Three Months Ended December 31, 2017

Per share diluted

GAAP-based net income, attributable to OpenText

$

85,111

$

0.32

Add:

Amortization

93,396

0.35

Share-based compensation

7,158

0.03

Special charges (recoveries)

715

—

Other (income) expense, net

(5,547)

(0.02)

GAAP-based provision for (recovery of) income taxes

53,146

0.20

Non-GAAP-based provision for income taxes

(31,051)

(0.12)

Non-GAAP-based net income, attributable to OpenText

$

202,928

$

0.76

Reconciliation of Adjusted EBITDA

Three Months Ended December 31, 2017

GAAP-based net income, attributable to OpenText

$

85,111

Add:

Provision for (recovery of) income taxes

53,146

Interest and other related expense, net

34,092

Amortization of acquired technology-based intangible assets

47,128

Amortization of acquired customer-based intangible assets

46,268

Depreciation

22,071

Share-based compensation

7,158

Special charges (recoveries)

715

Other (income) expense, net

(5,547)

Adjusted EBITDA

$

290,142

Reconciliation of selected GAAP-based measures to Non-GAAP-based measures for the three months ended March 31, 2017.

(In thousands except for per share amounts)

Three Months Ended March 31, 2017

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

$

77,225

$

(268)

(1)

$

76,957

Customer support

34,442

(261)

(1)

34,181

Professional service and other

55,529

(89)

(1)

55,440

Amortization of acquired technology-based intangible assets

39,285

(39,285)

(2)

—

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

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

382,641

64.5

%

39,903

(3)

422,544

71.2

%

Operating expenses

Research and development

77,086

(1,634)

(1)

75,452

Sales and marketing

117,498

(2,081)

(1)

115,417

General and administrative

44,828

(2,328)

(1)

42,500

Amortization of acquired customer-based intangible assets

40,825

(40,825)

(2)

—

Special charges (recoveries)

20,586

(20,586)

(4)

—

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

65,261

11.0

%

107,357

(5)

172,618

29.1

%

Other income (expense), net

1,424

(1,424)

(6)

—

Provision for (recovery of) income taxes

13,239

7,798

(7)

21,037

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

21,616

98,135

(8)

119,751

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

$

0.08

$

0.37

(8)

$

0.45

(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 38% 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: