Canadian tech information management company Open Text (TSE: OTEX) (NASDAQ: OTEX) reported its Fiscal Q1-2023 results today after market close. OTEX’s results beat both revenue expectations and earnings-per-share (EPS) expectations. Please note that the following figures are in U.S. dollars unless otherwise stated.
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OTEX’s revenue reached $852 million (2.4% year-over-year growth, 7.1% growth in constant currency), which beat expectations of $827.7 million. Notably, the company’s Cloud revenues grew 16.9% on a constant-currency basis, reaching $405 million, and annual recurring revenues reached $722 million (8.9% constant-currency growth), making up 85% of the company’s revenues. Interestingly, enterprise cloud bookings increased by 37%, hitting $112 million.
Meanwhile, diluted adjusted earnings per share were $0.77, just higher than the $0.76 per consensus estimate and a 1.3% increase compared to last year, but non-adjusted earnings per share were -$0.43. Additionally, the company’s adjusted EBITDA margin was 35.7% compared to 38.9% last year, and adjusted EBITDA fell by about 6%.
OpenText also reported cash flow from operations of $131.96 million (a 30.4% decline), with adjusted free cash flow of $95.6 million (a ~41.3% decline).
Madhu Ranganathan, OpenText EVP and CFO, stated, “With approximately $1.7 billion in cash as of September 30, 2022, our balance sheet and liquidity position remain solid. OpenText’s strong momentum reflects continued execution of OpenText strategic priorities and positions us well for the upcoming integration of Micro Focus.”
Is OpenText Stock a Buy?
According to analysts, OpenText stock earns a Moderate Buy consensus rating based on three Buys and three Holds assigned in the past three months. The average OTEX stock price forecast of C$59.21 implies 55.1% upside potential. Analyst price targets range from a high of C$71.20 to a low of C$46.55.
OpenText is also an intriguing stock to consider due to its low valuation and high profitability.
Conclusion: OTEX’s Results Beat Expectations but Weren’t Perfect
OpenText reported good earnings results relative to analysts’ expectations. However, the company’s cash flow and adjusted EBITDA fell year-over-year despite revenues increasing modestly. Also, earnings per share only grew by $0.01 year-over-year, suggesting slow growth. Nonetheless, the company is highly profitable and is generally liked by analysts, making it worth considering.
