Three Months Ended September 30, 2017

Per share diluted

GAAP-based net income, attributable to OpenText

$

36,596

$

0.14

Add:

Amortization

87,749

0.33

Share-based compensation

8,235

0.03

Special charges (recoveries)

18,031

0.07

Other (income) expense, net

(10,224)

(0.04)

GAAP-based provision for (recovery of ) income taxes

27,369

0.10

Non-GAAP-based provision for income taxes

(25,178)

(0.09)

Non-GAAP-based net income, attributable to OpenText

$

142,578

$

0.54

Reconciliation of Adjusted EBITDA

Three months ended September 30, 2017

GAAP-based net income, attributable to OpenText

$

36,596

Add:

Provision for (recovery of) income taxes

27,369

Interest and other related expense, net

33,288

Amortization of acquired technology-based intangible assets

43,960

Amortization of acquired customer-based intangible assets

43,789

Depreciation

18,878

Share-based compensation

8,235

Special charges (recoveries)

18,031

Other (income) expense, net

(10,224)

Adjusted EBITDA

$

219,922

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the three months ended December 31, 2016.

(In thousands except for per share amounts)

Three Months Ended December 31, 2016

GAAP-based

Measures

GAAP-based Measures
% of Total Revenue

Adjustments

Note

Non-GAAP-based

Measures

Non-GAAP-based Measures

% of Total Revenue

Cost of revenues

Cloud services and subscriptions

$

73,150

$

(211)

(1)

$

72,939

Customer support

27,349

(270)

(1)

27,079

Professional service and other

40,295

(468)

(1)

39,827

Amortization of acquired technology-based intangible assets

24,848

(24,848)

(2)

—

GAAP-based gross profit and gross margin (%) /
Non-GAAP-based gross profit and gross margin (%)

374,676

69.0

%

25,797

(3)

400,473

73.8

%

Operating expenses

Research and development

64,721

(1,995)

(1)

62,726

Sales and marketing

102,651

(2,329)

(1)

100,322

General and administrative

39,914

(2,299)

(1)

37,615

Amortization of acquired customer-based intangible assets

33,815

(33,815)

(2)

—

Special charges (recoveries)

11,117

(11,117)

(4)

—

GAAP-based income from operations and operating margin (%) / Non-GAAP-based income from operations and operating margin (%)

107,157

19.7

%

77,352

(5)

184,509

34.0

%

Other income (expense), net

(3,558)

3,558

(6)

—

Provision for (recovery of) income taxes

30,822

(7,319)

(7)

23,503

GAAP-based net income / Non-GAAP-based net income, attributable to OpenText

45,022

88,229

(8)

133,251

GAAP-based earnings per share / Non-GAAP-based earnings per share-diluted, attributable to OpenText

$

0.18

$

0.36

(8)

$

0.54

(1)

Adjustment relates to the exclusion of share-based compensation expense from our Non-GAAP-based operating expenses as this expense is excluded from our internal analysis of operating results.

(2)

Adjustment relates to the exclusion of amortization expense from our Non-GAAP-based operating expenses as the timing and frequency of amortization expense is dependent on our acquisitions and is hence excluded from our internal analysis of operating results.

(3)

GAAP-based and Non-GAAP-based gross profit stated in dollars, and gross margin stated as a percentage of total revenue.

(4)

Adjustment relates to the exclusion of Special charges (recoveries) from our Non-GAAP-based operating expenses as Special charges (recoveries) are generally incurred in the periods relevant to an acquisition and include one-time, non-recurring charges or recoveries that are not indicative or related to continuing operations, and are therefore excluded from our internal analysis of operating results.

(5)

GAAP-based and Non-GAAP-based income from operations stated in dollars, and operating margin stated as a percentage of total revenue.

(6)

Adjustment relates to the exclusion of Other income (expense) from our Non-GAAP-based operating expenses as Other income (expense) relates primarily 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 non-marketable securities investments as a limited partner. We do not actively trade equity securities in these privately held companies nor do we plan our ongoing operations based around any anticipated fundings or distributions from these investments. We exclude gains and losses on these investments as we do not believe they are reflective of our ongoing business and operating results.

(7)

Adjustment relates to differences between the GAAP-based tax provision rate of approximately 41% and a Non-GAAP-based tax rate of approximately 15%; these rate differences are due to the income tax effects of expenses that are excluded for the purpose of calculating Non-GAAP-based adjusted net income. Such excluded expenses 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 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 15%, we analyzed the individual adjusted expenses and took into consideration the impact of statutory tax rates from local jurisdictions incurring the expense.

(8)

Reconciliation of GAAP-based net income to Non-GAAP-based net income: