FinanceLooker

Excrept from filing document 2024-06-30

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 2023 the end of the registrant s most recently completed second fiscal quarter was approximately 11 2 billion As of July 26 2024 there were 268 189 944 outstanding Common Shares of the registrant
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 and Israel Hamas conflicts on our business and ii those discussed herein and in the Notes to Consolidated Financial Statements for the year ended June 30 2024 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
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
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
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 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
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
Increased attention from shareholders customers and other key relationships regarding our corporate social responsibility CSR and environmental social and corporate governance ESG practices and increased regulatory
We may fail to realize all of the anticipated benefits of our acquisitions and divestitures including the Micro Focus Acquisition and AMC Divestiture each 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
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
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 Fiscal 2018 and Fiscal 2019 An adverse outcome of these ongoing audits could have a material adverse effect on our financial position and results of operations
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
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
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 healthcare and life sciences energy 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 on cloud and off cloud 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 for a total purchase price of 6 2 billion the Micro Focus Acquisition inclusive of Micro Focus cash and repayment of Micro Focus outstanding indebtedness
On May 1 2024 we completed the divestiture of our Application Modernization and Connectivity AMC business to Rocket Software Inc Rocket Software for 2 275 billion in cash before taxes fees and other adjustments the AMC Divestiture We used the net proceeds from the AMC Divestiture to complete a 2 0 billion debt reduction which resulted in the termination of the Term Loan B as defined below and the reduction of amounts outstanding under the Acquisition Term Loan as defined below
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 Application Automation Cloud Business Network Cloud IT Operations Management Cloud and Analytics Cloud In addition to our six business clouds we have the Developer 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 continuing to enhance 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 2024 total revenues is comprised of 40 from Content Cloud 20 from Cybersecurity Cloud 15 from Application Automation Cloud 10 from Business Network Cloud 10 from IT Operations Management Cloud and 5 from Analytics Cloud with revenues from Business Network Cloud and Cybersecurity Cloud primarily derived from Cloud revenues and the remaining primarily derived from Customer support revenues
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 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
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
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 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
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 continues to integrate 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 expected 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
OpenText Analytics 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 Cloud can integrate with external AI services such as Google Cloud or Azure
Our Analytics Cloud solutions feature capabilities from data analytics to insights from new unstructured data types to visualization that can be applied to key processes These solutions help organizations process data of all types from anywhere at any speed and transform 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
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 Analytics Cloud solutions support composite AI for improved accuracy and we help customers turn repositories of operational and experience information into clean and integrated data lakes that can be mined by AI to extract useful knowledge and insight for our customers
The 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 faster with lower risk by transforming their core business applications processes and infrastructure from mainframe to cloud
The Application Automation Cloud included our AMC business prior to the AMC Divestiture on May 1 2024 During Fiscal 2024 the AMC business comprised approximately 45 of the Application Automation Cloud See Note 19 Acquisitions and Divestitures to our Consolidated Financial Statements for more details
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
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
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 2 0 billion in R D or 14 7 of cumulative revenue for that three year period On an annual basis we continue to target to spend
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 12 1 billion on acquisitions over the last 10 fiscal years 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 see Acquisitions and Divestitures During the Last Five Fiscal Years elsewhere in Item 1 of this Annual Report on Form 10 K
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 2024 Fiscal 2023 and Fiscal 2022 see Note 20 Segment Information to the Consolidated Financial Statements included in this Annual Report on Form 10 K
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
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 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
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
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
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
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
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
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
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 20 000 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
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
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 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
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 R D 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 893 9 million for Fiscal 2024 680 6 million for Fiscal 2023 and 440 4 million for Fiscal 2022 We believe our spending on R D 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
n 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
We believe opportunistic acquisitions or divestitures can strengthen our product offerings in the Information Management market Considering the continually evolving marketplace in which we operate we regularly evaluate such opportunities within the Information Management market and at any time may be in various stages of discussions with respect to such opportunities
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
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
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 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
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
As customers become increasingly multi national and as international markets continue to adopt Information Management solutions we plan to further grow our brand presence and partner networks in these new markets We are focused on using our direct sales for targeting existing G10K customers and plan to address new geographies and SMB customers jointly with our partners
As 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
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
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
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
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
We expect to continue to pursue strategic acquisitions to strengthen our product 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
Following the AMC Divestiture we announced our share repurchase plan pursuant to which we intend to repurchase our common shares for cancellation reflecting our confidence in our operational execution expanding cash flows and our continued commitment to returning capital to our shareholders via dividends and repurchase of common shares See Item 5 Market for Registrant s Common Equity Related Stockholder Matters and Issuer Purchases of Equity Securities
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 2024 we employed a total of approximately 22 900 individuals of which 8 300 or 36 are in the Americas 5 000 or 22 are in EMEA and 9 600 or 42 are in Asia Pacific Currently we have employees in 44 countries enabling strong access to multiple talent pools while ensuring reach and proximity to our customers 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 4 200 employees in sales and marketing ii 7 800 employees in product development iii 4 000 employees in cloud services iv 1 800 employees in professional services v 1 700 employees in customer support and vi 3 400 employees in general and administrative roles
We regularly conduct employee research to understand perceptions in the areas of engagement company strategy company mission and values personal impact manager effectiveness recognition career development and equity diversity and inclusion Participation level and engagement have remained high This has enabled us to listen to employees through the phases of the global health pandemic our return to office as well as the post integration perspective of employees following major acquisitions including the acquisition of Micro Focus Additional surveys and listening including feedback from new hires through onboarding surveys inform our communication and engagement plan to ensure we create meaningful experiences and support higher productivity and engagement
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 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 and increased regulatory scrutiny of CSR and ESG practices and related disclosures 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
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 strategy and initiatives We bring our ambition to life through project teams made of employees who come together to recommend policies programs and initiatives across a range of topics
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
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
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
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
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
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
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
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
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
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
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 as well as compliance with such regulation 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 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
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
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 Additionally the laws and enforcement mechanisms to protect our intellectual property from unauthorized use in new technologies like AI and other machine learning technology are evolving and may be inadequate 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
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 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 With certain exceptions our agreements with our partners and customers typically 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 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 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
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 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
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
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 Also the development and proliferation of specific AI applications and other machine learning technologies alongside related technological innovations may increase our exposure to cyber attacks and other cybersecurity risks by potentially enhancing the capabilities of third parties to breach our systems To address these challenges we strive to continuously fortify our defenses through strategic investments in advanced security technologies and practices comprehensive risk management frameworks and ongoing staff training in efforts to safeguard the integrity confidentiality and availability of our data and systems against sophisticated threats while also enhancing our security posture 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 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 geopolitical uncertainty in particular such as the ongoing Russia Ukraine and Israel Hamas conflicts
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
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 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
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 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
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
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
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
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
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 sanctions and export controls have 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 the Russia Ukraine and Israel Hamas conflicts have not had and are 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
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 we have historically made strategic decisions to implement restructuring activities to streamline our operations further reduce our real estate footprint around the world or strategically align our workforce to support our growth and innovation plans 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
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
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
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
Increased attention from shareholders customers and other key relationships regarding our CSR and ESG practices and increased regulatory scrutiny of CSR and ESG practices and related disclosures 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 for which we may have to contend with distinct climate related disclosure requirements in multiple jurisdictions 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 In addition certain jurisdictions have implemented anti greenwashing rules in order to limit the permissibility of certain sustainability related disclosures While the interpretation and application of such rules currently are unclear any actual or perceived breach of such rules may subject us to significant penalties or reputational harm
Since July 2022 we have maintained 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 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
A flexible workforce may also subject us to other operational challenges and risks For example a Flex Office program may adversely affect our ability to recruit and retain personnel who prefer a fully remote 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 reducing our real estate footprint around the world If we are unable to effectively continue 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
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 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 and divestitures including the Micro Focus Acquisition and AMC Divestiture 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 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 Achieving the benefits of the Micro Focus Acquisition will depend in part on our ability to continue integrating 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
Additionally we may not realize some or all of the anticipated benefits from the AMC Divestiture with respect to the anticipated performance of our remaining business or the anticipated benefits from the repayment of certain outstanding indebtedness with the after tax proceeds therefrom and the divestiture may in fact adversely affect our business Our ability to realize the anticipated benefits of the divestiture will depend to a large extent on our ability to continue to focus on Cloud and AI opportunities within Information Management and to achieve more predictable growth in the absence of the divested business Some of the anticipated benefits may not occur for a significant period of time In addition we may retain certain liabilities or obligations related to the AMC business that may arise under contract or law or may have difficulties enforcing our rights contractual or otherwise against the buyer The divestiture and the use of after tax proceeds to repay outstanding indebtedness may not enhance long term stockholder value as anticipated
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
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
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
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 has been and may in the future continue to 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
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 which may 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
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
The impact of the AMC Divestiture could be disruptive to our remaining business Specifically the constraints on our business imposed by the terms of the AMC Divestiture the limitations created by the sale of certain assets we have historically used in our business and our obligation to provide certain transition services to the buyer following completion of the divestiture for up to 24 months could have a continuing impact on the execution of our business strategy and our overall operating results The divestiture could cause customers to delay or to defer decisions with respect to the AMC business or to end their relationships with us altogether or otherwise limit our ability to compete for or perform certain contracts or services Further the divestiture could be disruptive to our employees making the execution of business strategies more difficult and could result in the turnover of key leaders or other personnel Any of the foregoing could adversely affect our remaining businesses the financial condition of such businesses and their results of operations and prospects
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 required capitalization and amortization of research and development costs starting in Fiscal 2023 has 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
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 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 changes in overall mix and levels of income before taxes changes in tax laws regulations and or rates and changing interpretations of existing tax laws or regulations Numerous countries have agreed to a statement in support of the Organization for Economic Co Operation and Development model rules that propose a global minimum tax rate of 15 for companies with revenue above 750 million calculated on a country by country basis and E U member states have agreed to implement the global minimum tax Certain countries have enacted or are expected to enact legislation with widespread implementation of a global minimum tax expected by 2025 We are unable to predict when and how such rules in various jurisdictions will be enacted into law however it is possible that the implementation of relevant legislation could impact our liability for 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 Fiscal 2018 and 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 2024 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 80 million As of June 30 2024 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 2024
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 Fiscal 2018 and Fiscal 2019 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 through Fiscal 2019 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 through Fiscal 2019 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 Fiscal 2018 and Fiscal 2019 on a basis consistent with its proposal to reduce the available depreciable basis of 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 On December 11 2023 we filed a notice of objection regarding Fiscal 2019 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 through Fiscal 2019 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 through Fiscal 2019 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 2025 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 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
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 Utah and Virginia also came into effect in 2023 and comprehensive privacy laws in Oregon and Texas came into effect July 1 2024 Montana s comprehensive privacy law comes into effect later this year Delaware Indiana Iowa Kentucky Maryland Minnesota Nebraska New Hampshire
New Jersey Rhode Island and Tennessee have similarly enacted broad laws relating to privacy data protection and information security that will come into effect in the next few years 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 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
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 now used for relevant new data transfers The UK s Information Commissioner s Office also released two new agreements governing international data transfers out of the UK the International Data Transfer Agreement IDTA and the Data Transfer Addendum Addendum 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 adopt an adequacy decision based on the Executive Order on July 10 2023 having determined that the TDPF ensures that the protection of personal information transferred from the EU to the certified organizations within the U S will be essentially equivalent to the protection offered in the EU However there remains a degree of legal uncertainty as critics and privacy advocacy groups have already commenced challenges to the validity of such decision before the Court of Justice of the EU
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
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 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 in 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
Using AI and other machine learning technologies while the technology is still developing may expose us to liability reputational harm and threats of litigation particularly if such technology produces errors AI bias AI hallucinations harmful content discrimination intellectual property infringement or misappropriation data privacy or cybersecurity issues or otherwise if such technology does not function as intended Such inaccurate or erroneous outputs may be the result of input data that is insufficient incorrect overbroad outdated or contain biased information Moreover with the use of certain AI and other machine learning technologies there may be a lack of transparency of the sources of data used to train or develop such technologies or how inputs are converted to outputs and we may not be able to fully validate this process and its accuracy
Additionally the use of AI and other machine learning technologies in connection with the creation or development of intellectual property may present challenges in asserting ownership over the resulting output given the position of courts and intellectual property offices in certain jurisdictions that human inventorship is required for patent protection of an AI generated invention and human authorship is required for copyright protection of an AI generated work of authorship Inventions or works of authorship created through the use of such technologies may be based or rely on or contain materials that were used in the training of such technologies and which are subject to third party intellectual property which could further limit our ability to obtain intellectual property protection in such inventions or works of authorship Further there is a risk that the data inputted into such technologies may contain confidential information including trade secrets resulting in such information becoming accessible by third parties The use of AI including potential inadvertent disclosure of confidential information or personal data could also lead to legal and regulatory investigations and enforcement actions or may give rise to specific obligations including required notices consents and opt outs under various data privacy protection and cybersecurity laws and regulations in a number of jurisdictions See Risks associated with data privacy issues including evolving laws and regulations and associated compliance efforts may adversely impact our business and Unauthorized disclosures cyber attacks breaches of data security and other information technology risks may adversely affect our operations
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 Moreover regulations relating to AI technologies including recent legislation approved by European Parliament and several U S states in relation to providers and deployers of AI technologies may also impose certain obligations on organizations and the costs of monitoring and responding to such regulations as well as the consequences of non compliance could have an adverse effect on our operations or financial condition 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
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
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 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 countries could materially affect our financial results These risks and their potential impacts may be exacerbated by the Russia Ukraine and Israel Hamas conflicts 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 and Israel Hamas conflicts have affected and may continue to affect our business
Although we completed a 2 billion debt reduction using the net proceeds from our AMC Divestiture we continue to have a significant amount of indebtedness outstanding following closing the Micro Focus Acquisition As of June 30 2024 we had 6 5 billion of total indebtedness This level of indebtedness could have important consequences to our business including but not limited to
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
As of June 30 2024 our credit facilities consisted of a 2 23 billion Acquisition Term Loan and a 750 million committed revolving credit facility which is currently undrawn 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 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 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 and Revolver include 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 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 2024 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 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 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
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
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 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
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
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
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 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 and Israel Hamas conflicts See Geopolitical instability political unrest war and other global conflicts including the Russia Ukraine and Israel Hamas conflicts have 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
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
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 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 Israel Hamas 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
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 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 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
As a leader in Information Management and cybersecurity we recognize the importance of assessing identifying and managing risks associated with cybersecurity threats These risks include among other things operational risks intellectual property theft fraud extortion harm to employees or customers violation of privacy or security laws and other litigation and legal risk and reputational risks At OpenText cybersecurity risk management is an integral part of our overall enterprise risk management program Our cybersecurity risk management program aligns with industry best practices such as the National Institute of Standards and Technology NIST Cybersecurity Framework and the International Organization for Standardization ISO International Electro technical Commission IEC ISO IEC 27001 standard This provides a framework for identifying monitoring evaluating and responding to cybersecurity threats and incidents including those associated with the use of our software applications services and cloud and hybrid infrastructures developed or provided by third party vendors and service providers Our framework includes steps for identifying the source of a cybersecurity threat or incident assessing the severity and risk of a cybersecurity threat or incident implementing cybersecurity mitigation or remediation strategies and informing our management and our Board of material cybersecurity threats and incidents
OpenText has a cross functional incident response team led by our cybersecurity team and comprised of representatives from our information technology cybersecurity finance and legal teams The cybersecurity team primarily is responsible for the monitoring and assessment of potential cybersecurity occurrences such as data breaches intrusions and other security incidents and implementing our detailed incident response plan Our incident response plan includes processes and procedures for assessing potential internal and external threats activation and notification crisis management and post incident recovery designed to safeguard the confidentiality availability and integrity of the Company and our customers information assets
Our cybersecurity team is responsible for assessing our cybersecurity risk management program and our incident response plan We have devoted significant financial and personnel resources to implement security measures to meet regulatory requirements and customer expectations and we intend to continue to make investments to maintain the security of the Company and its customers data and information management infrastructure We have also implemented a review process to assess the security profile and data protection practices of third party service providers that have exposure to our systems We review and update our cybersecurity policies standards and procedures annually or more frequently as needed to account for changes in the threat landscape as well as in response to legal and regulatory developments Our internal audit department has a team responsible for IT and information security including cybersecurity audits We also engage third party cybersecurity consultants to conduct additional audits of our cybersecurity processes provide assessments of our risk management programs and identify potential cybersecurity vulnerabilities Our cybersecurity efforts also include mandatory training for all employees and contractors on OpenText s security and privacy policies as well as other ancillary trainings on topics such as phishing emails and other social engineering tactics
In Fiscal 2024 we did not identify any cybersecurity threats or incidents or risks of such incidents that have materially affected or are reasonably likely to materially affect our business strategy results of operations or financial condition However despite our efforts we cannot eliminate all risks from cybersecurity threats or incidents or provide assurances that we have not experienced an undetected cybersecurity incident For more information about these risks see Risk Factors Risks Related to our Business and Industry in this Annual Report on Form 10 K
Our Board of Directors is responsible for monitoring and assessing the Company s cybersecurity risk management as part of its overall responsibility of risk oversight The Board s Audit Committee is responsible for overseeing risks related to our accounting financial statements and financial reporting process including the Company s cybersecurity incident materiality assessment and relevant disclosures For more information see Part III Item 11 Board s Role in Risk Oversight
Our Chief Information Security Officer CISO is responsible for day to day risk management activities including identifying and assessing cybersecurity risks establishing processes in an effort to ensure that potential cybersecurity risk exposures are monitored implementing appropriate mitigation or remediation measures and maintaining cybersecurity programs Our CISO is responsible for providing a single consolidated view of the Company s enterprise cybersecurity risk in various industries OpenText s CISO reports to the Chief Digital Officer CDO who is responsible for OpenText s broader IT program which includes the Company s ability to remediate and recover from a cybersecurity incident while minimizing impacts to the business and operations Management including the CDO updates the Audit Committee and the Board of Directors on the Company s cybersecurity programs material cybersecurity risks and mitigation or remediation strategies as needed or appropriate
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 3 7 million square feet of leased 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 the United Kingdom and South Africa that total approximately 170 000 square feet as of June 30 2024 These facilities are primarily used as data centers and office space by the Company and its subsidiaries
Included in the total approximate square footage of leased facilities is approximately 2 9 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
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 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
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
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
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 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
On April 30 2024 the Board authorized a share repurchase plan the Fiscal 2024 Repurchase Plan pursuant to which we were authorized to purchase for cancellation in open market transactions from time to time over the 12 month period commencing on May 7 2024 until May 6 2025 up to an aggregate of 250 million of our Common Shares on the NASDAQ Global Select Market the TSX as part of a Fiscal 2024 NCIB defined below and or other exchanges and alternative trading systems in Canada and or the United States if eligible subject to applicable law and stock exchange rules The 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
During the year ended June 30 2024 we repurchased and cancelled 5 073 913 Common Shares for 150 0 million under the Fiscal 2024 Repurchase Plan The Fiscal 2024 Repurchase Plan was effected in accordance with Rule 10b 18
On July 31 2024 in order to align its share repurchase plan to its fiscal year the Board approved the early termination of the Fiscal 2024 Repurchase Plan and authorized a new share repurchase plan the Fiscal 2025 Repurchase Plan pursuant to which we may purchase for cancellation in open market transactions from time to time over the 12 month period commencing on August 7 2024 until August 6 2025 if considered advisable up to an aggregate of 300 million of its common shares on the TSX as part of a Fiscal 2025 NCIB defined below NASDAQ and or alternative trading systems in Canada and or the United States if eligible subject to applicable law and stock exchange rules The price that we are authorized to pay for Common Shares in open market transactions is the market price at the time of purchase or such other price as is permitted by applicable law or stock exchange rules The Fiscal 2025 Repurchase Plan will be effected in accordance with Rule 10b 18
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
On April 30 2024 the Company established a Normal Course Issuer Bid the Fiscal 2024 NCIB in order to provide it with a means to execute purchases over the TSX as part of the overall Fiscal 2024 Repurchase Plan The TSX approved the Company s notice of intention to commence the Fiscal 2024 NCIB pursuant to which the Company could purchase Common Shares over the TSX for the period commencing on May 7 2024 until May 6 2025 in accordance with the TSX s normal course issuer bid rules including that such purchases be made at prevailing market prices or as otherwise permitted Under the rules of the TSX the maximum number of Common Shares that could have been purchased in this period was 13 643 472 representing 5 of the Company s issued and outstanding Common Shares as of April 26 2024 and the maximum number of Common Shares that could have been purchased on a single day was 138 175 Common Shares which is 25 of 552 700 the average daily trading volume for the Common Shares on the TSX for the six months ended March 31 2024 subject to certain exceptions for block purchases and subject in any case to the volume and other limitations under Rule 10b 18
On July 31 2024 the Company voluntarily terminated the Fiscal 2024 NCIB and established a new normal course issuer bid the Fiscal 2025 NCIB in order to provide it with a means to execute purchases over the TSX as part of the overall Fiscal 2025 Repurchase Plan The TSX approved the Company s notice of intention to commence the Fiscal 2025 NCIB pursuant to which the Company may purchase Common Shares over the TSX for the period commencing on August 7 2024 until August 6 2025 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 may be purchased in this period is 21 179 064 representing 10 of the Company s public float calculated in accordance with TSX rules as of July 24 2024 less the 5 073 913 Common Shares purchased under the Fiscal 2024 Repurchase Plan and the maximum number of Common Shares that can be purchased on a single day is 138 175 Common Shares which was 25 of 552 700 the average daily trading volume for the Common Shares on the TSX for the six months ended March 31 2024 subject to certain exceptions for block purchases and subject in any case to the volume and other limitations under Rule 10b 18
Excludes 2 Canadian excise taxes recorded during Fiscal 2024 related to repurchases under the Fiscal 2024 Repurchase Plan See Note 13 Share Capital Option Plans and Share based Payments for more details
The graph illustrates the cumulative return on a 100 investment in our Common Shares made on June 30 2019 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
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 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters of this Annual Report on Form 10 K
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
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
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
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
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
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 2023 or 2024 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 2025 taxable year
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
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 Securitie
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 2024 and ending June 30 2025 Fiscal 2025 and July 1 2025 and ending June 30 2026 Fiscal 2026 on growth in earnings and cash flows ii creating value through investments in broader Information Management capabilities iii our future business plans and operations strategic goals and business planning process including the Company s business optimization plan announced in July 2024 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 Micro Focus International Limited formerly Micro Focus International plc and its subsidiaries Micro Focus see Note 19 Acquisitions and Divestitures to our Consolidated Financial Statements for more details xxiii tax audits xxiv the expected impact of the Russia Ukraine and Israel Hamas conflicts on our business xxv expected costs of the restructuring and business optimization 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 xxviii divestitures and their expected impact including in connection with the AMC Divestiture as defined below see Note 19 Acquisitions and Divestitures to our Consolidated Financial Statements for more details and xxix 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 and the AMC Divestiture 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 Micro Focus vii the potential for the incurrence of or assumption of debt in connection with acquisitions its 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 and other geopolitical tensions including the Russia Ukraine and the Israel Hamas 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 xxii potential changes in ratings or outlooks of rating agencies on our outstanding debt securities and xxiii risks related to the AMC Divestiture and the impact of the divestiture on our remaining business 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 2024 compared with the year ended June 30 2023 unless otherwise noted Refer to Part II Item 7 of our Annual Report on Form 10 K for Fiscal 2023 for a comparative discussion of our Fiscal 2023 financial results as compared to Fiscal 2022
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 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
As of June 30 2024 we employed a total of approximately 22 900 individuals Of the total 22 900 individuals we employed as of June 30 2024 8 300 or 36 are in the Americas 5 000 or 22 are in EMEA and 9 600 or 42 are in Asia Pacific Currently we have employees in 44 countries enabling strong access to multiple talent pools while ensuring reach and proximity to our customers See Results of Operations below for our definitions of geographic regions
Total annual recurring revenue which we define as the sum of cloud services and subscriptions revenue and customer support revenue was 4 533 8 million up 25 4 compared to the prior fiscal year up 24 6 after factoring in the favorable impact of 28 3 million of foreign exchange rate changes
Enterprise cloud bookings were 701 4 million for the year ended June 30 2024 compared to 527 7 million for the year ended June 30 2023 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
On May 1 2024 we completed the sale of our AMC business to Rocket Software for 2 275 billion in cash before taxes fees and other adjustments As part of this sale we have agreed to provide certain transition services to Rocket Software following the completion of the divestiture for up to 24 months
On May 6 2024 we prepaid 2 0 billion of our aggregate outstanding debt including 940 million of the aggregate principal amounts outstanding under the Term Loan B as defined below representing all outstanding principal thereunder and 1 06 billion of the aggregate principal amount outstanding under the Acquisition Term Loan as defined below using the net proceeds from the AMC Divestiture
During the year ended June 30 2024 we repurchased and canceled 5 073 913 Common Shares for 152 3 million inclusive of 2 Canadian excise taxes recorded year ended June 30 2023 and 2022 nil and 3 809 559 Common Shares for nil and 177 0 million respectively
During the year ended June 30 2024 we declared and paid cash dividends of 1 00 per Common Share in the aggregate amount of 267 4 million an increase of 3 compared to the prior fiscal year year ended June 30 2023 and 2022 0 9720 and 0 8836 per Common Share respectively in the aggregate amount of 259 5 million and 237 7 million respectively
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
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
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 The results of operations of Micro Focus have been consolidated with those of OpenText beginning February 1 2023 The Micro Focus Acquisition has contributed to the growth in our revenues and impacts period over period comparability See Note 19 Acquisitions and Divestitures to our Consolidated Financial Statements for more details
On May 1 2024 we completed the sale of our AMC business to Rocket Software Inc Rocket Software for 2 275 billion in cash before taxes fees and other adjustments the AMC Divestiture For Fiscal 2024 the results of the AMC business from July 1 2023 through April 30 2024 were recorded and presented within our Consolidated Financial Statements See Note 19 Acquisitions and Divestitures to our Consolidated Financial Statements for more details
On August 23 2023 we acquired all of the equity interest in KineMatik Ltd KineMatik a provider of automated business process and project management solutions built on OpenText s Content Server In accordance with ASC Topic 805 Business Combinations this acquisition was accounted for as a business combination The results of operations of KineMatik have been consolidated with those of OpenText beginning August 24 2023 The results of KineMatik are not considered to be material to our business
On May 22 2024 we acquired Pillr a cloud native multi tenant MDR platform from Novacoast Inc for MSPs that includes powerful threat hunting capabilities In accordance with ASC Topic 805 Business Combinations this acquisition was accounted for as a business combination The results of operations of Pillr have been consolidated with those of OpenText beginning May 22 2024 The results of Pillr are not considered to be material to our business
We continue to monitor the geopolitical conflicts and diplomatic tensions around the world including the Russia Ukraine and Israel Hamas conflicts We have ceased all direct business in Russia and Belarus We continue to operate our Israeli based business and support our employees in the region While our operations within these locations are not material and we do not expect these geopolitical conflicts 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 these conflicts 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 see Part I Item 1A Risk Factors included in this Annual Report on Form 10 K
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
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 2 01 billion in R D or 14 7 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
On May 1 2024 we completed the sale of the AMC business to Rocket Software for 2 275 billion in cash before taxes fees and other adjustments For Fiscal 2024 the results of the AMC business from July 1 2023 through April 30 2024 were recorded and presented within our Consolidated Financial Statements See Note 19 Acquisitions and Divestitures to our Consolidated Financial Statements for more details During the fourth quarter of Fiscal 2024 we prepaid 2 0 billion of our aggregate outstanding principal balances including 940 million under the Term Loan B as defined below representing all outstanding principal thereunder and 1 06 billion under the Acquisition Term Loan as defined below using the net proceeds from the AMC Divestiture See Part I Item 1A Risk Factors included within this Annual Report on Form 10 K
On July 3 2024 the Company announced a business optimization plan which is intended to strategically align the Company s workforce to support its growth and innovation plans The plan is expected to result in the reduction of approximately 1 200 positions across the Company with an annualized cost savings of approximately 200 0 million as well as the reinvestment of approximately 50 0 million annually for approximately 800 new roles in Sales Professional Services and Engineering resulting in a 1 7 net reduction of the Company s workforce The Company expects to incur approximately 60 0 million in restructuring charges that will be substantially recognized in the first quarter of Fiscal 2025 and we expect the business optimization plan to be completed by the end of Fiscal 2025 See Note 26 Subsequent Events to our Consolidated Financial Statements and Part I Item 1A Risk Factors included within this Annual Report on Form 10 K for more details
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 and Israel Hamas conflicts on our business See Part I Item 1A Risk Factors included within this Annual Report on Form 10 K
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
For a full discussion of all our accounting policies see Note 2 Accounting Policies and Recent Accounting Pronouncements to the Consolidated Financial Statements included in this Annual Report on Form 10 K
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
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 platform as a service PaaS software as a service SaaS cloud subscriptions and managed services
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
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
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
As part of cloud services and subscription revenues 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 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 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 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 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
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
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
Our professional services when offered along with software licenses consist 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 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
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
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
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
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
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
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
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 2024 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 2024 no impairments were recorded for Fiscal 2023 and Fiscal 2022 respectively
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
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
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 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
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 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 2024 as compared to the year ended June 30 2023 was impacted by the Micro Focus Acquisition the results of which were consolidated with those of OpenText beginning February 1 2023 and the AMC Divestiture the results of which were excluded from those of OpenText beginning May 1 2024 As such consolidated operating results for the years ended June 30 2023 and 2024 included five and twelve months respectively of Micro Focus operating results which included five and ten months respectively of AMC business operating results
Our total revenues increased by 1 284 6 million across all of our product types in the year ended June 30 2024 relative to the year ended June 30 2023 primarily due to revenue contributions from the Micro Focus Acquisition organic revenue growth and a favorable impact of 40 5 million of foreign exchange rate changes The Micro Focus Acquisition contributed 2 210 7 million to our total revenues during the year ended June 30 2024 of which 1 414 5 million related to customer support revenues and 477 4 million related to license revenues Micro Focus total revenues increased by 1 234 1 million during the year ended June 30 2024 as compared to the same period in the prior fiscal year
Total cost of revenues increased by 262 0 million in the year ended June 30 2024 relative to the year ended June 30 2023 primarily from cost of revenues of 589 4 million as a result of the Micro Focus Acquisition an increase of 310 1 million
Total operating expenses increased by 651 8 million in the year ended June 30 2024 relative to the year ended June 30 2023 primarily from operating expenses of 1 325 5 million as a result of the Micro Focus Acquisition an increase of 564 1 million as compared to the same period in the prior fiscal year Micro Focus research and development sales and marketing and general and administrative expenses were 1 009 8 million in the year ended June 30 2024 an increase of 459 4 million as compared to the same period in the prior fiscal year
On May 1 2024 the Company completed the sale of its AMC business to Rocket Software The AMC business was comprised of the legacy OpenText connectivity business and the legacy Micro Focus AMC business The Company s Consolidated Financial Statements for the year ended June 30 2024 include ten months of combined results for the AMC business The legacy Micro Focus AMC business operating results were consolidated with those of the Company s beginning on February 1 2023 as such the Company s Consolidated Financial Statements for the year ended June 30 2023 reflects five months of legacy Micro Focus AMC business operating results and twelve months of legacy OpenText connectivity business operating results
The AMC business contributed 441 million of revenue during the year ended June 30 2024 of which 284 million related to customer support revenues and 139 million related to license revenues Total AMC revenues increased by 216 million for the year ended June 30 2024 relative to the year ended June 30 2023 primarily driven by increases in customer support and license revenues of 129 million and 77 million respectively due to the inclusion of ten months of operating results of the AMC business in Fiscal 2024 compared to five months of operating results in Fiscal 2023
In connection with the AMC Divestiture we entered into a Transition Service Agreement TSA with Rocket Software whereby we will provide certain transition services to Rocket Software for up to 24 months from the closing date These transition service costs are reimbursable by Rocket Software For Fiscal 2024 we billed Rocket Software 11 5 million under the TSA The following table illustrates the financial statement impact of these TSA reimbursements which have been recorded as an offset to the respective costs incurred within our Consolidated Statements of Income
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 2024 our cloud renewal rate excluding the impact of Carbonite Zix and Micro Focus was approximately 92 compared to approximately 94 for the year ended June 30 2023
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
Cloud services and subscriptions revenues increased by 120 1 million or 7 1 during the year ended June 30 2024 as compared to the prior fiscal year up 6 8 after factoring in the favorable impact of 5 0 million of foreign exchange rate changes The increase was primarily driven by incremental revenues from the Micro Focus Acquisition and organic revenue growth over the comparative period Geographically the overall change was attributable to an increase in Americas of 64 7 million an increase in EMEA of 47 6 million and an increase in Asia Pacific of 7 8 million
Cost of Cloud services and subscriptions revenues increased by 123 6 million during the year ended June 30 2024 as compared to the prior fiscal year This was primarily due to an increase in third party network usage fees of 79 2 million partially driven by incremental Cloud services and subscriptions cost of revenues from the Micro Focus Acquisition over the comparative period and an increase in labour related costs of 44 8 million Overall the gross margin percentage on Cloud services and subscriptions revenues decreased to 61 from 65
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 2024
Customer support revenues increased by 798 3 million or 41 7 during the year ended June 30 2024 as compared to the prior fiscal year up 40 5 after factoring in the favorable impact of 23 3 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 372 9 million an increase in EMEA of 329 2 million and an increase in Asia Pacific of 96 2 million
Cost of Customer support revenues increased by 83 0 million during the year ended June 30 2024 as compared to the prior fiscal year This was primarily due to an increase in labour related costs of 81 8 million and an increase in third party network usage fees of 2 1 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 remained stable at approximately 89 compared to the prior fiscal year
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
License revenues increased by 295 1 million or 54 8 during the year ended June 30 2024 as compared to the prior fiscal year up 53 3 after factoring in the favorable impact of 7 6 million of foreign exchange rate changes The increase was primarily driven by incremental License revenues from the Micro Focus Acquisition over the comparative period and License revenues relating to the grant of certain IP rights Geographically the overall change was attributable to an increase in EMEA of 138 5 million an increase in Americas of 109 3 million and an increase in Asia Pacific of 47 4 million
During Fiscal 2024 we closed 239 license contracts greater than 0 5 million of which 103 contracts were greater than 1 0 million contributing 371 7 million of License revenues This was compared to 163 license contracts greater than 0 5 million during Fiscal 2023 of which 71 contracts were greater than 1 0 million contributing 211 3 million of License revenues
Cost of License revenues increased by 9 0 million during the year ended June 30 2024 as compared to the prior fiscal year as a result of increased third party technology costs over the comparative period Overall the gross margin percentage on License revenues remained stable at 97 as compared to the prior fiscal year
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
Professional service and other revenues increased by 71 1 million or 21 5 during the year ended June 30 2024 as compared to the prior fiscal year up 20 1 after factoring in the favorable impact of 4 7 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 53 2 million an increase in Americas of 10 0 million and an increase in Asia Pacific of 7 9 million
Cost of Professional service and other revenues increased by 25 6 million during the year ended June 30 2024 as compared to the prior fiscal year This was due to an increase in labour related costs of 28 2 million primarily driven by incremental Professional service and other cost of revenues from the Micro Focus Acquisition over the comparative period offset by a decrease in other miscellaneous costs of 2 6 million Overall the gross margin percentage on Professional service and other revenues increased to 25 from 16
Amortization of acquired technology based intangible assets increased during the year ended June 30 2024 by 20 7 million as compared to the prior fiscal year This was primarily due to amortization of newly acquired technology based intangible assets from the Micro Focus Acquisition partially offset by intangible assets from previous acquisitions becoming fully amortized and reduced amortization related to the AMC Divestiture
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
Research and development expenses increased by 213 3 million during the year ended June 30 2024 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 145 8 million facility related expenses increased by 50 2 million and contract labour and consulting increased by 6 2 million Overall our research and development expenses as a percentage of total revenues remained stable compared to the prior fiscal year at 15
Sales and marketing expenses increased by 185 1 million during the year ended June 30 2024 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 145 7 million facility related expenses increased by 13 1 million contract labour and consulting expenses increased by 8 7 million commissions increased by 7 7 million credit loss expenses increased by 7 7 million and travel and communication expenses increased by 7 5 million Overall our sales and marketing expenses as a percentage of total revenues decreased to 20 compared to the prior fiscal year at 21
General and administrative expenses increased by 157 4 million during the year ended June 30 2024 as compared to the prior fiscal year partially driven by the Micro Focus Acquisition and other miscellaneous costs Other miscellaneous costs which include professional fees such as legal audit and tax related expenses increased by 93 9 million partially driven by increased costs related to IP including the grant of certain IP rights and the resolution of certain historical IP related matters and higher professional fees Additionally payroll and payroll related benefits which is comprised of salaries benefits and variable short term incentives increased by 48 9 million contract labour and consulting increased by 4 9 million facility related expenses increased by 4 9 million and travel and communication expenses increased by 3 7 million Overall general and administrative expenses as a percentage of total revenues increased to 10 from 9 in the prior fiscal year
Amortization of acquired customer based intangible assets increased during the year ended June 30 2024 by 106 0 million as compared to the prior fiscal year This was primarily due to amortization of newly acquired customer based intangible assets from the Micro Focus Acquisition partially offset by reduced amortization related to the AMC Divestiture and intangible assets from previous acquisitions becoming fully amortized
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
Special charges recoveries decreased by 33 9 million during the year ended June 30 2024 as compared to the prior fiscal year Acquisition related costs decreased by 46 9 million other miscellaneous charges decreased by 30 2 million which includes severance and other costs associated with the Micro Focus Acquisition and costs related to restructuring activities decreased by 3 4 million These decreases were partially offset by increased divestiture costs of 46 6 million related to the AMC Divestiture as compared to the same period in the prior fiscal year
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 and Divestitures to our Consolidated Financial Statements for more details
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
During the year ended June 30 2024 we recognized a loss on debt extinguishment of 56 4 million related to the acceleration and recognition of unamortized debt discount and issuance costs resulting from the optional repayments and prepayments of the Acquisition Term Loan as defined below and Term Loan B as defined below in Fiscal 2024 see Note 11 Long Term Debt to our Consolidated Financial Statements for more details
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
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 to our Consolidated Financial Statements for more details
On May 1 2024 the Company completed the sale of its AMC business which resulted in a gain on disposition see Note 19 Acquisitions and Divestitures to our Consolidated Financial Statements for more details
The effective tax rate increased to a provision of 36 2 for the year ended June 30 2024 compared to a provision of 32 0 for the year ended June 30 2023 Tax expense increased from 70 8 million during the year ended June 30 2023 to 264 0 million during the year ended June 30 2024 The increase in the effective tax rate was driven by an increase in valuation allowance the impact of internal reorganizations and the AMC Divestiture and U S Base Erosion and Anti Abuse Tax BEAT partially offset by tax credits and change in undistributed earnings The tax rate for the year ended June 30 2023 varied from the statutory rate due to withholding taxes changes in valuation allowance permanent differences related to foreign source income inclusions and the impact of internal reorganizations partially offset by tax credits and permanent differences related to preferential tax treatment of the mark to market gains on derivatives
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 Also see Part I Item 1A Risk Factors within this Annual Report on Form 10 K
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
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 2024 we have recognized a provision of 15 9 million June 30 2023 28 3 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 from operating activities increased by 188 5 million during the year ended June 30 2024 as compared to the same period in the prior fiscal year due to an increase in net changes from working capital of 198 8 million offset by a decrease in net income after the impact of non cash items of 10 4 million
During the fourth quarter of Fiscal 2024 we had a days sales outstanding DSO of 43 days compared to our DSO of 41 days during the fourth quarter of Fiscal 2023 The per day impact of our DSO in the fourth quarter of Fiscal 2024 and Fiscal 2023 on our cash flows was 14 7 million and 16 6 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 from investing activities increased by 7 71 billion during the year ended June 30 2024 as compared to the same period in the prior fiscal year primarily due to cash consideration received from the AMC Divestiture during Fiscal 2024 of 2 23 billion as compared to the cash paid during Fiscal 2023 for the Micro Focus Acquisition of 5 66 billion
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 from financing activities decreased by 7 4 billion during the year ended June 30 2024 as compared to the same period in the prior fiscal year This is primarily due to the net impact of the following activities
15 3 million due to net change in Transition Services Agreement TSA obligation driven by cash collections on behalf of Rocket Software related to certain transition services performed by the Company related to the divested AMC business
During the year ended June 30 2024 we declared and paid cash dividends of 1 00 per Common Share in the aggregate amount of 267 4 million year ended June 30 2023 and 2022 0 9720 and 0 8836 per Common Share respectively in the aggregate amount of 259 5 million and 237 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 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
On November 24 2021 Open Text 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 On July 1 2024 OTHI merged with and into Open Text Inc OTI a wholly owned indirect subsidiary of the Company As a result of the merger OTI assumed all rights and obligations of OTHI concerning the Senior Notes 2031 effective July 1 2024
OTI 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 OTI 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 OTI 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 OTI 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 OTI 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
The 2031 Indenture contains covenants that limit OTI 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 OTI 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 OTI 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 OTI s and the guarantors existing and future senior unsubordinated debt and will rank senior in right of payment to all of the Company s OTI s and the guarantors future subordinated debt Senior Notes 2031 and the guarantees will be effectively subordinated to all of the Company s OTI 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
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 On July 1 2024 as a result of the merger of OTHI with and into OTI OTI assumed all rights and obligations of OTHI concerning the Senior Notes 2030 effective July 1 2024
OTI 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 OTI 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 OTI 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 OTI 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 OTI 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 OTI 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 OTI 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 OTI 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 OTI and the guarantors existing and future senior unsubordinated debt and will rank senior in right of payment to all of the Company OTI and the guarantors future subordinated debt Senior Notes 2030 and the guarantees will be effectively subordinated to all of the Company OTI 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
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
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 on one or more occasions redeem the Senior Notes 2028 in whole or in part 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
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 to our Consolidated Financial Statements
On December 1 2022 we issued 1 billion in aggregate principal amount of senior secured notes due 2027 Senior Secured Notes 2027 and together with the Senior Notes 2031 Senior Notes 2030 Senior Notes 2029 and Senior Notes 2028 the Senior Notes 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 as defined below 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
On May 30 2018 we entered into a credit facility which provides for a 1 billion term loan facility Term Loan B and we borrowed under the facility 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 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 On May 6 2024 we used a portion of the net proceeds from the AMC Divestiture to prepay in full the aggregate principal balance of 940 million outstanding under Term Loan B at which point all remaining commitments under Term Loan B were reduced to zero and Term Loan B was terminated which resulted in a loss on debt extinguishment of 1 8 million relating to unamortized debt issuance costs see Note 23 Other Income Expense Net for more details
On December 19 2023 we amended our committed revolving credit facility the Revolver to among other things extend the maturity from October 31 2024 to December 19 2028 and to remove the 10 basis point credit spread adjustment for loans bearing interest based on the SOFR rate Borrowings under the Revolver are secured by a first charge over substantially all of our assets on a pari passu basis with the Acquisition Term Loan as defined below 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 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 50 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 2024 our consolidated net leverage ratio as calculated in accordance with the applicable agreement was 2 32 1 00
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 and Divestitures for more details On August 14 2023 we amended the Acquisition Term Loan to reduce the applicable interest rate margin by 0 75 over the remaining term of the Acquisition Term Loan On May 15 2024 we further amended the Acquisition Term Loan to reduce the applicable interest rate margin by 0 5 and remove the 10 basis point credit spread adjustment for loans bearing interest based on the SOFR rate Both of the above reductions in interest rate margin on the Acquisition Term Loan resulting from the amendments were accounted for by the Company as debt modifications
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 an applicable margin of 2 25 As of June 30 2024 the outstanding balance on the Acquisition Term Loan bears an interest rate of 7 58 As of June 30 2024 the Acquisition Term Loan bears an effective interest rate of 8 67 The effective interest rate includes interest expense of 272 5 million and amortization of debt discount and issuance costs of 18 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 2024 our consolidated net leverage ratio as calculated in accordance with the applicable agreement was 2 32 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 and the Senior Secured Notes 2027
On October 20 2023 and January 22 2024 the Company made prepayments of 75 million and 175 million respectively on the Acquisition Term Loan using cash on hand On May 6 2024 the Company used a portion of the net
proceeds from the AMC Divestiture to prepay 1 06 billion of the outstanding principal balance of the Acquisition Term Loan As a result of these prepayments in Fiscal 2024 the Company recognized a loss on debt extinguishment of 54 6 million relating to unamortized debt issuance costs see Note 23 Other Income Expense Net to our Consolidated Financial Statements for more details
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 23 Other Income Expense Net for more details
On December 15 2023 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 As the Company qualifies as a well known seasoned issuer in Canada a short form base shelf prospectus qualifying the distribution of such securities was concurrently filed with Canadian securities regulators on December 15 2023 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
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 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
On April 30 2024 the Board authorized a share repurchase plan the Fiscal 2024 Repurchase Plan pursuant to which we could purchase for cancellation in open market transactions from time to time over the 12 month period commencing on May 7 2024 until May 6 2025 up to an aggregate of 250 million of our Common Shares on the NASDAQ Global Select Market the TSX as part of a Fiscal 2024 NCIB defined below and or other exchanges and alternative trading systems in Canada and or the United States if eligible subject to applicable law and stock exchange rules
During the year ended June 30 2024 we repurchased and canceled 5 073 913 Common Shares for 150 0 million year ended June 30 2023 and 2022 nil and 3 809 559 Common Shares for nil and 177 0 million respectively
On July 31 2024 in order to align its share repurchase plan to its fiscal year the Board approved the early termination of the Fiscal 2024 Repurchase Plan and authorized a new share repurchase plan the Fiscal 2025 Repurchase Plan pursuant to which we may purchase for cancellation in open market transactions from time to time over the 12 month period commencing on August 7 2024 until August 6 2025 if considered advisable up to an aggregate of 300 million of its common shares on the TSX as part of a Fiscal 2025 NCIB defined below NASDAQ and or alternative trading systems in Canada and or the United States if eligible subject to applicable law and stock exchange rules The price that we are authorized to pay for Common Shares in open market transactions is the market price at the time of purchase or such other price as is permitted by applicable law or stock exchange rules The Fiscal 2025 Repurchase Plan will be effected in accordance with Rule 10b 18
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
On April 30 2024 the Company established a Normal Course Issuer Bid the Fiscal 2024 NCIB in order to provide it with a means to execute purchases over the TSX as part of the overall Fiscal 2024 Repurchase Plan
The TSX approved the Company s notice of intention to commence the Fiscal 2024 NCIB pursuant to which the Company could purchase Common Shares over the TSX for the period commencing on May 7 2024 until May 6 2025 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 have been purchased in this period is 13 643 472 representing 5 of the Company s issued and outstanding Common Shares as of April 26 2024 and the maximum number of Common Shares that could be purchased on a single day was 138 175 Common Shares which is 25 of 552 700 the average daily trading volume for the Common Shares on the TSX for the six months ended March 31 2024 subject to certain exceptions for block purchases and subject in any case to the volume and other limitations under Rule 10b 18
On July 31 2024 the Company voluntarily terminated the Fiscal 2024 NCIB and established a new normal course issuer bid the Fiscal 2025 NCIB in order to provide it with a means to execute purchases over the TSX as part of the overall Fiscal 2025 Repurchase Plan The TSX approved the Company s notice of intention to commence the Fiscal 2025 NCIB pursuant to which the Company may purchase Common Shares over the TSX for the period commencing on August 7 2024 until August 6 2025 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 may be purchased in this period is 21 179 064 representing 10 of the Company s public float calculated in accordance with TSX rules as of July 24 2024 less the 5 073 913 Common Shares purchased under the Fiscal 2024 Repurchase Plan and the maximum number of Common Shares that can be purchased on a single day is 138 175 Common Shares which was 25 of 552 700 the average daily trading volume for the Common Shares on the TSX for the six months ended March 31 2024 subject to certain exceptions for block purchases and subject in any case to the volume and other limitations under Rule 10b 18
As of June 30 2024 our total unfunded pension plan obligations were 132 1 million of which 4 8 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
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
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
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 2024 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 80 million As of June 30 2024 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 2024
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 Fiscal 2018 and Fiscal 2019 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 through Fiscal 2019 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 through Fiscal 2019 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 Fiscal 2018 and Fiscal 2019 on a basis consistent with its proposal to reduce the available depreciable basis of 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 On December 11 2023 we filed a notice of objection regarding Fiscal 2019 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 through Fiscal 2019 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 through Fiscal 2019 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 2025 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 also in preliminary stages of auditing Fiscal 2020
On August 1 2019 prior to our acquisition of Carbonite Inc 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 Exchange Act 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 On July 14 2023 the district court certified the lead plaintiff s proposed class following which the defendants filed a motion for class decertification On January 31 2024 the parties filed a motion for preliminary approval of a settlement to fully resolve the litigation On February 1 2024 the court issued a preliminary approval order and on May 15 2024 the court issued a final approval order for the settlement and dismissal of the case with prejudice The settlement was substantially paid from insurance coverage with any remaining amount not covered by insurance being immaterial to the Company All defendants denied the merit of the claims alleged in the case and the final settlement does not reflect any admission of fault wrongdoing or liability as to any defendant
Also see Part I Item 1A Risk Factors in this Annual Report on Form 10 K for Fiscal 2024 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
As of June 30 2024 we had no outstanding balance under the Revolver Borrowings under the Revolver currently bear interest per annum at a floating rate of interest equal to Term SOFR 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 2024 with no outstanding balance on the Revolver an adverse change of 100 basis points on the interest rate would have no effect on our annual interest payment June 30 2023 2 8 million
As of June 30 2024 we had an outstanding balance of 2 2 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 2 25 As of June 30 2024 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 22 2 million assuming that the loan balance as of June 30 2024 is outstanding for the entire period June 30 2023 35 7 million
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 2024 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 2023 0 7 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 2024 a one cent change in the Euro to U S dollar forward exchange rate would have caused a change of 7 2 million in the mark to market valuation on our existing cross currency swap June 30 2023 7 3 million
Based on the 7 year EUR USD cross currency swaps outstanding as of June 30 2024 a one cent change in the Euro to U S dollar forward exchange rate would have caused a change of 7 6 million in the mark to market valuation on our existing cross currency swaps June 30 2023 7 8 million
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
If overall foreign currency exchange rates in comparison to the U S dollar uniformly weakened by 10 the amount of cash and cash equivalents we would report in equivalent U S dollars would decrease by 52 2 million June 30 2023 59 8 million assuming we have not entered into any derivatives discussed above under Foreign Currency Transaction Risk
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
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
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
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
Adjustment relates to differences between the GAAP based tax provision rate of approximately 36 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
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
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
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
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
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
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
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
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 The GAAP based tax provision rate for the year ended June 30 2022 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
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 2024 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
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 2024 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
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 2024 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 2024 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 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
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
Based on the evaluation completed by our management in which our Chief Executive Officer and Chief Financial Officer participated our management has concluded that 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 2024 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting
During the three months ended June 30 2024 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
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
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
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
Mr Cione joined OpenText as the President of OpenText Worldwide Sales in April 2024 Mr Cione is responsible for global go to market strategy sales and revenue growth This includes Enterprise Sales International Sales Cybersecurity Sales and Sales Operations Mr Cione is a veteran business executive with more than 30 years of global experience in sales alliance partnerships marketing customer success and operations at large multi national technology organizations Prior to joining OpenText Mr Cione was Chief Revenue Officer CRO for Teradata Corporation At Teradata Mr Cione was responsible for the company s global go to market strategy and commercial execution including worldwide sales partner alliances technical architecture and revenue operations functions Prior to Teradata Mr Cione served as Head of U S Enterprise Accounts at Apple Inc as SVP of Oracle Digital North America Applications and as Chief Revenue Officer of Rackspace Technology Inc Additionally he spent 15 years at Microsoft Corporation where he held roles of increasing responsibility in the U S and Asia including General Manager Asia Pacific Region Marketing Operations and Managing Director Asia Pacific Region Enterprise Partner Services Sales Mr Cione holds a degree from Baylor University with continuing executive education at INSEAD Harvard and PIVOT Leadership Group He serves on several boards including Canonical Ltd as a non executive director Technology Services Industry Association s CRO Advisory Board and Baylor University Advisory Boards with Hankamer School of Business and ProSales
Ms Ranganathan joined OpenText as Executive Vice President Chief Financial Officer in April 2018 and became President CFO and Corporate Development in April 2024 With more than 25 years of financial leadership experience Ms Ranganathan 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
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
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
Ms Bell joined OpenText as the Executive Vice President and Chief Digital Officer in September 2023 Ms Bell is responsible for all our IT and digital systems data platforms networks and communications commercial and corporate cloud operations as well as our security and compliance Ms Bell has over 25 years of experience driving technology transformations and delivering innovative solutions to the market Prior to joining OpenText Ms Bell spent four years at Rogers Communications Inc where she led all aspects of IT digital cloud and data Prior to Rogers Ms Bell spent eight years at Amdocs Limited where she led product and strategy for Digital Intelligence and BSS Ms Bell has also encompassed roles in Canada the U S and Europe with companies including NewStep Networks MetaSolv Software Axiom Systems and Newbridge Networks Ms Bell graduated with an MBA from University of Surrey in England
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 Inc 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 Inc 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
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
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 the Hewlett Packard Enterprise Company from 2015 to 2022 and in the Strategy Operations practice at Deloitte Consulting LLP 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
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 International Business Machines Corporation and four years as Managing Director of a successful Executive Human Resources consultancy business
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 Technologies Inc 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
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
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 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 Ltd 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 and serves as a director of Antoxa Corp and the Canadian Forces College Foundation 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
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 Computer Corporation and Hewlett Packard Company as well as Microtec Research Inc 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 Inc 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
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
Mr Hyder has served as a director of OpenText since December 2023 From October 2018 to present Mr Hyder has served as President and Chief Executive Officer of the Business Council of Canada a non profit non partisan organization composed of the chief executives and entrepreneurs of Canada s leading companies whose members collectively employ approximately two million Canadians in every major industry Mr Hyder was previously President and Chief Executive Officer of Hill Knowlton Strategies Canada providing strategic communications counsel to the firm s extensive and diverse client base Prior to joining Hill Knowlton he served as Director of Policy and Chief of Staff to The Right Honourable Joe Clark former Prime Minister of Canada Mr Hyder holds a B A and Master s degree in Public Policy from the University of Calgary
Ms Powell has served as a director of OpenText since June 2021 She is currently a Corporate Director Ms Powell is the former 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 led 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 worked across the enterprise to support BMS s commitment to creating an energizing work experience and a diverse and globally inclusive culture 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
Ms Rippert was appointed as a director of OpenText in July 2024 She is the former Group Chief Executive Strategy Consulting at Accenture having retired after 28 years of service in 2022 In that role Ms Rippert led Accenture s global Strategy Consulting business transforming the advisory services portfolio by accelerating the use of technology data and AI to drive new differentiated growth She spearheaded the acquisition of more than 20 companies and introduced Accenture s Business Futures thought leadership creating a strong foundation for the future Ms Rippert also led Accenture s Technology business in North America pivoting the business to new areas including data cloud platform services and software engineering Throughout her distinguished career she has helped clients digitally transform in key industries such as communications media technology health and public service Ms Rippert serves as a member of the Board of Trustees for Northwestern University Ms Rippert holds a Bachelor of Science degree in Computer Science and a Master of Management degree both from Northwestern University
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
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
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 U S 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
from Harvard University She is certified with the professional designation ICD D granted by the Institute of Corporate Directors ICD Ms Stevenson received an honorary doctorate from Carleton University and has been named one of the Top 100 Most Powerful Women in Canada
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
The Audit Committee currently consists of four directors Mr Fowlie Chair Mr Hau Ms Stevenson and Ms Weinstein 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
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
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
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 filing of this Annual Report on Form 10 K there are five women on the Board which represents approximately 38 of the Board and 45 of the independent Board members One director self identified to the Company as a person with disabilities One director has self identified as a visible minority No director has identified as a member of aboriginal peoples in Canada
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 five new directors over the past six years demonstrates the Company s focus on this approach
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 17 and three women as executive officers part of the executive leadership team ELT 27 while approximately 21 of existing positions on the senior leadership team SLT exclusive of our ELT are held by women 16 of ELT and SLT members are based outside of North America Within North America 28 of the ELT and SLT members are visible minorities
We have adopted an Insider Trading Policy governing the purchase sale and or other dispositions of the Company s securities by directors officers and employees that are reasonably designed to promote compliance with insider trading laws rules and regulations and any listing standards applicable to the Company A copy of our policies and procedures is filed as Exhibit 19 1 to this 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 2024
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
The Talent and Compensation Committee seeks to ensure that our executive compensation and talent programs closely align the interests of our executives with those of our shareholders We conduct extensive engagement with our shareholders to obtain feedback on topics including our executive compensation program During the past fiscal year we have reached out to shareholders representing approximately 56 of our outstanding shares and held meetings with 9 of our 15 largest shareholders with our Board Chair and the Chair of our Talent and Compensation Committee leading all of these meetings We listened to the feedback discussed and analyzed it and then evaluated every aspect of the design of our executive compensation program with shareholder feedback in mind
The design changes that we have made to our executive compensation program further our objectives to attract and retain critical leaders incentivize leaders to deliver on our strategy and create long term value for shareholders We believe these changes are welcomed by our shareholders based on our engagement meetings In Fiscal 2024 we also refreshed our Board committees to benefit from new perspectives and enhance its effectiveness through among other things the appointment of a new Talent and Compensation Committee Chair
Following our Fiscal 2023 annual meeting of shareholders we immediately re engaged with our shareholders to obtain feedback and understand their concerns regarding our executive compensation program Shareholders expressed appreciation for the continued engagement on our executive compensation program our continued desire to evaluate and evolve our compensation practices and our commitment to be responsive to their concerns but were critical of certain of our prior compensation practices
We learned that many investors did not support our Fiscal 2023 say on pay vote primarily because of the quantum and timing of the one time performance based stock options grant to our CEO in Fiscal 2022 following the announcement of the Micro Focus acquisition
We responded to those concerns by upholding our commitment to only deliver Fiscal 2024 long term incentive awards through our annual long term incentive plans LTIP without any special one time awards Further for Fiscal 2024 we made no adjustments to our CEO s base salary ensured stretch goals in our approach to setting targets for our annual short term incentive STI plan and made sure that our Named Executive Officers compensation remains competitive to attract and retain talent while ensuring our LTIP parameters remain highly correlated to shareholder returns The CEO s Fiscal 2024 total direct compensation which is the sum of his salary target STI opportunity and the fair value of his LTIP award was 15 below the median compensation of our benchmarked peer group
We have also committed that we will only deliver Fiscal 2025 long term incentive awards through the annual LTIP without any special one time awards It is our intention to ensure that the competitive pay levels needed to attract and retain both our CEO and our Named Executive Officers are delivered through annual programs aligned with shareholder interests In
direct response to shareholder feedback and in consideration of the lack of majority support for our advisory say on pay proposal last year we have made substantial changes to our executive compensation program for the current Fiscal 2025
We adjusted our long term incentive Performance Share Unit PSU plan such that target awards will only be earned for achieving relative Total Shareholder Return rTSR that is above the median with target earned if performance is at the 55th percentile against the rTSR of the constituents of the NASDAQ Composite Index
We modified the payout curve of our annual STI plan for Named Executive Officers to deleverage it such that higher above target Revenue and above target Adjusted Operating Income AOI results must be achieved to be eligible for a maximum payout under the plan
We evaluated and confirmed the measures of Revenue and AOI each weighted 50 reflect our overarching strategy focused on profitable growth as we continue to gain efficiencies through management of the acquired Micro Focus business while taking a relentless focus on organic growth leveraging AI and accelerating to the Cloud
We modified our change in control provisions such that in the event of a change in control event payments for PSUs granted beginning Fiscal 2025 will be paid based on actual rTSR results rather than at target on a pro rata basis
We had extensive discussions with our shareholders regarding the criteria and the composition of our compensation peer group Consistent with overwhelming shareholder feedback we decided to leave our peer group unchanged for Fiscal 2025 as we deemed that a primarily U S peer group remains relevant considering factors such as the highly competitive executive talent market the U S based location of most of our executive team including the CEO our industry s complexity our global reach as well as the choices that investors make in allocating their capital
We believe these changes enhance our pay for performance philosophy further align the interests of our executives with shareholders and advance our objectives to attract develop and retain critical leaders given the exceptionally competitive landscape for executive talent In addition we are committed to providing clearer more transparent disclosure regarding our redesigned program so that our shareholders can better understand our decision making on executive compensation topics
We continuously review ways to evolve our executive compensation program to attract motivate and retain our executives because they are critical to our ongoing success and long term shareholder value creation We greatly benefit from and appreciate dialogue with our shareholders and look forward to continuing discussions Thank you for your support and investment in OpenText
The following discussion and analysis of compensation arrangements for the fiscal year ended June 30 2024 Fiscal 2024 should be read together with the compensation tables and related disclosures set forth below This discussion and analysis is focused on the persons who served as our named executive officers for Fiscal 2024 collectively the Named Executive Officers or NEOs The NEOs who are the subject of this compensation discussion and analysis are
On April 8 2024 the Company announced that Mr Harrison had decided to retire from the Company effective September 15 2024 and until such time will be acting as a Strategic Advisor to our recently hired President Worldwide Sales In accordance with Item 402 a 3 iv of Regulation S K Mr Harrison has been included as an NEO for Fiscal 2024 as he would have been included pursuant to Item 402 a 3 iii of Regulation S K but for the fact that he was not serving as an executive officer as of June 30 2024
Fiscal 2024 was a successful year for our business In Fiscal 2024 we successfully integrated Micro Focus acquired technology with our enterprise software providing expanded offerings to support our customers growing needs to digitize We also completed the divestiture of our AMC business for 2 275 billion in cash before taxes fees and other adjustments whereby we used the net proceeds to complete a 2 billion debt reduction The divestiture of our AMC business reinforces our focus on Cloud and AI and accelerated our deleveraging plans
In Fiscal 2024 our CEO s annual LTIP target grant value remained flat year over year and the mix of LTIP grants remained the same There was a decrease of 45 in the target amount of equity granted to the CEO in Fiscal 2024 compared to Fiscal 2023 given the absence of one time awards There will be no increase in Fiscal 2025 in the target amount of equity granted to our CEO
We increased the overall target grant value of annual NEO LTIP awards excluding the CEO so that the overall LTIP value was at least at or above the 25th percentile of our peers In so doing we added a long term PSU component tied to a two year organic growth metric to link our stock based compensation to strategic growth The mix of stock options PSUs and RSUs tied to one two three and four year vesting time horizons has been used to solidify our retention objectives for an executive team that is critical to our business growth scale and transformation
We chose not to modify our CEO s pay for performance measures We also recognize that our CEO has other outstanding performance based equity awards from previous years We acknowledge the importance of both internal equity and alignment of performance measures between the CEO and the other NEOs which is reflected in our CEO to NEO target ratio having decreased by 39 from Fiscal 2023 to Fiscal 2024 from 4 4x to 2 7x respectively
The performance period for the PSUs granted in Fiscal 2021 concluded in Fiscal 2024 Absolute TSR for such measurement period was 2 which was the 17th percentile relative to the S P Midcap 400 Software Services Peer Group used for the Fiscal 2021 PSU award This was below the earnout threshold and the Talent and Compensation Committee did not approve any payout under the plan As a result no PSUs vested from the Fiscal 2021 grant
As previously disclosed starting with the Fiscal 2024 grant rTSR PSUs will be measured against the three year TSR of the constituents of the NASDAQ Composite Index with target awards earned for performance at the 55th percentile to recognize that the goal is to provide enhanced value for shareholders We chose to start measuring against NASDAQ Composite Index constituents in order to reflect our new size and scope of
We reviewed the peer group established in Fiscal 2023 following the Micro Focus acquisition and determined that no changes were necessary in Fiscal 2024 because the peer group reflected the market for executive talent and outside shareholder investment while also maintaining a relevant revenue and market cap size
Fiscal 2024 STI plan measures focused on profitable growth including our objective to increase revenues across our portfolio by among other things reversing the historical decline of Micro Focus revenues that was occurring prior to our acquisition of the Micro Focus business For most executives including the CEO STI plan measures were Worldwide Revenue Adjusted Operating Income AOI and Micro Focus Revenues
The table below outlines Fiscal 2024 performance and the impact of assuming the budgeted performance of the AMC business for the fourth quarter of the fiscal year AMC business performance for the fourth quarter was assumed at the level budgeted at the start of the year because the AMC business was divested in May 2024 This divestiture was not expected at the start of the year when Fiscal 2024 short term incentive plan goals were being set The use of budgeted performance as a placeholder for the final quarter of the year to replace the divested unit s performance was viewed as fair and neutral for the overall STI plan funding outcome The AMC business s Revenue performance through the first three quarters of the fiscal year was exceeding the Company s plan at 109 achievement through March 2024 while the AMC business s AOI performance through three fiscal quarters was 96 achievement through March 2024
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 the scope of the business enterprise
AOI is a non GAAP measure intended to reflect the operational effectiveness of our leadership by showing our ability to generate profits from our operational activities and to manage the costs associated with our worldwide revenues AOI 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
Micro Focus revenues are included within 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 the Micro Focus business
As a lead up to our 2024 annual meeting of shareholders we specifically requested feedback from shareholders on our executive compensation program to consider ways to further evolve the design of our program We held meetings with 9 of our 15 largest shareholders relating to executive compensation which were led by our Chair of the Board and Chair of the Talent and Compensation Committee
Shareholders expressed appreciation for the continued engagement on our executive compensation program our continued desire to evaluate and evolve our compensation practices and our commitment to be responsive to their concerns While the shareholder feedback is generally supportive 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
Our peer group is aligned with U S software and technology companies with a global presence and is not aspirational It reflects our market for executive talent which is in the U S where 100 of the NEOs reside OpenText revenues are above the median of our Fiscal 2024 peer group
We reviewed and made adjustments to non CEO pay that resulted in a reduction in our CEO to average NEO ratio The Fiscal 2024 ratio at target was 3 1x compared to 5 3x in Fiscal 2023 representing a 41 decrease
Short term incentive performance goals should be set higher than the previous year s performance notwithstanding amounts reinvested into the business and maximum payouts under the STI plan should reflect significant performance over achievement
We recognize the importance of and engage in rigorous performance goal setting to ensure that growth and profitability are aligned with our business objectives and shareholder expectations After factoring in the complexities of our business on a like for like basis Fiscal 2025 variable compensation performance targets will be set higher than Fiscal 2024 actual outcomes
For Fiscal 2025 we will adjust the rTSR measure within the PSU plan so that earning a target award requires exceeding the median and achieving at least 55th percentile rTSR performance compared to the NASDAQ Composite Index
For Fiscal 2025 PSU vesting acceleration provisions within 12 months of a change in control will be aligned with peer group practices to provide for that the number of PSUs earned is based on actual rTSR performance through the change in control date on a pro rata basis as opposed to a pay out at target
Each year the Talent and Compensation Committee reviews the detailed succession plans for our CEO NEOs and the Top 50 management positions across our organization determining for each role whether there are individuals that are ready now or ready in 1 3 years This allows for development and hiring opportunities and aligns with our desire to have a strong leadership bench The Talent and Compensation Committee also reviews the evolution of the leadership structure to ensure it is scaled to OpenText s strategy growth and complexity See Statement of Corporate Governance Practices Succession Planning in Schedule A for more information
We reviewed with shareholders their perspectives on feedback from proxy advisors including the use of a Canadian only peer group Reinforced by their feedback we continue to believe that certain proxy advisors peer group methodology based on Canadian companies in the telecommunications and other unrelated industries results in a skewed analysis of our executive compensation program does not reflect the fact that 100 of our NEOs are located in the highly competitive U S technology industry and thus using Canadian only peers is not a relevant comparison methodology for measuring compensation at companies with which we compete for talent
We believe that compensation plays an important role in achieving short and long term business objectives that ultimately drive business success in alignment with long term shareholder value creation The Talent and Compensation Committee ensures compensation decisions are in line with our compensation philosophy to be talent competitive Our compensation program objectives include
Our compensation program reflects the market in terms of compensation value and structural design We use market data from similarly sized U S software and technology companies with a global presence for a variety of reasons including that greater than 95 of our revenues are outside of Canada 100 of our NEOs and 67 of the executive leadership team are based in the U S and we generally recruit from U S based competitors for executive leadership talent
Aligning the interests of executive officers with our shareholders interests and with the execution of our business strategy with the majority of the total compensation package tied to performance based variable rewards
Evaluation of executive performance is based on achievement of key financial metrics that we believe closely correlate to long term shareholder value Our short and long term goals are reflected in our overall compensation program with evaluations based on achieving and overachieving predetermined objectives Our CEO has only 7 of his total compensation provided in the form of base salary and has 93 tied to performance based variable rewards including 77 in the form of annual equity grants Other NEOs average only 17 of their total compensation in the form of base salary with 83 tied to performance based variable rewards
The Talent and Compensation Committee has responsibility for the oversight of executive compensation within the terms and conditions of our various compensation plans The Talent and Compensation Committee approves the compensation of our executive officers except for our CEO where decisions are approved by the Board without the CEO present 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 Talent and Compensation Committee also reviews and recommends for approval all equity awards related to executive compensation prior to final approval by the Board and supports the Board with respect to talent and culture matters including succession and development of our executive officers reviewing and discussing the progress of our equity diversity and inclusion efforts across our global talent providing input on human capital disclosures and reviewing our approach to retirement programs
The Talent and Compensation Committee coordinates with the CEO and the Chief Human Resources Officer CHRO in collaboration with management and the finance and legal groups as appropriate to design and develop the compensation program This group supports the preparation and analysis of financial data peer group comparisons and other materials to assist the Talent and Compensation Committee in making and implementing its decisions
The Board the Talent and Compensation Committee and our management employ a set of policies and processes to evaluate the performance of each of our NEOs which help determine the amount of long term incentives to award to each NEO The performance of each of our NEOs other than our CEO is assessed by our CEO in his capacity as the direct supervisor of the other NEOs 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 CEO with the assistance of the CHRO also conducts an annual review of the total compensation of each executive officer including the NEOs The review includes an assessment of each executive officer s experience performance the performance of the executive officer s respective business or function and market pay levels within our peer group After this review the CEO recommends base salaries target annual cash and long term incentive opportunities any payouts related to the annual cash incentive plan and annual equity grants for the executive officers to the Talent and Compensation Committee for approval
The Talent and Compensation Committee considers previous compensation awards competitive market practice the impact of tax and accounting treatments applicable regulatory requirements any material acquisitions or divestitures closed during the year and the results of the most recent shareholder advisory vote on executive compensation when approving compensation programs
The Talent and Compensation Committee met five times during Fiscal 2024 Management assisted in the coordination and preparation of the meeting agenda and materials for each meeting The agenda is reviewed and approved by the Chair of the Talent and Compensation Committee The meeting materials are generally posted and made available to the other Talent and Compensation Committee members and invitees if any for review approximately one week in advance of each meeting Following each meeting the Talent and Compensation Committee reported items that it in its determination considered noteworthy to the Board
Further prior to setting executive compensation the Talent and Compensation Committee considered internal pay equity to ensure that the pay of our executives including the CEO s pay relative to that of our other NEOs is appropriate
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 Such 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 Talent and Compensation Committee has the sole authority to retain and terminate outside consultants From time to time the Talent and Compensation Committee seeks the advice of an outside compensation consultant to provide assistance and guidance on compensation issues The compensation consultant may provide the Talent and Compensation Committee with relevant information pertaining to market compensation levels alternative compensation plan designs market trends and best practices and may assist the Talent and Compensation Committee with respect to determining the appropriate benchmarks for each NEO s compensation
In Fiscal 2024 the Talent and Compensation Committee retained Frederic W Cook Co Inc FW Cook an independent consulting firm specializing in executive compensation consulting During Fiscal 2024 the Chair and members of the Talent and 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 Fiscal 2024 FW Cook received 61 500 in respect of such consulting services
In addition in Fiscal 2024 management engaged Aon s Human Capital Solutions practice a division of Aon plc a third party consulting firm to review our peer group and supply market data to assist in the evaluation of our approach to executive and director compensation Management also engaged Mercer Canada Limited a management advising firm to provide certain analysis related to TSR and performance under our PSU programs
Aggregate compensation for each NEO is designed to be market competitive The Talent and Compensation Committee refers to the compensation practices of similarly situated companies in determining our compensation policy Although the Talent and Compensation Committee reviews each element of compensation for market competitiveness and may weigh a particular element more heavily than another based on an NEO s role within the Company the focus remains on being competitive in the market with respect to total compensation
We use the framework below to identify companies that are comparable in size have similar business strategies and financial models recognizing that there are very few if any direct peers that are based in Canada with named executive officers residing in the U S The following attributes were reviewed and considered in order of importance
We generally recruit from U S based software companies for executive leadership talent For the full range of Executive Leadership roles at the Company it is not feasible to solely source talent from Canada and from adjacent sectors when new or replacement officers are needed
The Talent and Compensation Committee recognizes that recruiting talent from the U S is critical for our success even though executive compensation levels in the U S are higher than in Canada Attracting and retaining talent with the highest level of industry expertise is a key part of the Company s business and strategy and our compensation practices must align with market expectations where the industry skills reside Further the Talent and 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 that provide Canadian residents with Canadian dollars Converting amounts paid to U S based executives into U S dollars to Canadian currency inflates the appearance of the compensation if compared to Canadian companies that pay Canadian residents in local currency
For Fiscal 2024 we reviewed our compensation peer group and determined that no peer group changes were necessary In April 2023 we had updated our peer group to reflect our new size and scope of our operations following the acquisition of Micro Focus
Our peer group is shown in the table below The Talent and Compensation Committee determined that revenue is a relevant metric for the scope of the enterprise All our peers are within the targeted 0 3x to 3x OpenText revenue range and our
As part of our peer group benchmarking we note that our CEO s target pay is near the median for target total cash compensation and was slightly below the median on a total target direct compensation basis
Our CEO s realizable pay aligns with the experience of shareholders of the Company and is directly correlated to TSR performance The grant date value in the Summary Compensation Table significantly overstates the CEO s actual realized and realizable compensation after our actual performance is measured because the program aligns the final reward with actual performance
The table below also shows that the actual value realizable is considerably lower than the grant date fair value of stock and option awards as reported in the Summary Compensation Table The actual value realizable by our CEO was 72 lower than the grant date fair value of stock and option awards reported in the Summary Compensation Table over the last three fiscal years
Number of stock and option awards reported in the Grants of Plan Based Awards table relating to Fiscal 2022 to Fiscal 2024 PSUs awards are reported at target All option awards granted remain outstanding and have not been exercised for value
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
In 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 realizable of the performance stock options represents the number of performance stock options that have vested as of June 30 2024 and that have achieved certain performance criteria as discussed in Long Term Equity Grants to CEO in Item 11 of our Annual Report on Form 10 K for Fiscal 2023
The following graph demonstrates the degree of alignment between our CEO s realizable pay and our TSR over the last three years relative to our Fiscal 2024 peer group The higher each company is shown on the chart below demonstrates the higher degree of alignment between 3 year TSR and Realizable Pay versus our peers Alignment was calculated based on the variance between the percentile ranking of 3 year TSR and Realizable Pay as compared to our peers with the smallest variance being positioned highest on the graph As shown below OpenText s alignment is positioned in the top quartile which demonstrates the effectiveness of the pay for performance design of our executive compensation program as the pay our CEO may realize is strongly aligned to our TSR performance
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 that is variable or 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
The base salary review for each NEO 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
In Fiscal 2024 all of our NEOs with the exception of Mr Cione participated in our STI plan which is designed to motivate achievement of our short term corporate goals Mr Cione joined the Company in April 2024 See below for the treatment of Mr Cione s STI award for Fiscal 2024 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 STI plan are made using cash only
The executive STI plan for Fiscal 2024 was based on the following metrics Worldwide Revenues Annual Operating Income AOI as well as Micro Focus Revenues Micro Focus Revenue was an additional metric introduced in Fiscal 2023 and continues into Fiscal 2024 The strong revenue orientation of the metrics was directly aligned to our business strategy reflecting our focus following the Micro Focus acquisition on organic growth in addition to the key objective of quickly changing the trajectory of revenues from Micro Focus products
The budget and STI goals for Fiscal 2024 included the assumption that the AMC business would be contributing to performance for the entire year because there was no prior expectation that the business would be divested during Fiscal 2024 The divestiture of the AMC business occurred in the fourth quarter of the fiscal year after it had contributed to the STI performance for three quarters The Talent and Compensation Committee decided to assume that the AMC business s revenue and AOI contributed to the fourth quarter STI performance at budget rather than reset the goals to account for the divestiture of the AMC business The assumption that the AMC business performed at the original budgeted level during the April May and June STI period was generally consistent with its results during the first three fiscal quarters and the AMC business s revenue performance was tracking above target in advance of the divestiture
For Fiscal 2024 the following table shows the target short term award for each NEO along with the associated weighting of the related performance measures for each weightings are slightly different to reflect individual differences in accountability
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 the scope of the business enterprise
AOI is a non GAAP measure intended to reflect the operational effectiveness of our leadership by showing our ability to generate profits from our operational activities and to manage the costs associated with our worldwide revenues AOI 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
Enterprise license revenues are a component of License revenue line of our audited income statement First year maintenance 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 Enterprise cloud bookings is the total value from cloud services and subscription contracts entered into in the period that is new committed and incremental to our existing contracts entered into with our enterprise based customers Enterprise professional services PS bookings are the total value from Enterprise PS contracts entered into the period that is new committed and incremental to our existing contracts
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 PS Bookings are the total value from Enterprise PS contracts entered into the period that is new committed and incremental to our existing contracts
Micro Focus revenues are included within 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 the Micro Focus business
For each performance measure noted above the Talent and Compensation Committee approves the target award eligible to be earned by an NEO The Board also sets a minimum performance threshold most worldwide performance measures require attainment of at least 90 of the goal a target performance level and a maximum performance level Where applicable the Board also creates an objective formula for determining the percentage STI payout for performance above and below the performance target with performance below threshold funding no STI award To the extent the performance goal is exceeded the award will be proportionately greater up to the maximum performance level
The threshold target and maximum levels and payout formula are set forth below as well as actual performance and payouts as a percentage of targets achieved in Fiscal 2024 The Fiscal 2024 performance goals for all measures were set above Fiscal 2023 performance goals because our strategic mandate is to grow the business The STI performance goals and measurement of the final levels include pre established plan adjustments that remove the impact of foreign exchange as compared to the original budget because performance due to rising or falling foreign currency exchange rates is viewed as outside of the control of the executives
Payment Scale for 2024 Worldwide Revenues Enterprise License Revenue FYM Cloud Bookings and PS Bookings Team Cloud and Customer Support Revenue and PS Enterprise Bookings and Worldwide Adjusted Operating Income
The actual STI award earned by each NEO for Fiscal 2024 was determined in accordance with the formulas described above without any discretionary adjustment We have set forth below for each NEO the award amount actually paid for Fiscal 2024 and the percentage of target award amount reflected by the actual award paid broken out by performance measure as follows
Mr Cione joined the Company at the start of the fourth quarter of the fiscal year As part of Mr Cione s sign on compensation arrangement he was provided with an at target STI payment prorated for the last quarter of 2024 to ensure Mr Cione does not benefit from or is penalized for performance metrics that would not have reflected Mr Cione s contribution to the Company during the remainder of the fiscal year As a result Mr Cione s at target payout in Fiscal 2024 was 167 828 based on his annual STI target of 675 000 Any STI payouts in future years would be based on performance measures derived from our annual business plan
We recognize the importance of and engage in rigorous performance goal setting to ensure growth and profitability are aligned with our business objectives and shareholder expectations Factoring in the complexities of our business on a like for like basis Fiscal 2025 variable compensation performance targets will be set higher than Fiscal 2024 actual outcomes
For Fiscal 2025 our short term incentive payout structure was deleveraged in response to shareholder feedback The Fiscal 2025 STI program requires attainment of 103 and 104 for Worldwide Revenue and AOI goals respectively before the maximum 200 payout is earned The higher level of required performance is to increase the incentive to achieve significant revenue and AOI growth for the Company We will no longer have a separate Micro Focus Revenue measure as part of the plan now that the business is integrated
Ambitious performance targets combined with the deleveraged payout curve for exceeding performance targets work together to provide significant financial results to our shareholders in return for earning the maximum 200 payout under the STI plan
We incentivize our executive officers including our NEOs in part with long term compensation pursuant to our LTIP Our LTIP grants represent a significant proportion of our NEOs total compensation and their purpose is two fold i as a component of a competitive compensation package and ii to align the interests of our NEOs with the interests of our shareholders
For each LTIP grant a target value is established by the Talent and Compensation Committee for each NEO except for the CEO whose target value is established by the Board based on competitive market practice and by the respective NEO s ability to influence financial or operational performance The target values of the annual grants are consistent with competitive market practice set to ensure that the annual total direct target compensation packages are appropriately positioned relative to our industry peer group for each of our NEOs Grant amounts consider the desired pay mix competitive position and internal equity across our NEOs The program is designed to ensure alignment with our performance over the longer term with a very high percentage of the long term incentive being at risk
The performance goals and the weightings of performance goals under the LTIP are first recommended by the Talent and Compensation Committee and then approved by the Board Grants are generally made annually and are comprised of the components outlined in the table below
NEOs excluding CEO Organic Growth Metric Cliff vesting in the second year following the determination by the Board that the performance criteria have been met for the organic growth operating financial performance metric
Are subject to the clawback policy the Clawback Policy we adopted in 2023 in accordance with SEC rules and NASDAQ listing standards and in line with market practice The Clawback Policy mandates the recovery of certain erroneously paid incentive based compensation that may be received by our executive officers on or after October 2 2023 if we have a qualifying financial restatement during the three completed fiscal years immediately preceding the fiscal year in which a financial restatement determination is made subject to limited exceptions Recovery is required regardless of whether the executive officer was involved in the preparation of the relevant financial statements and
For grants made on 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 The dividend equivalents for PSUs are only credited for shares earned under the PSU program
In Fiscal 2024 we maintained our practice of providing PSUs aligned with a rTSR metric for all NEOs Starting with the Fiscal 2024 grants we will use rTSR to benchmark our performance against the three year TSR of the constituents of the NASDAQ Composite Index The composition of the NASDAQ Composite Index is heavily weighted towards companies in the information technology sector which reflects similar alternate investments for our shareholders
We closely reviewed the LTIP award levels of our NEOs Recognizing that the LTIP grant values for NEOs other than our CEO were below market peer companies we increased their LTIP grant values to raise their target compensation to a level closer to the median This increase in grant value was achieved by adding a PSU component tied to an organic growth two year operating metric strengthening the link between compensation and our multi year internal financial goals This addition balanced clear line of sight to performance results with our objective to retain key executives through a competitive pay package The mix of stock options PSUs and RSUs tied to one two three and four year vesting time horizons has been used to solidify our retention objectives for an executive team that is critical to our business growth scale and transformation
Our CEO s annual LTIP grant is positioned 15 below the median of our selected peer group and deemed an appropriate level As such we did not modify our CEO s pay for performance or grant levels We also recognize that our CEO has other
outstanding performance based equity from previous years As such our CEO s awards are appropriately aligned with the rest of our NEOs resulting in greater internal compensation equity Our CEO s target long term incentive compensation decreased by 45 due to the fact that he was not provided with a one time LTIP grant and his regular annual Fiscal 2024 LTIP award value was kept flat to Fiscal 2023
As noted above Todd Cione joined the Company at the start of the fourth quarter of Fiscal 2024 Mr Cione was provided with grants for two of the in progress LTIPs on a pro rata basis These grants were provided to incent Mr Cione to join the organization and are a component of his compensation package that will immediately align his interests with the interests of our shareholders The LTIP grant that vests in Fiscal 2025 was prorated 47 of target 1 6 million and the LTIP grant that vests in Fiscal 2026 at 79 of target 2 8 million
Relative TSR PSUs granted in Fiscal 2022 were eligible to vest during Fiscal 2024 based on rTSR versus the relevant index over their three year performance period The threshold rTSR of 25th percentile was not achieved and no PSUs were earned under this grant
The stock options granted in connection with the annual LTIP vest over four years and are only valuable if the stock price increases during their seven year life 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 the Annual Report on Form 10 K
With respect to stock option grants the Board will determine the following based upon the recommendation of the Talent and 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
For Fiscal 2025 we have adjusted the rTSR measure within the PSU plan to require higher performance in order to earn a target payout New rTSR PSUs in Fiscal 2025 are earned at target only for above median rTSR performance The target is earned for 55
Further the vesting for the rTSR PSUs granted in Fiscal 2025 will only accelerate in the event of a change of control for the number of shares earned based on actual rTSR performance compared to the NASDAQ Composite Index
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 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 are intended to incentivize our senior executive officers to remain employed with the Company in such a transaction
Our NEOs receive a minimal amount of non cash compensation in the form of executive perquisites To remain competitive in the marketplace our NEOs are entitled to some limited benefits that are not otherwise available to all our employees including
We currently have equity ownership guidelines Share Ownership Guidelines the objective of which is to encourage our senior management including our NEOs 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
In Fiscal 2024 we updated our CEO s equity ownership guidelines to further strengthen the alignment between our key executive and the long term performance of the Company The equity ownership levels are as follows
For purposes of the Share Ownership Guidelines individuals are deemed to hold all securities over which they are 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
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 Talent and 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 NEOs 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
NEOs may achieve the Share Ownership Guidelines through the exercise of stock option awards for Common Shares 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 an NEO 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 NEOs are in compliance with the Share Ownership Guidelines applicable to them for Fiscal 2024 with Mr Duggan and Mr Cione having until 2026 and 2029 respectively to reach their applicable equity ownership guidelines
Regarding 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 their retainer and or fees in the form of common stock equivalents As of the date of the Circular all non management directors as applicable to them are in compliance with the Share Ownership Guidelines For further details see the table below titled Director Compensation for Fiscal 2024
All our employees officers and directors including our NEOs 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 NEOs 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 NASDAQ immediately preceding the applicable grant date
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 awards granted in Fiscal 2024 by each NEO see the Maximum column under Estimated Future Payouts under Equity Incentive Plan Awards under the Grants of Plan Based Awards in Fiscal 2024 table below
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 Also see Long Term Equity Grants to CEO and Grants of Plan Based Awards in Fiscal 2023 in Item 11 of our Annual Report on Form 10 K for 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
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 NEOs which are generally available to all our salaried employees
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 2023 and 2022
Represents amounts we paid or reimbursed for housing allowance inclusive of a related tax gross up amount of 80 059 160 118 and 160 118 for the fiscal years ended June 30 2024 2023 and 2022 respectively
Represents the threshold target and maximum estimated payouts under our short term incentive plan for Fiscal 2024 For further information see Compensation Discussion and Analysis Elements of Our Compensation Program Short Term Incentives above
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
Represents the threshold target and maximum estimated payouts under our LTIP PSUs for all NEOs For further information see Compensation Discussion and Analysis Elements of Our Compensation Program Long Term Incentives LTIP PSU Grants in 2024 above
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 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 Item 11 of our Annual Report on Form 10 K for Fiscal 2023
Represents each NEO 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 Elements of Our Compensation Program Long Term Incentives These amounts illustrate the market value as of June 30 2024 based upon the closing price for the Company s Common Shares as traded on the NASDAQ on such date of 30 04
Represents each NEO s target number of PSUs granted pursuant to our LTIP program which vest upon the schedules described above in Compensation Discussion and Analysis Elements of Our Compensation Program Long Term Incentives These
As of June 30 2024 options to purchase an aggregate of 12 207 412 Common Shares had been previously granted and are outstanding under our stock option plans of which 4 616 707 Common Shares were vested Options to purchase an additional 5 018 767 Common Shares remain available for issuance pursuant to our stock option plans Our outstanding options pool represents 4 6 of the Common Shares issued and outstanding as of June 30 2024
We have entered into employment contracts with each of our NEOs These contracts may require us to make certain types of payments and provide certain types of benefits to the NEOs upon the occurrence of any of these events
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 NEO 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 NEOs
Our employment agreements with our NEOs 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 NEO 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 NEO
If the NEO is terminated without cause we may be obligated to make payments or provide benefits to the NEO A termination without cause means a termination of an NEO for any reason other than the following each of which provides cause for termination
provided that in certain of the circumstances listed above the Company has given the NEO reasonable notice of the reason for termination as well as a reasonable opportunity to correct the circumstances giving rise to the termination
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 NEO without the NEO s written consent we may be obligated to provide payments or benefits to the NEO unless such a change is in connection with the termination of the NEO either for cause or due to the death or disability of the NEO
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
A material diminution in the duties and responsibilities of the NEO 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 reduction in the title or position of the NEO 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
None of our NEOs 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 NEO s relationship with the Company
Pursuant to our employment agreements with our NEOs and the terms of our LTIP each NEO s entitlement upon termination of employment without cause or following a change in the NEO 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
For Fiscal 2025 PSU vesting acceleration provisions within 12 months of a change in control will be aligned with peer group practices to provide for that the number of PSUs earned is based on actual rTSR performance through the change in control date as opposed to a pay out at target as was the case for Fiscal 2024
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
Already vested as of termination date with no acceleration of unvested options For a period of 90 days following the termination date the NEO has the right to exercise all options which have vested as of the date of termination
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 CEO and CTO 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 CEO and CTO 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 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 CEO and CTO 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 CEO and CTO 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 NEO 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 NEO 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 NEO must comply with certain obligations in favor of the Company including a non disparagement obligation Also each NEO is bound by a confidentiality and non solicitation agreement where the non solicitation obligation lasts six months from the date of termination of their employment
Further information regarding payments to our NEOs 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 NEO would be entitled to receive upon the occurrence of the indicated event assuming that the event occurred on June 30 2024 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 30 04 per share as reported on the NASDAQ on June 30 2024 the last trading day of our fiscal year The other material assumptions made with respect to the numbers reported in the table below are
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
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 CEO and CTO 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 CEO and CTO 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
Non management directors may elect to receive DSUs or cash for their directors fees and or annual equity grant Cash paid for directors fees are paid in accordance with the scheduled fee arrangements set forth in the table below If cash is elected for the annual equity grant such cash is payable at the Company s next annual general meeting In Fiscal 2024 Messrs Jenkins and Fowlie and Mses Hamilton and Weinstein elected to receive cash for all or a portion of their annual equity grant
Non management directors may elect to defer all or a portion of their retainer and or fees in the form of DSUs under our 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 DSUs granted for the annual equity grant vest 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
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 this Annual Report on Form 10 K In Fiscal 2024 Messrs Jenkins Fowlie Fraser Hau Hyder Sadler and Slaunwhite and Mses Hamilton Powell Stevenson and Weinstein received 4 259 8 748 8 141 7 002
During Fiscal 2024 Mr Sadler received 21 721 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
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
In addition to the scheduled fee arrangements set forth in the table above non management directors also receive an annual equity grant representing the long term component of their compensation The amount of the annual equity grant is discretionary however historically the amount of this grant has been determined and updated on a periodic basis with the assistance of the Talent and Compensation Committee and the compensation consultant and benchmarked against director compensation for comparable companies For Fiscal 2024 the annual equity grant was approximately 250 000 for each non management director and approximately 320 000 for the Chair of the Board
Non management directors may elect to receive DSUs or cash for their directors fees and or annual equity grant DSUs are granted under a DSU Plan which is available to any non management director of the Company DSUs granted as compensation for directors fees vest immediately whereas DSUs granted for the annual equity grant vest at the Company s next annual general meeting If cash is elected for the annual equity grant such cash is also payable 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 For further details of our Share Ownership Guidelines as they relate to directors see Share Ownership Guidelines above
The members of our Compensation Committee consist of Mses Powell Chair and Hamilton and Messrs Fraser and Slaunwhite 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
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 programs and risks and disaster recovery plans as well as environmental social and governance matters including climate related matters 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 programs and risks 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
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
The following table sets forth certain information as of June 30 2024 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 2024 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
For more information regarding stock compensation plans 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
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
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 2024 Mr Sadler received CAD 44 thousand in consulting fees from OpenText equivalent to 32 thousand 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
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 2024 OpenText paid 1 7 million under such agreements
The Audit Committee has established an Audit and Non Audit Services Pre Approval Policy to pre approve all permissible audit and non audit services provided by our independent registered public accounting firm The policy provides that the Audit Committee shall pre approve all audit and non audit services to be provided to the Company and its subsidiaries by its independent registered public accounting firm
On an annual basis the Audit Committee reviews and provides pre approval for certain types of services that may be rendered by the independent registered accounting firm and a budget for audit and non audit services for the applicable fiscal year Upon pre approval of the services on the initial list management may engage the auditor for specific engagements that are within the definition of the pre approved services Any significant service engagements above a certain threshold will require separate pre approval
The policy contains a provision delegating pre approval authority to the Chair of the Audit Committee in instances when pre approval is needed prior to a scheduled Audit Committee meeting The Chair of the Audit Committee is required to report on such pre approvals at the next scheduled Audit Committee meeting A final detailed review of all audit and non audit services and fees is performed by the Audit Committee prior to the issuance of the audit opinion at year end The Audit Committee has determined that the provision of the services set out below is compatible with the maintaining of KPMG LLP s independence in the conduct of its auditing functions
No services in 2024 were provided by KPMG for which the foregoing pre approval procedures were waived pursuant to Rule 2 01 c 7 i C of Regulation S X Audit services representing approximately 0 1 million in 2023 were provided by KPMG for which the foregoing pre approval procedures were waived pursuant to Rule 2 01 c 7 i C of Regulation S X
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
Audit related fees excluding the services performed in Fiscal 2024 related to the divestiture of the AMC business were primarily for assurance and related services such as IT assurance engagements and accounting research services
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
Supplemental Indenture to Indenture governing the Company s 3 875 Senior Notes due 2028 dated as of July 1 2024 among Open Text Inc Open Text Corporation and the Bank of NY Mellon as U S Trustee and BNY Trust Company of Canada as Canadian trustee
Supplemental Indenture to Indenture governing OTHI s 4 125 Senior Notes due 2030 dated as of July 1 2024 among Open Text Inc Open Text Corporation 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
Supplemental Indenture to Indenture governing the Company s 3 875 Senior Notes due 2029 dated as of July 1 2024 among Open Text Inc Open Text Corporation and the Bank of NY 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
Supplemental Indenture to Indenture governing OTHI s 4 125 Senior Notes due 2031 dated as of July 1 2024 among Open Text Inc Open Text Corporation and the Bank of NY Mellon as U S Trustee and BNY Trust Company of Canada as Canadian trustee
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
Supplemental Indenture to Indenture governing the Company s 6 90 senior secured notes due 2027 dated as of July 1 2024 among Open Text Inc Open Text Corporation and the Bank of NY Mellon as U S Trustee and BNY Trust Company of Canada as Canadian trustee
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
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
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
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
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
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
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
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
Second Amendment to Credit Agreement dated August 14 2023 by and among the Company the guarantors party thereto Barclays Bank PLC as administrative agent and collateral agent and certain financial institution parties thereto
Second Amendment to Fourth Amended and Restated Credit Agreement dated December 19 2023 by and among Open Text ULC Open Text Inc and the Company 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
Third Amendment to Credit Agreement dated May 15 2024 by and among the Company the guarantors party thereto Barclays Bank PLC as administrative agent and collateral agent and certain financial institution parties thereto
We have audited the accompanying consolidated balance sheets of Open Text Corporation the Company as of June 30 2024 and 2023 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 2024 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 2024 and 2023 and the results of its operations and its cash flows for each of the years in the three year period ended June 30 2024 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 2024 based on criteria established in
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
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
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
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
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
We have audited Open Text Corporation s internal control over financial reporting as of June 30 2024 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 2024 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 2024 and 2023 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 2024 and the related notes and our report dated July 31 2024 expressed an unqualified opinion on those consolidated financial statements
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
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
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 2024 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
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 and Divestitures for more details
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
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 The results of operations of Micro Focus have been consolidated with those of OpenText with effect from February 1 2023 See Note 19 Acquisitions and Divestitures for more details
On May 1 2024 the Company completed the sale of its Application Modernization and Connectivity AMC business to Rocket Software Inc Rocket Software for 2 275 billion in cash before taxes fees and other adjustments the AMC Divestiture See Note 19 Acquisitions and Divestitures for more details The Company has determined that the AMC business does not constitute a component as its operations and cash flows cannot be clearly distinguished from the rest of the Company s operations and cash flows due to significant shared costs Therefore the transaction does not meet the discontinued operations criteria and the results of operations from the AMC business are presented within Income from operations in our Consolidated Statements of Income
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
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 2024 and 2023 respectively
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 Statements of Cash Flows
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 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 2024
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 2024 and 2023 our capitalized software development costs were 250 9 million and 216 8 million respectively Our additions relating to capitalized software development costs incurred during Fiscal 2024 and Fiscal 2023 were 26 1 million and 18 3 million respectively
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
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 income taxes line of our Consolidated Statements of Income
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 2024 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 2024 no impairments were recorded for Fiscal 2023 and Fiscal 2022 respectively
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 in 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
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 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
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
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
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
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
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
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
As part of cloud services and subscription revenues 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 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 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
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
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
Our professional services when offered along with software licenses consist 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
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
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
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
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
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 execute certain sales contracts through resellers distributors and channel partners collectively referred to as resellers Typically we conclude that the resellers are OpenText 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
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
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
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
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 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 costs which include digital advertising marketing programs and other promotional costs are expensed as incurred Advertising expenses incurred in Fiscal 2024 Fiscal 2023 and Fiscal 2022 were 66 9 million 73 8 million and 59 6 million respectively
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
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 income taxes line of our Consolidated Statements of Income see Note 15 Income Taxes for more details
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 net in our Consolidated Statements of Income see Note 23 Other Income Expense Net for more details
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
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 net for Fiscal 2024 Fiscal 2023 and Fiscal 2022 were 1 2 million 56 6 million and 2 7 million respectively
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
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
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
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
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
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
Assessments for held for sale accounting classification are performed by the Company when events or changes in business circumstances indicate that a change in classification may be necessary The Company classifies assets and liabilities to be disposed of as held for sale in the period in which they are available for immediate sale in their present condition and when the sale is probable and expected to be completed within one year Assets and liabilities classified as held for sale are presented separately within current assets and liabilities in our Consolidated Balance Sheets and are measured at the lower of their carrying amount or fair value less costs to sell Further the Company ceases to record depreciation and amortization expense on assets that are classified as held for sale
In September 2022 the Financial Accounting Standards Board FASB issued ASU 2022 04 Liabilities Supplier Finance Programs Subtopic 405 50 Disclosure of Supplier Finance Program Obligations This standard requires companies that participate in supplier finance programs in connection with the procurement of goods or services to disclose quantitative and qualitative information about the programs
We adopted this ASU as of July 1 2023 which did not have a material impact on our Consolidated Financial Statements and related disclosures as we had no material supplier finance program obligations as of June 30 2024
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
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
The difference in the opening and closing balances of our contract assets and deferred revenues primarily results 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 2024 we reclassified 116 3 million year ended June 30 2023 61 9 million of contract assets to receivables as a result of the right to the transaction consideration becoming unconditional During the year ended June 30 2024 2023 and 2022 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 2024 that was included in the deferred revenue balances at June 30 2023 was 1 7 billion year ended June 30 2023 and 2022 887 million and 843 million respectively
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 2021
During the year ended June 30 2024 2023 and 2022 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
As of June 30 2024 approximately 2 7 billion of revenue is expected to be recognized from remaining performance obligations on existing contracts We expect to recognize approximately 44 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
During the year ended June 30 2024 we completed the sale of a Company owned facility with a carrying value of 4 5 million The Company recognized a gain of 1 0 million on this sale in the Consolidated Statements of Income within Other income expense net
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 We also have finance lease liabilities comprised of equipment lease arrangements with an average duration of 4 to 5 years of which all are currently being sublet Leases with an initial term of 12 months or less are not recorded on our Consolidated Balance Sheets
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
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 and Divestitures for further details including the finalization of the purchase price allocation for the Micro Focus Acquisition
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 and Divestitures for further details including the finalization of the purchase price allocation
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 10 7 million in Fiscal 2025 and 24 0 million thereafter
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
Excludes technology and customer intangible net assets with cost of 432 1 million and 610 2 million respectively accumulated amortization of 48 6 million and 62 9 million respectively and net book value of 383 5 million and 547 3 million respectively disposed of as part of the AMC Divestiture See Note 19 Acquisitions and Divestitures for more details
Where applicable the above balances as of June 30 2024 have been reduced to reflect the impact of intangible assets where the gross cost has become fully amortized during the year ended June 30 2024 The impact of this resulted in reductions to the cost and accumulated amortization of technology assets and customer assets of 240 million and 322 million respectively The weighted average amortization periods for acquired technology and customer intangible assets are approximately six years and nine years respectively
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 is 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 2024 our share of income loss from these investments was 18 2 million year ended June 30 2023 and 2022 23 1 million and 58 7 million respectively
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 21 Accumulated Other Comprehensive Income Loss
We are required to return certain of our leased facilities to their original state at the conclusion of our lease As of June 30 2024 the present value of this obligation was 29 6 million June 30 2023 31 3 million with an undiscounted value of 32 8 million June 30 2023 35 0 million
During the year ended June 30 2024 we recorded 3 5 million of debt issuance costs related to the amendment of the Revolver as defined below and the modification of the Acquisition Term Loan as defined below year ended June 30 2023 185 6 million of debt discount and issuance costs related to the issuance of Senior Secured Notes 2027 and Acquisition Term Loan each as defined below
During the year ended June 30 2024 we recognized a loss on debt extinguishment of 56 4 million related to the acceleration and recognition of unamortized debt discount and issuance costs related to the optional repayments of the Acquisition Term Loan and Term Loan B as defined below in Fiscal
On November 24 2021 Open Text 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 On July 1 2024 OTHI merged with and into Open Text Inc OTI a wholly owned indirect subsidiary of the Company As a result of the merger OTI assumed all rights and obligations of OTHI concerning the Senior Notes 2031 effective July 1 2024
On February 18 2020 OTHI 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 On July 1 2024 as a result of the merger of OTHI with and into OTI OTI assumed all rights and obligations of OTHI concerning the Senior Notes 2030 effective July 1 2024
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
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
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
On December 1 2022 we issued 1 billion in aggregate principal amount of senior secured notes due 2027 Senior Secured Notes 2027 and together with the Senior Notes 2031 Senior Notes 2030 Senior Notes 2029 and Senior Notes 2028 the Senior Notes 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
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 indenture to the Senior Secured Notes 2027 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 2024 the Senior Secured Notes 2027 bear an effective interest rate of 7 39 The effective interest rate includes interest expense of 69 0 million and amortization of debt discount and issuance costs of 2 7 million
On May 30 2018 we entered into a credit facility which provides for a 1 billion term loan facility Term Loan B and borrowed under the facility to among other things repay in full the loans under our prior 800 million term loan facility originally entered into on January 16 2014 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 On May 6 2024 we used a portion of the net proceeds from the AMC Divestiture to prepay in full the outstanding principal balance of 940 million under Term Loan B at which point all remaining commitments under Term Loan B were reduced to zero and Term Loan B was terminated which resulted in a loss on debt extinguishment of 1 8 million relating to unamortized debt issuance costs see Note 23 Other Income Expense Net for more details
As of June 30 2024 we had no outstanding aggregate principal balance under Term Loan B June 30 2023 947 5 million For the year ended June 30 2024 we recorded interest expense of 58 4 million relating to Term Loan B year ended June 30 2023 and 2022 54 0 million and 19 7 million respectively
On December 19 2023 we amended our committed revolving credit facility the Revolver to among other things extend the maturity from October 31 2024 to December 19 2028 and to remove the 10 basis point credit spread adjustment for loans bearing interest based on the SOFR rate Borrowings under the Revolver are secured by a first charge over substantially all of our assets on a pari passu basis with the Acquisition Term Loan as defined below and Senior Secured Notes 2027
The Revolver has no fixed repayment date prior to the end of the term On June 6 2023 we entered into an amendment to replace the LIBOR benchmark rate applicable to borrowings under the Revolver with SOFR benchmark rate Borrowings under the Revolver currently bear interest per annum at a floating rate of interest equal to Term SOFR 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 50 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 2024 our consolidated net leverage ratio as calculated in accordance with the applicable agreement was 2 32 1 00
As of June 30 2024 we had no outstanding balance under the Revolver June 30 2023 275 0 million For the year ended June 30 2024 we recorded interest expense of 2 2 million relating to the Revolver year ended June 30 2023 and 2022 10 1 million and nil respectively relating to amounts previously drawn
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 and Divestitures for more details On August 14 2023 we amended the Acquisition Term Loan to reduce the applicable interest rate margin by 0 75 over the remaining term of the Acquisition Term Loan On May 15 2024 we further amended the Acquisition Term Loan to reduce the applicable interest rate margin by 0 5 and remove the 10 basis point credit spread adjustment for loans bearing interest based on the SOFR rate Both of the above reductions in interest rate margin on the Acquisition Term Loan resulting from the amendments were accounted for by the Company as debt modifications
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 an applicable margin of 2 25 As of June 30 2024 the outstanding balance on the Acquisition Term Loan bears an interest rate of 7 58 As of June 30 2024 the Acquisition Term Loan bears an effective interest rate of 8 67 The effective interest rate includes interest expense of 272 5 million and amortization of debt discount and issuance costs of 18 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 2024 our consolidated net leverage ratio as calculated in accordance with the applicable agreement was 2 32 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 and the Senior Secured Notes 2027
On October 20 2023 and January 22 2024 the Company made prepayments of 75 million and 175 million respectively on the Acquisition Term Loan using cash on hand On May 6 2024 the Company used a portion of the net proceeds from the AMC Divestiture to prepay 1 06 billion of the outstanding principal balance of the Acquisition Term Loan As a result of these prepayments in Fiscal 2024 the Company recognized a loss on debt extinguishment of 54 6 million relating to unamortized debt issuance costs see Note 23 Other Income Expense Net for more details
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 23 Other Income Expense Net for more details
Debt discount and issuance costs relate primarily to costs incurred for the purpose of obtaining or amending our credit facilities and issuing our Senior Notes and are being amortized through interest expense over the respective terms of the Senior Notes and Acquisition Term Loan using the effective interest method and straight line method for the Revolver
The Company has 51 pension and other post retirement plans in multiple countries including 37 defined benefit and other post retirement benefit plans which were assumed as part of the Micro Focus Acquisition see Note 19 Acquisitions and Divestitures 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 2024 make up approximately 58 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 net 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 2024 we made cash contributions of 4 2 million year ended June 30 2023 and 2022 6 5 million and 3 7 million respectively For Fiscal 2025 we expect to make cash contributions of 7 6 million to our defined benefit plans
As part of the Micro Focus Acquisition see Note 19 Acquisitions and Divestitures for more details we assumed a total of 37 defined benefit plans all located outside of Canada and the United States As of June 30 2024 these assumed plans carried a net liability of 48 9 million and are funded at 77 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 9 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 2024 the fair value of these acquired plan assets was 167 0 million
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 for more details
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 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
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 2024 we made contributions of 54 7 million relating to the defined contribution retirement plans year ended June 30 2023 and 2022 40 0 million and 24 0 million respectively
For the year ended June 30 2024 pursuant to the Company s dividend policy we declared total non cumulative dividends of 1 00 per Common Share in the aggregate amount of 267 4 million which we paid during the same period year ended June 30 2023 and 2022 0 9720 and 0 8836 per Common Share respectively in the aggregate amount of 259 5 million and 237 7 million respectively
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 2024 we repurchased 1 400 000 Common Shares on the open market at a cost of 53 1 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 2023 and 2022 521 136 and 2 630 000 Common Shares respectively at a cost of 21 9 million and 111 6 million respectively
During the year ended June 30 2024 we delivered to eligible participants 1 800 395 Common Shares that were purchased in the open market in connection with the settlement of awards and other plans year ended June 30 2023 and 2022 691 181 and 491 244 Common Shares respectively
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
On April 30 2024 the Board authorized a share repurchase plan Fiscal 2024 Repurchase Plan pursuant to which we were authorized to purchase for cancellation in open market transactions from time to time over the 12 month period commencing on May 7 2024 until May 6 2025 up to 250 million of our Common Shares The Fiscal 2024 Repurchase Plan includes a normal course issuer bid to provide means to execute purchases over the Toronto Stock Exchange TSX During the year ended June 30 2024 we repurchased and cancelled 5 073 913 Common Shares for 152 3 million inclusive of 2 Canadian excise taxes recorded year ended June 30 2023 and 2022 nil and 3 809 559 Common Shares for nil and 177 0 million respectively
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
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
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
The aggregate intrinsic value of options exercised during the year ended June 30 2024 was 7 0 million year ended June 30 2023 and 2022 1 8 million and 17 0 million respectively For the year ended June 30 2024 cash in the amount of 31 4 million was received as the result of the exercise of options granted under share based payment arrangements year ended June 30 2023 and 2022 7 8 million and 32 7 million respectively The tax benefit realized by us during the year ended June 30 2024 from the exercise of options eligible for a tax deduction was 1 5 million year ended June 30 2023 and 2022 0 3 million and 2 8 million respectively
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 The Performance Conditions for vesting of the outstanding PSUs are based on market conditions or performance based revenue conditions RSUs become vested when an eligible employee remains employed throughout the vesting period For the year ended June 30 2024 we settled LTIP awards that vested by delivering to eligible participants 223 577 Common Shares that were purchased in the open market at a cost of 10 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 with market based conditions using the Monte Carlo pricing model and RSUs have been valued based upon their grant date fair value The fair value of PSUs with performance based conditions have been valued based upon their grant date fair value Beginning in Fiscal 2024 certain PSU and RSU grants were eligible to receive dividend equivalent units that vest under the same conditions as the underlying grants
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 RSUs other vest over a specified contract date typically two or three years from the respective date of grants
During the year ended June 30 2024 we delivered to eligible participants 1 576 565 Common Shares that were purchased in the open market in connection with the settlement of vested RSUs at a cost of 70 7 million year ended June 30 2023 and 2022 400 210 and 141 452 Common Shares respectively with a cost of 17 6 million and 5 9 million
The DSUs 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
Our ESPP offers employees the opportunity to purchase our Common Shares at a purchase price discount of 15 During the year ended June 30 2024 1 176 466 Common Shares were eligible for issuance to employees enrolled in the ESPP year ended June 30 2023 and 2022 1 089 120 and 931 036 Common Shares respectively During the year ended June 30 2024 cash in the amount of 33 9 million was received from employees relating to the ESPP year ended June 30 2023 and 2022 31 0 million and 34 5 million respectively
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
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
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 2024 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 80 million As of June 30 2024 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 2024
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 Fiscal 2018 and Fiscal 2019 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 through Fiscal 2019 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 through Fiscal 2019 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 Fiscal 2018 and Fiscal 2019 on a basis consistent with its proposal to reduce the available depreciable basis of 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 On December 11 2023 we filed a notice of objection regarding Fiscal 2019 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 through Fiscal 2019 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 through Fiscal 2019 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 2025 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 also in preliminary stages of auditing Fiscal 2020
On August 1 2019 prior to our acquisition of Carbonite Inc 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 Exchange Act 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 On July 14 2023 the district court certified the lead plaintiff s proposed class following which the defendants filed a motion for class decertification On January 31 2024 the parties filed a motion for preliminary approval of a settlement to fully resolve the litigation On February 1 2024 the court issued a preliminary approval order and on May 15 2024 the court issued a final approval order for the settlement and dismissal of the case with prejudice The settlement was substantially paid from insurance coverage with any remaining amount not covered by insurance being immaterial to the Company All defendants denied the merit of the claims alleged in the case and the final settlement does not reflect any admission of fault wrongdoing or liability as to any defendant
Also see Part I Item 1A Risk Factors in this Annual Report on Form 10 K for Fiscal 2024 as well as Note 15 Income Taxes related to certain historical matters arising prior to the Micro Focus Acquisition
The effective tax rate increased to a provision of 36 2 for the year ended June 30 2024 compared to a provision of 32 0 for the year ended June 30 2023 Tax expense increased from 70 8 million during the year ended June 30 2023 to 264 0 million during the year ended June 30 2024 The increase in the effective tax rate was driven by an increase in valuation allowance the impact of internal reorganizations and the AMC Divestiture and U S Base Erosion and Anti Abuse Tax BEAT partially offset by tax credits and change in undistributed earnings The tax rate for the year ended June 30 2023 varied from the statutory rate due to withholding taxes changes in valuation allowance permanent differences related to foreign source income inclusions and the impact of internal reorganizations partially offset by tax credits and permanent differences related to preferential tax treatment of the mark to market gains on derivatives
As of June 30 2024 we have 414 2 million of domestic non capital loss carryforwards In addition we have 3 1 billion of foreign non capital loss carryforwards which includes 490 6 million of U S state loss carryforwards 565 1 million of the foreign non capital loss carryforwards have no expiry date which includes 61 2 million of U S state loss carryforwards The remainder of the domestic and foreign losses expire between 2025 and 2044 In addition investment tax credits of 81 5 million will expire between 2028 and 2044
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 2024 and 2023 the Company had a valuation allowance on its domestic and foreign deferred tax assets of 662 7 million and 605 9 million respectively The balance at June 30 2024 consisted of 8 8 million and 653 9 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 2024 by 56 8 million primarily related to interest carryovers and losses that cannot be benefited
Included in the above tabular reconciliation are unrecognized tax benefits of 63 0 million as of June 30 2024 June 30 2023 66 1 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 117 4 million as of June 30 2024 June 30 2023 112 6 million
We recognize interest expense and penalties related to income tax matters in income tax expense For the year ended June 30 2024 2023 and 2022 respectively we recognized the following amounts as income tax related interest expense and penalties
We believe that it is reasonably possible that the gross unrecognized tax benefits as of June 30 2024 could decrease tax expense in the next 12 months by 44 0 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
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 the 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 for our major jurisdictions are 2012 for Canada 2020 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 refer to Note 14 Guarantees and Contingencies
As of June 30 2024 we have recognized a provision of 15 9 million June 30 2023 28 3 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
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 44 1 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
On April 11 2024 the CJEU Advocate General AG issued an Opinion proposing that the CJEU should i set aside the General Court decision of June 8 2022 ii annul the Commission Decision of April 2 2019 and iii order the European Commission to pay the costs of the appeals While this decision is not binding on the Court and it is possible that the Court forms a different view to the AG Court decisions do in most cases follow AG opinions The AG decision is therefore considered as positively impacting the collectability of this income tax recoverable
Micro Focus previously received and settled State Aid charging notices from HM Revenue and Customs including historic interest Although the Court decision is due within the period ending June 30 2025 the timing of the refund is uncertain and therefore the income tax recoverable has continued to be treated as long term and recognized as part of non current tangible assets as of June 30 2024
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 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
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
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 counterparties to which have 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
Our available for sale financial assets are classified as either Level 2 or 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 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 2024 and 2023 respectively we did not have any transfers between Level 1 Level 2 or Level 3
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 2024 and 2023 respectively no indications of impairments were identified and therefore no fair value measurements were required
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
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
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 loss net within the Consolidated Statements of Comprehensive Income As of June 30 2024 the fair value of the contracts is recorded within Accounts payable and accrued liabilities within the Consolidated Balance Sheets and represents the net loss before tax effect that is expected to be reclassified from accumulated other comprehensive income loss into earnings with the next twelve months
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
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 property and equipment 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 2024 we recognized costs of 36 4 million related to abandoned office spaces that have been early terminated or assigned to a third party of which 19 2 million was related to the write off of right of use assets and 3 5 million in charges associated with the write off of property and equipment as part of the Micro Focus Acquisition Restructuring Plan
Since the inception of the Micro Focus Acquisition Restructuring Plan 146 6 million has been recorded within Special charges recoveries within the Consolidated Statements of Income to date We do not expect to incur any further significant charges relating to the Micro Focus Acquisition 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 property and equipment 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 2024 we recognized costs of 0 5 million related to abandoned office spaces that have been early terminated or assigned to a third party of which 0 1 million was related to the write off of right of use assets
Since the inception of the Fiscal 2022 Restructuring Plan 32 9 million has been recorded within Special charges recoveries in our Consolidated Financial Statements to date We do not expect to incur any further significant charges relating to the Fiscal 2022 Restructuring Plan
Divestiture related costs recorded within Special charges recoveries include the direct costs related to the AMC Divestiture For the year ended June 30 2024 divestiture related costs were 46 6 million year ended June 30 2023 and 2022 nil
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 2024 were 2 0 million year ended June 30 2023 and 2022 48 9 million and 6 9 million respectively
For the year ended June 30 2024 Other charges recoveries includes 5 5 million of compensation related charges and 5 8 million of other miscellaneous charges both associated with the Micro Focus Acquisition along with 1 3 million related to pre acquisition equity incentives of Zix which upon acquisition were replaced by equivalent value cash settlements see Note 19 Acquisitions and Divestitures for more details
For the year ended June 30 2023 Other charges recoveries includes 23 0 million of severance charges 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 see Note 19 Acquisitions and Divestitures for more details
For the year ended June 30 2022 Other charges recoveries 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 Divestitures and 2 7 million relating to other miscellaneous charges
On May 1 2024 the Company completed the sale of its AMC business to Rocket Software for 2 275 billion in cash before taxes fees and other adjustments The results of the AMC business were recorded and presented within our Consolidated Financial Statements during Fiscal 2024 for the period of July 1 2023 through April 30 2024 In connection with the sale a gain of 429 1 million was recorded in Other income expense net within the Company s Consolidated Statements of Comprehensive Income for the year ended June 30 2024
The Company determined that the AMC business did not constitute a component as its operations and cash flows cannot be clearly distinguished from the rest of the Company s operations and cash flows due to significant shared costs therefore the transaction did not meet the discontinued operations criteria and the results of operations from the AMC business are presented within Income from operations in our Consolidated Statements of Income
The Company used the net proceeds from the transaction to prepay in full the outstanding principal balances of the Term Loan B and prepay a portion of the outstanding principal balance of the Acquisition Term Loan as further described in Note 11 Long Term Debt The Company has also agreed to provide certain transition services to Rocket Software following completion of the divestiture for up to 24 months which are included in financing activities on the Consolidated Statements of Cash Flows These transition service costs are reimbursable by Rocket Software For Fiscal 2024 we billed Rocket Software 11 5 million under the TSA
On August 23 2023 we acquired all of the equity interest in KineMatik Ltd KineMatik a provider of automated business process and project management solutions built on OpenText s Content Server In accordance with ASC Topic 805 Business Combinations this acquisition was accounted for as a business combination The results of operations of KineMatik have been consolidated with those of OpenText beginning August 24 2023 The results of KineMatik are not considered to be material to our business
On May 22 2024 we acquired Pillr a cloud native multi tenant Managed Detection and Response MDR platform from Novacoast Inc for Managed Service Providers MSPs that includes powerful threat hunting capabilities In accordance with ASC Topic 805 Business Combinations this acquisition was accounted for as a business combination The results of operations of Pillr have been consolidated with those of OpenText beginning May 22 2024 The results of Pillr are not considered to be material to our business
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 The results of operations of Micro Focus have been consolidated with those of OpenText with effect from February 1 2023
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 billion in aggregate principal amount of 6 90 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 were settled
Current period purchase price allocation adjustments of 32 1 million for the year ended June 30 2024 were primarily driven by changes in other current assets and other liabilities related to adjustments of pre acquisition other current assets and deferred tax liabilities
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 received final court approval and is now resolved was fully paid from insurance coverage and therefore a receivable was 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
Acquisition related costs for Micro Focus included in Special charges recoveries in the Consolidated Statements of Income for the year ended June 30 2024 were 1 1 million year ended June 30 2023 and 2022 48 3 million and nil
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
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
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 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
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
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
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 long lived assets representing property and equipment ROU assets and intangible assets by significant geographic area as of the periods indicated below
The amount of foreign currency translation recognized in other comprehensive income during the year ended June 30 2024 and 2023 included net gains losses relating to our net investment hedge of 0 3 million and 32 3 million respectively as further discussed in Note 17 Derivative Instruments and Hedging Activities
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 and Divestitures 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
During the year ended June 30 2024 the Company recognized a loss on debt extinguishment of 56 4 million related to the acceleration and recognition of unamortized debt discount and issuance costs resulting from the optional repayments and prepayments of the Acquisition Term Loan and Term Loan B in Fiscal 2024 see Note 11 Long Term Debt for more details
On December 1 2022 the Company 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
On December 9 2021 the Company 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
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
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
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
consulting fees from OpenText for assistance with acquisition related business activities The fees earned were not material Mr Sadler abstained from voting on all transactions from which he would potentially derive consulting fees
As part of our quarterly non cumulative cash dividend program we declared on July 31 2024 a dividend of 0 2625 per Common Share The record date for this dividend is August 30 2024 and the payment date is September 20 2024 Future declarations of dividends and the establishment of future record and payment dates are subject to the final determination and discretion of our Board
On July 3 2024 the Company announced a business optimization plan The plan is expected to result in the reduction of approximately 1 200 positions across the Company as well as the reinvestment of approximately 800 new roles in Sales Professional Services and Engineering The business optimization plan is intended to strategically align the Company s workforce to support its growth and innovation plans On an overall basis the business optimization plan is expected to result in a 1 7 reduction of the Company s workforce to approximately 23 000 employees The Company expects to complete the business optimization plan substantially during the first quarter of Fiscal 2025
The Company expects to incur approximately 60 million in restructuring charges that will be substantially recognized in the first quarter of Fiscal 2025 with the majority of such charges anticipated to be paid in cash during the same quarter
On July 31 2024 in order to align its share repurchase plan to its fiscal year the Board approved the early termination of the Fiscal 2024 Repurchase Plan and authorized a new share repurchase plan the Fiscal 2025 Repurchase Plan pursuant to which we may purchase for cancellation in open market transactions from time to time over the 12 month period commencing on August 7 2024 until August 6 2025 if considered advisable up to an aggregate of 300 million of its common shares on the TSX as part of a Fiscal 2025 NCIB defined below NASDAQ and or alternative trading systems in Canada and or the United States if eligible subject to applicable law and stock exchange rules The price that we are authorized to pay for Common Shares in open market transactions is the market price at the time of purchase or such other price as is permitted by applicable law or stock exchange rules The Fiscal 2025 Repurchase Plan will be effected in accordance with Rule 10b 18
On July 31 2024 the Company voluntarily terminated the Fiscal 2024 NCIB and established a new normal course issuer bid the Fiscal 2025 NCIB in order to provide it with a means to execute purchases over the TSX as part of the overall Fiscal 2025 Repurchase Plan
The TSX approved the Company s notice of intention to commence the Fiscal 2025 NCIB pursuant to which the Company may purchase Common Shares over the TSX for the period commencing on August 7 2024 until August 6 2025 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 may be purchased in this period is 21 179 064 representing 10 of the Company s public float calculated in accordance with TSX rules as of July 24 2024 less the 5 073 913 Common Shares purchased under the Fiscal 2024 Repurchase Plan and the maximum number of Common Shares that can be purchased on a single day is 138 175 Common Shares which was 25 of 552 700 the average daily trading volume for the Common Shares on the TSX for the six months ended March 31 2024 subject to certain exceptions for block purchases and subject in any case to the volume and other limitations under Rule 10b 18

Company Name	OPEN TEXT CORP Vist SEC web-site
Category	SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN
Trading Symbol	OTEX