anticipated timetables, which may result in a failure to realize some or all
of the anticipated benefits of our acquisitions.
As a result of the Micro Focus Acquisition, the scope and size of our operations and business has substantially changed and
will result in certain incremental risks to us. We cannot provide assurance that our expansion in scope and size will be
successful
The Micro Focus Acquisition has substantially expanded the scope and size of our business by adding substantial assets
and operations to our previously existing business. The anticipated future growth of our business will impose significant added
responsibilities on management, including the need to identify, recruit, train and integrate additional employees. Our senior
management’s attention may be diverted from the management of daily operations and other important business objectives to
the integration of the assets acquired in the Micro Focus Acquisition. Our ability to manage our business and growth will
require us to continue to improve our operational, financial and management controls, reporting systems and procedures. We
may also encounter risks, costs and expenses associated with any undisclosed or other unanticipated liabilities and use more
cash and other financial resources on integration and implementation activities than we expect. We may not be able to integrate
the Micro Focus business into our existing operations on our anticipated timelines or realize the full expected economic benefits
of the Micro Focus Acquisition, which may have a material adverse effect on our business, financial condition and results of
operations. Further, as permitted by applicable rules and laws, we have excluded Micro Focus from the assessment of our
internal control over financial reporting as of June 30, 2023. See “Item 9A. Controls and Procedures.”
We may also encounter risk, costs and expenses associated with preparing periodic reporting and consolidated financial
statements now that the Micro Focus Acquisition has closed. The expansion of effective internal controls over financial
reporting and adequate disclosure controls and procedures over the Micro Focus business will be necessary to provide reliable
financial reports and reporting. Micro Focus identified a material weakness in its internal controls over financial reporting for
the fiscal year ended October 31, 2021, which was subsequently remediated. In the course of applying our internal controls
framework to the Micro Focus business we may identify other material weaknesses, significant deficiencies or other
deficiencies, which could result in our determining we have a material weakness in internal controls over financial reporting,
and lead to an adverse reaction in the financial markets and a material adverse effect on our business, financial condition,
results of operation and prospects. Also, Micro Focus’ historical financial statements were prepared in accordance with
International Financial Reporting Standards and have not been prepared in accordance with United States generally accepted
accounting principles (U.S. GAAP). Prior to the Micro Focus Acquisition, Micro Focus provided financial statements semi-
annually, with a fiscal year end of October 31. Given such differences, it may be difficult for us to integrate systems in a timely
fashion to continue to produce financial statements now that the Micro Focus Acquisition has closed.
We incurred significant transaction costs in connection with the Micro Focus Acquisition, and could incur unanticipated
costs during the integration of Micro Focus that could adversely affect our results of operations
We incurred significant transaction costs in connection with the Micro Focus Acquisition, including payment of certain
fees and expenses incurred in connection with the Micro Focus Acquisition and related transactions to obtain financing for the
Micro Focus Acquisition, including entering into certain derivative transactions as further described herein. We have mark-to-
market valuation adjustments for certain derivative transactions, based on foreign currency fluctuations. For more information
on our mark-to-market derivatives, see Note 17 “Derivative Instruments and Hedging Activities” and Note 23 “Other Income
(Expense), Net” to our Consolidated Financial Statements and in Part II, Item 7 “Management’s Discussion and Analysis of
Financial Condition and Results of Operations.” Additional unanticipated costs may be incurred in the integration process.
These could adversely affect our results of operations in the period in which such expenses are recorded or our cash flow in the
period in which any related costs are actually paid.
Furthermore, we have incurred and may continue to incur severance expenses and restructuring charges in connection
with the Micro Focus Acquisition Restructuring Plan, which may, now that the Micro Focus Acquisition has closed, adversely
affect our operating results in the period in which such expenses are recorded or our cash flow in the period in which any
related costs are actually paid.
For more information on our transaction costs, see Note 18 “Special Charges (Recoveries)” to our Consolidated Financial
Statements included in this Annual Report on Form 10-K.
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Loss of key personnel could impair the integration of acquired businesses, lead to loss of customers and a decline in
revenues, or otherwise could have an adverse effect on our operations
Our success as a combined business with any prior or future acquired businesses will depend, in part, upon our ability to
retain key employees, especially during the integration phase of the businesses. It is possible that the integration process could
result in current and prospective employees of ours and the acquired business to experience uncertainty about their future roles
with us, which could have an adverse effect on our ability to retain or recruit key managers and other employees. If, despite our
retention and recruiting efforts, key employees depart, the loss of their services and their experience and knowledge regarding
our business or an acquired business could have an adverse effect on our future operating results and the successful ongoing
operation of our businesses.
Businesses we acquire may have disclosure controls and procedures and internal controls over financial reporting,
cybersecurity and compliance with data privacy laws that are weaker than or otherwise not in conformity with ours
We have a history of acquiring complementary businesses of varying size and organizational complexity and we may
continue to engage in such acquisitions. Upon consummating an acquisition, we seek to implement our disclosure controls and
procedures, our internal controls over financial reporting as well as procedures relating to cybersecurity and compliance with
data privacy laws and regulations at the acquired company as promptly as possible. 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. Our integration efforts may periodically expose deficiencies in the disclosure controls and procedures and
internal controls over financial reporting as well as procedures relating to cybersecurity and compliance with data privacy laws
and regulations of an acquired company that were not identified in our due diligence undertaken prior to consummating the
acquisition; contractual protections intended to protect against any such deficiencies may not fully eliminate all related risks. If
such deficiencies exist, we may not be in a position to comply with our periodic reporting requirements and, as a result, our
business and financial condition may be materially harmed. Refer to Item 9A “Controls and Procedures”, included elsewhere in
this Annual Report on Form 10-K, for details on our internal controls over financial reporting for recent acquisitions.
Pro forma financial information may not be indicative of our financial condition or results following the Micro Focus
Acquisition
The selected pro forma financial information with respect to the Micro Focus Acquisition contained in our public
disclosure record is presented for illustrative purposes only as of its respective dates and may not be indicative of our current
financial condition or results of operations. The selected unaudited pro forma financial information was derived from the
respective historical financial statements of the Company and Micro Focus, and certain adjustments and assumptions were
made as of such dates to give effect to the Micro Focus Acquisition. The information upon which these adjustments and
assumptions were made was preliminary and these kinds of adjustments and assumptions are difficult to make with complete
accuracy. Accordingly, the combined business, assets, results of operations and financial condition may differ significantly
from those indicated in the unaudited pro forma financial information, and such variations may negatively impact our financial
condition, results of operations and the market price of our Common Shares.
Risks Related to Laws and Regulatory Compliance
Our provision for income taxes and effective income tax rate may vary significantly and may adversely affect our results of
operations and cash resources
Significant judgment is required in determining our provision for income taxes. Various internal and external factors may
have favorable or unfavorable effects on our future provision for income taxes, income taxes receivable and our effective
income tax rate. These factors include, but are not limited to, changes in tax laws, regulations and/or rates, results of audits by
tax authorities, changing interpretations of existing tax laws or regulations, changes in estimates of prior years’ items, the
impact of transactions we complete, future levels of research and development spending, changes in the valuation of our
deferred tax assets and liabilities, transfer pricing adjustments, changes in the overall mix of income among the different
jurisdictions in which we operate and changes in overall levels of income before taxes. For instance, the provision for income
taxes from the Tax Cuts and Jobs Act of 2017, which requires capitalization and amortization of research and development
costs starting Fiscal 2023, have materially increased cash taxes. Furthermore, new accounting pronouncements or new
interpretations of existing accounting pronouncements, and/or any internal restructuring initiatives we may implement from
time to time to streamline our operations, can have a material impact on our effective income tax rate.
Tax examinations are often complex as tax authorities may disagree with the treatment of items reported by us and our
transfer pricing methodology based upon our limited risk distributor model, the result of which could have a material adverse
effect on our financial condition and results of operations. Although we believe our estimates are reasonable, the ultimate
32
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 United Kingdom (UK) tax authorities have challenged certain historic tax filing positions of Micro Focus. Based on
Micro Focus’ assessment of the value of the underlying tax benefit under dispute, and as supported by external professional
advice, it believed that it had no liability in respect of these matters and therefore no tax charge was recorded in current or
previous periods. Although the Company, after closing of the Micro Focus Acquisition, believes that assessment is reasonable,
no assurance can be made regarding the ultimate outcome of these matters.
The Company is also subject to income taxes in numerous jurisdictions and significant judgment has been applied in
determining its worldwide provision for income taxes, including historical Micro Focus matters related to the EU State Aid and
UK tax authority challenge in respect of prior periods. The provision for income taxes may be impacted by various internal and
external factors that could have favorable or unfavorable effects, including changes in tax laws, regulations and/or rates, results
of audits, changing interpretations of existing tax laws or regulations, changes in estimates of prior years’ items, the impact of
transactions completed, the structuring of activities undertaken, the application of complex transfer pricing rules, changes in the
valuation of deferred tax assets and liabilities, and changes in overall mix and levels of income before taxes. Further, due to
Micro Focus’ complex acquisitive history, we could become subject to additional tax audits in jurisdictions in which we have
not historically been subject to examination. As a result, our worldwide provision for income taxes and any ultimate tax liability
may differ from the amounts initially recorded and such differences could have an adverse effect on the combined company’s
financial condition and results of operations.
For further details on certain tax matters relating to the Company 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.
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. 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. 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. 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.
The notices of reassessment for Fiscal 2012, Fiscal 2013, Fiscal 2014, Fiscal 2015 and Fiscal 2016 would, as drafted,
increase our taxable income by approximately $90 million to $100 million for each of those years, as well as impose a 10%
penalty on the proposed adjustment to income. Audits by the CRA of our tax returns for fiscal years prior to Fiscal 2012 have
been completed with no reassessment of our income tax liability.
We strongly disagree with the CRA’s positions and believe the reassessments of Fiscal 2012, Fiscal 2013, Fiscal 2014,
Fiscal 2015 and Fiscal 2016 (including any penalties) are without merit, and we are continuing to contest these reassessments.
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.
Even if we are unsuccessful in challenging the CRA’s reassessments to increase our taxable income for Fiscal 2012,
Fiscal 2013, Fiscal 2014, Fiscal 2015 and Fiscal 2016, we have elective deductions available for those years (including carry-
backs from later years) that would offset such increased amounts so that no additional cash tax would be payable, exclusive of
any assessed penalties and interest, as described above.
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. In accordance with applicable rules, these assets were recognized for tax purposes
at fair market value as of that time, which value was supported by an expert valuation prepared by an independent leading
accounting and advisory firm. 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. Other aspects of CRA’s position for Fiscal 2017 and Fiscal 2018
conflict with the expert valuation prepared by the independent leading accounting and advisory firm that was used to support
our original filing position. The CRA issued notices of reassessment in respect of Fiscal 2017 and Fiscal 2018 on a basis
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consistent with its proposal to reduce the available depreciable basis of these assets in Canada. 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. If we are ultimately unsuccessful in defending our position, the estimated
impact of the proposed adjustment could result in us recording an income tax expense, with no immediate cash payment, to
reduce the stated value of our deferred tax assets of up to approximately $470 million. Any such income tax expense could also
have a corresponding cash tax impact that would primarily occur over a period of several future years based upon annual
income realization in Canada. We strongly disagree with the CRA’s position for Fiscal 2017 and Fiscal 2018 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 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.
We will continue to vigorously contest the adjustments to our taxable income and any penalty and interest assessments, as
well as any reduction to the basis of our depreciable property. We are confident that our original tax filing positions were
appropriate. 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. 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.
Risks associated with data privacy issues, including evolving laws and regulations and associated compliance efforts, may
adversely impact our business
Our business depends on the processing of personal data, including data transfer between our affiliated entities, to and
from our business partners and customers, and with third-party service providers. The laws and regulations relating to personal
data are constantly evolving, as federal, state and foreign governments continue to adopt new measures addressing data privacy
and processing (including collection, storage, transfer, disposal and use) of personal data. 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. Any such new
laws or regulations, any changes to existing laws and regulations and any such interpretation or application may affect demand
for our products and services, impact our ability to effectively transfer data across borders in support of our business operations
or increase the cost of providing our products and services. Additionally, any actual or perceived breach of such laws or
regulations may subject us to claims and may lead to administrative, civil or criminal liability, as well as reputational harm to
our Company and our employees. We could also be required to fundamentally change our business activities and practices, or
modify our products and services, which could have an adverse effect on our business.
In the U.S., various laws and regulations apply to the collection, processing, transfer, disposal, unauthorized disclosure
and security of personal data. For example, data protection laws passed by all states within the U.S. require notification to users
when there is a security breach for personal data. Additionally, the Federal Trade Commission (FTC) and many state attorneys
general are interpreting federal and state consumer protection laws as imposing standards for the online collection, use, transfer
and security of data. The U.S. Congress and state legislatures, along with federal regulatory authorities, have recently increased
their attention to matters concerning personal data, and this has and may continue to result in new legislation which could
increase the cost of compliance. For example, the California Consumer Privacy Act of 2018 came into effect on January 1,
2020 and was subsequently amended by the California Privacy Rights Act, which took effect January 1, 2023 (the foregoing,
collectively, the CCPA). The CCPA requires companies that process information of California residents to make new
disclosures to consumers about their data collection, use and sharing practices, allows consumers to access and request deletion
of their data and opt out of certain data sharing with third parties and provides a new private right of action for data breaches.
Violations of the CCPA are enforced by the California Attorney General with sizeable civil penalties, particularly for violations
that impact large numbers of consumers. The CCPA also establishes a regulatory agency dedicated to enforcing the
requirements of the CCPA. Comprehensive privacy laws in Colorado, Connecticut and Virginia also came into effect in 2023.
Indiana, Iowa, Montana, Tennessee, Texas and Utah have similarly enacted broad laws relating to privacy, data protection and
information security that will come into effect in the next few years, and Delaware and Oregon have passed comprehensive
privacy laws that are awaiting enactment, further complicating our privacy compliance obligations through the introduction of
increasingly disparate requirements across the various U.S. jurisdictions in which we operate. In addition to government
regulation, privacy advocacy and industry groups may propose new and different self-regulatory standards that either legally or
contractually apply to us or our clients.
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
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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. The GDPR imposes a number of obligations for subject companies, and we will need to
continue dedicating financial resources and management time to GDPR compliance. The GDPR enhances the obligations
placed on companies that control or process personal data including, for example, expanded disclosures about how personal
data is to be used, mechanisms for obtaining consent from data subjects, controls for data subjects with respect to their personal
data (including by enabling them to exercise rights to erasure and data portability), limitations on retention of personal data and
mandatory data breach notifications. Additionally, the GDPR places companies under obligations relating to data transfers and
the security of the personal data they process. 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. Individuals who have suffered damage as a result of a subject company’s non-compliance with the GDPR
also have the right to seek compensation from such company. Given the breadth of the GDPR, compliance with its
requirements is likely to continue to require significant expenditure of resources on an ongoing basis, and there can be no
assurance that the measures we have taken for the purposes of compliance will be successful in preventing violation of the
GDPR. Given the potential fines, liabilities and damage to our reputation in the event of an actual or perceived violation of the
GDPR, such a violation may have a material adverse effect on our business and operations.
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. In light of the July
2020 decision of the Court of Justice of the European Union in Data Protection Commissioner vs Facebook Ireland Limited
and Maximillian Schrems (C-311/118) (Schrems II) invalidating the EU-U.S. Privacy Shield Framework and the Irish Data
Protection Authority’s May 2023 decision to impose a fine of €1.2 billion on Meta Platforms, Inc. (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. In addition to the increased legal risk in the event of any such transfers, additional costs might also need to be
incurred in order to implement necessary safeguards to comply with GDPR. 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. In June 2021, the European Commission issued new SCCs that must be used for relevant new data transfers, and
existing SCCs must be migrated to the new SCCs by December 27, 2022. 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). All
existing contracts and any new contracts signed before September 21, 2022 can continue to use the old SCCs until March 21,
2024, after which the old SCCs must be replaced by either the IDTA or the Addendum in conjunction with the new SCCs. All
contracts signed after September 21, 2022 must use either the IDTA or the Addendum in conjunction with the new SCCs.
Additionally, on March 25, 2022, the U.S. and European Commission announced that they had agreed in principle to a new
“Trans-Atlantic Data Privacy Framework” (the TDPF to enable trans-Atlantic data flows and address the concerns raised in the
Schrems II decision. To implement the commitments of the U.S. under the TDPF, in October 2022, President Biden signed an
Executive Order on Enhancing Safeguards for the United States Signals Intelligence Activities (the Executive Order). This
subsequently prompted the European Commission to formally launch the process to adopt an adequacy decision based on the
Executive Order in December 2022, and the adequacy decision was adopted on July 10, 2023. However, the TDPF is likely to
be subject to legal challenges and may be struck down by the EU courts.
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 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. Any failure to successfully navigate the changing regulatory landscape could result in legal
liability or impairment to our reputation in the marketplace, which could have a material adverse effect on our business, results
of operations and financial condition.
Privacy-related claims or lawsuits initiated by governmental bodies, customers or other third parties, whether meritorious
or not, could be time consuming, result in costly regulatory proceedings, litigation, penalties, fines, or other potential liabilities,
or require us to change our business practices, sometimes in expensive ways. 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.
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Certain of our products may be perceived as, or determined by the courts to be, a violation of privacy rights and related laws.
Any such perception or determination could adversely affect our revenues and results of operations
Because of the nature of certain of our products, including those relating to digital investigations, potential customers and
purchasers of our products or the general public may perceive that the use of these products results in violations of individual
privacy rights. 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. Any such determination or
perception by potential customers and purchasers, the general public, government entities or the judicial system could harm our
reputation and adversely affect our revenues and results of operations.
AI and other machine learning technology is being integrated into some of our products, systems or solutions, which could
present risks and challenges to our business
AI and other machine learning technology is being integrated into some of our products, systems or solutions and could be a
significant factor in future offerings. While AI can present significant benefits, it can also present risks and challenges to our
business. Data sourcing, technology, integration and process issues, program bias into decision-making algorithms, security
challenges and the protection of personal privacy could impair the adoption and acceptance of AI. If the output from AI in our
products, systems or solutions are deemed to be inaccurate or questionable, or if the use of AI does not operate as anticipated or
perform as promised, our business and reputation may be harmed. As the adoption of AI quickens, we expect competition to
intensify and additional companies may enter our markets offering similar products, systems or solutions.We may not be able to
compete effectively with our competitors and our strategy to integrate AI and other machine learning technology into our
products, systems or solutions may also not be accepted by our customers or by other businesses in the marketplace.The
integration of AI may also expose us to risks regarding intellectual property ownership and license rights, particularly if any
copyrighted material is embedded in training models. The use of copyrighted materials in AI and other machine learning
technology has not been fully interpreted by federal, state, or international courts and the regulatory framework for AI continues
to evolve and remains uncertain. It is possible that new laws and regulations will be adopted in the jurisdictions in which we
operate, or existing laws and regulations may be interpreted in new ways, that would affect the way in which AI and other
machine learning technology is used in our products, systems or solutions. Further, the cost to comply with such laws or
regulations, including court decisions, could be significant. The risks and challenges associated with integrating AI and other
machine learning technology into our products, systems and solutions could adversely affect our business, financial condition
and results of operations.
Risks Related to our Financial Condition
We may not generate sufficient cash flow to satisfy our unfunded pension obligations
Through our acquisitions, we have assumed certain unfunded pension plan liabilities. We will be required to use the
operating cash flow that we generate in the future to meet these obligations. As a result, our future net pension liability and cost
may be materially affected by the discount rate used to measure these pension obligations and by the longevity and actuarial
profile of the relevant workforce. A change in the discount rate may result in a significant increase or decrease in the valuation
of these pension obligations, and these changes may affect the net periodic pension cost in the year the change is made and in
subsequent years. We cannot assure that we will generate sufficient cash flow to satisfy these obligations. Any inability to
satisfy these pension obligations may have a material adverse effect on the operational and financial health of our business.
For more information on our pension obligations, see Note 12 “Pension Plans and Other Post Retirement Benefits” to the
Consolidated Financial Statements included in this Annual Report on Form 10-K.
Fluctuations in foreign currency exchange rates could materially affect our financial results
Our Consolidated Financial Statements are presented in U.S. dollars. In general, the functional currency of our
subsidiaries is the local currency. For each subsidiary, assets and liabilities denominated in foreign currencies are translated into
U.S dollars at the exchange rates in effect at the balance sheet dates and revenues and expenses are translated at the average
exchange rates prevailing during the month of the transaction. Therefore, increases or decreases in the value of the U.S. dollar
against other major currencies affect our net operating revenues, operating income and the value of balance sheet items
denominated in foreign currencies. In addition, unexpected and dramatic devaluations of currencies in developing, as well as
developed, markets could negatively affect our revenues from, and the value of the assets located in, those markets.
Transactional foreign currency gains (losses) are included in the Consolidated Statements of Income under the line item
“Other income (expense) net.” See Item 8. Financial Statements and Supplementary Data. 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
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countries, could materially affect our financial results. 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. See “Geopolitical
instability, political unrest, war and other global conflicts, including the Russia-Ukraine conflict, has affected and may continue
to affect our business.”
Our indebtedness could limit our operations and opportunities
We have a significant amount of indebtedness outstanding following closing the Micro Focus Acquisition. As of June 30,
2023, we had $9.1 billion of total indebtedness. This level of indebtedness could have important consequences to our business,
including, but not limited to:
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increasing our debt service obligations, making it more difficult for us to satisfy our obligations;
limiting our ability to borrow additional funds for working capital, capital expenditures, acquisitions and other
general purposes and increasing the cost of any such borrowing;
increasing our vulnerability to, and reducing our flexibility to respond to, general adverse economic and industry
conditions;
expose us to fluctuations in the interest rate environment because the interest rates under our credit facilities are
variable;
require us to dedicate a substantial portion of our cash flow from operations to make payments on our indebtedness,
thereby reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions,
dividends and other general corporate purposes;
limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
potentially placing us at a competitive disadvantage as compared to certain of our competitors that are not as highly
leveraged;
increasing the risk of a future credit ratings downgrade of our debt, which could increase future debt costs and limit
the future availability of debt financing; and
restricting us from pursuing certain business opportunities, including other acquisitions.
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). Borrowings under our
credit facilities are secured by a first charge over substantially all of our assets, which security interests may limit our financial
flexibility.
Repayments made under the Acquisition Term Loan and Term Loan B are equal to 0.25% of the original principal amount
in equal quarterly installments for the life of such loans, with the remainder due at maturity. 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. 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. 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. 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.
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. Our failure to comply with any of the covenants that
are included in the indentures governing the Senior Notes could result in a default under the terms thereof, which could result in
all or a portion of the Senior Notes to be immediately due and payable.
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
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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.
For more information on our indebtedness, see Note 11 “Long-Term Debt” to the Consolidated Financial Statements
included in this Annual Report on Form 10-K.
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:
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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;
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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;
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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.
A general weakening of the global economy, a continued weakening of the economy in a particular region, economic or
business uncertainty or changes in political developments, trade policies or policies implemented to stimulate or preserve
economies could result in the cancellation of or delay in customer purchases. A cancellation or deferral of even a small number
of license sales or services or delays in the implementation of our software products could have a material adverse effect on our
business, operating results and financial condition. As a result of the timing of software product and service introductions and
the rapid evolution of our business as well as of the markets we serve, we cannot predict whether patterns or trends experienced
in the past will continue. For these reasons, you should not rely upon period-to-period comparisons of our financial results to
forecast future performance. Our revenues and operating results may vary significantly, and this possible variance could
materially reduce the market price of our Common Shares.
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 market price of our Common Shares and credit ratings of our outstanding debt securities are subject to fluctuations.
Such fluctuations in market price or credit ratings may continue in response to: (i) quarterly and annual variations in operating
results; (ii) announcements of technological innovations or new products or services that are relevant to our industry; (iii)
changes in financial estimates by securities analysts; (iv) changes to the ratings or outlook of our outstanding debt securities by
rating agencies; (v) impacts of general economic and market conditions or (vi) other events or factors (including those events or
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factors noted in this Part I, Item 1A “Risk Factors” or in Part I, “Forward-Looking Statements” of this Annual Report on 10-K).
In addition, financial markets experience significant price and volume fluctuations that particularly affect the market prices of
equity securities of many technology companies in particular due to concerns about increasing interest rates, rising inflation or
any potential recession. These fluctuations have often resulted from the failure of such companies to meet market expectations
in a particular quarter, and thus such fluctuations may or may not be related to the underlying operating performance of such
companies. Broad market fluctuations or any failure of our operating results in a particular quarter to meet market expectations
may adversely affect the market price of our Common Shares or the credit ratings of our outstanding debt securities.
Additionally, short sales, hedging and other derivative transactions in our Common Shares and technical factors in the public
trading market for our Common Shares may produce price movements that may or may not comport with macro, industry or
company-specific fundamentals, including, without limitation, the sentiment of retail investors (including as may be expressed
on financial trading and other social media sites), the amount and status of short interest in our Common Shares, access to
margin debt, trading in options and other derivatives on our Common Shares and other technical trading factors. Occasionally,
periods of volatility in the market price of a company’s securities may lead to the institution of securities class action litigation
against a company. If we are subject to such volatility in our market price, we may be the target of such securities litigation in
the future. Such legal action could result in substantial costs to defend our interests and a diversion of management’s attention
and resources, each of which would have a material adverse effect on our business and operating results.
General Risks
Unexpected events may materially harm our ability to align when we incur expenses with when we recognize revenues
We incur operating expenses based upon anticipated revenue trends. Since a high percentage of these expenses are
relatively fixed, a delay in recognizing revenues from transactions related to these expenses (such a delay may be due to the
factors described herein or it may be due to other factors) could cause significant variations in operating results from quarter to
quarter and could materially reduce operating income. If these expenses are not subsequently matched by revenues, our
business, financial condition, or results of operations could be materially and adversely affected.
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. We use a “pipeline” system, a common industry practice, to forecast sales and trends in our
business. By reviewing the status of outstanding sales proposals to our customers and potential customers, we make an estimate
as to when a customer will make a purchasing decision involving our software products. These estimates are aggregated
periodically to make an estimate of our sales pipeline, which we use as a guide to plan our activities and make internal financial
forecasts. Our sales pipeline is only an estimate and may be an unreliable predictor of actual sales activity, both in a particular
quarter and over a longer period of time. Many factors may affect actual sales activity, such as weakened economic conditions,
including as a result of any potential recession, which may cause our customers and potential customers to delay, reduce or
cancel information technology-related purchasing decisions, our decision to increase prices in response to rising inflation, and
the tendency of some of our customers to wait until the end of a fiscal period in the hope of obtaining more favorable terms
from us. If actual sales activity differs from our pipeline estimate, then we may have planned our activities and budgeted
incorrectly, and this may adversely affect our business, operating results and financial condition. In addition, for newly acquired
companies, we have limited ability to immediately predict how their pipelines will convert into sales or revenues following the
acquisition and their conversion rate post-acquisition may be quite different from their historical conversion rate.
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. These international
operations are subject to certain risks and costs, including the difficulty and expense of administering business and compliance
abroad, differences in business practices, compliance with domestic and foreign laws (including without limitation domestic
and international import and export laws and regulations and the Foreign Corrupt Practices Act, including potential violations
by acts of agents or other intermediaries), costs related to localizing products for foreign markets, costs related to translating
and distributing software products in a timely manner, costs related to increased financial accounting and reporting burdens and
complexities, longer sales and collection cycles for accounts receivables, failure of laws or courts to protect our intellectual
property rights adequately, local competition, and economic or political instability and uncertainties, including inflation,
recession, interest rate fluctuations and actual or anticipated military or geopolitical conflicts. International operations also tend
to be subject to a longer sales and collection cycle. In addition, regulatory limitations regarding the repatriation of earnings may
adversely affect the transfer of cash earned from international operations. Significant international sales may also expose us to
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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. 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. 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.
We may become involved in litigation that may materially adversely affect us
From time to time in the ordinary course of our business, we may become involved in various legal proceedings, including
commercial, product liability, employment, class action and other litigation and claims, as well as governmental and other
regulatory investigations and proceedings. Such matters can be time-consuming, divert management’s attention and resources
and cause us to incur significant expenses. Furthermore, because litigation is inherently unpredictable, the results of any such
actions may have a material adverse effect on our business, operating results or financial condition.
The declaration, payment and amount of dividends will be made at the discretion of our Board of Directors and will depend
on a number of factors
We have adopted a policy to declare non-cumulative quarterly dividends on our Common Shares. The declaration,
payment and amount of any dividends will be made pursuant to our dividend policy and is subject to final determination each
quarter by our Board of Directors in its discretion based on a number of factors that it deems relevant, including our financial
position, results of operations, available cash resources, cash requirements and alternative uses of cash that our Board of
Directors may conclude would be in the best interest of our shareholders. Our dividend payments are subject to relevant
contractual limitations, including those in our existing credit agreements and to solvency conditions established by the Canada
Business Corporations Act (CBCA), the statute under which we are incorporated. Accordingly, there can be no assurance that
any future dividends will be equal or similar in amount to any dividends previously paid or that our Board of Directors will not
decide to reduce, suspend or discontinue the payment of dividends at any time in the future.
Our operating results could be adversely affected by any weakening of economic conditions
Our overall performance depends in part on worldwide economic conditions. 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 severity and length of
time that a downturn in economic and financial market conditions may persist, as well as the timing, strength and sustainability
of any recovery from such downturn, are unknown and are beyond our control. 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. During such downturns, many
customers may delay or reduce technology purchases. Contract negotiations may become more protracted, or conditions could
result in reductions in the licensing of our software products and the sale of cloud and other services, longer sales cycles,
pressure on our margins, difficulties in collection of accounts receivable or delayed payments, increased default risks associated
with our accounts receivables, slower adoption of new technologies and increased price competition. In addition, deterioration
of the global credit markets could adversely impact our ability to complete licensing transactions and services transactions,
including maintenance and support renewals. Any of these events, as well as a general weakening of, or declining corporate
confidence in, the global economy, or a curtailment in government or corporate spending, could delay or decrease our revenues
and therefore have a material adverse effect on our business, operating results and financial condition.
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
Financial developments seemingly unrelated to us or to our industry may adversely affect us over the course of time. 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. Credit contraction in
financial markets may hurt our ability to access credit in the event that we identify an acquisition opportunity or require
significant access to credit for 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
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hurt our ability to raise capital for the financing of acquisitions or other reasons. Potential price inflation caused by an excess of
liquidity in countries where we conduct business may increase the cost we incur to provide our solutions and may reduce profit
margins on agreements that govern the licensing of our software products and/or the sale of our services to customers over a
multi-year period. A reduction in credit, combined with reduced economic activity, may adversely affect businesses and
industries that collectively constitute a significant portion of our customer base such as the public sector. As a result, these
customers may need to reduce their licensing of our software products or their purchases of our services, or we may experience
greater difficulty in receiving payment for the licenses and services that these customers purchase from us. In addition, inflation
is often accompanied by higher interest rates, which may cause additional economic fluctuation. 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.
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. 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. The option to renew is exercisable by us upon providing written
notice to the University of Waterloo not earlier than the 40th anniversary and not later than the 45th anniversary of the lease
commencement date.
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.
Leased Facilities
The following table sets forth the location and approximate square footage of our leased facilities as of June 30, 2023:
Americas (1)
EMEA (2)
Asia Pacific (3)
Total
_____________________
Square Footage
1,775,462
846,494
1,369,962
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.
(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.
Item 3. Legal Proceedings
In the normal course of business, we are subject to various legal claims, as well as potential legal claims. While the results
of litigation and claims cannot be predicted with certainty, we believe that the final outcome of these matters will not have a
materially adverse effect on our consolidated results of operations or financial conditions.
For 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
Item 4. Mine Safety Disclosures
Not applicable.
42
Part II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Our Common Shares have traded on the NASDAQ stock market since 1996 under the symbol “OTEX” and our Common
Shares have traded on the Toronto Stock Exchange (TSX) since 1998, first under the symbol “OTC”, and since 2017, trades
under the symbol “OTEX”.
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.
Dividend Policy
We currently expect to continue paying cash dividends on a quarterly basis. However, future declarations of dividends are
subject to the final determination of our Board of Directors, in its discretion, based on a number of factors that it deems
relevant, including our financial position, results of operations, available cash resources, cash requirements and alternative uses
of cash that our Board of Directors may conclude would be in the best interest of our shareholders. Our dividend payments are
subject to relevant contractual limitations, including those in our existing credit agreements and to solvency conditions
established under the CBCA, the statute under which we are incorporated. We have historically declared dividends in U.S.
dollars, but registered shareholders can elect to receive dividends in U.S. dollars or Canadian dollars by contacting the
Company’s transfer agent.
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. 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).
Purchases made under the Fiscal 2021 Repurchase Plan were subject to a limit of 13,618,774 shares (representing 5% of the
Company’s issued and outstanding Common Shares as of November 4, 2020). All Common Shares purchased by us pursuant to
the Fiscal 2021 Repurchase Plan were cancelled.
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 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. All Common Shares purchased by us
pursuant to the Fiscal 2022 Repurchase Plan were cancelled.
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
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.
The TSX approved the Company’s notice of intention to commence the Fiscal 2021 NCIB, pursuant to which the
Company was authorized to purchase Common Shares over the TSX for the period commencing November 12, 2020 until
November 11, 2021 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. 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.
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.
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. 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.
Stock Purchases
No shares were repurchased during the three months ended June 30, 2023.
Stock 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.
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. Dividends declared on
securities comprising the respective Indices and declared on our Common Shares are assumed to be reinvested. The
performance of our Common Shares as set out in the graph is based upon historical data and is not indicative of, nor intended to
forecast, future performance of our Common Shares. The graph lines merely connect measurement dates and do not reflect
fluctuations between those dates.
44
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
S&P North American Technology-Software Index
NASDAQ Composite
$ 100.00 $ 119.04 $ 124.83 $ 151.85 $ 115.29 $ 130.34
$ 100.00 $ 120.63 $ 156.65 $ 214.77 $ 150.56 $ 195.95
$ 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.
For information relating to our various stock compensation plans, see Item 12 of this Annual Report on Form 10-K.
Canadian Tax Matters
Dividends
Since June 21, 2013 and unless stated otherwise, dividends paid by the Company to Canadian residents are eligible
dividends as per the Income Tax Act (Canada).
Non-residents of Canada
Dividends paid or credited to non-residents of Canada are subject to a 25% withholding tax unless reduced by treaty.
Under the Canada-United States Tax Convention (1980) (the Treaty), U.S. residents who are entitled to all the benefits of the
Treaty are generally subject to a 15% withholding tax.
Beginning in calendar year 2012, the Canada Revenue Agency has introduced new rules requiring residents of any
country with which Canada has a tax treaty to certify that they reside in that country and are eligible to have Canadian non-
resident tax withheld on the payment of dividends at the tax treaty rate. 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
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. For purposes of this summary, a “U.S. holder” is a beneficial owner of Common Shares that
holds such shares as capital assets under the U.S. Internal Revenue Code of 1986, as amended (the Code), and is a citizen or
resident of the United States and not of Canada, a corporation organized under the laws of the United States or any political
subdivision thereof, or a person that is otherwise subject to U.S. federal income tax on a net income basis in respect of Common
Shares. It does not address any aspect of U.S. federal gift or estate tax, or of state, local or non-U.S. tax laws and does not
address aspects of U.S. federal income taxation applicable to U.S. holders holding options, warrants or other rights to acquire
Common Shares. Further, this discussion does not address the U.S. federal income tax consequences to U.S. holders that are
subject to special treatment under U.S. federal income tax laws, including, but not limited to U.S. holders owning directly,
indirectly or by attribution 10% or more of the voting power or value of the Company’s stock; broker-dealers; banks or
insurance companies; financial institutions; regulated investment companies; taxpayers who have elected mark-to-market
accounting; tax-exempt organizations; taxpayers who hold Common Shares as part of a “straddle,” “hedge,” or “conversion
transaction” with other investments; individual retirement or other tax-deferred accounts; taxpayers whose functional currency
is not the U.S. dollar; partnerships or the partners therein; S corporations; or U.S. expatriates.
The discussion is based upon the provisions of the Code, the Treasury regulations promulgated thereunder, the
Convention Between the United States and Canada with Respect to Taxes on Income and Capital, together with related
Protocols and Competent Authority Agreements (the Convention), the administrative practices published by the U.S. Internal
Revenue Service (IRS) and U.S. judicial decisions, all of which are subject to change. This discussion does not consider the
potential effects, both adverse and beneficial, of any recently proposed legislation which, if enacted, could be applied, possibly
on a retroactive basis, at any time.
Distributions on the Common Shares
Subject to the discussion below under “Passive Foreign Investment Company Rules,” U.S. holders generally will treat the
gross amount of distributions paid by the Company equal to the U.S. dollar value of such dividends on the date the dividends
are received or treated as received (based on the exchange rate on such date), without reduction for Canadian withholding tax
(see “Canadian Tax Matters - Dividends - Non-residents of Canada”), as dividend income for U.S. federal income tax purposes
to the extent of the Company’s current and accumulated earnings and profits. Because the Company does not expect to maintain
calculations of its earnings and profits under U.S. federal income tax principles, it is expected that distributions paid to U.S.
holders generally will be reported as dividends.
Individual U.S. holders will generally be eligible to treat dividends as “qualified dividend income” taxable at preferential
rates with certain exceptions for short-term and hedged positions, and provided that the Company is not during the taxable year
in which the dividends are paid (and was not in the preceding taxable year) classified as a “passive foreign investment
company” (PFIC) as described below under “Passive Foreign Investment Company Rules.” Dividends paid on the Common
Shares generally will not be eligible for the “dividends received” deduction allowed to corporate U.S. holders in respect of
dividends from U.S. corporations.
If a U.S. holder receives foreign currency on a distribution that is not converted into U.S. dollars on the date of receipt, the
U.S. holder will have a tax basis in the foreign currency equal to its U.S. dollar value on the date the dividends are received or
treated as received. Any gain or loss recognized upon a subsequent sale or other disposition of the foreign currency, including
an exchange for U.S. dollars, will generally be U.S. source ordinary income or loss.
Subject to limitations and conditions under the Code and applicable U.S. Treasury Regulations, a U.S. holder may be able
to claim a foreign tax credit in respect of the amount of Canadian income tax withheld at the appropriate rate from dividends
paid to such U.S. holder. These limitations and conditions include new requirements recently adopted by the IRS that the
Canadian tax would need to satisfy in order to be eligible to be a creditable tax for a U.S. holder. In the case of a U.S. Holder
that is eligible for, and properly elects, the benefits of the Treaty, the Canadian tax on dividends will be treated as meeting the
new requirements and therefore as a creditable tax. In the case of all other U.S. holders, the application of these requirements to
the Canadian tax on dividends is uncertain and we have not determined whether these requirements have been met. If the
Canadian dividend tax is not a creditable tax for a U.S. holder or the U.S. holder does not elect to claim a foreign tax credit for
any foreign income taxes, the U.S. Holder may be able to deduct the Canadian tax in computing its taxable income for U.S.
federal income tax purposes. 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
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. However, if the Company were to be
treated as a United States-owned foreign corporation for any year, the portion of the dividends paid in that year that is
attributable to the Company’s United States-source earnings and profits may be re-characterized as United States-source income
for foreign tax credit purposes. A United States-owned foreign corporation is any foreign corporation when 50% or more of the
value or voting power of its stock is owned by United States persons (directly, indirectly or by attribution). The Company does
not expect to calculate its earnings and profits under U.S. federal income tax principles. Therefore, the effect of this rule may
cause dividends paid by the Company to be treated as entirely from sources within the United States. This could limit a U.S.
holder’s ability to claim a foreign tax credit for any Canadian taxes withheld from the dividends. A U.S. holder entitled to
benefits under the Convention may, however, elect to treat dividends paid by the Company as foreign source income for foreign
tax credit purposes, subject to certain requirements. The foreign tax credit rules are complex. U.S. holders should consult their
own tax advisors with respect to the implications of those rules for their investments in the Common Shares.
Sale, Exchange, Redemption or Other Disposition of Common Shares
Subject to the discussion below under “Passive Foreign Investment Company Rules,” the sale of Common Shares
generally will result in the recognition of gain or loss to a U.S. holder in an amount equal to the difference between the amount
realized and the U.S. holder’s adjusted basis in the Common Shares. A U.S. holder’s tax basis in a Common Share will
generally equal the price it paid for the Common Share. Any capital gain or loss will be long-term if the Common Shares have
been held for more than one year. The deductibility of capital losses is subject to limitations.
Passive Foreign Investment Company Rules
Special U.S. federal income tax rules apply to U.S. persons owning shares of a PFIC. The Company will be classified as a
PFIC in a particular taxable year if either: (i) 75 percent or more of the Company’s gross income for the taxable year is passive
income, or (ii) the average percentage of the value of the Company’s assets that produce or are held for the production of
passive income is at least 50 percent. If the Company is treated as a PFIC for any year, U.S. holders may be subject to adverse
tax consequences upon a sale, exchange, or other disposition of the Common Shares, or upon the receipt of certain “excess
distributions” in respect of the Common Shares. Dividends paid by a PFIC are not qualified dividends eligible for taxation at
preferential rates. 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. 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.
Information Reporting and Backup Withholding
Except in the case of corporations or other exempt holders, dividends paid to a U.S. holder may be subject to U.S.
information reporting requirements and may be subject to backup withholding unless the U.S. holder provides an accurate
taxpayer identification number on a properly completed IRS Form W-9 and certifies that no loss of exemption from backup
withholding has occurred. 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
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Annual Report on Form 10-K, including this Management’s Discussion and Analysis of Financial Condition and
Results of Operations (MD&A), contains forward-looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995, Section 21E of the U.S. Securities Exchange Act of 1934, as amended (the Exchange Act), and Section 27A
of the U.S. Securities Act of 1933, as amended (the Securities Act), and is subject to the safe harbors created by those sections.
All statements other than statements of historical facts are statements that could be deemed forward-looking statements.
When used in this report, the words “anticipates”, “expects”, “intends”, “plans”, “believes”, “seeks”, “estimates”,
“may”, “could”, “would”, “might”, “will” and other similar language, as they relate to Open Text Corporation (OpenText or
the Company), are intended to identify forward-looking statements under applicable securities laws. 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.
In addition, any statements or information that refer to expectations, beliefs, plans, projections, objectives, performance
or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking, and
based on our current expectations, forecasts and projections about the operating environment, economies and markets in which
we operate. Forward-looking statements reflect our current estimates, beliefs and assumptions, which are based on
management’s perception of historic trends, current conditions and expected future developments, as well as other factors it
believes are appropriate in the circumstances. 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. Management’s estimates, beliefs and assumptions
are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future
events and, as such, are subject to change. We can give no assurance that such estimates, beliefs and assumptions will prove to
be correct.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual
results, performance or achievements to differ materially from the anticipated results, performance or achievements expressed
or implied by such forward-looking statements. The risks and uncertainties that may affect forward-looking statements include,
but are not limited to: (i) our inability to realize successfully any anticipated synergy benefits from the acquisition of Micro
Focus (Micro Focus Acquisition); (ii) the actual and potential impacts of the use of cash and incurrence of indebtedness,
including the granting of security interests related to such debt; (iii) the change in scope and size of our operations as a result
of the Micro Focus Acquisition; (iv) the uncertainty around expectations related to Micro Focus’ business prospects; (v)
integration of acquisitions and related restructuring efforts, including the quantum of restructuring charges and the timing
thereof; (vi) the possibility that we may be unable to successfully integrate the assets we acquire or fail to utilize such assets to
their full capacity and not realize the benefits we expect from our acquired portfolios and businesses, including the acquisition
of Zix and Micro Focus, (vii) the potential for the incurrence of or assumption of debt in connection with acquisitions, its
48
impact on future operations and on the ratings or outlooks of rating agencies on our outstanding debt securities, and the
possibility of not being able to generate sufficient cash to service all indebtedness; (viii) the possibility that the Company may
be unable to meet its future reporting requirements under the Exchange Act, and the rules promulgated thereunder, or
applicable Canadian securities regulation; (ix) the risks associated with bringing new products and services to market; (x)
fluctuations in currency exchange rates (including as a result of the impact of any policy changes resulting from trade and tariff
disputes) and the impact of mark-to-market valuation relating to associated derivatives; (xi) delays in the purchasing decisions
of the Company’s customers; (xii) competition the Company faces in its industry and/or marketplace; (xiii) the final
determination of litigation, tax audits (including tax examinations in Canada, the United States or elsewhere) and other legal
proceedings; (xiv) potential exposure to greater than anticipated tax liabilities or expenses, including with respect to changes
in Canadian, United States or international tax regimes; (xv) the possibility of technical, logistical or planning issues in
connection with the deployment of the Company’s products or services; (xvi) the continuous commitment of the Company’s
customers; (xvii) demand for the Company’s products and services; (xviii) increase in exposure to international business risks
including the impact of geopolitical instability, political unrest, war and other global conflicts, as we continue to increase our
international operations; (xix) adverse macroeconomic conditions, including inflation, disruptions in global supply chains and
increased labour costs; (xx) inability to raise capital at all or on not unfavorable terms in the future; (xxi) downward pressure
on our share price and dilutive effect of future sales or issuances of equity securities (including in connection with future
acquisitions); and (xxii) potential changes in ratings or outlooks of rating agencies on our outstanding debt securities. Other
factors that may affect forward-looking statements include, but are not limited to: (i) the future performance, financial and
otherwise, of the Company; (ii) the ability of the Company to bring new products and services to market and to increase sales;
(iii) the strength of the Company’s product development pipeline; (iv) failure to secure and protect patents, trademarks and
other proprietary rights; (v) infringement of third-party proprietary rights triggering indemnification obligations and resulting
in significant expenses or restrictions on our ability to provide our products or services; (vi) failure to comply with privacy
laws and regulations that are extensive, open to various interpretations and complex to implement; (vii) the Company’s growth
and other profitability prospects; (viii) the estimated size and growth prospects of the Information Management market; (ix) the
Company’s competitive position in the Information Management market and its ability to take advantage of future opportunities
in this market; (x) the benefits of the Company’s products and services to be realized by customers; (xi) the demand for the
Company’s products and services and the extent of deployment of the Company’s products and services in the Information
Management marketplace; (xii) the Company’s financial condition and capital requirements; (xiii) system or network failures
or information security, cybersecurity or other data breaches in connection with the Company’s offerings or the information
technology systems used by the Company generally, the risk of which may be increased during times of natural disaster or
pandemic due to remote working arrangements; (xiv) failure to achieve our environmental goals on energy consumption, waste
diversion and greenhouse gas emissions or our targets relating to ED&I initiatives; (xv) failure to attract and retain key
personnel to develop and effectively manage the Company’s business; and (xvi) the ability of the Company’s subsidiaries to
make distributions to the Company.
Readers should carefully review Part I, Item 1A “Risk Factors” and other documents we file from time to time with the
Securities and Exchange Commission (SEC) and other securities regulators. A number of factors may materially affect our
business, financial condition, operating results and prospects. These factors include but are not limited to those set forth in Part
I, Item 1A “Risk Factors” and elsewhere in this Annual Report on Form 10-K. Any one of these factors, and other factors that
we are unaware of, or currently deem immaterial, may cause our actual results to differ materially from recent results or from
our anticipated future results. Readers are cautioned not to place undue reliance upon any such forward-looking statements,
which speak only as of the date made. Unless otherwise required by applicable securities laws, the Company disclaims any
intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future
events or otherwise.
The following MD&A is intended to help readers understand our results of operations and financial condition, and is
provided as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and the
accompanying Notes to our Consolidated Financial Statements under Part II, Item 8 of this Annual Report on Form 10-K.
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.
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
EXECUTIVE OVERVIEW
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, connected, secure and responsible. Our innovations maximize the strategic benefits of data and content for our
customers, strengthening their productivity, growth and competitive advantage.
Our comprehensive Information Management platform and services provide secure and scalable solutions for global
companies, small and medium-sized businesses (SMBs), governments and consumers around the world. We have a complete
and integrated portfolio of Information Management solutions delivered at scale in the OpenText Cloud, helping organizations
master modern work, automate application delivery and modernization, and optimize their digital supply chains. To do this, we
bring together our Content Cloud, Cybersecurity Cloud, Business Network Cloud, IT Operations Management Cloud,
Application Automation Cloud and Analytics & AI Cloud. We also accelerate information modernization with intelligent tools
and services for moving off paper, automating classification and building clean data lakes for Artificial Intelligence (AI),
analytics and automation.
We are fundamentally integrated into the parts of our customers’ businesses that matter, so they can securely manage the
complexity of information flow end to end. Through automation and AI, we connect, synthesize and deliver information where
it is needed to drive new efficiencies, experiences and insights. We make information more valuable by connecting it to digital
business processes, enriching it with analytics, protecting and securing it throughout its entire lifecycle, and leveraging it to
create engaging experiences for employees, suppliers, developers, partners, and customers. Our solutions range from
connecting large digital supply chains to managing HR processes to driving better IT service management in 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, identify threats on any endpoint or across their networks, enable
privacy, leverage eDiscovery and digital forensics to defensibly investigate and collect evidence, and ensure business continuity
in the event of a security incident.
Our initial public offering was on the NASDAQ in 1996 and we were subsequently listed on the Toronto Stock Exchange
(TSX) in 1998. Our ticker symbol on both the NASDAQ and the TSX is “OTEX.”
As of June 30, 2023, we employed a total of approximately 24,100 individuals, of which approximately 9,700 joined our
workforce as part of the Micro Focus Acquisition. Of the total 24,100 individuals we employed as of June 30, 2023, 9,050 or
38% are in the Americas, 5,750 or 24% are in EMEA and 9,300 or 38% are in Asia Pacific. 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” below for our definitions of geographic regions.
Period-over-period comparisons presented here are significantly impacted by our Micro Focus Acquisition.
Fiscal 2023 Summary:
•
•
•
•
•
•
•
•
•
•
Total revenue was $4,485.0 million, up 28.4% compared to the prior fiscal year; up 32.2% after factoring in the
unfavorable impact of $132.4 million of foreign exchange rate changes. The Micro Focus Acquisition contributed
$976.5 million of revenues.
Total annual recurring revenue, which we define as the sum of cloud services and subscriptions revenue and
customer support revenue, was $3,615.5 million, up 26.2% compared to the prior fiscal year; up 29.7% after
factoring in the unfavorable impact of $102.4 million of foreign exchange rate changes.
Cloud services and subscriptions revenue was $1,700.4 million, up 10.8% compared to the prior fiscal year; up
13.3% after factoring in the unfavorable impact of $38.6 million of foreign exchange rate changes.
GAAP-based gross margin was 70.6% compared to 69.6% in the prior fiscal year.
Non-GAAP-based gross margin was 76.1% compared to 75.6% in the prior fiscal year.
GAAP-based net income attributable to OpenText was $150.4 million compared to $397.1 million in the prior fiscal
year. The Micro Focus Acquisition contributed $94.7 million of GAAP-based net losses.
Non-GAAP-based net income attributable to OpenText was $890.7 million compared to $876.2 million in the prior
fiscal year.
GAAP-based earnings per share (EPS), diluted, was $0.56 compared to $1.46 in the prior fiscal year.
Non-GAAP-based EPS, diluted, was $3.29 compared to $3.22 in the prior fiscal year.
Adjusted EBITDA, a non-GAAP measure, was $1,472.9 million compared to $1,265.0 million in the prior fiscal
year.
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•
•
•
•
•
Operating cash flow was $779.2 million for the year ended June 30, 2023, compared to $981.8 million in the prior
fiscal year, down 20.6%.
Cash and cash equivalents were $1,231.6 million as of June 30, 2023, compared to $1,693.7 million as of June 30,
2022.
Acquired Micro Focus for total consideration of $6.2 billion, inclusive of Micro Focus’ cash, subject to final
adjustments.
In connection with the financing of the Micro Focus Acquisition, we drew down the entire $3.585 billion of the
Acquisition Term Loan (as defined below), issued $1 billion of Senior Secured Notes 2027 (as defined below) and
drew down $450 million under the Revolver (as defined below). Subsequent to the closing of the Micro Focus
Acquisition we repaid $175 million of the outstanding balance on the Revolver during the year ended June 30, 2023
and subsequently repaid $175 million on July 5, 2023.
Enterprise cloud bookings were $527.7 million for the year ended June 30, 2023, compared to $482.0 million for the
year ended June 30, 2022. 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. See “Acquisitions” below for the impact of acquisitions on the period-to-period comparability of
results.
Acquisitions
As a result of the continually changing marketplace in which we operate, we regularly evaluate acquisition opportunities
within our market and at any time may be in various stages of discussions with respect to such opportunities.
Acquisition of Micro Focus
On January 31, 2023, we acquired all of the issued and to be issued share capital of Micro Focus for a total purchase price
of $6.2 billion, inclusive of Micro Focus’ cash and repayment of Micro Focus’ outstanding indebtedness, subject to final
adjustments.
In connection with the financing of the Micro Focus Acquisition, concurrent with the announcement of the acquisition on
August 25, 2022, the Company entered into the Acquisition Term Loan and Bridge Loan (as defined below) as well as certain
derivative transactions. On December 1, 2022, the Company issued and sold $1 billion in aggregate principal amount of 6.90%
Senior Secured Notes due 2027 (Senior Secured Notes 2027), amended the Acquisition Term Loan and terminated the Bridge
Loan. On January 31, 2023, we drew down the entire aggregate principal amount of $3.585 billion of the Acquisition Term
Loan, net of original issuance discount and other fees, and drew down $450 million under the Revolver. We used these
proceeds and cash on hand to fund the purchase price consideration and repayment of Micro Focus’ outstanding indebtedness.
In conjunction with the closing of the Micro Focus Acquisition, the deal-contingent forward contracts and non-contingent
forward contract, as described in Note 17 “Derivative Instruments and Hedging Activities” to our Consolidated Financial
Statements were settled. See Note 19 “Acquisitions” to our Consolidated Financial Statements for more details. The Micro
Focus Acquisition has contributed to the growth in our revenues and significantly impacts period-over-period comparability.
Impacts of Russia-Ukraine Conflict
We have ceased all direct business in Russia and Belarus and with known Russian-owned companies. 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. However, we may adjust our
business practices as required by applicable rules and regulations. 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,
including adverse effects on the global economy, on our business and operations as well as those of our customers, partners and
third party service providers. 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. With an emphasis on increasing recurring revenues and expanding profitability, we
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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. 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.
We are committed to continuous innovation. Our investments in research and development (R&D) push product
innovation, increasing the value of our offerings to our existing customer base and new customers, which includes Global
10,000 companies (G10K), SMBs and consumers. The G10K are the world’s largest companies, ranked by estimated total
revenues, as well as the world's largest governments and global organizations. More valuable products, coupled with our
established global partner program, lead to greater distribution and cross-selling opportunities which further help us to achieve
organic growth. Over the last three fiscal years, we have invested a cumulative total of $1.54 billion in R&D or 13.6% of
cumulative revenue for that three-year period. On an annual basis, we continue to target to spend 14% to 16% of revenues on
R&D expense. With our innovation roadmap delivered, we believe we have fortified our support for customer choice: private
cloud, public cloud, off-cloud, and API cloud.
Looking ahead, the destination for innovation is cloud. Businesses of all sizes rely on a combination of 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 our existing investments in the OpenText Cloud and programs to help customers off-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 OpenText Cloud is designed to build additional flexibility and scalability for our
customers: becoming cloud-native, connecting anything, and extending capabilities with multi-tenant SaaS applications and
services.
The completion of the Micro Focus Acquisition during Fiscal 2023 has substantially expanded our scope and size by
adding substantial assets and operations to our existing business. During Fiscal 2023, we incurred significant transaction costs
in connection with the Micro Focus Acquisition. We have incurred and will continue to incur additional integration costs. As
part of the Micro Focus Acquisition, the Company made a strategic decision to implement a restructuring plan that impacted its
global workforce and further reduce its real estate footprint around the world in an effort to further streamline our operations,
consistent with previously announced cost synergies of $400 million (Micro Focus Acquisition Restructuring Plan). The total
size of the plan is expected to result in a reduction in the combined workforce of approximately 8%, or 2,000 employees, with
an estimated cost of $135.0 million to $150.0 million, of which we incurred $72.3 million during Fiscal 2023. We expect the
Micro Focus Acquisition Restructuring Plan to be completed by the end of Fiscal 2024. See also Part I, Item 1A, “Risk Factors”
included within this Annual Report on Form 10-K. The Micro Focus Acquisition has a significant impact on period-over-period
comparability as more fully discussed below.
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.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates, judgments and
assumptions that affect the amounts reported in the Consolidated Financial Statements. These estimates, judgments and
assumptions are evaluated on an ongoing basis. 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. The policies
listed below are areas that may contain key components of our results of operations and are based on complex rules requiring us
to make judgments and estimates and consequently, we consider these to be our critical accounting policies. Some of these
accounting policies involve complex situations and require a higher degree of judgment, either in the application and
interpretation of existing accounting literature or in the development of estimates that affect our financial statements. The
critical accounting policies which we believe are the most important to aid in fully understanding and evaluating our reported
financial results include the following:
(i)
(ii)
(iii)
(iv)
Revenue recognition,
Goodwill,
Acquired intangibles and
Income taxes.
For a full discussion of all our accounting policies, please see Note 2 “Accounting Policies and Recent Accounting
Pronouncements” to the Consolidated Financial Statements included in this Annual Report on Form 10-K.
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Revenue recognition
In accordance with Accounting Standards Codification (ASC) Topic 606 “Revenue from Contracts with
Customers” (Topic 606), we account for a customer contract when we obtain written approval, the contract is committed, the
rights of the parties, including the payment terms, are identified, the contract has commercial substance and consideration is
probable of collection. Revenue is recognized when, or as, control of a promised product or service is transferred to our
customers in an amount that reflects the consideration we expect to be entitled to in exchange for our products and services (at
its transaction price). Estimates of variable consideration and the determination of whether to include estimated amounts in the
transaction price are based on readily available information, which may include historical, current and forecasted information,
taking into consideration the type of customer, the type of transaction and specific facts and circumstances of each arrangement.
We report revenue net of any revenue-based taxes assessed by governmental authorities that are imposed on and concurrent
with specific revenue producing transactions.
We have four revenue streams: cloud services and subscriptions, customer support, license and professional service and
other.
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). 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.
PaaS/ SaaS/ Cloud Subscriptions (collectively referred to here as cloud-based solutions): We offer cloud-based
solutions that provide customers the right to access our software through the internet. Our cloud-based solutions represent
a series of distinct services that are substantially the same and have the same pattern of transfer to the customer. These
services are made available to the customer continuously throughout the contractual period. However, the extent to which
the customer uses the services may vary at the customer’s discretion. The payment for cloud-based solutions may be
received either at inception of the arrangement, or over the term of the arrangement.
These cloud-based solutions are considered to have a single performance obligation where the customer simultaneously
receives and consumes the benefit, and as such we recognize revenue for these cloud-based solutions ratably over the term
of the contractual agreement. For example, revenue related to cloud-based solutions that are provided on a usage basis,
such as the number of users, is recognized based on a customer’s utilization of the services in a given period.
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.
In these cases where a software license is present in a cloud-based solutions arrangement it is assessed to determine if it is
distinct from the cloud-based solutions arrangement. The revenue allocated to the distinct software license would be
recognized at the point in time the software license is transferred to the customer, whereas the revenue allocated to the
hosting performance obligation would be recognized ratably on a monthly basis over the contractual term unless evidence
suggests that revenue is earned, or obligations are fulfilled in a different pattern over the contractual term of the
arrangement.
Managed services: We provide comprehensive B2B process outsourcing services for all day-to-day operations of a
customers’ B2B integration program. Customers using these managed services are not permitted to take possession of our
software and the contract is for a defined period, where customers pay a monthly or quarterly fee. Our performance
obligation is satisfied as we provide services of operating and managing a customer’s electronic data interchange (EDI)
environment. Revenue relating to these services is recognized using an output method based on the expected level of
service we will provide over the term of the contract.
In connection with cloud subscription and managed service contracts, we often agree to perform a variety of services
before the customer goes live, such as, converting and migrating customer data, building interfaces and providing training.
These services are considered an outsourced suite of professional services which can involve certain project-based activities.
These services can be provided at the initiation of a contract, during the implementation or on an ongoing basis as part of the
customer life cycle. These services can be charged separately on a fixed fee, a time and materials basis, or the costs associated
may be recovered as part of the ongoing cloud subscription or managed services fee. 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
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time, with the customer simultaneously receiving and consuming the benefits as we satisfy our performance obligations. For
outsourced professional services, we recognize revenue by measuring progress toward the satisfaction of our performance
obligation. Progress for services that are contracted for a fixed price is generally measured based on hours incurred as a portion
of total estimated hours. As a practical expedient, when we invoice a customer at an amount that corresponds directly with the
value to the customer of our performance to date, we recognize revenue at that amount.
Customer support revenue
Customer support revenue is associated with perpetual, term license and off-cloud subscription arrangements. As
customer support is not critical to the customers’ ability to derive benefit from their right to use our software, customer support
is considered a distinct performance obligation when sold together in a bundled arrangement along with the software.
Customer support consists primarily of technical support and the provision of unspecified updates and upgrades on a
when-and-if-available basis. Customer support for perpetual licenses is renewable, generally on an annual basis, at the option of
the customer. Customer support for term and subscription licenses is renewable concurrently with such licenses for the same
duration of time. Payments for customer support are generally made at the inception of the contract term or in installments over
the term of the maintenance period. Our customer support team is ready to provide these maintenance services, as needed, to the
customer during the contract term. As the elements of customer support are delivered concurrently and have the same pattern of
transfer, customer support is accounted for as a single performance obligation. The customer benefits evenly throughout the
contract period from the guarantee that the customer support resources and personnel will be available to them, and that any
unspecified upgrades or unspecified future products developed by us will be made available. Revenue for customer support is
recognized ratably over the contract period based on the start and end dates of the maintenance term, in line with how we
believe services are provided.
License revenue
Our license revenue can be broadly categorized as perpetual licenses, term licenses and subscription licenses, all of which
are deployed on the customer’s premises (off-cloud).
Perpetual licenses: We sell perpetual licenses which provide customers the right to use software for an indefinite period
of time in exchange for a one-time license fee, which is generally paid at contract inception. Our perpetual licenses
provide a right to use intellectual property (IP) that is functional in nature and have significant stand-alone functionality.
Accordingly, for perpetual licenses of functional IP, revenue is recognized at the point-in-time when control has been
transferred to the customer, which normally occurs once software activation keys have been made available for download.
Term licenses and Subscription licenses: We sell both term and subscription licenses which provide customers the right
to use software for a specified period in exchange for a fee, which may be paid at contract inception or paid in
installments over the period of the contract. Like perpetual licenses, both our term licenses and subscription licenses are
functional IP that have significant stand-alone functionality. 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.
Professional service and other revenue
Our professional services, when offered along with software licenses, consist primarily of technical and training services.
Technical services may include installation, customization, implementation or consulting services. Training services may
include access to online modules, or the delivery of a training package customized to the customer’s needs. At the customer’s
discretion, we may offer one, all, or a mix of these services. Payment for professional services is generally a fixed fee or a fee
based on time and materials. Professional services can be arranged in the same contract as the software license or in a separate
contract.
As our professional services do not significantly change the functionality of the license and our customers can benefit
from our professional services on their own or together with other readily available resources, we consider professional services
distinct within the context of the contract.
Professional service revenue is recognized over time as long as: (i) the customer simultaneously receives and consumes
the benefits as we perform them, (ii) our performance creates or enhances an asset the customer controls as we perform and (iii)
our performance does not create an asset with an alternative use, and we have the enforceable right to payment.
If all the above criteria are met, we use an input-based measure of progress for recognizing professional service revenue.
For example, we may consider total labour hours incurred compared to total expected labour hours. As a practical expedient,
when we invoice a customer at an amount that corresponds directly with the value to the customer of our performance to date,
we will recognize revenue at that amount.
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Material rights
To the extent that we grant our customer an option to acquire additional products or services in one of our arrangements,
we will account for the option as a distinct performance obligation in the contract only if the option provides a material right to
the customer that the customer would not receive without entering into the contract. For example, if we give the customer an
option to acquire additional goods or services in the future at a price that is significantly lower than the current price, this would
be a material right as it allows the customer to, in effect, pay in advance for the option to purchase future products or services. If
a material right exists in one of our contracts, then revenue allocated to the option is deferred and we would recognize that
deferred revenue only when those future products or services are transferred or when the option expires.
Based on history, our contracts do not typically contain material rights and when they do, the material right is not
significant to our Consolidated Financial Statements.
Arrangements with multiple performance obligations
Our contracts generally contain more than one of the products and services listed above. Determining whether goods and
services are considered distinct performance obligations that should be accounted for separately or as a single performance
obligation may require judgment, specifically when assessing whether both of the following two criteria are met:
•
•
the customer can benefit from the product or service either on its own or together with other resources that are
readily available to the customer; and
our promise to transfer the product or service to the customer is separately identifiable from other promises in the
contract.
If these criteria are not met, we determine an appropriate measure of progress based on the nature of our overall promise
for the single performance obligation.
If these criteria are met, each product or service is separately accounted for as a distinct performance obligation and the
total transaction price is allocated to each performance obligation on a relative standalone selling price (SSP) basis.
Standalone selling price
The SSP reflects the price we would charge for a specific product or service if it were sold separately in similar
circumstances and to similar customers. In most cases we are able to establish the SSP based on observable data. We typically
establish a narrow SSP range for our products and services and assess this range on a periodic basis or when material changes in
facts and circumstances warrant a review.
If the SSP is not directly observable, then we estimate the amount using either the expected cost plus a margin or residual
approach. 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.
Transaction Price Allocation
In bundled arrangements, where we have more than one distinct performance obligation, we must allocate the transaction
price to each performance obligation based on its relative SSP. However, in certain bundled arrangements, the SSP may not
always be directly observable. For instance, in bundled arrangements with license and customer support, we allocate the
transaction price between the license and customer support performance obligations using the residual approach because we
have determined that the SSP for licenses in these arrangements are highly variable. We use the residual approach only for our
license arrangements. When the SSP is observable but contractual pricing does not fall within our established SSP range, then
an adjustment is required, and we will allocate the transaction price between license and customer support based on the relative
SSP established for the respective performance obligations.
When two or more contracts are entered into at or near the same time with the same customer, we evaluate the facts and
circumstances associated with the negotiation of those contracts. Where the contracts are negotiated as a package, we will
account for them as a single arrangement and allocate the consideration for the combined contracts among the performance
obligations accordingly.
We believe there are significant assumptions, judgments and estimates involved in the accounting for revenue recognition
as discussed above and these assumptions, judgments and estimates could impact the timing of when revenue is recognized and
could have a material impact on our Consolidated Financial Statements.
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Goodwill
Goodwill represents the excess of the purchase price in a business combination over the fair value of net tangible and
intangible assets acquired. The carrying amount of goodwill is periodically reviewed for impairment (at a minimum annually)
and whenever events or changes in circumstances indicate that the carrying value of this asset may not be recoverable.
Our operations are analyzed by management and our chief operating decision maker (CODM) as being part of a single
industry segment: the design, development, marketing and sales of Information Management software and solutions. Therefore,
our goodwill impairment assessment is based on the allocation of goodwill to a single reporting unit.
We perform a qualitative assessment to test our reporting unit’s goodwill for impairment. Based on our qualitative
assessment, if we determine that the fair value of our reporting unit is more likely than not (i.e., a likelihood of more than 50
percent) to be less than its carrying amount, the quantitative assessment of the impairment test is performed. In the quantitative
assessment, we compare the fair value of our reporting unit to its carrying value. If the fair value of the reporting unit exceeds
its carrying value, goodwill is not considered impaired, and we are not required to perform further testing. 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. 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).
Acquired intangibles
In accordance with business combinations accounting, we allocate the purchase price of acquired companies to the
tangible and intangible assets acquired and the liabilities assumed based on their estimated fair values. Such valuations may
require management to make significant estimates and assumptions, especially with respect to intangible assets. Acquired
intangible assets typically consist of acquired technology and customer relationships.
In valuing our acquired intangible assets, we may make assumptions and estimates based in part on information obtained
from the management of the acquired company, which may make our assumptions and estimates inherently uncertain.
Examples of critical estimates we may make in valuing certain of the intangible assets that we acquire include, but are not
limited to:
•
•
•
•
future expected cash flows of our individual revenue streams;
historical and expected customer attrition rates and anticipated growth in revenue from acquired customers;
the expected use of the acquired assets; and
discount rates.
As a result of the judgments that need to be made, we obtain the assistance of independent valuation firms. We complete
these assessments as soon as practical after the closing dates. Any excess of the purchase price over the estimated fair values of
the identifiable net assets acquired is recorded as goodwill.
Although we believe the assumptions and estimates of fair value we have made in the past have been reasonable and
appropriate, they are based in part on historical experience and information obtained from the management of the acquired
companies and are inherently uncertain and subject to refinement. Unanticipated events and circumstances may occur that may
affect the accuracy or validity of such assumptions, estimates or actual results. As a result, during the measurement period,
which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed
with the corresponding offset to goodwill, if the changes are related to conditions that existed at the time of the acquisition.
Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed,
whichever comes first, any subsequent adjustments, based on events that occurred subsequent to the acquisition date, are
recorded in our Consolidated Statements of Income.
Income taxes
We account for income taxes in accordance with ASC Topic 740, “Income Taxes” (Topic 740).
We account for our uncertain tax provisions by using a two-step approach. The first step is to evaluate the tax position for
recognition by determining if the weight of the available evidence indicates it is more likely than not, based solely on the
technical merits, that the position will be sustained on audit, including the resolution of related appeals or litigation processes, if
any. The second step is to measure the appropriate amount of the benefit to recognize. The amount of benefit to recognize is
measured as the maximum amount which is more likely than not to be realized. The tax position is derecognized when it is no
longer more likely than not that the position will be sustained on audit. 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
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estimate, given the information available at the reporting date, although the outcome of the tax position is not absolute or final.
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.
Deferred tax assets and liabilities arise from temporary differences between the tax bases of assets and liabilities and their
reported amounts in the Consolidated Financial Statements that will result in taxable or deductible amounts in future years.
These temporary differences are measured using enacted tax rates. A valuation allowance is recorded to reduce deferred tax
assets to the extent that we consider it is more likely than not that a deferred tax asset will not be realized. In determining the
valuation allowance, we consider factors such as the reversal of deferred income tax liabilities, projected taxable income and
the character of income tax assets and tax planning strategies. A change to these factors could impact the estimated valuation
allowance and income tax expense.
The Company’s tax positions are subject to audit by local taxing authorities across multiple global subsidiaries and the
resolution of such audits may span multiple years. Since tax law is complex and often subject to varied interpretations, it is
uncertain whether some of the Company’s tax positions will be sustained upon audit. Our assumptions, judgments and
estimates relative to the current provision for income taxes considers current tax laws, our interpretations of current tax laws
and possible outcomes of current and future audits conducted by domestic and foreign tax authorities. 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.
RESULTS OF OPERATIONS
The following tables provide a detailed analysis of our results of operations and financial condition. For each of the
periods indicated below, we present our revenues by product type, revenues by major geography, cost of revenues by product
type, total gross margin, total operating margin, gross margin by product type and their corresponding percentage of total
revenue.
In addition, we provide Non-GAAP measures for the periods discussed in order to provide additional information to
investors that we believe will be useful as this presentation is in line with how our management assesses our Company’s
performance. See “Use of Non-GAAP Financial Measures” below for a reconciliation of GAAP-based measures to Non-
GAAP-based measures.
The comparability of our operating results for the year ended June 30, 2023 as compared to the year ended June 30, 2022
was impacted by the recent Micro Focus Acquisition. Our total revenues increased by $991.1 million across all of our product
types in the year ended June 30, 2023, relative to the year ended June 30, 2022, primarily due to revenue contributions from the
Micro Focus Acquisition, offset by unfavorable impact of $132.4 million of foreign exchange rate changes. The Micro Focus
Acquisition contributed $976.5 million to our total revenues during the year ended June 30, 2023, of which $629.1 million
related to customer support revenues and $219.6 million related to license revenues.
Total cost of revenues increased by $254.4 million in the year ended June 30, 2023, relative to the year ended June 30,
2022, primarily from additional cost of revenues of $279.3 million as a result of the Micro Focus Acquisition.
Total operating expenses increased by $865.2 million in the year ended June 30, 2023, relative to the year ended June 30,
2022, primarily from additional operating expenses of $761.5 million as a result of the Micro Focus Acquisition, of which
$550.4 million was related to research and development, sales and marketing, and general and administrative expenses.
57
Summary of Results of Operations
(In thousands)
Total Revenues by Product Type:
Cloud services and subscriptions
Customer support
License
Professional service and other
Total revenues
Total Cost of Revenues
Total GAAP-based Gross Profit
Total GAAP-based Gross Margin %
Total GAAP-based Operating Expenses
Year Ended June 30,
2023
Change
increase
(decrease)
2022
Change
increase
(decrease)
2021
$ 1,700,433
$
165,416 $ 1,535,017
$
127,572 $ 1,407,445
1,915,020
539,026
330,501
4,484,980
1,316,587
3,168,393
584,055
180,675
60,990
991,136
254,386
736,750
1,330,965
358,351
269,511
3,493,844
1,062,201
2,431,643
70.6 %
69.6 %
(3,097)
1,334,062
(26,360)
9,614
107,729
27,735
79,994
384,711
259,897
3,386,115
1,034,466
2,351,649
69.4 %
2,652,101
865,231
1,786,870
176,124
1,610,746
Total GAAP-based Income from Operations
$
516,292
$
(128,481) $
644,773
$
(96,130) $
740,903
% Revenues by Product Type:
Cloud services and subscriptions
Customer support
License
Professional service and other
Total Cost of Revenues by Product Type:
Cloud services and subscriptions
Customer support
License
Professional service and other
Amortization of acquired technology-based intangible assets
37.9 %
42.7 %
12.0 %
7.4 %
43.9 %
38.1 %
10.3 %
7.7 %
41.6 %
39.4 %
11.3 %
7.7 %
$
590,165
$
78,452 $
511,713
$
29,895 $
481,818
209,705
16,645
276,888
223,184
88,220
3,144
59,993
24,577
121,485
13,501
216,895
198,607
(1,268)
(415)
19,712
(20,189)
122,753
13,916
197,183
218,796
Total cost of revenues
$ 1,316,587
$
254,386 $ 1,062,201
$
27,735 $ 1,034,466
% GAAP-based Gross Margin by Product Type:
Cloud services and subscriptions
Customer support
License
Professional service and other
Total Revenues by Geography: (1)
Americas (2)
EMEA (3)
Asia Pacific (4)
Total revenues
% Revenues by Geography:
Americas (2)
EMEA (3)
Asia Pacific (4)
Other Metrics:
GAAP-based gross margin
Non-GAAP-based gross margin (5)
Net income, attributable to OpenText
GAAP-based EPS, diluted
Non-GAAP-based EPS, diluted (5)
Adjusted EBITDA (5)
_______________________________
65.3 %
89.0 %
96.9 %
16.2 %
66.7 %
90.9 %
96.2 %
19.5 %
65.8 %
90.8 %
96.4 %
24.1 %
$ 2,785,003
$
597,374 $ 2,187,629
$
118,546 $ 2,069,083
1,310,016
389,961
283,815
109,947
1,026,201
280,014
(5,406)
(5,411)
1,031,607
285,425
$ 4,484,980
$
991,136 $ 3,493,844
$
107,729 $ 3,386,115
62.1 %
29.2 %
8.7 %
70.6 %
76.1 %
$
$
150,379
0.56
$
3.29
$ 1,472,917
62.6 %
29.4 %
8.0 %
69.6 %
75.6 %
$
$
397,090
1.46
$
3.22
$ 1,264,986
61.1 %
30.5 %
8.4 %
69.4 %
76.1 %
$
$
310,672
1.14
$
3.39
$ 1,315,033
(1) Total revenues by geography are determined based on the location of our direct end customer.
(2) Americas consists of countries in North, Central and South America.
(3) EMEA primarily consists of countries in Europe, the Middle East and Africa.
(4) Asia Pacific primarily consists of Japan, Australia, China, Korea, Philippines, Singapore, India and New Zealand.
(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
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 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 via an identified line. Our cloud
arrangements can be broadly categorized as PaaS, SaaS, cloud subscriptions and managed services. For the year ended June 30,
2023, our cloud renewal rate, excluding the impact of Carbonite, Zix and Micro Focus was approximately 94%, consistent with
the year ended June 30, 2022.
Cost of Cloud services and subscriptions revenues is comprised primarily of third-party network usage fees, maintenance
of in-house data hardware centers, technical support personnel-related costs and some third party royalty costs.
(In thousands)
Cloud Services and Subscriptions:
Americas
EMEA
Asia Pacific
Total Cloud Services and Subscriptions Revenues
Cost of Cloud Services and Subscriptions Revenues
Year Ended June 30,
2023
Change
increase
(decrease)
2022
Change
increase
(decrease)
2021
$ 1,287,731
305,293
$
131,813 $ 1,155,918
274,824
30,469
$
107,474 $ 1,048,444
256,199
18,625
107,409
1,700,433
590,165
3,134
165,416
78,452
104,275
1,535,017
511,713
1,473
127,572
29,895
102,802
1,407,445
481,818
GAAP-based Cloud Services and Subscriptions Gross Profit
$ 1,110,268
$
86,964 $ 1,023,304
$
97,677 $
925,627
GAAP-based Cloud Services and Subscriptions Gross Margin %
65.3 %
% Cloud Services and Subscriptions Revenues by Geography:
Americas
EMEA
Asia Pacific
75.7 %
18.0 %
6.3 %
66.7 %
75.3 %
17.9 %
6.8 %
65.8 %
74.5 %
18.2 %
7.3 %
Cloud services and subscriptions revenues increased by $165.4 million or 10.8% during the year ended June 30, 2023 as
compared to the prior fiscal year; up 13.3% after factoring in the unfavorable impact of $38.6 million of foreign exchange rate
changes. The increase was primarily driven by organic revenue growth, as well as partially driven by incremental revenues
from the Micro Focus Acquisition over the comparative period. Geographically, the overall change was attributable to an
increase in Americas of $131.8 million, an increase in EMEA of $30.5 million and an increase in Asia Pacific of $3.1 million.
There were 89 cloud services contracts greater than $1.0 million that closed during Fiscal 2023, compared to 98 contracts
during Fiscal 2022.
Cost of Cloud services and subscriptions revenues increased by $78.5 million during the year ended June 30, 2023 as
compared to the prior fiscal year. This was primarily due to an increase in labour-related costs of $40.0 million and an increase
in third-party network usage fees of $37.8 million partially driven by incremental Cloud services and subscriptions cost of
revenues from the Micro Focus Acquisition over the comparative period. 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. Customer support revenues are generated from support and maintenance relating to current year sales
of software products and from the renewal of existing maintenance agreements for software licenses sold in prior periods.
Therefore, changes in Customer support revenues do not always correlate directly to the changes in license revenues from
period to period. The terms of support and maintenance agreements are typically twelve months, and are renewable, generally
on an annual basis, at the option of the customer. Our management reviews our Customer support renewal rates on a quarterly
basis, and we use these rates as a method of monitoring our customer service performance. For the year ended June 30, 2023,
our Customer support renewal rate was approximately 95%, compared to approximately 94% for the year ended June 30, 2022,
excluding the impact of Carbonite, Zix and Micro Focus.
59
Cost of Customer support revenues is comprised primarily of technical support personnel and related costs, as well as
third party royalty costs.
(In thousands)
Customer Support Revenues:
Americas
EMEA
Asia Pacific
Total Customer Support Revenues
Cost of Customer Support Revenues
Year Ended June 30,
2023
Change
increase
(decrease)
2022
Change
increase
(decrease)
2021
$ 1,081,192
$
337,718 $
743,474
$
(250) $
743,724
662,601
171,227
1,915,020
209,705
186,915
59,422
475,686
111,805
584,055
1,330,965
88,220
121,485
(5,872)
3,025
(3,097)
(1,268)
481,558
108,780
1,334,062
122,753
GAAP-based Customer Support Gross Profit
$ 1,705,315
$
495,835 $ 1,209,480
$
(1,829) $ 1,211,309
GAAP-based Customer Support Gross Margin %
% Customer Support Revenues by Geography:
Americas
EMEA
Asia Pacific
89.0 %
56.5 %
34.6 %
8.9 %
90.9 %
55.9 %
35.7 %
8.4 %
90.8 %
55.7 %
36.1 %
8.2 %
Customer support revenues increased by $584.1 million or 43.9% during the year ended June 30, 2023 as compared to the
prior fiscal year; up 48.7% after factoring in the unfavorable impact of $63.8 million of foreign exchange rate changes. The
increase was primarily driven by incremental Customer support revenues from the Micro Focus Acquisition over the
comparative period. Geographically, the overall change was attributable to an increase in Americas of $337.7 million, an
increase in EMEA of $186.9 million and an increase in Asia Pacific of $59.4 million.
Cost of Customer support revenues increased by $88.2 million during the year ended June 30, 2023 as compared to the
prior fiscal year. This was primarily due to an increase in labour-related costs of $82.2 million and an increase in third-party
network usage fees of $5.5 million driven by incremental Customer support cost of revenues from the Micro Focus Acquisition
over the comparative period. 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. Cost of License revenues consists primarily of royalties payable to third parties.
(In thousands)
License Revenues:
Americas
EMEA
Asia Pacific
Total License Revenues
Cost of License Revenues
GAAP-based License Gross Profit
GAAP-based License Gross Margin %
% License Revenues by Geography:
Americas
EMEA
Asia Pacific
Year Ended June 30,
2023
Change
increase
(decrease)
2022
Change
increase
(decrease)
2021
$
270,809
$
107,090 $
163,719
$
4,189 $
159,530
199,627
68,590
539,026
16,645
37,892
35,693
180,675
3,144
161,735
32,897
358,351
13,501
(16,768)
(13,781)
(26,360)
(415)
178,503
46,678
384,711
13,916
$
522,381
$
177,531 $
344,850
$
(25,945) $
370,795
96.9 %
50.2 %
37.0 %
12.8 %
96.2 %
45.7 %
45.1 %
9.2 %
96.4 %
41.5 %
46.4 %
12.1 %
License revenues increased by $180.7 million or 50.4% during the year ended June 30, 2023 as compared to the prior
fiscal year; up 55.0% after factoring in the unfavorable impact of $16.4 million of foreign exchange rate changes. The increase
was primarily driven by incremental License revenues from the Micro Focus Acquisition over the comparative period.
Geographically, the overall change was attributable to an increase in Americas of $107.1 million, an increase in EMEA of $37.9
million and an increase in Asia Pacific of $35.7 million.
60
During Fiscal 2023, we closed 163 license contracts greater than $0.5 million, of which 71 contracts were greater than
$1.0 million, contributing $211.3 million of License revenues. This was compared to 122 license contracts greater than $0.5
million during Fiscal 2022, of which 46 contracts were greater than $1.0 million, contributing $131.7 million of License
revenues.
Cost of License revenues increased by $3.1 million during the year ended June 30, 2023 as compared to the prior fiscal
year as a result of higher third-party technology costs primarily driven by incremental cost of License revenues from the Micro
Focus Acquisition over the comparative period. Overall, the gross margin percentage on License revenues increased to 97%
from 96%.
4) Professional Service and Other:
Professional service and other revenues consist of revenues from consulting contracts and contracts to provide
implementation, training and integration services (professional services). Other revenues consist of hardware revenues, which
are included within the “Professional service and other” category because they are relatively immaterial to our service revenues.
Professional services are typically performed after the purchase of new software licenses. Professional service and other
revenues can vary from period to period based on the type of engagements as well as those implementations that are assumed
by our partner network.
Cost of Professional service and other revenues consists primarily of the costs of providing integration, configuration and
training with respect to our various software products. The most significant components of these costs are personnel-related
expenses, travel costs and third-party subcontracting.
(In thousands)
Professional Service and Other Revenues:
Americas
EMEA
Asia Pacific
Total Professional Service and Other Revenues
Cost of Professional Service and Other Revenues
Year Ended June 30,
2023
Change
increase
(decrease)
2022
Change
increase
(decrease)
2021
$
145,271
$
20,753 $
124,518
$
7,133 $
117,385
142,495
42,735
330,501
276,888
28,539
11,698
60,990
59,993
113,956
31,037
269,511
216,895
(1,391)
3,872
9,614
19,712
115,347
27,165
259,897
197,183
GAAP-based Professional Service and Other Gross Profit
$
53,613
$
997 $
52,616
$
(10,098) $
62,714
GAAP-based Professional Service and Other Gross Margin %
16.2 %
% Professional Service and Other Revenues by Geography:
Americas
EMEA
Asia Pacific
44.0 %
43.1 %
12.9 %
19.5 %
46.2 %
42.3 %
11.5 %
24.1 %
45.2 %
44.4 %
10.4 %
Professional service and other revenues increased by $61.0 million or 22.6% during the year ended June 30, 2023 as
compared to the prior fiscal year; up 27.7% after factoring in the unfavorable impact of $13.6 million of foreign exchange rate
changes. The increase was primarily driven by incremental Professional service and other revenues from the Micro Focus
Acquisition over the comparative period. Geographically, the overall change was attributable to an increase in EMEA of $28.5
million, an increase in Americas of $20.8 million and an increase in Asia Pacific of $11.7 million.
Cost of Professional service and other revenues increased by $60.0 million during the year ended June 30, 2023 as
compared to the prior fiscal year. This was primarily due to an increase in labour-related costs of $58.1 million primarily driven
by the incremental Professional service and other cost of revenues from the Micro Focus Acquisition over the comparative
period. Overall, the gross margin percentage on Professional service and other revenues decreased to 16% from 20%.
61
Amortization of Acquired Technology-based Intangible Assets
(In thousands)
Year Ended June 30,
2023
Change
increase
(decrease)
2022
Change
increase
(decrease)
2021
Amortization of acquired technology-based intangible assets
$
223,184 $
24,577 $
198,607 $
(20,189) $
218,796
Amortization of acquired technology-based intangible assets increased during the year ended June 30, 2023 by $24.6
million as compared to the prior fiscal year. This was due to an increase of $91.2 million relating to amortization of newly
acquired technology-based intangible assets from the Micro Focus Acquisition, partly offset by a reduction of $68.8 million
related to technology-based intangible assets from previous acquisitions becoming fully amortized.
Operating Expenses
(In thousands)
Research and development
Sales and marketing
General and administrative
Depreciation
Amortization of acquired customer-based intangible assets
Special charges (recoveries)
Total operating expenses
% of Total Revenues:
Research and development
Sales and marketing
General and administrative
Depreciation
Amortization of acquired customer-based intangible assets
Special charges (recoveries)
Year Ended June 30,
2023
Change
increase
(decrease)
2022
Change
increase
(decrease)
2021
$
680,587
$
240,139 $
440,448
$
19,001 $
421,447
948,598
419,590
107,761
326,406
169,159
271,480
102,505
19,520
109,301
122,286
677,118
317,085
88,241
217,105
46,873
54,897
53,564
2,976
561
45,125
622,221
263,521
85,265
216,544
1,748
$ 2,652,101
$
865,231 $ 1,786,870
$
176,124 $ 1,610,746
15.2 %
21.2 %
9.4 %
2.4 %
7.3 %
3.8 %
12.6 %
19.4 %
9.1 %
2.5 %
6.2 %
1.3 %
12.4 %
18.4 %
7.8 %
2.5 %
6.4 %
0.1 %
Research and development expenses consist primarily of payroll and payroll-related benefits expenses, contracted
research and development expenses and facility costs. Research and development enables organic growth and improves product
stability and functionality, and accordingly, we dedicate extensive efforts to update and upgrade our product offerings. The
primary drivers are typically software upgrades and development.
(In thousands)
Payroll and payroll-related benefits
Contract labour and consulting
Share-based compensation
Travel and communication
Facilities
Other miscellaneous
Total change in research and development expenses
Change between Fiscal Years
increase (decrease)
2023 and 2022
2022 and 2021
$
$
152,915 $
14,660
21,964
1,363
45,791
3,446
240,139 $
17,070
2,576
7,263
294
(9,053)
851
19,001
Research and development expenses increased by $240.1 million during the year ended June 30, 2023 as compared to the
prior fiscal year, primarily as a result of the Micro Focus Acquisition. Payroll and payroll-related benefits, which is comprised
of salaries, benefits and variable short-term incentives, increased by $152.9 million, facility-related expenses increased by $45.8
million, share-based compensation expense increased by $22.0 million and contract labour and consulting increased by $14.7
million. Overall, our research and development expenses, as a percentage of total revenues, increased to 15% compared to the
prior fiscal year at 13%.
Our research and development labour resources increased by 3,953 employees, from 4,326 employees at June 30, 2022 to
8,279 employees at June 30, 2023.
62
Sales and marketing expenses consist primarily of personnel expenses and costs associated with advertising, marketing
events and trade shows.
(In thousands)
Payroll and payroll-related benefits
Commissions
Contract labour and consulting
Share-based compensation
Travel and communication
Marketing expenses
Facilities
Credit loss expense (recovery)
Other miscellaneous
Total change in sales and marketing expenses
Change between Fiscal Years
increase (decrease)
2023 and 2022
2022 and 2021
$
$
136,300 $
38,142
7,670
19,081
13,347
29,076
23,168
(94)
4,790
271,480 $
38,613
6,993
2
4,316
3,806
9,579
(3,991)
(9,045)
4,624
54,897
Sales and marketing expenses increased by $271.5 million during the year ended June 30, 2023 as compared to the prior
fiscal year, primarily as a result of the Micro Focus Acquisition. Payroll and payroll-related benefits, which is comprised of
salaries, benefits and variable short-term incentives, increased by $136.3 million, commissions increased by $38.1 million,
marketing expenses increased by $29.1 million, facility-related expenses increased by $23.2 million, share-based compensation
expense increased by $19.1 million and travel and communication expenses increased by $13.3 million. Overall, our sales and
marketing expenses, as a percentage of total revenues, increased to 21% compared to the prior fiscal year at 19%.
Our sales and marketing labour resources increased by 2,105 employees, from 2,710 employees at June 30, 2022 to 4,815
employees at June 30, 2023.
General and administrative expenses consist primarily of payroll and payroll related benefits expenses, related overhead,
audit fees, other professional fees, contract labour and consulting expenses and public company costs.
(In thousands)
Payroll and payroll-related benefits
Contract labour and consulting
Share-based compensation
Travel and communication
Facilities
Other miscellaneous
Change between Fiscal Years
increase (decrease)
2023 and 2022
2022 and 2021
50,695 $
15,827
9,856
9,106
3,393
13,628
Total change in general and administrative expenses
$
102,505 $
47,831
5,294
2,478
5,827
322
(8,188)
53,564
General and administrative expenses increased by $102.5 million during the year ended June 30, 2023 as compared to the
prior fiscal year, primarily as a result of the Micro Focus Acquisition. Payroll and payroll-related benefits, which is comprised
of salaries, benefits and variable short-term incentives, increased by $50.7 million, contract labour and consulting increased by
$15.8 million, other miscellaneous costs, which include professional fees such as legal, audit, and tax related expenses
increased by $13.6 million, share-based compensation expense increased by $9.9 million and travel and communication
expenses increased by $9.1 million. Overall, general and administrative expenses, as a percentage of total revenues, remained
stable at 9% in both fiscal years.
Our general and administrative labour resources increased by 1,425 employees, from 1,971 employees at June 30, 2022
to 3,396 employees at June 30, 2023, primarily as a result of the Micro Focus Acquisition.
63
Depreciation expenses:
(In thousands)
Depreciation
Year Ended June 30,
2023
Change
increase
(decrease)
2022
Change
increase
(decrease)
2021
$
107,761 $
19,520 $
88,241 $
2,976 $
85,265
Depreciation expenses increased during the year ended June 30, 2023 by $19.5 million compared to the prior fiscal year,
primarily as a result of the Micro Focus Acquisition.
Depreciation expenses as a percentage of total revenue remained stable for the year ended June 30, 2023 at 2% compared
to the prior fiscal year.
Amortization of acquired customer-based intangible assets:
(In thousands)
Year Ended June 30,
2023
Change
increase
(decrease)
2022
Change
increase
(decrease)
2021
Amortization of acquired customer-based intangible assets
$
326,406 $
109,301 $
217,105 $
561 $
216,544
Amortization of acquired customer-based intangible assets increased during the year ended June 30, 2023 by $109.3
million as compared to the prior fiscal year. This was due to an increase of $111.2 million relating to amortization of newly
acquired customer-based intangible assets from the Micro Focus Acquisition, partly offset by a reduction of $9.8 million related
to customer-based intangible assets from previous acquisitions becoming fully amortized.
Special charges (recoveries):
Special charges (recoveries) typically relate to amounts that we expect to pay in connection with restructuring plans,
acquisition-related costs and other similar charges and recoveries. Generally, we implement such plans in the context of
integrating acquired entities with existing OpenText operations and most recently in response to our return to office planning.
Actions related to such restructuring plans are typically completed within a period of one year. In certain limited situations, if
the planned activity does not need to be implemented, or an expense lower than anticipated is paid out, we record a recovery of
the originally recorded expense to Special charges (recoveries).
(In thousands)
Special charges (recoveries)
Year Ended June 30,
2023
Change
increase
(decrease)
2022
Change
increase
(decrease)
2021
$
169,159 $
122,286 $
46,873 $
45,125 $
1,748
Special charges (recoveries) increased by $122.3 million during the year ended June 30, 2023 as compared to the prior
fiscal year. Restructuring activities increased by $55.5 million driven by the Micro Focus Restructuring Plan, acquisition related
costs increased by $42.1 million primarily due to the Micro Focus Acquisition and other miscellaneous charges increased by
$24.7 million, primarily driven by severance charges related to the Micro Focus Acquisition.
For more details on Special charges (recoveries), see Note 18 “Special Charges (Recoveries)” to our Consolidated
Financial Statements.
64
Other Income (Expense), Net
The components of other income (expense), net were as follows:
(In thousands)
Foreign exchange gains (losses) (1)
Unrealized losses on derivatives not designated as hedges (2)
Realized gains on derivatives not designated as hedges (3)
OpenText share in net income (loss) of equity investees (4)
Loss on debt extinguishment (5)(6)
Other miscellaneous income (expense)
Total other income (expense), net
__________________________
Year Ended June 30,
2023
Change
increase
(decrease)
2022
Change
increase
(decrease)
2021
$
56,599 $
59,269 $
(2,670) $
(1,397) $
(1,273)
(128,841)
137,471
(23,077)
(8,152)
469
(128,841)
137,471
(81,779)
19,261
(30)
—
—
58,702
(27,413)
499
—
—
(4,195)
(27,413)
689
—
—
62,897
—
(190)
$
34,469 $
5,351 $
29,118 $
(32,316) $
61,434
(1) The year ended June 30, 2023 includes a foreign exchange gain of $36.6 million resulting from the delayed payment of a portion of the purchase
consideration, settled on February 9, 2023, related to the Micro Focus Acquisition (see Note 19 “Acquisitions” to our Consolidated Financial
Statements for more details).
(2) Represents the unrealized losses on our derivatives not designated as hedges related to the financing of the Micro Focus Acquisition (see Note 17
“Derivative Instruments and Hedging Activities” to our Consolidated Financial Statements for more details).
(3) Represents the realized gains on our derivatives not designated as hedges related to the financing of the Micro Focus Acquisition (see Note 17
“Derivative Instruments and Hedging Activities” to our Consolidated Financial Statements for more details).
(4) Represents our share in net income (loss) of equity investees, which approximates fair value and subject to volatility based on market trends and
business conditions, based on our interest in certain investment funds in which we are a limited partner. Our interests in each of these investees
range from 4% to below 20% and these investments are accounted for using the equity method (see Note 9 “Prepaid Expenses and Other Assets” to
our Consolidated Financial Statements for more details).
(5) On December 1, 2022, we amended the Acquisition Term Loan and Bridge Loan to reallocate commitments under the Bridge Loan to the
Acquisition Term Loan and terminated all remaining commitments under the Bridge Loan which resulted in a loss on debt extinguishment related to
unamortized debt issuance costs (see Note 11 “Long-Term Debt” to our Consolidated Financial Statements for more details).
(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. Of this, $25.0
million related to the early termination call premium, $6.2 million related to unamortized debt issuance costs and ($3.8) million related to
unamortized premium (see Note 11 “Long-Term Debt” to our Consolidated Financial Statements for more details).
Interest and Other Related Expense, Net
Interest and other related expense, net is primarily comprised of interest paid and accrued on our debt facilities, offset by
interest income earned on our cash and cash equivalents.
(In thousands)
Interest expense related to total outstanding debt (1)
Interest income
Other miscellaneous expense (2)
Total interest and other related expense, net
__________________________
Year Ended June 30,
2023
Change
increase
(decrease)
2022
Change
increase
(decrease)
$
363,632 $
(53,486)
19,282
212,063 $
(48,849)
151,569 $
(4,637)
8,334
10,948
5,923 $
(781)
1,171
2021
145,646
(3,856)
9,777
$
329,428 $
171,548 $
157,880 $
6,313 $
151,567
(1) For more details see Note 11 “Long-Term Debt” to our Consolidated Financial Statements.
(2) Other miscellaneous expense primarily consists of the amortization of debt discount and the debt issuance costs. For more details see Note 11
“Long-Term Debt” to our Consolidated Financial Statements.
Provision for (recovery of) Income Taxes
We operate in several tax jurisdictions and are exposed to various foreign tax rates.
(In thousands)
Year Ended June 30,
2023
Change
increase
(decrease)
2022
Change
increase
(decrease)
2021
Provision for (recovery of) income taxes
$
70,767 $
(47,985) $
118,752 $
(221,154) $
339,906
The effective tax rate increased to a provision of 32.0% for the year ended June 30, 2023, compared to a provision of
23.0% for the year ended June 30, 2022. Tax expense decreased from $118.8 million during the year ended June 30, 2022 to
$70.8 million during the year ended June 30, 2023. The increase in the effective tax rate was driven by increases in withholding
taxes, changes in valuation allowance, permanent differences related to foreign source income inclusions, and the impact of
65
internal reorganizations, partially offset by lower pretax income, tax credits and permanent adjustments related to the
preferential tax treatment of the mark-to-market gains on derivatives. The tax rate for the year ended June 30, 2022 varied from
the statutory rate due favorable permanent adjustments related to excess share-based compensation deductions, tax credits, and
the reduction in the accrual on unremitted foreign earnings, partially offset by the impact of internal reorganizations and an
increase in unrecognized tax benefits.
Beginning July 1, 2022, as a result of the Tax Cuts and Jobs Act of 2017 (“Tax Act”), our research and development
expenditures are now being capitalized and amortized. For fiscal year 2023, the new regulations resulted in incremental cash tax
payments of approximately $68 million. The actual impact on future cash flows from operations will primarily depend on if or
when this legislation is deferred, modified, or repealed by the U.S. Congress and the amount of R&D expenditures paid or
incurred in those respective years. We estimate the largest potential impact will be related to Fiscal 2023 cash flows from
operations and that the impact in future years should gradually decrease over the respective amortization periods.
The Inflation Reduction Act and Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act (the
Inflation Reduction Act) were signed into law in August 2022. The Inflation Reduction Act introduced new provisions,
including a 15% corporate alternative minimum tax for certain large corporations that have at least an average of $1 billion of
adjusted financial statement income over a consecutive three-tax-year period. The corporate minimum tax will be effective for
Fiscal 2024. We are currently evaluating the applicability and the effect of the new law to our financial results.
For information on certain potential tax contingencies, including the Canada Revenue Agency (CRA) matter, see Note 14
“Guarantees and Contingencies” and Note 15 “Income Taxes” to our Consolidated Financial Statements. Please also see Part I,
Item 1A, “Risk Factors” within this Annual Report on Form 10-K.
66
LIQUIDITY AND CAPITAL RESOURCES
The following tables set forth changes in cash flows from operating, investing and financing activities for the periods
indicated:
(In thousands)
Cash and cash equivalents
Restricted cash (1)
Total cash, cash equivalents and restricted cash
__________________________
As of June 30,
2023
Change
increase
(decrease)
As of June 30,
2022
Change
increase
(decrease)
As of June 30,
2021
$ 1,231,625 $
(462,116) $ 1,693,741 $
2,327
157
2,170
$ 1,233,952 $
(461,959) $ 1,695,911 $
86,435 $ 1,607,306
2,494
86,111 $ 1,609,800
(324)
(1) Restricted cash is classified under the Prepaid expenses and other current assets and Other assets line items on the Consolidated
Balance Sheets (see Note 9 “Prepaid Expenses and Other Assets” to our Consolidated Financial Statements for more details).
(In thousands)
Cash provided by operating activities
Cash used in investing activities
Cash provided by (used in) financing activities
2023
779,205 $
Change
(202,605) $
$
$ (5,651,420) $ (4,680,461) $
$ 4,403,053 $ 4,264,597 $
Change
2022
105,690 $
981,810 $
(970,959) $
(902,189) $
138,456 $ 1,063,003 $
2021
876,120
(68,770)
(924,547)
Year Ended June 30,
Cash and cash equivalents
Cash and cash equivalents primarily consist of balances with banks as well as deposits with original maturities of 90 days
or less.
We continue to anticipate that our cash and cash equivalents, as well as available credit facilities, will be sufficient to fund
our anticipated cash requirements for working capital, contractual commitments, capital expenditures, dividends and operating
needs for the next twelve months. Any further material or acquisition-related activities may require additional sources of
financing and would be subject to the financial covenants established under our credit facilities. For more details, see “Long-
term Debt and Credit Facilities” below.
As of June 30, 2023, we have recognized a provision of $28.3 million (June 30, 2022—$15.1 million) in respect of
deferred income tax liabilities for temporary differences related to the undistributed earnings of certain non-United States
subsidiaries and planned periodic repatriations from certain German subsidiaries, that will be subject to withholding taxes upon
distribution.
Cash flows provided by operating activities
Cash flows from operating activities decreased by $202.6 million during the year ended June 30, 2023, as compared to the
same period in the prior fiscal year due to a decrease in net changes from working capital of $255.8 million, partially offset by
an increase in net income after the impact of non-cash items of $53.2 million.
During the fourth quarter of Fiscal 2023 we had a days sales outstanding (DSO) of 41 days, compared to our DSO of 43
days during the fourth quarter of Fiscal 2022. The per day impact of our DSO in the fourth quarter of Fiscal 2023 and Fiscal
2022 on our cash flows was $16.6 million and $10.0 million, respectively. In arriving at DSO, we exclude contract assets as
these assets do not provide an unconditional right to the related consideration from the customer.
Cash flows used in investing activities
Our cash flows used in investing activities is primarily on account of acquisitions and additions of property and
equipment.
Cash flows used in investing activities increased by $4.68 billion during the year ended June 30, 2023, as compared to the
same period in the prior fiscal year primarily due to consideration paid for acquisitions during Fiscal 2023, which includes cash
paid for the Micro Focus Acquisition of $5.658 billion, as compared to the cash paid during Fiscal 2022 for the acquisition of
Zix of $856.2 million and the acquisition of Bricata Inc. of $17.8 million.
67
Cash flows provided by (used in) financing activities
Our cash flows from financing activities generally consist of long-term debt financing and amounts received from stock
options exercised by our employees and Employee Stock Purchase Plan (ESPP) purchases by our employees. These inflows are
typically offset by scheduled and non-scheduled repayments of our long-term debt financing and, when applicable, the payment
of dividends and/or repurchases of our Common Shares.
Cash flows provided by financing activities increased by $4.265 billion during the year ended June 30, 2023 as compared
to the same period in the prior fiscal year. This is primarily due to the net impact of the following activities:
(i) $3.427 billion increase in proceeds from the issuance of long-term debt and draw down on the Revolver;
(ii) $657.1 million decrease in repayments of long-term debt and Revolver;
(iii) $266.7 million related to less cash used in the repurchases of Common Shares and treasury stock; and
(iv) $25.0 million relating to early call termination premium upon redemption of Senior Notes 2026 in Fiscal 2022
that did not occur in Fiscal 2023.
The increases in cash flows provided by financing activities above were partially offset by the following decreases:
(i) $60.7 million increase in debt issuance costs;
(ii) $27.9 million related to lower proceeds from the issuance of Common Shares for the exercise of options and
the OpenText ESPP; and
(iii) $21.9 million related to higher cash dividends paid to shareholders.
Cash Dividends
During the year ended June 30, 2023, we declared and paid cash dividends of $0.9720 per Common Share in the
aggregate amount of $259.5 million (year ended June 30, 2022 and 2021—$0.8836 and $0.7770 per Common Share,
respectively, in the aggregate amount of $237.7 million and $210.7 million, respectively).
Future declarations of dividends and the establishment of future record and payment dates are subject to final
determination and discretion of the Board. See Item 5 “Dividend Policy” included in this Annual Report on Form 10-K for
more information.
Long-term Debt and Credit Facilities
Senior Unsecured Fixed Rate Notes
Senior Notes 2031
On November 24, 2021, OpenText Holdings, Inc. (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.
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.
OTHI may redeem all or a portion of the Senior Notes 2031 at any time prior to December 1, 2026 at a redemption price
equal to 100% of the principal amount of the Senior Notes 2031 plus an applicable premium, plus accrued and unpaid interest,
if any, to the redemption date. OTHI may also redeem up to 40% of the aggregate principal amount of the Senior Notes 2031,
on one or more occasions, prior to December 1, 2024, using the net proceeds from certain qualified equity offerings at a
redemption price of 104.125% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, subject
to compliance with certain conditions. OTHI may, on one or more occasions, redeem the Senior Notes 2031, in whole or in
part, at any time on and after December 1, 2026 at the applicable redemption prices set forth in the indenture governing the
Senior Notes 2031, dated as of November 24, 2021, among OTHI, the Company, the subsidiary guarantors party thereto, The
Bank of New York Mellon, as U.S. trustee, and BNY Trust Company of Canada, as Canadian trustee (the 2031 Indenture), plus
accrued and unpaid interest, if any, to the redemption date.
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
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.
These covenants are subject to a number of important limitations and exceptions as set forth in the 2031 Indenture. The 2031
Indenture also provides for events of default, which, if any of them occurs, may permit or, in certain circumstances, require the
principal, premium, if any, interest and any other monetary obligations on all the then-outstanding Senior Notes 2031 to be due
and payable immediately.
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 2031 and the guarantees rank equally in right of payment with all of the Company’s, OTHI’s and the guarantors’ existing
and future senior unsubordinated debt and will rank senior in right of payment to all of the Company’s, OTHI’s and the
guarantors’ future subordinated debt. Senior Notes 2031 and the guarantees will be effectively subordinated to all of the
Company’s, OTHI’s 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 foregoing description of the 2031 Indenture does not purport to be complete and is qualified in its entirety by
reference to the full text of the 2031 Indenture, which is filed as an exhibit to the Company’s Current Report on Form 8-K filed
with the SEC on November 24, 2021.
For further details relating to our debt, please see Note 11 “Long-Term Debt” to our Consolidated Financial Statements.
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. Senior Notes 2030 bear interest at a rate of 4.125% per
annum, payable semi-annually in arrears on February 15 and August 15, commencing on August 15, 2020. Senior Notes 2030
will mature on February 15, 2030, unless earlier redeemed, in accordance with their terms, or repurchased.
OTHI may redeem all or a portion of the Senior Notes 2030 at any time prior to February 15, 2025 at a redemption price
equal to 100% of the principal amount of the Senior Notes 2030 plus an applicable premium, plus accrued and unpaid interest,
if any, to the redemption date. OTHI may also redeem up to 40% of the aggregate principal amount of the Senior Notes 2030,
on one or more occasions, prior to February 15, 2025, using the net proceeds from certain qualified equity offerings at a
redemption price of 104.125% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, subject
to compliance with certain conditions. OTHI may, on one or more occasions, redeem the Senior Notes 2030, in whole or in
part, at any time on and after February 15, 2025 at the applicable redemption prices set forth in the indenture governing the
Senior Notes 2030, dated as of February 18, 2020, among OTHI, the Company, the subsidiary guarantors party thereto, The
Bank of New York Mellon, as U.S. trustee, and BNY Trust Company of Canada, as Canadian trustee (the 2030 Indenture), plus
accrued and unpaid interest, if any, to the redemption date.
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.
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.
These covenants are subject to a number of important limitations and exceptions as set forth in the 2030 Indenture. The 2030
Indenture also provides for events of default, which, if any of them occurs, may permit or, in certain circumstances, require the
principal, premium, if any, interest and any other monetary obligations on all the then-outstanding Senior Notes 2030 to be due
and payable immediately.
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 2030 and the guarantees rank equally in right of payment with all of the Company, OTHI and the guarantors’ existing
and future senior unsubordinated debt and will rank senior in right of payment to all of the Company, OTHI and the guarantors’
future subordinated debt. Senior Notes 2030 and the guarantees will be effectively subordinated to all of the Company, OTHI
69
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 foregoing description of the 2030 Indenture does not purport to be complete and is qualified in its entirety by
reference to the full text of the 2030 Indenture, which is filed as an exhibit to the Company’s Current Report on Form 8-K filed
with the SEC on February 18, 2020.
For further details relating to our debt, please see Note 11 “Long-Term Debt” to our Consolidated Financial Statements.
Senior Notes 2029
On November 24, 2021, we issued $850 million in aggregate principal amount of 3.875% Senior Notes due 2029 (Senior
Notes 2029) 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 2029 bear
interest at a rate of 3.875% per annum, payable semi-annually in arrears on June 1 and December 1, commencing on June 1,
2022. Senior Notes 2029 will mature on December 1, 2029, unless earlier redeemed, in accordance with their terms, or
repurchased.
We may redeem all or a portion of the Senior Notes 2029 at any time prior to December 1, 2024 at a redemption price
equal to 100% of the principal amount of the Senior Notes 2029 plus an applicable premium, plus accrued and unpaid interest,
if any, to the redemption date. We may also redeem up to 40% of the aggregate principal amount of the Senior Notes 2029, on
one or more occasions, prior to December 1, 2024, using the net proceeds from certain qualified equity offerings at a
redemption price of 103.875% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, subject
to compliance with certain conditions. We may, on one or more occasions, redeem the Senior Notes 2029, in whole or in part,
at any time on and after December 1, 2024 at the applicable redemption prices set forth in the indenture governing the Senior
Notes 2029, dated as of November 24, 2021, among the Company, the subsidiary guarantors party thereto, The Bank of New
York Mellon, as U.S. trustee, and BNY Trust Company of Canada, as Canadian trustee (the 2029 Indenture), plus accrued and
unpaid interest, if any, to the redemption date.
If we experience one of the kinds of change of control triggering events specified in the 2029 Indenture, we will be
required to make an offer to repurchase the Senior Notes 2029 at a price equal to 101% of the principal amount of the Senior
Notes 2029, plus accrued and unpaid interest, if any, to the date of purchase.
The 2029 Indenture contains covenants that limit our and certain of our 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 or the guarantors without such subsidiary becoming a
subsidiary guarantor of Senior Notes 2029; 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. These covenants are subject to a
number of important limitations and exceptions as set forth in the 2029 Indenture. The 2029 Indenture also provides for events
of default, which, if any of them occurs, may permit or, in certain circumstances, require the principal, premium, if any, interest
and any other monetary obligations on all the then-outstanding Senior Notes 2029 to be due and payable immediately.
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 2029 and the guarantees rank equally in right
of payment with all of our and our guarantors’ existing and future senior unsubordinated debt and will rank senior in right of
payment to all of our and our guarantors’ future subordinated debt. Senior Notes 2029 and the guarantees will be effectively
subordinated to all of our and our 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 foregoing description of the 2029 Indenture does not purport to be complete and is qualified in its entirety by
reference to the full text of the 2029 Indenture, which is filed as an exhibit to the Company’s Current Report on Form 8-K filed
with the SEC on November 24, 2021.
For further details relating to our debt, please see Note 11 “Long-Term Debt” to our Consolidated Financial Statements.
70
Senior Notes 2028
On February 18, 2020 we issued $900 million in aggregate principal amount of 3.875% Senior Notes due 2028 (Senior
Notes 2028) 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 2028 bear
interest at a rate of 3.875% per annum, payable semi-annually in arrears on February 15 and August 15, commencing on August
15, 2020. Senior Notes 2028 will mature on February 15, 2028, unless earlier redeemed, in accordance with their terms, or
repurchased.
We may redeem all or a portion of the Senior Notes 2028 at any time prior to February 15, 2023 at a redemption price
equal to 100% of the principal amount of the Senior Notes 2028 plus an applicable premium, plus accrued and unpaid interest,
if any, to the redemption date. We may also redeem up to 40% of the aggregate principal amount of the Senior Notes 2028, on
one or more occasions, prior to February 15, 2023, using the net proceeds from certain qualified equity offerings at a
redemption price of 103.875% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, subject
to compliance with certain conditions. We may, on one or more occasions, redeem the Senior Notes 2028, in whole or in part,
at any time on and after February 15, 2023 at the applicable redemption prices set forth in the indenture governing the Senior
Notes 2028, dated as of February 18, 2020, among the Company, the subsidiary guarantors party thereto, The Bank of New
York Mellon, as U.S. trustee, and BNY Trust Company of Canada, as Canadian trustee (the 2028 Indenture), plus accrued and
unpaid interest, if any, to the redemption date.
If we experience one of the kinds of change of control triggering events specified in the 2028 Indenture, we will be
required to make an offer to repurchase the Senior Notes 2028 at a price equal to 101% of the principal amount of the Senior
Notes 2028, plus accrued and unpaid interest, if any, to the date of purchase.
The 2028 Indenture contains covenants that limit our and certain of our 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 or the guarantors without such subsidiary becoming a
subsidiary guarantor of Senior Notes 2028; 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. These covenants are subject to a
number of important limitations and exceptions as set forth in the 2028 Indenture. The 2028 Indenture also provides for events
of default, which, if any of them occurs, may permit or, in certain circumstances, require the principal, premium, if any, interest
and any other monetary obligations on all the then-outstanding Senior Notes 2028 to be due and payable immediately.
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. Senior Notes 2028 and the guarantees rank equally in right
of payment with all of our and our guarantors’ existing and future senior unsubordinated debt and will rank senior in right of
payment to all of our and our guarantors’ future subordinated debt. Senior Notes 2028 and the guarantees will be effectively
subordinated to all of our and our 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 foregoing description of the 2028 Indenture does not purport to be complete and is qualified in its entirety by
reference to the full text of the 2028 Indenture, which is filed as an exhibit to the Company’s Current Report on Form 8-K filed
with the SEC on February 18, 2020.
For further details relating to our debt, please see Note 11 “Long-Term Debt” to our Consolidated Financial Statements.
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. Senior Notes 2026 had interest at a rate of
5.875% per annum, payable semi-annually in arrears on June 1 and December 1, commencing on December 1, 2016. Senior
Notes 2026 would have matured on June 1, 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. The outstanding
aggregate principal amount of Senior Notes 2026, after taking into consideration the additional issuance, was $850 million as of
December 9, 2021.
On December 9, 2021, we redeemed Senior Notes 2026 in full at a price equal to 102.9375% of the principal amount plus
accrued and unpaid interest to, but excluding, the redemption date. 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. The resulting loss of $27.4 million, consisting of $25.0 million
71
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. See Note 23 “Other Income (Expense), Net” to our Consolidated Financial Statements.
For further details relating to our debt, please see Note 11 “Long-Term Debt” to our Consolidated Financial Statements.
Senior Secured Fixed Rate Notes
Senior Secured Notes 2027
On December 1, 2022, we issued $1 billion in aggregate principal amount of Senior Secured Notes 2027 in connection
with the financing of the Micro Focus Acquisition 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 Secured Notes 2027 bear interest at a rate of 6.90% per annum, payable semi-annually in arrears on June
1 and December 1, commencing on June 1, 2023. Senior Secured Notes 2027 will mature on December 1, 2027, unless earlier
redeemed, in accordance with their terms, or repurchased.
We may redeem all or a portion of the Senior Secured Notes 2027 at any time prior to November 1, 2027 at a redemption
price equal to the greater of (a) 100% of the principal amount of the Senior Secured Notes 2027 to be redeemed and (b) the net
present value of the remaining scheduled payments of principal and interest thereon discounted to the Par Call Date less interest
accrued to the date of redemption, plus accrued and unpaid interest to, but excluding, the redemption date. On or after the Par
Call Date (as defined in the 2027 Indenture), the Company may redeem the Senior Secured Notes 2027, in whole or in part, at
any time and from time to time, at a redemption price equal to 100% of the principal amount of the Senior Secured Notes 2027
being redeemed plus accrued and unpaid interest thereon to the redemption date.
If we experience one of the kinds of change of control triggering events specified in the indenture governing the Senior
Secured Notes 2027 dated as of December 1, 2022, among the Company, the subsidiary guarantors party thereto, The Bank of
New York Mellon, as U.S. trustee, and BNY Trust Company of Canada, as Canadian trustee (the 2027 Indenture), we will be
required to make an offer to repurchase the Senior Secured Notes 2027 at a price equal to 101% of the principal amount of the
Senior Secured Notes 2027, plus accrued and unpaid interest, if any, to the date of purchase.
The 2027 Indenture contains covenants that limit our 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) create, assume, incur or guarantee additional
indebtedness of the Company or certain of the Company’s subsidiaries without such subsidiary becoming a subsidiary
guarantor of the Senior Secured Notes 2027; and (iii) consolidate, amalgamate or merge with, or convey, transfer, lease or
otherwise dispose of the Company’s property and assets substantially as an entirety to, another person. These covenants are
subject to a number of important limitations and exceptions as set forth in the 2027 Indenture. The 2027 Indenture also provides
for certain events of default, which, if any of them occurs, may permit or, in certain circumstances, require the principal,
premium, if any, interest and any other monetary obligations on all the then-outstanding Senior Secured Notes 2027 to be due
and payable immediately.
The Senior Secured Notes 2027 are guaranteed on a senior secured basis by certain of the Company’s subsidiaries and are
secured with the same priority as the Company’s senior credit facilities. The Senior Secured Notes 2027 and the related
guarantees are effectively senior to all of the Company’s and the guarantors’ senior unsecured debt to the extent of the value of
the Collateral (as defined in the 2027 Indenture) and are structurally subordinated to all existing and future liabilities of each of
the Company’s existing and future subsidiaries that do not guarantee the Senior Secured Notes 2027.
The foregoing description of the 2027 Indenture does not purport to be complete and is qualified in its entirety by
reference to the full text of the 2027 Indenture, which is filed as an exhibit to the Company’s Current Report on Form 8-K filed
with the SEC on December 1, 2022.
For further details relating to our debt, please see Note 11 “Long-Term Debt” to our Consolidated Financial Statements.
Term Loan B
On May 30, 2018, we entered into a credit facility, which provides for a $1 billion term loan facility with certain lenders
named therein, Barclays Bank PLC (Barclays), as sole administrative agent and collateral agent, and as lead arranger and joint
bookrunner (Term Loan B) and borrowed the full amount on May 30, 2018 to, among other things, repay in full the loans under
our prior $800 million term loan credit facility originally entered into on January 16, 2014. Repayments made under Term Loan
B are equal to 0.25% of the principal amount in equal quarterly installments for the life of Term Loan B, with the remainder due
at maturity.
Borrowings under Term Loan B are secured by a first charge over substantially all of our assets on a pari passu basis with
the Revolver, the Acquisition Term Loan and Senior Secured Notes 2027. Term Loan B has a seven-year term, maturing in
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May 2025. On June 6, 2023, we amended the Term Loan B to replace the LIBOR benchmark rate applicable to borrowings
under Term Loan B with a SOFR benchmark rate.
Borrowings under Term Loan B bear interest at a rate per annum equal to an applicable margin plus, at the borrower’s
option, either (1) the SOFR benchmark rate for the interest period relevant to such borrowing or (2) an alternate base rate
(ABR). 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). As of June 30, 2023, the outstanding balance on the Term Loan B bears an interest rate of 6.90%.
Term Loan B has incremental facility capacity of (i) $250 million plus (ii) additional amounts, subject to meeting a
“consolidated senior secured net leverage” ratio not exceeding 2.75:1.00, in each case subject to certain conditions.
Consolidated senior secured 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, that is secured by our or any of our subsidiaries’ assets, over our
trailing twelve months net income before interest, taxes, depreciation, amortization, restructuring, share-based compensation
and other miscellaneous charges.
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. 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, 2023, our
consolidated net leverage ratio, as calculated in accordance with the applicable agreement, was 3.49:1.00.
For further details relating to our debt, please see Note 11 “Long-Term Debt” to our Consolidated Financial Statements.
Revolver
On October 31, 2019, we amended our committed revolving credit facility (the Revolver) to increase the total
commitments under the Revolver from $450 million to $750 million as well as to extend the maturity from May 5, 2022 to
October 31, 2024. 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. On June 6, 2023, we amended the Revolver to replace the LIBOR benchmark rate
applicable to borrowings with a SOFR benchmark rate. 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%.
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. 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, 2023, we had $275 million outstanding balance under the Revolver (June 30, 2022—nil). For the year
ended June 30, 2023, we recorded interest expense of $10.1 million relating to the Revolver (June 30, 2022—nil). In July 2023,
the Company subsequently repaid $175 million drawn under the Revolver.
For further details relating to our debt, please see Note 11 “Long-Term Debt” to our Consolidated Financial Statements.
Acquisition Term Loan
On December 1, 2022, we amended our first lien term loan facility (the Acquisition Term Loan), dated as of August 25,
2022, to increase the aggregate commitments under the senior secured delayed-draw term loan facility from an aggregate
principal amount of $2.585 billion to an aggregate principal amount of $3.585 billion. During the third quarter of Fiscal 2023,
the Company drew down $3.585 billion, net of original issuance discount of 3% and other fees, of which the net proceeds were
used to fund the Micro Focus Acquisition (see Note 19 “Acquisitions” to our Consolidated Financial Statements for more
details).
The Acquisition Term Loan has a seven-year term from the date of funding, and repayments under the Acquisition Term
Loan are equal to 0.25% of the principal amount in equal quarterly installments for the life of the Acquisition Term Loan, with
the remainder due at maturity. 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%. As of
June 30, 2023, the outstanding balance on the Acquisition Term Loan bears an interest rate of 8.75%. As of June 30, 2023, the
Acquisition Term Loan bears an effective interest rate of 9.85%. The effective interest rate includes interest expense of $125.7
million and amortization of debt discount and issuance costs of $9.3 million.
The Acquisition Term Loan has incremental facility capacity of (i) $250 million plus (ii) additional amounts, subject to
meeting a “consolidated senior secured net leverage” ratio not exceeding 2.75:1.00, in each case subject to certain conditions.
73
Consolidated senior secured net leverage ratio is defined for this purpose as the proportion of the Company’s total debt reduced
by unrestricted cash, including guarantees and letters of credit, that is secured by the Company’s or any of the Company’s
subsidiaries’ assets, over the Company’s trailing four financial quarter net income before interest, taxes, depreciation,
amortization, restructuring, share-based compensation and other miscellaneous charges. Under the Acquisition Term Loan, we
must maintain a “consolidated net leverage” ratio of no more than 4.50:1.00 at the end of each financial quarter. Consolidated
net leverage ratio is defined for this purpose as the proportion of the Company’s total debt reduced by unrestricted cash,
including guarantees and letters of credit, over the Company’s trailing four financial quarter net income before interest, taxes,
depreciation, amortization, restructuring, share-based compensation and other miscellaneous charges as defined in the
Acquisition Term Loan. As of June 30, 2023, our consolidated net leverage ratio, as calculated in accordance with the
applicable agreement, was 3.49:1.
The Acquisition Term Loan is unconditionally guaranteed by certain subsidiary guarantors, as defined in the Acquisition
Term Loan, and is secured by a first charge on substantially all of the assets of the Company and the subsidiary guarantors on a
pari passu basis with the Revolver, Term Loan B and the Senior Secured Notes 2027.
For the year ended June 30, 2023, we recorded interest expense of $125.7 million, relating to the Acquisition Term Loan
(year ended June 30, 2022— nil).
The foregoing description of the Acquisition Term Loan does not purport to be complete and is qualified in its entirety by
reference to the full text of the Acquisition Term Loan, which is filed as an exhibit to the Company’s Current Report on Form
8-K filed with the SEC on August 25, 2022.
For further details relating to our debt, please see Note 11 “Long-Term Debt” to our Consolidated Financial Statements.
Bridge Loan
On August 25, 2022, we entered into a bridge loan agreement (Bridge Loan) which provided for commitments of up to
$2.0 billion to finance a portion of the repayment of Micro Focus’ existing debt. On December 1, 2022, we entered into an
amendment to the Bridge Loan that reallocated commitments under the Bridge Loan to the Acquisition Term Loan. In
connection with the amendment to the Bridge Loan and the receipt of proceeds from the issuance of the Senior Secured Notes
2027, all remaining commitments under the Bridge Loan were reduced to zero and the Bridge Loan was terminated, which
resulted in a loss on debt extinguishment of $8.2 million relating to unamortized debt issuance costs (see Note 22 “Other
Income (Expense), Net” to our Consolidated Financial Statements for more details).
As of June 30, 2023, we had no borrowings under the Bridge Loan. For the year ended June 30, 2023, we did not record
any interest expense relating to the Bridge Loan.
The foregoing description of the Bridge Loan does not purport to be complete and is qualified in its entirety by reference
to the full text of the Bridge Loan, which is filed as an exhibit to the Company’s Current Report on Form 8-K filed with the
SEC on August 25, 2022.
For further details relating to our debt, please see Note 11 “Long-Term Debt” to our Consolidated Financial Statements.
Shelf Registration Statement
On December 6, 2021, we filed a universal shelf registration statement on Form S-3 with the SEC, which became
effective automatically (the Shelf Registration Statement). 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. The type of
securities and the specific terms thereof will be determined at the time of any offering and will be described in the applicable
prospectus supplement to be filed separately with the SEC and Canadian securities regulators.
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. 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
The Fiscal 2021 Repurchase Plan was effected in accordance with Rule 10b-18. Purchases made under the Fiscal 2021
Repurchase Plan were subject to a limit of 13,618,774 shares (representing 5% of the Company’s issued and outstanding
Common Shares as of November 4, 2020). All Common Shares purchased by us pursuant to the Fiscal 2021 Repurchase Plan
were cancelled.
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 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. All Common Shares purchased by us
pursuant to the Fiscal 2022 Repurchase Plan were cancelled.
During the year ended June 30, 2023, we did not repurchase and cancel any Common Shares (year ended June 30, 2022
and 2021— 3,809,559 and 2,500,000 Common Shares for $177.0 million and $119.1 million, respectively).
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.
The TSX approved the Company’s notice of intention to commence the Fiscal 2021 NCIB pursuant to which the
Company was authorized to purchase Common Shares over the TSX for the period commencing November 12, 2020 until
November 11, 2021 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. 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.
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.
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. 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.
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Pensions
As of June 30, 2023, our total unfunded pension plan obligations were $130.82 million, of which $4.50 million is payable
within the next twelve months. We expect to be able to make the long-term and short-term payments related to these obligations
in the normal course of operations.
Anticipated pension payments under our defined benefit plans for the fiscal years indicated below are as follows:
2024
2025
2026
2027
2028
2029 to 2033
Total
Fiscal years ending June 30,
13,115
13,221
14,258
16,146
17,745
102,196
176,681
$
$
For a detailed discussion on pensions, see Note 12 “Pension Plans and Other Post Retirement Benefits” to our
Consolidated Financial Statements.
Commitments and Contractual Obligations
As of June 30, 2023, we have entered into the following contractual obligations with minimum payments for the indicated
fiscal periods as follows:
$
Long-term debt obligations (1)
Operating lease obligations (2)
Finance lease obligations (3)
Purchase obligations for
contracts not accounted for as
lease obligations
July 1, 2023 - June
30, 2024
Payments due between
July 1, 2024 - June
30, 2026
July 1, 2026 - June
30, 2028
648,414 $
105,685
5,712
2,373,260 $
144,062
5,311
2,948,038 $
90,267
459
July 1, 2028 and
beyond
6,454,574
71,380
—
Total
12,424,286 $
411,394
11,482
176,440
52,588
108,346
15,506
—
________________________________________
$
13,023,602 $
812,399 $
2,630,979 $
3,054,270 $
6,525,954
(1)
Includes interest up to maturity and principal payments. Please see Note 11 “Long-Term Debt” to our Consolidated Financial
Statements for more details.
(2) Represents the undiscounted future minimum lease payments under our operating leases liabilities and excludes sublease income
expected to be received under our various sublease agreements with third parties. Please see Note 6 “Leases” to our Consolidated
Financial Statements for more details.
(3) Represents the undiscounted future minimum lease payments under our financing leases liabilities and excludes sublease income
expected to be received under our various sublease agreements with third parties. Please see Note 6 “Leases” to our Consolidated
Financial Statements for more details.
Guarantees and Indemnifications
We have entered into customer agreements which may include provisions to indemnify our customers against third party
claims that our software products or services infringe certain third-party intellectual property rights and for liabilities related to
a breach of our confidentiality obligations. We have not made any material payments in relation to such indemnification
provisions and have not accrued any liabilities related to these indemnification provisions in our Consolidated Financial
Statements.
Occasionally, we enter into financial guarantees with third parties in the ordinary course of our business, including,
among others, guarantees relating to taxes and letters of credit on behalf of parties with whom we conduct business. Such
agreements have not had a material effect on our results of operations, financial position or cash flows.
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Litigation
We are currently involved in various claims and legal proceedings.
Quarterly, we review the status of each significant legal matter and evaluate such matters to determine how they should be
treated for accounting and disclosure purposes in accordance with the requirements of ASC Topic 450-20 “Loss
Contingencies” (Topic 450-20). Specifically, this evaluation process includes the centralized tracking and itemization of the
status of all our disputes and litigation items, discussing the nature of any litigation and claim, including any dispute or claim
that is reasonably likely to result in litigation, with relevant internal and external counsel, and assessing the progress of each
matter in light of its merits and our experience with similar proceedings under similar circumstances.
If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably
estimated, we accrue a liability for the estimated loss in accordance with Topic 450-20. As of the date of this Annual Report on
Form 10-K, the aggregate of such accrued liabilities was not material to our consolidated financial position or results of
operations and we do not believe as of the date of this filing that it is reasonably possible that a loss exceeding the amounts
already recognized will be incurred that would be material to our consolidated financial position or results of operations. As
described more fully below, we are unable at this time to estimate a possible loss or range of losses in respect of certain
disclosed matters.
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. 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. 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.
The notices of reassessment for Fiscal 2012, Fiscal 2013, Fiscal 2014, Fiscal 2015 and Fiscal 2016 would, as drafted,
increase our taxable income by approximately $90 million to $100 million for each of those years, as well as impose a 10%
penalty on the proposed adjustment to income. Audits by the CRA of our tax returns for fiscal years prior to Fiscal 2012 have
been completed with no reassessment of our income tax liability.
We strongly disagree with the CRA’s positions and believe the reassessments of Fiscal 2012, Fiscal 2013, Fiscal 2014,
Fiscal 2015 and Fiscal 2016 (including any penalties) are without merit, and we are continuing to contest these reassessments.
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.
Even if we are unsuccessful in challenging the CRA’s reassessments to increase our taxable income for Fiscal 2012,
Fiscal 2013, Fiscal 2014, Fiscal 2015 and Fiscal 2016, we have elective deductions available for those years (including carry-
backs from later years) that would offset such increased amounts so that no additional cash tax would be payable, exclusive of
any assessed penalties and interest, as described above.
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. In accordance with applicable rules, these assets were recognized for tax purposes
at fair market value as of that time, which value was supported by an expert valuation prepared by an independent leading
accounting and advisory firm. 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. Other aspects of CRA’s position for Fiscal 2017 and Fiscal 2018
conflict with the expert valuation prepared by the independent leading accounting and advisory firm that was used to support
our original filing position. The CRA issued notices of reassessment in respect of Fiscal 2017 and Fiscal 2018 on a basis
consistent with its proposal to reduce the available depreciable basis of these assets in Canada. 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. If we are ultimately unsuccessful in defending our position, the estimated
impact of the proposed adjustment could result in us recording an income tax expense, with no immediate cash payment, to
reduce the stated value of our deferred tax assets of up to approximately $470 million. Any such income tax expense could also
have a corresponding cash tax impact that would primarily occur over a period of several future years based upon annual
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income realization in Canada. We strongly disagree with the CRA’s position for Fiscal 2017 and Fiscal 2018 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 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.
We will continue to vigorously contest the adjustments to our taxable income and any penalty and interest assessments, as
well as any reduction to the basis of our depreciable property. We are confident that our original tax filing positions were
appropriate. 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. The CRA is also in preliminary stages of auditing
Fiscal 2020.
Carbonite Class Action Complaint
On August 1, 2019, prior to our acquisition of Carbonite, a purported stockholder of Carbonite filed a putative class action
complaint against Carbonite, its former Chief Executive Officer, Mohamad S. Ali, and its former Chief Financial Officer,
Anthony Folger, in the United States District Court for the District of Massachusetts captioned Ruben A. Luna, Individually
and on Behalf of All Others Similarly Situated v. Carbonite, Inc., Mohamad S. Ali, and Anthony Folger (No. 1:19-cv-11662-
LTS) (the Luna Complaint). The complaint alleges violations of the federal securities laws under Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder. The complaint generally alleges
that the defendants made materially false and misleading statements in connection with Carbonite’s Server Backup VM Edition,
and seeks, among other things, the designation of the action as a class action, an award of unspecified compensatory damages,
costs and expenses, including counsel fees and expert fees, and other relief as the court deems appropriate. 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 November 21, 2019, the district court consolidated the Securities Actions, appointed a
lead plaintiff, and designated a lead counsel. On January 15, 2020, the lead plaintiff filed a consolidated amended complaint
generally making the same allegations and seeking the same relief as the complaint filed on August 1, 2019. The defendants
moved to dismiss the Securities Actions on March 10, 2020. On October 22, 2020, the district court granted with prejudice the
defendants’ motion to dismiss the Securities Actions. On November 20, 2020, the lead plaintiff filed a notice of appeal to the
United States Court of Appeals for the First Circuit. On December 21, 2021, the United States Court of Appeals for the First
Circuit issued a decision reversing and remanding the Securities Actions to the district court for further proceedings. The parties
have completed discovery and defendants have filed a motion for summary judgment. The defendants remain confident in their
position, believe the Securities Actions are without merit, and will continue to vigorously defend the matter.
Carbonite vs Realtime Data
On February 27, 2017, before our acquisition of Carbonite, a non-practicing entity named Realtime Data LLC (Realtime
Data) filed a lawsuit against Carbonite in 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. District Court for the Eastern District of Texas
transferred the case to the U.S. District Court for the District of Massachusetts (No. 1:17-cv-12499). Realtime Data has also
filed numerous other patent suits on the same asserted patents against other companies. After a stay pending appeal in one of
those suits, on January 21, 2021, the district court held a hearing to construe the claims of the asserted patents. As to the fourth
patent asserted against Carbonite, on September 24, 2019, the U.S. Patent & Trademark Office Patent Trial and Appeal Board
invalidated certain claims of that patent, including certain claims that had been asserted against Carbonite. The parties then
jointly stipulated to dismiss that patent from this action. On August 23, 2021, in one of the suits against other companies, the
District of Delaware (No. 1:17-cv-800), held all of the patents asserted against Carbonite to be invalid. Realtime Data has
appealed that decision to the U.S. Court of Appeals for the Federal Circuit. We continue to vigorously defend the matter, and
the U.S. District Court for the District of Massachusetts has issued a claim construction order. We have not accrued a loss
contingency related to this matter because litigation related to a non-practicing entity is inherently unpredictable. Although a
loss is reasonably possible, an unfavorable outcome is not considered by management to be probable at this time and we remain
unable to reasonably estimate a possible loss or range of loss associated with this litigation.
Other Matters
Please also see Part I, Item 1A, “Risk Factors” in this Annual Report on Form 10-K for Fiscal 2023, as well as Note 15
“Income Taxes” to the Consolidated Financial Statements included in this Annual Report on Form 10-K related to certain
historical matters arising prior to the Micro Focus Acquisition.
78
Off-Balance Sheet Arrangements
We do not enter into off-balance sheet financing as a matter of practice, except for guarantees relating to taxes and letters
of credit on behalf of parties with whom we conduct business.
79
Use of Non-GAAP Financial Measures
In addition to reporting financial results in accordance with U.S. GAAP, the Company provides certain financial measures
that are not in accordance with U.S. GAAP (Non-GAAP). These Non-GAAP financial measures have certain limitations in that
they do not have a standardized meaning and thus the Company’s definition may be different from similar Non-GAAP financial
measures used by other companies and/or analysts and may differ from period to period. Thus, it may be more difficult to
compare the Company’s financial performance to that of other companies. However, the Company’s management compensates
for these limitations by providing the relevant disclosure of the items excluded in the calculation of these Non-GAAP financial
measures both in its reconciliation to the U.S. GAAP financial measures and its Consolidated Financial Statements, all of which
should be considered when evaluating the Company’s results.
The Company uses these Non-GAAP financial measures to supplement the information provided in its Consolidated
Financial Statements, which are presented in accordance with U.S. GAAP. The presentation of Non-GAAP financial measures
is not meant to be a substitute for financial measures presented in accordance with U.S. GAAP, but rather should be evaluated
in conjunction with and as a supplement to such U.S. GAAP measures. OpenText strongly encourages investors to review its
financial information in its entirety and not to rely on a single financial measure. The Company therefore believes that despite
these limitations, it is appropriate to supplement the disclosure of the U.S. GAAP measures with certain Non-GAAP measures
defined below.
Non-GAAP-based net income and Non-GAAP-based EPS, attributable to OpenText, are consistently calculated as
GAAP-based net income or earnings (loss) per share, attributable to OpenText, on a diluted basis, excluding the effects of the
amortization of acquired intangible assets, other income (expense), share-based compensation, and special charges (recoveries),
all net of tax and any tax benefits/expense items unrelated to current period income, as further described in the tables below.
Non-GAAP-based gross profit is the arithmetical sum of GAAP-based gross profit and the amortization of acquired technology-
based intangible assets and share-based compensation within cost of sales. Non-GAAP-based gross margin is calculated as
Non-GAAP-based gross profit expressed as a percentage of total revenue. Non-GAAP-based income from operations is
calculated as GAAP-based income from operations, excluding the amortization of acquired intangible assets, special charges
(recoveries), and share-based compensation expense.
Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) is consistently calculated as
GAAP-based net income, 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 Company’s management believes that the presentation of the above defined Non-GAAP financial measures provides
useful information to investors because they portray the financial results of the Company before the impact of certain non-
operational charges. The use of the term “non-operational charge” is defined for this purpose as an expense that does not impact
the ongoing operating decisions taken by the Company’s management. These items are excluded based upon the way the
Company’s management evaluates the performance of the Company’s business for use in the Company’s internal reports and
are not excluded in the sense that they may be used under U.S. GAAP.
The Company does not acquire businesses on a predictable cycle, and therefore believes that the presentation of Non-
GAAP measures, which in certain cases adjust for the impact of amortization of intangible assets and the related tax effects that
are primarily related to acquisitions, will provide readers of financial statements with a more consistent basis for comparison
across accounting periods and be more useful in helping readers understand the Company’s operating results and underlying
operational trends. Additionally, the Company has engaged in various restructuring activities over the past several years,
primarily due to acquisitions and most recently in response to our return to office planning, that have resulted in costs
associated with reductions in headcount, consolidation of leased facilities and related costs, all which are recorded under the
Company’s “Special charges (recoveries)” caption on the Consolidated Statements of Income. Each restructuring activity is a
discrete event based on a unique set of business objectives or circumstances, and each differs in terms of its operational
implementation, business impact and scope, and the size of each restructuring plan can vary significantly from period to period.
Therefore, the Company believes that the exclusion of these special charges (recoveries) will also better aid readers of financial
statements in the understanding and comparability of the Company’s operating results and underlying operational trends.
In summary, the Company believes the provision of supplemental Non-GAAP measures allow investors to evaluate the
operational and financial performance of the Company’s core business using the same evaluation measures that management
uses, and is therefore a useful indication of OpenText’s performance or expected performance of future operations and
facilitates period-to-period comparison of operating performance (although prior performance is not necessarily indicative of
future performance). As a result, the Company considers it appropriate and reasonable to provide, in addition to U.S. GAAP
measures, supplementary Non-GAAP financial measures that exclude certain items from the presentation of its financial results.
The following charts provide unaudited reconciliations of U.S. GAAP-based financial measures to Non-GAAP-based
financial measures for the following periods presented. The Micro Focus Acquisition significantly impacts period-over-period
comparability.
80
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures
for the year ended June 30, 2023
(In thousands, except for per share data)
Cost of revenues
Cloud services and subscriptions
Customer support
Professional service and other
Amortization of acquired technology-based intangible assets
GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross
profit and gross margin (%)
Operating expenses
Research and development
Sales and marketing
General and administrative
Amortization of acquired customer-based intangible assets
Special charges (recoveries)
GAAP-based income from operations / Non-GAAP-based income from
operations
Other income (expense), net
Provision for income taxes
GAAP-based net income / Non-GAAP-based net income, attributable to
OpenText
GAAP-based EPS / Non-GAAP-based EPS-diluted, attributable to
OpenText
__________________________
Year Ended June 30, 2023
GAAP-
based
Measures
% of Total
Revenue
GAAP-based
Measures
Non-GAAP-
based
Measures
Non-GAAP-
based
Measures
% of Total
Revenue
Adjustments Note
$
590,165
$
(10,664) (1) $ 579,501
209,705
276,888
223,184
(3,627) (1)
(6,998) (1)
(223,184) (2)
206,078
269,890
—
3,168,393
70.6%
244,473
(3)
3,412,866
76.1%
680,587
948,598
419,590
326,406
169,159
516,292
34,469
70,767
150,379
(39,065) (1)
(41,710) (1)
(28,238) (1)
(326,406) (2)
(169,159) (4)
641,522
906,888
391,352
—
—
849,051
(5)
1,365,343
(34,469) (6)
—
74,261
(7)
145,028
740,321
(8)
890,700
$
0.56
$
2.73
(8) $
3.29
(1) Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is
excluded from our internal analysis of operating results.
(2) Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of
amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.
(3) GAAP-based and Non-GAAP-based gross profit stated in dollars and gross margin stated as a percentage of total revenue.
(4) Adjustment relates to the exclusion of special charges (recoveries) from our Non-GAAP-based operating expenses as special charges (recoveries)
are generally incurred in the periods relevant to an acquisition and include certain charges or recoveries that are not indicative or related to
continuing operations and are therefore excluded from our internal analysis of operating results. 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. Other income (expense) also includes our share of income (losses) from our holdings in investments
as a limited partner. We do not actively trade equity securities in these privately held companies nor do we plan our ongoing operations based
around any anticipated fundings or distributions from these investments. We exclude gains and losses on these investments as we do not believe they
are reflective of our ongoing business and operating results. Other income (expense) also includes unrealized and realized gains (losses) on our
derivatives which are not designated as hedges. We exclude gains and losses on these derivatives as we do not believe they are reflective of our
ongoing business and operating results.
(7) Adjustment relates to differences between the GAAP-based tax provision rate of approximately 32% and a Non-GAAP-based tax rate of
approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-
based net income. Such excluded items include amortization, share-based compensation, special charges (recoveries) and other income (expense),
net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation
allowance reserves and “book to return” adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising
from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period.
In arriving at our Non-GAAP-based tax rate of approximately 14%, we analyzed the individual adjusted expenses and took into consideration the
impact of statutory tax rates from local jurisdictions incurring the expense.
81
(8) Reconciliation of GAAP-based net income to Non-GAAP-based net income:
Year Ended June 30, 2023
Per share diluted
GAAP-based net income, attributable to OpenText
$
150,379 $
Add:
Amortization
Share-based compensation
Special charges (recoveries)
Other (income) expense, net
GAAP-based provision for income taxes
Non-GAAP-based recovery of income taxes
Non-GAAP-based net income, attributable to OpenText
$
Reconciliation of Adjusted EBITDA
GAAP-based net income, attributable to OpenText
Add:
Provision for income taxes
Interest and other related expense, net
Amortization of acquired technology-based intangible assets
Amortization of acquired customer-based intangible assets
Depreciation
Share-based compensation
Special charges (recoveries)
Other (income) expense, net
Adjusted EBITDA
549,590
130,302
169,159
(34,469)
70,767
(145,028)
890,700 $
$
$
0.56
2.03
0.48
0.63
(0.13)
0.26
(0.54)
3.29
Year Ended June 30, 2023
150,379
70,767
329,428
223,184
326,406
107,761
130,302
169,159
(34,469)
1,472,917
82
Reconciliation of selected GAAP-based measures to Non-GAAP-based measures
for the year ended June 30, 2022
(In thousands, except for per share data)
Cost of revenues
Cloud services and subscriptions
Customer support
Professional service and other
Amortization of acquired technology-based intangible assets
GAAP-based gross profit and gross margin (%) / Non-GAAP-based gross
Year Ended June 30, 2022
GAAP-based
Measures
GAAP-based
Measures
% of Total
Revenue
Adjustments Note
Non-GAAP-
based
Measures
Non-GAAP-
based
Measures
% of Total
Revenue
$
511,713
$
(5,285) (1) $
506,428
121,485
216,895
198,607
(2,399) (1)
(3,740) (1)
(198,607) (2)
119,086
213,155
—
profit and gross margin (%)
2,431,643
69.6%
210,031
(3)
2,641,674
75.6%
Operating expenses
Research and development
Sales and marketing
General and administrative
Amortization of acquired customer-based intangible assets
Special charges (recoveries)
GAAP-based income from operations / Non-GAAP-based income from
operations
Other income (expense), net
Provision for income taxes
GAAP-based net income / Non-GAAP-based net income, attributable to
OpenText
GAAP-based EPS / Non-GAAP-based EPS-diluted, attributable to
OpenText
__________________________
440,448
677,118
317,085
217,105
46,873
644,773
29,118
118,752
397,090
(17,122) (1)
(22,628) (1)
(18,382) (1)
(217,105) (2)
(46,873) (4)
423,326
654,490
298,703
—
—
532,141
(5)
1,176,914
(29,118) (6)
—
23,913
(7)
142,665
479,110
(8)
876,200
$
1.46
$
1.76
(8) $
3.22
(1) Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is
excluded from our internal analysis of operating results.
(2) Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of
amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.
(3) GAAP-based and Non-GAAP-based gross profit stated in dollars and gross margin stated as a percentage of total revenue.
(4) Adjustment relates to the exclusion of special charges (recoveries) from our Non-GAAP-based operating expenses as special charges (recoveries)
are generally incurred in the periods relevant to an acquisition and include certain charges or recoveries that are not indicative or related to
continuing operations and are therefore excluded from our internal analysis of operating results. 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. Other income (expense) also includes our share of income (losses) from our holdings in investments
as a limited partner. We do not actively trade equity securities in these privately held companies nor do we plan our ongoing operations based
around any anticipated fundings or distributions from these investments. We exclude gains and losses on these investments as we do not believe they
are reflective of our ongoing business and operating results.
(7) Adjustment relates to differences between the GAAP-based tax provision rate of approximately 23% and a Non-GAAP-based tax rate of
approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-
based net income. Such excluded items include amortization, share-based compensation, special charges (recoveries) and other income (expense),
net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation
allowance reserves and “book to return” adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising
from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period.
In arriving at our Non-GAAP-based tax rate of approximately 14%, we analyzed the individual adjusted expenses and took into consideration the
impact of statutory tax rates from local jurisdictions incurring the expense.
83
(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 $
Add:
Amortization
Share-based compensation
Special charges (recoveries)
Other (income) expense, net
GAAP-based provision for income taxes
Non-GAAP-based recovery of income taxes
415,712
69,556
46,873
(29,118)
118,752
(142,665)
Non-GAAP-based net income, attributable to OpenText
$
876,200 $
1.46
1.52
0.26
0.17
(0.11)
0.44
(0.52)
3.22
Year Ended June 30, 2022
$
$
397,090
118,752
157,880
198,607
217,105
88,241
69,556
46,873
(29,118)
1,264,986
Reconciliation of Adjusted EBITDA
GAAP-based net income, attributable to OpenText
Add:
Provision for income taxes
Interest and other related expense, net
Amortization of acquired technology-based intangible assets
Amortization of acquired customer-based intangible assets
Depreciation
Share-based compensation
Special charges (recoveries)
Other (income) expense, net
Adjusted EBITDA
84
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)
Cost of revenues
Cloud services and subscriptions
Customer support
Professional service and other
Amortization of acquired technology-based intangible assets
GAAP-based gross profit and gross margin (%) /
Non-GAAP-based gross profit and gross margin (%)
Operating expenses
Research and development
Sales and marketing
General and administrative
Amortization of acquired customer-based intangible assets
Special charges (recoveries)
GAAP-based income from operations / Non-GAAP-based income from
operations
Other income (expense), net
Provision for income taxes
GAAP-based net income / Non-GAAP-based net income, attributable to
OpenText
GAAP-based EPS/ Non-GAAP-based EPS-diluted, attributable to
OpenText
__________________________
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
$
481,818
$
(3,419) (1) $
478,399
122,753
197,183
218,796
(1,910) (1)
(2,565) (1)
(218,796) (2)
120,843
194,618
—
2,351,649
69.4%
226,690
(3)
2,578,339
76.1%
421,447
622,221
263,521
216,544
1,748
740,903
61,434
339,906
310,672
(9,859) (1)
(18,312) (1)
(15,904) (1)
(216,544) (2)
(1,748) (4)
411,588
603,909
247,617
—
—
489,057
(5)
1,229,960
(61,434) (6)
—
(188,931) (7)
150,975
616,554
(8)
927,226
$
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.
(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. 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. Other income (expense) also includes our share of income (losses) from our holdings in investments
as a limited partner. We do not actively trade equity securities in these privately held companies nor do we plan our ongoing operations based
around any anticipated fundings or distributions from these investments. We exclude gains and losses on these investments as we do not believe they
are reflective of our ongoing business and operating results.
(7) Adjustment relates to differences between the GAAP-based tax provision rate of approximately 52% and a Non-GAAP-based tax rate of
approximately 14%; these rate differences are due to the income tax effects of items that are excluded for the purpose of calculating Non-GAAP-
based net income. Such excluded items include amortization, share-based compensation, special charges (recoveries) and other income (expense),
net. Also excluded are tax benefits/expense items unrelated to current period income such as changes in reserves for tax uncertainties and valuation
allowance reserves and “book to return” adjustments for tax return filings and tax assessments. Included is the amount of net tax benefits arising
from the internal reorganization that occurred in Fiscal 2017 assumed to be allocable to the current period based on the forecasted utilization period.
In arriving at our Non-GAAP-based tax rate of approximately 14%, we analyzed the individual adjusted expenses and took into consideration the
impact of statutory tax rates from local jurisdictions incurring the expense. The 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
(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 $
Add:
Amortization
Share-based compensation
Special charges (recoveries)
Other (income) expense, net
GAAP-based provision for income taxes
Non-GAAP-based recovery of income taxes
435,340
51,969
1,748
(61,434)
339,906
(150,975)
Non-GAAP-based net income, attributable to OpenText
$
927,226 $
Reconciliation of Adjusted EBITDA
GAAP-based net income, attributable to OpenText
Add:
Provision for income taxes
Interest and other related expense, net
Amortization of acquired technology-based intangible assets
Amortization of acquired customer-based intangible assets
Depreciation
Share-based compensation
Special charges (recoveries)
Other (income) expense, net
Adjusted EBITDA
1.14
1.59
0.19
0.01
(0.22)
1.23
(0.55)
3.39
Year Ended June 30, 2021
$
$
310,672
339,906
151,567
218,796
216,544
85,265
51,969
1,748
(61,434)
1,315,033
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.
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%. 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).
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,
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
As of June 30, 2023, we had an outstanding balance of $3.6 billion under the Acquisition Term Loan. 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%. 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 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).
Foreign currency risk
Foreign currency transaction risk
We transact business in various foreign currencies. Our foreign currency exposures typically arise from intercompany
fees, intercompany loans and other intercompany transactions that are expected to be cash settled in the near term and are
transacted in non-functional currency. We expect that we will continue to realize gains or losses with respect to our foreign
currency exposures. Our ultimate realized gain or loss with respect to foreign currency exposures will generally depend on the
size and type of cross-currency transactions that we enter into, the currency exchange rates associated with these exposures and
changes in those rates. We have hedged certain of our Canadian dollar foreign currency exposures relating to our payroll
expenses in Canada.
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).
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. 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.
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).
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. 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. 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).
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)
Euro
British Pound
Indian Rupee
Swiss Franc
Other foreign currencies
Total cash and cash equivalents denominated in foreign currencies
U.S. Dollar
Total cash and cash equivalents
U.S. Dollar
Equivalent at
June 30, 2023
U.S. Dollar
Equivalent at
June 30, 2022
$
$
200,282 $
69,108
57,199
53,122
218,663
598,374
633,251
1,231,625 $
254,546
44,020
38,247
48,674
103,453
488,940
1,204,801
1,693,741
If overall foreign currency exchange rates in comparison to the U.S. dollar uniformly weakened by 10%, the amount of
87
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. Financial Statements and Supplementary Data
The response to this Item 8 is submitted as a separate section of this Annual Report on Form 10-K. See Part IV, Item 15.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
(A) Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Annual Report on Form 10-K, our management, with the participation of the
Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of the design and operation
of our disclosure controls and procedures as defined in Rule 13a-15(e) promulgated under the Exchange Act. Based upon that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded that as of June 30, 2023, our disclosure controls
and procedures were effective to provide reasonable assurance that information required to be disclosed in our reports filed or
submitted under the Exchange Act were recorded, processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission’s rules and forms, and that information required to be disclosed by us in the reports we
file under the Exchange Act (according to Rule 13(a)-15(e)) is accumulated and communicated to our management, including
the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
(B) Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (ICFR),
as such term is defined in Exchange Act Rule 13a-15(f). ICFR is a process designed by, or under the supervision of, our Chief
Executive Officer and Chief Financial Officer and effected by our Board of Directors, management and other personnel, to
provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements
for external purposes in accordance with generally accepted accounting principles. ICFR includes those policies and procedures
that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and
dispositions of assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are
being made only in accordance with the authorizations of our management and our directors; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have
a material effect on our financial statements.
Our management assessed our ICFR as of June 30, 2023, the end of our most recent fiscal year. In making our assessment,
our management used the criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
Our management has excluded the ICFR of Micro Focus, which we acquired on January 31, 2023 as discussed in Note 19
“Acquisitions” to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K. Total
revenues subject to Micro Focus’ ICFR represented 21.8% of our consolidated total revenues for the fiscal year ended June 30,
2023. Total assets subject to Micro Focus’ ICFR represented 47.6% of our consolidated total assets as of June 30, 2023 (of
which $6.8 billion, or 39.6% of our consolidated total assets, represents Micro Focus’ goodwill and net intangible assets subject
to our internal control over financial reporting as of June 30, 2023). Under guidelines established by the SEC, companies are
permitted to exclude acquisitions from their assessment of ICFR for a period of up to one year following an acquisition while
integrating the acquired company.
Based on the results of our evaluation, our management, including the Chief Executive Officer and Chief Financial
Officer, concluded that our ICFR was effective as of June 30, 2023. The results of our management’s assessment were reviewed
with our Audit Committee and the conclusion that our ICFR was effective as of June 30, 2023 has been audited by KPMG LLP,
our independent registered public accounting firm, as stated in their report which is included in Part IV, Item 15 of this Annual
Report.
Our management, including the Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure
controls or our ICFR will prevent or detect all error or all fraud. A control system, no matter how well designed and operated,
can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control
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system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their
costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute
assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have
been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that
breakdowns can occur because of simple error. Controls can also be circumvented by the individual acts of some persons, by
collusion of two or more people, or by management override of the controls. The design of any system of controls is based in
part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions. Any evaluation of prospective control effectiveness, with respect
to future periods, is subject to risks. Over time, controls may become inadequate because of changes in conditions or
deterioration in the degree of compliance with policies or procedures.
(C) Attestation Report of the Independent Registered Public Accounting Firm
KPMG LLP, our independent registered public accounting firm, has issued a report under Public Company Accounting
Oversight Board Auditing Standards AS 2201 on the effectiveness of our ICFR. See Part IV, Item 15 of this Annual Report on
Form 10-K.
(D) Changes in Internal Control over Financial Reporting (ICFR)
Based on the evaluation completed by our management, in which our Chief Executive Officer and Chief Financial Officer
participated, our management has concluded that, except as noted above with respect to the acquisition of Micro Focus, there
were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during
the fiscal quarter ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
Item 9B. Other Information
Rule 10b5-1 Trading Plans
During the three months ended June 30, 2023, none of our officers or directors adopted or terminated any contract,
instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense
conditions of Rule 10b5-1(c) under the Exchange Act or any “non-10b5-1 trading arrangement” as defined in Item 408(c) of
Regulation S-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not Applicable.
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Item 10. Directors, Executive Officers and Corporate Governance
Part III
The following table sets forth certain information as to our directors and executive officers as of August 3, 2023.
Name
Mark J. Barrenechea
Madhu Ranganathan
Michael Acedo
Cosmin Balota
Prentiss Donohue
Paul Duggan
Simon Harrison
Muhi Majzoub
James McGourlay
Renee McKenzie
Sandy Ono
Douglas M. Parker
Paul Rodgers
Brian Sweeney
P. Thomas Jenkins
Randy Fowlie (2)(3)
Major General David Fraser (3)
Gail E. Hamilton (1)
Robert Hau (2)
Ann M. Powell (1)
Stephen J. Sadler
Michael Slaunwhite (1)(3)
Katharine B. Stevenson (2)
Deborah Weinstein (1)(3)
_______________________________
Senior Vice President, Chief Accounting Officer
Age Office and Position Currently Held With Company
58 Vice Chair, Chief Executive Officer and Chief Technology Officer, Director
59 Executive Vice President, Chief Financial Officer
42 Executive Vice President, Chief Legal Officer & Corporate Secretary
49
53 Executive Vice President, Cybersecurity Sales
48 Executive Vice President, Chief Customer Officer
53 Executive Vice President, Enterprise Sales
63 Executive Vice President, Chief Product Officer
54 Executive Vice President, International Sales
48 Executive Vice President, Chief Information Officer
41 Executive Vice President, Chief Marketing Officer
52 Executive Vice President, Corporate Development
60 Executive Vice President, Sales Operations
59 Executive Vice President, Chief Human Resources Officer
63 Chairman of the Board
63 Director
66 Director
73 Director
57 Director
57 Director
72 Director
62 Director
61 Director
63 Director
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
(3) Member of the Corporate Governance and Nominating Committee.
Mark J. Barrenechea
Mr. Barrenechea joined OpenText in January 2012 as the President and Chief Executive Officer. In January 2016, Mr.
Barrenechea took on the role of Chief Technology Officer, while remaining the Company’s Chief Executive Officer. In
September 2017, Mr. Barrenechea was appointed Vice Chair, in addition to remaining the Chief Executive Officer and Chief
Technology Officer. Before joining OpenText, Mr. Barrenechea was President and Chief Executive Officer of Silicon Graphics
International Corporation (SGI), where he also served as a member of the Board. During Mr. Barrenechea’s tenure at SGI, he
led strategy and execution, which included transformative acquisition of assets, as well as penetrating diverse new markets and
geographic regions. Mr. Barrenechea also served as a director of SGI from 2006 to 2012. Prior to SGI, Mr. Barrenechea served
as Executive Vice President and CTO for CA, Inc. (CA), (formerly Computer Associates International, Inc.) from 2003 to 2006
and was a member of the executive management team. Before going to CA, Mr. Barrenechea was the Senior Vice President of
Applications Development at Oracle Corporation from 1997 to 2003, managing a multi-thousand person global team while
serving as a member of the executive management team. From 1994 to 1997, Mr. Barrenechea served as Vice President of
Development at Scopus, a software applications company. Prior to Scopus, Mr. Barrenechea was the Vice President of
Development at Tesseract, where he was responsible for reshaping the company’s line of CRM and human capital management
software. Mr. Barrenechea serves as a member of the Board and Audit Committee Chair of Dick’s Sporting Goods and is also
on the Board of Directors of the Leukemia & Lymphoma Society. In the past five years, Mr. Barrenechea also served as a
director of Hamilton Insurance Group and as a board member of Avery Dennison Corporation. Mr. Barrenechea holds a
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Bachelor of Science degree in computer science from Saint Michael’s College. He has been the recipient of many awards,
including the 2011 Best Large Company CEO from the San Francisco Business Times and 2015 Results-Oriented CEO of the
year by CEO World Awards. Mr. Barrenechea has authored several books including The Intelligent and Connected Enterprise,
The Golden Age of Innovation, Digital Manufacturing, Digital Financial Services, On Digital, Digital: Disrupt or Die,
eGovernment or Out of Government, Enterprise Information Management: The Next Generation of Enterprise Software,
Versant. He has also written a number of whitepapers, such as The Resilient Organization: COVID-19 and New Ways to Work,
The Cloud: Destination for Innovation, Security: Creating Trust in a Zero Trust World and The Information Advantage.
Madhu Ranganathan
Ms. Ranganathan joined OpenText as Executive Vice President, Chief Financial Officer in April 2018. With more than 25
years of financial leadership experience, Ms. Ranganathan most recently served as the Chief Financial Officer for [24]7.ai from
June 2008 to March 2018. Ms. Ranganathan also held senior financial roles at Rackable Systems from December 2005 to May
2008, Redback Networks from August 2002 to November 2005, and Backweb Technologies from December 1996 to January
2000. She also has public accounting experience with PricewaterhouseCoopers LLC. Ms. Ranganathan currently serves as a
Board Member for the Bank of Montreal and Akamai Technologies. In past years she served as a Board Member of
ServiceSource and Watermark, a Bay Area organization focused on professional development for women. Ms. Ranganathan
holds an MBA in Finance from the University of Massachusetts, is a member of the AICPA and a Chartered Accountant
(India).
Michael Acedo
Mr. Acedo was appointed Chief Legal Officer and Corporate Secretary in January 2022, and became Executive Vice
President, Chief Legal Officer and Corporate Secretary in August 2022. Since joining OpenText in 2014, Mr. Acedo has held
various increasingly senior legal roles, primarily supporting corporate governance, external reporting, investor relations,
Corporate Citizenship, capital markets, corporate communications, government relations, and merger and acquisitions matters
and, most recently, as the Vice President, General Counsel–Corporate & Corporate Secretary. Mr. Acedo is responsible for
leading the global legal organization, including the Office of the Chief Compliance Officer and the Corporate Secretarial
department. Prior to joining OpenText, Mr. Acedo practiced corporate and securities law, with a concentration on international
capital markets and merger and acquisitions transactions, at the global law firm, Skadden, Arps, Slate, Meagher & Flom LLP.
Mr. Acedo holds a Law Degree from The University of Western Ontario, Canada (including Law exchange at Hong Kong
University) and a B.A. (Honours) from The University of Toronto, and is a member of the New York State Bar Association and
a Foreign Legal Consultant with the Law Society of Ontario.
Cosmin Balota
Mr. Balota has served as the Company’s Senior Vice President and Chief Accounting Officer since December 2022. Prior
to this, Mr. Balota served as Vice President, Accounting and Reporting from August 2020 to December 2022 and Vice
President, Corporate Accounting from January 2019 to August 2020. Mr. Balota has over 25 years of experience in various
U.S., Canadian and international finance and accounting roles where he has been responsible for external reporting, corporate
accounting, controllership, mergers & acquisitions, and financial planning & analysis. Prior to joining OpenText, Mr. Balota
served as Vice President, Corporate Finance at Enercare Inc. from January 2017 to December 2018, along with other finance
leadership positions from April 2012 to January 2017. He also held various increasingly senior finance, accounting, and audit
positions from October 1998 to April 2012 at Expedia Group, The Globe and Mail, and Deloitte. Mr. Balota is a Chartered
Professional Accountant (CPA, CA) in Canada and holds a Bachelor of Arts (Honours) degree in Chartered Accountancy
Studies and a Master of Accounting degree from The University of Waterloo.
Prentiss Donohue
Mr. Donohue has served as Executive Vice President of Cybersecurity Sales since January 2023. Prior to this role, Mr.
Donohue served as Executive Vice President of Small and Medium-sized Business and Consumer (SMB/C) Sales from
December 2020 to January 2023, Senior Vice President, Portfolio Group from January 2019 to December 2020 and as Senior
Vice President of Professional Services from April 2016 to January 2019. He brings over 20 years of experience in support and
services management. Prior to joining OpenText, Mr. Donohue served as Group Vice President and General Manager of
Advanced Customer Services for Oracle Corporation from January 2010 to March 2016, where he was responsible for driving
Oracle’s innovative software, systems and cloud services. From April 1998 to December 2010, Mr. Donohue worked at Sun
Microsystems in various leadership roles, including in Managed Services Management and Corporate Marketing. Mr. Donohue
served on the board of directors of Summit Charter School until May 2016. Mr. Donohue holds a BA from the University of
Colorado and has completed executive leadership programs at the University of Michigan’s Ross School of Business and the
University of Hong Kong.
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Paul Duggan
Mr. Duggan has served as Executive Vice President, Chief Customer Officer since January 2023. Prior to this role, Mr.
Duggan served as Executive Vice President, Worldwide Renewals from July 2021 to January 2023 and as Senior Vice
President, Revenue Operations from January 2017 to July 2021. He is responsible for operations across sales, professional
services, business networks and customer support. Prior to joining OpenText, Mr. Duggan held various roles at Oracle
Corporation, including Group Vice President of Support Renewal Sales, North America from December 1999 to January 2017.
Previously, Mr. Duggan served on the advisory board for the Technology Services Industry Association from 2016 to 2017. He
has completed executive leadership programs at the University of Michigan Ross School of Business and IESE Business School
in Barcelona, Spain.
Simon Harrison
Mr. Harrison has served as the Company’s Executive Vice President of Enterprise Sales since March 2021. Prior to this,
Mr. Harrison, who joined the Company through its acquisition of IXOS AG, has held a number of senior leadership roles,
including serving as its Executive Vice President, Worldwide Sales from October 2017 to March 2021, Senior Vice President of
Enterprise Sales from 2015 to 2017, Senior Vice President of Fast Growth Markets from 2014 to 2015 and as the Company’s
Senior Vice President of Sales for the EMEA region from 2012 to 2014. Mr. Harrison holds an honors degree in Computer
Science from Leeds University.
Muhi Majzoub
Mr. Majzoub has served as Executive Vice President, Chief Product Officer since September 2019. Prior to this role, Mr.
Majzoub served as Executive Vice President, Engineering from January 2016 to September 2019 and as Senior Vice President,
Engineering from June 2012 to January 2016. Mr. Majzoub is responsible for managing product development cycles, global
development organization and driving internal operations and development processes. Mr. Majzoub is a seasoned enterprise
software technology executive having recently served as Head of Products for NorthgateArinso, a private company that
provides global Human Resources software and services. Prior to this, Mr. Majzoub was Senior Vice President of Product
Development for CA, Technologies from June 2004 to July 2010. Mr. Majzoub also worked for several years as Vice President
for Product Development at Oracle Corporation from January 1989 to June 2004. Mr. Majzoub attended San Francisco State
University.
James McGourlay
Mr. McGourlay has served as Executive Vice President, International Sales since July 2021. Prior to this, Mr. McGourlay
was the Company’s Executive Vice President, Customer Operations from October 2017 to July 2021, Senior Vice President of
Global Technical Services from May 2015 to October 2017 and Senior Vice President of Worldwide Customer Service from
February 2012 to May 2015. Mr. McGourlay joined OpenText in 1997 and held progressive positions in information
technology, technical support, product support and special projects, including, Director, Customer Service and Vice President,
Customer Service.
Renee McKenzie
Ms. McKenzie has served as Executive Vice President, Chief Information Officer since August 2022. Prior to this, Ms.
McKenzie was the Senior Vice President, Chief Information Officer for OpenText from April 2021 to August 2022. Ms.
McKenzie joined the Company in 2004 and has held a number of positions within the Company, including Vice President,
Enterprise Business Systems from 2015 to 2021. Ms. McKenzie holds a Master’s Degree in Business Administration and a
Bachelor’s Degree in Biology & Psychology from Dalhousie University in Halifax, Nova Scotia, Canada.
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Sandy Ono
Ms. Ono joined OpenText as Executive Vice President and Chief Marketing Officer in January 2022. Ms. Ono is
responsible for driving marketing and communications worldwide, from brand to demand, to deliver growth for the Company.
Prior to joining OpenText, Ms. Ono was Vice President, Growth Marketing at Hewlett Packard Enterprise from 2015 to 2022
and in the Strategy & Operations practice at Deloitte Consulting from 2003 to 2015. Ms. Ono has a bachelor’s degree in
business administration and rhetoric from UC Berkeley, and her MBA from the Wharton School of Business.
Douglas M. Parker
Mr. Parker has served as the Company’s Executive Vice President, Corporate Development since January 2022. Prior to
this, Mr. Parker was the Company’s Senior Vice President, Corporate Development from October 2019 to January 2022. From
January 2018 to October 2019, Mr. Parker served as President & Chief Executive Officer of Quarterhill Inc., focused on the
acquisition, management and growth of companies in dedicated technology areas. Mr. Parker previously served as Senior Vice
President, Corporate Development of OpenText from 2015 to 2017. Prior to this role, Mr. Parker held the position of Vice
President, General Counsel & Assistant Secretary from 2009 to 2015, where he was responsible for a variety of corporate legal,
litigation management and governance activities. Mr. Parker also served as Executive Sponsor to OpenText Brazil operations in
2014. Prior to joining OpenText, Mr. Parker worked for Nortel Networks Corporation in a variety of senior legal roles,
including Managing Attorney, where he was responsible for the company’s global M&A legal function from 2006 to 2009. Mr.
Parker holds an Executive Masters of Business Administration from the Richard Ivey School of Business, the University of
Western Ontario, a Bachelor of Laws degree from Queen’s University, and a Bachelor of Arts (Honors) degree from Trinity
College, the University of Toronto.
Paul Rodgers
Mr. Rodgers joined OpenText as Executive Vice President, Sales Operations in January 2023. Prior to joining the
Company, Mr. Rodgers served as the Business Operations and Integration lead for Micro Focus from April 2018 to January
2023, where he was responsible for overseeing the successful integrations resulting from Micro Focus’ merger and acquisition
activity. Mr. Rodgers joined Micro Focus in April 2008 as the Group Human Resources Director, and prior to joining Micro
Focus, Mr. Rodgers spent 17 years with IBM and four years as Managing Director of a successful Executive Human Resources
consultancy business.
Brian Sweeney
Mr. Sweeney joined OpenText as Chief Human Resources Officer in October 2018. He has over 25 years of experience as
a Human Resource (HR) leader in high growth, global technology businesses, and professional services consulting. He has led
organizational growth and transformation initiatives, including international expansion, M&A, global talent management,
compensation and benefits, employee engagement, communication and cultural transformation. Prior to joining OpenText, Mr.
Sweeney worked at Amgen Inc. from 2003 to 2018, where he served in various HR leadership roles, including Global VP of
HR, Head of HR for Global R&D and VP of International Human Resources. Prior to this, Mr. Sweeney worked at Dell, where
he served as Director of Worldwide Compensation and Benefits from 1993 to 1997 and HR Director from 1997 to 2001. From
1989 to 1992, Mr. Sweeney was a Human Resource consultant at AON Hewitt Associates, working across multiple client
industry sectors in the practice areas of employee benefits and executive compensation. Earlier in his professional career, Mr.
Sweeney worked in corporate sales and sales management for Steelcase, Inc. Mr. Sweeney holds an MBA from the University
of Michigan and a Bachelor’s degree in Sociology from Vanderbilt University.
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P. Thomas Jenkins
Mr. Jenkins is Chair of the Board of OpenText. From 1994 to 2005, Mr. Jenkins was President, then Chief Executive
Officer and then from 2005 to 2013, Chief Strategy Officer of OpenText. Mr. Jenkins has served as a Director of OpenText
since 1994 and as its Chairman since 1998. Mr. Jenkins has also served as a board member of Manulife Financial Corporation,
Thomson Reuters Inc. and TransAlta Corporation. He was also past Chair of the Ontario Global 100 (OG100), past Canadian
Co-Chair of the Atlantik Bruecke and past Chair of the World Wide Web Foundation, a Commissioner of the Tri-Lateral
Commission. He was the tenth Chancellor of the University of Waterloo and was the Chair of the National Research Council of
Canada (NRC). Mr. Jenkins received an M.B.A. from Schulich School of Business at York University, an M.A.Sc. from the
University of Toronto and a B.Eng. & Mgt. from McMaster University. Mr. Jenkins has received honorary doctorates from six
universities. He is a member of the Waterloo Region Entrepreneur Hall of Fame, a Companion of the Canadian Business Hall
of Fame and recipient of the Ontario Entrepreneur of the Year award, the McMaster Engineering L.W. Shemilt Distinguished
Alumni Award and the Schulich School of Business Outstanding Executive Leadership award. He is a Fellow of the Canadian
Academy of Engineering (FCAE). Mr. Jenkins was awarded the Canadian Forces Decoration (CD), the Queen’s Diamond
Jubilee Medal (QJDM) and the Cross of the Order of Merit of the Federal Republic of Germany. Mr. Jenkins is an Officer of
the Order of Canada (OC).
Randy Fowlie
Mr. Fowlie has served as a director of OpenText since March 1998. From December 2010 to April 2017, Mr. Fowlie was
the President and CEO of RDM Corporation, a leading provider of specialized hardware and software solutions in the electronic
payment industry. Mr. Fowlie operated a consulting practice from July 2006 to December 2010. From January 2005 until July
2006, Mr. Fowlie held the position of Vice President and General Manager, Digital Media, of Harris Corporation, formerly
Leitch Technology Corporation (Leitch), a company that was engaged in the manufacturing of audio and video infrastructure
products for the professional broadcast and video industry. From June 1999 to January 2005, Mr. Fowlie held the position of
Chief Operating Officer and Chief Financial Officer of Inscriber Technology Corporation (Inscriber), a software company
providing products to the broadcast and video industry. From February 1998 to June 1999, Mr. Fowlie was the Chief Financial
Officer of Inscriber. Inscriber was acquired by Leitch in January 2005. Prior to working at Inscriber Mr. Fowlie was a partner
with KPMG LLP, Chartered Accountants, where he worked from 1984 to February 1998. Mr. Fowlie received a B.B.A.
(Honours) from Wilfrid Laurier University and is a Chartered Professional Accountant. Mr. Fowlie is also a director of
InvestorCom Inc. and Sapphire Digital Health Solutions Inc., both privately held companies. In the last five years, Mr. Fowlie
also served as a director of Dye & Durham Limited (TSX: DND) a leading provider of cloud-based software and technology
solutions for legal and business professionals.
Major General David Fraser
Major-General (Ret.) David Fraser has served as a director of OpenText since September 2018. Mr. Fraser is the President
of Aegis Six Corporation of Toronto. Mr. Fraser was commissioned as an Infantry Officer following graduation from Carleton
University with a Bachelor of Arts in 1980. He served in various command and staff positions in the Princess Patricia’s
Canadian Light Infantry from platoon to Division throughout his 30 year career. Most notable, he commanded the NATO
coalition in southern Afghanistan in 2006. He is a graduate of the Canadian Forces Command and Staff College in Toronto,
holds a Master’s of Management and Policy and is a graduate of the United States Capstone Program (Executive School for
generals). His honors and awards including the Commander of Military Merit, the Canadian Meritorious Service Cross, the
Meritorious Service Medal, the United States Legion of Honor and Bronze Star (for service in Afghanistan), and leadership
recognition awards from the Netherlands, Poland, and NATO. He is the recipient of the Vimy award for contributions to
leadership and international affairs and the Atlantic Council Award for international leadership. Upon his departure from the
military, Mr. Fraser joined the private sector and, along with his partners, created Blue Goose Pure Foods. Mr. Fraser joined
INKAS® Armored Vehicle Manufacturing as their Chief Operating Officer in 2015 until 2017. In 2016, he founded Aegis Six
Corporation, which aims at addressing the needs of capacity building abroad and for the private sector within Canada. Mr.
Fraser currently works with the Bank of Montreal on their Canadian Defence Community Banking Program, serves as a
director of Antoxa Corp. and the Canadian Forces College Foundation and is a member of The Prince’s Charities Advisory
Council. In the last five years, Mr. Fraser was also a member of the Conference of Defence Association board and was a
director of Route1 Inc.. Mr. Fraser is also a mentor at the Ivey Business School and is the co-author of Operation Medusa, The
Furious Battle that Saved Afghanistan from the Taliban.
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Gail E. Hamilton
Ms. Hamilton has served as a director of OpenText since December 2006. Ms. Hamilton previously led a team of over
2,000 employees worldwide as Executive Vice President at Symantec Corp (Symantec), an infrastructure software company,
and had “P&L” responsibility for their global services and support business. While leading Symantec’s $2 billion enterprise and
consumer business, Ms. Hamilton helped steer the company through an aggressive acquisition strategy. In 2003, Information
Security magazine recognized Ms. Hamilton as one of the “20 Women Luminaries” shaping the security industry. Ms.
Hamilton has over 20 years of experience growing leading technology and services businesses in the enterprise market. She has
extensive management experience at Compaq and Hewlett Packard, as well as Microtec Research. Ms. Hamilton received both
a BSEE from the University of Colorado and an MSEE from Stanford University. Currently, Ms. Hamilton is also a director of
Arrow Electronics. Ms. Hamilton also served as a director of Ixia and Westmoreland Coal Company. She was named as one of
WomenInc.’s 2018 Most Influential Corporate Board Directors.
Robert Hau
Mr. Hau has served as a director of OpenText since September 2020. He is the Chief Financial Officer and Treasurer at
Fiserv, Inc., and provides oversight for all financial functions of the company. Mr. Hau has nearly 30 years of experience in
business and financial leadership roles. Prior to joining Fiserv, he was Executive Vice President and Chief Financial Officer of
TE Connectivity Ltd. from 2012 to 2016, where he was responsible for developing and implementing financial strategy, as well
as creating the financial infrastructure necessary to drive the company’s financial direction, vision and compliance initiatives.
Previously, Mr. Hau served as Chief Financial Officer for Lennox International Inc. Mr. Hau also spent 22 years at Honeywell
International Inc. in a variety of progressive financial and operations leadership roles, including serving as Chief Financial
Officer of its Aerospace Business Group, Specialty Materials Business Group and Aerospace Electronic Systems Unit. Mr. Hau
holds a Master’s degree in business administration from the USC Marshall School of Business and a Bachelor’s degree in
business administration from Marquette University.
Ann M. Powell
Ms. Powell has served as a director of OpenText since June 2021. She is the EVP, Global Chief Human Resource Officer
for Bristol Myers Squibb (BMS) whose mission is to discover, develop and deliver innovative medicines that help patients
prevail over serious diseases. With a focus on business performance, Ms. Powell leads efforts to drive the corporation’s global
people strategy, empowering the company’s current and future workforce and building a healthy culture focused on serving
patients and communities. Ms. Powell works across the enterprise to support BMS’s commitment to creating an energizing
work experience and a culture that is powerfully diverse and globally inclusive. Ms. Powell’s industry experience and expertise
lie in executive compensation, global leadership development, change management, global diversity and inclusion, training
design and delivery, recruitment and placement, labour relations, mergers and acquisitions, divestitures and green field start-
ups. With a career spanning both international and domestic assignments, Ms. Powell has held leadership roles of increasing
responsibility within the gas, chemical and pharmaceutical industries, including Dow Chemical and Wyeth Pharmaceuticals.
Prior to joining BMS in 2013, Ms. Powell was the Chief Human Resources Officer for Shire Pharmaceuticals. Ms. Powell holds
a B.S. degree from Iowa State University, a Master’s degree in Industrial Relations, University of Minnesota, and is certified as
a Senior Professional in Human Resources (SPHR®).
Stephen J. Sadler
Mr. Sadler has served as a director of OpenText since September 1997. From April 2000 to present, Mr. Sadler has served
as the Chairman and CEO of Enghouse Systems Limited, a publicly traded software company that provides enterprise software
solutions focusing on remote work, contact centers, visual computing and communications for next generation software defined
networks. Mr. Sadler was previously Chief Financial Officer, President and Chief Executive Officer of GEAC Computer
Corporation Ltd. (GEAC). Prior to Mr. Sadler’s involvement with GEAC, he held executive positions with Phillips Electronics
Limited and Loblaws Companies Limited, and was Chairman of Helix Investments (Canada) Inc. Currently, Mr. Sadler is a
director of Enghouse Systems Limited. Mr. Sadler has a Business and Security Valuation certificate from Canadian Association
of Business Valuators, holds a B.A. Sc. (Honours) in Industrial Engineering and an M.B.A. (Dean’s List) from York University.
He is also a Chartered Professional Accountant.
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Michael Slaunwhite
Mr. Slaunwhite has served as a director of OpenText since March 1998. Mr. Slaunwhite also previously served on the
board of Vector Talent Holdings, L.P., the parent holding company of Saba Software from 2017 to December 2020. Previously,
Mr. Slaunwhite also served as Chairman of the Board of Saba Software. Prior to his appointment at Vector Talent Holdings,
Mr. Slaunwhite served as CEO and Chairman of Halogen Software Inc. from 2000 to August 2006, as President and Chairman
from 1995 to 2000, and as a Director and Chairman from 1995 up to its acquisition by Vector Talent Holdings in 2017. From
1994 to 1995, Mr. Slaunwhite was an independent consultant to a number of companies, assisting them with strategic and
financing plans. Mr. Slaunwhite was the Chief Financial Officer of Corel Corporation from 1988 to 1993. Mr. Slaunwhite holds
a B.A. Commerce (Honours) from Carleton University.
Katharine B. Stevenson
Ms. Stevenson has served as a director of OpenText since December 2008. She has extensive corporate governance
experience, having served on numerous public company and not-for-profit boards in Canada and the US over the past two
decades, where she has consistently assumed leadership roles. Ms. Stevenson is the Chair of the Board of the Canadian Imperial
Bank of Commerce (CIBC). Ms. Stevenson also serves on the board of Unity Health Toronto. Ms. Stevenson has previously
served as a director of Capital Power Corporation and CAE Inc. She was previously a financial executive in the
telecommunications and banking sectors. Ms. Stevenson holds a B.A. (Magna Cum Laude) from Harvard University. She is
certified with the professional designation ICD.D. granted by the Institute of Corporate Directors (ICD). In June 2023, Ms.
Stevenson received an honorary doctorate from Carleton University. Ms. Stevenson has been named one of the Top 100 Most
Powerful Women in Canada.
Deborah Weinstein
Ms. Weinstein has served as a director of OpenText since December 2009. Ms. Weinstein is a co-founder and partner of
LaBarge Weinstein LLP, a business law firm based in Ottawa, Ontario, since 1997. Ms. Weinstein’s legal practice specializes in
corporate finance, securities law, mergers and acquisitions and business law representation of public and private companies,
primarily in knowledge-based growth industries. Prior to founding LaBarge Weinstein LLP, Ms. Weinstein was a partner of the
law firm Blake, Cassels & Graydon LLP, where she practiced from 1990 to 1997 in Ottawa, and in Toronto from 1985 to 1987.
Ms. Weinstein also serves on a number of not-for-profit boards. Ms. Weinstein has been recognized by Martindale-Hubbell
(U.S.) with the highest possible rating in both Legal Ability and Ethical Standards. As well LaBarge Weinstein has been
recognized by Canadian Lawyer as one of the Top 10 Corporate Boutiques. Ms. Weinstein holds an LL.B. from Osgoode Hall
Law School of York University.
Involvement in Certain Legal Proceedings
None of our directors or executive officers have been involved in any events during the past ten years that would require
disclosure under Item 401(f) of Regulation S-K.
Audit Committee
The Audit Committee currently consists of three directors, Mr. Fowlie (Chair), Mr. Hau and Ms. Stevenson, all of whom
have been determined by the Board of Directors to be independent as that term is defined in NASDAQ Rule 5605(a)(2) and in
Rule 10A-3 promulgated by the SEC under the Exchange Act, and within the meaning of our director independence standards
and those of any exchange, quotation system or market upon which our securities are traded.
The responsibilities, mandate and operation of the Audit Committee are set out in the Audit Committee Charter, a copy of
which is available on the Company’s website, investors.opentext.com under the Corporate Governance section.
The Board of Directors has determined that Mr. Fowlie qualifies as an “audit committee financial expert” as such term is
defined in SEC Regulation S-K, Item 407(d)(5)(ii).
Code of Business Conduct and Ethics
We have a Code of Business Conduct and Ethics (the Ethics Code) that applies to all of our directors, officers and
employees. The Ethics Code incorporates our guidelines designed to deter wrongdoing and to promote honest and ethical
conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional
relationships, and compliance with all applicable laws and regulations. The Ethics Code also incorporates our expectations of
our employees that enable us to provide full, fair, accurate, timely and understandable disclosure in our filings with the SEC
and other public communications.
96
The full text of the Ethics Code is published on our web site at investors.opentext.com under the Corporate Governance
section.
If we make any substantive amendments to the Ethics Code or grant any waiver, including any implicit waiver, from a
provision of the Ethics Code to our Chief Executive Officer, Chief Financial Officer or Chief Accounting Officer, we will
disclose the nature of the amendment or waiver on our website at investors.opentext.com or on a Current Report on Form 8-K.
Board Diversity and Term Limits
The Company, including the Corporate Governance and Nominating Committee, views diversity in a broad context and
considers a variety of factors when assessing nominees for the Board. The Company has established a Board Diversity Policy
recognizing that a Board made up of highly qualified directors from diverse backgrounds, including diversity of gender, age,
race, sexual orientation, religion, ethnicity and geographic representation, is important.
In reference to the disclosure requirements under the CBCA, the Company has not adopted a written policy that
specifically relates to the identification and nomination of women, aboriginal peoples in Canada, persons with disabilities and
members of visible minorities (collectively, the Designated Groups) for election as directors. As discussed above, the Board
Diversity Policy of the Company includes consideration of broader categories of diversity beyond those of the Designated
Groups but which encompass the Designated Groups and which the Board of Directors considers to be better aligned to achieve
the range of perspectives, experience and expertise required by the Company. For each of the four Designated Groups, the
Company has not established a specific target number or percentage, nor a specific target date by which to achieve a specific
target number or percentage of members of each Designated Groups on the Board, as we consider a multitude of factors,
including skills, experience, expertise, character and the Company’s objective and challenges at the time in determining the best
nominee at such time. As of the date of this Annual Report on Form 10-K, there are currently four women on the Board which
represents approximately 36% of the current Board, and 44% of the current independent Board members. One director self-
identified to the Company as a person with disabilities.
The Company has not set term limits for independent directors because it values the cumulative experience and
comprehensive knowledge of the Company that long serving directors possess. The Company does not have a director
retirement policy, however, the Corporate Governance and Nominating Committee considers the results of its director
assessment process in determining the nominees to be put forward. In conducting director evaluations and nominations, the
Corporate Governance and Nominating Committee considers the composition of the Board and whether there is a need to
include nominees with different skills, experiences and perspectives on the Board. This flexible approach allows the Company
to consider each director individually as well as the Board composition generally to determine if the appropriate balance is
being achieved. The onboarding of three new directors since 2018 demonstrates the Company’s focus on this approach.
The table below reports self-identified diversity statistics for the Board as required by NASDAQ Rule 5606.
Board Diversity Matrix
Country of Principal Executive Offices
Canada
Foreign Private Issuer
Disclosure Prohibited Under Home Country
Law
Yes
No
Total Number of Directors
11
12
As of June 30, 2023
As of June 30, 2022
Gender Identity
Directors
Demographic Background
Underrepresented Individual in Home
Country Jurisdiction
LGBTQ+
Did Not Disclose Demographic
Background
Female Male
Non-
Binary
Did Not
Disclose
Gender Female Male
Non-
Binary
Did Not
Disclose
Gender
4
5
0
2
4
6
0
2
1
0
3
0
0
2
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Diversity in Executive Officer Positions
The Company is committed to a diverse and inclusive workplace, including advancing women to executive officer
positions. The Company has adopted a formal written Global Employment Equity and Diversity Policy which expresses its
commitment to fostering a diverse and inclusive workplace for all employees, regardless of culture, national origin, race, color,
gender, gender identification, sexual orientation, family status, age, veteran status, disability, or religion, or other basis. A
principal objective of our Global Employment Equity and Diversity Policy is to support and monitor the identification,
development and retention of diverse employees, including gender diversity at executive and leadership positions. We will
continue to develop a sustainable culture of equity, diversity and inclusion that provides all employees an opportunity to excel,
and strive to present diverse slates of candidates for all our roles and mandate it for our senior leader positions. At the executive
officer level, we consider a multitude of factors, including skills, experience, expertise, character and the Company’s objectives
and challenges at the time in determining the best appointment at such time. To advance equity, diversity and inclusion, we
have committed to have, by 2030, a majority of ethnically diverse staff, with a 50/50 gender representation in key roles and
40% women in leadership positions at all management levels. The Company currently has one woman as a Named Executive
Officer (20%) and three women as executive officers part of the executive leadership team (ELT) (23%), while approximately
16% of existing positions on the senior leadership team (SLT), exclusive of our ELT, are held by women. 40% of ELT and SLT
members are based outside of North America. Within North America, 16% of the ELT/SLT members are visible minorities.
Item 11. Executive Compensation
TALENT AND COMPENSATION COMMITTEE REPORT
Our Talent and Compensation Committee of Open Text’s board of directors (the Talent and Compensation Committee,
the Compensation Committee or the Committee) has reviewed and discussed with our management the following
Compensation Discussion and Analysis (CD&A). Based on this review and discussion, our Talent and Compensation
Committee has recommended to the Board that the following CD&A be included in our Annual Report on Form 10-K for Fiscal
2023.
This report is provided by the following independent directors, who comprise our Compensation Committee:
Michael Slaunwhite (Chair), Gail E. Hamilton, Ann M. Powell, Deborah Weinstein.
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 of 1933, as amended, or the Securities Exchange Act of 1934, as amended (Exchange Act),
this “Compensation Committee Report” shall not be deemed “soliciting materials”, unless specifically otherwise provided in
any such filing.
COMPENSATION DISCUSSION AND ANALYSIS
The following discussion and analysis of compensation arrangements of the following individuals for the fiscal year
which ended on June 30, 2023 (Fiscal 2023), should be read together with the compensation tables and related disclosures set
forth below: (i) our principal executive officer, (ii) our principal financial officer, and (iii) our three most highly compensated
executive officers, other than our principal executive officer and principal financial officer (collectively, the Named Executive
Officers). This discussion contains forward-looking statements that are based on our current plans, considerations, expectations
and projections regarding future compensation programs. Actual compensation programs that we adopt in the future may differ
materially from the various planned programs summarized in this discussion.
Executive Summary
Despite the prior five years having averaged greater than 90% shareholder support, at our last annual meeting of
shareholders held on September 15, 2022, our advisory vote on our approach to executive compensation for Fiscal 2022
received the support of 45% of the shareholder votes cast. The results of the vote are not acceptable to our Compensation
Committee and were not taken lightly, and we acknowledge the votes cast by shareholders in this regard. In full collaboration
with our Board, throughout Fiscal 2023, management and, in certain instances, our Board Chair and Compensation Committee
Chair, directly engaged with our U.S., Canadian and global shareholders as well as leading corporate governance organizations
to discuss, among other things, their feedback regarding our approach to executive compensation overall. See “Shareholder
Engagement and Say on Pay” for an overview of our shareholder outreach and feedback channels. Our Committee considered
the vote result and the feedback we received from shareholders as it evaluated the design of our executive compensation
program for Fiscal 2023. See “Summary of Key Fiscal 2023 Considerations” for details of key considerations and our response
to shareholder feedback.
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On August 25, 2022, we announced our acquisition of all of the issued and to be issued share capital of Micro Focus for a
total purchase price of $6.2 billion, inclusive of Micro Focus’ cash and repayment of Micro Focus’ outstanding indebtedness,
subject to final adjustments (the Micro Focus Acquisition). The Micro Focus Acquisition significantly expands our scope and
size by adding substantial assets and operations to our existing business. As a result of the Micro Focus Acquisition, we possess
one of the largest global customer bases and broadest solution suites in enterprise software. For the year ended June 30, 2023,
the combined company generated approximately $4.5 billion in revenue, approximately $150.6 million in net income and
approximately $1.5 billion in Adjusted EBITDA. See Part II, Item 7 “Use of Non-GAAP Financial Measures” of the Annual
Report on Form 10-K for definitions and reconciliations of GAAP-based measures to Non-GAAP-based measures. As of
June 30, 2023, we employed a total of approximately 24,100 individuals, of which approximately 9,700 joined our workforce as
part of the Micro Focus Acquisition. Given the significance of the Micro Focus Acquisition, our approach to Executive
Compensation in Fiscal 2023 included adjustments to our existing compensation programs to reflect the added complexity and
larger scale resulting from the acquisition, in combination with feedback from our engagement with shareholders. On January
31, 2023, we completed the acquisition.
Following the acquisition of Micro Focus, our CEO and other Named Executive Officers have had the responsibility to
lead the combined organization, which includes accountability for a more diverse geographical footprint and a company with
significantly larger revenues and greater scale. To address this unique transition year, we adjusted our approach to executive
compensation to ensure: (1) appointment and retention of a qualified executive team to lead the combined organization with a
strong alignment to long term shareholder value; (2) clear line of sight to achievement of the performance objectives set for
stand-alone OpenText operations (which excludes the results from the Micro Focus Acquisition); and (3) immediate post-close
actions to ensure customer and revenue retention across the Micro Focus business within the first five months of the acquisition
(from the January 31, 2023 acquisition close date to the end of Fiscal 2023).
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Summary of Key Fiscal 2023 Considerations
In the discussions that were held with our shareholders prior to and following our September 2022 annual meeting of
shareholders, feedback generally supported the design of our executive compensation program, including that we continue to
increase the proportion of our executive officers’ compensation that is “at risk”, in line with our peers. The table below outlines
the areas of specific feedback and topics discussed during our shareholder engagement efforts and how we responded, informed
by such feedback.
What We Heard
Ensure relevant peer
group and pay
position
How We Responded and Rationale
• The Fiscal 2023 compensation of the CEO and other Named Executive Officers was set based on
an industry peer group of organizations of a similar size, scope and geographic reach. In setting
Fiscal 2023 compensation, which occurred in July 2022, the peer group was the same from Fiscal
2022. CEO target cash and total direct compensation was aligned based on the median of the peer
group.
• In April 2023, our peer group was updated to reflect the new size and scope of our operations
resulting from the Micro Focus Acquisition. The new peer group, comprised of primarily U.S.-
based companies, is designed to reflect competitors for executive talent in our industry and our
focus on geographic markets outside of Canada. A number of proxy advisors compare us to
primarily Canadian companies, which does not reflect where we recruit for executive talent, nor
does it represent who we benchmark against for compensation practices and competitive pay levels.
Executives must have relevant experience with complex enterprise delivery of cloud-based
products and be able to mobilize delivery across global operations - requiring experience in both
the global commercial and compliance context. As such, our recruitment of qualified executive
talent does not come from adjacent industries such as telecommunications or from firms with a
primarily domestic or North American footprint.
• Our new peer group is not aspirational. Our revenue is near the 75th percentile of our new peer
group, with the CEO’s total direct compensation remaining at the median of the peer group. To
align with the market for talented software executives as evidenced by independent data from the
updated peer group, effective April 1, 2023, Named Executive Officers (other than the CEO) were
provided base salary increases between 9% and 18%, which is reflective of our larger revenue base
that has grown 28% year-over-year, from $3.5 billion in Fiscal 2022 to $4.5 billion in Fiscal 2023,
largely due to the impact of the Micro Focus Acquisition. Despite the significant revenue growth,
there was no base salary adjustment for the CEO.
• In order to reflect the increased size and scope of the roles of our executives due to leading a
significantly larger, combined organization, and in order to focus and reward management on the
attainment and sustainability of Micro Focus revenue for the first five month “stub” period from
February 1, 2023 to June 30, 2023, specific incentive plans to align with our business objectives
were put in place. The Named Executive Officers target short-term incentive opportunity increased
year-over-year, where in each case, the incremental increase was directly tied to attaining certain
revenue thresholds for Micro Focus’ operations during the balance of Fiscal 2023. See “Micro
Focus Special Performance Incentive Plan (MF SPIP).” Even after incorporating these adjustments
to short-term incentive opportunity, the pay position of the CEO’s target total compensation
remained at market median (as compared to our peers), and the pay position of all other Named
Executive Officers' target total compensation remained below median.
100
What We Heard
Demonstrate pay-for-
performance linkages
How We Responded and Rationale
•
•
The pay program, with pay levels set to industry peer group practices, is designed to ensure that
Named Executive Officer compensation aligns with our shareholders’ interests and supports our
business objectives. Our compensation philosophy is that the realizable pay of the CEO and
other Named Executive Officers be:
◦
◦
Directly correlated to total shareholder return; and
Aligned with the realizable pay earned by our peers for similar relative shareholder
return.
The assessment of realizable CEO pay relative to our peers can be found on page 112 and
confirms that, over the past three years, CEO realizable pay aligned with our relative total
shareholder return (Relative TSR) performance (i.e., the amount of compensation actually paid
to the CEO was at a percentile that was similar to the Company's Relative TSR for the same
period).
101
What We Heard
CEO Pay Appears
High Relative to
Other Named
Executive Officers
How We Responded and Rationale
• We recognize the importance of providing a clear rationale of how Named Executive Officer pay
levels are set, including the careful consideration of both our external market peer group position
and internal equity.
• Among our peer group, the CEO pay ratio as compared to the average compensation of its other
named executive officers was 3.2x, with the highest ratio amongst our peers at 5.9x. In comparison,
our CEO pay ratio as compared to the average compensation of our other Named Executive
Officers was 4.7x, due to the fact that our CEO serves in a dual capacity as CEO and Chief
Technology Officer (CTO). None of our peers had its CEO serve in a dual operating capacity with
such a high level of responsibility and personal contribution. The Board believes this distinction is
important, as it means that this role is accountable for the long-term strategy and success of the
business overall, as CEO, as well as technology innovation, development strategy and long-term
innovation roadmap, as CTO. The Board believes our CEO pay ratio as compared to other Named
Executive Officers should reflect these above-average accountabilities.
Use of and
insufficient rationale
for one time stock
awards
• Prior to setting executive compensation, the Compensation Committee considered internal pay
equity and determined that, given the dual responsibilities, the ratio of the CEO’s pay to that of our
other Named Executive Officers is appropriate. As the CEO and CTO roles are individually
significant, the Board believes the compensation awarded should reflect leadership in these critical
areas that would typically be handled by two individuals. Notwithstanding that, to ensure internal
pay equity and reflect the increasing role scope and accountabilities, our Named Executive
Officers’ have received base salary increases over the past two years, while the CEO base salary
has remained constant over the same period.
• In recognition of the requirement to complete the Micro Focus Acquisition and achieve integration
targets over the longer term with strong alignment to shareholder returns, one-time stock options
with stock price growth performance conditions were awarded to the CEO in August 2022, after
the announcement of the Micro Focus Acquisition but prior to our last annual meeting of
shareholders. One-time stock options were also granted to our other Named Executive Officers in
November 2022. All stock option grants have a four-year vesting horizon and do not begin vesting
until year two. These awards were granted to the Named Executive Officers to align executive
compensation directly to the integration and longer term success of the Micro Focus Acquisition.
With these one-time awards, at least 80% of our Named Executive Officers’ compensation is
directly tied to company share growth appreciation – ensuring appropriate pay for performance,
retention of key executives, and alignment with the annual compensation positioning relative our
peers.
• The use of these one-time awards in Fiscal 2023 was to drive and reward growth related to the
integration of the large-scale Micro Focus Acquisition and are not intended to be adopted as a go-
forward compensation process.
• Specifically, Fiscal 2024 long-term incentive awards will be delivered through the annual LTIP
program without any one-time awards. Further, the annual LTIP in Fiscal 2024 will include a
revised Relative TSR measured against the NASDAQ Composite Index for our performance share
unit program, given the significance of the Micro Focus Acquisition.
102
What We Heard
Fiscal 2023 Short-
Term Incentive
Performance Metric
Target Setting Below
Prior Year Actual
Results
Importance of Micro
Focus Acquisition and
shareholder value
How We Responded and Rationale
• Under the Annual Worldwide Short-Term Incentive Plan for Fiscal 2023, revenue targets were set
at $3.558 billion, 1.8% above Fiscal 2022 actual results.
• The worldwide adjusted operating income (AOI), as defined in “Compensation Discussion and
Analysis - Our Compensation Program - Short-Term Incentives,” target was set at $1.13 billion,
which was 4.0% lower than Fiscal 2022 actual results to reflect a planned $80 million investment
in Research and Development and Sales and Marketing that we expect will drive organic growth
under our long-term strategic plan. This strategic investment increased expenses and resulted in a
reduced AOI target, which the AOI target would have been flat compared to the prior year actual
results if not for such investment (excludes foreign currency effect). The Fiscal 2024 AOI target,
excluding any results from Micro Focus, has been set higher than the Fiscal 2023 actual results to
reflect an increase in organic growth and a reduction in expenses.
• Further, the payout of short-term incentives in Fiscal 2023 was 93% of target based on worldwide
revenue and AOI, which is a considerable reduction from the 200% target short-term incentive
payout under the Fiscal 2022 Short-Term Incentive plan.
• Integration of the Micro Focus Acquisition highlighted the following needs:
(1) Retention of a qualified executive team to lead the combined organization with a strong
alignment to long-term shareholder value – including the provision of one-time stock option
grants in consideration of an appropriate mix of awards in favor of long-term incentives.
(2) Clear line of sight to achievement of the performance objectives set for stand-alone OpenText
operations, excluding the impact of the Micro Focus Acquisition (before the incremental
revenue and operating profit attributed to the Micro Focus Acquisition) to maintain a focus on
OpenText organic revenue growth and efficient operations.
(3) Implementing immediate post-close actions to ensure customer and revenue retention across the
Micro Focus business within the first five months of the acquisition – through the use of a
supplemental short-term incentive plan tied to the achievement of Micro Focus planned revenue
target for the period from February 1, 2023 to June 30, 2023.
103
Compensation Governance Best Practices
Our approach to executive pay is guided by the following compensation governance best practices:
What We Do
What We Don’t Do
P Balance among short- and long-term incentives, cash
O Overemphasize any single performance metric.
and equity and fixed and variable pay.
P Link a significant amount (at least 80%) of target
O Use an aspirational peer group of significantly larger
Named Executive Officer pay to company performance.
companies.
P Cap short-term incentive plans at 200% of target.
P Use multiple types of equity awards to balance risk and
O Replace underwater options.
O Grant in-the-money stock options with an exercise price
reward.
below the fair market value on the grant date.
P Maintain overlapping performance periods for long-
O Guarantee a minimum level of vesting for long-term
term incentives.
incentives.
P Compare executive compensation and company
performance to relevant peer group companies
considering our industry scope and geographic
footprint.
P Require executives to meet minimum stock ownership
requirements.
O Guarantee annual base salary increases.
O Provide discretionary bonuses.
O Provide supplemental executive retirement plans.
P Maintain a compensation claw back policy to recapture
O Provide single-trigger change in control benefits.
unearned incentive pay.
P Provide only limited perquisites.
P Retain an independent compensation consultant.
P Conduct an annual shareholder say-on-pay advisory
vote.
Overview of Compensation Program
O Apply pay policies or practices that pose a material
adverse risk to the Company.
Determining the compensation of our Named Executive Officers is the responsibility of the Compensation Committee
alone, or in certain circumstances, in consultation with the Board. The Compensation Committee ensures compensation
decisions are in line with our goal to provide total compensation to our Named Executive Officers that (i) is fair, reasonable and
consistent with our compensation philosophy to achieve our short-term and long-term business goals, and (ii) is market
competitive. The Named Executive Officers who are the subject of this CD&A are:
• Mark J. Barrenechea - Vice Chair, Chief Executive Officer and Chief Technology Officer (CEO)
• Madhu Ranganathan - Executive Vice President and Chief Financial Officer (CFO)
•
Simon Harrison - Executive Vice President, Enterprise Sales
• Muhi Majzoub - Executive Vice President, Chief Product Officer
•
Paul Duggan - Executive Vice President, Chief Customer Officer
Shareholder Engagement and Say-on-Pay
We have a longstanding practice of proactive shareholder engagement every quarter, during both the proxy season and
non-quiet periods, to address investor questions and concerns and encourage their feedback on a variety of topics such as
company performance, executive compensation, and environmental, social and governance issues. These meetings are primarily
attended by members of management, including some led by our CEO, CFO and Investor Relations team, as well as members
of our Board from time to time. Throughout Fiscal 2023, we met or initiated contact with shareholders representing 64% of our
outstanding shares and all of our top 25 shareholders that actively manage assets.
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At our last annual meeting of shareholders held on September 15, 2022, for the first time in our history, we did not receive
a favorable result for our approach to executive compensation. This result is not acceptable to the Compensation Committee and
is not aligned with our previous historical support for our approach to executive compensation, which in the prior five years had
averaged greater than 90% support.
While our shareholders understood the design of our executive compensation program, and were generally supportive that
we continue to increase the proportion of our executive officers’ compensation that is “at risk” in line with our peers, a number
of key areas of discussion throughout Fiscal 2023 included: (1) peer group selection; (2) demonstration of the pay-for-
performance linkages in our programs, particularly with respect to CEO pay; (3) ratio of CEO compensation as compared to
other Named Executive Officer’s pay; (4) use of one-time awards; (5) Fiscal 2022 short-term incentive metric targets set below
previous year actual results; and (6) aligning compensation with the achievement of stated goals for the Micro Focus
transaction, particularly given the size, complexity and importance of the transaction and need to deliver sustainable
shareholder value through a successful integration.
The CEO’s compensation plan is structured to align with long-term shareholder return, to reward outstanding
performance, provide incentives for continued long-term sustainable growth, accomplish the Board’s retention objectives and
reflect the dual responsibilities of our CEO who serves as both our CEO and CTO.
In reviewing executive compensation, the Compensation Committee benchmarks against U.S. software and technology
companies with a global presence, and not Canadian companies, for a variety of reasons including that greater than 95% of our
revenues are outside of Canada and most of the executive leadership team are based in the U.S. where we primarily recruit for
executive talent. Specifically, all Named Executive Officers, including our CEO, and a majority of our other executive
leadership team members are located in the highly competitive Silicon Valley—a key market for multi-national executive talent
in the software and technology industry—which has higher pay levels than the limited market for software and technology
executives in Canada. Our executive compensation benchmarking, like that of our direct competitors, is focused on the
compensation practices of U.S.-based peer companies, as we generally recruit from U.S.-based competitors for executive
leadership talent. Compensation for executive talent in Canada, and in adjacent sectors such as telecommunications, do not
reflect the same level of competitiveness as among our Company and its peers. The Board believes that our CEO and other
Named Executive Officer’s total compensation is reasonable relative to comparable U.S. software and technology companies
with a global presence. See “Compensation Philosophy and Objectives” for our benchmarking practices. Further, the peer group
was updated in April 2023 to reflect the Company’s increased size and scope following completion of the Micro Focus
Acquisition. See “Peer Group” for our peer group, including our CEO’s relative target pay positioning for Fiscal 2023.
CEO’s in our peer group were paid an average of 3.2x the average of the other named executive officers, with the highest
ratio amongst our peers at 5.9x. In comparison, our CEO is paid 4.7x the average of our other Named Executive Officers
because he serves in a dual capacity as CEO and CTO. Among our peer group, none of our peers had its CEO serve in a dual
capacity. The Board believes this distinction is important, as it means that this role is accountable for the long-term strategy and
success of the business overall, as CEO, as well as technology innovation, development strategy and long-term innovation
roadmap, as CTO. As the CEO and CTO roles are individually significant, the Board believes the compensation awarded
should reflect leadership in these critical areas that would typically be handled by two senior officers. Further, the Board
believes that our CEO’s extensive experience and expertise in the information management and cloud computing industry
makes him uniquely positioned to provide leadership in this dual capacity.
We considered and evaluated the feedback received from our shareholders in the context of the enlarged organization as a
result of the Micro Focus Acquisition and its impact on executive compensation. See “Summary of Key Fiscal 2023
Considerations” for details of decisions made in this transition year. We value the input of our shareholders and will continue to
engage with our shareholders to consider their views expressed through our annual Say-on-Pay voting process.
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Compensation Philosophy and Objectives
We believe that compensation plays an important role in achieving short and long-term business objectives that ultimately
drives business success in alignment with long-term shareholder value creation.
Our compensation philosophy is based on three fundamental
principles:
l Strong link to business strategy - Our short and long-
term goals are reflected in our overall compensation
program.
The objectives of our compensation program are to:
l Attract and retain highly qualified executive officers
who have a history of proven success.
l Pay for performance - We aim to reward sustained
l Align the interests of executive officers with our
shareholders' interests and with the execution of our
business strategy by evaluating executive performance
on the basis of key financial metrics which we believe
closely correlate to long-term shareholder value.
l Motivate and reward our high-caliber executive team
through competitive pay practices and an appropriate
mix of short and long-term incentives.
l Tie compensation awards directly to key financial
metrics with evaluations based on achieving and
overachieving predetermined objectives.
company performance by aligning a significant portion
of total compensation to our financial results and
strategic objectives. We believe compensation should
fluctuate with financial performance and accordingly,
we structure total compensation to be at or above our
peer group median when our financial performance
exceeds our target performance and likewise, we
structure total compensation to be below our peer group
median if our financial performance falls below our
targets. See “Aligning CEO Pay with Shareholders’
Interests.”
l Market relevant - Our compensation program provides
market competitive pay in terms of value and structure
in order to retain talent who are performing according to
their objectives and to attract new talent of the highest
caliber. We use market data of similarly sized U.S.
software and technology companies with a global
presence, rather than Canadian companies, for a variety
of reasons including that greater than 95% of our
revenues are outside of Canada, all of our Named
Executive Officers and most of the executive leadership
team are based in the U.S., and we generally recruit
from U.S.-based competitors for executive leadership
talent. We aim to position our executive officers’
compensation targets at the median in relation to our
peer group, however, actual pay depends on the
performance of the executive officers and the Company.
Our reward package is based primarily on results achieved by the Company as a whole. The Compensation Committee
has the flexibility to exercise discretion to ensure total compensation appropriately reflects performance. The Compensation
Committee rarely exercises this discretion.
Competitive Compensation
Aggregate compensation for each Named Executive Officer is designed to be market competitive. The Compensation
Committee researches and refers to the compensation practices of similarly-situated companies in determining our
compensation policy. Although the Compensation Committee reviews each element of compensation for market
competitiveness and may weigh a particular element more heavily than another based on our Named Executive Officer’s role
within the Company, the focus remains on being competitive in the market with respect to total compensation.
In particular, we are a global cloud software company with greater than 95% of our revenues outside of Canada, including
56% of our revenues in the U.S. All of our Named Executive Officers, including our CEO, and a majority of our executive
leadership team are located in the highly competitive Silicon Valley—a key market for multi-national executive talent in the
software and technology industry. Our executive compensation benchmarking, like that of our direct competitors, is focused on
the compensation practices of U.S.-based peer companies, as we generally recruit from U.S.-based competitors for executive
leadership talent. Executive talent from Canada and adjacent sectors such as telecommunications is not viewed as reflecting the
106
same competition for company talent. See “Peer Group” for details of OpenText’s profile relative to the selected peer group as
well as the relative peer group pay positioning of the CEO and Named Executive Officers, respectively.
The Compensation Committee recognizes that, while executive compensation levels in the United States are higher than
the market for compensation in Canada, recruiting talent from this area is critical for our success. Attracting and retaining talent
with the highest level of industry expertise is a key part of the Company’s business and strategy, and therefore our
compensation practices must align with market expectations where the industry skills reside. Further, the Compensation
Committee also acknowledges that paying U.S. market compensation to U.S. executives in U.S. dollars may result in higher
relative compensation compared to other Canadian companies. Converting amounts paid to U.S.-based executives in U.S.
dollars to Canadian dollars further inflates the compensation in Canadian dollars if analyzed against other Canadian companies.
Despite the elevated compensation relative to Canadian companies, the Compensation Committee believes that the Company’s
pay practice of paying according to each executive’s local market serves the long-term interests of our shareholders and
enhances our ability to find appropriate leadership talent.
Peer Group
The Compensation Committee periodically reviews market data related to compensation levels and programs at
comparable peer companies. Our peer group consists of companies in the software and technology industry. The peer group is
reviewed annually. In July 2022, when setting compensation for Fiscal 2023, no new companies were added to or removed
from our peer group. In April 2023, in line with our key metrics considered for our peer group, which included an increase in
revenue, market capitalization, number of employees and net income as a result of the Micro Focus Acquisition, we updated our
peer group to reflect our new size and scope of our operations. Below are our peer groups used to set Fiscal 2023 pay and
changes made to reflect the addition of the Micro Focus organization, as well as the criteria considered in establishing the peer
groups.
General Description
Global software and
service providers that
are similar in size,
business complexity,
and scope of
operations to us.
Criteria Considered
Key metrics considered
include revenue,
market capitalization,
number of employees,
and net income.
Generally,
organizations within
our peer group are in a
similar software/
technology industry
with similar revenues,
market size and
number of employees.
Peer Group used in July 2022 to set Fiscal
2023 Compensation Program
Akamai Technology, Inc.
Amdocs Ltd.
Autodesk, Inc.
Avaya Inc.
Broadridge Financial Solutions, Inc.
Cadence Design Systems, Inc.
CDK Global LLC
Check Point Software Technologies
Ltd.
Citrix Systems, Inc.
NetApp, Inc.
Pitney Bowes Inc.
Palo Alto Networks, Inc.
Sabre Corporation
SS&C Technologies, Inc.
Synopsys, Inc.
Teradata Corporation
Peer Group Updated as of April 2023 based
on Company Size and Scope including the
Impact of the Micro Focus Acquisition
Akamai Technology, Inc.
Amdocs Ltd.
Autodesk, Inc.
Broadridge Financial Solutions, Inc.
Cadence Design Systems, Inc.
CGI Inc.
DXC Technology Company
Euronet Worldwide, Inc.
Fortinet, Inc.
Gartner Inc.
Gen Digital Inc.
GoDaddy Inc.
NCR Corporation
NetApp, Inc.
Palo Alto Networks, Inc.
Paychex Inc.
Roper Technologies Inc.
Splunk Inc.
SS&C Technologies, Inc.
Synopsys, Inc.
Workday, Inc.
OpenText revenues and operating income are positioned at the 75th and 25th percentiles, respectively, compared to the
updated peer group as of April 2023. Following the adoption of our updated peer group, our CEO’s target pay positioning was
aligned closer to the market median as summarized in the following table:
Position to Market Median of
July 2022 Peer Group
Position to Market Median of Peer Group
Updated Effective April 2023
Total Target Cash
Compensation
CEO
50th Percentile
Total Target Direct
Compensation
50th-75th Percentile
Total Target Cash
Compensation
Total Target Direct
Compensation
50th Percentile
50th Percentile
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Compensation Oversight Process
Role of Compensation Committee
The Compensation Committee has responsibility for the oversight of executive compensation within the terms and
conditions of our various compensation plans. The Compensation Committee approves the compensation of our executive
officers, with the exception of our CEO. Compensation decisions for our executive officers consider, among other things,
performance goals, base salary, bonuses, executive benefits, short-term incentives and long-term incentives. The Compensation
Committee also considers the input of the CEO with respect to his direct reports. The Compensation Committee considers CEO
compensation without the CEO present and makes recommendations to the Board for approval. The Compensation Committee
reviews and recommends for approval all equity awards related to executive compensation prior to final approval by the Board.
Further, the Compensation Committee supports the Board with respect to succession and development of our executive officers;
reports to the Board on human resources matters including reviewing and discussing the progress of our equity, diversity and
inclusion efforts across our global talent; provides input on human capital disclosures; and reviews our approach to retirement
programs.
The Board, the Compensation Committee, and our management have instituted a set of detailed policies and procedures to
evaluate the performance of each of our Named Executive Officers which help determine the amount of the short-term
incentives and long-term incentives to award to each Named Executive Officer. The performance of each of our Named
Executive Officers, other than our CEO, is assessed by our CEO in his capacity as the direct supervisor of the other Named
Executive Officers. The performance of our CEO is assessed by the Board (excluding the CEO). The Board conducts
discussions and makes decisions with respect to the performance of our CEO in special sessions from which management and
the CEO is absent.
The Compensation Committee considers previous compensation awards, competitive market practice, the impact of tax
and accounting treatments, applicable regulatory requirements, any material acquisitions closed during the year and the results
of the most recent shareholder advisory vote on executive compensation when approving compensation programs. See
“Shareholder Engagement and Say-on-Pay.”
During Fiscal 2023, the Committee’s work included the following:
•
•
Executive Compensation Review - The Compensation Committee continually reviews compensation practices and
policies with respect to our senior management team against similar-sized software and technology companies with
a global presence, in order to allow us to place our compensation practices for these positions in a market context.
This benchmarking may include a review of base salary, short-term incentives and long-term incentives.
Long-Term Incentive Plan - The Compensation Committee reviewed semi-annual analysis provided by Mercer
Canada Limited (Mercer) related to performance under all outstanding Performance Share Unit Programs (for details
on the programs, refer to the section titled “Long Term Incentives”).
Although the Compensation Committee has responsibility for decisions on executive compensation, it may consider input
from management, analysis provided by the compensation consultant, as well as other factors that the Committee considers
appropriate.
Compensation Consultant
NASDAQ standards require compensation committees to have certain responsibilities and authority regarding the
retention, oversight and funding of committees’ advisors and perform an evaluation of each advisor’s independence, taking into
consideration all factors relevant to that person’s independence from management. NASDAQ standards also require that such
rights and responsibilities be enumerated in the compensation committee’s charter. While, as a foreign private issuer under the
U.S. federal securities laws, we are exempt from these rules, nonetheless, our Compensation Committee has the sole authority
to retain and terminate outside consultants. From time to time, the Compensation Committee seeks the advice of an outside
compensation consultant to provide assistance and guidance on compensation issues. The compensation consultant may provide
the Compensation Committee with relevant information pertaining to market compensation levels, alternative compensation
plan designs, market trends and best practices and may assist the Compensation Committee with respect to determining the
appropriate benchmarks for each Named Executive Officer’s compensation.
In Fiscal 2023, the Compensation Committee retained Frederic W. Cook & Co., Inc. (FW Cook), an independent
consulting firm specializing in executive compensation consulting. During Fiscal 2023, the Chairman and members of the
Compensation Committee held discussions from time to time with representatives of FW Cook in connection with
compensation market practices, and potential impacts on Company’s financial performance. FW Cook reviewed relevant
information and industry benchmarks on matters relating to CEO and executive officer compensation. In addition, in Fiscal
2023, management engaged AON Consulting, Inc. (AON), an independent consulting firm, to review our peer group and supply
108
market data to assist in the evaluation of our approach to executive and director compensation. For further information, see
“Compensation Philosophy and Objectives.”
The Compensation Committee met six times during Fiscal 2023. Management assisted in the coordination and preparation
of the meeting agenda and materials for each meeting. The agenda is reviewed and approved by the Chairman of the
Compensation Committee. The meeting materials are generally posted and made available to the other Committee members and
invitees, if any, for review approximately one week in advance of each meeting. Following each meeting, the Compensation
Committee reported items that it, in its determination, considered noteworthy to the Board.
Compensation Decisions for Fiscal 2023
Our compensation philosophy is to consider market data and the relative position of total compensation for our Named
Executive Officers. Most executive compensation decisions were made in the first quarter of Fiscal 2023, at which time the
Compensation Committee considered performance, size, pay amounts, and incentive design relative to our peer group.
The Performance Share Unit Plan awards granted in 2019, which vested in September 2022, were measured against the
constituents of the S&P MidCap400 Software and Services Index. Absolute TSR for the measurement period was negative 9%,
which was 32nd percentile TSR performance, above the peer group’s 25th percentile TSR performance of negative 19% and
below the median TSR of +17%. The Committee reviewed these results and concluded that the formulaic payout factor was
64% of target, based on a linear interpolation applied between the 25th and 50th percentiles as applied according to the plan’s
payout table. The below-target funding combined with the reduction in share price for the period aligned with the 2019
Performance Share Unit Plan’s objective of aligning actual executive compensation with our shareholders’ experience.
During Fiscal 2023, our CEO was not provided any adjustment to base salary despite having had no increase in base
salary for the past five fiscal years. Other Named Executive Officers were provided with adjustments to their base salary and
short-term incentive targets based on market data following the increase in scope of their roles upon close of the Micro Focus
Acquisition. The short-term target incentive opportunity for all Named Executive Officers was adjusted on a pro-rated basis to
reflect the increase in responsibilities of leading the larger, integrated organization, including for our CEO.
To ensure an appropriate portion of our Named Executive Officers pay is “at risk” in alignment with our selected peer
group, and with the advice of our external compensation consultant, for Fiscal 2023 we increased the long-term incentive
targets of our Named Executive Officers (excluding our CEO), a component of total compensation where we have historically
lagged the market. For our CEO, the long-term incentive target remains unchanged year-over-year. Similar to previous years,
the Compensation Committee considered this increase to the long-term incentive compensation of our other Named Executive
Officers appropriate in light of the need to retain high-quality leadership to drive our growth strategy, our historical strong
performance relative to our peers and the positive future trajectory of the Company.
Further, prior to setting executive compensation, the Compensation Committee considered internal pay equity and
determined that, given the dual responsibilities of being both CEO and CTO, the ratio of the CEO’s pay to that of our other
Named Executive Officers is appropriate.
Aligning CEO Pay with Shareholders’ Interests
We look at pay for performance from different perspectives to ensure there is strong alignment between what our
executive officers earn and our TSR. A realized and realizable pay analysis shows the actual value of compensation awarded to
our CEO in each of the last five fiscal years as of June 30, 2023 relative to the amount reported. This analysis also compares the
actual value to the CEO for each $100 of compensation awarded each fiscal year to the value earned by shareholders over the
same period. We have indexed these values at $100 to provide a meaningful comparison.
The graphic and table below illustrate that the actual value of CEO compensation is aligned with the experience of
shareholders because CEO realized and realizable compensation directly correlates to TSR performance. This analysis shows
109
that the executive compensation program has performed as intended, reinforcing accountability as the actual value (realized and
realizable) for each fiscal year fluctuates with our share performance.
Fiscal year
Total direct
compensation
awarded (1)
Actual value (realized
and realizable) at
June 30, 2023 (2)
Period
Value of $100
CEO(3)
Shareholders(4)
2019
2020
2021
2022
2023
$
$
$
$
$
8,082,359 $
9,702,562 $
20,930,804 $
15,920,496 $
23,227,232 $
_________________________
9,857,985
July 1, 2018 to June 30, 2023
6,277,263
July 1, 2019 to June 30, 2023
8,608,640
July 1, 2020 to June 30, 2023
9,789,848
July 1, 2021 to June 30, 2023
14,663,667
July 1, 2022 to June 30, 2023
$
$
$
$
$
121.97 $
64.70 $
41.13 $
61.49 $
63.13 $
130.37
109.52
104.45
86.05
113.46
(1)
Includes salary, short-term incentive, stock awards and option awards, as reported in the summary compensation table each year. For Fiscal 2021
and Fiscal 2023, the value of performance stock options included in total direct compensation awarded represents the grant date fair value as
calculated in accordance with ASC Topic 718 as reported in the Summary Compensation Table for the applicable year.
(2) Represents the actual value to the CEO of compensation awarded each year, realized between grant and June 30, 2023 or still realizable on June 30,
2023. Realized value includes cash compensation paid for the fiscal year, including salary, short-term incentive (earned for the fiscal year but paid in
the following fiscal year), payouts of RSUs and PSUs that have vested, and gains realized from stock options exercised. Realizable value includes
the value of RSUs and PSUs that have not vested, and outstanding stock options that were in-the-money.
(3) Represents the actual value (realized and realizable) to the CEO for each $100 of total direct compensation awarded for each fiscal year.
(4) Represents the cumulative value for each of the periods noted of a $100 investment in common shares made on the first trading day of the period,
assuming dividends are reinvested.
Further, the value that our executives realize from our long-term incentive programs is a key driver of the pay for
performance relationship. The table below illustrates the difference in actual value (realized and realizable) and the grant date
fair value of stock and option awards as reported in the summary compensation table each year.
The actual value (realized and realizable) received by our CEO has been 46% lower than the grant date fair value of stock
and option awards reported in the summary compensation table over the last five fiscal years.
110
Grant date
August 6, 2018
August 6, 2018
August 5, 2019
August 5, 2019
August 10, 2020
August 10, 2020
August 10, 2020
August 9, 2021
August 9, 2021
August 8, 2022
August 8, 2022
August 29, 2022
Number of stock
awards (1)
Number of option
awards (1)
Exercise price of
options
Grant date fair value
reported (2)
Actual value (realized
and realizable) at
June 30, 2023 (3)
—
161,040
111,960
—
—
273,010
124,410
—
$
$
$
$
—
—
174,810
213,680
$
750,000 (4) $
$
—
—
256,410
144,160
—
—
306,370
$
$
$
184,770
—
—
$
1,000,000 (4) $
39.27 $
1,407,800 $
367,171
— $
3,693,934 $
6,510,189
38.76 $
1,751,342 $
761,698
— $
4,970,594 $
2,534,939
45.81 $
45.81 $
1,750,993 $
7,635,000 $
—
—
— $
8,991,036 $
6,054,865
52.62 $
2,499,173 $
—
— $
9,621,323 $
5,989,848
39.09 $
2,499,263 $
— $
9,189,844 $
31.89 $
8,090,000 $
753,670
7,677,194
2,784,679
$
62,100,302 $
33,434,253
Total (Reported vs. Actual Value)
________________________
(1) Number of stock and option awards reported in the Grants of Plan-Based Awards table relating to Fiscal 2019 to Fiscal 2023. PSUs
are reported at target. All option awards granted remain outstanding and have not been exercised for value.
(2) The amount recognized as the aggregate grant date fair value of equity-based compensation awards, as calculated in accordance
with ASC Topic 718 for the fiscal year in which the awards were granted, as reported in the summary compensation table for the
applicable year.
(3) Based upon the closing price for the Company’s Common Shares as traded on the NASDAQ on June 30, 2023 of $41.55.
(4)
In Fiscal 2021 and Fiscal 2023, Mr. Barrenechea was granted performance stock options with vesting subject to certain performance
conditions. The amount in the table represents the grant date fair value as calculated in accordance with ASC Topic 718 for the
fiscal year in which the awards were granted, as reported in the summary compensation table for the applicable year. The actual
value of the performance stock options represents the number of performance stock options that have vested as of June 30, 2023,
that have achieved certain performance criteria as discussed in “Long-Term Equity Grants to CEO” below.
111
Realizable Pay Analysis Relative to Peers
The following graph demonstrates the degree of alignment between our CEO realizable pay and OpenText TSR over the
last three years relative to our current industry peer group. Companies that fall within the diagonal bar are generally viewed as
peers having pay for performance alignment. Over the three-year period, our CEO realizable pay was aligned with TSR in the
bottom quartile (and below all but three of our 21 peers), positioning our CEO within the zone of realizable alignment. This
demonstrates the effectiveness of the pay for performance design of our executive compensation program as per plan design to
recognize relative TSR performance.
The realizable pay analysis compares our relative TSR performance for the period of June 30, 2020 to June 30, 2023 to
our current peer group for the same period, using publicly disclosed information. Realizable pay uses the values included in
“Aligning CEO Pay with Shareholders’ Interests” table above.
Our Compensation Program
We believe that transparent, objective and easily verifiable corporate goals play an important role in creating and
maintaining an effective compensation strategy for our Named Executive Officers. Our objective is to facilitate an increase in
shareholder value, over the longer term, through the achievement of these corporate goals under the leadership of our Named
Executive Officers working in conjunction with all of our valued employees.
We use a combination of fixed and variable compensation to motivate our executive officers to achieve our corporate
goals. For Fiscal 2023, the basic components of our executive officer compensation program were:
•
•
•
Fixed pay;
Short-term incentives; and
Long-term incentives.
To ensure alignment of the interests of our executive officers with the interests of our shareholders, our executive officers
have a significant proportion of compensation “at risk.” Compensation that is “at risk” means compensation that may or may
not be paid to an executive officer depending on whether the Company and such executive officer is able to meet or exceed
applicable performance targets. Short-term incentives and long-term incentives meet this definition of compensation which is at
risk, and long-term incentives are an additional incentive used to promote the creation of longer-term shareholder value. In
general, the greater the executive officer’s influence upon our financial or operational results, the higher is the “at risk” portion
of the executive officer’s compensation. The Board and the Compensation Committee have broad discretion to make positive or
negative adjustments if it considers them to be reasonably appropriate. Discretion may, from time to time, be applied in order to
avoid unintended windfalls or penalties for plan participants. Events that might warrant such discretionary adjustments include,
but are not limited to, terrorism, political unrest, war, pandemics and natural disasters. No such discretion was applied to the
variable cash incentive payouts nor long-term incentive payouts during Fiscal 2023.
112
The Compensation Committee annually considers the percentage of each Named Executive Officer’s total compensation
that is “at risk” depending on the Named Executive Officer’s responsibilities and objectives.
The chart below provides the approximate percentage of target total compensation, reflective of the compensation
adjustments discussed above, provided to each Named Executive Officer that was either fixed pay or “at risk” for Fiscal 2023:
Fixed Pay
Percentage
(“Not At Risk”)
8%
19%
22%
22%
27%
Short-Term
Incentive
Percentage
(at 100% target)
(“At Risk”)
Long-Term
Incentive
Percentage
(at 100% target)
(“At Risk”)
11%
19%
21%
21%
26%
81%
62%
57%
57%
47%
Named Executive Officer
Mark J. Barrenechea
Madhu Ranganathan
Simon Harrison
Muhi Majzoub
Paul Duggan
Fixed Pay
Fixed pay includes:
•
•
•
Base salary;
Perquisites; and
Other benefits.
Base Salary
The base salary review for each Named Executive Officer considers factors such as current competitive market conditions
and the individual’s particular skills (such as leadership ability and management effectiveness, experience, responsibility and
proven or expected performance). The Compensation Committee obtains information regarding competitive market conditions
through the assistance of management and our compensation consultants.
For details on our benchmarking process, see “Competitive Compensation” and “Peer Group” above.
Perquisites
Our Named Executive Officers receive a minimal amount of non-cash compensation in the form of executive perquisites.
In order to remain competitive in the marketplace, our Named Executive Officers are entitled to some limited benefits that are
not otherwise available to all of our employees, including:
•
•
An annual executive medical physical examination; and
An annual allowance to reimburse expenses to a pre-defined maximum related to financial planning, tax preparation
or club memberships.
Other Benefits
We provide various employee benefit programs on the same terms to all employees, including our Named Executive
Officers, such as, but not limited to:
• Medical health insurance;
•
•
•
Dental insurance;
Life insurance; and
Tax-based retirement savings plans matching contributions.
Short-Term Incentives
In Fiscal 2023, all of our Named Executive Officers participated in our short-term incentive plan, which is designed to
motivate achievement of our short-term corporate goals. These short-term corporate goals are typically derived from our annual
business plan which is prepared by management and approved by the Board at the start of the fiscal year. Awards made under
the short-term incentive plan are made using cash only.
The amount of the short-term incentive payable to each Named Executive Officer, in general, is based on the attainment
of pre-established quantitative corporate objectives related to improving shareholder and company value, as applicable, which
113
are reviewed and approved by the Compensation Committee and the Board. Mr. Barrenechea, Mrs. Ranganathan and Mr.
Majzoub’s objectives consist of worldwide revenues, AOI and the MF SPIP.
Worldwide revenues are derived from the “Total Revenues” line of our audited income statement with certain adjustments
relating to the aging of accounts receivable. Worldwide revenues are an important metric for measuring our growth and
profitability to help us to assess our Named Executive Officers’ performance.
AOI, which is intended to reflect the operational effectiveness of our leadership by showing our ability to generate profits
from our operational activities, is calculated as total revenues less the total cost of revenues and operating expenses excluding
amortization of intangible assets, special charges and stock-based compensation expense. AOI is also adjusted to remove the
impact of foreign exchange.
Due to his responsibilities as Executive Vice President, Enterprise Sales, Mr. Harrison’s objectives consist of enterprise
license revenue, first year maintenance (FYM), cloud new contract value (NCV), Enterprise professional services revenue (PS)
primarily within North America and EMEA and AOI and MF SPIP.
Enterprise license revenues are a component of “License” revenue line of our audited income statement. FYM is allocated
for the first annual term of maintenance as invoiced for new license deals, which is a component of our “Customer support”
revenue line of our audited income statement. NCV is the total projected commissionable incremental revenue in a signed and
written agreement between the Company and its customer. It represents the minimum amount of new revenue that we expect to
receive from a contract. For the purposes of calculating the achievement of this performance objective, we consider only NCV
that is derived from new business. Enterprise PS revenues are a component of our “Professional Services and Other” line of our
audited income statement.
In Fiscal 2023, Mr. Duggan held the role of Executive Vice President, Worldwide Renewals from July 2022 through
December 2022. Due to his responsibilities in this role, Mr. Duggan’s objectives consisted of team cloud revenue and customer
support revenue and AOI for this time period. Mr. Duggan transitioned to the role of Executive Vice President, Chief Customer
Officer in January 2023. Due to his responsibilities as Executive Vice President, Chief Customer Officer, Mr. Duggan’s
objectives changed and consist of team cloud revenue, customer support revenue, and the addition of enterprise professional
services revenue (PS) and AOI. Team cloud revenues are a component of “Cloud services and subscriptions” revenue line of
our audited income statement and customer support revenues are a component of our “Customer support” revenue line of our
audited income statement, and enterprise professional services revenues are a component of our “Professional Services”
revenue line of our audited income statement. Mr. Duggan objectives also included the MF SPIP.
For Fiscal 2023, the following table illustrates the total short-term target awards, excluding the MF SPIP, for each Named
Executive Officer, along with the associated weighting of the related performance measures.
Named Executive Officer
Mark J. Barrenechea
Madhu Ranganathan
Simon Harrison
Muhi Majzoub
Paul Duggan
_______________________________
Total Target
Award
Worldwide
Revenues
$ 1,425,000
660,000
$
$
$
$
550,000
550,000
550,000
50%
50%
N/A
50%
N/A
Enterprise
License,
FYM, NCV
and PS
Revenue
Team Cloud,
Customer
Support and
PS Revenue
Worldwide
Adjusted
Operating
Income
N/A
N/A
70%
N/A
N/A
N/A
N/A
N/A
N/A
70%
(1)
50%
50%
30%
50%
30%
(1) Mr. Duggan transitioned from the role of Executive Vice President, Worldwide Renewals to Executive Vice President, Chief
Customer Officer in January 2023. For Fiscal 2023, team cloud and customer support revenue were performance measures from
July 2022 through December 2022 and team cloud, customer support and PS revenue were performance measures from January
2023 through June 2023. Therefore, total short-term awards were prorated in accordance with the associated weighting in the table
above.
For the short-term incentive award amounts that would be earned at each of threshold, target and maximum levels of
performance, see “Grants of Plan-Based Awards for Fiscal 2023” below.
114
For each performance measure noted above, the Compensation Committee approves the total target award eligible to be
earned by a Named Executive Officer, and the Board applies a threshold and target level of performance. Where applicable, the
Board also applies an objective formula for determining the percentage payout under awards for levels of performance above
and below threshold and target. To the extent the performance goal is exceeded, the award will be proportionately greater. The
threshold and target levels and payout formula are set forth below as well as actual performance and payouts as a percentage of
targets achieved in Fiscal 2023. The Fiscal 2023 performance goal for worldwide adjusted operating income was set slightly
below actual performance in Fiscal 2022 as a result of our long-term strategic plan to increase organic growth through an $80
million investment in research and development and sales and marketing. Without this strategic investment, which increased
expenses and resulted in a reduction in the AOI target, the AOI goal would have been flat compared to the prior year actual
results (excluding foreign currency headwinds for revenue).
The table below illustrates the percentage of the target awards paid to our Named Executive Officers in accordance with
our actual results achieved during Fiscal 2023, with pre-established plan adjustments to remove the impact of foreign exchange
as compared to plan (i.e. use of budgeted foreign exchange rates), which are outside of the control of the executives.
Objectives (in millions)
Worldwide Revenues
Enterprise License, FYM, NCV and PS Revenue
Team Cloud, Customer Support and PS Revenue
Worldwide Adjusted Operating Income (1)
______________________________
Threshold
Target
Target
Fiscal 2023
Actual
$
$
$
$
3,202 $
968 $
2,495 $
1,017 $
3,558 $
1,076 $
2,772 $
1,130 $
3,532
964
2,804
1,128
% Target
Actually
Achieved
% of Payment
per Fiscal
2023 Payout
Table
99 %
90 %
101 %
100 %
85 %
15 %
158 %
100 %
(1) This is a non-GAAP measure, calculated as total revenues less the total cost of revenues and operating expenses excluding
amortization of intangible assets, special charges and stock-based compensation expense.
In Fiscal 2023, we achieved 99% of our worldwide revenue target; 90% of our enterprise license, FYM, NCV and PS
revenue; 101% of our team cloud, customer support and PS revenue; and 100% of our AOI target. The table below illustrates
under the “% Attainment” column that an achievement of 99% of target for the worldwide revenue performance criteria results
in an award payment of 85% of the target award amount; an achievement of 90% of target for the enterprise license, FYM,
NCV and PS revenue performance criteria results in an award payment of 15% of the target award amount; an achievement of
101% of target for the team cloud, customer support and PS revenue performance criteria results in an award payment of 158%;
and an achievement of 100% of target for the AOI performance criterion results in an award payment of 100% of the target
award amount.
Our short-term incentive payout structure illustrated below is asymmetrical with the maximum attainment of 102%,
resulting in a 200% payout, because this provides an incentive for significant revenue and AOI growth for the Company. For
example, in Fiscal 2023, if revenues and AOI achieved the maximum attainment of 102%, it would have equated to $3.7
million in additional short-term incentive payouts for our CEO and other Named Executive Officers but would have also
resulted in approximately an additional $71 million in revenues and $23 million in AOI for OpenText and its shareholders.
Worldwide Revenues, Enterprise License, FYM, NCV and PS Revenue, Team Cloud and Customer Support Revenue, Team Cloud,
Customer Support, and PS Revenue and Worldwide Adjusted Operating Income - Attainment and Corresponding Payment
% Attainment
0 - 89%
90 - 91%
92 - 93%
94 - 95%
96 - 97%
98 - 99%
% Payment
—%
15%
40%
55%
70%
85%
% Attainment
100.0%
100.5%
101.0%
101.5%
102% and above
% Payment
100%
125%
150%
175%
200% cap
Formula: Actual / Target = % of Attainment
(Linear x25 for every 0.5% over 100%)
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The actual short-term incentive award earned by each Named Executive Officer for Fiscal 2023 was determined in
accordance with the formulas described above and reflects the strong performance levels achieved by the Company in Fiscal
2023 related to this “at risk” compensation component. We have set forth below for each Named Executive Officer the award
amount actually paid for Fiscal 2023, and the percentage of target award amount reflected by the actual award paid, broken out
by performance measure as follows:
Mark J. Barrenechea
Performance Measure:
Worldwide Revenues
Worldwide Adjusted Operating Income
Total
Madhu Ranganathan
Performance Measure:
Worldwide Revenues
Worldwide Adjusted Operating Income
Total
Simon Harrison
Performance Measure:
Enterprise License, FYM, NCV and PS Revenue
Worldwide Adjusted Operating Income
Total
Muhi Majzoub
Performance Measure:
Worldwide Revenues
Worldwide Adjusted Operating Income
Total
Paul Duggan
Performance Measure:
Team Cloud, Customer Support and PS Revenue
Worldwide Adjusted Operating Income
Total
Payable at
Target
Payable at
Threshold
Actual
Payable
($)
Actual
Payable
(% of Target)
$
$
712,500 $
106,875 $
605,625
712,500 $
106,875 $
712,500
$ 1,425,000 $
213,750 $ 1,318,125
85 %
100 %
93 %
Payable at
Target
Payable at
Threshold
Actual
Payable
($)
Actual
Payable
(% of Target)
330,000 $
49,500 $
280,500
330,000 $
49,500 $
330,000
660,000 $
99,000 $
610,500
85 %
100 %
93 %
Payable at
Target
Payable at
Threshold
Actual
Payable
($)
Actual
Payable
(% of Target)
385,000 $
57,750 $
57,750
165,000 $
24,750 $
165,000
550,000 $
82,500 $
222,750
15 %
100 %
41 %
Payable at
Target
Payable at
Threshold
Actual
Payable
($)
Actual
Payable
(% of Target)
275,000 $
41,250 $
233,750
275,000 $
41,250 $
275,000
550,000 $
82,500 $
508,750
85 %
100 %
93 %
Payable at
Target
Payable at
Threshold
Actual
Payable
($)
Actual
Payable
(% of Target)
385,000 $
57,750 $
608,300
165,000 $
24,750 $
165,000
550,000 $
82,500 $
773,300
158 %
100 %
141 %
$
$
$
$
$
$
$
$
$
$
$
$
Micro Focus Special Performance Incentive Plan (MF SPIP)
The Fiscal 2023 short-term incentive plan performance results and targets discussed above excluded the Micro Focus
results for the five-month period from February 2023 to June 2023. No adjustment was made to the expected performance of
stand-alone OpenText operations. This was to ensure line of sight to achievement and measurement of the performance
objectives set for the OpenText operations, excluding the impact of the acquisition for the fiscal year commencing July 1, 2022.
116
The MF SPIP was added to our compensation program to account for the Micro Focus Acquisition on January 31, 2023.
Our CEO and other Named Executive Officers increased their responsibilities while leading the larger, integrated Company
after the acquisition, so their short-term target incentives relating to Micro Focus revenues for the last five months ending June
30, 2023 were adjusted. The core worldwide incentive plan in place prior to the acquisition focused on metrics attributable to
OpenText stand-alone operations, so an incremental incentive plan was introduced with a new measure tied to the immediate
five-month stabilization of Micro Focus revenues for the period of February 1, 2023 to June 30, 2023. This met the total
company objectives of continued focus on delivering on the OpenText business objectives for the year while also delivering on
the Micro Focus integration plan and Micro Focus customer retention. The MF SPIP is tied to Micro Focus revenues, which is
included in the “Total Revenues” line of our audited income statement with certain adjustments relating to the aging of accounts
receivable. This is an important metric for measuring the stabilization of Micro Focus revenues.
The Committee approved this program to pay $1.6 million in bonuses to our Named Executive Officers for achieving the
goal of between $864 million and $944 million in Micro Focus revenue (96% and 104.9%, respectively, of $900 million target).
We achieved $978 million in Micro Focus revenues, equating to 108.6% of target, which resulted in a total of $3.2 million in
bonuses paid under the MF SPIP (200% payout). This recognized the short-term business objective of stabilizing Micro Focus’
revenue and acknowledged the increased scope of the roles of the Named Executive Officers who assumed additional
accountability for the combined OpenText and Micro Focus organizations.
The amount of the MF SPIP payable to each Named Executive Officer, in general, is based on the attainment of pre-
established quantitative corporate objectives which were reviewed and approved by the Compensation Committee and the
Board.
The table below illustrates the percentage of the target awards related to the MF SPIP paid to our Named Executive
Officers in accordance with our actual results achieved during Fiscal 2023, with adjustments to remove the impact of foreign
exchange as compared to budgeted rates, which are outside of the control of the executives.
Objective (in millions)
FY23 Micro Focus Revenues for the five months ended
June 30, 2023
Threshold
Target
Target
Fiscal 2023
Actual
% Target
Actually
Achieved
% of
Payment per
Fiscal 2023
Payout Table
$
846 $
900 $
978
109 %
200 %
In Fiscal 2023, we achieved 108.6% of our MF SPIP target. The table below illustrates under the “% Attainment” column
that an achievement of 108.6% of target for the MF SPIP performance criteria results in an award payment of 200% of the
target award amount.
FY23 Micro Focus Special Performance Incentive Plan
% Attainment
0 - 93.9%
94.0 - 95.9%
96.0 - 104.9%
105.0 - 106.9%
107% and above
% Payment
—%
50%
100%
150%
200% cap
For Fiscal 2023, the following table illustrates the MF SPIP award amount actually paid and the percentage of target
award amount represented by the actual award paid for each Named Executive Officer.
Formula: Actual / Target = % of Attainment
Named Executive Officer
Mark J. Barrenechea
Madhu Ranganathan
Simon Harrison
Muhi Majzoub
Paul Duggan
Payable at
Target
Payable at
Threshold
Actual
Payable
($)
Actual
Payable
(% of Target)
$
$
$
$
$
590,000 $
295,000 $ 1,180,000
250,000 $
125,000 $
500,000
250,000 $
125,000 $
500,000
250,000 $
125,000 $
500,000
250,000 $
125,000 $
500,000
200 %
200 %
200 %
200 %
200 %
117
Long-Term Incentives
As with many North American software and technology companies, we have a general practice of granting variable long-
term incentives to executive officers, including our Named Executive Officers. Our long-term incentives represent a significant
proportion of our Named Executive Officers’ total compensation, and its purpose is two-fold: (i) as a component of a
competitive compensation package; and (ii) to align the interests of our Named Executive Officers with the interests of our
shareholders. The target value of the annual grants are consistent with competitive market practice, set to ensure that annual
total direct target compensation package is appropriately positioned relative to our industry peer group for each Named
Executive Officers. Grant amounts take into account the desired pay mix, competitive positioning and internal equity across our
Named Executive Officers. Vesting occurs over time, to ensure alignment with our performance over the longer term. Usually,
a very high percentage of the long-term incentive is “at risk” indicating we will not provide any compensation to the executive
unless shareholders have received a positive return.
Long-Term Incentive Plans (LTIP) - General
We incentivize our executive officers, including our Named Executive Officers, in part, with long-term compensation
pursuant to our LTIP. For each LTIP grant, a target value is established by the Compensation Committee for each Named
Executive Officer, except for the CEO, whose target value is established by the Board, based on competitive market practice
and by the respective Named Executive Officer’s ability to influence financial or operational performance.
The performance goals and the weightings of performance goals under each LTIP are first recommended by the
Compensation Committee and then approved by the Board. Grants are generally made annually and are comprised of the
components outlined in the table below. No dividends were paid or accrued on PSUs or RSUs for grants made prior to Fiscal
2023. For grants made during or after Fiscal 2023, when cash dividends are paid by the Company on outstanding Common
Shares, the Company will credit additional dividend equivalent PSUs and RSUs to the participant’s account. Dividend
equivalent PSUs and RSUs will be subject to the same terms and conditions as the granted PSUs or RSUs, as applicable, and
vest and are settled at the same time and in the same form as the PSUs or RSUs to which such dividend equivalent PSUs or
RSUs relate.
118
Vehicle
% of Total
LTIP
Description
Performance
Share Units
(PSUs)
50% of
LTIP target
award value
The value of each PSU is equivalent to one
Common Share. The number of PSUs granted is
determined by converting the dollar value of the
target award to PSUs, based on an average share
price determined at time of Board grant. The
number of PSUs to vest will be based on the
Company’s relative TSR at the end of a three-year
period as compared to the TSR of companies
comprising the performance peer group. For Fiscal
2023, Relative TSR was measured against the
constituents of the S&P MidCap400 Software and
Services Index and for Fiscal 2024, Relative TSR
will be measured against the constituents of the
NASDAQ Composite Index.
Vesting
Payout
Cliff vesting in
the third year
following the
determination
by the Board
that the
performance
criteria have
been met.
Once vested, units will
be settled in either
Common Shares or
cash, at the discretion of
the Board. We expect to
settle these awards in
Common Shares.
Restricted
Share Units
(RSUs)
25% of
LTIP target
award value
The value of each RSU is equivalent to one
Common Share. The number of RSUs granted is
determined by converting the dollar value of the
target award to RSUs, based on an average share
price determined at time of Board grant.
Cliff vesting,
generally three
years after grant
date.
Stock
Options
25% of
LTIP target
award value
The dollar value of the target award is converted to
a number of options using a Black-Scholes model.
The exercise price is equal to the closing price of
our Common Shares on the trading day preceding
the date of grant.
Vesting is
typically 25%
on each of the
first four
anniversaries of
grant date.
Options expire
seven years
after the grant
date.
Once vested, units will
be settled in either
Common Shares or
cash, at the discretion of
the Board. We expect to
settle these awards in
Common Shares.
Once vested,
participants may
exercise options for
Common Shares.
Payouts under LTIP grants:
• May be subject to certain limitations in the event of early termination of employment or change in control of the
Company; and
•
Are subject to mandatory repayment or “claw-back” in the event of fraud, willful misconduct or gross negligence by
an employee, including a Named Executive Officer, affecting the financial performance or financial statements of
the Company or the price of our Common Shares.
LTIP
Grants made in Fiscal 2023 under the LTIP were granted on August 8, 2022 with the goal of measuring performance over
a three-year period (from July 1, 2022 to September 15, 2025). The table below illustrates the target value of each element
under the LTIP for each Named Executive Officer.
Named Executive Officer
Mark J. Barrenechea
Madhu Ranganathan
Simon Harrison
Muhi Majzoub
Paul Duggan
Performance Share Units
Value
Restricted Share Units
Value
Stock Options Value
Total
$
$
$
$
$
5,000,000 $
1,100,000 $
742,500 $
742,500 $
500,000 $
2,500,000 $
2,500,000 $
10,000,000
550,000 $
371,250 $
371,250 $
250,000 $
550,000 $
371,250 $
371,250 $
250,000 $
2,200,000
1,485,000
1,485,000
1,000,000
The LTIP is an annual program. For details of our previous LTIPs, see Item 11 of our Annual Report on Form 10-K for
the relevant year.
119
LTIP - PSUs
With respect to our PSUs, we used relative TSR to benchmark the Company’s performance against the performance of the
corporations comprising the constituents of the S&P Mid Cap 400 Software & Services Index for the Fiscal 2023 award. The
S&P Mid Cap 400 Software & Services Index is comprised of a subset of software and services companies of the S&P Mid Cap
400, which consists of 400 U.S. public companies with market capitalization of $1.4 billion to $17.8 billion and is a measure of
the performance of mid-sized companies. Relative TSR is the sole measure for each Named Executive Officer’s performance
over the relevant three-year period with respect to PSUs.
PSUs granted for Fiscal 2024 will include a Relative TSR metric as part of their long-term incentive plan design. Relative
TSR will be calculated in comparison to the NASDAQ Composite Index which correlates better to our own market movement.
The NASDAQ Composite Index will replace the previous index for the Fiscal 2024 grant. This change reflects our new size and
scope of operations as a result of the Micro Focus Acquisition while providing for a larger peer group reflecting a wide range of
shareholder alternatives for investment choices.
If the Company’s cumulative Relative TSR, compared to the
cumulative TSR of the Index is:
Below 25th percentile
25th percentile
50th percentile
80th percentile
Then the percentage of the PSU target award that will be paid
out will be:
0%
50%
100%
200%
Any target percentile achieved between 25th and 80th percentile will be interpolated to determine a payout that can range
from 50% to 200% of the target award. External benchmarking shows that the threshold of the 25th percentile with a 50%
payout, is the majority practice among our peer group.
The amounts that may be realized for PSU awards are as follows, calculated based on the market price of our Common
Shares on the NASDAQ as of June 30, 2023, and applied to the number of PSUs granted to the Named Executive Officers on
August 8, 2022, based on the levels of achievement disclosed above. See “Grants of Plan-Based Awards in Fiscal 2023” for the
number of PSUs granted in Fiscal 2023.
Named Executive Officer
Mark J. Barrenechea
Madhu Ranganathan
Simon Harrison
Muhi Majzoub
Paul Duggan
LTIP - RSUs
LTIP PSUs value as of June 30, 2023
50% Payout
100% Payout
200% Payout
$
$
$
$
$
2,635,579 $
579,831 $
391,339 $
391,339 $
263,593 $
5,271,158 $
1,159,661 $
782,677 $
782,677 $
527,186 $
10,542,316
2,319,322
1,565,354
1,565,354
1,054,372
RSUs vest after three years and do not have any specific performance-based vesting criteria. Provided the eligible
employee remains employed throughout the vesting period, all RSUs granted will become vested RSUs at the end of the three
year period.
The following RSU award values have been calculated based on the market price of our Common Shares on the
NASDAQ as of June 30, 2023, and applied to the number of RSUs granted to the Named Executive Officers on August 8, 2022.
See “Grants of Plan-Based Awards in Fiscal 2023” for the number of RSUs granted in Fiscal 2023.
Named Executive Officer
Mark J. Barrenechea
Madhu Ranganathan
Simon Harrison
Muhi Majzoub
Paul Duggan
LTIP RSUs
120
Value as of June 30, 2023
$
$
$
$
$
2,635,558
579,830
391,567
391,567
263,593
LTIP - Stock Options
The stock options granted in connection with the annual LTIP program vest over four years, do not have any specific
performance-based vesting criteria and, if not exercised, expire after seven years. Our Named Executive Officers will realize
value on these stock options only if there is future OpenText share price appreciation from the date of grant. For a discussion of
the assumptions used in the valuation of stock options, see Note 13 “Share Capital, Option Plans and Share-based Payments” to
our Notes to Consolidated Financial Statements under Item 8 of this Annual Report on Form 10-K.
With respect to stock option grants, the Board will determine the following, based upon the recommendation of the
Compensation Committee: the executive officers entitled to participate in our stock option plan, the number of options to be
granted, and any other material terms and conditions of the stock option grant.
All stock option grants, whether part of the LTIP or granted separately for new hires, promotions, retention or other
reasons, are governed by our stock option plans. In addition, grants and exercises of stock options are subject to our Insider
Trading Policy. For details of our Insider Trading Policy, see “Other Information with Respect to Our Compensation Program -
Insider Trading Policy” below.
Other Long-Term Equity Grants
In Fiscal 2023, we made a grant of stock options to our Named Executive Officers (excluding our CEO - see “Long-Term
Equity Grants to CEO”), following the announcement of the Micro Focus Acquisition. The stock option grants have a four-year
vesting horizon and do not begin vesting until year two. With the increased size of the organization, which includes the Named
Executive Officers leading a larger combined OpenText organization for their respective functions, the objective of the one-
time grants was to retain and engage the leadership team to successfully integrate Micro Focus and execute on the combined
company’s operational goals over the next two to four years in order to achieve sustainable growth and long-term shareholder
value.
Long-Term Equity Grants to CEO
In connection with the Compensation Committee’s review of competitive compensation and the review of Mr.
Barrenechea’s performance, as discussed earlier under “Compensation Decisions for Fiscal 2023”, on August 29, 2022, Mr.
Barrenechea was awarded a grant of performance stock options with an exercise price of $31.89, a seven-year term, and vesting
subject to certain performance conditions provided that Mr. Barrenechea remains an employee. The grant was made after the
announcement of the Micro Focus Acquisition and was in recognition of the size, importance and need to achieve the stated
benefits and synergies associated with the transaction.
These performance options will vest based on the extent to which the average closing price (ACP) of the Common Shares
on the NASDAQ for the trading days in any fiscal quarter commencing October 1, 2022, prior to the expiration of the options,
exceeds the exercise price by a specified percentage or greater (subject to a linear interpolation for quarterly ACP between the
performance levels outlined below). Absolute share growth at target performance ($44.65 reflecting an increase of 40%) will
result in 500,000 options vesting, with no options vesting below threshold performance ($38.27 reflecting an increase of 20%)
and 1,000,000 options vesting if maximum performance is achieved ($51.02 reflecting an increase of 60%). No more than
1,000,000 performance options (2x target) may vest under the award.
ACP Increase (%)
Threshold (20%)
30%
Target (40%)
50%
Maximum (60%)
Illustrative ACP ($)
Aggregate Number of Options to Vest
$38.27
$41.46
$44.65
$47.84
$51.02
200,000
350,000
500,000
750,000
1,000,000
To the extent that any performance options vest during the first five-year period, the options (or the underlying Common
Shares upon exercise) must be held by Mr. Barrenechea until the earlier of the fifth anniversary of the date of grant and the date
he ceases to be an employee. Any performance options that vest may be exercised by Mr. Barrenechea during this five-year
period, provided that the Common Shares acquired on exercise, net of a number of Common Shares that may be sold by Mr.
Barrenechea to fund the exercise price and any income taxes payable as a result of such exercise, must be held by Mr.
Barrenechea for this same period.
Executive Change in Control and Severance Benefits
Our severance benefit agreements are designed to provide reasonable compensation to departing senior executive officers
under certain circumstances. While we do not believe that the severance benefits would be a determinative factor in a senior
121
executive’s decision to join or remain with the Company, the absence of such benefits, we believe, would present a distinct
competitive disadvantage in the market for talented executive officers. Furthermore, we believe that it is important to set forth
the benefits payable in triggering circumstances in advance to avoid future disputes or litigation.
The severance benefits we offer to our senior executive officers are competitive with similarly-situated individuals and
companies. We have structured our senior executive officers’ change in control benefits as “double trigger” benefits, meaning
that the benefits are paid only in the event of, first, a change in control transaction, and second, a change in relationship between
the Company and the senior executive officer within one year after the transaction. These benefits attempt to provide an
incentive to our senior executive officers to remain employed with the Company in the event of such a transaction.
Other Information with Respect to Our Compensation Program
Pension Plans
We do not provide pension benefits or any non-qualified deferred compensation to any of our Named Executive Officers.
Share Ownership Guidelines
We currently have equity ownership guidelines (Share Ownership Guidelines), the objective of which is to encourage our
senior management, including our Named Executive Officers, and our directors to buy and hold Common Shares in the
Company based upon an investment target. We believe that the Share Ownership Guidelines help align the financial interests of
our senior management team and directors with the financial interests of our shareholders.
The equity ownership levels are as follows:
CEO
Other senior management
Non-management director
4x base salary
1x base salary
5x annual retainer
For purposes of the Share Ownership Guidelines, individuals are deemed to hold all securities over which he or she is the
registered or beneficial owner thereof under the rules of Section 13(d) of the Exchange Act through any contract, arrangement,
understanding, relationship or otherwise in which such person has or shares:
•
•
voting power which includes the power to vote, or to direct the voting of, such security; and/or
investment power which includes the power to dispose, or to direct the disposition of, such security.
Also, Common Shares will be valued at the greater of their book value (i.e., purchase price) or the current market value.
On an annual basis, the Compensation Committee reviews the recommended ownership levels under the Share Ownership
Guidelines and the compliance by our executive officers and directors with the Share Ownership Guidelines.
The Board originally implemented the Share Ownership Guidelines in October 2009 and recommends that equity
ownership levels be achieved within five years of becoming a member of the executive leadership team, including Named
Executive Officers. The Board also recommends that the executive leadership team retain their ownership levels for as long as
they remain members of the executive leadership team.
Named Executive Officers
Named Executive Officers may achieve these Share Ownership Guidelines through the exercise of stock option awards,
Common Shares received as a result of vested RSUs or PSUs, purchases under the OpenText Employee Stock Purchase Plan
(ESPP), through open market purchases made in compliance with applicable securities laws or through any equity plan(s) we
may adopt from time to time providing for the acquisition of Common Shares. Until the Share Ownership Guidelines are met, it
is recommended that a Named Executive Officer retain a portion of any stock option exercise or LTIP award in Common
Shares to contribute to the achievement of the Share Ownership Guidelines. Common Shares issuable pursuant to the
unexercised options are not counted towards meeting the equity ownership target.
All Named Executive Officers had complied with the Share Ownership Guidelines for Fiscal 2023. However, due to
increases in responsibilities and related compensation in Fiscal 2023, Mr. Duggan is currently below the requirements of the
Share Ownership Guidelines and expects to be compliant in Fiscal 2024.
Directors
With respect to non-management directors, both Common Shares and deferred stock units (DSUs) are counted towards
the achievement of the Share Ownership Guidelines. The Company currently has a Directors’ Deferred Share Unit Plan (DSU
Plan), whereby any non-management director of the Company may elect to defer all or part of his or her retainer and/or fees in
the form of common stock equivalents. As of the date of this Annual Report on Form 10-K, all non-management directors, have
122
exceeded the Share Ownership Guidelines applicable to them, which is five times their annual retainer. For further details, see
the table below titled “Director Compensation for Fiscal 2023.”
Insider Trading Policy
All of our employees, officers and directors, including our Named Executive Officers, are required to comply with our
Insider Trading Policy. Our Insider Trading Policy prohibits the purchase, sale or trade of our securities with the knowledge of
material inside information. In addition, our Insider Trading Policy prohibits our employees, officers and directors, including
our Named Executive Officers, from, directly or indirectly, short selling any security of the Company or entering into any other
arrangement that results in a gain only if the value of the Company’s securities decline in the future, selling a “call option”
giving the holder an option to purchase securities of the Company, or buying a “put option” giving the holder an option to sell
securities of the Company. The definition of “trading in securities” includes any derivatives-based, monetization, non-recourse
loan or similar arrangement that changes the insider’s economic exposure to or interest in securities of the Company and which
may not necessarily involve a sale.
All grants of stock options are subject to our Insider Trading Policy and as a result, stock options may not be granted
during the “blackout” period beginning on the fifteenth day of the last month of each quarter and ending at the beginning of the
second trading day following the date on which the Company’s quarterly or annual financial results, as applicable, have been
publicly released. If the Board approves the issuance of stock options during the blackout period, these stock options are not
granted until the blackout period is over. The price at which stock options are granted is not less than the closing price of the
Company’s Common Shares on the trading day for the NASDAQ market immediately preceding the applicable grant date.
Summary Compensation Table
The following table sets forth summary information concerning the annual compensation of our Named Executive
Officers. All numbers are rounded to the nearest dollar or whole share.
Mark J. Barrenechea
Vice Chair, Chief Executive
Officer and Chief Technology
Officer
Fiscal
Year
2023
Salary
($) (1)
$ 950,000
Bonus
($) (2)
— $
Stock
Awards
($) (3)
9,189,844
Option
Awards
($) (4)
$ 10,589,263 $
Non-Equity
Incentive Plan
Compensation
($) (1)(5)
All Other
Compensation
($) (6)
2,498,125 $ 21,050
Total ($)
23,248,282
(7) $
2022
$ 950,000
— $
9,621,323
$ 2,499,173 $
2,850,000 $ 16,947
(8) $
15,937,443
2021
$ 890,625
— $
8,991,036
$ 9,385,993 $
1,663,150 $ 31,825
(8) $
20,962,629
Madhu Ranganathan
2023
$ 688,750
— $
2,021,796
$ 1,588,832 $
1,110,500 $
—
(9) $
5,409,878
Executive Vice President and
Chief Financial Officer
2022
$ 600,000
— $
1,924,114
$
499,815 $
1,200,000 $
—
(8) $
4,223,929
2021
$ 468,750
— $
1,765,137
$ 1,319,658 $
937,534 $
—
(8) $
4,491,079
Simon Harrison
2023
$ 575,000
— $
1,364,721
$ 1,410,180 $
722,750 $ 304,118
(10) $
4,376,769
Executive Vice President,
Enterprise Sales
2022
$ 500,000
— $
1,298,676
$
337,434 $
1,000,000 $ 304,118
(10) $
3,440,228
2021
$ 421,875
— $
1,415,475
$ 1,140,192 $
844,239 $ 304,118
(10) $
4,125,899
Muhi Majzoub
2023
$ 562,500
— $
1,364,721
$ 1,410,180 $
1,008,750 $
4,329
(11) $
4,350,480
Executive Vice President, Chief
Product Officer
2022
$ 500,000
— $
1,298,676
$
337,434 $
1,000,000 $
4,995
(8) $
3,141,105
2021
$ 398,437
— $
1,377,238
$ 1,087,917 $
796,904 $
—
(8) $
3,660,496
Paul Duggan
2023
$ 575,000
— $
919,134
$ 1,288,957 $
1,273,300 $ 10,110
(12) $
4,066,501
Executive Vice President, Chief
Customer Officer
___________________________________
2022
2021
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A (13)
N/A (13)
N/A
N/A
(1) Amounts reflect Fiscal 2021 COVID-19 compensation adjustments, which included a base salary reduction for each of the Named Executive
Officers effective May 15, 2020, and the subsequent restoration of those adjustments which became effective December 1, 2020. See Item 11 of our
Annual Report on Form 10-K for Fiscal 2021 for further details on our COVID-19 compensation adjustments.
(2) Amounts set forth in this column for Fiscal 2021 represent a special performance bonus, approved by the Board, equal to an amount equal to the
reductions in their Fiscal 2020 salary and annual incentive payout made pursuant to the previously disclosed COVID-19 compensation adjustments.
A special performance bonus was paid in September 2020; however, as it related to performance in Fiscal 2020, the bonus received by each of the
Named Executive Officers was included in Fiscal 2020.
(3) The amounts set forth in this column represent the aggregate grant date fair value, as computed in accordance with ASC Topic 718 “Compensation-
Stock Compensation” (Topic 718). Grant date fair value may vary from the target value indicated in the table set forth above in the section “LTIP.”
For a discussion of the assumptions used in these valuations, see Note 13 “Share Capital, Option Plans and Share-based Payments” to our Notes to
Consolidated Financial Statements under Item 8 of this Annual Report on Form 10-K. For the maximum value that may be received under the PSU
123
awards granted in Fiscal 2023 by each Named Executive Officer, see the “Maximum” column under “Estimated Future Payouts under Equity
Incentive Plan Awards” under the “Grants of Plan-Based Awards in Fiscal 2023” table below.
(4) Amounts set forth in this column represent the amount recognized as the aggregate grant date fair value of stock option awards, as calculated in
accordance with Topic 718 for the fiscal year in which the awards were granted. In all cases, these amounts do not reflect whether the recipient has
actually realized a financial benefit from the exercise of the awards. The performance options granted to Mr. Barrenechea in Fiscal 2021 and Fiscal
2023 have been reflected and valued here, assuming all performance conditions are satisfied. Please also see “Long-Term Equity Grants to CEO”
and “Grants of Plan-Based Awards in Fiscal 2023” for details of target performance value and vesting. For a discussion of the assumptions used in
this valuation, see Note 13 “Share Capital, Option Plans and Share-based Payments” to our Notes to Consolidated Financial Statements under Item 8
of this Annual Report on Form 10-K.
(5) The amounts set forth in this column for Fiscal 2023 represent payments under the short-term incentive plan based on actual performance achieved.
(6) Except as otherwise indicated the amounts in “All Other Compensation” primarily include (i) medical examinations and (ii) tax preparation and
financial advisory fees paid. “All Other Compensation” does not include benefits received by the Named Executive Officers which are generally
available to all our salaried employees.
(7) Represents amounts we paid, reimbursed or attributed for international tax and financial planning and travel related items.
(8) For details of the amounts of fees or expenses we paid or reimbursed please refer to Summary Compensation Table in Item 11 of our Annual Report
on Form 10-K for the corresponding fiscal years ended June 30, 2022 and June 30, 2021.
(9) The total value of all perquisites and personal benefits for this Named Executive Officer was less than $10,000, and, therefore, excluded.
(10) Represents amounts we paid or reimbursed for housing allowance inclusive of a related tax gross-up amount of $160,118, $160,118 and $160,118
for the fiscal years ended June 30, 2023, 2022 and 2021, respectively.
(11) Represents amounts we paid or reimbursed for tax, financial, and estate planning.
(12) Represents amounts we paid or reimbursed for medical examinations and life insurance.
(13) The executive officer was not a Named Executive Officer during the fiscal year, and therefore compensation details have been excluded.
Grants of Plan-Based Awards in Fiscal 2023
The following table sets forth certain information concerning grants of awards made to each Named Executive Officer
during Fiscal 2023.
Name
Grant Date
Threshold
($)
Target
($)
Maximum
($)
Estimated Future Payouts
Under Non-Equity
Incentive Plan Awards (1)
All Other Option
Awards: Number
of Securities
Underlying (2)
Options
(#)
Exercise or
Base Price
of Option
Awards
Grant
Date Fair
Value of
Options (3)
($/share)
Awards ($)
Mark J. Barrenechea August 8, 2022
$ 508,750 $ 2,015,000 $ 4,030,000
August 29, 2022
306,370
$ 39.09 $ 2,499,263
1,000,000 (6) $ 31.89 $ 8,090,000
Madhu Ranganathan August 8, 2022
$ 224,000 $ 910,000 $ 1,820,000
67,400
$ 39.09 $
549,826
November 7, 2022
180,000
$ 26.81 $ 1,039,006
Simon Harrison
August 8, 2022
$ 207,500 $ 800,000 $ 1,600,000
45,500
$ 39.09 $
371,174
November 7, 2022
180,000
$ 26.81 $ 1,039,006
Muhi Majzoub
August 8, 2022
$ 207,500 $ 800,000 $ 1,600,000
45,500
$ 39.09 $
371,174
November 7, 2022
180,000
$ 26.81 $ 1,039,006
Paul Duggan
August 8, 2022
$ 207,500 $ 800,000 $ 1,600,000
30,640
$ 39.09 $
249,951
November 7, 2022
180,000
$ 26.81 $ 1,039,006
Name
Mark J. Barrenechea
Madhu Ranganathan
Simon Harrison
Muhi Majzoub
Paul Duggan
Grant Date
August 8, 2022
August 8, 2022
August 8, 2022
August 8, 2022
August 8, 2022
Estimated Future Payouts
Under Equity
Incentive Plan Awards (4)
Target
(#)
Threshold
(#)
Maximum
(#)
All Other Stock
Awards: Number
of Securities
Underlying (5)
Stock
(#)
Grant
Date Fair
Value of
Stock (3)
Awards ($)
61,590
123,180
246,360
61,590 $
9,189,844
13,550
27,100
54,200
13,550 $
2,021,796
9,145
18,290
36,580
9,150 $
1,364,721
9,145
18,290
36,580
9,150 $
1,364,721
6,160
12,320
24,640
6,160 $
919,134
124
____________________________
(1) Represents the threshold, target and maximum estimated payouts under our short-term incentive plan for Fiscal 2023. For further
information, see “Compensation Discussion and Analysis - Our Compensation Program - Short-Term Incentives” above.
(2) For further information regarding our options granting procedures, see “Compensation Discussion and Analysis - Our
Compensation Program - Long-Term Incentives” above.
(3) Amounts set forth in this column represent the amount recognized as the aggregate grant date fair value of equity-based
compensation awards, as calculated in accordance with ASC Topic 718 for the fiscal year in which the awards were granted. In all
cases, these amounts do not reflect whether the recipient has actually realized a financial benefit from the exercise of the awards.
For a discussion of the assumptions used in this valuation, see Note 13 “Share Capital, Option Plans and Share-based Payments” to
our Notes to Consolidated Financial Statements under Item 8 of this Annual Report on Form 10-K.
(4) Represents the threshold, target and maximum estimated payouts under our LTIP PSUs for all Named Executive Officers. For
further information, see “Compensation Discussion and Analysis - Our Compensation Program - Long-Term Incentives - LTIP” and
Compensation Discussion and Analysis - Our Compensation Program - Long-Term Incentives - Long-Term Equity Grants to CEO”
above.
(5) Represents the estimated payouts under our LTIP RSUs. For further information, see “Compensation Discussion and Analysis - Our
Compensation Program - Long-Term Incentives - LTIP” above.
(6) Amount consists of the performance option award. The threshold, target and maximum estimated payout for the performance
options reflect the vesting of 200,000, 500,000 and 1,000,000 options, respectively. The value of the performance option at the date
of grant was as set forth herein, assuming the highest level of the performance condition is satisfied.
Outstanding Equity Awards at End of Fiscal 2023
The following table sets forth certain information regarding outstanding equity awards held by each Named Executive
Officer as of June 30, 2023.
Option Awards (1)
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
Number of
Securities
Underlying
Unexercised
Options (#)
Non-
exercisable
Option
Exercise
Price ($)
Option Expiration
Date
Number
of Shares
or Units
of Stock
That
Have Not
Vested
(#) (2)
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($) (2)
Name
Grant Date
Stock Awards
Equity
Incentive
Plan
Awards:
Number of
unearned
shares,
units or
other
rights that
have
not vested
(#) (3)
Equity
Incentive
Plan
Awards:
Market or
payout value
of unearned
shares,
units or
other
rights that
have not
vested ($) (3)
200,000
324,255
189,180
161,040
204,758
106,840
— $ 32.63 June 1, 2024
— $ 32.63 June 1, 2024
— $ 34.49 August 7, 2024
— $ 39.27 August 6, 2025
68,252 $ 38.76 August 5, 2026
106,840 $ 45.81 August 10, 2027
—
750,000 $ 45.81 August 10, 2027
64,103
192,307 $ 52.62 August 9, 2028
—
306,370 $ 39.09 August 8, 2029
288,269
711,731 $ 31.89 August 29, 2029
Mark J.
Barrenechea
June 1, 2017
June 1, 2017
August 7, 2017
August 6, 2018
August 5, 2019
August 10, 2020
August 10, 2020
August 9, 2021
August 8, 2022
August 29, 2022
August 10, 2020
August 10, 2020
August 9, 2021
August 9, 2021
August 8, 2022
August 8, 2022
Madhu
Ranganathan May 11, 2018
August 6, 2018
August 5, 2019
August 10, 2020
August 9, 2021
220,132
28,600
32,175
50,974
12,820
— $ 34.71 May 11, 2025
— $ 39.27 August 6, 2025
10,725 $ 38.76 August 5, 2026
104,080 $ 45.81 August 10, 2027
38,460 $ 52.62 August 9, 2028
125
98,270
$ 4,083,119
48,050
$ 1,996,478
63,431
$ 2,635,572
76,540
$ 3,180,237
96,110
$ 3,993,371
126,863
$ 5,271,144
August 8, 2022
November 7, 2022
—
—
67,400 $ 39.09 August 8, 2029
180,000 $ 26.81 November 7, 2029
August 10, 2020
August 10, 2020
August 9, 2021
August 9, 2021
August 8, 2022
August 8, 2022
Simon
Harrison
November 6, 2017
Muhi
Majzoub
August 6, 2018
August 5, 2019
August 10, 2020
August 9, 2021
August 8, 2022
November 7, 2022
August 10, 2020
August 10, 2020
August 9, 2021
August 9, 2021
August 8, 2022
August 8, 2022
July 29, 2016
August 7, 2017
August 6, 2018
May 7, 2019
August 5, 2019
August 10, 2020
August 9, 2021
August 8, 2022
November 7, 2022
August 10, 2020
August 10, 2020
August 9, 2021
August 9, 2021
August 8, 2022
August 8, 2022
Paul Duggan August 6, 2018
May 7, 2019
August 5, 2019
August 10, 2020
August 9, 2021
August 8, 2022
November 7, 2022
August 10, 2020
August 10, 2020
August 9, 2021
August 9, 2021
August 8, 2022
August 8, 2022
______________________________
40,000
12,510
14,625
42,978
8,655
—
—
— $ 34.48 November 6, 2024
— $ 39.27 August 6, 2025
4,875 $ 38.76 August 5, 2026
90,774 $ 45.81 August 10, 2027
25,965 $ 52.62 August 9, 2028
45,500 $ 39.09 August 8, 2029
180,000 $ 26.81 November 7, 2029
32,560
36,960
31,460
60,000
32,175
41,267
8,655
—
—
— $ 29.75 July 29, 2023
— $ 34.49 August 7, 2024
— $ 39.27 August 6, 2025
15,000 $ 40.20 May 7, 2026
10,725 $ 38.76 August 5, 2026
86,405 $ 45.81 August 10, 2027
25,965 $ 52.62 August 9, 2028
45,500 $ 39.09 August 8, 2029
180,000 $ 26.81 November 7, 2029
2,502
30,000
4,875
12,237
4,808
—
—
— $ 39.27 August 6, 2025
15,000 $ 40.20 May 7, 2026
4,875 $ 38.76 August 5, 2026
32,893 $ 45.81 August 10, 2027
14,422 $ 52.62 August 9, 2028
30,640 $ 39.09 August 8, 2029
180,000 $ 26.81 November 7, 2029
10,983
$
456,344
9,610
$
399,296
13,955
$
579,834
17,490
$
726,710
19,220
$
798,591
27,910
$ 1,159,669
8,839
$
367,260
6,490
$
269,660
9,424
$
391,549
13,670
$
567,989
12,970
$
538,904
18,837
$
782,670
8,598
$
357,247
6,490
$
269,660
9,424
$
391,549
13,390
$
556,355
12,970
$
538,904
18,837
$
782,670
3,438
$
142,849
3,600
$
149,580
6,344
$
263,600
5,470
$
227,279
7,210
$
299,576
12,688
$
527,200
(1) Options in the table above vest annually over a period of 4 years starting from the date of grant, with the exception of (i) options granted to certain
of our executive officers on August 10, 2020 in recognition of their service which vest annually over a 5 year period, with the first vesting date
being two years from the date of grant, (ii) options granted to certain of our executive officers on November 7, 2022 in recognition of their services
which vest annually over a 4 year period, with the first vesting date being two years from the date of grant, and (iii) 750,000 performance options
granted to the CEO in Fiscal 2021 and 1,000,000 performance options granted to the CEO in Fiscal 2023 both of which vest subject to the
satisfaction of certain performance criteria. For additional detail, see “Compensation Discussion and Analysis - Our Compensation Program - Long-
126
Term Incentives - Long-Term Grants to CEO”, Item 11 of our Annual Report on Form 10-K for Fiscal 2021 and “Compensation Discussion and
Analysis - Our Compensation Program - Long-Term Incentives - Long-Term Grants to CEO” above.
(2) Represents each Named Executive Officer’s target number of RSUs granted pursuant to our LTIP program, and other non-LTIP related RSUs,
which vest upon the schedules described above in “Compensation Discussion and Analysis - Our Compensation Program - Long Term Incentives.”
These amounts illustrate the market value as of June 30, 2023, based upon the closing price for the Company’s Common Shares as traded on the
NASDAQ on such date of $41.55.
(3) Represents each Named Executive Officer’s target number of PSUs granted pursuant to our LTIP program, which vest upon the schedules described
above in “Compensation Discussion and Analysis - Our Compensation Program - Long Term Incentives.” These amounts illustrate the market value
as of June 30, 2023, based upon the closing price for the Company’s Common Shares as traded on the NASDAQ on such date of $41.55.
As of June 30, 2023, options to purchase an aggregate of 12,219,439 Common Shares had been previously granted and are
outstanding under our stock option plans, of which 4,292,254 Common Shares were vested. Options to purchase an additional
5,950,832 Common Shares remain available for issuance pursuant to our stock option plans. Our outstanding options pool
represents 4.5% of the Common Shares issued and outstanding as of June 30, 2023.
During Fiscal 2023, the Company granted options to purchase 4,964,650 Common Shares or 1.8% of the Common Shares
issued and outstanding as of June 30, 2023.
Option Exercises and Stock Vested in Fiscal 2023
The following table sets forth certain details with respect to each of the Named Executive Officers concerning the exercise
of stock options and vesting of stock in Fiscal 2023:
Name
Mark J. Barrenechea
Madhu Ranganathan
Simon Harrison
Muhi Majzoub
Paul Duggan
_______________________________
Option Awards
Stock Awards (3)
Number of Shares
Acquired on Exercise
(#)
Value Realized on
Exercise (1)
($)
Number of Shares
Acquired on Vesting
(#)
Value Realized on
Vesting (2)
($)
— $
— $
— $
37,840 $
— $
—
—
—
252,412
—
94,552 $
17,091 $
8,758 $
16,756 $
7,457 $
2,534,939
482,806
256,941
470,133
207,724
(1) “Value realized on exercise” is the excess of the market price, at date of exercise, of the shares underlying the options over the
exercise price of the options.
(2) “Value realized on vesting” is the market price of the underlying Common Shares on the vesting date.
(3) Relates to the vesting of PSUs and RSUs under our LTIP program.
Potential Payments Upon Termination or Change in Control
We have entered into employment contracts with each of our Named Executive Officers. These contracts may require us
to make certain types of payments and provide certain types of benefits to the Named Executive Officers upon the occurrence
of any of these events:
•
•
If the Named Executive Officer is terminated without cause; and
If there is a change in control in the ownership of the Company and subsequent to the change in control, there is a
change in the relationship between the Company and the Named Executive Officer.
When determining the amounts and the type of compensation and benefits to provide in the event of a termination or
change in control described above, we considered available information with respect to amounts payable to similarly situated
officers of our peer groups and the position held by the Named Executive Officer within the Company. The amounts payable
upon termination or change in control represent the amounts determined by the Company and are not the result of any
individual negotiations between us and any of our Named Executive Officers.
Our employment agreements with our Named Executive Officers are similar in structure, terms and conditions, with the
key exception of the amount of severance payments, which is determined by the position held by the Named Executive Officer.
Details are set out below of each of their potential payments upon a termination by the Company without cause and upon a
change in control event where there is a subsequent change in the relationship between the Company and the Named Executive
Officer.
127
Termination Without Cause
If the Named Executive Officer is terminated without cause, we may be obligated to make payments or provide benefits to
the Named Executive Officer. A termination without cause means a termination of a Named Executive Officer for any reason
other than the following, each of which provides “cause” for termination:
•
•
•
•
•
•
•
•
The failure by the Named Executive Officer to attempt in good faith to perform his duties, other than as a result of a
physical or mental illness or injury;
The Named Executive Officer’s willful misconduct or gross negligence of a material nature in connection with the
performance of his duties which is or could reasonably be expected to be injurious to the Company;
The breach by the Named Executive Officer of his fiduciary duty or duty of loyalty to the Company;
The Named Executive Officer’s intentional and unauthorized removal, use or disclosure of information relating to
the Company, including customer information, which is injurious to the Company or its customers;
The willful performance by the Named Executive Officer of any act of dishonesty or willful misappropriation of
funds or property of the Company or its affiliates;
The indictment of the Named Executive Officer or a plea of guilty or nolo contender to a felony or other serious
crime involving moral turpitude;
The material breach by the Named Executive Officer of any obligation material to his employment relationship with
the Company; or
The material breach by the Named Executive Officer of the Company’s policies and procedures which breach causes
or could reasonably be expected to cause harm to the Company;
provided that in certain of the circumstances listed above, OpenText has given the Named Executive Officer reasonable notice
of the reason for termination as well as a reasonable opportunity to correct the circumstances giving rise to the termination.
Change in Control
If there is a change in control of the Company and within one year of such change in control event, there is a change in the
relationship between the Company and the Named Executive Officer without the Named Executive Officer’s written consent,
we may be obligated to provide payments or benefits to the Named Executive Officer, unless such a change is in connection
with the termination of the Named Executive Officer either for cause or due to the death or disability of the Named Executive
Officer.
A change in control includes the following events:
•
•
•
•
The sale, lease, exchange or other transfer, in one transaction or a series of related transactions, of all or substantially
all of the Company’s assets;
The approval by the holders of Common Shares of any plan or proposal for the liquidation or dissolution of the
Company;
Any transaction in which any person or group acquires ownership of more than 50% of outstanding Common
Shares; or
Any transaction in which a majority of the Board is replaced over a twelve-month period and such replacement of
the Board was not approved by a majority of the Board still in office at the beginning of such period.
Examples of a change in the relationship between the Named Executive Officer and the Company where payments or
benefits may be triggered following a change in control event include:
•
•
•
•
A material diminution in the duties and responsibilities of the Named Executive Officer, other than (a) a change
arising solely out of the Company becoming part of a larger organization following the change in control event or
any related change in the reporting hierarchy or (b) a reorganization of the Company resulting in similar changes to
the duties and responsibilities of similarly situated executive officers;
A material reduction to the Named Executive Officer’s compensation, other than a similar reduction to the
compensation of similarly situated executive officers;
A relocation of the Named Executive Officer’s primary work location by more than fifty miles;
A reduction in the title or position of the Named Executive Officer, other than (a) a change arising solely out of the
Company becoming part of a larger organization following the change in control event or any related change in the
reporting hierarchy or (b) a reorganization of the Company resulting in similar changes to the titles or positions of
similarly situated executive officers.
128
None of our Named Executive Officers are entitled to the payments or benefits described below, or any other payments or
benefits, solely upon a change in control where there is no change to the Named Executive Officer’s relationship with the
Company.
Amounts Payable Upon Termination or Change in Control
Pursuant to our employment agreements with our Named Executive Officers and the terms of our LTIP, each Named
Executive Officer’s entitlement upon termination of employment without cause or following a change in the Named Executive
Officer’s relationship with the Company, both absent a change in control event and within twelve months of a change in control
event, are set forth below.
No Change in Control
Mark J.
Barrenechea
Madhu
Ranganathan
Simon Harrison
Muhi Majzoub
Paul Duggan
Termination without cause or
Change in relationship
Termination without cause or
Change in relationship
Termination without cause or
Change in relationship
Termination without cause or
Change in relationship
Termination without cause or
Change in relationship
____________________________
No change in control
Base
Short term
incentives (1)
LTIP (2)
Options (3)
24 months
24 months
Prorated
Vested
Employee and
Medical Benefits (4)
24 months (5)
12 months
12 months
Prorated
Vested
12 months
12 months
12 months
Prorated
Vested
12 months
12 months
12 months
Prorated
Vested
12 months
12 months
12 months
Prorated
Vested
12 months
(1) Assuming 100% achievement of the expected targets for the fiscal year in which the triggering event occurred.
(2) LTIP amounts are prorated for the number of months of participation at termination date in the applicable 38-month performance
period. If the termination date is before the commencement of the 19th month of the performance period, a prorated LTIP will not
be paid.
(3) Already vested as of termination date with no acceleration of unvested options. For a period of 90 days following the termination
date, the Named Executive Officer has the right to exercise all options which have vested as of the date of termination.
(4) Employee and medical benefits provided to each Named Executive Officer immediately prior to the occurrence of the trigger event.
In accordance with the terms of his employment agreement, as amended, Mr. Barrenechea is entitled to participate until the age of
(5)
65 in healthcare benefits substantially similar to what he currently receives as Vice Chair, Chief Executive Officer and Chief
Technology Officer of the Company. These benefits will be provided at the cost of the Company, provided that Mr. Barrenechea
continues to be responsible for funding an amount that is equal to his employee contribution as Vice Chair, Chief Executive Officer
and Chief Technology Officer, unless he becomes employed elsewhere, at which point this benefit will terminate. In the event that
the employee or company contribution funding increases, Mr. Barrenechea would be responsible for that increase.
Within 12 Months of a Change in Control
Mark J.
Barrenechea
Madhu
Ranganathan
Simon Harrison
Muhi Majzoub
Paul Duggan
Termination without cause or
Change in relationship
Termination without cause or
Change in relationship
Termination without cause or
Change in relationship
Termination without cause or
Change in relationship
Termination without cause or
Change in relationship
_____________________________
Within 12 Months of a Change in Control
Base
Short term
incentives (1)
24 months
24 months
24 months
24 months
12 months
12 months
24 months
24 months
12 months
12 months
LTIP
100%
Vested
100%
Vested
100%
Vested
100%
Vested
100%
Vested
Options (2)
Employee and
Medical Benefits (3)
100% Vested
24 months(4)
100% Vested
24 months
100% Vested
12 months
100% Vested
24 months
100% Vested
12 months
(1) Assuming 100% achievement of the expected targets for the fiscal year in which the triggering event occurred.
(2) For a period of 90 days following the termination date, the Named Executive Officer has the right to exercise all options which are
deemed to have vested as of the date of termination.
129
(3) Employee and medical benefits provided to each Named Executive Officer immediately prior to the occurrence of the trigger event.
(4)
In accordance with the terms of his employment agreement, as amended, Mr. Barrenechea is entitled to participate until the age of
65 in healthcare benefits substantially similar to what he currently receives as Vice Chair, Chief Executive Officer and Chief
Technology Officer of the Company. These benefits will be provided at the cost of the Company, provided that Mr. Barrenechea
continues to be responsible for funding an amount that is equal to his employee contribution as Vice Chair, Chief Executive Officer
and Chief Technology Officer, unless he becomes employed elsewhere, at which point this benefit will terminate. In the event that
the employee or company contribution funding increases, Mr. Barrenechea would be responsible for that increase.
In addition to the information identified above, each Named Executive Officer is entitled to all accrued payments up to the
date of termination, including all earned but unpaid short-term incentive amounts and earned but unsettled LTIP. Except as
otherwise required by law, we are required to make all these payments and provide these benefits over a period of 12 months or
24 months, depending on the Named Executive Officer’s entitlement and the circumstances which triggered our obligation to
make such payments and provide such benefits, from the date of the event which triggered our obligation. With respect to
payments to Mr. Barrenechea, the Company intends to make all required payments to Mr. Barrenechea no later than two and a
half months after the end of the later of the fiscal year or calendar year in which the payments are no longer subject to a
substantial risk of forfeiture.
In return for receiving the payments and the benefits described above, each Named Executive Officer must comply with
certain obligations in favor of the Company, including a non-disparagement obligation. Also, each Named Executive Officer is
bound by a confidentiality and non-solicitation agreement where the non-solicitation obligation lasts six months from the date
of termination of his employment.
Any breach by a Named Executive Officer of any provision of his contractual agreements may only be waived upon the
review and approval of the Board.
Quantitative Estimates of Payments upon Termination or Change in Control
Further information regarding payments to our Named Executive Officers in the event of a termination or a change in
control may be found in the table below. This table sets forth the estimated amount of payments and other benefits each Named
Executive Officer would be entitled to receive upon the occurrence of the indicated event, assuming that the event occurred on
June 30, 2023. Amounts (i) potentially payable under plans which are generally available to all salaried employees, such as life
and disability insurance, and (ii) earned but unpaid, in both cases, are excluded from the table. The values related to vesting of
stock options and awards are based upon the fair market value of our Common Shares of $41.55 per share as reported on the
NASDAQ on June 30, 2023, the last trading day of our fiscal year. The other material assumptions made with respect to the
numbers reported in the table below are:
•
•
The salary and incentive payments are calculated based on the amounts of salary, incentive and benefit payments
which were payable to each Named Executive Officer as of June 30, 2023; and
Payments under the LTIPs are calculated as though 100% of outstanding LTIP awards have vested with respect to a
termination without cause or change in relationship following a change in control event, and as though a pro-rated
amount have vested with respect to no change in control event.
Actual payments made at any future date may vary, including the amount the Named Executive Officer would have
accrued under the applicable benefit or compensation plan as well as the price of our Common Shares.
Named Executive Officer
Mark J.
Barrenechea
Madhu
Ranganathan
Termination Without
Cause / Change in
Relationship with no
Change in Control
Termination Without
Cause / Change in
Relationship, within
12 months following a
Change in Control
Termination Without
Cause / Change in
Relationship with no
Change in Control
Short-term
Incentive
Payment
($)
Gain on Vesting
of LTIP and
Non-LTIP RSUs
($)
Gain on
Vesting of
Stock Options
($)
Employee
Benefits
($)
Salary
($)
Total
($)
$ 1,900,000 $ 2,850,000 $ 10,798,442 $
— $
42,099 (1) $ 15,590,541
$ 1,900,000 $ 2,850,000 $ 21,159,919 $
944,093 $
42,099
$ 26,896,111
$
688,750 $
660,000 $ 1,883,208 $
— $
—
$ 3,231,958
130
Simon
Harrison
Muhi
Majzoub
Paul Duggan
Termination Without
Cause / Change in
Relationship, within
12 months following a
Change in Control
Termination Without
Cause / Change in
Relationship with no
Change in Control
Termination Without
Cause / Change in
Relationship, within
12 months following a
Change in Control
Termination Without
Cause / Change in
Relationship with no
Change in Control
Termination Without
Cause / Change in
Relationship, within
12 months following a
Change in Control
Termination Without
Cause / Change in
Relationship with no
Change in Control
Termination Without
Cause / Change in
Relationship, within
12 months following a
Change in Control
_____________________________
$ 1,377,500 $ 1,320,000 $ 4,120,430 $ 2,848,927 $
—
$ 9,666,857
$
575,000 $
550,000 $ 1,402,055 $
— $ 152,059
$ 2,679,114
$
575,000 $
550,000 $ 2,918,057 $ 2,778,731 $ 152,059
$ 6,973,847
$
562,500 $
550,000 $ 1,381,259 $
— $
4,329
$ 2,498,088
$ 1,125,000 $ 1,100,000 $ 2,896,409 $ 2,815,303 $
8,657
$ 7,945,369
$
575,000 $
550,000 $
636,060 $
— $
10,110
$ 1,771,170
$
575,000 $
550,000 $ 1,610,063 $ 2,762,426 $
10,110
$ 5,507,599
(1)
In accordance with the terms of his employment agreement, as amended, Mr. Barrenechea is entitled to participate until the age of
65 in healthcare benefits substantially similar to what he currently receives as Chief Executive Officer of the Company. These
benefits will be provided at the cost of the Company, provided that Mr. Barrenechea continues to be responsible for funding an
amount that is equal to his employee contribution as Chief Executive Officer, unless he becomes employed elsewhere, at which
point this benefit will terminate. In the event that the employee or company contribution funding increases, Mr. Barrenechea would
be responsible for that increase.
131
Director Compensation for Fiscal 2023
The following table sets forth summary information concerning the annual compensation received by each of the non-
management directors of OpenText for the fiscal year ended June 30, 2023.
Fees Earned or
Paid in Cash (1)
($)
Stock
Awards (2)
($)
Option
Awards
($)
Non-Equity
Incentive Plan
Compensation
($)
All Other
Compensation
($)
P. Thomas Jenkins (3)
Randy Fowlie (4)
David Fraser (5)
Gail E. Hamilton (6)
Robert Hau (7)
Ann M. Powell (8)
Stephen J. Sadler (9)
Harmit Singh (10)
Michael Slaunwhite (11)
Katharine B. Stevenson (12)
Deborah Weinstein (13)
______________________________
$
$
$
$
$
$
$
$
$
$
$
200,000 $
461,675 $ — $
84,500 $
407,331 $ — $
75,000 $
295,888 $ — $
90,000 $
345,559 $ — $
100,000 $
267,321 $ — $
90,000 $
262,678 $ — $
— $
445,805 $ — $
6,250 $
14,535 $ — $
1,850 $
501,517 $ — $
— $
469,825 $ — $
24,750 $
468,109 $ — $
— $
— $
— $
— $
— $
—
—
—
—
—
$
$
$
$
$
—
— $
$
— $ 334,695 (14) $
$
— $
—
— $
— $
— $
—
—
—
$
$
$
Total
($)
661,675
491,831
370,888
435,559
367,321
352,678
780,500
20,785
503,367
469,825
492,859
(1) Non-management directors may elect to defer all or a portion of their retainer and/or fees in the form of Common Share equivalent
units under our Directors’ Deferred Share Unit Plan (DSU Plan) based on the value of the Company’s shares as of the date fees
would otherwise be paid. The DSU Plan, originally effective February 2, 2010, and amended and restated in October 2018, is
available to any non-management director of the Company and is designed to promote greater alignment of long-term interests
between directors of the Company and its shareholders. DSUs granted as compensation for directors’ fees vest immediately whereas
the annual DSU grant vests at the Company’s next annual general meeting. No DSUs are payable by the Company until the director
ceases to be a member of the Board.
(2) The amounts set forth in this column represents the amount recognized as the aggregate grant date fair value of equity-based
compensation awards, inclusive of DSU dividend equivalents, as calculated in accordance with ASC Topic 718. These amounts do
not reflect whether the recipient has actually realized a financial benefit from the awards. For a discussion of the assumptions used
in this valuation, see Note 13 “Share Capital, Option Plans and Share-based Payments” to our consolidated financial statements. In
Fiscal 2023, Messrs. Jenkins, Fowlie, Fraser, Hau, Sadler, Singh and Slaunwhite and Mses. Hamilton, Powell, Stevenson and
Weinstein received 15,609, 13,797, 10,210, 9,358, 15,150, 512, 16,795, 11,735, 9,217, 15,856, and 15,770 DSUs, respectively.
(3) As of June 30, 2023, Mr. Jenkins holds 151,162 DSUs. Mr. Jenkins serves as Chairman of the Board.
(4) As of June 30, 2023, Mr. Fowlie holds 127,953 DSUs.
(5) As of June 30, 2023, Mr. Fraser holds 35,703 DSUs.
(6) As of June 30, 2023, Ms. Hamilton holds 102,273 DSUs.
(7) As of June 30, 2023, Mr. Hau holds 20,371 DSUs.
(8) As of June 30, 2023, Ms. Powell holds 15,502 DSUs.
(9) As of June 30, 2023, Mr. Sadler holds 125,209 DSUs.
(10) Mr. Singh retired from the Board effective September 15, 2022.
(11) As of June 30, 2023, Mr. Slaunwhite holds 147,961 DSUs.
(12) As of June 30, 2023, Ms. Stevenson holds 126,494 DSUs.
(13) As of June 30, 2023, Ms. Weinstein holds 141,940 DSUs.
(14) During Fiscal 2023, Mr. Sadler received $334,695 in consulting fees, paid or payable in cash, for assistance with acquisition-related
business activities. Mr. Sadler abstained from voting on all transactions from which he would potentially derive consulting fees.
132
The Board sets the level of compensation for directors, based on the recommendations of the Corporate Governance and
Nominating Committee. From time to time, the Corporate Governance and Nominating Committee reviews the amount and
form of compensation paid to directors, having regard to the workload and responsibilities involved in being an effective
director, and benchmarked against director compensation for comparable companies. The committee’s review may be
conducted with the assistance of outside consultants. Directors who are salaried officers or employees receive no compensation
for serving as directors. Mr. Barrenechea was the only employee director in Fiscal 2023. The material terms of our director
compensation arrangements are as follows:
Description
Annual Chairman retainer fee payable to the Chairman of the
Board
Amount and Frequency of Payment
$200,000 per year payable following our Annual General
Meeting
Annual retainer fee payable to each non-management director $75,000 per director payable following our Annual General
Meeting
Annual Audit Committee retainer fee payable to each member
of the Audit Committee
$25,000 per year payable at $6,250 at the beginning of each
quarterly period.
Annual Audit Committee Chair retainer fee payable to the
Chair of the Audit Committee
$10,000 per year payable at $2,500 at the beginning of each
quarterly period.
Annual Compensation Committee retainer fee payable to each
member of the Compensation Committee
$15,000 per year payable at $3,750 at the beginning of each
quarterly period.
Annual Compensation Committee Chair retainer fee payable
to the Chair of the Compensation Committee
$10,000 per year payable at $2,500 at the beginning of each
quarterly period.
Annual Corporate Governance & Nominating Committee
retainer fee payable to each member of the Corporate
Governance & Nominating Committee
$10,000 per year payable at $2,500 at the beginning of each
quarterly period.
Annual Corporate Governance & Nominating Committee
Chair retainer fee payable to the Chair of the Corporate
Governance & Nominating Committee
$8,000 per year payable at $2,000 at the beginning of each
quarterly period.
Excess travel fee payable to each non-management director
attending a meeting who travels more than six hours
$2,000 per meeting when applicable
The Board has adopted a DSU Plan which is available to any non-management director of the Company. In Fiscal 2023,
certain directors elected to receive DSUs instead of a cash payment for their directors’ fees. In addition to the scheduled fee
arrangements set forth in the table above, whether paid in cash or DSUs, non-management directors also receive an annual DSU
grant representing the long-term component of their compensation. The amount of the annual DSU grant is discretionary;
however, historically, the amount of this grant has been determined and updated on a periodic basis with the assistance of the
Compensation Committee and the compensation consultant and benchmarked against director compensation for comparable
companies. For Fiscal 2023, the annual DSU grant was approximately $250,000 for each non-management director and
approximately $320,000 for the Chairman of the Board. DSUs granted as compensation for directors’ fees vest immediately
whereas the annual DSU grant vests at the Company’s next annual general meeting. No DSUs are payable by the Company
until the director ceases to be a member of the Board.
As with its employees, the Company believes that granting compensation to directors in the form of equity, such as DSUs,
promotes a greater alignment of long-term interests between directors of the Company and the shareholders of the Company
and since Fiscal 2013 the Company has taken the position that non-management directors will receive DSUs instead of stock
options where granting of equity awards is appropriate. All non-management directors have exceeded the Share Ownership
Guidelines applicable to them, which is five times their annual retainer. For further details of our Share Ownership Guidelines
as they relate to directors, see “Share Ownership Guidelines” above.
The Company does not have a retirement policy for its directors; however, the Company does review its director
performance annually as part of its governance process.
133
Compensation Committee Interlocks and Insider Participation
The members of our Compensation Committee consist of Mr. Slaunwhite (Chair) and Mses. Hamilton, Powell and
Weinstein. None of the members of the Compensation Committee have been or are an officer or employee of the Company, or
any of our subsidiaries, or had any relationship requiring disclosure herein. None of our executive officers served as a member
of the compensation committee of another entity (or other committee of the board of directors performing equivalent functions,
or in the absence of any such committee, the entire board of directors) one of whose executive officers served as a director of
ours.
Board’s Role in Risk Oversight
The Board has overall responsibility for risk oversight. The Board is responsible for overseeing management’s
implementation and operation of enterprise risk management, either directly or through its committees, which shall report to the
Board with respect to risk oversight undertaken in accordance with their respective charters. At least annually, the Board shall
review reports provided by management on the risks inherent in the business of the Company (including appropriate crisis
preparedness, business continuity, information system controls, cybersecurity and disaster recovery plans), the appropriate
degree of risk mitigation and risk control, overall compliance with and the effectiveness of the Company’s risk management
policies, and residual risks remaining after implementation of risk controls. In addition, each committee reviews and reports to
the Board on risk oversight matters, as described below.
The Audit Committee oversees risks related to our accounting, financial statements and financial reporting process. On a
quarterly basis, the Audit Committee also reviews reports provided by management on the risks inherent in the business of the
Company, including those related to cybersecurity and disaster recovery plans, and reports to the Board with respect to risk
oversight undertaken.
The Compensation Committee oversees risks which may be associated with our compensation policies, practices and
programs, in particular with respect to our executive officers. The Compensation Committee assesses such risks with the review
and assistance of the Company’s management and the Compensation Committee’s external compensation consultants.
The Corporate Governance and Nominating Committee monitors risk and potential risks with respect to the effectiveness
of the Board, and considers aspects such as director succession, Board composition and the principal policies that guide the
Company’s overall corporate governance.
The members of each of the Audit Committee, Compensation Committee, and the Corporate Governance and Nominating
Committee are all “independent” directors within the meaning ascribed to it in Multilateral Instrument 52-110-Audit
Committees as well as the listing standards of NASDAQ, and, in the case of the Audit Committee, the additional independence
requirements set out by the SEC.
All of our directors are kept informed of our business through open discussions with our management team, including our
CEO, who serves on our Board. The Board also receives documents, such as quarterly and periodic management reports and
financial statements, as well our directors have access to all books, records and reports upon request, and members of
management are available at all times to answer any questions which Board members may have.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth certain information as of June 30, 2023 regarding Common Shares beneficially owned by
the following persons or companies: (i) each person or company known by us to be the beneficial owner of approximately 5%
or more of our outstanding Common Shares, (ii) each director of our Company, (iii) each Named Executive Officer, and (iv) all
directors and executive officers as a group. Except as otherwise indicated, we believe that the beneficial owners of the Common
Shares listed below have sole investment and voting power with respect to such Common Shares, subject to community
property laws where applicable.
The number and percentage of shares beneficially owned as exhibited in Item 12 is based on filings made in accordance
with the rules of the SEC and is not necessarily indicative of beneficial ownership for any other purpose. Under these rules,
beneficial ownership includes any shares as to which a person has sole or shared voting or investment power and also any
shares of Common Shares underlying options or warrants that are exercisable by that person within 60 days of June 30, 2023.
Unless otherwise indicated, the address of each person or entity named in the table is “care of” Open Text Corporation, 275
Frank Tompa Drive, Waterloo, Ontario, Canada N2L 0A1.
134
Name and Address of Beneficial Owner
Jarislowsky, Fraser Ltd. (1)
1010 Sherbrooke St. West, Montreal QC H3A 2R7
Harris Associates LP (1)
111 South Wacker Drive, Chicago, IL 60606
P. Thomas Jenkins (2)
Mark J. Barrenechea (3)
Michael Slaunwhite (4)
Stephen J. Sadler (5)
Madhu Ranganathan (6)
Muhi Majzoub (7)
Randy Fowlie (8)
Simon Harrison (9)
Deborah Weinstein (10)
Katharine B. Stevenson (11)
Gail E. Hamilton (12)
Paul Duggan (13)
David Fraser (14)
Robert Hau (15)
Ann M. Powell (16)
All executive officers and directors as a group (17)
______________________
Amount and Nature of
Beneficial Ownership
Percent of Common
Shares Outstanding
16,804,467
14,572,307
3,428,647
2,913,517
1,082,270
463,866
451,870
403,525
313,610
203,540
153,097
143,281
93,440
92,790
27,037
11,528
6,659
6.20%
5.38%
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
10,244,832
3.73%
*
(1)
Less than 2%
Information regarding the shares outstanding is based on information filed in Schedule 13G, 13F, or Schedule 13G/A with the SEC.
The percentage of Common Shares outstanding is calculated using the total shares outstanding as of June 30, 2023.
(2) Includes 3,288,804 Common Shares owned and 139,843 deferred stock units (DSUs) which are exercisable.
(3) Includes 1,112,704 Common Shares owned, 1,538,445 options which are exercisable and 262,368 options which will become
exercisable within 60 days of June 30, 2023.
(4) Includes 943,152 Common Shares owned and 139,118 DSUs which are exercisable.
(5) Includes 347,500 Common Shares owned and 116,366 DSUs which are exercisable.
(6) Includes 28,010 Common Shares owned, 344,701 options which are exercisable and 79,159 options which will become exercisable
within 60 days of June 30, 2023.
(7) Includes 97,775 Common Shares owned, 243,077 options which are exercisable and 62,673 options which will become exercisable
within 60 days of June 30, 2023.
(8) Includes 194,500 Common Shares owned and 119,110 DSUs which are exercisable.
(9) Includes 26,429 Common Shares owned, 118,768 options which are exercisable and 58,343 options which will become exercisable
within 60 days of June 30, 2023.
(10) Includes 20,000 Common Shares owned and 133,097 DSUs which are exercisable.
(11) Includes 25,630 Common Shares owned and 117,651 DSUs which are exercisable.
(12) Includes 10 Common Shares owned and 93,430 DSUs which are exercisable.
(13) Includes 8,789 Common Shares owned, 54,422 options which are exercisable and 29,579 options which will become exercisable
within 60 days of June 30, 2023.
(14) Includes 177 Common Shares owned and 26,860 DSUs which are exercisable.
(15) Includes 11,528 DSUs which are exercisable.
(16) Includes 6,659 DSUs which are exercisable.
(17) Includes 6,152,996 Common Shares owned, 2,563,831 options which are exercisable, 624,343 options which will become
exercisable within 60 days of June 30, 2023, and 903,662 DSUs which are exercisable.
135
Securities Authorized for Issuance under Equity Compensation Plans
The following table sets forth summary information relating to our various stock compensation plans as of June 30, 2023:
Plan Category
Equity compensation plans approved
by security holders:
Equity compensation plans not
approved by security holders:
Under deferred stock unit awards
Under performance stock unit
awards
Under restricted stock unit awards
Total
Number of securities
to be issued upon exercise
of outstanding options,
warrants, and rights
Weighted average
exercise price
of outstanding options,
warrants, and rights
(a)
12,219,439
994,568
1,013,385
774,360
15,001,752
(b)
$38.44
N/A
N/A
N/A
Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in column a)
(c)
5,950,832
—
—
—
5,950,832
For more information regarding stock compensation plans, please refer to Note 13 “Share Capital, Option Plans and
Share-based Payments” to our Consolidated Financial Statements within this Annual Report on Form 10-K.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Related Transactions Policy and Director Independence
We have adopted a written policy that all transactional agreements between us and our officers, directors and affiliates
will be first approved by a majority of the independent directors. Once these agreements are approved, payments made pursuant
to the agreements are approved by the members of our Audit Committee.
Our procedure regarding the approval of any related party transaction is that the material facts of such transaction shall be
reviewed by the independent members of our Audit Committee and the transaction approved by a majority of the independent
members of our Audit Committee. The Audit Committee reviews all transactions wherein we are, or will be a participant and
any related party has or will have a direct or indirect interest. In determining whether to approve a related party transaction, the
Audit Committee generally takes into account, among other facts it deems appropriate: whether the transaction is on terms no
less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances; the extent
and nature of the related person’s interest in the transaction; the benefits to the company of the proposed transaction; if
applicable, the effects on a director’s independence; and if applicable, the availability of other sources of comparable services
or products.
The Board has determined that all directors, except Messrs. Barrenechea and Sadler, meet the independence requirements
under the NASDAQ Listing Rules and qualify as “independent directors” under those Listing Rules. Mr. Barrenechea is not
considered independent by virtue of being our Vice Chair, Chief Executive Officer and Chief Technology Officer. See
“Transactions with Related Persons” below with respect to payments made to Mr. Sadler. Each of the members of our
Compensation Committee, Audit Committee and Corporate Governance and Nominating Committee is an independent director.
Transactions With Related Persons
One of our directors, Mr. Sadler, received consulting fees for assistance with acquisition-related business activities
pursuant to a consulting agreement with the Company. Mr. Sadler’s consulting agreement, which was adopted by way of Board
resolution effective July 1, 2011, is for an indefinite period. The material terms of the agreement are as follows: Mr. Sadler is
paid at the rate of Canadian dollars (CAD) $450 per hour for services relating to his consulting agreement. In addition, he is
eligible to receive a bonus fee equivalent to 1.0% of the acquired company’s revenues, up to CAD $10.0 million in revenue,
plus an additional amount of 0.5% of the acquired company’s revenues above CAD $10.0 million. The total bonus fee payable,
for any given fiscal year, is subject to an annual limit of CAD $450,000 per single acquisition and an aggregate annual limit of
CAD $980,000. The acquired company’s revenues, for this purpose, is equal to the acquired company’s revenues for the 12
months prior to the date of acquisition. During Fiscal 2023, Mr. Sadler received CAD $0.5 million in consulting fees from
OpenText (equivalent to $0.3 million USD), for assistance with acquisition-related business activities. Mr. Sadler abstained
from voting on all transactions from which he would potentially derive consulting fees. Additionally, Mr. Sadler has direct or
indirect control over a material interest in Enghouse Systems Limited ,a publicly traded software company, and its subsidiaries.
136
OpenText entered into product supply and license agreements to purchase certain software licenses from Enghouse Systems
Limited and its subsidiaries, under which the company makes payments in the normal course of business. During Fiscal 2023,
OpenText paid $2.1 million under such agreements.
Item 14. Principal Accountant Fees and Services
The aggregate fees for professional services rendered by our independent registered public accounting firm, KPMG LLP,
for Fiscal 2023 and Fiscal 2022 were:
(In thousands)
Audit fees (1)
Audit-related fees (2)
Tax fees (3)
All other fees (4)
Total
____________________________________
Year ended June 30,
2023
2022
14,546 $
113
—
—
14,659 $
6,622
72
—
—
6,694
$
$
(1) Audit fees were primarily for professional services rendered for (a) the annual audits of our consolidated financial statements and
the accompanying attestation report regarding our ICFR contained in our Annual Report on Form 10-K, (b) the review of quarterly
financial information included in our Quarterly Reports on Form 10-Q, (c) audit services related to mergers and acquisitions, (d)
fees associated with non-periodic securities filings, and (e) annual statutory audits where applicable. The increase in 2023 as
compared to 2022 is primarily due to the Micro Focus Acquisition, including audit procedures over (a) the opening balance sheet
and purchase equation, (b) the results of operations from the date of acquisition to year end, and (c) Micro Focus statutory audits.
(2) Audit related fees were primarily for assurance and related services, such as IT assurance engagements and accounting research
services.
(3) Tax fees were for services related to tax compliance, including the preparation of tax returns, tax planning and tax advice.
