OPEN TEXT CORP
For the period ended Mar 31, 2024. Filed May 2, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2024 · Filed May 2, 2024
OTEX$24.85-4.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2023-12-31; filed 2024-02-01.
0001002638-24-000005
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-03-31; filed 2024-05-02.
0001002638-24-000025
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 296 previous paragraphs and 308 current paragraphs.
173 unchanged; 93 reworded; 35 added; 25 removed; 5 previous and 7 current paragraphs rearranged.
Tables are not compared: 31 previous and 31 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (35)
Current report
•Total revenue was $1,447.1 million, up 16.3% compared to the same period in the prior fiscal year; up 16.0% after factoring in the favorable impact of $3.5 million of foreign exchange rate changes.
Current report
•GAAP-based gross margin was 73.0% compared to 70.3% in the same period in the prior fiscal year.
Current report
•Non-GAAP-based gross margin was 76.7% compared to 75.8% in the same period in the prior fiscal year.
Current report
•GAAP-based net income attributable to OpenText was $98.3 million compared to $57.6 million in the same period in the prior fiscal year.
Current report
•Non-GAAP-based net income attributable to OpenText was $257.0 million compared to $197.8 million in the same period in the prior fiscal year.
Current report
•On May 1, 2024, we completed the previously announced 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 completion of the divestiture for up to 24 months.
Current report
•On May 1, 2024, we provided notices to prepay $2.0 billion of our aggregate outstanding debt including an additional $1.06 billion on the Acquisition Term Loan and $940 million under Term Loan B using net proceeds from the AMC Divestiture. We expect the prepayments to be made on or about May 6, 2024, at which point the remaining balance of the Acquisition Term Loan will be $2.23 billion and the Term Loan B will have been repaid in full.
Current report
On May 1, 2024, the Company completed the previously announced sale of its AMC business to Rocket Software for $2.275 billion in cash before taxes, fees and other adjustments. For the three and nine months ended March 31, 2024, the results of the AMC business were recorded and presented within our Condensed Consolidated Financial Statements. See Note 25 “Subsequent Events” to our Condensed Consolidated Financial Statements for more details.
Current report
On May 1, 2024, we completed the previously announced sale of the AMC business to Rocket Software, for $2.275 billion in cash before taxes, fees and other adjustments. For the three and nine months ended March 31, 2024, the results of the AMC business were recorded and presented within our Condensed Consolidated Financial Statements. See Note 25 “Subsequent Events” to our Condensed Consolidated Financial Statements for more details. On May 1, 2024, we provided notices to prepay $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) and $1.06 billion of the outstanding balance on the Acquisition Term Loan (as defined below), using the net proceeds from the AMC Divestiture. We do not expect the divestiture to have a material impact to our Fiscal 2024 operating results. See Part II, Item 1A “Risk Factors” herein and Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for Fiscal 2023. Due to the limited time since the transaction’s closing date and the size and complexity of the transaction, the Company has not completed the accounting for the business divestiture, including the determination of the gain or loss to be recognized in connection with its completion.
Current report
The comparability of our operating results for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, was impacted by the Micro Focus Acquisition, the results of which were consolidated with those of Open Text beginning February 1, 2023. As such, consolidated operating results for the three months ended March 31, 2023 and 2024 include two and three months, respectively, of Micro Focus operating results.
Current report
reductions in amortization related to intangible assets associated with the AMC Divestiture and its held for sale classification. Micro Focus incurred $140.4 million of cost of revenues during the three months ended March 31, 2024, an increase of $32.2 million as compared to the same period in the prior fiscal year.
Current report
The comparability of our operating results for the nine months ended March 31, 2024, as compared to the nine months ended March 31, 2023, was impacted by the Micro Focus Acquisition, the results of which were consolidated with those of Open Text beginning February 1, 2023. As such, consolidated operating results for the nine months ended March 31, 2023 and 2024 include two and nine months, respectively, of Micro Focus operating results.
Current report
Cloud services and subscriptions revenues increased by $19.1 million or 4.4% during the three months ended March 31, 2024 as compared to the same period in the prior fiscal year; up 4.4% after factoring in the favorable impact of $0.1 million of foreign exchange rate changes. The increase was primarily driven by incremental Cloud services and subscriptions revenues from the Micro Focus Acquisition over the comparative period. Geographically, the overall change was attributable to an increase in EMEA of $8.0 million, an increase in Americas of $12.1 million and a decrease in Asia Pacific of $1.0 million.
Current report
Cloud services and subscriptions revenues increased by $106.9 million or 8.6% during the nine months ended March 31, 2024 as compared to the same period in the prior fiscal year; up 8.0% after factoring in the favorable impact of $6.5 million of foreign exchange rate changes. The increase was primarily driven by incremental Cloud services and subscriptions revenues from the Micro Focus Acquisition over the comparative period. Geographically, the overall change was attributable to an increase in Americas of $56.6 million, an increase in EMEA of $43.0 million and an increase in Asia Pacific of $7.3 million.
Current report
Customer support revenues increased by $115.6 million or 20.1% during the three months ended March 31, 2024 as compared to the same period in the prior fiscal year; up 19.6% after factoring in the favorable impact of $2.5 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 $41.9 million, an increase in EMEA of $55.1 million and an increase in Asia Pacific of $18.6 million.
Current report
Customer support revenues increased by $875.2 million or 72.3% during the nine months ended March 31, 2024 as compared to the same period in the prior fiscal year; up 70.3% after factoring in the favorable impact of $25.2 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 $433.9 million, an increase in EMEA of $341.7 million and an increase in Asia Pacific of $99.6 million.
Current report
Professional service and other revenues increased by $7.2 million or 7.7% during the three months ended March 31, 2024 as compared to the same period in the prior fiscal year; up 7.0% after factoring in the favorable impact of $0.6 million of foreign exchange rate changes. The increase was primarily driven by incremental Professional service and other revenues from the Micro Focus Acquisition over the comparative period. Geographically, the overall change was attributable to an increase in EMEA of $8.6 million, a decrease in Americas of $0.9 million and a decrease in Asia Pacific of $0.5 million.
Current report
Cost of Professional service and other revenues decreased by $3.1 million during the three months ended March 31, 2024 as compared to the same period in the prior fiscal year. This was driven by a decrease in labour-related costs of $3.0 million. Overall, the gross margin percentage on Professional service and other revenues increased to 25% from 16% in the same period in the prior fiscal year.
Current report
Professional service and other revenues increased by $78.8 million or 35.0% during the nine months ended March 31, 2024 as compared to the same period in the prior fiscal year; up 32.8% after factoring in the favorable impact of $4.9 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 Americas of $14.9 million, an increase in Asia Pacific of $8.2 million and an increase in EMEA of $55.8 million.
Current report
Research and development expenses increased by $23.3 million during the three months ended March 31, 2024 as compared to the same period in 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 $13.4 million, facility- related expenses increased by $8.7 million and travel and communication increased by $1.1 million. These increases were partially offset by a reduction in contract labour and consulting of $1.8 million. Overall, our research and development expenses, as a percentage of total revenues, decreased to 16% compared to the same period in the prior fiscal year at 17%.
Current report
Sales and marketing expenses increased by $25.2 million during the three months ended March 31, 2024 as compared to the same period in 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 $17.7 million, credit loss expense increased by $4.8 million, commissions increased by $4.3 million and facility-related expenses increased by $1.5 million. Overall, our sales and marketing expenses, as a percentage of total revenues, decreased to 20% compared to 22% in the same period in the prior fiscal year.
Current report
Special charges (recoveries) decreased by $54.8 million during the three months ended March 31, 2024 as compared to the same period in the prior fiscal year. Acquisition related costs decreased by $34.1 million and other miscellaneous charges decreased by $27.6 million, which includes severance and other costs associated with the Micro Focus Acquisition. These costs were partially offset by divestiture costs related to the AMC Divestiture, which increased by $7.3 million, as compared to the same period in the prior fiscal year.
Current report
Special charges (recoveries) decreased by $11.4 million during the nine months ended March 31, 2024 as compared to the same period in the prior fiscal year. Acquisition related costs decreased by $43.6 million and other miscellaneous charges decreased by $26.0 million, which includes severance and other costs associated with the Micro Focus Acquisition. These decreases were partially offset by increased restructuring costs related to the Micro Focus Acquisition of $50.0 million and increased divestiture costs of $14.3 million related to the AMC Divestiture, as compared to the same period in the prior fiscal year.
Current report
(1)The three and nine months ended March 31, 2023 include 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 Condensed Consolidated Financial Statements for more details).
Current report
(6)During the three and nine months ended March 31, 2024, we recognized a loss on debt extinguishment of $10.8 million related to the acceleration and recognition of unamortized debt discount and issuance costs resulting from the optional repayments of the Acquisition Term Loan in Fiscal 2024 (see Note 11 “Long-Term Debt” to our Condensed Consolidated Financial Statements for more details).
Current report
(7)Adjustment relates to differences between the GAAP-based tax provision rate of approximately 6% 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.
Current report
for the nine months ended March 31, 2024
Current report
(7)Adjustment relates to differences between the GAAP-based tax provision rate of approximately 10% 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.
Current report
for the nine months ended March 31, 2023
Current report
Cash flows from operating activities
Current report
Cash flows from investing activities
Current report
Cash flows from financing activities
Current report
Following the end of the quarter, on May 1, 2024, we provided notices to prepay $2.0 billion of our aggregate outstanding debt including $940 million of the aggregate principal amount outstanding under Term Loan B, using the net proceeds from the AMC Divestiture. We expect the prepayment to be made on or about May 6, 2024. See Note 25 “Subsequent Events” to our Condensed Consolidated Financial Statements for more details.
Current report
For the three and nine months ended March 31, 2024, we recorded interest expense of $69.2 million and $219.5 million, respectively, relating to the Acquisition Term Loan (three and nine months ended March 31, 2023— $48.1 million).
Current report
Following the end of the quarter, on May 1, 2024, we provided notices to prepay $2.0 billion of our aggregate outstanding debt including an additional$1.06 billion drawn under the Acquisition Term Loan using net proceeds from the AMC Divestiture. We expect the prepayment to be made on or about May 6, 2024, at which point the Term Loan B will have been repaid in full. See Note 25 “Subsequent Events” to our Condensed Consolidated Financial Statements for more details.
Removed paragraphs (25)
Previous report
•Total revenue was $1,534.9 million, up 71.0% compared to the same period in the prior fiscal year; up 68.2% after factoring in the favorable impact of $25.6 million of foreign exchange rate changes.
Previous report
•GAAP-based gross margin was 73.6% compared to 70.8% in the same period in the prior fiscal year.
Previous report
•Non-GAAP-based gross margin was 78.6% compared to 76.0% in the same period in the prior fiscal year.
Previous report
•GAAP-based net income attributable to OpenText was $37.7 million compared to $258.5 million in the same period in the prior fiscal year.
Previous report
•Non-GAAP-based net income attributable to OpenText was $338.5 million compared to $240.2 million in the same period in the prior fiscal year.
Previous report
•We entered into a definitive agreement to divest the AMC business to Rocket Software for consideration of $2.275 billion in cash, before taxes, fees and other adjustments, and subject to certain regulatory approvals and other customary closing conditions.
Previous report
•We repaid the outstanding balance on the Revolver of $100 million and repaid $75 million drawn under on the Acquisition Term Loan. Subsequent to the end of the second quarter, on January 22, 2024, we repaid an additional $175 million of the Acquisition Term Loan.
Previous report
On November 28, 2023, the Company entered into an agreement to sell its AMC business to Rocket Software, for $2.275 billion in cash before taxes, fees and other adjustments. The transaction remains subject to certain regulatory approvals and other customary closing conditions and is expected to close in the fourth quarter of Fiscal 2024.
Previous report
On November 28, 2023, the Company entered into an agreement to sell its AMC business to Rocket Software, for $2.275 billion in cash before taxes, fees and other adjustments. The transaction remains subject to certain regulatory approvals and other customary closing conditions and is expected to close in the fourth quarter of Fiscal 2024. We do not expect the divestiture to have a material impact to our Fiscal 2024 results. See Part II, Item 1A “Risk Factors” herein and Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for Fiscal 2023.
Previous report
Cloud services and subscriptions revenues increased by $41.4 million or 10.1% during the three months ended December 31, 2023 as compared to the same period in the prior fiscal year; up 9.2% after factoring in the favorable impact of $4.0 million of foreign exchange rate changes. The increase was primarily driven by incremental Cloud services and subscriptions revenues from the Micro Focus Acquisition over the comparative period. Geographically, the overall change was attributable to an increase in EMEA of $20.2 million, an increase in Americas of $17.7 million and an increase in Asia Pacific of $3.5 million.
Previous report
Cloud services and subscriptions revenues increased by $87.8 million or 10.8% during the six months ended December 31, 2023 as compared to the same period in the prior fiscal year; up 10.0% after factoring in the favorable impact of $6.4 million of foreign exchange rate changes. The increase was primarily driven by incremental Cloud services and subscriptions revenues from the Micro Focus Acquisition over the comparative period. Geographically, the overall change was attributable to an increase in Americas of $44.4 million, an increase in EMEA of $35.1 million and an increase in Asia Pacific of $8.3 million.
Previous report
Customer support revenues increased by $379.3 million or 119.8% during the three months ended December 31, 2023 as compared to the same period in the prior fiscal year; up 115.6% after factoring in the favorable impact of $13.5 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 $189.6 million, an increase in EMEA of $147.1 million and an increase in Asia Pacific of $42.5 million.
Previous report
Customer support revenues increased by $759.6 million or 119.8% during the six months ended December 31, 2023 as compared to the same period in the prior fiscal year; up 116.3% after factoring in the favorable impact of $22.7 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 $392.0 million, an increase in EMEA of $286.6 million and an increase in Asia Pacific of $81.0 million.
Previous report
Professional service and other revenues increased by $35.5 million or 55.2% during the three months ended December 31, 2023 as compared to the same period in the prior fiscal year; up 51.3% after factoring in the favorable impact of $2.5 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 $23.0 million, an increase in Americas of $8.4 million and an increase in Asia Pacific of $4.1 million.
Previous report
Professional service and other revenues increased by $71.7 million or 54.4% during the six months ended December 31, 2023 as compared to the same period in the prior fiscal year; up 51.1% after factoring in the favorable impact of $4.4 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 Americas of $15.8 million, an increase in Asia Pacific of $8.7 million and an increase in EMEA of $47.2 million.
Previous report
Research and development expenses increased by $234.8 million during the six months ended December 31, 2023 as compared to the same period in the prior fiscal year, partially 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 $159.5 million, facility-related expenses increased by $47.4 million, contract labour and consulting increased by $10.8 million, and share-based compensation expense increased by $9.8 million. Overall, our research and development expenses, as a percentage of total revenues, increased to 15% compared to the same period in the prior fiscal year at 13%.
Previous report
Sales and marketing expenses increased by $103.1 million during the three months ended December 31, 2023 as compared to the same period in 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 $71.8 million, commissions increased by $10.0 million, facility-related expenses increased by $7.0 million, contract labour and consulting expenses increased by $4.2 million, share-based compensation expense increased by $3.8 million, and travel and communication expenses increased by $3.7 million. Overall, our sales and marketing expenses, as a percentage of total revenues, decreased to 18% compared to 20% in the same period in the prior fiscal year.
Previous report
Special charges (recoveries) increased by $43.9 million during the three months ended December 31, 2023 as compared to the same period in the prior fiscal year. Restructuring costs related to the Micro Focus Acquisition increased by $44.8 million and divestiture costs related to the proposed divestiture of the AMC business increased by $5.4 million, offset by acquisition related costs which decreased by $6.0 million, as compared to the same period in the prior fiscal year.
Previous report
Special charges (recoveries) increased by $43.4 million during the six months ended December 31, 2023 as compared to the same period in the prior fiscal year. Restructuring costs related to the Micro Focus Acquisition increased by $51.6 million, divestiture costs related to the proposed divestiture of the AMC business increased by $7.0 million and other miscellaneous charges increased by $1.6 million, offset by acquisition related costs which decreased by $9.5 million as compared to the same period in the prior fiscal year.
Previous report
Provision for Income Taxes
Previous report
(7)Adjustment relates to differences between the GAAP-based tax provision rate of approximately 18% 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.
Previous report
(7)Adjustment relates to differences between the GAAP-based tax provision rate of approximately 13% 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.
Previous report
Cash flows provided by operating activities
Previous report
Cash flows provided by (used in) financing activities
Previous report
Please see Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for Fiscal 2023.
Reworded paragraphs (93)
Previous wording
When used in this report, the words “anticipates”, “expects”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “may”, “could”, “would”, “might”, “will” and other similar language, as they relate to Open Text Corporation (OpenText or the Company), are intended to identify forward-looking statements under applicable securities laws. Specific forward-looking statements in this report include, but are not limited to, statements regarding: (i) our focus in the fiscal years beginning July 1, 2023 and ending June 30, 2024 (Fiscal 2024) and July 1, 2024 and ending June 30, 2025 (Fiscal 2025) on growth in earnings and cash flows; (ii) creating value through investments in broader Information Management capabilities; (iii) our future business plans and operations, and business planning process; (iv) business trends; (v) distribution; (vi) the Company’s presence in the cloud and in growth markets; (vii) product and solution developments, enhancements and releases, the timing thereof and the customers targeted; (viii) the Company’s financial condition, results of operations and earnings; (ix) the basis for any future growth and for our financial performance; (x) declaration of quarterly dividends; (xi) future tax rates; (xii) the changing regulatory environment; (xiii) annual recurring revenues; (xiv) research and development and related expenditures; (xv) our building, development and consolidation of our network infrastructure; (xvi) competition and changes in the competitive landscape; (xvii) our management and protection of intellectual property and other proprietary rights; (xviii) existing and foreign sales and exchange rate fluctuations; (xix) cyclical or seasonal aspects of our business; (xx) capital expenditures; (xxi) potential legal and/or regulatory proceedings; (xxii) acquisitions and their expected impact, including our ability to realize the benefits expected from the acquisitions and to successfully integrate the assets we acquire or utilize such assets to their full capacity, including in connection with the acquisition of Micro Focus International Limited, formerly Micro Focus International plc, and its subsidiaries (Micro Focus) (see Note 19 “Acquisitions and Divestitures” to our Condensed Consolidated Financial Statements for more details); (xxiii) tax audits; (xxiv) the expected impact of our decision to cease all direct business in Russia and Belarus and with known Russian-owned companies;(xxv) expected costs of the restructuring plans; (xxvi) targets regarding greenhouse gas emissions, waste diversion, energy consumption and Equity, Diversity and Inclusion (ED&I) initiatives; (xvii) integration of Micro Focus, resulting synergies and timing thereof; (xxviii) divestitures and their expected impact, including in connection with the proposed divestiture of the AMC business (see Note 19 “Acquisitions and Divestitures” to our Condensed Consolidated Financial Statements for more details); and (xxix) other matters.
Current wording
When used in this report, the words “anticipates”, “expects”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “may”, “could”, “would”, “might”, “will” and other similar language, as they relate to Open Text Corporation (OpenText or the Company), are intended to identify forward-looking statements under applicable securities laws. Specific forward-looking statements in this report include, but are not limited to, statements regarding: (i) our focus in the fiscal years beginning July 1, 2023 and ending June 30, 2024 (Fiscal 2024) and July 1, 2024 and ending June 30, 2025 (Fiscal 2025) on growth in earnings and cash flows; (ii) creating value through investments in broader Information Management capabilities; (iii) our future business plans and operations, and business planning process; (iv) business trends; (v) distribution; (vi) the Company’s presence in the cloud and in growth markets; (vii) product and solution developments, enhancements and releases, the timing thereof and the customers targeted; (viii) the Company’s financial condition, results of operations and earnings; (ix) the basis for any future growth and for our financial performance; (x) declaration of quarterly dividends; (xi) future tax rates; (xii) the changing regulatory environment; (xiii) annual recurring revenues; (xiv) research and development and related expenditures; (xv) our building, development and consolidation of our network infrastructure; (xvi) competition and changes in the competitive landscape; (xvii) our management and protection of intellectual property and other proprietary rights; (xviii) existing and foreign sales and exchange rate fluctuations; (xix) cyclical or seasonal aspects of our business; (xx) capital expenditures; (xxi) potential legal and/or regulatory proceedings; (xxii) acquisitions and their expected impact, including our ability to realize the benefits expected from the acquisitions and to successfully integrate the assets we acquire or utilize such assets to their full capacity, including in connection with the acquisition of Micro Focus International Limited, formerly Micro Focus International plc, and its subsidiaries (Micro Focus) (see Note 19 “Acquisitions and Divestitures” to our Condensed Consolidated Financial Statements for more details); (xxiii) tax audits; (xxiv) the expected impact of our decision to cease all direct business in Russia and Belarus and with known Russian-owned companies;(xxv) expected costs of the restructuring plans; (xxvi) targets regarding greenhouse gas emissions, waste diversion, energy consumption and Equity, Diversity and Inclusion (ED&I) initiatives; (xvii) integration of Micro Focus, resulting synergies and timing thereof; (xxviii) divestitures and their expected impact, including in connection with the divestiture of the Application, Modernization and Connectivity (AMC) business (the AMC Divestiture) (see Note 19 “Acquisitions and Divestitures” to our Condensed Consolidated Financial Statements for more…
Excerpt shortened here; the source contains the full paragraph.
Previous wording
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; (ix) our ability to successfully complete the proposed divestiture of the AMC business; and (x) 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.
Current wording
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.
Previous wording
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 proposed divestiture of the AMC business; (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 …
Excerpt shortened here; the source contains the full paragraph.
Current wording
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 wars, 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…
Excerpt shortened here; the source contains the full paragraph.
Previous wording
All dollar and percentage comparisons made herein refer to the three and six months ended December 31, 2023 compared with the three and six months ended December 31, 2022, unless otherwise noted.
Current wording
All dollar and percentage comparisons made herein refer to the three and nine months ended March 31, 2024 compared with the three and nine months ended March 31, 2023, unless otherwise noted.
Previous wording
As of December 31, 2023, we employed a total of approximately 23,600 individuals. Of the total 23,600 individuals we employed as of December 31, 2023, 8,700 or 37% are in the Americas, 5,400 or 23% are in EMEA and 9,500 or 40% 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. Please see “Results of Operations” below for our definitions of geographic regions.
Current wording
As of March 31, 2024, we employed a total of approximately 23,700 individuals. Of the total 23,700 individuals we employed as of March 31, 2024, 8,700 or 37% are in the Americas, 5,400 or 23% are in EMEA and 9,600 or 40% 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.
Previous wording
During the second quarter of Fiscal 2024 (which includes the results of Micro Focus, which has a significant impact on period-over-period comparisons) we saw the following activity:
Current wording
During the third quarter of Fiscal 2024 (which includes the results of Micro Focus, which has an impact on period-over-period comparisons) we saw the following activity:
Previous wording
•Total annual recurring revenue, which we define as the sum of cloud services and subscriptions revenue and customer support revenue, was $1,145.9 million, up 58.0% compared to the same period in the prior fiscal year; up 55.6% after factoring in the favorable impact of $17.5 million of foreign exchange rate changes.
Current wording
•Total annual recurring revenue, which we define as the sum of cloud services and subscriptions revenue and customer support revenue, was $1,146.0 million, up 13.3% compared to the same period in the prior fiscal year; up 13.1% after factoring in the favorable impact of $2.6 million of foreign exchange rate changes.
Previous wording
•Cloud services and subscriptions revenue was $450.1 million, up 10.1% compared to the same period in the prior fiscal year; up 9.2% after factoring in the favorable impact of $4.0 million of foreign exchange rate changes.
Current wording
•Cloud services and subscriptions revenue was $454.5 million, up 4.4% compared to the same period in the prior fiscal year; up 4.4% after factoring in the favorable impact of $0.1 million of foreign exchange rate changes.
Previous wording
•GAAP-based earnings per share (EPS), diluted, was $0.14 compared to $0.96 in the same period in the prior fiscal year.
Current wording
•GAAP-based earnings per share (EPS), diluted, was $0.36 compared to $0.21 in the same period in the prior fiscal year.
Previous wording
•Non-GAAP-based EPS, diluted, was $1.24 compared to $0.89 the same period in the prior fiscal year.
Current wording
•Non-GAAP-based EPS, diluted, was $0.94 compared to $0.73 the same period in the prior fiscal year.
Previous wording
•Adjusted EBITDA, a non-GAAP measure, was $566.3 million compared to $340.9 million in the same period in the prior fiscal year.
Current wording
•Adjusted EBITDA, a non-GAAP measure, was $463.7 million compared to $365.1 million in the same period in the prior fiscal year.
Previous wording
•Operating cash flow was $397.8 million for the six months ended December 31, 2023 compared to $327.1 million in the same period in the prior fiscal year, up 21.6%.
Current wording
•Operating cash flow was $782.5 million for the nine months ended March 31, 2024 compared to $663.9 million in the same period in the prior fiscal year, up 17.9%.
Previous wording
•Cash and cash equivalents were $1,003.1 million as of December 31, 2023, compared to $1,231.6 million as of June 30, 2023.
Current wording
•Cash and cash equivalents were $1,125.3 million as of March 31, 2024, compared to $1,231.6 million as of June 30, 2023.
Previous wording
For the three and six months ended December 31, 2023, we recorded interest expense of $73.1 million and $150.3 million, respectively, relating to the Acquisition Term Loan (three and six months ended December 31, 2022— nil). Following the end of the quarter, on January 22, 2024, the Company repaid an additional $175 million drawn under the Acquisition Term Loan (see Note 25 “Subsequent Events” to our Condensed Consolidated Financial Statements for more details).
Current wording
•We repaid $175 million drawn under the Acquisition Term Loan in January 2024.
Previous wording
•Enterprise cloud bookings were $235.5 million, compared to $144.7 million in the same period in the prior fiscal year. We define Enterprise cloud bookings as 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.
Current wording
•Enterprise cloud bookings were $165.1 million, compared to $108.2 million in the same period in the prior fiscal year. We define Enterprise cloud bookings as 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.
Previous wording
On January 31, 2023, we acquired all of the issued and to be issued share capital of Micro Focus for a total purchase price of $6.2 billion, inclusive of Micro Focus’ cash and repayment of Micro Focus’ outstanding indebtedness, subject to final adjustments. 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 significantly impacts period-over-period comparability. See Note 19 “Acquisitions” to our Condensed Consolidated Financial Statements for more details.
Current wording
On January 31, 2023, we acquired all of the issued and to be issued share capital of Micro Focus for a total purchase price of $6.2 billion, inclusive of Micro Focus’ cash and repayment of Micro Focus’ outstanding indebtedness, subject to final adjustments. 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 Condensed Consolidated Financial Statements for more details.
Previous wording
The Company determined that the assets and liabilities of the AMC business met the criteria for held for sale classification and the respective assets and liabilities have been reclassified to assets held for sale and liabilities held for sale reported in our Condensed Consolidated Balance Sheets as of December 31, 2023. The Company has determined that the AMC business does not constitute a component, as its operations and cash flows can not 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 Condensed Consolidated Statements of Income. The Company expects that the sale proceeds less costs to sell will exceed the preliminary estimate of the carrying value of the net assets for the AMC business. The carrying value is subject to change based on developments leading up to the closing date. See Note 19 “Acquisitions and Divestitures” to our Condensed Consolidated Financial Statements for more details.
Current wording
As of March 31, 2024, the Company determined that the assets and liabilities of the AMC business met the criteria for held for sale classification and the respective assets and liabilities have been reclassified to Assets held for sale and Liabilities held for sale reported in our Condensed Consolidated Balance Sheets. 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 Condensed Consolidated Statements of Income. The Company expects that the sale proceeds less costs to sell will exceed the carrying value of the net assets for the AMC business. The carrying value is subject to change based on developments leading up to the closing date. See Note 19 “Acquisitions and Divestitures” to our Condensed Consolidated Financial Statements for more details.
Previous wording
We continue to monitor the geopolitical conflicts and diplomatic tensions around the world, including the Russia-Ukraine and Israel-Hamas wars. We have ceased all direct business in Russia and Belarus and with known Russian-owned companies. 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, please see Part I, Item 1A “Risk Factors” and Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for Fiscal 2023.
Current wording
We continue to monitor the geopolitical conflicts and diplomatic tensions around the world, including the Russia-Ukraine and Israel-Hamas wars. We have ceased all direct business in Russia and Belarus and with known Russian-owned companies. 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” and Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for Fiscal 2023.
Previous wording
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. On a fiscal year-to-date basis, we have invested $454.7 million or 15.4% of revenue in R&D expense, which is in line with our target spend for R&D expense this fiscal year.
Current wording
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. On a fiscal year-to-date basis, we have invested $688.7 million or 15.6% of revenue in R&D expense, which is in line with our target spend for R&D expense this fiscal year.
Previous wording
The completion of the Micro Focus Acquisition during Fiscal 2023 has substantially expanded our scope and size by adding assets and operations to our existing business. We have incurred and will continue to incur additional integration costs. As part of the Micro Focus Acquisition, we made a strategic decision to implement a restructuring plan that impacted its global workforce and further reduced our real estate footprint around the world in an effort to further streamline our operations, consistent with previously announced cost synergies of $400 million (Micro Focus Acquisition Restructuring Plan). The total size of the plan is expected to result in a reduction in the combined workforce of approximately 8%, or 2,000 employees, with an estimated cost of $160 million to $175 million, of which we have incurred $123.9 million as of December 31, 2023. We expect the Micro Focus Acquisition Restructuring Plan to be completed by the end of Fiscal 2024. See Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for Fiscal 2023. The Micro Focus Acquisition has a significant impact on period-over-period comparability as more fully discussed below.
Current wording
The completion of the Micro Focus Acquisition during Fiscal 2023 substantially expanded our scope and size by adding assets and operations to our existing business. We have incurred and will continue to incur additional integration costs. As part of the Micro Focus Acquisition, we made a strategic decision to implement a restructuring plan that impacted its global workforce and further reduced our real estate footprint around the world in an effort to further streamline our operations, consistent with previously announced cost synergies of $400 million (Micro Focus Acquisition Restructuring Plan). The total size of the plan is expected to result in a reduction in the combined workforce of approximately 8%, or 2,000 employees, with an estimated cost of $155 million to $170 million, of which we have incurred $133.5 million as of March 31, 2024. We expect the Micro Focus Acquisition Restructuring Plan to be completed by the end of Fiscal 2024. See Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for Fiscal 2023. The Micro Focus Acquisition has a significant impact on period-over-period comparability as more fully discussed below.
Previous wording
For a full discussion of all our accounting policies, please see Note 2 “Accounting Policies and Recent Accounting Pronouncements” to the Consolidated Financial Statements included in our Annual Report on Form 10-K for Fiscal 2023.
Current wording
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 our Annual Report on Form 10-K for Fiscal 2023.
Previous wording
The comparability of our operating results for the three months ended December 31, 2023 as compared to the three months ended December 31, 2022 was impacted by the recent Micro Focus Acquisition. Our total revenues increased by $637.4 million across all of our product types for the three months ended December 31, 2023, relative to the three months ended December 31, 2022, primarily due to revenue contributions from the Micro Focus Acquisition and a favorable impact of $25.6 million of foreign exchange rate changes. Micro Focus contributed $601.4 million to our total revenues for the three months ended December 31, 2023, of which $369.5 million related to customer support revenues and $153.3 million related to license revenues.
Current wording
Our total revenues increased by $202.5 million across all of our product types for the three months ended March 31, 2024, relative to the three months ended March 31, 2023, primarily due to revenue contributions from the Micro Focus Acquisition and a favorable impact of $3.5 million of foreign exchange rate changes. Micro Focus contributed $564.7 million to our total revenues for the three months ended March 31, 2024, of which $366.5 million related to customer support revenues and $117.6 million related to license revenues. Micro Focus total revenues increased by $190.3 million during the three months ended March 31, 2024, as compared to the same period in the prior fiscal year.
Previous wording
Total cost of revenues increased by $144.1 million for the three months ended December 31, 2023, relative to the three months ended December 31, 2022, primarily from additional cost of revenues as a result of the Micro Focus Acquisition. Micro Focus incurred $155.4 million of cost of revenues during the three months ended December 31, 2023.
Current wording
Total cost of revenues increased by $21.6 million for the three months ended March 31, 2024, relative to the three months ended March 31, 2023, primarily from additional cost of revenues as a result of the Micro Focus Acquisition, partially offset by
Previous wording
Total operating expenses increased by $782.4 million for the six months ended December 31, 2023, relative to the six months ended December 31, 2022, primarily from additional operating expenses as a result of the Micro Focus Acquisition. Micro Focus incurred $708.5 million of operating expenses for the six months ended December 31, 2023, of which $522.1 million was related to research and development, sales and marketing, and general and administrative expenses.
Current wording
Total operating expenses increased by $17.8 million for the three months ended March 31, 2024, relative to the three months ended March 31, 2023, primarily from additional operating expenses as a result of the Micro Focus Acquisition, partially offset by decreased acquisition related costs. Micro Focus incurred $321.1 million of operating expenses during the three months ended March 31, 2024, of which $262.4 million was related to research and development, sales and marketing, and general and administrative expenses. Micro Focus total operating expenses increased by $5.8 million during the three months ended March 31, 2024, of which $38.7 million was related to research and development, sales and marketing, and general and administrative expenses, which were partly offset by decreased acquisition related costs, as compared to the same period in the prior fiscal year.
Previous wording
The comparability of our operating results for the six months ended December 31, 2023 as compared to the six months ended December 31, 2022 was impacted by the recent Micro Focus Acquisition. Our total revenues increased by $1,210.8 million across all of our product types for the six months ended December 31, 2023 relative to the six months ended December 31, 2022, primarily due to revenue contributions from the Micro Focus Acquisition, and the favorable impact of $41.5 million of foreign exchange rate changes. Micro Focus contributed $1,164.3 million to our total revenues for the six months ended December 31, 2023, of which $739.4 million related to customer support revenues and $268.8 million related to license revenues.
Current wording
Our total revenues increased by $1,413.3 million across all of our product types for the nine months ended March 31, 2024 relative to the nine months ended March 31, 2023, primarily due to revenue contributions from the Micro Focus Acquisition and the favorable impact of $45.0 million of foreign exchange rate changes. Micro Focus contributed $1,729.0 million to our total revenues for the nine months ended March 31, 2024, of which $1,105.8 million related to customer support revenues and $386.4 million related to license revenues. Micro Focus total revenues increased by $1,354.6 million during the nine months ended March 31, 2024, as compared to the same period in the prior fiscal year.
Previous wording
Total cost of revenues increased by $292.7 million for the six months ended December 31, 2023 relative to the six months ended December 31, 2022, primarily from additional cost of revenues as a result of the Micro Focus Acquisition. Micro Focus incurred $313.5 million of cost of revenues for the six months ended December 31, 2023.
Current wording
Total cost of revenues increased by $314.3 million for the nine months ended March 31, 2024 relative to the nine months ended March 31, 2023, primarily from additional cost of revenues as a result of the Micro Focus Acquisition. Micro Focus incurred $454.0 million of cost of revenues for the nine months ended March 31, 2024, an increase of $345.8 million as compared to the same period in the prior fiscal year.
Previous wording
Total operating expenses increased by $424.2 million for the three months ended December 31, 2023, relative to the three months ended December 31, 2022, primarily from additional operating expenses as a result of the Micro Focus Acquisition. Micro Focus incurred $357.6 million of operating expenses during the three months ended December 31, 2023, of which $254.1 million was related to research and development, sales and marketing, and general and administrative expenses.
Current wording
Total operating expenses increased by $800.1 million for the nine months ended March 31, 2024, relative to the nine months ended March 31, 2023, primarily from additional operating expenses as a result of the Micro Focus Acquisition. Micro Focus incurred $1,029.6 million of operating expenses for the nine months ended March 31, 2024, of which $784.5 million was related to research and development, sales and marketing, and general and administrative expenses. Micro Focus total operating expenses increased by $714.3 million during the nine months ended March 31, 2024, of which $560.8 million was related to research and development, sales and marketing, and general and administrative expenses, as compared to the same period in the prior fiscal year.
Previous wording
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 business-to-business 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 platform as a service (PaaS), SaaS, cloud subscriptions and managed services. For the quarter ended December 31, 2023, our cloud renewal rate, excluding the impact of Carbonite, Zix and Micro Focus, decreased to 93% from 94% over the quarter ended December 31, 2022.
Current wording
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 business-to-business 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 platform as a service (PaaS), SaaS, cloud subscriptions and managed services. For the quarter ended March 31, 2024, our cloud renewal rate, excluding the impact of Carbonite, Zix and Micro Focus, decreased to 92% from 95% over the quarter ended March 31, 2023.
Previous wording
There were 48 cloud services contracts greater than $1.0 million that closed during the second quarter of Fiscal 2024, compared to 23 contracts during the second quarter of Fiscal 2023.
Current wording
There were 28 cloud services contracts greater than $1.0 million that closed during the third quarter of Fiscal 2024, compared to 13 contracts during the third quarter of Fiscal 2023.
Previous wording
Cost of Cloud services and subscriptions revenues increased by $45.8 million during the three months ended December 31, 2023 as compared to the same period in the prior fiscal year. This was due to an increase in third-party network usage fees of $32.3 million and an increase in labour-related costs of $13.3 million both partially driven by incremental Cloud services and subscriptions cost of revenues from the Micro Focus Acquisition. Overall, the gross margin percentage on Cloud services and subscriptions revenues decreased to 60% from 67%.
Current wording
Cost of Cloud services and subscriptions revenues increased by $28.7 million during the three months ended March 31, 2024 as compared to the same period in the prior fiscal year. This was due to an increase in third-party network usage fees of $25.3 million and an increase in labour-related costs of $3.9 million both partially driven by incremental Cloud services and subscriptions costs of revenues from the Micro Focus Acquisition. Overall, the gross margin percentage on Cloud services and subscriptions revenues decreased to 59% from 64%.
Previous wording
There were 69 cloud services contracts greater than $1.0 million that closed during the first six months of Fiscal 2024, compared to 41 contracts during the first six months of Fiscal 2023.
Current wording
There were 97 cloud services contracts greater than $1.0 million that closed during the first nine months of Fiscal 2024, compared to 54 contracts during the first nine months of Fiscal 2023.
Previous wording
Cost of Cloud services and subscriptions revenues increased by $85.4 million during the six months ended December 31, 2023 as compared to the same period in the prior fiscal year. This was due to an increase in third-party network usage fees of $44.9 million and an increase in labour-related costs of $40.4 million both partially driven by incremental Cloud services and subscriptions costs of revenue from the Micro Focus Acquisition. Overall, the gross margin percentage on Cloud services and subscriptions revenues decreased to 61% from 67%.
Current wording
Cost of Cloud services and subscriptions revenues increased by $114.2 million during the nine months ended March 31, 2024 as compared to the same period in the prior fiscal year. This was due to an increase in third-party network usage fees of $70.2 million and an increase in labour-related costs of $44.3 million both partially driven by incremental Cloud services and subscriptions costs of revenues from the Micro Focus Acquisition. Overall, the gross margin percentage on Cloud services and subscriptions revenues decreased to 60% from 66%.
Previous wording
Cost of Customer support revenues increased by $44.8 million during the three months ended December 31, 2023 as compared to the same period in the prior fiscal year. This was primarily due to an increase in labour-related costs of $42.6 million driven by incremental Customer support cost of revenues from the Micro Focus Acquisition over the comparative period. Overall, the gross margin percentage on Customer support revenues decreased to 89% from 91%.
Current wording
Cost of Customer support revenues increased by $7.6 million during the three months ended March 31, 2024 as compared to the same period in the prior fiscal year. This was primarily due to an increase in labour-related costs of $8.2 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 increased to 89% from 88%.
Previous wording
Cost of Customer support revenues increased by $92.4 million during the six months ended December 31, 2023 as compared to the same period in the prior fiscal year. This was primarily due to an increase in labour-related costs of $88.5 million driven by incremental Customer support cost of revenues from the Micro Focus Acquisition over the comparative period. Overall, the gross margin percentage on Customer support revenues decreased to 89% from 91%.
Current wording
Cost of Customer support revenues increased by $100.0 million during the nine months ended March 31, 2024 as compared to the same period in the prior fiscal year. This was primarily due to an increase in labour-related costs of $96.6 million driven by incremental Customer support cost of revenues from the Micro Focus Acquisition over the comparative period. Overall, the gross margin percentage on Customer support revenues decreased to 89% from 90%.
Previous wording
License revenues increased by $181.3 million or 167.9% during the three months ended December 31, 2023 as compared to the same period in the prior fiscal year; up 162.7% after factoring in the favorable impact of $5.7 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 revenue relating to the grant of certain IP rights. Geographically, the overall change was attributable to an increase in Americas of $84.9 million, an increase in EMEA of $79.3 million and an increase in Asia Pacific of $17.1 million.
Current wording
License revenues increased by $60.6 million or 43.4% during the three months ended March 31, 2024 as compared to the same period in the prior fiscal year; up 43.2% after factoring in the favorable impact of $0.3 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 revenue relating to the grant of certain IP rights. Geographically, the overall change was attributable to an increase in Americas of $24.7 million, an increase in EMEA of $30.1 million and an increase in Asia Pacific of $5.8 million.
Previous wording
During the second quarter of Fiscal 2024, we closed 83 license contracts greater than $0.5 million, of which 35 contracts were greater than $1.0 million, contributing $147.7 million of License revenues. This was compared to 38 license contracts greater than $0.5 million during the second quarter of Fiscal 2023, of which 15 contracts were greater than $1.0 million, contributing $43.0 million of License revenues.
Current wording
During the third quarter of Fiscal 2024, we closed 55 license contracts greater than $0.5 million, of which 23 contracts were greater than $1.0 million, contributing $92.3 million of License revenues. This was compared to 42 license contracts greater than $0.5 million during the third quarter of Fiscal 2023, of which 22 contracts were greater than $1.0 million, contributing $58.6 million of License revenues.
Previous wording
Cost of License revenues increased by $2.1 million during the three months ended December 31, 2023 as compared to the same period in the prior fiscal year as a result of higher third-party technology costs primarily driven by incremental cost of License revenues from the Micro Focus Acquisition over the comparative period. Overall, the gross margin percentage on License revenues increased to 98% from 96%.
Current wording
Cost of License revenues increased by $2.9 million during the three months ended March 31, 2024 as compared to the same period in the prior fiscal year as a result of higher third-party technology costs primarily driven by incremental cost of License revenues from the Micro Focus Acquisition over the comparative period. Overall, the gross margin percentage on License revenues remained stable at 97%, compared with the same period in the prior fiscal year.
Previous wording
License revenues increased by $291.8 million or 171.1% during the six months ended December 31, 2023 as compared to the same period in the prior fiscal year; up 166.4% after factoring in the favorable impact of $8.0 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 revenue relating to the grant of certain IP rights. Geographically, the overall change was attributable to an increase in Americas of $135.8 million, an increase in EMEA of $117.8 million and an increase in Asia Pacific of $38.1 million.
Current wording
License revenues increased by $352.4 million or 113.6% during the nine months ended March 31, 2024 as compared to the same period in the prior fiscal year; up 110.9% after factoring in the favorable impact of $8.4 million of foreign exchange rate changes. The increase was primarily driven by incremental License revenues from the Micro Focus Acquisition over the comparative period and license revenue relating to the grant of certain IP rights. Geographically, the overall change was attributable to an increase in Americas of $160.6 million, an increase in EMEA of $148.0 million and an increase in Asia Pacific of $43.9 million.
Previous wording
During the first six months of Fiscal 2024, we closed 134 license contracts greater than $0.5 million, of which 56 contracts were greater than $1.0 million, contributing $211.6 million of License revenues. This was compared to 60 license contracts greater than $0.5 million during the first six months of Fiscal 2023, of which 24 contracts were greater than $1.0 million, contributing $65.6 million of License revenues.
Current wording
During the first nine months of Fiscal 2024, we closed 189 license contracts greater than $0.5 million, of which 79 contracts were greater than $1.0 million, contributing $303.9 million of License revenues. This was compared to 102 license contracts greater than $0.5 million during the first nine months of Fiscal 2023, of which 46 contracts were greater than $1.0 million, contributing $124.2 million of License revenues.
Previous wording
Cost of License revenues increased by $3.2 million during the six months ended December 31, 2023 as compared to the same period in the prior fiscal year as a result of lower third-party technology costs. Overall, the gross margin percentage on License revenues increased to 98% from 96%.
Current wording
Cost of License revenues increased by $6.1 million during the nine months ended March 31, 2024 as compared to the same period in the prior fiscal year as a result of increased third-party technology costs. Overall, the gross margin percentage on License revenues remained stable at 97%, compared with the same period in the prior fiscal year.
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Rearranged current paragraphs (7)
Current report — wording carried from elsewhere
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’
Current report — wording carried from elsewhere
Following the end of the third quarter of Fiscal 2024, we saw the following activity:
Current report — wording carried from elsewhere
(2)Represents the unrealized gains (losses) on our derivatives not designated as hedges related to the Micro Focus Acquisition (see Note 17 “Derivative Instruments and Hedging Activities” to our Condensed Consolidated Financial Statements for more details).
Current report — wording carried from elsewhere
Provision for (recovery of) Income Taxes
Current report — wording carried from elsewhere
The Revolver has no fixed repayment date prior to the end of the term. Borrowings under the Revolver currently bear interest per annum at a floating rate of interest equal to Term SOFR (as defined in the Revolver) and a fixed margin dependent on our consolidated net leverage ratio ranging from 1.25% to 1.75%.
Current report — wording carried from elsewhere
On April 30, 2024, the Board authorized a share repurchase plan (the Fiscal 2024 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 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.
Current report — wording carried from elsewhere
See Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for Fiscal 2023.
Rearranged previous paragraphs (5)
Previous report — wording carried elsewhere
Cost of Professional service and other revenues increased by $47.5 million during the six months ended December 31, 2023 as compared to the same period in the prior fiscal year. This was due to an increase in labour-related costs of $49.1 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 $1.6 million. Overall, the gross margin percentage on Professional service and other revenues increased to 24% from 18% in the same period in the prior fiscal year.
Previous report — wording carried elsewhere
for the six months ended December 31, 2023
Previous report — wording carried elsewhere
for the six months ended December 31, 2022
Previous report — wording carried elsewhere
Cash flows used in investing activities
Previous report — wording carried elsewhere
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.