Bullboard - Stock Discussion Forum Open Text Corp OTEX

Primary Symbol: T.OTEX

Open Text Corporation is a Canada-based information management company, which provides software and services. Its comprehensive Information Management platform and services provide secure and scalable solutions for global companies, small and medium-sized businesses (SMBs), governments and consumers around the world. It has a complete and integrated portfolio of information management solutions... see more

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TSX:OTEX - Post Discussion

Open Text Corp > TD 2

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Post by retiredcf on Oct 30, 2020 8:58am

TD 2

Open Text Corp.

(OTEX-Q, OTEX-T) US$38.04 | C$50.64

Q1/F21 Preview: Expecting Mixed Impact from the Pandemic

Event

Q1/F21 Results: Thursday, November 5, 2020 after markets close. Conference Call: 5:00 p.m. ET; 1-800-319-4610 or 1-604-638-5340.Impact: NEUTRAL

We estimate total revenue of $756.4mm, up 9% y/y. We forecast EBITDA of $266.8mm, or 35.3% EBITDA margin, and EPS of $0.65. We attribute this quarter's top-line growth to ~$122.7mm of revenue contribution from recent acquisitions. We expect EBITDA margin to contract ~120bps y/y.

Expecting to see continued negative impact on non-recurring revenue from the pandemic, but potential improvement in cloud revenue. We expect OpenText's non-recurring revenue base, from licenses and professional services revenue, to remain challenged this quarter. We believe that customers' focus towards capital preservation and work from home directives will weigh on these segments. OpenText's recurring revenue base, specifically cloud services revenue, should drive the company's top-line growth this quarter, largely from Carbonite's revenue contribution. We believe that demand for endpoint security, data protection, data backup services, and overall cloud services should continue to remain strong. While business network activity is likely still depressed relative to last year, the sharp recovery in U.S. GDP in Q3/C20 suggests that there could have been a material sequential improvement in transactional cloud revenue.

OpenText has a healthy balance sheet to weather through the economic uncertainty. We estimate the company will have ~$1.8bln of gross cash at the end of Q1/F21. Additionally, we expect OpenText to generate ~$888mm of FCF in F2021.

TD Investment Conclusion

We maintain our BUY rating and US$52.00 target price. We remain confident that OpenText will weather through the economic uncertainty due to its strong recurring revenue base and healthy balance sheet. We also remain positive on management's proven track record of executing and integrating acquisitions.

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