(4) All other fees consist of fees for services other than the services reported in audit fees, audit-related fees, and tax fees.
OpenText’s Audit Committee has established a policy of reviewing, in advance, and either approving or not approving, all
audit, audit-related, tax and other non-audit services that our independent registered public accounting firm provides to us. This
policy requires that all services received from our independent registered public accounting firm be approved in advance by the
Audit Committee or a delegate of the Audit Committee. The Audit Committee has delegated the pre-approval responsibility to
the Chair of the Audit Committee. All services that KPMG LLP provided to us in Fiscal 2023 and Fiscal 2022 have been pre-
approved by the Audit Committee.
The Audit Committee has determined that the provision of the services as set out above is compatible with the
maintaining of KPMG LLP’s independence in the conduct of its auditing functions. Audit services representing approximately
$0.01 million were provided by KPMG LLP for which the foregoing pre-approval procedures were waived pursuant to Rule
2-01(c)(7)(i)(C) of Regulation S-X.
137
Item 15. Exhibits and Financial Statement Schedules
(a) Financial Statements and Schedules
Part IV
Index to Consolidated Financial Statements and Supplementary Data (Item 8)
Report of Independent Registered Public Accounting Firm (KPMG LLP, Toronto, Canada, Auditor Firm ID:
85)
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(b) The following documents are filed as a part of this report:
Page Number
142
144
145
146
147
148
149
151
1) Consolidated financial statements and Reports of Independent Registered Public Accounting Firm and the related
notes thereto are included in Part II, Item 8.
2) Valuation and Qualifying Accounts; see Note 4 “Allowance for Credit Losses” and Note 15 “Income Taxes” in the
Notes to Consolidated Financial Statements included in Part II, Item 8.
3) Exhibits: The following exhibits are filed as part of this Annual Report on Form 10-K or are incorporated by
reference to exhibits previously filed with the SEC. Exhibits not incorporated by reference to a prior filing are
designated by a cross (+); all exhibits not so designated are incorporated by reference to a prior filing as indicated.
Management contracts relating to compensatory plans or arrangements are designated by a star (*).
Exhibit
Number
2.1
2.2
Description
Report or Registration
Statement
Exhibit
Reference
Agreement and Plan of Merger, dated November 10, 2019, by and among Open Text
Corporation, Coral Merger Sub Inc. and Carbonite, Inc.
Company’s Form 8-K, filed
November 12, 2019
Exhibit 2.1
Rule 2.7 Announcement, dated August 25, 2022.
Company’s Form 8-K/A, filed
August 29, 2022
Exhibit 2.1
3.1
Articles of Amalgamation of the Company
3.2
Articles of Amendment of the Company
3.3
Articles of Amendment of the Company
3.4
Articles of Amalgamation of the Company
3.5
3.6
3.7
Articles of Amalgamation of the Company, dated July 1, 2001
Articles of Amalgamation of the Company, dated July 1, 2002
Articles of Amalgamation of the Company, dated July 1, 2003
138
Company’s registration
statement on Form F-1, filed
November 1, 1995, or
Amendments 1, 2 or 3 thereto
(filed December 28, 1995,
January 22, 1996 and January
23, 1996, respectively)
Company’s registration
statement on Form F-1, filed
November 1, 1995, or
Amendments 1, 2 or 3 thereto
(filed December 28, 1995,
January 22, 1996 and January
23, 1996, respectively)
Company’s registration
statement on Form F-1, filed
November 1, 1995, or
Amendments 1, 2 or 3 thereto
(filed December 28, 1995,
January 22, 1996 and January
23, 1996, respectively)
Company’s registration
statement on Form F-1, filed
November 1, 1995, or
Amendments 1, 2 or 3 thereto
(filed December 28, 1995,
January 22, 1996 and January
23, 1996, respectively)
Company’s Form 10-K, filed
September 28, 2001
Company’s Form 10-K, filed
September 28, 2002
Company’s Form 10-K, filed
September 29, 2003
Exhibit 3.10
Exhibit 3.11
4.3
4.4
4.5
4.6
4.7
4.8
4.9
3.8
3.9
3.10
3.11
4.1
Articles of Amalgamation of the Company, dated July 1, 2004
Articles of Amalgamation of the Company, dated July 1, 2005
Articles of Continuance of the Company, dated December 29, 2005
By-Law 1 of Open Text Corporation
Company’s Form 10-K, filed
September 13, 2004
Company’s Form 10-K, filed
September 27, 2005
Company’s Form 10-Q, filed
February 3, 2006
Company’s Form 8-K, filed
September 26, 2013
Description of the Registrant’s Securities Registered Pursuant to Section 12 of the
Securities Exchange Act of 1934
Company’s Form 10-K, filed
August 1, 2019
Exhibit 3.12
Exhibit 3.13
Exhibit 3.1
Exhibit 3.1
Exhibit 4.1
4.2
Form of Common Share Certificate
Company’s registration
statement on Form F-1
(Registration Number
33-98858), filed November 1,
1995, or Amendments 1, 2 or 3
thereto (filed December 28,
1995, January 22, 1996 and
January 23, 1996, respectively)
Indenture, dated as of February 18, 2020, between Open Text Corporation and the Bank
of NY Mellon, as U.S. Trustee, and BNY Trust Company of Canada, as Canadian
trustee
Indenture, dated as of February 18, 2020, between Open Text Holdings, Inc. and the
Bank of NY Mellon, as U.S. Trustee, and BNY Trust Company of Canada, as Canadian
trustee
Indenture governing the Company’s 3.875% Senior Notes due 2029, dated as of
November 24, 2021, among the Company, the subsidiary guarantors party thereto, The
Bank of New York Mellon, as U.S. trustee, and BNY Trust Company of Canada, as
Canadian trustee.
Indenture governing OTHI’s 4.125% Senior Notes due 2031, dated as of November 24,
2021, among OTHI, the Company, the subsidiary guarantors party thereto, The Bank of
New York Mellon, as U.S. trustee, and BNY Trust Company of Canada, as Canadian
trustee.
Company’s Form 8-K filed
February 18, 2020
Exhibit 4.1
Company’s Form 8-K filed
February 18, 2020
Exhibit 4.3
Company’s Form 8-K filed
November 24, 2021
Exhibit 4.1
Company’s Form 8-K filed
November 24, 2021
Exhibit 4.3
Amended and Restated Shareholder Rights Plan Agreement between Open Text
Corporation and Computershare Investor Services, Inc. dated September 15, 2022.
Company’s Form 8-K, filed
September 15, 2022
Exhibit 4.1
Form of Common Share Certificate
Indenture governing the Company’s 6.90% senior secured notes due 2027, dated as of
December 1, 2022, among the Company, the subsidiary guarantors party thereto, The
Bank of New York Mellon, as U.S. trustee and Notes collateral agent, and BNY Trust
Company of Canada, as Canadian trustee.
10.1*
1998 Stock Option Plan
Company’s Form 10-Q, filed
November 3, 2022
Company’s Form 8-K, filed
December 1, 2022
Exhibit 4.1
Company’s Form 10-K filed
August 20, 1999
10.2*
10.3*
10.4*
10.5
10.6*
10.7*
10.8*
10.9*
10.10
10.11
Form of Indemnity Agreement between the Company and certain of its officers dated
September 7, 2006
Company’s Form 10-K filed
September 12, 2006
Consulting Agreement between Steven Sadler and SJS Advisors Inc. and the Company,
dated May 3, 2005
Company’s Form 10-K filed
August 26, 2008
Exhibit 10.26
Exhibit 10.28
OpenText Corporation Directors’ Deferred Share Unit Plan, as amended and restated
October 30, 2018
Company’s Form 10-Q filed
January 31, 2019
Exhibit 10.1
Amended and Restated Credit Agreement among Open Text Corporation and certain of
its subsidiaries, the Lenders, Barclays Bank PLC, Royal Bank of Canada, Barclays
Capital and RBC Capital Markets, dated as of November 9, 2011
Company’s Form 8-K filed
November 9, 2011
Exhibit 99.1
OpenText Corporation Long-Term Incentive Plan 2015 for eligible employees,
effective October 3, 2012
Company’s Form 10-Q filed
November 1, 2012
Employment Agreement, dated October 30, 2012 between Mark Barrenechea and the
Company
Company’s Form 10-Q filed
November 1, 2012
Exhibit 10.2
Exhibit 10.3
Amendment No. 1 to the Employment Agreement between Mark J. Barrenechea and the
Company dated January 24, 2013 (amending the Employment Agreement between
Mark J. Barrenechea and the Company dated October 30, 2012)
Company’s Form 10-Q filed
January 25, 2013
Exhibit 10.3
Employment Agreement, as of December 19, 2012, between Gordon A. Davies and the
Company
Company’s Form 10-K filed
August 1, 2013
Exhibit 10.20
First Amendment to Amended and Restated Credit Agreement and Amended and
Restated Security and Pledge Agreement, dated as of December 16, 2013, between
Open Text ULC, as term borrower, Open Text ULC, Open Text Inc. and Open Text
Corporation, as revolving credit borrowers, the domestic guarantors party thereto, each
of the lenders party thereto, Barclays Bank PLC, as sole administrative agent and
collateral agent, and Royal Bank of Canada, as documentary credit lender
Credit Agreement, dated as of January 16, 2014, among Open Text Corporation, as
guarantor, Ocelot Merger Sub, Inc., which on January 16, 2014 merged with and into
GXS Group, Inc. which survived such merger, as borrower, the other domestic
guarantors party thereto, the lenders named therein, as lenders, Barclays Bank PLC, as
sole administrative agent and collateral agent, and with Barclays and RBC Capital
Markets, as lead arrangers and joint bookrunners
Company’s Form 8-K filed
December 20, 2013
Exhibit 10.1
Company’s Form 8-K filed
January 16, 2014
Exhibit 10.1
139
10.12
10.13*
10.14*
10.15
10.16
10.17*
10.18
10.19*
10.20
10.21
Second Amendment to Amended and Restated Credit Agreement, dated as of December
22, 2014, between Open Text ULC, as term borrower, Open Text ULC, Open Text
Holdings, Inc. and Open Text Corporation, as revolving credit borrowers, the domestic
guarantors party thereto, each of the lenders party thereto, Barclays Bank PLC, as sole
administrative agent and collateral agent, and Royal Bank of Canada, as documentary
credit lender
Company’s Form 8-K filed
December 23, 2014
Exhibit 10.1
Employment Agreement, dated November 30, 2012, between Muhi Majzoub and the
Company
Company’s Form 10-K filed
July 31, 2014
Exhibit 10.20
Amendment No. 2 to the Employment Agreement between Mark J. Barrenechea and the
Company dated July 30, 2014 (amending the Employment Agreement between Mark J.
Barrenechea and the Company dated October 30, 2012)
Repricing Amendment and Amendment No. 2 dated as of February 22, 2017 to Credit
Agreement, by and among Open Text Corporation, as guarantor, Open Text GXS ULC,
as borrower, the other guarantors party thereto, each of the lenders party thereto and
Barclays Bank PLC, as administrative agent
Amendment No. 3 to Second Amended and Restated Credit Agreement, dated as of
May 5, 2017, among Open Text ULC, Open Text Holdings, Inc. and Open Text
Corporation, as borrowers, the guarantors party thereto, each of the lenders party
thereto, and Barclays Bank PLC, as sole administrative agent and collateral agent
Amendment No. 3 to the Employment Agreement between Mark J. Barrenechea and the
Company dated June 1, 2017 (amending the Employment Agreement between Mark J.
Barrenechea and the Company dated October 30, 2012)
Amendment No. 4 to Second Amended and Restated Credit Agreement, dated as of
September 6, 2017, among Open Text ULC, Open Text Holdings, Inc. and Open Text
Corporation, as borrowers, the guarantors party thereto, each of the lenders party
thereto, and Barclays Bank PLC, as sole administrative agent and collateral agent
Company’s Form 10-K filed
July 31, 2014
Exhibit 10.23
Company’s Form 8-K filed
February 22, 2017
Exhibit 10.1
Company’s Form 10-Q filed
May 8, 2017
Exhibit 10.2
Company’s Form 8-K filed
June 6, 2017
Exhibit 10.1
Company’s Form 10-Q filed
November 2, 2017
Exhibit 10.1
Employment Agreement, dated January 30, 2018, among the Company, Open Text Inc.
and Madhu Ranganathan
Company’s Form 8-K filed
February 1, 2018
Exhibit 10.1
Amended and Restated Credit Agreement dated as of May 30, 2018, by and among
Open Text Corporation, as borrower, the guarantors party thereto, each of the lenders
party thereto and Barclays Bank PLC, as administrative agent and collateral agent
Third Amended and Restated Credit Agreement dated as of May 30, 2018, by and
among Open Text ULC, Open Text Holdings, Inc. and Open Text Corporation, as
borrowers, the guarantors party thereto, each of the lenders party thereto, Barclays Bank
PLC, as administrative agent, collateral agent and swing line lender and Royal Bank of
Canada as documentary credit lender
Company’s Form 8-K filed
May 30, 2018
Exhibit 10.1
Company’s Form 8-K filed
May 30, 2018
Exhibit 10.2
10.22*
Employment Agreement, dated October 1, 2017, between Simon (Ted) Harrison and the
Company
Company’s Form 10-K filed
August 2, 2018
Exhibit 10.31
10.23
10.24*
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
21.1+
23.1+
31.1+
Fourth Amended and Restated Credit Agreement dated as of October 31, 2019, by and
among Open Text ULC, Open Text Holdings, Inc. and Open Text Corporation, as
borrowers, the guarantors party thereto, each of the lenders party thereto, Barclays Bank
PLC, as administrative agent, collateral agent and swing line lender and Royal Bank of
Canada as documentary credit lender
Amendment No. 4 to the Employment Agreement between Mark J. Barrenechea and the
Company dated August 14, 2020 (amending the Employment Agreement between Mark
J. Barrenechea and the Company dated October 30, 2012, as amended)
Open Text Corporation 2004 Stock Option Plan, as amended and restated on September
14, 2020
Open Text Corporation 2004 Employee Stock Purchase Plan, as amended and restated
on September 14, 2020
Bridge Loan Agreement, dated August 25, 2022, by and between the Company, the
guarantors party thereto, Barclays Bank PLC, as administrative agent, and certain
financial institution parties thereto.
Company’s Form 8-K filed
November 5, 2019
Exhibit 10.1
Company’s Form 8-K filed
August 14, 2020
Exhibit 10.1
Company’s Registration
Statement on Form S-8 filed
September 30, 2020
Company’s Registration
Statement on Form S-8 filed
September 30, 2020
Exhibit 4.1
Exhibit 4.2
Company’s Form 8-K, filed
August 25, 2022
Exhibit 10.3
Co-operation Agreement, dated August 25, 2022, by and between the Company, Bidco
and Micro Focus International plc.
Company’s Form 8-K/A, filed
August 29, 2022
Exhibit 10.1
Company’s Form 8-K/A, filed
August 29, 2022
Exhibit 10.2
Company’s Form 8-K, filed
December 1, 2022
Exhibit 10.1
Term Loan Credit Agreement, dated August 25, 2022, by and between the Company,
the guarantors party thereto, Barclays Bank PLC, as administrative agent, and certain
financial institution parties thereto.
First Amendment to Credit Agreement, dated December 1, 2022, by and among the
Company, the guarantors party thereto, Barclays Bank PLC, as administrative agent and
collateral agent, and certain financial institution parties thereto.
Amendment No. 1 to Amended and Restated Credit Agreement dated June 6, 2023, by
and among Open Text Corporation, as borrower, the guarantors party thereto, each of
the lenders party thereto and Barclays Bank PLC, as administrative agent and collateral
agent.
Amendment No. 1 to Fourth Amended and Restated Credit Agreement dated as of June
6, 2023, by and among Open Text ULC, Open Text Holdings, Inc. and Open Text
Corporation, as borrowers, the guarantors party thereto, each of the lenders party
thereto, Barclays Bank PLC, as administrative agent, collateral agent and swing line
lender and Royal Bank of Canada as documentary credit lender.
List of the Company’s Subsidiaries
Consent of Independent Registered Public Accounting Firm
Certification of the Chief Executive Officer, pursuant to Rule 13a-14(a) of the
Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
140
31.2+
32.1+
32.2+
Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange
Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of the Chief Executive Officer pursuant to 18 U.S.C Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Certification of the Chief Financial Officer pursuant to 18 U.S.C Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS+
XBRL instance document - the instance document does not appear in the Interactive
Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH+
Inline XBRL taxonomy extension schema
101.CAL+
Inline XBRL taxonomy extension calculation linkbase
101.DEF+
Inline XBRL taxonomy extension definition linkbase
101.LAB+
Inline XBRL taxonomy extension label linkbase
101.PRE+
Inline XBRL taxonomy extension presentation
141
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of Open Text Corporation
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Open Text Corporation (the Company) as of June 30, 2023
and 2022, the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each
of the years in the three-year period ended June 30, 2023, and the related notes (collectively, the consolidated financial
statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of
the Company as of June 30, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the
three-year period ended June 30, 2023, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over financial reporting as of June 30, 2023, based on criteria established in Internal
Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission,
and our report dated August 2, 2023, expressed an unqualified opinion on the effectiveness of the Company’s internal control
over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the
consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management,
as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a
reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial
statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or
disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or
complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate
opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Evaluation of the determination of standalone selling prices of revenue performance obligations for customer contracts with
a software license
As discussed in Note 2 and Note 3 to the consolidated financial statements, the Company generally sells or licenses its software
in combination with other products and services such as customer support and professional services. The accounting for
customer contracts with a software license requires an allocation of the transaction price to each distinct performance obligation
based on the determination of the standalone selling price (SSP). SSP for a performance obligation in a customer contract is an
estimate of the price that would be charged for the specific product or service if it was sold separately in similar circumstances
and to similar customers. This estimate determines the allocation of the transaction price and affects the amount and timing of
revenue recognized for each performance obligation in a customer contract. SSP is estimated based on the impact of geographic
or regional specific factors, profit objectives and pricing practices for different performance obligations. We identified the
evaluation of the determination of the SSP of revenue performance obligations for customer contracts with a software license as
a critical audit matter. A higher degree of auditor judgment was required to evaluate the approach and the significant
assumptions, including the basis for stratification, used to establish SSP for each performance obligation which could be offered
in a customer contract.
The primary procedures we performed to address this critical audit matter included the following. We evaluated the design and
tested the operating effectiveness of certain internal controls over the Company’s revenue process, including controls over the
approach and the significant assumptions used to determine SSP for identified performance obligations in customer contracts
which include a software license. We evaluated the approach used to determine SSP based on current pricing patterns in
142
relevant customer contracts, historical analysis of renewal contract pricing completed by the Company and pricing practices
observed in the industry. We inspected a selection of contracts from the SSP population and compared attributes such as price
and employee consultant level to historical information.
Assessment of uncertain tax positions
As discussed in Note 2, Note 14 and Note 15 to the consolidated financial statements, the Company has recognized uncertain
tax positions including associated interest and penalties. The Company’s tax positions are subject to audit by local taxing
authorities across multiple global subsidiaries and the resolution of such audits may span multiple years. Tax law is complex
and often subject to varied interpretations. Accordingly, the ultimate outcome with respect to taxes the Company may owe may
differ from the amounts recognized.
We identified the assessment of uncertain tax positions as a critical audit matter. The assessment of tax exposures and the
ultimate resolution of uncertain tax positions requires a higher degree of auditor judgment in evaluating the Company’s
interpretation of, and compliance with, tax law globally across multiple jurisdictions.
The primary procedures we performed to address this critical audit matter included the following. We evaluated the design and
tested the operating effectiveness of certain internal controls over the Company’s process to assess uncertain tax positions,
including controls related to the interpretation of tax law and identification of uncertain tax positions, the evaluation of which of
the Company’s tax positions may not be sustained upon audit and the estimation of exposures associated with uncertain tax
positions. We involved domestic and international tax professionals with specialized skills and knowledge who assisted in
assessing filed tax positions and transfer pricing studies, and evaluating the Company’s interpretation of tax law and its
assessment of certain tax uncertainties and expected outcomes, including, if applicable, the measurement thereof, by reading
advice obtained from the Company’s external specialists and correspondence with taxation authorities.
Business combination - Valuation of acquired intangible assets
As discussed in Note 19 to the consolidated financial statements, on January 31, 2023, the Company acquired 100% of the
outstanding shares of Micro Focus International plc (Micro Focus) for $6.2 billion. The Company identified customer
relationships and internally developed technology as acquired intangible assets and have determined the fair value of the
customer relationships and internally developed technology to be $2.162 billion and $1.392 billion, respectively. As discussed
in note 2 to the consolidated financial statements, the Company estimated the fair value of the identified intangible assets
acquired in the business combination based on the income approach. The Company used the multi-period excess earnings
methodology for customer relationships and the relief from royalty method for internally developed technology. These
valuation approaches involve significant subjectivity and estimation uncertainty, including the use of assumptions related to the
future revenues attributable to the acquired customer relationships and to the internally developed technology asset, and
discount rates.
We identified the valuation of customer relationships and internally developed technology acquired in the business combination
with Micro Focus as a critical audit matter. Significant auditor judgment and attention was required due to the significant
measurement uncertainty in the assumptions related to future revenues attributable to the acquired customer relationships and to
the internally developed technology asset, and discount rates used to determine the fair value.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested
the operating effectiveness of certain internal controls related to the Company’s valuation of customer relationships and
internally developed technology. This included controls related to management’s determination of the assumptions identified
above. We evaluated the future revenues attributable to the acquired customer relationships and to the internally developed
technology asset by comparing the forecasted revenues to the historical performance of the acquired business. We involved
valuation professionals with specialized skills and knowledge to assess the methodology applied in estimating the fair value of
the identified intangible assets and assist in evaluating the discount rates by comparing the inputs to the discount rates to
publicly available data for comparable entities and assessing the resulting discount rate.
/s/ KPMG LLP
Chartered Professional Accountants, Licensed Public Accountants
We have served as the Company’s auditor since 2001.
Toronto, Canada
August 2, 2023
143
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of Open Text Corporation:
Opinion on Internal Control Over Financial Reporting
We have audited Open Text Corporation’s internal control over financial reporting as of June 30, 2023, based on criteria
established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission. In our opinion, Open Text Corporation (the Company) maintained, in all material respects, effective
internal control over financial reporting as of June 30, 2023, based on criteria established in Internal Control – Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of June 30, 2023 and 2022, the related consolidated statements of
income, comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended June
30, 2023, and the related notes (collectively, the consolidated financial statements), and our report dated August 2, 2023
expressed an unqualified opinion on those consolidated financial statements.
The Company acquired Micro Focus International plc (Micro Focus) on January 31, 2023, and management excluded from its
assessment of the effectiveness of the Company’s internal control over financial reporting as of June 30, 2023, Micro Focus’
internal control over financial reporting associated with 21.8% of consolidated total revenues and 47.6% of consolidated total
assets (of which $6.8 billion, or 39.6% of consolidated total assets, represents goodwill and net intangible assets that are
included within the scope of management’s assessment of internal control over financial reporting as of June 30, 2023) included
in the consolidated financial statements of the Company as of and for the year ended June 30, 2023. Our audit of internal
control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of
Micro Focus.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in this Annual Report on Form 10-K. Our
responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a
public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KPMG LLP
Chartered Professional Accountants, Licensed Public Accountants
Toronto, Canada
August 2, 2023
144
OPEN TEXT CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars, except share data)
ASSETS
Cash and cash equivalents
Accounts receivable trade, net of allowance for credit losses of $13,828 as of June 30, 2023
and $16,473 as of June 30, 2022 (Note 4)
Contract assets (Note 3)
Income taxes recoverable (Note 15)
Prepaid expenses and other current assets (Note 9)
Total current assets
Property and equipment (Note 5)
Operating lease right of use assets (Note 6)
Long-term contract assets (Note 3)
Goodwill (Note 7)
Acquired intangible assets (Note 8)
Deferred tax assets (Note 15)
Other assets (Note 9)
Long-term income taxes recoverable (Note 15)
Total assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities (Note 10)
Current portion of long-term debt (Note 11)
Operating lease liabilities (Note 6)
Deferred revenues (Note 3)
Income taxes payable (Note 15)
Total current liabilities
Long-term liabilities:
Accrued liabilities (Note 10)
Pension liability (Note 12)
Long-term debt (Note 11)
Long-term operating lease liabilities (Note 6)
Long-term deferred revenues (Note 3)
Long-term income taxes payable (Note 15)
Deferred tax liabilities (Note 15)
Total long-term liabilities
Shareholders’ equity:
Share capital and additional paid-in capital (Note 13)
270,902,571 and 269,522,639 Common Shares issued and outstanding at June 30, 2023 and
June 30, 2022, respectively; authorized Common Shares: unlimited
Accumulated other comprehensive income (loss) (Note 21)
Retained earnings
Treasury stock, at cost (3,536,375 and 3,706,420 shares at June 30, 2023 and June 30, 2022,
respectively)
Total OpenText shareholders’ equity
Non-controlling interests
Total shareholders’ equity
Total liabilities and shareholders’ equity
Guarantees and contingencies (Note 14)
Related party transactions (Note 25)
Subsequent events (Note 26)
June 30, 2023
June 30, 2022
$
1,231,625 $
1,693,741
682,517
71,196
68,161
221,732
2,275,231
356,904
285,723
64,553
8,662,603
4,080,879
926,719
342,318
94,270
17,089,200 $
996,261 $
320,850
91,425
1,721,781
89,297
3,219,614
51,961
126,312
8,562,096
271,579
217,771
193,808
423,955
9,847,482
426,652
26,167
18,255
120,552
2,285,367
244,709
198,132
19,719
5,244,653
1,075,208
810,154
256,987
44,044
10,178,973
448,607
10,000
56,380
902,202
51,069
1,468,258
18,208
60,951
4,209,567
198,695
91,144
34,003
65,887
4,678,455
2,176,947
(53,559)
2,048,984
(151,597)
4,020,775
1,329
4,022,104
17,089,200 $
2,038,674
(7,659)
2,160,069
(159,966)
4,031,118
1,142
4,032,260
10,178,973
$
$
$
See accompanying Notes to Consolidated Financial Statements
145
OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands of U.S. dollars, except share and per share data)
Year Ended June 30,
2023
2022
2021
Revenues (Note 3):
Cloud services and subscriptions
Customer support
License
Professional service and other
Total revenues
Cost of revenues:
$
1,700,433 $
1,915,020
539,026
330,501
4,484,980
1,535,017 $
1,330,965
358,351
269,511
3,493,844
Cloud services and subscriptions
Customer support
License
Professional service and other
Amortization of acquired technology-based intangible assets
(Note 8)
Total cost of revenues
Gross profit
Operating expenses:
Research and development
Sales and marketing
General and administrative
Depreciation
Amortization of acquired customer-based intangible assets (Note 8)
Special charges (recoveries) (Note 18)
Total operating expenses
Income from operations
Other income (expense), net (Note 23)
Interest and other related expense, net
Income before income taxes
Provision for income taxes (Note 15)
Net income
Net (income) attributable to non-controlling interests
Net income attributable to OpenText
Earnings per share—basic attributable to OpenText (Note 24)
Earnings per share—diluted attributable to OpenText (Note 24)
Weighted average number of Common Shares outstanding—basic (in
$
$
$
$
‘000’s)
Weighted average number of Common Shares outstanding—diluted (in
‘000’s)
590,165
209,705
16,645
276,888
223,184
1,316,587
3,168,393
680,587
948,598
419,590
107,761
326,406
169,159
2,652,101
516,292
34,469
(329,428)
221,333
70,767
150,566 $
(187)
150,379 $
0.56 $
0.56 $
511,713
121,485
13,501
216,895
198,607
1,062,201
2,431,643
440,448
677,118
317,085
88,241
217,105
46,873
1,786,870
644,773
29,118
(157,880)
516,011
118,752
397,259 $
(169)
397,090 $
1.46 $
1.46 $
1,407,445
1,334,062
384,711
259,897
3,386,115
481,818
122,753
13,916
197,183
218,796
1,034,466
2,351,649
421,447
622,221
263,521
85,265
216,544
1,748
1,610,746
740,903
61,434
(151,567)
650,770
339,906
310,864
(192)
310,672
1.14
1.14
270,299
271,271
272,533
270,451
271,909
273,479
See accompanying Notes to Consolidated Financial Statements
146
OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands of U.S. dollars)
Net income
Other comprehensive income (loss)—net of tax:
Net foreign currency translation adjustments
Unrealized gain (loss) on cash flow hedges:
Unrealized gain (loss) - net of tax (1)
(Gain) loss reclassified into net income - net of tax (2)
Unrealized gain (loss) on available-for-sale financial assets:
Unrealized gain (loss) - net of tax (3)
Actuarial gain (loss) relating to defined benefit pension plans:
Actuarial gain (loss) - net of tax (4)
Amortization of actuarial (gain) loss into net income - net of tax (5)
Total other comprehensive income (loss), net
Total comprehensive income
Comprehensive income attributable to non-controlling interests
Total comprehensive income attributable to OpenText
______________________________
Year Ended June 30,
2023
150,566 $
2022
397,259 $
2021
310,864
$
(40,798)
(78,724)
42,440
(941)
2,721
(1,859)
373
4,246
(3,280)
(602)
—
—
(6,605)
325
(45,900)
104,666
(187)
104,479 $
5,595
718
(73,897)
323,362
(169)
323,193 $
3,987
1,020
48,413
359,277
(192)
359,085
$
(1) Net of tax expense (recovery) of ($339), ($671), and $1,532 for the year ended June 30, 2023, 2022 and 2021, respectively.
(2) Net of tax expense (recovery) of $981, $134, and ($1,182) for the year ended June 30, 2023, 2022 and 2021, respectively.
(3) Net of tax expense (recovery) of $159, $—, and $— for the year ended June 30, 2023, 2022, and 2021, respectively.
(4) Net of tax expense (recovery) of ($1,961), $1,866 and $990 for the year ended June 30, 2023, 2022 and 2021, respectively.
(5) Net of tax expense (recovery) of $143, $290 and $379 for the year ended June 30, 2023, 2022 and 2021, respectively.
See accompanying Notes to Consolidated Financial Statements
147
OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands of U.S. dollars and shares)
Balance as of June 30, 2020
271,863 $ 1,851,777
(622) $ (23,608) $ 2,159,396 $
17,825 $
1,319 $ 4,006,709
Common Shares and
Additional Paid in Capital
Treasury Stock
Shares
Amount
Shares
Amount
Retained
Earnings
Accumulated
Other
Comprehensive
Income
Non-
Controlling
Interests
Total
—
—
—
—
(2,450)
Adoption of ASU 2016-13 - cumulative
effect, net
Issuance of Common Shares
Under employee stock option plans
Under employee stock purchase plans
Share-based compensation
Purchase of treasury stock
Issuance of treasury stock
Repurchase of Common Shares
Dividends declared
($0.7770 per Common Share)
Other comprehensive income (loss) - net
Non-controlling interest
Net income
Balance as of June 30, 2021
Issuance of Common Shares
Under employee stock option plans
Under employee stock purchase plans
Share-based compensation
Purchase of treasury stock
Issuance of treasury stock
Repurchase of Common Shares
Dividends declared
($0.8836 per Common Share)
Other comprehensive income (loss) - net
Distribution to non-controlling interest
Net income
Balance as of June 30, 2022
Issuance of Common Shares
—
—
—
—
—
—
—
—
—
—
1,605
573
—
—
—
(2,500)
—
—
—
950
842
—
—
—
(3,810)
—
—
—
49,565
22,307
51,969
—
193
—
—
6,690
—
—
(1,455)
(64,847)
316
12,379
(12,379)
(15,475)
—
—
—
—
—
—
—
—
(103,630)
—
(210,662)
—
—
—
—
48,413
—
—
—
271,541 $ 1,947,764
—
—
(1,568) $ (69,386) $ 2,153,326 $
310,672
32,714
33,806
69,556
—
—
—
—
—
—
—
(2,630)
(111,593)
492
21,013
(21,013)
(24,295)
—
—
142
—
—
—
—
—
(152,692)
—
(237,655)
—
—
—
—
—
—
269,523 $ 2,038,674
—
—
(3,706) $ (159,966) $ 2,160,069 $
397,090
Under employee stock option plans
Under employee stock purchase plans
245
1,135
7,830
31,679
Share-based compensation
Purchase of treasury stock
Issuance of treasury stock
Dividends declared
($0.9720 per Common Share)
Other comprehensive income (loss) - net
—
—
—
—
—
130,119
—
(31,355)
—
—
Net income
Balance as of June 30, 2023
—
—
270,903 $ 2,176,947
—
—
—
(21,919)
30,288
—
—
—
—
—
—
(261,464)
—
—
—
(521)
691
—
—
—
—
—
—
—
—
—
—
—
(2,450)
—
—
—
—
—
—
49,565
28,997
51,969
(64,847)
—
(119,105)
—
(210,662)
—
—
48,413
—
—
66,238 $
192
310,864
1,511 $ 4,099,453
—
—
—
—
—
—
—
—
—
—
—
—
—
32,714
33,806
69,556
(111,593)
—
(176,987)
—
(237,655)
(73,897)
—
—
(538)
(73,897)
(396)
—
(7,659) $
169
397,259
1,142 $ 4,032,260
—
—
—
—
—
—
—
—
—
—
—
7,830
31,679
130,119
(21,919)
(1,067)
—
(261,464)
—
—
(45,900)
—
(45,900)
—
—
(3,536) $ (151,597) $ 2,048,984 $
150,379
—
(53,559) $
187
150,566
1,329 $ 4,022,104
148
OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating
activities:
2023
Year Ended June 30,
2022
2021
$
150,566 $
397,259 $
310,864
Depreciation and amortization of intangible assets
Share-based compensation expense
Pension expense
Amortization of debt discount and issuance costs
Write-off of right of use assets
Loss on extinguishment of debt
Loss on sale and write down of property and equipment
Deferred taxes
Share in net (income) loss of equity investees
Changes in financial instruments
Changes in operating assets and liabilities:
Accounts receivable
Contract assets
Prepaid expenses and other current assets
Income taxes
Accounts payable and accrued liabilities
Deferred revenue
Other assets
Operating lease assets and liabilities, net
Net cash provided by operating activities
Cash flows from investing activities:
Additions of property and equipment
Purchase of Micro Focus, net of cash acquired
Purchase of Zix Corporation, net of cash acquired
Purchase of Bricata Inc.
Purchase of XMedius
Purchase of Dynamic Solutions Group Inc.
Realized gain on financial instruments
Other investing activities
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from issuance of Common Shares from exercise of stock
options and ESPP
Proceeds from long-term debt and Revolver
Repayment of long-term debt and Revolver
Debt extinguishment costs
Debt issuance costs
Repurchase of Common Shares
Purchase of treasury stock
Distribution to non-controlling interest
Payments of dividends to shareholders
Other financing activities
Net cash provided by (used in) financing activities
Foreign exchange gain (loss) on cash held in foreign currencies
Increase (decrease) in cash, cash equivalents and restricted cash during
the year
657,351
130,302
9,207
16,753
9,626
8,152
2,331
(149,560)
23,077
128,841
168,604
(73,539)
(23,035)
14,948
(127,092)
(128,395)
(11,297)
(27,635)
779,205
(123,832)
(5,657,963)
—
—
—
—
131,248
(873)
(5,651,420)
503,953
69,556
6,606
5,422
17,707
27,413
294
(36,088)
(58,702)
—
81,841
(37,966)
(13,954)
34,589
(24,177)
(5,236)
17,297
(4,004)
981,810
(93,109)
—
(856,175)
(17,753)
—
—
—
(3,922)
(970,959)
520,605
51,969
6,616
4,548
—
—
2,771
73,039
(62,897)
—
60,954
(39,333)
37,733
(140,763)
26,088
39,295
11,914
(27,283)
876,120
(63,675)
—
—
—
444
(971)
—
(4,568)
(68,770)
39,331
67,215
80,067
4,927,450
(202,926)
—
(77,899)
—
(21,919)
—
(259,549)
(1,435)
4,403,053
7,203
1,500,000
(860,000)
(24,969)
(17,159)
(176,987)
(111,593)
(396)
(237,655)
—
138,456
(63,196)
(461,959)
86,111
—
(610,000)
—
—
(119,105)
(64,847)
—
(210,662)
—
(924,547)
29,734
(87,463)
Cash, cash equivalents and restricted cash at beginning of the year
Cash, cash equivalents and restricted cash at end of the year
1,695,911
1,233,952 $
1,609,800
1,695,911 $
1,697,263
1,609,800
$
149
OPEN TEXT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents
Restricted cash (1)
Total cash, cash equivalents and restricted cash
_________________________________
June 30, 2023
June 30, 2022
June 30, 2021
$
$
1,231,625 $
2,327
1,233,952 $
1,693,741 $
2,170
1,695,911 $
1,607,306
2,494
1,609,800
(1)
Restricted cash is classified under the Prepaid expenses and other current assets and Other assets line items on the Consolidated
Balance Sheets (Note 9).
Supplemental cash flow disclosures (Note 6 and Note 22)
See accompanying Notes to Consolidated Financial Statements
150
OPEN TEXT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Year Ended June 30, 2023
(Tabular amounts in thousands of U.S. dollars, except share and per share data)
NOTE 1—BASIS OF PRESENTATION
The accompanying Consolidated Financial Statements include the accounts of Open Text Corporation and our
subsidiaries, collectively referred to as “OpenText” or the “Company.” We wholly own all of our subsidiaries with the
exception of Open Text South Africa Proprietary Ltd. (OT South Africa), which as of June 30, 2023, was 70% owned by
OpenText. All intercompany balances and transactions have been eliminated.
Previously, our ownership in EC1 Pte. Ltd. (GXS Singapore) was 81%. During the first quarter of Fiscal 2022 (as defined
below), we made a final cash distribution of $0.4 million to the non-controlling interest holder in GXS Singapore as part of the
process to liquidate the subsidiary. During Fiscal 2022, the liquidation of GXS Singapore was completed.
The following Fiscal Year terms are used throughout this Annual Report on Form 10-K:
Fiscal Year
Fiscal 2025
Fiscal 2024
Fiscal 2023
Fiscal 2022
Fiscal 2021
Fiscal 2020
Fiscal 2019
Fiscal 2018
Fiscal 2017
Fiscal 2016
Fiscal 2015
Fiscal 2014
Fiscal 2013
Fiscal 2012
Beginning Date
July 1, 2024
July 1, 2023
July 1, 2022
July 1, 2021
July 1, 2020
July 1, 2019
July 1, 2018
July 1, 2017
July 1, 2016
July 1, 2015
July 1, 2014
July 1, 2013
July 1, 2012
July 1, 2011
Ending Date
June 30, 2025
June 30, 2024
June 30, 2023
June 30, 2022
June 30, 2021
June 30, 2020
June 30, 2019
June 30, 2018
June 30, 2017
June 30, 2016
June 30, 2015
June 30, 2014
June 30, 2013
June 30, 2012
These Consolidated Financial Statements are expressed in U.S. dollars and are prepared in accordance with United States
generally accepted accounting principles (U.S. GAAP). The information furnished reflects all adjustments necessary for a fair
presentation of the results for the periods presented and includes the consolidated financial results of Micro Focus International
Limited, formerly Micro Focus International plc, and its subsidiaries (Micro Focus), with effect from February 1, 2023 (see
below and Note 19 “Acquisitions”).
Use of estimates
The preparation of financial statements in conformity with U.S. GAAP requires us to make certain estimates, judgments
and assumptions that affect the amounts reported in the Consolidated Financial Statements. These estimates, judgments and
assumptions are evaluated on an ongoing basis. We base our estimates on historical experience and on various other
assumptions that we believe are reasonable at that time, the results of which form the basis for making judgments about the
carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those
estimates. In particular, key estimates, judgments and assumptions include those related to: (i) revenue recognition,
(ii) accounting for income taxes, (iii) testing of goodwill for impairment, (iv) the valuation of acquired intangible assets, (v) the
valuation of long-lived assets, (vi) the recognition of contingencies, (vii) restructuring accruals, (viii) acquisition accruals and
pre-acquisition contingencies, (ix) the valuation of stock options granted and obligations related to share-based payments,
including the valuation of our long-term incentive plans, (x) the valuation of pension obligations and pension assets, (xi) the
valuation of available-for-sale investments and (xii) the valuation of derivative instruments.
151
Acquisition of Micro Focus
On January 31, 2023, we acquired all of the issued and to be issued share capital of Micro Focus (the Micro Focus
Acquisition) for a total purchase price of $6.2 billion, inclusive of Micro Focus’ cash and repayment of Micro Focus’
outstanding indebtedness, subject to final adjustments.
In connection with the financing of the Micro Focus Acquisition, concurrent with the announcement of the acquisition on
August 25, 2022, the Company entered into the Acquisition Term Loan and Bridge Loan (each as defined below) as well as
certain derivative transactions. On December 1, 2022, the Company issued and sold $1.0 billion in aggregate principal amount
of 6.90% Senior Secured Notes due 2027 (Senior Secured Notes 2027), amended the Acquisition Term Loan and terminated the
Bridge Loan. On January 31, 2023, we drew down the entire aggregate principal amount of $3.585 billion of the Acquisition
Term Loan, net of original issuance discount and other fees, and drew down $450 million under the Revolver (as defined
below). We used these proceeds and cash on hand to fund the purchase price consideration and repayment of Micro Focus’
outstanding indebtedness. In conjunction with the closing of the Micro Focus Acquisition, the deal-contingent forward contracts
and non-contingent forward contract, as described in Note 17 “Derivative Instruments and Hedging Activities,” were settled.
NOTE 2—ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS
Accounting Policies
Cash and cash equivalents
Cash and cash equivalents include balances with banks as well as deposits that have original terms to maturity of three
months or less. Cash equivalents are recorded at cost and typically consist of term deposits, commercial paper, certificates of
deposit and short-term interest-bearing investment-grade securities of major banks in the countries in which we operate.
Accounts Receivable and Allowance for Credit Losses
From time to time, we may sell certain accounts receivable to a financial institution on a non-recourse basis for cash, less
a discount. Proceeds from the sale of receivables approximate their discounted book value and are included in operating cash
flows on the Consolidated Statement of Cash Flows.
In accordance with ASC Topic 326, “Financial Instruments - Credit Losses” (Topic 326), we recognize expected credit
losses for accounts receivable and contract assets based on lifetime expected losses. We recognize a loss allowance using a
collective assessment for accounts receivable, including contract assets, with similar risk characteristics based on historical
credit loss experience, adjusted for forward-looking factors specific to the debtors and economic environment. We continue to
maintain an allowance for 100% of all accounts deemed to be uncollectible.
Customer creditworthiness is evaluated prior to order fulfillment and based on evaluations, we adjust our credit limit to
the respective customer. In addition to these evaluations, we conduct on-going credit evaluations of our customers’ payment
history and current creditworthiness. To date, the actual losses have been within our expectations. No single customer
accounted for more than 10% of the accounts receivable balance as of June 30, 2023 and 2022, respectively.
Property and equipment
Property and equipment are stated at the lower of cost or net realizable value and shown net of depreciation which is
computed on a straight-line basis over the estimated useful lives of the related assets. Gains and losses on asset disposals are
taken into income in the year of disposition. Fully depreciated property and equipment are retired from the Consolidated
Balance Sheets when they are no longer in use. Please see the “Impairment of long-lived assets” section below for policy on
property and equipment impairments. The following represents the estimated useful lives of property and equipment as of
June 30, 2023:
Furniture, equipment and other
Computer hardware
Computer software
Capitalized software development costs
Leasehold improvements
Building
5 to 15 years
3 to 5 years
3 to 7 years
3 to 5 years
Lesser of the lease term or 5 years
40 years
152
Capitalized Software
We capitalize software development costs in accordance with ASC Topic 350-40, “Internal-Use Software.” We capitalize
costs for software to be used internally when we enter the application development stage. This occurs when we complete the
preliminary project stage, management authorizes and commits to funding the project, and it is feasible that the project will be
completed, and the software will perform the intended function. We cease to capitalize costs related to a software project when
it enters the post-implementation and operation stage. If different determinations are made with respect to the state of
development of a software project, then the amount capitalized and the amount charged to expense for that project could differ
materially.
Costs capitalized during the application development stage consist of payroll and related costs for employees who are
directly associated with, and who devote time directly to, a project to develop software for internal use. We also capitalize the
direct costs of materials and services, which generally includes outside contractors, and interest. We do not capitalize any
general and administrative or overhead costs or costs incurred during the application development stage related to training or
data conversion costs. Costs related to upgrades and enhancements to internal-use software, if those upgrades and
enhancements result in additional functionality, are capitalized. If upgrades and enhancements do not result in additional
functionality, those costs are expensed as incurred. If different determinations are made with respect to whether upgrades or
enhancements to software projects would result in additional functionality, then the amount capitalized and the amount charged
to expense for that project could differ materially.
We amortize capitalized costs with respect to development projects for internal-use software when the software is ready
for use. The capitalized software development costs are generally amortized using the straight-line method over a 3 to 5 year
period. In determining and reassessing the estimated useful life over which the cost incurred for the software should be
amortized, we consider the effects of obsolescence, technology, competition and other economic factors. If different
determinations are made with respect to the estimated useful life of the software, the amount of amortization charged in a
particular period could differ materially.
As of June 30, 2023 and 2022 our capitalized software development costs were $216.8 million and $149.1 million,
respectively. Our additions, relating to capitalized software development costs, incurred during Fiscal 2023 and Fiscal 2022
were $18.3 million and $18.2 million, respectively.
Leases
We enter into operating leases, both domestically and internationally, for certain facilities, automobiles, data centers and
equipment for use in the ordinary course of business. During Fiscal 2023, as part of the Micro Focus Acquisition, we acquired
certain finance leases primarily comprised of equipment leases, all of which are sublet. Leases with an initial term of 12 months
or less are not recorded on the Consolidated Balance Sheets.
In accordance with ASC Topic 842, “Leases” (Topic 842), we account for a contract as a lease when we have the right to
direct the use of the asset for a period of time while obtaining substantially all of the asset’s economic benefits. We determine
the initial classification and measurement of our right of use (ROU) assets and lease liabilities at the lease commencement date
and thereafter if modified.
ROU assets represent our right to control the underlying assets under lease, and the lease liability is our obligation to
make the lease payments related to the underlying assets under lease, over the contractual term. ROU assets and lease liabilities
are recognized on the Consolidated Balance Sheets based on the present value of future minimum lease payments to be made
over the lease term. When available, we will use the rate implicit in the lease to discount lease payments to present value.
However, real estate leases generally do not provide a readily determinable implicit rate, therefore, we must estimate our
incremental borrowing rate to discount the lease payments. We estimate our incremental borrowing rate based on a
collateralized basis with similar terms and payments, in an economic environment where the leased asset is located.
The ROU asset equals the lease liability, adjusted for any initial direct costs, prepaid rent and lease incentives on initial
recognition. Fixed lease costs are included in the recognition of ROU assets and lease liabilities. Variable lease costs are not
included in the measurement of the lease liability. These variable lease payments are recognized in the Consolidated Statements
of Income in the period in which the obligation for those payments is incurred. Lease expense for minimum lease payments
continues to be recognized in the Consolidated Statements of Income on a straight-line basis over the lease term.
We have not elected the practical expedient to combine lease and non-lease components in the determination of lease
costs for our facility leases. For all other asset classes, we have elected the practical expedient to combine the lease and the non-
lease components. The lease liability includes lease payments related to options to extend or renew the lease term only if we are
reasonably certain we will exercise those options. Our leases typically do not contain any material residual value guarantees or
restrictive covenants. In certain circumstances, we sublease all or a portion of a leased facility to various other companies
through a sublease agreement.
153
Business combinations
We apply the provisions of ASC Topic 805, “Business Combinations” (Topic 805), in the accounting for our acquisitions.
It requires us to recognize separately from goodwill the assets acquired and the liabilities assumed at their acquisition date fair
values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition
date fair values of the assets acquired and the liabilities assumed. While we use our best estimates and assumptions to
accurately value assets acquired and liabilities, including contingent consideration where applicable, assumed at the acquisition
date, our estimates are inherently uncertain and subject to refinement, particularly since these assumptions and estimates are
based in part on historical experience and information obtained from the management of the acquired companies. As a result,
during the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the assets
acquired and liabilities assumed with the corresponding offset to goodwill in the period identified. Furthermore, when valuing
certain intangible assets that we have acquired, critical estimates may be made relating to, but not limited to: (i) future expected
cash flows from software license sales, cloud SaaS, “desktop as a service” (DaaS) and PaaS contracts, support agreements,
consulting agreements and other customer contracts (ii) the acquired company’s technology and competitive position, as well as
assumptions about the period of time that the acquired technology will continue to be used in the combined company’s product
portfolio, and (iii) discount rates. Upon the conclusion of the measurement period or final determination of the values of assets
acquired or liabilities assumed, whichever comes first, any subsequent adjustments would be recorded to our Consolidated
Statements of Income.
For a given acquisition, we may identify certain pre-acquisition contingencies as of the acquisition date and may extend
our review and evaluation of these pre-acquisition contingencies throughout the measurement period in order to obtain
sufficient information to assess whether we include these contingencies as a part of the purchase price allocation and, if so, to
determine the estimated amounts.
If we determine that a pre-acquisition contingency (non-income tax related) is probable in nature and estimable as of the
acquisition date, we record our best estimate for such a contingency as a part of the preliminary purchase price allocation. We
often continue to gather information and evaluate our pre-acquisition contingencies throughout the measurement period and if
we make changes to the amounts recorded or if we identify additional pre-acquisition contingencies during the measurement
period, such amounts will be included in the purchase price allocation during the measurement period and, subsequently, in our
results of operations.
Uncertain tax positions and tax related valuation allowances assumed in connection with a business combination are
initially estimated as of the acquisition date. We review these items during the measurement period as we continue to actively
seek and collect information relating to facts and circumstances that existed at the acquisition date. Changes to these uncertain
tax positions and tax related valuation allowances made subsequent to the measurement period, or if they relate to facts and
circumstances that did not exist at the acquisition date, are recorded in the “Provision for (recovery of) income taxes” line of
our Consolidated Statements of Income.
Goodwill
Goodwill represents the excess of the purchase price in a business combination over the fair value of net tangible and
intangible assets acquired. The carrying amount of goodwill is periodically reviewed for impairment (at a minimum annually)
and whenever events or changes in circumstances indicate that the carrying value of this asset may not be recoverable.
Our operations are analyzed by management and our chief operating decision maker (CODM) as being part of a single
industry segment: the design, development, marketing and sales of Information Management software and solutions. Therefore,
our goodwill impairment assessment is based on the allocation of goodwill to a single reporting unit.
We perform a qualitative assessment to test our reporting unit’s goodwill for impairment. Based on our qualitative
assessment, if we determine that the fair value of our reporting unit is more likely than not (i.e., a likelihood of more than 50
percent) to be less than its carrying amount, the quantitative assessment of the impairment test is performed. In the quantitative
assessment, we compare the fair value of our reporting unit to its carrying value. If the fair value of the reporting unit exceeds
its carrying value, goodwill is not considered impaired and we are not required to perform further testing. 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. 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).
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Acquired intangibles
Acquired intangibles consist of acquired technology and customer relationships associated with various acquisitions.
Acquired technology is initially recorded at fair value based on the present value of the estimated net future income-producing
capabilities of software products acquired on acquisitions. We amortize acquired technology over its estimated useful life on a
straight-line basis.
Customer relationships represent relationships that we have with customers of the acquired companies and are either
based upon contractual or legal rights or are considered separable; that is, capable of being separated from the acquired entity
and being sold, transferred, licensed, rented or exchanged. These customer relationships are initially recorded at their fair value
based on the present value of expected future cash flows. We amortize customer relationships on a straight-line basis over their
estimated useful lives.
We continually evaluate the remaining estimated useful life of our intangible assets being amortized to determine whether
events and circumstances warrant a revision to the remaining period of amortization.
Impairment of long-lived assets
We account for the impairment and disposition of long-lived assets in accordance with ASC Topic 360, “Property, Plant,
and Equipment” (Topic 360). We test long-lived assets or asset groups, such as property and equipment, ROU assets and
definite lived intangible assets, for recoverability when events or changes in circumstances indicate that their carrying amount
may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant adverse changes
in the business climate or legal factors; current period cash flow or operating losses combined with a history of losses or a
forecast of continuing losses associated with the use of the asset; and a current expectation that the asset will more likely than
not be sold or disposed of before the end of its estimated useful life.
Recoverability is assessed based on comparing the carrying amount of the asset to the aggregate pre-tax undiscounted
cash flows expected to result from the use and eventual disposal of the asset or asset group. Impairment is recognized when the
carrying amount is not recoverable and exceeds the fair value of the asset or asset group. The impairment loss, if any, is
measured as the amount by which the carrying amount exceeds fair value, which for this purpose is based upon the discounted
projected future cash flows of the asset or asset group.
We have not recorded any significant impairment charges for long-lived assets during Fiscal 2023, Fiscal 2022 and Fiscal
2021, respectively.
Derivative financial instruments
We use derivative financial instruments to manage foreign currency rate risk. We account for these instruments in
accordance with ASC Topic 815, “Derivatives and Hedging” (Topic 815), which requires that every derivative instrument be
recorded on the balance sheet as either an asset or liability measured at its fair value as of the reporting date. Topic 815 also
requires that changes in our derivative financial instruments’ fair values be recognized in earnings; unless specific hedge
accounting and documentation criteria are met (i.e., the instruments are accounted for as hedges). We recorded the effective
portions of the gain or loss on derivative financial instruments that were designated as cash flow hedges in “Accumulated other
comprehensive income (loss),” net of tax, in our accompanying Consolidated Balance Sheets. Any ineffective or excluded
portion of a designated cash flow hedge, if applicable, was recognized in our Consolidated Statements of Income.
In Fiscal 2023, we entered into certain derivative financial instruments, a portion of which were designated as a net
investment hedge. In accordance with Topic 815, we recorded the effective portion of the gain or loss on derivative financial
instruments that were designated as a net investment hedge within our currency translation adjustment component of
“Accumulated other comprehensive income (loss),” in our accompanying Consolidated Balance Sheets. Any ineffective or
excluded portion of our net investment hedge, if applicable, is recognized in “Interest and other related expense, net” of our
Consolidated Statements of Income. See Note 17 “Derivative Instruments and Hedging Activities” for more details.
Asset retirement obligations
We account for asset retirement obligations in accordance with ASC Topic 410, “Asset Retirement and Environmental
Obligations” (Topic 410), which applies to certain obligations associated with “leasehold improvements” within our leased
office facilities. Topic 410 requires that a liability be initially recognized for the estimated fair value of the obligation when it is
incurred. The associated asset retirement cost is capitalized as part of the carrying amount of the long-lived asset and
depreciated over the remaining life of the underlying asset and the associated liability is accreted to the estimated fair value of
the obligation at the settlement date through periodic accretion charges which are generally recorded within “General and
administrative” expense in our Consolidated Statements of Income. When the obligation is settled, any difference between the
final cost and the recorded amount is recognized as income or loss on settlement in our Consolidated Statements of Income.
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Revenue recognition
In accordance with ASC Topic 606, we account for a customer contract when we obtain written approval, the contract is
committed, the rights of the parties, including the payment terms, are identified, the contract has commercial substance and
consideration is probable of collection. Revenue is recognized when, or as, control of a promised product or service is
transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for our products
and services (at its transaction price). Estimates of variable consideration and the determination of whether to include estimated
amounts in the transaction price are based on readily available information, which may include historical, current and forecasted
information, taking into consideration the type of customer, the type of transaction and specific facts and circumstances of each
arrangement. We report revenue net of any revenue-based taxes assessed by governmental authorities that are imposed on and
concurrent with specific revenue producing transactions.
We have four revenue streams: cloud services and subscriptions, customer support, license, and professional service and
other.
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). 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 PaaS, SaaS, cloud subscriptions and managed services.
PaaS/ SaaS/ Cloud Subscriptions (collectively referred to here as cloud-based solutions): We offer cloud-based
solutions that provide customers the right to access our software through the internet. Our cloud-based solutions represent
a series of distinct services that are substantially the same and have the same pattern of transfer to the customer. These
services are made available to the customer continuously throughout the contractual period. However, the extent to which
the customer uses the services may vary at the customer’s discretion. The payment for cloud-based solutions may be
received either at inception of the arrangement, or over the term of the arrangement.
These cloud-based solutions are considered to have a single performance obligation where the customer simultaneously
receives and consumes the benefit, and as such we recognize revenue for these cloud-based solutions ratably over the term
of the contractual agreement. For example, revenue related to cloud-based solutions that are provided on a usage basis,
such as the number of users, is recognized based on a customer’s utilization of the services in a given period.
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.
In these cases where a software license is present in a cloud-based solutions arrangement it is assessed to determine if it is
distinct from the cloud-based solutions arrangement. The revenue allocated to the distinct software license would be
recognized at the point in time the software license is transferred to the customer, whereas the revenue allocated to the
hosting performance obligation would be recognized ratably on a monthly basis over the contractual term unless evidence
suggests that revenue is earned, or obligations are fulfilled in a different pattern over the contractual term of the
arrangement.
Managed services: We provide comprehensive B2B process outsourcing services for all day-to-day operations of a
customers’ B2B integration program. Customers using these managed services are not permitted to take possession of our
software and the contract is for a defined period, where customers pay a monthly or quarterly fee. Our performance
obligation is satisfied as we provide services of operating and managing a customer’s EDI environment. Revenue relating
to these services is recognized using an output method based on the expected level of service we will provide over the
term of the contract.
In connection with cloud subscription and managed service contracts, we often agree to perform a variety of services
before the customer goes live, such as, converting and migrating customer data, building interfaces and providing training.
These services are considered an outsourced suite of professional services which can involve certain project-based activities.
These services can be provided at the initiation of a contract, during the implementation or on an ongoing basis as part of the
customer life cycle. These services can be charged separately on a fixed fee or time and materials basis, or the costs associated
may be recovered as part of the ongoing cloud subscription or managed services fee. These outsourced professional services are
considered to be 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. For
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outsourced professional services, we recognize revenue by measuring progress toward the satisfaction of our performance
obligation. Progress for services that are contracted for a fixed price is generally measured based on hours incurred as a portion
of total estimated hours. As a practical expedient, when we invoice a customer at an amount that corresponds directly with the
value to the customer of our performance to date, we recognize revenue at that amount.
Customer support revenue
Customer support revenue is associated with perpetual, term license and off-cloud subscription arrangements. As
customer support is not critical to the customer’s ability to derive benefit from its right to use our software, customer support is
considered as a distinct performance obligation when sold together in a bundled arrangement along with the software.
Customer support consists primarily of technical support and the provision of unspecified updates and upgrades on a
when-and-if-available basis. Customer support for perpetual licenses is renewable, generally on an annual basis, at the option of
the customer. Customer support for term and subscription licenses is renewable concurrently with such licenses for the same
duration of time. Payments for customer support are generally made at the inception of the contract term or in installments over
the term of the maintenance period. Our customer support team is ready to provide these maintenance services, as needed, to the
customer during the contract term. As the elements of customer support are delivered concurrently and have the same pattern of
transfer, customer support is accounted for as a single performance obligation. The customer benefits evenly throughout the
contract period from the guarantee that the customer support resources and personnel will be available to them, and that any
unspecified upgrades or unspecified future products developed by us will be made available. Revenue for customer support is
recognized ratably over the contract period based on the start and end dates of the maintenance term, in line with how we
believe services are provided.
License revenue
Our license revenue can be broadly categorized as perpetual licenses, term licenses and subscription licenses, all of which
are deployed on the customer’s premises (off-cloud).
Perpetual licenses: We sell perpetual licenses which provide customers the right to use software for an indefinite period
of time in exchange for a one-time license fee, which is generally paid at contract inception. Our perpetual licenses
provide a right to use IP that is functional in nature and have significant stand-alone functionality. Accordingly, for
perpetual licenses of functional IP, revenue is recognized at the point-in-time when control has been transferred to the
customer, which normally occurs once software activation keys have been made available for download.
Term licenses and Subscription licenses: We sell both term and subscription licenses which provide customers the right
to use software for a specified period in exchange for a fee, which may be paid at contract inception or paid in
installments over the period of the contract. Like perpetual licenses, both our term licenses and subscription licenses are
functional IP that have significant stand-alone functionality. 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.
Professional service and other revenue
Our professional services, when offered along with software licenses, consists primarily of technical services and training
services. Technical services may include installation, customization, implementation or consulting services. Training services
may include access to online modules or delivering a training package customized to the customer’s needs. At the customer’s
discretion, we may offer one, all, or a mix of these services. Payment for professional services is generally a fixed fee or is a fee
based on time and materials. Professional services can be arranged in the same contract as the software license or in a separate
contract.
As our professional services do not significantly change the functionality of the license and our customers can benefit
from our professional services on their own or together with other readily available resources, we consider professional services
as distinct within the context of the contract.
Professional service revenue is recognized over time so long as: (i) the customer simultaneously receives and consumes
the benefits as we perform them, (ii) our performance creates or enhances an asset the customer controls as we perform, and
(iii) our performance does not create an asset with alternative use and we have enforceable right to payment.
If all the above criteria are met, we use an input-based measure of progress for recognizing professional service revenue.
For example, we may consider total labour hours incurred compared to total expected labour hours. As a practical expedient,
when we invoice a customer at an amount that corresponds directly with the value to the customer of our performance to date,
we will recognize revenue at that amount.
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Material rights
To the extent that we grant our customer an option to acquire additional products or services in one of our arrangements,
we will account for the option as a distinct performance obligation in the contract only if the option provides a material right to
the customer that the customer would not receive without entering into the contract. For example, if we give the customer an
option to acquire additional goods or services in the future at a price that is significantly lower than the current price, this would
be a material right as it allows the customer to, in effect, pay in advance for the option to purchase future products or services. If
a material right exists in one of our contracts, then revenue allocated to the option is deferred and we would recognize revenue
only when those future products or services are transferred or when the option expires.
Based on history, our contracts do not typically contain material rights and when they do, the material right is not
significant to our Consolidated Financial Statements.
Arrangements with multiple performance obligations
Our contracts generally contain more than one of the products and services listed above. Determining whether goods and
services are considered distinct performance obligations that should be accounted for separately or as a single performance
obligation may require judgment, specifically when assessing whether both of the following two criteria are met:
•
•
the customer can benefit from the product or service either on its own or together with other resources that are
readily available to the customer; and
our promise to transfer the product or service to the customer is separately identifiable from other promises in the
contract.
If these criteria are not met, we determine an appropriate measure of progress based on the nature of our overall promise
for the single performance obligation.
If these criteria are met, each product or service is separately accounted for as a distinct performance obligation and the
total transaction price is allocated to each performance obligation on a relative SSP basis.
Standalone selling price
The SSP reflects the price we would charge for a specific product or service if it were sold separately in similar
circumstances and to similar customers. In most cases we can establish the SSP based on observable data. We typically
establish a narrow SSP range for our products and services and assess this range on a periodic basis or when material changes in
facts and circumstances warrant a review.
If the SSP is not directly observable, then we estimate the amount using either the expected cost plus a margin or residual
approach. 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 regional specific factors,
competitive positioning, internal costs, profit objectives, and pricing practices.
Transaction Price Allocation
In bundled arrangements, where we have more than one distinct performance obligation, we must allocate the transaction
price to each performance obligation based on its relative SSP. However, in certain bundled arrangements, the SSP may not
always be directly observable. For instance, in bundled arrangements with license and customer support, we allocate the
transaction price between the license and customer support performance obligations using the residual approach because we
have determined that the SSP for licenses in these arrangements are highly variable. We use the residual approach only for our
license arrangements. When the SSP is observable but contractual pricing does not fall within our established SSP range, then
an adjustment is required, and we will allocate the transaction price between license and customer support based on the relative
SSP established for the respective performance obligations.
When two or more contracts are entered into at or near the same time with the same customer, we evaluate the facts and
circumstances associated with the negotiation of those contracts. Where the contracts are negotiated as a package, we will
account for them as a single arrangement and allocate the consideration for the combined contracts among the performance
obligations accordingly.
Sales to resellers
We execute certain sales contracts through resellers, distributors and channel partners (collectively referred to as
resellers). Typically, we conclude that the resellers are Open Text customers in our reseller agreements. The resellers have
control over the pricing, service and products prior to being transferred to the end customer. We also assess the creditworthiness
of each reseller and if they are newly formed, undercapitalized or in financial difficulty, we defer any revenues expected to
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emanate from such reseller and recognize revenue only when cash is received, and all other revenue recognition criteria under
ASC Topic 606 are met.
Rights of return and other incentives
We do not generally offer rights of return or any other incentives such as concessions, product rotation, or price protection
and, therefore, do not provide for or make estimates of rights of return and similar incentives. However, we do offer consumers
who purchase certain of our products online directly from us an unconditional full 70-day money-back guarantee. Distributors
and resellers are also permitted to return the consumer products, subject to certain limitations. Revenue is reduced for such
rights based on the estimate of future returns originating from contractual agreements with these customers.
Additionally, in some contracts, however, discounts may be offered to the customer for future software purchases and
other additional products or services. Such arrangements grant the customer an option to acquire additional goods or services in
the future at a discount and therefore are evaluated under guidance related to “material rights” as discussed above.
Other policies
Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30
to 60 days of the invoice date. In certain arrangements, we will receive payment from a customer either before or after the
performance obligation to which the invoice relates has been satisfied. As a practical expedient, we do not account for
significant financing components if the period between when we transfer the promised good or service to the customer and
when the customer pays for the product or service will be one year or less. On that basis, our contracts for license and
maintenance typically do not contain a significant financing component, however, in determining the transaction price we
consider whether we need to adjust the promised consideration for the effects of the time value of money if the timing of
payments provides either the customer or OpenText with a significant benefit of financing. Our managed services contracts may
not include an upfront charge for outsourced professional services performed as part of an implementation and are recovered
through an ongoing fee. Therefore, these contracts may be expected to have a financing component associated with revenue
being recognized in advance of billings.
We may modify contracts to offer customers additional products or services. The additional products and services will be
considered distinct from those products or services transferred to the customer before the modification and will be accounted
for as a separate contract. We evaluate whether the price for the additional products and services reflects the SSP adjusted as
appropriate for facts and circumstances applicable to that contract. In determining whether an adjustment is appropriate, we
evaluate whether the incremental consideration is consistent with the prices previously paid by the customer or similar
customers.
Certain of our subscription services and product support arrangements generally contain performance response time
guarantees. For subscription services arrangements, we estimate variable consideration using a portfolio approach because
performance penalties are tied to standard response time requirements. For product support arrangements, we estimate variable
consideration on a contract basis because such arrangements are customer-specific. For both subscription services and product
support arrangements, we use an expected value approach to estimate variable consideration based on historical business
practices and current and future performance expectations to determine the likelihood of incurring penalties.
Performance Obligations
A summary of our typical performance obligations and when the obligations are satisfied are as follows:
Performance Obligation
Cloud services and subscriptions revenue:
Outsourced Professional Services
Managed Services / Ongoing Hosting / SaaS
Customer support revenue:
When and if available updates and upgrades and technical
support
License revenue:
Software licenses (Perpetual, Term, Subscription)
When Performance Obligation is Typically Satisfied
As the services are provided (over time)
Over the contract term, beginning on the date that service is
made available (i.e., “Go live”) to the customer (over time)
Ratable over the course of the service term (over time)
When software activation keys have been made available for
download (point in time)
Professional service and other revenue:
Professional services
As the services are provided (over time)
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Incremental Costs of Obtaining a Contract with a Customer
Incremental costs of obtaining a contract include only those costs that we incur to obtain a contract that we would not
have incurred if the contract had not been obtained, such as sales commissions. We have determined that certain of our
commission programs meet the requirements to be capitalized. Some commission programs are not subject to capitalization as
the commission expense is paid and recognized as the related revenue is recognized. In assessing costs to obtain a contract, we
apply a practical expedient that allows us to assess our incremental costs on a portfolio of contracts with similar characteristics
instead of assessing the incremental costs on each individual contract. We do not expect the financial statement effects of
applying this practical expedient to the portfolio of contracts to be materially different than if we were to apply the standard to
each individual contract.
We pay commissions on the sale of new customer contracts as well as for renewals of existing contracts to the extent the
renewals generate incremental revenue. Commissions paid on renewal contracts are limited to the incremental new revenue and
therefore these payments are not commensurate with the commission paid on the original sale. We allocate commission costs to
the performance obligations in an arrangement consistent with the allocation of the transaction price. Commissions allocated to
the license performance obligation are expensed at the time the license revenue is recognized. Commissions allocated to
professional service performance obligations are expensed as incurred, as these contracts are generally for one year or less and
we apply a practical expedient to expense costs as incurred if the amortization period would have been one year or less.
Commissions allocated to maintenance, managed services, on-going hosting arrangements or other recurring services, are
capitalized and amortized consistent with the pattern of transfer to the customer of the services over the period expected to
benefit from the commission payment. As commissions paid on renewals are not commensurate with the original sale, the
period of benefit considers anticipated renewals. The benefit period is estimated to be approximately six years which is based
on our customer contracts and the estimated life of our technology.
Expenses for incremental costs associated with obtaining a contract are recorded within “Sales and marketing” expense in
the Consolidated Statements of Income.
Our short-term capitalized costs to obtain a contract are included in “Prepaid expenses and other current assets”, while our
long-term capitalized costs to obtain a contract are included in “Other assets” on our Consolidated Balance Sheets.
Research and development costs
Research and development costs internally incurred in creating computer software to be sold, licensed or otherwise
marketed are expensed as incurred unless they meet the criteria for deferral and amortization, as described in ASC Topic
985-20, “Costs of Software to be Sold, Leased, or Marketed” (Topic 985-20). In accordance with Topic 985-20, costs related to
research, design and development of products are charged to expense as incurred and capitalized between the dates that the
product is considered to be technologically feasible and is considered to be ready for general release to customers. In our
historical experience, the dates relating to the achievement of technological feasibility and general release of the product have
substantially coincided. In addition, no significant costs are incurred subsequent to the establishment of technological
feasibility. As a result, we do not capitalize any research and development costs relating to internally developed software to be
sold, licensed or otherwise marketed.
Advertising Expenses
Advertising costs, which include digital advertising, marketing programs and other promotional costs, are expensed as
incurred. Advertising expenses incurred in Fiscal 2023, Fiscal 2022 and Fiscal 2021 were $73.8 million, $59.6 million and
$52.9 million, respectively.
Income taxes
We account for income taxes in accordance with ASC Topic 740, “Income Taxes” (Topic 740). Deferred tax assets and
liabilities arise from temporary differences between the tax bases of assets and liabilities and their reported amounts in the
Consolidated Financial Statements that will result in taxable or deductible amounts in future years. These temporary differences
are measured using enacted tax rates. A valuation allowance is recorded to reduce deferred tax assets to the extent that we
consider it is more likely than not that a deferred tax asset will not be realized. In determining the valuation allowance, we
consider factors such as the reversal of deferred income tax liabilities, projected taxable income, and the character of income tax
assets and tax planning strategies. A change to these factors could impact the estimated valuation allowance and income tax
expense.
We account for our uncertain tax provisions by using a two-step approach. The first step is to evaluate the tax position for
recognition by determining if the weight of the available evidence indicates it is more likely than not, based solely on the
technical merits, that the position will be sustained on audit, including the resolution of related appeals or litigation processes, if
any. The second step is to measure the appropriate amount of the benefit to recognize. The amount of benefit to recognize is
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measured as the maximum amount which is more likely than not to be realized. The tax position is derecognized when it is no
longer more likely than not that the position will be sustained on audit. 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.
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 (see Note 15 “Income Taxes” for more details).
Equity investments
We invest in investment funds in which we are a limited partner. Our interests in each of these investees range from 4% to
below 20%. These investments are accounted for using the equity method. Our share of net income or losses based on our
interest in these investments, which approximates fair value, is recorded as a component of “Other income (expense), net” in
our Consolidated Statements of Income (see Note 23 “Other Income (Expense), Net” for more details).
Fair value of financial instruments
Carrying amounts of certain financial instruments, including cash and cash equivalents, accounts receivable and accounts
payable (trade and accrued liabilities) approximate the fair value due to the relatively short period of time between origination
of the instruments and their expected realization.
The fair value of our Senior Notes is determined based on observable market prices and categorized as a Level 2
measurement. The carrying value of our other long-term debt facilities approximates the fair value since the interest rate is at
market.
We apply the provisions of ASC Topic 820, “Fair Value Measurement” (Topic 820), to our available-for-sale financial
assets and derivative financial instruments that we are required to carry at fair value pursuant to other accounting standards (see
Note 16 “Fair Value Measurement” for more details).
Foreign currency
Our Consolidated Financial Statements are presented in U.S. dollars. In general, the functional currency of our
subsidiaries is the local currency. For each subsidiary, assets and liabilities denominated in foreign currencies are translated into
U.S dollars at the exchange rates in effect at the balance sheet dates and revenues and expenses are translated at the average
exchange rates prevailing during the previous month of the transaction. The effect of foreign currency translation adjustments
are recorded as a component of “Accumulated other comprehensive income (loss).” Transactional foreign currency gains
(losses) included in the Consolidated Statements of Income under the line item “Other income (expense), net” for Fiscal 2023,
Fiscal 2022 and Fiscal 2021 were $56.6 million, $(2.7) million, and $(1.3) million, respectively.
Restructuring charges
We record restructuring charges relating to contractual lease obligations, not accounted for under Topic 842, and other
exit costs in accordance with ASC Topic 420, “Exit or Disposal Cost Obligations” (Topic 420). Topic 420 requires that a
liability for a cost associated with an exit or disposal activity be recognized and measured initially at its fair value in the period
in which the liability is incurred. In order to incur a liability pursuant to Topic 420, our management must have established and
approved a plan of restructuring in sufficient detail. A liability for a cost associated with involuntary termination benefits is
recorded when benefits have been communicated and a liability for a cost to terminate an operating lease or other contract is
incurred, when the contract has been terminated in accordance with the contract terms or we have ceased using the right
conveyed by the contract, such as vacating a leased facility not accounted for under Topic 842.
The recognition of restructuring charges requires us to make certain judgments regarding the nature, timing and amount
associated with the planned restructuring activities, including estimating sub-lease income and the net recoverable amount of
equipment to be disposed of. At the end of each reporting period, we evaluate the appropriateness of the remaining accrued
balances (see Note 18 “Special Charges (Recoveries)” for more details).
Loss Contingencies
We are currently involved in various claims and legal proceedings. Quarterly, we review the status of each significant
legal matter and evaluate such matters to determine how they should be treated for accounting and disclosure purposes in
accordance with the requirements of ASC Topic 450-20, “Loss Contingencies” (Topic 450-20). Specifically, this evaluation
process includes the centralized tracking and itemization of the status of all our disputes and litigation items, discussing the
nature of any litigation and claim, including any dispute or claim that is reasonably likely to result in litigation, with relevant
161
internal and external counsel, and assessing the progress of each matter in light of its merits and our experience with similar
proceedings under similar circumstances.
If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably
estimated, we accrue a liability for the estimated loss in accordance with Topic 450-20. As of the date of this Annual Report on
Form 10-K, the aggregate of such accrued liabilities was not material to our consolidated financial position or results of
operations and we do not believe as of the date of this filing that it is reasonably possible that a loss exceeding the amounts
already recognized will be incurred that would be material to our consolidated financial position or results of operations. As
described more fully below, we are unable at this time to estimate a possible loss or range of losses in respect of certain
disclosed matters (see Note 14 “Guarantees and Contingencies” for more details).
Net income per share
Basic net income per share is computed using the weighted average number of Common Shares outstanding including
contingently issuable shares where the contingency has been resolved. Diluted net income per share is computed using the
weighted average number of Common Shares and stock equivalents outstanding using the treasury stock method during the
year. For periods in which we incur a net loss, our outstanding Common Share equivalents are not included in the calculation of
diluted earnings (loss) per share as their effect is antidilutive. Accordingly, basic and diluted net loss per share for those periods
are identical. See Note 24 “Earnings Per Share” for more details.
Share-based payment
We measure share-based compensation costs, in accordance with ASC Topic 718, “Compensation - Stock
Compensation” (Topic 718) on the grant date, based on the calculated fair value of the award. We have elected to treat awards
with graded vesting as a single award when estimating fair value. Compensation cost is recognized on a straight-line basis over
the employee requisite service period, which in our circumstances is the stated vesting period of the award, provided that total
compensation cost recognized at least equals the pro-rata value of the award that has vested. Compensation cost is initially
based on the estimated number of options for which the requisite service is expected to be rendered. This estimate is adjusted in
the period once actual forfeitures are known (see Note 13 “Share Capital, Option Plans and Share-based Payments” for more
details).
Accounting for Pensions, post-retirement and post-employment benefits
Pension expense is accounted for in accordance with ASC Topic 715, “Compensation-Retirement Benefits” (Topic 715).
Pension expense consists of actuarially computed costs of pension benefits in respect of the current year of service, imputed
returns on plan assets (for funded plans), imputed interest on pension obligations and amortization of actuarial gain/loss. The
expected costs of post-retirement benefits, other than pensions, are accrued in the Consolidated Financial Statements based
upon actuarial methods and assumptions.
The over-funded or under-funded status of defined benefit pension and other post-retirement plans are recognized as an
asset or a liability (with the offset to “Accumulated other comprehensive income (loss)”, net of tax, within “Shareholders’
equity”), respectively, on the Consolidated Balance Sheets. Actuarial gains or losses in excess of the greater of (i) 10% of the
projected benefit obligation, or (ii) 10% of the plan assets, are recognized as a component of “Other Comprehensive Income
(Loss), net” and subsequently amortized as a component of net periodic benefit costs over the weighted average of future
working life of the plan’s active employees. See Note 12 “Pension Plans and Other Post Retirement Benefits” for more details.
Accounting Pronouncements Adopted in Fiscal 2023
Reference Rate Reform
In March 2020, the Financial Accounting Standards Board (FASB) issued ASU No. 2020-04 “Reference Rate Reform
(Topic 848)—Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” In Fiscal 2023, we adopted this
ASU and applied the optional practical expedients relating to contract modifications as a result of the transition away from
London Interbank Offer Rate (LIBOR). In the fourth quarter of Fiscal 2023, the Company’s debt instruments that referenced
LIBOR were amended to replace the benchmark rate with the Secured Overnight Financing Rate (SOFR) in anticipation of the
termination of published LIBOR rates. The adoption did not have a material impact on our Consolidated Financial Statements
and related disclosures. See Note 11 “Long-Term Debt” for more details.
162
NOTE 3—REVENUES
Disaggregation of Revenue
We have four revenue streams: cloud services and subscriptions, customer support, license, and professional service and
other. The following tables disaggregate our revenue by significant geographic area, based on the location of our direct end
customer, by type of performance obligation and timing of revenue recognition for the periods indicated:
Total Revenues by Geography:
Americas (1)
EMEA (2)
Asia Pacific (3)
Total revenues
Total Revenues by Type of Performance Obligation:
Recurring revenues (4)
Cloud services and subscriptions revenue
Customer support revenue
Total recurring revenues
License revenue (perpetual, term and subscriptions)
Professional service and other revenue
Total revenues
Total Revenues by Timing of Revenue Recognition:
Point in time
Over time (including professional service and other revenue)
Total revenues
___________________________
Year Ended June 30,
2023
2022
2021
$
2,785,003 $
2,187,629 $
2,069,083
1,310,016
1,026,201
389,961
4,484,980 $
280,014
3,493,844 $
1,031,607
285,425
3,386,115
1,700,433 $
1,915,020
3,615,453 $
539,026
330,501
4,484,980 $
1,535,017 $
1,330,965
2,865,982 $
358,351
269,511
3,493,844 $
1,407,445
1,334,062
2,741,507
384,711
259,897
3,386,115
539,026 $
3,945,954 $
4,484,980 $
358,351 $
3,135,493 $
3,493,844 $
384,711
3,001,404
3,386,115
$
$
$
$
$
$
$
(1) Americas consists of countries in North, Central and South America.
(2) EMEA consists of countries in Europe, the Middle East and Africa.
(3) Asia Pacific primarily consists of Japan, Australia, China, Korea, Philippines, Singapore, India and New Zealand.
(4) Recurring revenue is defined as the sum of Cloud services and subscriptions revenue and Customer support revenue.
Contract Balances
A contract asset, net of allowance for credit losses, will be recorded if we have recognized revenue but do not have an
unconditional right to the related consideration from the customer. For example, this will be the case if implementation services
offered in a cloud arrangement are identified as a separate performance obligation and are provided to a customer prior to us
being able to bill the customer. In addition, a contract asset may arise in relation to subscription licenses if the license revenue
that is recognized upfront exceeds the amount that we are able to invoice the customer at that time. Contract assets are
reclassified to accounts receivable when the rights become unconditional.
163
The balance for our contract assets and contract liabilities (i.e., deferred revenues) for the periods indicated below were as
follows:
Short-term contract assets
Long-term contract assets
Short-term deferred revenues
Long-term deferred revenues
_______________________________
As of June 30, 2023(1)
As of June 30, 2022
$
$
$
$
71,196 $
64,553 $
1,721,781 $
217,771 $
26,167
19,719
902,202
91,144
(1) As of June 30, 2023, the deferred revenue and contract assets balances related to the Micro Focus Acquisition are $930.9 million
and $87.7 million, respectively.
The difference in the opening and closing balances of our contract assets and deferred revenues primarily results from the
Micro Focus Acquisition and from the timing difference between our performance and customer payments. We fulfill our
obligations under a contract with a customer by transferring products and services in exchange for consideration from the
customer. During the year ended June 30, 2023, we reclassified $61.9 million (year ended June 30, 2022 - $37.1 million) of
contract assets to receivables as a result of the right to the transaction consideration becoming unconditional. During the year
ended June 30, 2023, 2022 and 2021 respectively, there was no significant impairment loss recognized related to contract
assets.
We recognize deferred revenue when we have received consideration, or an amount of consideration is due from the
customer for future obligations to transfer products or services. Our deferred revenues primarily relate to cloud services and
customer support agreements which have been paid for by customers prior to the performance of those services. The amount of
revenue that was recognized during the year ended June 30, 2023 that was included in the deferred revenue balances at June 30,
2022 was $887 million (year ended June 30, 2022 and 2021 —$843 million and $811 million, respectively).
Incremental Costs of Obtaining a Contract with a Customer
Incremental costs of obtaining a contract include only those costs that we incur to obtain a contract that we would not
have incurred if the contract had not been obtained, such as sales commissions. The following table summarizes the changes in
total capitalized costs to obtain a contract, since June 30, 2020:
Capitalized costs to obtain a contract as of June 30, 2020
New capitalized costs incurred
Amortization of capitalized costs
Adjustments on account of foreign exchange
Capitalized costs to obtain a contract as of June 30, 2021
New capitalized costs incurred
Amortization of capitalized costs
Adjustments on account of foreign exchange
Capitalized costs to obtain a contract as of June 30, 2022
New capitalized costs incurred
Amortization of capitalized costs
Impact of foreign exchange rate changes
Capitalized costs to obtain a contract as of June 30, 2023
$
$
61,163
32,202
(21,960)
1,495
72,900
39,852
(26,255)
(3,935)
82,562
47,305
(33,269)
609
97,207
During the year ended June 30, 2023, 2022 and 2021 respectively, there was no significant impairment loss recognized
related to capitalized costs to obtain a contract. Refer to Note 9 “Prepaid Expenses and Other Assets” for additional information
on incremental costs of obtaining a contract.
Transaction Price Allocated to the Remaining Performance Obligations
As of June 30, 2023, approximately $2.5 billion of revenue is expected to be recognized from remaining performance
obligations on existing contracts. We expect to recognize approximately 47% of this amount over the next 12 months and the
remaining balance substantially over the next three years thereafter. We apply the practical expedient and do not disclose
performance obligations that have original expected durations of one year or less.
Refer to Note 2 “Accounting Policies and Recent Accounting Pronouncements” for additional information on our revenue
policy.
164
NOTE 4—ALLOWANCE FOR CREDIT LOSSES
The following illustrates the activity in our allowance for credit losses on accounts receivable:
Balance as of June 30, 2020
Adoption of ASC Topic 326 - cumulative effect
Credit loss expense
Write-off /adjustments
Balance as of June 30, 2021
Credit loss expense (recovery)
Write-off /adjustments
Balance as of June 30, 2022
Credit loss expense (recovery)
Write-off / adjustments
Balance as of June 30, 2023
$
$
$
$
20,906
3,025
7,132
(8,912)
22,151
(1,913)
(3,765)
16,473
(2,007)
(638)
13,828
Included in accounts receivable are unbilled receivables in the amount of $66.5 million as of June 30, 2023 (June 30, 2022
—$47.9 million).
As of June 30, 2023, we have an allowance for credit losses of $0.3 million for contract assets (June 30, 2022—$0.7
million). For additional information on contract assets please see Note 3 “Revenues.”
NOTE 5—PROPERTY AND EQUIPMENT
Computer hardware
Computer software
Capitalized software development costs
Leasehold improvements
Land and buildings
Furniture, equipment and other
Total
Computer hardware
Computer software
Capitalized software development costs
Leasehold improvements
Land and buildings
Furniture, equipment and other
Total
As of June 30, 2023
Cost
386,400 $
178,899
216,762
123,607
62,041
55,741
1,023,450 $
Accumulated
Depreciation
(254,131) $
(135,123)
(122,730)
(94,721)
(18,020)
(41,821)
(666,546) $
As of June 30, 2022
Accumulated
Depreciation
Cost
332,462 $
142,094
149,053
107,739
49,011
52,381
832,740 $
(226,341) $
(117,026)
(101,874)
(86,514)
(16,633)
(39,643)
(588,031) $
$
$
$
$
Net
132,269
43,776
94,032
28,886
44,021
13,920
356,904
Net
106,121
25,068
47,179
21,225
32,378
12,738
244,709
165
NOTE 6—LEASES
We enter into operating leases, both domestically and internationally, for certain facilities, automobiles, data centers and
equipment for use in the ordinary course of business. The duration of the majority of these leases generally ranges from 1 to 10
years, some of which include options to extend for an additional 3 to 5 years after the initial term. Additionally, the land upon
which our headquarters in Waterloo, Ontario, Canada is located 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. Leases with an initial term of 12
months or less are not recorded on our Consolidated Balance Sheets.
As part of the Micro Focus Acquisition, we acquired $165.1 million of operating lease liabilities along with the respective
right of use assets and $13.0 million of finance lease liabilities along with the respective finance lease receivable. The finance
lease liabilities are comprised of equipment lease arrangements with an average duration of 4 to 5 years of which all are
currently being sublet.
The following illustrates the Consolidated Balance Sheets information related to leases:
Operating Leases
Operating lease right of use assets
Balance Sheet Location
Operating lease right of use assets
Operating lease liabilities (current)
Operating lease liabilities (noncurrent)
Total operating lease liabilities
Finance Leases
Finance lease receivables (current)
Finance lease receivables (noncurrent)
Total finance lease receivables
Operating lease liabilities
Long-term operating lease liabilities
Prepaid expenses and other current assets $
Other assets
$
Finance lease liabilities (current)
Finance lease liabilities (noncurrent)
Total finance lease liabilities
Accounts payable and accrued liabilities $
Accrued liabilities
$
As of June 30, 2023
As of June 30, 2022
$
$
$
285,723 $
198,132
91,425 $
271,579
363,004 $
56,380
198,695
255,075
6,362 $
5,515
11,877 $
5,281 $
5,500
10,781 $
—
—
—
—
—
—
The weighted average remaining lease term and discount rate for the periods indicated below were as follows:
Weighted-average remaining lease term
Operating leases
Finance leases
Weighted-average discount rate
Operating leases
Finance leases
Lease Costs and Other Information
As of June 30, 2023
As of June 30, 2022
5.62 years
2.40 years
4.66 %
5.60 %
6.13 years
0 years
2.95 %
— %
The following illustrates the various components of lease costs for the period indicated:
Operating lease cost
Short-term lease cost
Variable lease cost
Sublease income
Total lease cost
2023
Year Ended June 30,
2022
2021
$
72,977 $
62,401 $
4,195
3,488
687
2,694
(12,518)
68,142 $
(10,008)
55,774 $
$
63,068
881
2,754
(6,469)
60,234
166
Supplemental Cash Flow Information
The following table presents supplemental information relating to cash flows arising from lease transactions. Cash
payments made for variable lease costs and short-term leases are not included in the measurement of lease liabilities, and, as
such, are excluded from the amounts below:
Cash paid for amounts included in the measurement of lease liabilities:
Operating leases
Finance leases
Right of use assets obtained in exchange for new lease liabilities:
Operating leases (1) (2) (3)
___________________________
Year Ended June 30,
2023
2022
2021
$
$
$
93,556 $
2,473 $
70,611 $
— $
72,871
—
29,551 $
39,155 $
82,718
(1) The year ended June 30, 2023 excludes the impact of $129.7 million of right of use assets obtained through the Micro Focus
Acquisition. See Note 19 “Acquisitions” for further details including the finalization of the purchase price allocation for the Micro
Focus Acquisition.
(2) The year ended June 30, 2022 excludes the impact of $8.1 million of right of use assets obtained through the acquisition of Zix
Corporation. See Note 19 “Acquisitions” for further details including expected finalization of preliminary purchase price allocation.
(3) The year ended June 30, 2021 excludes the release of $22.6 million of lease liabilities relating to office space that was abandoned
during the fourth quarter of Fiscal 2020 and was subsequently early terminated or assigned to a third party. These recoveries were
recorded in “Special charges (recoveries)” in the Consolidated Statements of Income. Please see Note 18 “Special Charges
(Recoveries).”
Maturity of Lease Liabilities
The following table presents the future minimum lease payments under our lease liabilities as of June 30, 2023:
Fiscal years ending June 30,
2024
2025
2026
2027
2028
Thereafter
Total lease payments
Less: Imputed interest
Total
Operating Leases
Finance Leases
$
$
$
105,685 $
83,123
60,939
50,605
39,662
71,380
411,394 $
(48,390)
363,004 $
5,712
3,370
1,941
459
—
—
11,482
(701)
10,781
Operating lease maturity amounts included in the table above do not include sublease income expected to be received
under our various sublease agreements with third parties. Under the agreements initiated with third parties, we expect to receive
sublease income of $12.8 million in Fiscal 2024 and $34.1 million thereafter.
167
NOTE 7—GOODWILL
Goodwill is recorded when the consideration paid for an acquisition of a business exceeds the fair value of identifiable net
tangible and intangible assets. The following table summarizes the changes in goodwill:
Balance as of June 30, 2021
Acquisition of Zix Corporation (Note 19)
Acquisition of Bricata Inc. (Note 19)
Impact of foreign exchange rate changes
Balance as of June 30, 2022
Acquisition of Micro Focus (Note 19)
Acquisition of Zix Corporation (Note 19) (1)
Impact of foreign exchange rate changes
Balance as of June 30, 2023
______________________
(1) Adjustments relating to open measurement period.
NOTE 8—ACQUIRED INTANGIBLE ASSETS
Technology assets (1)
Customer assets (1)
Total
Technology assets
Customer assets
Total
______________________
$
4,691,673
581,032
9,643
(37,695)
5,244,653
3,417,635
4,878
(4,563)
$
8,662,603
As of June 30, 2023
Accumulated
Amortization
Net
Cost
1,815,260 $
(385,868) $
1,429,392
3,691,252
(1,039,765)
2,651,487
5,506,512 $
(1,425,633) $
4,080,879
As of June 30, 2022
Accumulated
Amortization
Cost
999,032 $
(738,710) $
1,595,219
(780,333)
Net
260,322
814,886
2,594,251 $
(1,519,043) $
1,075,208
$
$
$
$
(1) The balances as of June 30, 2023 include $1.4 billion of technology assets and $2.2 billion of customer assets acquired through the
Micro Focus Acquisition. See Note 19 “Acquisitions” for further details including the finalization of the purchase price allocation
for the Micro Focus Acquisition.
Where applicable, the above balances as of June 30, 2023 have been reduced to reflect the impact of intangible assets
where the gross cost has become fully amortized during the year ended June 30, 2023. The impact of this resulted in a reduction
of $578 million to technology assets and accumulated amortization and $69 million to customer assets and accumulated
amortization. The weighted average amortization periods for acquired technology and customer intangible assets are
approximately six years and eight years, respectively.
The following table shows the estimated future amortization expense for the fiscal years indicated. This calculation
assumes no future adjustments to acquired intangible assets:
Fiscal years ending June 30,
2024
2025
2026
2027
2028
2029 and Thereafter
Total
$
$
753,128
642,147
598,872
528,820
505,047
1,052,865
4,080,879
168
NOTE 9—PREPAID EXPENSES AND OTHER ASSETS
Prepaid expenses and other current assets:
Deposits and restricted cash
Capitalized costs to obtain a contract
Short-term prepaid expenses and other current assets
Derivative asset (1)
Total
______________________________
As of June 30, 2023
As of June 30, 2022
$
$
2,621 $
39,685
175,879
3,547
221,732 $
6,300
27,077
87,175
—
120,552
(1) Represents the asset related to our derivative instrument activity (see Note 17 “Derivative Instruments and Hedging Activities”).
Other assets:
Deposits and restricted cash
Capitalized costs to obtain a contract
Investments
Available-for-sale financial assets
Long-term prepaid expenses and other long-term assets
Total
As of June 30, 2023
As of June 30, 2022
$
$
20,418 $
57,522
147,974
39,858
76,546
342,318 $
6,462
55,484
173,205
—
21,836
256,987
Deposits and restricted cash primarily relate to security deposits provided to landlords in accordance with facility lease
agreements and cash restricted per the terms of certain contractual-based agreements.
Capitalized costs to obtain a contract relate to incremental costs of obtaining a contract, such as sales commissions, which
are eligible for capitalization on contracts to the extent that such costs are expected to be recovered (see Note 3 “Revenues”).
Investments relate to certain investment funds in which we are a limited partner. Our interests in each of these investees
range from 4% to below 20%. These investments are accounted for using the equity method. Our share of net income or losses
based on our interest in these investments, which approximates fair value and subject to volatility based on market trends and
business conditions, is recorded as a component of Other income (expense), net in our Consolidated Statements of Income (see
Note 23 “Other Income (Expense), Net”).
During the year ended June 30, 2023, our share of income (loss) from these investments was $(23.1) million (year ended
June 30, 2022 and 2021 — $58.7 million and $62.9 million, respectively).
As part of the Micro Focus Acquisition, we acquired the rights to certain available-for-sale financial assets. A portion of
the available-for-sale financial assets relate to contractual arrangements under insurance policies held by the Company with
guaranteed interest rates that are utilized to meet certain pension and post retirement obligations but do not meet the definition
of a plan asset. The remaining portion of available-for-sale financial assets are primarily comprised of various debt and equity
funds, which are valued utilizing market quotes provided by our third-party custodian. These arrangements are treated as
available-for-sale financial assets measured at fair value quarterly (see Note 16 “Fair Value Measurement”) with unrealized
gains and losses recorded within “Other Comprehensive Income (Loss) Net” (see Note 20 “Accumulated Other Comprehensive
Income (Loss)”).
Prepaid expenses and other assets, both short-term and long-term, include advance payments on licenses that are being
amortized over the applicable terms of the licenses and other miscellaneous assets.
169
NOTE 10—ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities:
Accounts payable—trade
Accrued salaries, incentives and commissions
Accrued liabilities
Accrued sales and other tax liabilities
Derivative liability (1)
Accrued interest on long-term debt
Amounts payable in respect of restructuring and other special charges
Asset retirement obligations
Total
______________________________
As of June 30, 2023
As of June 30, 2022
$
162,720 $
333,543
239,817
25,439
161,191
37,563
30,073
5,915
113,978
193,421
80,672
20,423
892
31,813
3,589
3,819
$
996,261 $
448,607
(1) Represents the liability related to our derivative instrument activity (see Note 17 “Derivative Instruments and Hedging Activities”).
Long-term accrued liabilities:
Amounts payable in respect of restructuring and other special charges
Other accrued liabilities
Asset retirement obligations
Total
Asset retirement obligations
As of June 30, 2023
As of June 30, 2022
$
$
8,875 $
17,749
25,337
51,961 $
5,702
563
11,943
18,208
We are required to return certain of our leased facilities to their original state at the conclusion of our lease. As of June 30,
2023, the present value of this obligation was $31.3 million (June 30, 2022—$15.8 million), with an undiscounted value of
$35.0 million (June 30, 2022—$16.4 million). As of June 30, 2023, the present value of this obligation and the undiscounted
value related to the Micro Focus Acquisition was $11.8 million and $14.1 million, respectively.
170
NOTE 11—LONG-TERM DEBT
Total debt
Senior Notes 2031
Senior Notes 2030
Senior Notes 2029
Senior Notes 2028
Senior Secured Notes 2027
Term Loan B
Acquisition Term Loan
Revolver
Total principal payments due
Unamortized debt discount and issuance costs (1)
Total amount outstanding
Less:
Current portion of long-term debt
Term Loan B
Acquisition Term Loan
Revolver
Total current portion of long-term debt
Non-current portion of long-term debt
___________________________
As of June 30, 2023
As of June 30, 2022
$
650,000 $
900,000
850,000
900,000
1,000,000
947,500
3,567,075
275,000
9,089,575
650,000
900,000
850,000
900,000
—
957,500
—
—
4,257,500
(206,629)
8,882,946
(37,933)
4,219,567
10,000
35,850
275,000
320,850
10,000
—
—
10,000
$
8,562,096 $
4,209,567
(1) During the year ended June 30, 2023, we recorded $185.6 million of debt discount and issuance costs, relating to the issuance of
Senior Secured Notes 2027 and Acquisition Term Loan. Included in this amount was $107.6 million of original issue discount fees
related to the Acquisition Term Loan.
Senior Unsecured Fixed Rate Notes
Senior Notes 2031
On November 24, 2021, OpenText Holdings, Inc. 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.
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.
For the year ended June 30, 2023, we recorded interest expense of $26.8 million relating to Senior Notes 2031 (year ended
June 30, 2022 and 2021—$16.1 million and nil, respectively)
Senior Notes 2030
On February 18, 2020, OpenText Holdings, Inc. 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 bear interest at a rate of
4.125% per annum, payable semi-annually in arrears on February 15 and August 15, commencing on August 15, 2020. Senior
Notes 2030 will mature on February 15, 2030, unless earlier redeemed, in accordance with their terms, or repurchased.
For the year ended June 30, 2023, we recorded interest expense of $37.1 million relating to Senior Notes 2030 (year ended
June 30, 2022 and 2021—$37.1 million and $37.0 million, respectively).
171
Senior Notes 2029
On November 24, 2021, we issued $850 million in aggregate principal amount of 3.875% Senior Notes due 2029 (Senior
Notes 2029) 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 2029 bear
interest at a rate of 3.875% per annum, payable semi-annually in arrears on June 1 and December 1, commencing on June 1,
2022. Senior Notes 2029 will mature on December 1, 2029, unless earlier redeemed, in accordance with their terms, or
repurchased.
For the year ended June 30, 2023, we recorded interest expense of $32.9 million relating to Senior Notes 2029 (year ended
June 30, 2022 and 2021—$19.8 million and nil, respectively).
Senior Notes 2028
On February 18, 2020, we issued $900 million in aggregate principal amount of 3.875% Senior Notes due 2028 (Senior
Notes 2028, and together with the Senior Notes 2031, Senior Notes 2030, Senior Notes 2029, and Senior Notes 2027, the
Senior Notes) 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 2028 bear
interest at a rate of 3.875% per annum, payable semi-annually in arrears on February 15 and August 15, commencing on August
15, 2020. Senior Notes 2028 will mature on February 15, 2028, unless earlier redeemed, in accordance with their terms, or
repurchased.
For the year ended June 30, 2023, we recorded interest expense of $34.9 million relating to Senior Notes 2028 (year ended
June 30, 2022 and 2021—$34.9 million and $34.8 million, respectively).
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. Senior Notes 2026 had interest at a rate of
5.875% per annum, payable semi-annually in arrears on June 1 and December 1, commencing on December 1, 2016. Senior
Notes 2026 would have matured on June 1, 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. The outstanding
aggregate principal amount of Senior Notes 2026, after taking into consideration the additional issuance, was $850 million as of
December 9, 2021.
On December 9, 2021, we redeemed Senior Notes 2026 in full at a price equal to 102.9375% of the principal amount plus
accrued and unpaid interest to, but excluding, the redemption date. 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. 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. See Note 23 “Other Income (Expense), Net.”
For the year ended June 30, 2023, we did not record any interest expense relating to Senior Notes 2026 (year ended June
30, 2022 and 2021—$21.9 million and $49.9 million, respectively).
Senior Secured Fixed Rate Notes
Senior Secured Notes 2027
On December 1, 2022, we issued $1 billion in aggregate principal amount of Senior Secured Notes 2027 in connection
with the financing of the Micro Focus Acquisition 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 Secured Notes 2027 bear interest at a rate of 6.90% per annum, payable semi-annually in arrears on June
1 and December 1, commencing on June 1, 2023. Senior Secured Notes 2027 will mature on December 1, 2027, unless earlier
redeemed, in accordance with their terms, or repurchased.
172
The Senior Secured Notes 2027 are guaranteed on a senior secured basis by certain of the Company’s subsidiaries, and are
secured with the same priority as the Company’s senior credit facilities. The Senior Secured Notes 2027 and the related
guarantees are effectively senior to all of the Company’s and the guarantors’ senior unsecured debt to the extent of the value of
the Collateral (as defined in the 2027 Indenture) and are structurally subordinated to all existing and future liabilities of each of
the Company’s existing and future subsidiaries that do not guarantee the Senior Secured Notes 2027. As of June 30, 2023, the
Senior Secured Notes 2027 bear an effective interest rate of 7.39%. The effective interest rate includes interest expense of $40.3
million and amortization of debt discount and issuance costs of $1.5 million.
For the year ended June 30, 2023, we recorded interest expense of $40.3 million, relating to Senior Secured Notes 2027
(year ended June 30, 2022 and 2021—nil, respectively).
Term Loan B
On May 30, 2018, we refinanced our existing term loan facility, by entering into a new $1 billion term loan facility (Term
Loan B), whereby we borrowed $1 billion on that day and repaid in full the loans under our prior $800 million term loan facility
originally entered into on January 16, 2014. Borrowings under Term Loan B are secured by a first charge over substantially all
of our assets on a pari passu basis with the Revolver (as defined below), Acquisition Term Loan (as defined below) and Senior
Secured Notes 2027. On June 6, 2023, we amended the Term Loan B to replace the LIBOR benchmark rate applicable to
borrowings under Term Loan B with a SOFR benchmark rate.
Term Loan B has a seven-year term, maturing in May 2025, and repayments made under Term Loan B are equal to 0.25%
of the principal amount in equal quarterly installments for the life of Term Loan B, with the remainder due at maturity.
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%. As of June 30, 2023, the outstanding balance on the Term
Loan B bears an interest rate of 6.90%. As of June 30, 2023, the Term Loan B bears an effective interest rate of 7.19%. The
effective interest rate includes interest expense of $54.0 million and amortization of debt discount and issuance costs of $1.6
million.
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. 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, 2023, our
consolidated net leverage ratio, as calculated in accordance with the applicable agreement, was 3.49:1.00.
For the year ended June 30, 2023, we recorded interest expense of $54.0 million relating to Term Loan B (year ended
June 30, 2022 and 2021—$19.7 million and $18.6 million, respectively).
Revolver
On October 31, 2019, we amended our committed revolving credit facility (the Revolver) to increase the total
commitments under the Revolver from $450 million to $750 million as well as to extend the maturity from May 5, 2022 to
October 31, 2024. 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. On June 6, 2023, we entered into an
amendment to replace the LIBOR benchmark rate applicable to borrowings under the Revolver with a SOFR benchmark rate.
The Revolver has no fixed repayment date prior to the end of the term. 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, 2023, the
outstanding balance on the Revolver bears an interest rate of 6.91%.
As of June 30, 2023, we had $275 million outstanding balance under the Revolver (June 30, 2022—nil). For the year
ended June 30, 2023, we recorded interest expense of $10.1 million relating to the Revolver (year ended June 30, 2022 and
2021—nil and $3.6 million, respectively, relating to amounts previously drawn). In July 2023, the Company subsequently
repaid $175 million drawn under the Revolver.
Acquisition Term Loan
On December 1, 2022, we amended our first lien term loan facility (the Acquisition Term Loan), dated as of August 25,
2022, to increase the aggregate commitments under the senior secured delayed-draw term loan facility from an aggregate
principal amount of $2.585 billion to an aggregate principal amount of $3.585 billion. During the third quarter of Fiscal 2023,
the Company drew down $3.585 billion from the Acquisition Term Loan, net of original issuance discount of 3% and other fees
(see Note 19 “Acquisitions” for more details).
173
The Acquisition Term Loan has a seven-year term from the date of funding, and repayments under the Acquisition Term
Loan are equal to 0.25% of the principal amount in equal quarterly installments for the life of the Acquisition Term Loan, with
the remainder due at maturity. 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%. As of
June 30, 2023, the outstanding balance on the Acquisition Term Loan bears an interest rate of 8.75%. As of June 30, 2023, the
Acquisition Term Loan bears an effective interest rate of 9.85%. The effective interest rate includes interest expense of $125.7
million and amortization of debt discount and issuance costs of $9.3 million.
The Acquisition Term Loan has incremental facility capacity of (i) $250 million plus (ii) additional amounts, subject to
meeting a “consolidated senior secured net leverage” ratio not exceeding 2.75:1.00, in each case subject to certain conditions.
Consolidated senior secured net leverage ratio is defined for this purpose as the proportion of the Company’s total debt reduced
by unrestricted cash, including guarantees and letters of credit, that is secured by the Company’s or any of the Company’s
subsidiaries’ assets, over the Company’s trailing four financial quarter net income before interest, taxes, depreciation,
amortization, restructuring, share-based compensation and other miscellaneous charges. Under the Acquisition Term Loan, we
must maintain a “consolidated net leverage” ratio of no more than 4.50:1.00 at the end of each financial quarter. Consolidated
net leverage ratio is defined for this purpose as the proportion of the Company’s total debt reduced by unrestricted cash,
including guarantees and letters of credit, over the Company’s trailing four financial quarter net income before interest, taxes,
depreciation, amortization, restructuring, share-based compensation and other miscellaneous charges as defined in the
Acquisition Term Loan. As of June 30, 2023, our consolidated net leverage ratio, as calculated in accordance with the
applicable agreement, was 3.49:1.00.
The Acquisition Term Loan is unconditionally guaranteed by certain subsidiary guarantors, as defined in the Acquisition
Term Loan, and is secured by a first charge on substantially all of the assets of the Company and the subsidiary guarantors on a
pari passu basis with the Revolver, Term Loan B and the Senior Secured Notes 2027.
For the year ended June 30, 2023, we recorded interest expense of $125.7 million relating to the Acquisition Term Loan
(year ended June 30, 2022 and 2021—nil, respectively).
Bridge Loan
On August 25, 2022, we entered into a bridge loan agreement (Bridge Loan) which provided for commitments of up to
$2.0 billion to finance a portion of the repayment of Micro Focus’ existing debt. On December 1, 2022, we entered into an
amendment to the Bridge Loan that reallocated commitments under the Bridge Loan to the Acquisition Term Loan. In
connection with the amendment to the Bridge Loan and the receipt of proceeds from the issuance of the Senior Secured Notes
2027, all remaining commitments under the Bridge Loan were reduced to zero and the Bridge Loan was terminated, which
resulted in a loss on debt extinguishment of $8.2 million relating to unamortized debt issuance costs (see Note 22 “Other
Income (Expense), Net” for more details).
For the year ended June 30, 2023, we did not have any borrowings or record any interest expense relating to the Bridge
Loan (year ended June 30, 2022—nil).
Debt Issuance Costs
Debt issuance costs relate primarily to costs incurred for the purpose of obtaining our credit facilities and issuing our
Senior Notes and are being amortized through interest expense over the respective terms of the Senior Notes, Term Loan B and
Acquisition Term Loan using the effective interest method and straight-line method for the Revolver.
174
NOTE 12—PENSION PLANS AND OTHER POST RETIREMENT BENEFITS
Defined Benefit Plans
The Company has 52 pension and other post retirement plans in multiple countries, including 38 defined benefit and other
post retirement benefit plans which were assumed as part of the Micro Focus Acquisition (see Note 19 “Acquisitions” for more
details). All of our pension and other post retirement plans are located outside of Canada and the United States. The plans are
primarily located in Germany, which, as of June 30, 2023, make up approximately 64% of the total net benefit pension
obligations.
Our defined benefit pension plans include a mix of final salary type plans which provide for retirement, old age, disability
and survivor’s benefits. Final salary type pension plans provide benefits to members either in the form of a lump sum payment
or a guaranteed level of pension payable for life in the case of retirement, disability and death. Benefits under our final salary
type plans are generally based on the participant’s age, compensation and years of service as well as the social security ceiling
and other factors. Many of these plans are closed to new members. The net periodic costs of these plans are determined using
the projected unit credit method and several actuarial assumptions, the most significant of which are the discount rate and
estimated service costs.
Other post-retirement plans include statutory plans that offer termination, indemnity or other end of service benefits.
Many of these plans were assumed through our acquisitions or are required by local regulatory and statutory requirements. All
of our defined benefit and other post retirement plans are included in the aggregate projected benefit obligation within “Pension
liability” on our Consolidated Balance Sheets.
The Company does not intend to make any cash contributions to any defined benefit pension or post-retirement plans
unless required by the local regulatory or statutory requirements. For the year ended June 30, 2023, we made cash contributions
of $6.5 million (year ended June 30, 2022 and 2021—$3.7 million and $2.6 million, respectively). For Fiscal 2024, we expect
to make cash contributions of $9.7 million to our defined benefit plans.
As part of the Micro Focus Acquisition (see Note 19 “Acquisitions” for more details), we assumed a total of 38 defined
benefit plans, all located outside of Canada and the United States. As of June 30, 2023, these assumed plans carried a net
liability of $56.6 million and are funded at 73% of the defined benefit obligations. Plan assets that partially fund these assumed
defined benefit obligations are primarily classified within Level 1 and Level 2 of the fair value hierarchy and consist primarily
of investments in equity and debt funds. Plan assets exclude insurance contracts with guaranteed interest rates classified as
Level 3 available-for-sale financial assets of $24.6 million that do not meet the definition of a qualifying insurance policy, as
they have not been pledged to the defined benefit and other post retirement plans (see Note 16 “Fair Value Measurement” for
more details). As of June 30, 2023, the fair value of these acquired plan assets was $155.3 million.
The following tables provides the details of the funded status of our defined benefit pension and other post-retirement
plans:
Plan assets
Projected benefit obligations
Funded status
As of June 30, 2023
As of June 30, 2022
$
$
208,363 $
(339,179)
(130,816) $
52,111
(115,591)
(63,480)
The following tables provides details of the net benefit obligations of our defined benefit pension and other post-
retirement plans:
Current portion of benefit obligation(1)
Non-current portion of benefit obligation
Total
____________________________
As of June 30, 2023
As of June 30, 2022
$
$
4,504 $
126,312
130,816 $
2,529
60,951
63,480
(1)
The current portion of the benefit obligation has been included within “Accrued salaries, incentives and commissions,” all within
“Accounts payable and accrued liabilities” in the Consolidated Balance Sheets (see Note 10 “Accounts Payable and Accrued
Liabilities”).
175
The following tables provides the details of the change in the benefit obligation and plan assets for the periods indicated:
As of June 30, 2023
As of June 30, 2022
Benefit obligation—beginning of fiscal year
Service cost
Interest cost
Benefits paid
Company contributions
Employee contributions
Plan settlement
Plan amendment
Net transfers
Actuarial (gain) loss
Foreign exchange (gain) loss
Benefit obligation—end of period
Less: Current portion
Non-current portion of benefit obligation
Plan assets—beginning of fiscal year
Benefit payments from plan assets
Expected return on plan assets
Return on plan assets
Company contributions
Employee contributions
Net transfers
Plan Settlement
Foreign exchange (gain) loss
Plan assets—end of period
115,591 $
6,921
7,091
(3,293)
20
1,393
(2,789)
(221)
205,556
6,199
2,711
339,179
4,504
334,675 $
141,698
4,404
2,271
(5,079)
2
50
—
—
—
(19,649)
(8,106)
115,591
2,529
113,062
As of June 30, 2023
As of June 30, 2022
$
$
$
52,111 $
(325)
5,502
(3,174)
3,522
1,515
150,058
(2,789)
1,943
$
208,363 $
60,379
(2,436)
1,299
(7,859)
1,034
50
—
—
(356)
52,111
The following table provides details of net pension expense for the periods indicated:
Pension expense:
Service cost
Interest cost
Expected return of plan assets
Amortization of actuarial (gains) losses
Settlement cost
Net pension expense
Year Ended June 30,
2023
2022
2021
$
$
6,921 $
7,091
(5,502)
246
451
9,207 $
4,404 $
2,271
(1,299)
1,008
—
6,384 $
3,693
1,733
(214)
1,399
—
6,611
Service-related net periodic pension costs are recorded within operating expense and all other non-service related net
periodic pension costs are classified under “Interest and other related expense, net” on our Consolidated Statements of Income.
The following table provides details of amounts recognized in Other Comprehensive Income:
Net actuarial gain (loss)
Amortization of actuarial loss (gain)
Settlement cost and plan amendments
Total recognized in other comprehensive income
Year Ended June 30,
2023
2022
2021
$
$
(9,017) $
246
673
(8,098) $
7,461 $
1,008
—
8,469 $
4,978
1,399
—
6,377
176
The following table provides details of the plan assets measured at fair value presented by asset category and fair value
hierarchy for the periods indicated:
As of June 30, 2023
As of June 30, 2022
Cash
Debt funds
Equity funds
Real estate funds
Other
Total
Level 3
— $
Level 1
Level 2
Level 1
Level 2
Level 3
Total
$ 2,924 $
73,053
66,975
235
9,497
2
15,869
10,414
—
25,826
$ 152,684 $ 47,207 $ 8,472 $ 208,363 $ 26,285 $ 24,805 $ 1,021 $ 52,111
— $
—
—
—
24,805
— $
—
—
—
1,021
Total
— $ 2,924 $
87,818
—
72,720
—
6,727
6,420
38,174
2,052
15,869
10,414
—
—
14,765
5,745
72
26,625
2 $
The Company’s investment objective with respect to its defined benefit plan assets is to achieve an optimal rate of return
over the long term while managing an appropriate level of risk to meet adequate future benefit obligations. Plan assets are
managed by investment fiduciaries that determine the appropriate asset allocation, risk tolerance, fund diversification and
investment strategies to achieve the long term investment objectives of the plan assets.
In determining the fair value of the defined benefit obligations as of June 30, 2023 and 2022, we used the following
weighted-average key assumptions:
Assumptions:
Salary increases
Pension increases
Discount rate
Expected return on plan assets
Normal retirement age
Year Ended June 30,
2023
2022
2.9 %
2.1 %
3.9 %
5.8 %
64
Anticipated pension payments under the defined benefit plans for the fiscal years indicated below are as follows:
Fiscal years ending June 30,
2024
2025
2026
2027
2028
2029 to 2033
Total
$
$
2.7 %
2.0 %
3.6 %
3.3 %
65
13,115
13,221
14,258
16,146
17,745
102,196
176,681
Defined Contribution Plans
The Company has various defined contribution retirement plans around the world covering many of its employees. Under
these plans, employees can contribute a portion of their salary to the plan and the Company makes minimum non-elective
contributions, discretionary contributions, and matching contributions, depending on the terms of the specific plan. The
majority of the plans are primarily located in Canada, the United States, the United Kingdom and Germany. For the year ended
June 30, 2023, we made contributions of $40.0 million relating to the defined contribution retirement plans (year ended June
30, 2022 and 2021—$24.0 million and $16.4 million, respectively).
NOTE 13—SHARE CAPITAL, OPTION PLANS AND SHARE-BASED PAYMENTS
Cash Dividends
For the year ended June 30, 2023, pursuant to the Company’s dividend policy, we declared total non-cumulative
dividends of $0.9720 per Common Share in the aggregate amount of $259.5 million, which we paid during the same period
(year ended June 30, 2022 and 2021—$0.8836 and $0.7770 per Common Share, respectively, in the aggregate amount of
$237.7 million and $210.7 million, respectively).
177
Share Capital
Our authorized share capital includes an unlimited number of Common Shares and an unlimited number of Preference
Shares. No Preference Shares have been issued.
Treasury Stock
From time to time we may provide funds to an independent agent to facilitate repurchases of our Common Shares in
connection with the settlement of awards under the Long-Term Incentive Plans (LTIP) or other plans.
During the year ended June 30, 2023, we repurchased 521,136 Common Shares on the open market at a cost of $21.9
million for potential settlement of awards under “Long-Term Incentive Plans” and “Restricted Share Units” or other plans as
described below (year ended June 30, 2022 and 2021—2,630,000 and 1,455,088 Common Shares, respectively, at a cost of
$111.6 million and $64.8 million, respectively).
During the year ended June 30, 2023, we delivered to eligible participants 691,181 Common Shares that were purchased
in the open market in connection with the settlement of awards and other plans (year ended June 30, 2022 and 2021—491,244
and 509,721 Common Shares, respectively).
Share Repurchase Plan
On November 4, 2021, the Board authorized a share repurchase plan (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. During the year ended June 30, 2023, we did not
repurchase and cancel any Common Shares (year ended June 30, 2022—3,809,559 Common Shares for $177.0 million).
Share-Based Payments
Share-based compensation expense for the periods indicated below is detailed as follows:
Year Ended June 30,
2023
2022
2021
Stock options
Performance Share Units (issued under LTIP)
Restricted Share Units (issued under LTIP)
Restricted Share Units (other)
Deferred Share Units (directors)
Employee Stock Purchase Plan
$
20,144 $
17,091 $
18,631
9,762
72,149
4,036
5,580
13,844
7,799
20,859
3,993
5,970
Total share-based compensation expense
$
130,302 $
69,556 $
15,639
9,898
7,358
10,561
3,396
5,117
51,969
No cash was used by us to settle equity instruments granted under share-based compensation arrangements in any of the
periods presented. We have not capitalized any share-based compensation costs as part of the cost of an asset in any of the
periods presented.
A summary of unrecognized compensation cost for unvested shared-based payment awards is as follows:
Stock Options (issued under Stock Option Plans)
Performance Share Units (issued under LTIP)
Restricted Share Units (issued under LTIP)
Restricted Share Units (other)
Total unrecognized share-based compensation cost
As of June 30, 2023
Unrecognized
Compensation Cost
$
$
47,731
27,797
14,038
108,956
198,522
Weighted Average
Recognition Period
(years)
2.5
1.8
1.9
1.5
178
Stock Option Plans
A summary of stock options outstanding under our 2004 Stock Option Plan is set forth below.
Date of inception
Eligibility
Options granted to date
Options exercised to date
Options cancelled to date
Options outstanding
Options available for issuance
Termination grace periods
Vesting schedule
Exercise price range
Expiration dates
2004 Stock Option Plan
Oct-04
Eligible employees, as determined by the Board of Directors
45,866,567
(21,993,009)
(11,654,119)
12,219,439
5,950,832
Immediately “for cause”; 90 days for any other reason; 180 days due to death
25% per year, unless otherwise specified
$26.81 - $52.62
7/29/2023 - 5/08/2030
Our stock options generally vest over four years and expire between seven and ten years from the date of the grant.
Currently we also have options outstanding that vest over five years, as well as options outstanding that vest based on meeting
certain market conditions. The exercise price of all our options is set at an amount that is not less than the closing price of our
Common Shares on the NASDAQ on the trading day immediately preceding the applicable grant date.
We estimate the fair value of stock options using the Black-Scholes option-pricing model or, where appropriate, the
Monte Carlo pricing model, consistent with the provisions of ASC Topic 718, “Compensation—Stock Compensation” (Topic
718) and SEC Staff Accounting Bulletin No. 107. The option-pricing models require input of subjective assumptions, including
the estimated life of the option and the expected volatility of the underlying stock over the estimated life of the option. We use
historical volatility as a basis for projecting the expected volatility of the underlying stock and estimate the expected life of our
stock options based upon historical data.
We believe that the valuation techniques and the approach utilized to develop the underlying assumptions are appropriate
in calculating the fair value of our stock option grants. Estimates of fair value are not intended, however, to predict actual future
events or the value ultimately realized by employees who receive equity awards.
A summary of activity under our stock option plans for the year ended June 30, 2023 is as follows:
Outstanding at June 30, 2022
Granted
Exercised
Forfeited or expired
Outstanding at June 30, 2023
Exercisable at June 30, 2023
Options
Weighted-
Average Exercise
Price
8,820,662 $
4,964,650
(245,235)
(1,320,638)
12,219,439 $
4,292,254 $
42.74
31.29
31.93
41.52
38.44
39.30
Weighted-
Average
Remaining
Contractual Term
(years)
Aggregate Intrinsic
Value
($’000’s)
4.68 $
7,111
4.68 $
3.09 $
62,473
16,497
179
For the periods indicated, the weighted-average fair value of options and weighted-average assumptions estimated under
the Black-Scholes option-pricing model were as follows:
Weighted–average fair value of options granted
Weighted-average assumptions used:
Expected volatility
Risk–free interest rate
Expected dividend yield
Expected life (in years)
Forfeiture rate (based on historical rates)
Average exercise share price
Performance Options
Year Ended June 30,
2023
2022
2021
$
6.75
$
9.02
$
8.45
28.73 %
3.98 %
3.07 %
4.20
7 %
26.39 %
1.15 %
1.78 %
4.15
7 %
26.26 %
0.24 %
1.55 %
4.59
7 %
$
31.13
$
48.20
$
45.76
During the year ended June 30, 2023, we granted 1,000,000 performance options (year ended June 30, 2022 and 2021—
nil and 750,000 performance options, respectively).
For the periods in which performance options were granted, as indicated, the weighted-average fair value of performance
options and weighted-average assumptions estimated under the Monte Carlo pricing model were as follows:
Weighted–average fair value of options granted
Derived service period (in years)
Weighted-average assumptions used:
Expected volatility
Risk–free interest rate
Expected dividend yield
Average exercise share price
Year Ended June 30,
2023
2022
2021
$
8.09
1.70
$
—
0.00
10.18
1.80
26.00 %
3.21 %
2.00 %
31.89
$
— %
— %
— %
—
$
28.00 %
0.42 %
1.70 %
45.81
$
$
Summary of Stock Options and Performance Options
The aggregate intrinsic value of options exercised during the year ended June 30, 2023 was $1.8 million (year ended June
30, 2022 and 2021—$17.0 million and $25.0 million, respectively). For the year ended June 30, 2023, cash in the amount of
$7.8 million was received as the result of the exercise of options granted under share-based payment arrangements (year ended
June 30, 2022 and 2021—$32.7 million and $49.6 million, respectively). The tax benefit realized by us during the year ended
June 30, 2023 from the exercise of options eligible for a tax deduction was $0.3 million (year ended June 30, 2022 and 2021
—$2.8 million and $2.3 million, respectively).
Long-Term Incentive Plans
We incentivize certain eligible employees, in part, with long-term compensation pursuant to our LTIP. The LTIP is a
rolling three-year program that grants eligible employees a certain number of target Performance Share Units (PSUs) and/or
Restricted Share Units (RSUs). Target PSUs become vested upon the achievement of certain financial and/or operational
performance criteria (the Performance Conditions) that are determined at the time of the grant. RSUs become vested when an
eligible employee remains employed throughout the vesting period. For the year ended June 30, 2023, we settled LTIP awards
that vested by delivering to eligible participants 290,971 Common Shares that were purchased in the open market at a cost of
$12.7 million.
PSUs and RSUs granted under the LTIP have been measured at fair value as of the effective date, consistent with ASC
Topic 718, and will be charged to share-based compensation expense over the remaining life of the plan. We estimate the fair
value of PSUs using the Monte Carlo pricing model and RSUs have been valued based upon their grant date fair value.
Beginning in Fiscal 2023 certain PSU and RSU grants were eligible to receive dividend equivalent units that vest under the
same conditions as the underlying grants.
180
Performance Share Units (Issued Under LTIP)
A summary of activity under our performance share units issued under long-term incentive plans for the year ended June
30, 2023 is as follows:
Outstanding at June 30, 2022
Granted (1)
Vested (1)
Forfeited or expired
Outstanding at June 30, 2023
__________________________
Units
Weighted-Average
Grant Date Fair
Value
812,937 $
539,911
(224,593)
(114,870)
1,013,385 $
61.29
54.38
41.75
62.80
61.64
Weighted-
Average
Remaining
Contractual Term
(years)
Aggregate Intrinsic
Value
($’000’s)
1.89 $
30,762
1.75 $
42,106
(1) Performance share units are earned based on market conditions and the actual number of performance units earned, if any, is
dependent upon performance and may range from 0 to 200 percent.
For the periods indicated, the weighted-average fair value of PSUs issued under LTIP, and weighted-average assumptions
estimated under the Monte Carlo pricing model were as follows:
Weighted–average fair value of performance share units granted
Weighted-average assumptions used:
Expected volatility
Risk–free interest rate
Expected dividend yield
Expected life (in years)
Forfeiture rate (based on historical rates)
Year Ended June 30,
2023
2022
2021
$43.10 - $55.06
$69.78 - $75.15
$44.56 - $61.67
29.00 %
28.00 %
28.00 %
3.13% - 3.39%
0.45% - 0.71% 0.15% - 0.24%
0.0%
3.11
7 %
1.7% - 1.8%
3.10
7 %
1.7 %
3.09
7 %
Weighted–average fair value of performance share units vested
$
Aggregate intrinsic value of performance share units vested ($ in ‘000’s) $
41.75
6,216
$
$
30.39
10,370
$
$
25.76
4,286
Restricted Share Units (Issued Under LTIP)
A summary of activity under our restricted share units issued under long-term incentive plans for the year ended June 30,
2023 is as follows:
Outstanding at June 30, 2022
Granted
Vested
Forfeited or expired
Outstanding at June 30, 2023
Units
Weighted-Average
Grant Date Fair
Value
611,743 $
404,880
(147,223)
(95,040)
774,360 $
44.14
38.82
36.83
43.32
42.83
Weighted-
Average
Remaining
Contractual Term
(years)
Aggregate Intrinsic
Value
($’000’s)
1.62 $
23,148
1.68 $
32,175
For the periods indicated, the weighted-average fair value and aggregate intrinsic value of RSUs (issued under LTIP) were
as follows:
Weighted–average fair value of restricted share units granted
Weighted–average fair value of restricted share units vested
Aggregate intrinsic value of restricted share units vested ($ in 000’s)
Year Ended June 30,
2023
2022
2021
$
$
$
38.82 $
36.83 $
3,947 $
49.91 $
37.36 $
9,139 $
43.39
32.93
7,832
181
Restricted Share Units (Other)
In addition to the grants made in connection with the LTIP plans discussed above, from time to time, we may grant RSUs
to certain employees in accordance with employment and other non-LTIP related agreements. During the year ended June 30,
2023, we granted RSUs through a special one-time grant for development, engagement and long-term retention to certain of our
non-executive employees. RSUs (other) vest in tranches over a specified contract date, typically two or three years from the
respective date of grants.
A summary of activity under our RSUs (other) issued for the year ended June 30, 2023 is as follows:
Outstanding at June 30, 2022
Granted
Vested
Forfeited or expired
Outstanding at June 30, 2023
Units
Weighted-Average
Grant Date Fair
Value
2,593,707 $
3,493,488
(400,210)
(376,390)
5,310,595 $
44.90
30.46
36.33
41.91
36.43
Weighted-
Average
Remaining
Contractual Term
(years)
Aggregate Intrinsic
Value
($’000’s)
2.86 $
98,146
1.97 $
220,655
For the periods indicated, the weighted-average fair value and intrinsic value of RSUs (other) were as follows:
Weighted–average fair value of restricted share units granted
Weighted–average fair value of restricted share units vested
Aggregate intrinsic value of restricted share units vested ($ in 000’s)
Year Ended June 30,
2023
2022
2021
$
$
$
30.46 $
36.33 $
15,755 $
44.81 $
45.73 $
7,406 $
45.73
—
—
During the year ended June 30, 2023, we delivered to eligible participants 400,210 Common Shares that were purchased
in the open market in connection with the settlement of vested RSUs, at a cost of $17.6 million (year ended June 30, 2022 and
2021—141,452 and zero Common Shares, respectively, with a cost of $5.9 million and nil).
Deferred Share Units (DSUs)
The deferred share units are granted to certain non-employee directors. DSUs are issued under our Deferred Share Unit
Plan. DSUs granted as compensation for director fees vest immediately, whereas all other DSUs granted vest at our next annual
general meeting following the granting of the DSUs. No DSUs are payable by us until the director ceases to be a member of the
Board.
A summary of activity under our deferred share units issued for the year ended June 30, 2023 is as follows:
Outstanding at June 30, 2022 (1)
Granted (2)
Settled
Outstanding at June 30, 2023 (2)
______________________
Units
Weighted-Average
Price
885,701 $
139,140
(30,273) $
994,568 $
31.49
29.72
40.46
29.98
Weighted-
Average
Remaining
Contractual Term
(years)
Aggregate Intrinsic
Value
($’000’s)
0.36 $
33,515
0.36 $
41,324
182
(1) Includes 55,520 unvested DSUs.
(2) Includes 90,906 unvested DSUs.
For the periods indicated, the weighted-average fair value and intrinsic value of DSUs were as follows:
Weighted–average fair value of deferred share units granted
Weighted–average fair value of deferred share units vested
Aggregate intrinsic value of deferred share units vested ($ in 000’s)
Year Ended June 30,
2023
2022
2021
$
$
$
29.72 $
32.44 $
1,565 $
50.04 $
41.24 $
4,133 $
40.15
41.48
3,109
During the year ended June 30, 2023, we settled 30,273 DSUs at a cost of $1.1 million (year ended June 30, 2022 and
2021—nil and 23,640 Common Shares, respectively, with a cost of nil and $1.1 million, respectively).
Employee Stock Purchase Plan (ESPP)
Our ESPP offers employees the opportunity to purchase our Common Shares at a purchase price discount of 15%. During
the year ended June 30, 2023, 1,089,120 Common Shares were eligible for issuance to employees enrolled in the ESPP (year
ended June 30, 2022 and 2021—931,036 and 769,031 Common Shares, respectively). During the year ended June 30, 2023,
cash in the amount of $31.0 million was received from employees relating to the ESPP (year ended June 30, 2022 and 2021
—$34.5 million and $30.5 million, respectively).
NOTE 14—GUARANTEES AND CONTINGENCIES
We have entered into the following contractual obligations with minimum payments for the indicated fiscal periods as
follows:
Long-term debt obligations (1) $
Purchase obligations for
contracts not accounted for
as lease obligations (2)
Payments due between
Total
July 1, 2023 - June
30, 2024
July 1, 2024 - June
30, 2026
July 1, 2026 - June
30, 2028
July 1, 2028 and
beyond
12,424,286 $
648,414 $
2,373,260 $
2,948,038 $
6,454,574
176,440
52,588
108,346
15,506
—
_______________________________________
$
12,600,726 $
701,002 $
2,481,606 $
2,963,544 $
6,454,574
Includes interest up to maturity and principal payments. Please see Note 11 “Long-Term Debt” for more details.
(1)
(2) For contractual obligations relating to leases and purchase obligations accounted for under ASC Topic 842, please see Note 6
“Leases.”
Guarantees and Indemnifications
We have entered into customer agreements which may include provisions to indemnify our customers against third party
claims that our software products or services infringe certain third-party intellectual property rights and for liabilities related to
a breach of our confidentiality obligations. We have not made any material payments in relation to such indemnification
provisions and have not accrued any liabilities related to these indemnification provisions in our Consolidated Financial
Statements.
Occasionally, we enter into financial guarantees with third parties in the ordinary course of our business, including,
among others, guarantees relating to taxes and letters of credit on behalf of parties with whom we conduct business. Such
agreements have not had a material effect on our results of operations, financial position or cash flows.
Litigation
We are currently involved in various claims and legal proceedings.
Quarterly, we review the status of each significant legal matter and evaluate such matters to determine how they should be
treated for accounting and disclosure purposes in accordance with the requirements of ASC Topic 450-20 “Loss
Contingencies” (Topic 450-20). Specifically, this evaluation process includes the centralized tracking and itemization of the
status of all our disputes and litigation items, discussing the nature of any litigation and claim, including any dispute or claim
183
that is reasonably likely to result in litigation, with relevant internal and external counsel, and assessing the progress of each
matter in light of its merits and our experience with similar proceedings under similar circumstances.
If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably
estimated, we accrue a liability for the estimated loss in accordance with Topic 450-20. As of the date of this Annual Report on
Form 10-K, the aggregate of such accrued liabilities was not material to our consolidated financial position or results of
operations and we do not believe as of the date of this filing that it is reasonably possible that a loss exceeding the amounts
already recognized will be incurred that would be material to our consolidated financial position or results of operations. As
described more fully below, we are unable at this time to estimate a possible loss or range of losses in respect of certain
disclosed matters.
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. 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. 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.
The notices of reassessment for Fiscal 2012, Fiscal 2013, Fiscal 2014, Fiscal 2015 and Fiscal 2016 would, as drafted,
increase our taxable income by approximately $90 million to $100 million for each of those years, as well as impose a 10%
penalty on the proposed adjustment to income. Audits by the CRA of our tax returns for fiscal years prior to Fiscal 2012 have
been completed with no reassessment of our income tax liability.
We strongly disagree with the CRA’s positions and believe the reassessments of Fiscal 2012, Fiscal 2013, Fiscal 2014,
Fiscal 2015 and Fiscal 2016 (including any penalties) are without merit, and we are continuing to contest these reassessments.
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.
Even if we are unsuccessful in challenging the CRA’s reassessments to increase our taxable income for Fiscal 2012,
Fiscal 2013, Fiscal 2014, Fiscal 2015 and Fiscal 2016, we have elective deductions available for those years (including carry-
backs from later years) that would offset such increased amounts so that no additional cash tax would be payable, exclusive of
any assessed penalties and interest, as described above.
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. In accordance with applicable rules, these assets were recognized for tax purposes
at fair market value as of that time, which value was supported by an expert valuation prepared by an independent leading
accounting and advisory firm. 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. Other aspects of CRA’s position for Fiscal 2017 and Fiscal 2018
conflict with the expert valuation prepared by the independent leading accounting and advisory firm that was used to support
our original filing position. The CRA issued notices of reassessment in respect of Fiscal 2017 and Fiscal 2018 on a basis
consistent with its proposal to reduce the available depreciable basis of these assets in Canada. 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. If we are ultimately unsuccessful in defending our position, the estimated
impact of the proposed adjustment could result in us recording an income tax expense, with no immediate cash payment, to
reduce the stated value of our deferred tax assets of up to approximately $470 million. Any such income tax expense could also
have a corresponding cash tax impact that would primarily occur over a period of several future years based upon annual
income realization in Canada. We strongly disagree with the CRA’s position for Fiscal 2017 and Fiscal 2018 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 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.
We will continue to vigorously contest the adjustments to our taxable income and any penalty and interest assessments, as
well as any reduction to the basis of our depreciable property. We are confident that our original tax filing positions were
184
appropriate. 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. The CRA is also in preliminary stages of auditing
Fiscal 2020.
Carbonite Class Action Complaint
On August 1, 2019, prior to our acquisition of Carbonite, a purported stockholder of Carbonite filed a putative class action
complaint against Carbonite, its former Chief Executive Officer, Mohamad S. Ali, and its former Chief Financial Officer,
Anthony Folger, in the United States District Court for the District of Massachusetts captioned Ruben A. Luna, Individually
and on Behalf of All Others Similarly Situated v. Carbonite, Inc., Mohamad S. Ali, and Anthony Folger (No. 1:19-cv-11662-
LTS) (the Luna Complaint). The complaint alleges violations of the federal securities laws under Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder. The complaint generally alleges
that the defendants made materially false and misleading statements in connection with Carbonite’s Server Backup VM Edition,
and seeks, among other things, the designation of the action as a class action, an award of unspecified compensatory damages,
costs and expenses, including counsel fees and expert fees, and other relief as the court deems appropriate. 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 November 21, 2019, the district court consolidated the Securities Actions, appointed a
lead plaintiff, and designated a lead counsel. On January 15, 2020, the lead plaintiff filed a consolidated amended complaint
generally making the same allegations and seeking the same relief as the complaint filed on August 1, 2019. The defendants
moved to dismiss the Securities Actions on March 10, 2020. On October 22, 2020, the district court granted with prejudice the
defendants’ motion to dismiss the Securities Actions. On November 20, 2020, the lead plaintiff filed a notice of appeal to the
United States Court of Appeals for the First Circuit. On December 21, 2021, the United States Court of Appeals for the First
Circuit issued a decision reversing and remanding the Securities Actions to the district court for further proceedings. The parties
have completed discovery and defendants have filed a motion for summary judgment. The defendants remain confident in their
position, believe the Securities Actions are without merit, and will continue to vigorously defend the matter.
Carbonite vs Realtime Data
On February 27, 2017, before our acquisition of Carbonite, a non-practicing entity named Realtime Data LLC (Realtime
Data) filed a lawsuit against Carbonite in 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. District Court for the Eastern District of Texas
transferred the case to the U.S. District Court for the District of Massachusetts (No. 1:17-cv-12499). Realtime Data has also
filed numerous other patent suits on the same asserted patents against other companies. After a stay pending appeal in one of
those suits, on January 21, 2021, the district court held a hearing to construe the claims of the asserted patents. As to the fourth
patent asserted against Carbonite, on September 24, 2019, the U.S. Patent & Trademark Office Patent Trial and Appeal Board
invalidated certain claims of that patent, including certain claims that had been asserted against Carbonite. The parties then
jointly stipulated to dismiss that patent from this action. On August 23, 2021, in one of the suits against other companies, the
District of Delaware (No. 1:17-cv-800), held all of the patents asserted against Carbonite to be invalid. Realtime Data has
appealed that decision to the U.S. Court of Appeals for the Federal Circuit. We continue to vigorously defend the matter, and
the U.S. District Court for the District of Massachusetts has issued a claim construction order. We have not accrued a loss
contingency related to this matter because litigation related to a non-practicing entity is inherently unpredictable. Although a
loss is reasonably possible, an unfavorable outcome is not considered by management to be probable at this time and we remain
unable to reasonably estimate a possible loss or range of loss associated with this litigation.
Other Matters
Please also see Part I, Item 1A, “Risk Factors” in this Annual Report on Form 10-K for Fiscal 2023, as well as Note 15
“Income Taxes” related to certain historical matters arising prior to the Micro Focus Acquisition.
185
NOTE 15—INCOME TAXES
Our effective tax rate represents the net effect of the mix of income earned in various tax jurisdictions that are subject to a
wide range of income tax rates.
The effective tax rate increased to a provision of 32.0% for the year ended June 30, 2023, compared to a provision of
23.0% for the year ended June 30, 2022. Tax expense decreased from $118.8 million during the year ended June 30, 2022 to
$70.8 million during the year ended June 30, 2023. The increase in the effective tax rate was driven by increases in withholding
taxes, changes in valuation allowance, permanent differences related to foreign source income inclusions, and the impact of
internal reorganizations, partially offset by lower pretax income, tax credits and permanent adjustments related to the
preferential tax treatment of the mark-to-market gains on derivatives. The tax rate for the year ended June 30, 2022 varied from
the statutory rate due favorable permanent adjustments related to excess share-based compensation deductions, tax credits, and
the reduction in the accrual on unremitted foreign earnings, partially offset by the impact of internal reorganizations and an
increase in unrecognized tax benefits.
A reconciliation of the combined Canadian federal and provincial income tax rate with our effective income tax rate is as
follows:
Expected statutory rate
Expected provision for income taxes
Effect of foreign tax rate differences
Change in valuation allowance
Effect of permanent differences
Effect of changes in unrecognized tax benefits
Effect of withholding taxes
Effect of tax credits
Effect of accrual for undistributed earnings
Effect of US BEAT
Effect of IRS Settlement
Impact of internal reorganizations
Other items
Provision for income taxes
Year Ended June 30,
2023
2022
2021
26.50 %
26.50 %
26.50 %
$
58,653
$
136,743
$
172,454
(17,502)
16,218
17,281
857
12,464
(45,596)
5,804
6,854
—
8,822
6,912
(4,578)
(2,444)
(12,710)
8,130
6,617
(12,330)
(6,343)
—
—
13,077
(7,410)
(4,309)
(5,900)
(1,885)
(86,170)
8,500
(16,086)
3,209
7,967
300,460
(33,676)
(4,658)
$
70,767
$
118,752
$
339,906
The following is a geographical breakdown of income before the provision for income taxes:
Domestic income (loss)
Foreign income (loss)
Income before income taxes
Year Ended June 30,
2023
2022
2021
300,437
(79,104)
435,355
80,656
$
221,333 $
516,011 $
462,315
188,455
650,770
186
The provision for (recovery of) income taxes consisted of the following:
Current income taxes (recoveries):
Domestic
Foreign
Total current income taxes (recoveries)
Deferred income taxes (recoveries):
Domestic
Foreign
Total deferred income taxes (recoveries)
Provision for income taxes
Year Ended June 30,
2023
2022
2021
15,619
204,708
220,327
17,428
137,412
154,840
17,461
(167,021)
(149,560)
54,867
(90,955)
(36,088)
310,615
(43,748)
266,867
111,232
(38,193)
73,039
$
70,767 $
118,752 $
339,906
The primary components of the deferred tax assets and liabilities are as follows, for the periods indicated below:
Deferred tax assets
Non-capital loss carryforwards
Capital loss carryforwards
Interest expense carryforwards
Capitalized scientific research and development expenses
Depreciation and amortization
Restructuring costs and other reserves
Capitalized inventory and intangible expenses
Tax credits
Lease liabilities
Deferred revenue
Share-based compensation
Derivatives
Other
Total deferred tax asset
Valuation allowance
Deferred tax liabilities
Depreciation and amortization
Right of use assets
Other
Deferred tax liabilities
Net deferred tax asset
Comprised of:
Long-term assets
Long-term liabilities
Net deferred tax asset
As of June 30,
2023
2022
$
754,852 $
207,631
13,512
156,832
343,308
—
34,357
52,345
171,536
48,378
90,312
37,692
42,716
50,272
1,796,112 $
(605,926)
(546,024)
(31,933)
(109,465)
(687,422) $
502,764 $
926,719
(423,955)
$
$
$
$
502,764 $
—
—
121,771
314,168
19,561
43,129
126,920
40,486
9,288
29,239
—
30,540
942,733
(73,965)
—
(31,452)
(93,049)
(124,501)
744,267
810,154
(65,887)
744,267
As of June 30, 2023, we have $364.2 million of domestic non-capital loss carryforwards. In addition, we have $3.0 billion
of foreign non-capital loss carryforwards, which includes $372.1 million of U.S. state loss carryforwards. $476.3 million of the
foreign non-capital loss carryforwards have no expiry date, which includes $12.8 million of U.S. state loss carryforwards. The
remainder of the domestic and foreign losses expire between 2024 and 2043. In addition, investment tax credits of $74.1 million
will expire between 2028 and 2043.
187
We believe that sufficient uncertainty exists regarding the realization of certain deferred tax assets that a valuation
allowance is required. We continue to evaluate our taxable position quarterly and consider factors by taxing jurisdiction,
including but not limited to factors such as estimated taxable income, any historical experience of losses for tax purposes and
the future growth of OpenText. As of June 30, 2023 and 2022, the Company had a valuation allowance on its domestic and
foreign deferred tax assets of $605.9 million and $74.0 million, respectively. The balance at June 30, 2023 consisted of $8.7
million and $597.2 million against the Company’s domestic and foreign deferred tax assets, respectively, which, the Company
believes, are more likely than not to be utilized in future years. The valuation allowance increased in Fiscal 2023 by $532.0
million primarily related to the Micro Focus Acquisition, which has significant losses that cannot be benefited.
The aggregate changes in the balance of our gross unrecognized tax benefits (including interest and penalties) were as
follows:
Unrecognized tax benefits as of June 30, 2021
Increases on account of current year positions
Increases on account of prior year positions
Decreases on account of prior year positions
Decreases due to settlements with tax authorities
Decreases due to lapses of statutes of limitations
Unrecognized tax benefits as of June 30, 2022
Increases on account of current year positions
Increases on account of prior year positions (1)
Decreases on account of prior year positions
Decreases due to settlements with tax authorities
Decreases due to lapses of statutes of limitations
Unrecognized tax benefits as of June 30, 2023
__________________________________
$
$
$
36,749
206
27,398
(694)
(3,830)
(5,703)
54,126
8,118
138,062
(2,086)
(4,485)
(15,007)
178,728
(1) The increase in unrecognized tax benefits is primarily driven by the assumption of unrecognized tax benefits related to
the Micro Focus Acquisition.
Included in the above tabular reconciliation are unrecognized tax benefits of $66.1 million as of June 30, 2023 (June 30,
2022—$23.4 million) relating to tax attributes in which the unrecognized tax benefit has been recorded as a reduction to the
deferred tax asset. The net unrecognized tax benefit excluding these deferred tax assets is $112.6 million as of June 30, 2023
(June 30, 2022—$30.7 million).
We recognize interest expense and penalties related to income tax matters in income tax expense. For the year ended June
30, 2023, 2022 and 2021, respectively, we recognized the following amounts as income tax-related interest expense and
penalties:
Interest expense (income)
Penalties expense
Total
Year Ended June 30,
2023
2022
2021
$
$
(1,922) $
419 $
(21)
1,739
(1,943) $
2,158 $
44,657
1,125
45,782
The following amounts have been accrued on account of income tax-related interest expense and penalties:
Interest expense accrued (1)
Penalties accrued (1)
__________________________________
As of June 30, 2023
As of June 30, 2022
$
$
10,187 $
3,332 $
4,821
3,569
(1) These balances are primarily included within “Long-term income taxes payable” within the Consolidated Balance Sheets.
We believe that it is reasonably possible that the gross unrecognized tax benefits, as of June 30, 2023, could decrease tax
expense in the next 12 months by $9.9 million, relating primarily to the expiration of competent authority relief and tax years
becoming statute barred for purposes of future tax examinations by local taxing jurisdictions.
188
We are subject to income tax audits in all major taxing jurisdictions in which we operate. Our four most significant tax
jurisdictions are Canada, the United States, United Kingdom and Germany. Our tax filings remain subject to audits by
applicable tax authorities for a certain length of time following the tax year to which those filings relate. We currently have
income tax audits open in Canada, the United States, the United Kingdom, Germany and other immaterial jurisdictions. The
earliest fiscal years open for examination are 2012 for Canada, 2018 for the United States, 2015 for the United Kingdom and
2016 for Germany. On a quarterly basis we assess the status of these examinations and the potential for adverse outcomes to
determine the adequacy of the provision for income and other taxes. Statements regarding the Canada audits are included in
Note 14 “Guarantees and Contingencies.”
The timing of the resolution of income tax audits is highly uncertain, and the amounts ultimately paid, if any, upon
resolution of the issues raised by the taxing authorities may differ from the amounts accrued. It is reasonably possible that
within the next 12 months we will receive additional assessments by various tax authorities or possibly reach resolution of
income tax audits in one or more jurisdictions. These assessments or settlements may or may not result in changes to our
contingencies related to positions on tax filings. The actual amount of any change could vary significantly depending on the
ultimate timing and nature of any settlements. We cannot currently provide an estimate of the range of possible outcomes. For
more information relating to certain income tax audits, please refer to Note 14 “Guarantees and Contingencies.”
As of June 30, 2023, we have recognized a provision of $28.3 million (June 30, 2022—$15.1 million) in respect of
deferred income tax liabilities for temporary differences related to the undistributed earnings of certain non-United States
subsidiaries and planned periodic repatriations from certain German subsidiaries, that will be subject to withholding taxes upon
distribution. We have not provided for additional foreign withholding taxes or deferred income tax liabilities related to
undistributed earnings of all other non-Canadian subsidiaries, since such earnings are considered permanently invested in those
subsidiaries or are not subject to withholding taxes. It is not practicable to reasonably estimate the amount of additional deferred
income tax liabilities or foreign withholding taxes that may be payable should these earnings be distributed in the future.
On December 21, 2020, we entered into a closing agreement with the IRS resolving all of the proposed adjustments to our
taxable income for Fiscal 2010 and Fiscal 2012. As a result, we recorded charges of $300.5 million during the year ended June
30, 2021 to “Provision for income taxes.” We believe the IRS Settlement to be in the best interest of all stakeholders, as it
closes all past, present and future items related to this matter. The IRS Settlement provides finality to this longstanding matter.
State Aid Matter
In April 2019, the European Commission published its final decision on its State Aid investigation into the UK’s
“Financing Company Partial Exemption” legislation and concluded that part of the legislation was in breach of EU State Aid
rules. The UK government and certain UK-based international companies, supported by Micro Focus, appealed to the General
Court of the Court of Justice of the European Union (General Court of the CJEU) against the decision.
In February 2021, Micro Focus received and settled GBP denominated State Aid charging notices issued by HM Revenue
and Customs, following the requirement for the UK government to start collection proceedings. As a result, Micro Focus
recorded a long-term income tax receivable of $43.2 million. This reflects the payment that was made following the final
decision published by the European Commission on its State Aid investigation into the UK’s ‘Financing Company Partial
Exemption’ legislation. Based on management’s assessment of the value of the underlying tax benefit under dispute, and as
supported by external professional advice, Micro Focus believed they had no liability in respect of these matters and therefore
no tax charge was recorded.
On June 8, 2022, the General Court of the CJEU found in favor of the European Commission’s decision that the UK’s
‘Financing Company Partial Exemption’ legislation is in breach of EU State Aid rules. The UK Government and UK-based
international companies, supported by Micro Focus, lodged an appeal against the judgement with the CJEU. Micro Focus
previously received and settled State Aid charging notices from HM Revenue and Customs (including historic interest) and
given that an appeal would be expected to take more than a year, a long-term income tax recoverable continues to be recognized
as part of non-current tangible assets as of June 30, 2023, in the preliminary purchase price allocation relating to the Micro
Focus Acquisition, as described in Note 19 “Acquisitions.”
189
NOTE 16—FAIR VALUE MEASUREMENT
ASC Topic 820 “Fair Value Measurement” (Topic 820) defines fair value, establishes a framework for measuring fair
value, and addresses disclosure requirements for fair value measurements. Fair value is the price that would be received upon
sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date
and in the principal or most advantageous market for that asset or liability. The fair value, in this context, should be calculated
based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the
entity. In addition, the fair value of liabilities should include consideration of non-performance risk, including our own credit
risk.
In addition to defining fair value and addressing disclosure requirements, Topic 820 establishes a fair value hierarchy for
valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair
value are observable in the market. Each fair value measurement is reported in one of the three levels which are determined by
the lowest level input that is significant to the fair value measurement in its entirety. These levels are:
•
•
•
Level 1—inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.
Level 2—inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or
similar instruments in markets that are not active, and model-based valuation techniques for which all significant
assumptions are observable in the market or can be corroborated by observable market data for substantially the full
term of the assets or liabilities.
Level 3—inputs are generally unobservable and typically reflect management’s estimates of assumptions that market
participants would use in pricing the asset or liability. The fair values are therefore determined using model-based
techniques that include option pricing models, discounted cash flow models and similar techniques.
190
Financial Assets and Liabilities Measured at Fair Value:
Our cash and cash equivalents, along with our accounts receivable and accounts payable and accrued liabilities balances,
are measured and recognized in our Consolidated Financial Statements at an amount that approximates the fair value (a Level 2
measurement) due to their short maturities. The carrying value of our other long-term debt facilities approximates the fair value
since the interest rate is at market. See Note 11 “Long-Term Debt” for further details.
The following table summarizes the fair value of the Company’s financial instruments as of June 30, 2023 and 2022:
Assets:
Available-for-sale financial assets (Note 9)
Available-for-sale financial assets (Note 9)
Derivative asset (Note 17)
Liabilities:
Derivative liability (Note 17)
Senior Notes (Note 11) (1)
__________________________________
Fair Value
Hierarchy
June 30, 2023
June 30, 2022
Fair Value
Level 2
Level 3
Level 2
Level 2
Level 2
$
$
$
$
$
15,231 $
24,627 $
3,547 $
—
—
—
(161,191) $
(3,827,888) $
(892)
(2,835,810)
(1) Senior Notes are presented within the Consolidated Balance Sheets at amortized cost. See Note 11 “Long-Term Debt” for further
details.
Changes in Level 3 Fair Value Measurements
The following table provides a reconciliation of changes in the fair value of our Level 3 deal-contingent foreign currency
forward contracts and available-for-sale financial assets between June 30, 2022 and June 30, 2023.
Balance as of June 30, 2022
Gain (loss) recognized in income
Purchases
Settlements
Balance as of June 30, 2023
$
Deal-contingent foreign
currency forward contracts
$
— $
Available-for-sale
financial assets
—
209
24,418
—
24,627
9,354
—
(9,354)
— $
Our derivative liabilities and our derivative assets are classified as Level 2 and are comprised of foreign currency forward
and swap contracts. Our valuation techniques used to measure the fair values of the derivative instruments, the counterparty to
which has high credit ratings, were derived from pricing models including discounted cash flow techniques, with all significant
inputs derived from or corroborated by observable market data, as no quoted market prices exist for these instruments. Our
discounted cash flow techniques use observable market inputs, such as, where applicable, foreign currency spot and forward
rates.
As part of the Micro Focus Acquisition, we acquired the rights to certain available-for-sale financial assets which are
classified as Level 2 and Level 3. Our Level 2 available-for-sale financial assets are comprised primarily of various debt and
equity funds, which are valued utilizing market quotes provided by our third-party custodian. Our Level 3 available-for-sale
financial assets are comprised of insurance contracts which are valued by an external insurance expert by applying a discount
rate to the future cash flows and taking into account the fixed interest rate, mortality rates and term of the insurance contracts.
Please see Note 9 “Prepaid Expenses and Other Assets” for further details.
If applicable, we will recognize transfers between levels within the fair value hierarchy at the end of the reporting period
in which the actual event or change in circumstance occurs. During the year ended June 30, 2023 and 2022, respectively, we did
not have any transfers between Level 1, Level 2 or Level 3.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
We measure certain assets and liabilities at fair value on a nonrecurring basis. These assets and liabilities are recognized at
fair value when they are deemed to be other-than-temporarily impaired. During the year ended June 30, 2023 and 2022,
respectively, no indications of impairments were identified and therefore no fair value measurements were required.
191
NOTE 17—DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Non-designated Hedges
In connection with the Micro Focus Acquisition, in August 2022, we entered into certain derivative transactions to meet
certain foreign currency obligations under UK cash confirmation requirements 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. 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.
The deal-contingent forward contracts had an aggregate notional amount of £1.475 billion. The non-contingent forward
contract had a notional amount of £350 million. The cross currency swaps are comprised of 5-year EUR/USD cross currency
swaps with a notional amount of €690 million and 7-year EUR/USD cross currency swaps with a notional amount of €690
million.
These instruments were entered into as economic hedges to mitigate foreign currency risks associated with the Micro
Focus Acquisition. The instruments did not initially qualify for hedge accounting at the time they were entered into. In
connection with the closing of the Micro Focus Acquisition, the deal-contingent forward and non-contingent forward contracts
were settled and we designated the 7-year EUR/USD cross currency swaps as net investment hedges (see further details below).
The 5-year EUR/USD cross currency swaps are non-designated and are measured at fair value with changes to fair value being
recognized in the Consolidated Statements of Income within “Other income (expense), net.”
Net Investment Hedge
During the third quarter of Fiscal 2023, the Company designated the €690 million of 7-year EUR/USD cross currency
swaps as net investment hedges in accordance with “Derivatives and Hedging” (Topic 815). The Company utilizes the
designated cross currency swaps to protect our EUR-denominated operations against exchange rate fluctuations.
The Company assesses the hedge effectiveness of its net investment hedges on a quarterly basis utilizing a method based
on the changes in spot price. As such, for derivative instruments designated as net investment hedges, changes in fair value of
the designated hedging instruments attributable to fluctuations in the foreign currency spot exchange rates are initially recorded
as a component of currency translation adjustments included within Consolidated Statements of Comprehensive Income until
the hedged foreign operations are either sold or substantially liquidated.
In accordance with Topic 815 certain components of the designated cross currency swaps relating to counterparty credit
risk and forward exchange rates were excluded from the above effectiveness assessment. The fair value of these excluded
components will be amortized over the life of the hedging instruments within “Interest and other related expense, net” within
the Consolidated Statements of Income. Additionally, we will record the cash flows related to the periodic interest settlements
on the 7-year EUR/USD cross currency swaps within the investing activities section of the Consolidated Statements of Cash
Flows. Any gains or losses recognized upon settlement of the cross currency swaps will be recorded within the investing
activities section of the Consolidated Statements of Cash Flows.
Foreign Currency Forward Contracts
We are engaged in hedging programs with various banks to limit the potential foreign exchange fluctuations incurred on
future cash flows relating to a portion of our Canadian dollar payroll expenses. We operate internationally and are therefore
exposed to foreign currency exchange rate fluctuations in the normal course of our business, in particular to changes in the
Canadian dollar on account of large costs that are incurred from our centralized Canadian operations, which are denominated in
Canadian dollars. As part of our risk management strategy, we use foreign currency forward contracts to hedge portions of our
payroll exposure with typical maturities of between one and twelve months. We do not use foreign currency forward contracts
for speculative purposes.
We have designated these transactions as cash flow hedges of forecasted transactions under Topic 815. As the critical
terms of the hedging instrument and of the entire hedged forecasted transaction are the same, in accordance with Topic 815, we
have been able to conclude that changes in fair value or cash flows attributable to the risk being hedged are expected to
completely offset at inception and on an ongoing basis. Accordingly, quarterly unrealized gains or losses on the effective
portion of these forward contracts have been included within “Other Comprehensive Income (Loss) - net.” The fair value of the
contracts, as of June 30, 2023, is recorded within “Prepaid expenses and other current assets” and represents the net gain before
tax effect that is expected to be reclassified from accumulated other comprehensive income (loss) into earnings with the next
twelve months.
192
As of June 30, 2023, the notional amount of forward contracts we held to sell U.S. dollars in exchange for Canadian
dollars was $96.3 million (June 30, 2022—$66.5 million).
Fair Value of Derivative Instruments and Effect of Derivative Instruments on Financial Performance
The effect of these derivative instruments on our Consolidated Financial Statements for the periods indicated below were
as follows (amounts presented do not include any income tax effects).
Fair Value of Derivative Instruments in the Consolidated Balance Sheets (see Note 16 “Fair Value Measurement”)
Instrument
Balance Sheet Location
Asset
Liability
Asset
Liability
As of
June 30, 2023
As of
June 30, 2022
Derivatives designated as hedges:
Cash flow hedge
Net investment hedge
Prepaid expenses and other
current assets (Accounts payable
and accrued liabilities)
Prepaid expenses and other
current assets (Accounts payable
and accrued liabilities)
$
1,530 $
— $
— $
(892)
596
(87,855)
—
—
Total derivatives designated as hedges:
$
2,126 $ (87,855) $
— $
(892)
Derivatives not designated as hedges:
Cross currency swap contracts
Total derivatives not designated as hedges:
Total derivatives
Prepaid expenses and other
current assets (Accounts payable
and accrued liabilities)
1,421
(73,336)
—
$
$
1,421 $ (73,336) $
3,547 $ (161,191) $
— $
— $
—
—
(892)
193
Effects of Derivative Instruments on Income (Loss)
Instrument
Income Statement Location
2023
2022
2021
Year Ended June 30,
Derivatives designated as hedges:
Cash flow hedge
Net investment hedge
Derivatives not designated as hedges:
Deal-contingent forward contract
Non-contingent forward contract
Cross currency swap contracts
Cross currency swap contracts
Total
Operating expenses
Interest and other related
expense, net
$
(3,702) $
(507) $
1,344
9,354
9,052
(9,779)
1,421
7,690 $
—
—
—
—
—
(507) $
4,462
4,462
—
—
—
—
—
Other income (expense), net
Other income (expense), net
Other income (expense), net
Interest and other related
expense, net
$
Effects of Derivative Instruments on Income and Other Comprehensive Income (OCI) (Loss)
Consolidated Statements of
Income and Consolidated
Statements of
Comprehensive Income
Location
Gain (loss) recognized in OCI (loss) on cash
flow hedge (effective portion)
Gain (loss) recognized in OCI (loss) on net
investment hedge (effective portion)
Unrealized gain (loss) on
cash flow hedge
Net foreign currency
translation adjustment
Gain (loss) reclassified from AOCI into income
(effective portion) - cash flow hedge
Gain (loss) reclassified from AOCI into income
(excluded from effectiveness testing) - net
investment hedge
Operating expenses
Interest and other related
expense, net
$
$
$
$
NOTE 18—SPECIAL CHARGES (RECOVERIES)
Year Ended June 30,
2023
2022
2021
(1,280) $
(2,530) $
5,778
(32,347) $
— $
—
(3,702) $
(507) $
4,462
748 $
— $
—
Special charges (recoveries) include costs and recoveries that relate to certain restructuring initiatives that we have
undertaken from time to time under our various restructuring plans, as well as acquisition-related costs and other charges.
Micro Focus Acquisition Restructuring Plan
Fiscal 2022 Restructuring Plan
Other historical restructuring plans
Acquisition-related costs
Other charges (recoveries)
Total
Year Ended June 30,
2023
2022
2021
$
$
72,284 $
6,744
(1,628)
48,941
42,818
169,159 $
— $
25,778
(3,892)
6,872
18,115
46,873 $
—
—
(5,313)
5,906
1,155
1,748
194
Micro Focus Acquisition Restructuring Plan
During the third quarter of Fiscal 2023, as part of the Micro Focus Acquisition, we made a strategic decision to implement
restructuring activities to reduce our overall workforce and further reduce our real estate footprint around the world (Micro
Focus Acquisition Restructuring Plan). The Micro Focus Acquisition Restructuring Plan charges relate to facility costs and
workforce reductions. Facility costs include the accelerated amortization associated with the abandonment of right of use assets,
the write-off of fixed assets and other related variable lease and exit costs. These charges require management to make certain
judgments and estimates regarding the amount and timing of restructuring charges or recoveries. Our estimated liability could
change subsequent to its recognition, requiring adjustments to the expense and the liability recorded. On a quarterly basis, we
conduct an evaluation of the related liabilities and expenses and revise our assumptions and estimates as appropriate.
During the year ended June 30, 2023, we recognized costs of $13.3 million related to abandoned office spaces that have
been early terminated or assigned to a third party, of which $5.5 million was related to the write-off of right of use assets, and
$1.7 million in charges associated with the write-off of fixed assets as part of the Micro Focus Acquisition Restructuring Plan.
As of June 30, 2023, we expect total costs to be incurred in connection with the Micro Focus Acquisition Restructuring
Plan to be approximately $135.0 million to $150.0 million, of which $72.3 million has been recorded within “Special charges
(recoveries)” to date.
A reconciliation of the beginning and ending restructuring liability, which is included within “Accounts payable and
accrued liabilities” in our Consolidated Balance Sheets, for the year ended June 30, 2023 is shown below.
Micro Focus Acquisition Restructuring Plan
Balance payable as of June 30, 2022
Accruals and adjustments
Cash payments
Foreign exchange and other non-cash adjustments
Balance payable as of June 30, 2023
Workforce reduction
$
— $
57,261
(31,738)
293
25,816 $
$
Facility charges
Total
— $
7,887
(556)
(55)
7,276 $
—
65,148
(32,294)
238
33,092
Fiscal 2022 Restructuring Plan
During the third quarter of Fiscal 2022, as part of our return to office planning, 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). The Fiscal 2022 Restructuring Plan charges relate to facility costs and workforce reductions. Facility costs
include the accelerated amortization associated with the abandonment of right of use assets, the write-off of fixed assets and
other related variable lease and exit costs. These charges require management to make certain judgments and estimates
regarding the amount and timing of restructuring charges or recoveries. Our estimated liability could change subsequent to its
recognition, requiring adjustments to the expense and the liability recorded. On a quarterly basis, we conduct an evaluation of
the related liabilities and expenses and revise our assumptions and estimates as appropriate.
During the year ended June 30, 2023, we recognized costs (recoveries) of $2.7 million related to abandoned office space
that have been early terminated or assigned to a third party, of which $1.4 million was related to the write-off of right of use
assets.
Since the inception of the Fiscal 2022 Restructuring Plan, $32.5 million has been recorded within “Special charges
(recoveries)” to date. We do not expect to incur any further significant charges relating to the Fiscal 2022 Restructuring Plan.
A reconciliation of the beginning and ending restructuring liability, which is included within “Accounts payable and
accrued liabilities” in our Consolidated Balance Sheets, for the year ended June 30, 2023 is shown below.
Fiscal 2022 Restructuring Plan
Balance payable as of June 30, 2021
Accruals and adjustments
Cash payments
Foreign exchange and other non-cash adjustments
Balance payable as of June 30, 2022
Accruals and adjustments
Cash payments
Foreign exchange and other non-cash adjustments
Balance payable as of June 30, 2023
Workforce reduction
$
— $
2,138
(1,117)
(32)
989 $
3,729
(4,212)
(9)
497 $
$
$
195
Facility charges
Total
— $
5,690
(219)
(61)
5,410 $
1,387
(3,199)
(290)
3,308 $
—
7,828
(1,336)
(93)
6,399
5,116
(7,411)
(299)
3,805
Acquisition-related costs
Acquisition-related costs, recorded within “Special charges (recoveries)” include direct costs of potential and completed
acquisitions. Acquisition-related costs for the year ended June 30, 2023 were $48.9 million (year ended June 30, 2022 and 2021
—$6.9 million and $5.9 million, respectively).
Other charges (recoveries)
For the year ended June 30, 2023, “Other charges (recoveries)” includes $23.0 million of severance charges and $11.8
million of other miscellaneous charges, both associated with the Micro Focus Acquisition, and $8.3 million related to pre-
acquisition equity incentives of Zix, which upon acquisition were replaced by equivalent value cash settlements and $(0.2)
million related to other Zix miscellaneous charges (recoveries) (see Note 19 “Acquisitions”).
For the year ended June 30, 2022, “Other charges” includes $15.4 million related to pre-acquisition equity incentives of
Zix, which upon acquisition were replaced by equivalent value cash settlements (see Note 19 “Acquisitions”) and $2.7 million
related to other miscellaneous charges.
For the year ended June 30, 2021, “Other charges” includes $1.2 million relating to other miscellaneous charges.
NOTE 19—ACQUISITIONS
Fiscal 2023 Acquisitions
Acquisition of Micro Focus
On January 31, 2023, we acquired all of the issued and to be issued share capital of Micro Focus for a total purchase price
of $6.2 billion, inclusive of Micro Focus’ cash and repayment of Micro Focus’ outstanding indebtedness, subject to final
adjustments.
In connection with the financing of the Micro Focus Acquisition, concurrent with the announcement of the acquisition on
August 25, 2022, the Company entered into the Acquisition Term Loan and Bridge Loan as well as certain derivative
transactions. On December 1, 2022, the Company issued and sold $1.0 billion in aggregate principal amount of 6.90% Senior
Secured Notes due 2027, amended the Acquisition Term Loan and terminated the Bridge Loan. On January 31, 2023, we drew
down the entire aggregate principal amount of $3.585 billion of the Acquisition Term Loan, net of original issuance discount
and other fees, and drew down $450 million under the Revolver. We used these proceeds and cash on hand to fund the purchase
price consideration and repayment of Micro Focus’ outstanding indebtedness. In conjunction with the closing of the Micro
Focus Acquisition, the deal-contingent forward contracts and non-contingent forward contract, as described in Note 17
“Derivative Instruments and Hedging Activities,” were settled.
The results of operations of Micro Focus have been consolidated with those of OpenText beginning February 1, 2023.
Preliminary Purchase Price Allocation
The recognized amounts of identifiable assets acquired and liabilities assumed, based on their fair values as of January 31,
2023, are set forth below:
Cash and cash equivalents
Accounts receivable, net of allowance for credit losses (1)
Other current assets
Non-current tangible assets
Goodwill (2)
Intangible customer assets
Intangible technology assets
Accounts payable and accrued liabilities
Deferred revenues
Other liabilities
Net Assets Acquired
______________________________
$
$
541,582
407,379
290,324
444,618
3,417,635
2,162,400
1,392,300
(505,737)
(1,107,021)
(796,498)
6,246,982
(1) The gross amount receivable was $418.2 million of which $10.8 million of this receivable was expected to be uncollectible.
(2) The goodwill of $3.4 billion is primarily attributable to the synergies expected to arise after the acquisition. There is $67.3 million
of goodwill that is deductible for tax purposes.
196
Acquisition-related costs for Micro Focus included in “Special Charges (Recoveries)” in the Consolidated Statements of
Income for the year ended June 30, 2023 was $48.3 million.
A settlement related to Micro Focus’ securities litigation that was agreed to prior to the Micro Focus Acquisition has been
accrued as part of the liabilities assumed. This settlement, which the court has informed the parties will be approved, will be
fully paid from insurance coverage, and therefore a receivable has been recognized as part of the assets acquired. During the
third quarter of Fiscal 2023, payment was made into escrow by insurers, and therefore both the associated receivable and
liability are no longer included on the Consolidated Balance Sheets as of June 30, 2023.
The finalization of the above purchase price allocation is pending the finalization of the valuation of fair value for the
assets acquired and liabilities assumed, including intangible assets and taxation-related balances as well as for potential
unrecorded liabilities. We expect to finalize this determination on or before our quarter ending March 31, 2024.
The amount of Micro Focus’ revenues and net loss included in our Consolidated Statements of Income for the year ended
June 30, 2023 is set forth below:
Revenues
Net Loss (1)
______________________
February 1, 2023 – June 30, 2023
$
$
976,537
(94,741)
(1) Net loss for the year ended includes one-time fees of approximately $82.9 million on account of special charges and $202.4 million
of amortization charges relating to intangible assets.
The unaudited pro forma revenues and net income of the combined entity for the year ended June 30, 2023 and 2022,
respectively, had the Micro Focus Acquisition been consummated on July 1, 2021, are set forth below:
Supplemental Unaudited Pro Forma Information
Revenues
Net income (loss) (1)
Net income (loss) attributable to OpenText (1)
______________________
$
Year Ended June 30,
2023
5,933,106 $
(500,105)
(500,292)
2022
6,248,335
206,985
206,816
(1)
Included in the pro forma net loss for the year ended June 30, 2023, is a $448.2 million goodwill impairment recorded by Micro
Focus in its pre-acquisition historical results as a result of the Company’s offer to acquire Micro Focus at a price of 532 pence per
share.
The unaudited pro forma financial information in the table above is presented for information purposes only and is not
indicative of the results of operations that would have been achieved if the Micro Focus Acquisition had taken place at the
beginning of the periods presented or the results that may be realized in the future.
197
Fiscal 2022 Acquisitions
Acquisition of Zix Corporation
On December 23, 2021, we acquired all of the equity interest in Zix Corporation (Zix), a leader in SaaS based email
encryption, threat protection and compliance cloud solutions for small and medium-sized businesses (SMB). Total
consideration for Zix was $894.5 million paid in cash, inclusive of cash acquired and $18.6 million relating to the cash
settlement of pre-acquisition vested share-based compensation that was previously accrued but since paid as of June 30, 2022.
In accordance with Topic 805, this acquisition was accounted for as a business combination. We believe the acquisition
increases our position in the data protection, threat management, email security and compliance solutions spaces.
The results of operations of Zix have been consolidated with those of OpenText beginning December 23, 2021.
Purchase Price Allocation
The recognized amounts of identifiable assets acquired, and liabilities assumed, based on their preliminary fair values as
of December 23, 2021, are set forth below:
Current assets (inclusive of cash acquired of $38.3 million)
Non-current tangible assets
Intangible customer assets
Intangible technology assets
Liabilities assumed
Total identifiable net assets
Goodwill
Net assets acquired
$
$
71,527
13,450
212,400
92,650
(81,476)
308,551
585,910
894,461
The goodwill of $585.9 million is primarily attributable to the synergies expected to arise after the acquisition. There is
$103.7 million of goodwill that is deductible for tax purposes.
The fair value of current assets acquired includes accounts receivable with a fair value of $26.0 million. The gross amount
receivable was $32.6 million, of which $6.6 million is expected to be uncollectible.
Acquisition-related costs for Zix included in “Special charges (recoveries)” in the Consolidated Financial Statements for
the year ended June 30, 2023 were $0.2 million.
Pre-acquisition equity incentives of $25.3 million were replaced upon acquisition by equivalent value cash settlements to
be settled in accordance with the original vesting dates, primarily over the next two years. Of these equity incentives, $8.3
million for the year ended June 30, 2023 were included in “Special charges (recoveries).”
The finalization of the purchase price allocation during the quarter ended December 31, 2022 did not result in any
significant changes to the preliminary amounts previously disclosed.
Acquisition of Bricata Inc.
On November 24, 2021, we acquired all of the equity interest in Bricata Inc. (Bricata) for $17.8 million. In accordance
with Topic 805, this acquisition was accounted for as a business combination. We believe the acquisition strengthens our
OpenText Security and Protection Cloud with Network Detection and Response technologies.
The results of operations of Bricata have been consolidated with those of OpenText beginning November 24, 2021.
198
NOTE 20—SEGMENT INFORMATION
ASC Topic 280, “Segment Reporting” (Topic 280), establishes standards for reporting, by public business enterprises,
information about operating segments, products and services, geographic areas and major customers. The method of
determining what information, under Topic 280, to report is based on the way that an entity organizes operating segments for
making operational decisions and how the entity’s management and CODM assess an entity’s financial performance. Our
operations are analyzed by management and our CODM as being part of a single industry segment: the design, development,
marketing and sale of Information Management software and solutions.
The following table sets forth the distribution of revenues, by significant geographic area, for the periods indicated:
Revenues (1):
United States
Germany
United Kingdom
Canada
Rest of EMEA (2)
All other countries
Total revenues
_________________________
Year Ended June 30,
2023
2022
2021
$
$
2,523,737 $
291,772
204,683
186,014
808,824
469,950
4,484,980 $
1,968,597 $
241,506
198,459
186,213
586,236
312,833
3,493,844 $
1,870,620
212,014
195,721
166,430
623,872
317,458
3,386,115
Total revenues by geographic area are determined based on the location of our direct customer.
(1)
(2) EMEA consists of countries in Europe, the Middle East and Africa.
The following table sets forth the distribution of long-lived assets, representing property and equipment, ROU assets and
intangible assets, by significant geographic area, as of the periods indicated below.
Long-lived assets:
United States
United Kingdom
Canada
Germany
Rest of EMEA (1)
All other countries
Total
_______________________________
(1)
EMEA consists of countries in Europe, the Middle East and Africa.
As of June 30, 2023
As of June 30, 2022
$
$
2,647,068 $
1,560,968
280,174
39,231
62,662
133,403
4,723,506 $
1,003,803
13,359
339,793
39,554
76,440
45,100
1,518,049
199
NOTE 21—ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Foreign
Currency
Translation
Adjustments
Cash Flow
Hedges
Available-for-
Sale Financial
Assets
Defined Benefit
Pension Plans
Balance as of June 30, 2020
$
32,968 $
(136) $
— $
(15,007) $
Accumulated
Other
Comprehensive
Income (Loss)
17,825
Other comprehensive income (loss) before
reclassifications, net of tax
Amounts reclassified into net income, net of tax
Total other comprehensive income (loss) net
Balance as of June 30, 2021
Other comprehensive income (loss) before
reclassifications, net of tax
Amounts reclassified into net income, net of tax
Total other comprehensive income (loss) net
Balance as of June 30, 2022
Other comprehensive income (loss) before
reclassifications, net of tax
Amounts reclassified into net income, net of tax
42,440
—
42,440
75,408
4,246
(3,280)
966
830
(78,724)
(1,859)
—
(78,724)
(3,316)
373
(1,486)
(656)
—
—
—
—
—
—
—
—
3,987
50,673
1,020
5,007
(10,000)
(2,260)
48,413
66,238
5,595
(74,988)
718
6,313
(3,687)
1,091
(73,897)
(7,659)
(40,798)
(941)
(602)
(6,605)
(48,946)
—
2,721
1,780
1,124 $
—
(602)
(602) $
325
(6,280)
(9,967) $
3,046
(45,900)
(53,559)
Total other comprehensive income (loss) net
Balance as of June 30, 2023
(40,798)
(44,114) $
$
NOTE 22—SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash paid during the period for interest
Cash received during the period for interest
Cash paid during the period for income taxes (1)
_____________________________
Year Ended June 30,
2023
2022
2021
$
$
$
360,232 $
53,486 $
202,486 $
152,750 $
4,637 $
116,583 $
147,996
3,856
400,137
(1) Included for the year ended June 30, 2021 is cash paid of $299.6 million relating to settlements with the IRS. Please
see Note 15 “Income Taxes” for additional details.
NOTE 23—OTHER INCOME (EXPENSE), NET
Foreign exchange gains (losses) (1)
Unrealized gains (losses) on derivatives
not designated as hedges (2)
Realized gains (losses) on derivatives
not designated as hedges (3)
OpenText share in net income (loss) of equity investees (4)
Loss on debt extinguishment (5) (6)
Other miscellaneous income (expense)
Total other income, net
____________________________
Year Ended June 30,
2023
2022
2021
$
56,599 $
(2,670) $
(1,273)
(128,841)
—
—
137,471
(23,077)
(8,152)
469
34,469 $
—
58,702
(27,413)
499
29,118 $
—
62,897
—
(190)
61,434
$
(1) The year ended June 30, 2023 includes a foreign exchange gain of $36.6 million resulting from the delayed payment of a portion of
the purchase consideration, settled on February 9, 2023, related to the Micro Focus Acquisition (see Note 19 “Acquisitions” for
more details).
(2) Represents the unrealized gains (losses) on our derivatives not designated as hedges related to the Micro Focus Acquisition (see
Note 17 “Derivative Instruments and Hedging Activities” for more details).
(3) Represents the realized gains (losses) on our derivatives not designated as hedges related to the Micro Focus Acquisition (see
(4)
Note 17 “Derivative Instruments and Hedging Activities” for more details).
Represents our share in net income of equity investees, which approximates fair value and subject to volatility based on market
trends and business conditions, based on our interest in certain investment funds in which we are a limited partner. Our interests in
200
each of these investees range from 4% to below 20% and these investments are accounted for using the equity method (see Note 9
“Prepaid Expenses and Other Assets” for more details).
(5) On December 1, 2022, we amended the Acquisition Term Loan and Bridge Loan to reallocate commitments under the Bridge Loan
to the Acquisition Term Loan and terminated all remaining commitments under the Bridge Loan which resulted in a loss on debt
extinguishment related to unamortized debt issuance costs (see Note 11 “Long-Term Debt” for more details).
(6) On December 9, 2021, we redeemed Senior Notes 2026 in full, which resulted in a loss on debt extinguishment of $27.4 million. Of
this, $25.0 million related to the early termination call premium, $6.2 million related to unamortized debt issuance costs and ($3.8)
million related to unamortized premium (see Note 11 “Long-Term Debt” for more details).
NOTE 24—EARNINGS PER SHARE
Basic earnings per share are computed by dividing net income, attributable to OpenText, by the weighted average number
of Common Shares outstanding during the period. Diluted earnings per share are computed by dividing net income, attributable
to OpenText, by the shares used in the calculation of basic earnings per share plus the dilutive effect of Common Share
equivalents, such as stock options, using the treasury stock method. Common Share equivalents are excluded from the
computation of diluted earnings per share if their effect is anti-dilutive.
Basic earnings per share
Net income attributable to OpenText
Basic earnings per share attributable to OpenText
Diluted earnings per share
Net income attributable to OpenText
Diluted earnings per share attributable to OpenText
Weighted-average number of shares outstanding
(in ‘000’s)
Basic
Effect of dilutive securities
Diluted
Excluded as anti-dilutive (1)
Year Ended June 30,
2023
2022
2021
$
$
$
$
150,379 $
0.56 $
397,090 $
1.46 $
310,672
1.14
150,379 $
0.56 $
397,090 $
1.46 $
310,672
1.14
270,299
152
270,451
8,909
271,271
638
271,909
4,927
272,533
946
273,479
4,147
____________________________________
(1) Represents options to purchase Common Shares excluded from the calculation of diluted earnings per share because the exercise
price of the stock options was greater than or equal to the average price of the Common Shares during the period.
NOTE 25—RELATED PARTY TRANSACTIONS
Our procedure regarding the approval of any related party transaction requires that the material facts of such transaction
be reviewed by the independent members of the Audit Committee and the transaction be approved by a majority of the
independent members of the Audit Committee. The Audit Committee reviews all transactions in which we are, or will be, a
participant and any related party has or will have a direct or indirect interest in the transaction. In determining whether to
approve a related party transaction, the Audit Committee generally takes into account, among other facts it deems appropriate,
whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same
or similar circumstances; the extent and nature of the related person’s interest in the transaction; the benefits to the Company of
the proposed transaction; if applicable, the effects on a director’s independence; and if applicable, the availability of other
sources of comparable services or products.
During the year ended June 30, 2023, Mr. Stephen Sadler, a member of the Board of Directors, earned $0.3 million (year
ended June 30, 2022 and 2021—$0.4 million and $37 thousand, respectively) in consulting fees from OpenText for assistance
with acquisition-related business activities. Mr. Sadler abstained from voting on all transactions from which he would
potentially derive consulting fees.
201
NOTE 26—SUBSEQUENT EVENTS
Cash Dividends
As part of our quarterly, non-cumulative cash dividend program, we declared, on August 2, 2023, a dividend of $0.25 per
Common Share. The record date for this dividend is September 1, 2023 and the payment date is September 22, 2023. Future
declarations of dividends and the establishment of future record and payment dates are subject to the final determination and
discretion of our Board.
Revolver Repayment
Following the end of the quarter, on July 5, 2023 we subsequently repaid $175 million of the $275 million outstanding
balance on the Revolver using cash on hand. As of July 31, 2023, we had a balance of $100 million outstanding on our
Revolver.
Item 16. Form 10-K Summary
None.
202
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.
OPEN TEXT CORPORATION
Date: August 3, 2023
By:
/s/ MARK J. BARRENECHEA
Mark J. Barrenechea
Vice Chair, Chief Executive Officer and Chief Technology Officer
(Principal Executive Officer)
/s/ MADHU RANGANATHAN
Madhu Ranganathan
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ COSMIN BALOTA
Cosmin Balota
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)
203
DIRECTORS
Signature
Title
Date
/s/ MARK J. BARRENECHEA
Mark J. Barrenechea
/S/ P. THOMAS JENKINS
P. Thomas Jenkins
/S/ RANDY FOWLIE
Randy Fowlie
/S/ DAVID FRASER
David Fraser
/S/ GAIL E. HAMILTON
Gail E. Hamilton
/S/ ROBERT HAU
Robert Hau
/S/ ANN M. POWELL
Ann M. Powell
/S/ STEPHEN J. SADLER
Stephen J. Sadler
/S/ MICHAEL SLAUNWHITE
Michael Slaunwhite
/S/ KATHARINE B. STEVENSON
Katharine B. Stevenson
/S/ DEBORAH WEINSTEIN
Deborah Weinstein
Vice Chair, Chief Executive Officer and
Chief Technology Officer
(Principal Executive Officer)
August 3, 2023
Chairman of the Board
August 3, 2023
Director
August 3, 2023
Director
August 3, 2023
Director
August 3, 2023
Director
August 3, 2023
Director
August 3, 2023
Director
August 3, 2023
Director
August 3, 2023
Director
August 3, 2023
Director
August 3, 2023
204
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
The Board of Directors of Open Text Corporation
We consent to the use of:
•
our report dated August 2, 2023, on the consolidated financial statements of Open Text Corporation (the “Company”),
which comprise the consolidated balance sheets as at June 30, 2023 and June 30, 2022, the related consolidated
statements of income, comprehensive income, shareholders’ equity and cash flows for each of the years in the three-
year period ended June 30, 2023, and the related notes and
•
our report dated August 2, 2023 on the effectiveness of internal control over financial reporting as of June 30, 2023
which are included in this Annual Report on Form 10-K of the Company for the fiscal year ended June 30, 2023.
We also consent to the incorporation by reference of such reports in Registration Statement Nos. 333-249181, 333-214427,
333-184670, 333-146351, 333-121377 and 333-87024 on Form S-8 and No. 333-261510 on Form S-3 of the Company.
/s/ KPMG LLP
Chartered Professional Accountants, Licensed Public Accountants
August 3, 2023
Toronto, Canada
Exhibit 31.1
I, Mark J. Barrenechea, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Open Text Corporation;
CERTIFICATIONS
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Securities Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Securities Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report
is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial
reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and
report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: August 3, 2023
By:
/s/ MARK J. BARRENECHEA
Mark J. Barrenechea
Vice Chair, Chief Executive Officer and Chief Technology Officer
Exhibit 31.2
I, Madhu Ranganathan, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Open Text Corporation;
CERTIFICATIONS
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Securities Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Securities Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report
is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial
reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and
report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: August 3, 2023
By:
/s/ MADHU RANGANATHAN
Madhu Ranganathan
Executive Vice President and Chief Financial Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report on Form 10-K of Open Text Corporation (the “Company”) for the year ended
June 30, 2023 as filed with the Securities and Exchange Commission (the “Report”), I, Mark J. Barrenechea, Vice Chair, Chief
Executive Officer and Chief Technology Officer of the Company, certify, as of the date hereof, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
Date: August 3, 2023
By:
/s/ MARK J. BARRENECHEA
Mark J. Barrenechea
Vice Chair, Chief Executive Officer and Chief Technology Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
In connection with the Annual Report on Form 10-K of Open Text Corporation (the “Company”) for the year ended
June 30, 2023 as filed with the Securities and Exchange Commission (the “Report”), I, Madhu Ranganathan, Executive Vice
President and Chief Financial Officer of the Company, certify, as of the date hereof, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
Date: August 3, 2023
By:
/s/ MADHU RANGANATHAN
Madhu Ranganathan
Executive Vice President and Chief Financial Officer
Executive Leadership Team
Mark J. Barrenechea
Vice Chair, Chief Executive Officer and Chief Technology Officer
Madhu Ranganathan
Executive Vice President, Chief Financial Officer
Michael F. Acedo
Executive Vice President, Chief Legal Officer &
Corporate Secretary
Prentiss Donohue
Executive Vice President, Cybersecurity Sales
Paul Duggan
Executive Vice President, Chief Customer Officer
Simon Harrison
Executive Vice President, Enterprise Sales
Muhi Majzoub
Executive Vice President, Chief Product Officer
James McGourlay
Executive Vice President, International Sales
Renee McKenzie
Executive Vice President, Chief Information Officer
Sandy Ono
Executive Vice President, Chief Marketing Officer
Douglas M. Parker
Executive Vice President, Corporate Development
Paul Rodgers
Executive Vice President, Sales Operations
Brian Sweeney
Executive Vice President, Chief Human Resources Officer
Board of Directors
P. Thomas Jenkins, Chair
Mark J. Barrenechea, Vice Chair
Randy Fowlie
Major General David Fraser
Gail E. Hamilton
Robert (Bob) Hau
Ann M. Powell
Stephen J. Sadler
Michael Slaunwhite
Katharine B. Stevenson
Deborah Weinstein
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