From this morning Globe and Mail ! Enterprise software provider Open Text Corp. reported first-quarter earnings Thursday that far exceeded analysts’ expectations.
The Waterloo, Ont.-based company reported revenue in the quarter ended Sept. 30 of US$804-million, up 15.4 per cent from a year earlier and close to $50-million above average analyst expectations.
Open Text, which sells data-management software to large enterprises such as General Motors Co., Citigroup Inc. and the Canadian government, earned $103.4-million (38 cents per share), up 39 per cent from its first quarter last year. Analysts focus on Open Text’s adjusted earnings before interest, tax, depreciation and amortization (EBITDA), which came in at $342.3-million – far surpassing their expectations in the $277-million range.
Chief executive officer Mark Barrenechea said in a release that Open Text had “record performance across all our key metrics,” including an adjusted EBITDA margin of 42.6 per cent of revenues. The company also appeared to overcome concerns raised last month after SAP, a key integration partner, warned investors of softness in its business.
But National Bank Financial analyst Richard Tse questioned whether the solid performance – “probably some the best results I’ve ever seen from this company" – was enough to revive the lacklustre performance of the company’s stock.
Open Text, which relies primarily on acquisitions for growth, has seen its share price sink by more than 9 per cent this year, while many fast-growing internet-based companies have soared in value. The company issued its results after the close of trading Thursday. Open Text stock was up 2 per cent in after-hours trading on the New York Stock Exchange.
“That performance is not reflective of these results at all,” Mr. Tse said, noting this was the second consecutive strong quarter for Open Text. “Many legacy names [such as Open Text] are being ignored" by investors.
Open Text said Thursday it would repurchase up to $350-million worth of shares in the next year and increased its quarterly dividend by 15 per cent to 20.1 cents per common share, which should improve the stock’s profile. The company generated US$218.6-million of free cash flow in the quarter, up 84 per cent year over year.
“We continue to grow, generate cash and remain committed to our proven total growth strategy," Mr. Barrenechea said in a release. The CEO has complained in the past that Open Text doesn’t get enough respect for its high profits and disciplined acquisition strategy.