OPEN TEXT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars)

(unaudited)

Three Months Ended December 31,

Six Months Ended December 31,

2017

2016

2017

2016

Cash flows from operating activities:

Net income for the period

$

84,917

$

45,034

$

121,607

$

957,945

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization of intangible assets

115,467

73,964

222,094

145,977

Share-based compensation expense

7,158

7,572

15,393

15,712

Excess tax expense (benefits) on share-based compensation expense

—

(537)

—

(542)

Pension expense

834

871

1,869

2,061

Amortization of debt issuance costs

1,234

1,331

2,532

2,654

Amortization of deferred charges and credits

1,117

2,146

2,234

4,292

Loss on sale and write down of property and equipment

—

—

163

—

Release of unrealized gain on marketable securities to income

—

—

(841)

—

Deferred taxes

38,427

7,591

44,374

(868,233)

Share in net (income) loss of equity investees

(316)

(464)

196

(5,993)

Other non-cash charges

—

—

—

1,033

Changes in operating assets and liabilities:

Accounts receivable

(54,620)

(15,713)

(49,458)

456

Prepaid expenses and other current assets

(2,575)

13,074

(5,383)

11,885

Income taxes and deferred charges and credits

(7,565)

(12,841)

1,583

(9,620)

Accounts payable and accrued liabilities

(8,023)

6,604

(72,499)

(23,995)

Deferred revenue

(10,366)

(21,633)

(48,846)

(47,742)

Other assets

958

20

(1,269)

(5,420)

Net cash provided by operating activities

166,647

107,019

233,749

180,470

Cash flows from investing activities:

Additions of property and equipment

(25,488)

(11,609)

(55,937)

(32,274)

Proceeds from maturity of short-term investments

—

—

—

9,212

Purchase of Guidance Software,  net of cash acquired

(8,510)

—

(229,275)

—

Purchase of Covisint Corporation, net of cash acquired

—

—

(71,279)

—

Purchase of HP Inc. CCM Business

—

(2,802)

—

(315,000)

Purchase of Recommind, Inc.

—

—

—

(170,107)

Purchase of HP Inc. CEM Business

—

—

—

(7,289)

Purchase consideration for acquisitions completed prior to Fiscal 2017

—

143

—

143

Other investing activities

(3,855)

(440)

(8,061)

(563)

Net cash used in investing activities

(37,853)

(14,708)

(364,552)

(515,878)

Cash flows from financing activities:

Excess tax (expense) benefits on share-based compensation expense

—

537

—

542

Proceeds from issuance of long-term debt and revolver

—

256,875

200,000

256,875

Proceeds from issuance of Common Shares from exercise of stock options and ESPP

7,797

5,391

29,622

10,701

Proceeds from issuance of Common shares under public Equity Offering

—

604,223

—

604,223

Repayment of long-term debt and revolver

(1,940)

(2,000)

(3,880)

(4,000)

Debt issuance costs

—

(2,825)

—

(4,155)

Equity issuance costs

—

(18,127)

—

(18,127)

Payments of dividends to shareholders

(34,811)

(27,859)

(69,828)

(55,650)

Net cash provided by (used in) financing activities

(28,954)

816,215

155,914

790,409

Foreign exchange gain (loss) on cash held in foreign currencies

(216)

(20,979)

7,546

(16,267)

Increase (decrease) in cash and cash equivalents during the period

99,624

887,547

32,657

438,734

Cash and cash equivalents at beginning of the period

376,390

834,944

443,357

1,283,757

Cash and cash equivalents at end of the period

$

476,014

$

1,722,491

$

476,014

$

1,722,491

Notes

(1)

All dollar amounts in this press release are in U.S. Dollars unless otherwise indicated.

(2)

Use of Non-GAAP Financial Measures: In addition to reporting financial results in accordance with U.S. GAAP, the Company provides certain financial measures that are not in accordance with U.S. GAAP (Non-GAAP). These Non-GAAP financial measures have certain limitations in that they do not have a standardized meaning and thus the Company's definition may be different from similar Non-GAAP financial measures used by other companies and/or analysts and may differ from period to period. Thus it may be more difficult to compare the Company's financial performance to that of other companies. However, the Company's management compensates for these limitations by providing the relevant disclosure of the items excluded in the calculation of these Non-GAAP financial measures both in its reconciliation to the U.S. GAAP financial measures and its consolidated financial statements, all of which should be considered when evaluating the Company's results.

The Company uses these Non-GAAP financial measures to supplement the information provided in its consolidated financial statements, which are presented in accordance with U.S. GAAP. The presentation of Non-GAAP financial measures are not meant to be a substitute for financial measures presented in accordance with U.S. GAAP, but rather should be evaluated in conjunction with and as a supplement to such U.S. GAAP measures. OpenText strongly encourages investors to review its financial information in its entirety and not to rely on a single financial measure. The Company therefore believes that despite these limitations, it is appropriate to supplement the disclosure of the U.S. GAAP measures with certain Non-GAAP measures defined below.

Non-GAAP-based net income and Non-GAAP-based EPS, attributable to OpenText, are calculated as GAAP-based net income or earnings per share, attributable to OpenText, on a diluted basis, after giving effect to the amortization of acquired intangible assets, other income (expense), share-based compensation, and Special charges (recoveries), all net of tax and any tax benefits/expense items unrelated to current period income, as further described in the tables below. Non-GAAP-based gross profit is the arithmetical sum of GAAP-based gross profit and the amortization of acquired technology-based intangible assets and share-based compensation within cost of sales. Non-GAAP-based gross margin is calculated as Non-GAAP-based gross profit expressed as a percentage of total revenue. Non-GAAP-based income from operations is calculated as income from operations, excluding the amortization of acquired intangible assets, Special charges (recoveries), and share-based compensation expense. Non-GAAP-based operating margin is calculated as Non-GAAP-based income from operations expressed as a percentage of total revenue.

Adjusted earnings (loss) before interest, taxes, depreciation and amortization (Adjusted EBITDA) is calculated as GAAP-based net income, attributable to OpenText, excluding interest income (expense), provision for income taxes, depreciation and amortization of acquired intangible assets, other income (expense), share-based compensation and Special charges (recoveries).

The Company's management believes that the presentation of the above defined Non-GAAP financial measures provides useful information to investors because they portray the financial results of the Company before the impact of certain non-operational charges. The use of the term "non-operational charge" is defined for this purpose as an expense that does not impact the ongoing operating decisions taken by the Company's management and is based upon the way the Company's management evaluates the performance of the Company's business for use in the Company's internal reports. In the course of such evaluation and for the purpose of making operating decisions, the Company's management excludes certain items from its analysis, including amortization of acquired intangible assets, Special charges (recoveries), share-based compensation, other income (expense), and the taxation impact of these items. These items are excluded based upon the manner in which management evaluates the business of the Company and are not excluded in the sense that they may be used under U.S. GAAP.

The Company believes the provision of supplemental Non-GAAP measures allow investors to evaluate the operational and financial performance of the Company's core business using the same evaluation measures that management uses, and is therefore a useful indication of OpenText's performance or expected performance of future operations and facilitates period-to-period comparison of operating performance (although prior performance is not necessarily indicative of future performance). As a result, the Company considers it appropriate and reasonable to provide, in addition to U.S. GAAP measures, supplementary Non-GAAP financial measures that exclude certain items from the presentation of its financial results.

The following charts provide (unaudited) reconciliations of U.S. GAAP-based financial measures to Non-U.S. GAAP-based financial measures for the following periods presented: