Latest news with #OpenTextCorp
San Francisco Chronicle
30-04-2025
- Business
- San Francisco Chronicle
Open Text: Fiscal Q3 Earnings Snapshot
WATERLOO, Ontario (AP) — WATERLOO, Ontario (AP) — Open Text Corp. (OTEX) on Wednesday reported earnings of $92.8 million in its fiscal third quarter. On a per-share basis, the Waterloo, Ontario-based company said it had net income of 35 cents. Earnings, adjusted for one-time gains and costs, came to 82 cents per share. The software provider posted revenue of $1.25 billion in the period. _____
Forbes
28-03-2025
- Business
- Forbes
OpenText - A Rare Deep Value Software Stock With Growth Potential
By Praveen Chawla OpenText Corporation, a Canada based enterprise information management software company, has faced significant challenges in recent years following a large acquisition. The stock has experienced a substantial decline, with a 41% drop over the past three years and a 33% decrease in the last year alone, currently trading at $26.09 per share. Despite this, it offers an attractive forward dividend yield of 4.05%, supported by an annual dividend payout ratio of $0.26. OpenText's valuation is notably low, with a forward price-to-earnings (P/E) ratio of 6.38, suggesting potential undervaluation compared to industry peers. The company's financials show revenue decline due to divestments, but strong adjusted EBITDA margins remain. OpenText is focusing on growth areas like cloud computing and artificial intelligence (AI), with initiatives such as the Titanium X platform launch expected to drive AI-related revenue. However, high debt levels and slow organic growth posed challenges. The company has now addressed the debt issue through a divestiture and has made good progress in reducing debt. OpenText is a global leader in information management, operating in a $200 billion total addressable market. The company is active in six key markets: content management, IT operations management, application development and modernization, business network, cybersecurity, and AI analytics. OpenText is approaching $6 billion in revenue for fiscal 2026, with cloud bookings growth exceeding 15% annually and an adjusted EBITDA of 30%. Analysts anticipate earnings growth and increased free cash flow, but concerns about underperformance and investor confidence remain. Overall, OpenText presents a mixed picture for investors, balancing potential undervaluation and growth prospects against significant business challenges. Open Text Corp 12 Month Price Targets Chart OpenText offers a comprehensive suite of enterprise software products that span various aspects of information management and digital business processes. At the core of their offerings is the Enterprise Content Management (ECM) suite, which includes the Content Suite Platform, Extended ECM, and Documentum. For business-to-business integration, OpenText provides the Trading Grid as part of its Business Network solutions. The company also offers Customer Experience Management tools and Digital Process Automation solutions like AppWorks. In the realm of legal technology, OpenText's Discovery suite, featuring Axcelerate, supports eDiscovery and investigations. The company has significantly bolstered its security offerings with products such as EnCase Forensic Security Suite, Carbonite, Webroot, NetIQ, ArcSight, Voltage, and Fortify. For organizations looking to leverage artificial intelligence and analytics, OpenText provides the Magellan Product Suite. Additional key products include information management tools like Archive Center and RightFax, as well as web content management solutions. This diverse product portfolio positions OpenText as a one-stop shop for enterprises seeking comprehensive information management and digital transformation solutions. Over its history OpenText has been an highly acquisitive company to build out its software stack. The acquisitions started in 2003 with IXOS Software AG; some recent acquisitions included Micro Focus in 2023 and Application Modernization and Connectivity (AMC) business in 2024. These acquisitions highlight OpenText's significant acquisitions and a recent major divestment, showcasing the company's strategic evolution in the enterprise information management space. It also demonstrates the company's considerable experience in integrating acqusitions. OpenText's $5.8 billion acquisition of UK based MicroFocus in 2023 was driven by a multifaceted strategy aimed at significantly expanding its market presence and enhancing its product portfolio. This move expanded OpenText's total addressable market (TAM) to $170 billion and added approximately $2.7 billion in annual revenue, making it one of the world's largest software and cloud businesses. The acquisition brought valuable software solutions in areas such as identity access, security, IT operations management, and networking, complementing OpenText's existing offerings and accelerating its digital transformation capabilities through enhanced cloud and AI technologies. OpenText also /gained access to MicroFocus's prestigious customer base, strengthening its global reach and cybersecurity offerings. The company projected annual cost savings of $400 million through operational synergies and expected the acquisition to immediately boost its adjusted EBITDA and free cash flow. Ultimately, this strategic move positioned OpenText as a more comprehensive and competitive player in the information management and enterprise software space, while achieving significant operational and financial synergies. Company Strategy The company's future business strategy focuses more on organic growth, primarily driven by cloud services. Cloud revenue is projected to comprise 40% of total revenue, with customer support at 40% and license/professional services at 20%. OpenText continues to offer on-premises options for customers while investing heavily in cloud development. This dual approach allows the company to cater to a wide range of customer needs. Open Text Operating Revenue by Business Segment In early 2023, OpenText acquired Micro Focus for approximately $6 billion. As part of its strategic realignment, the company has divested the Mainframe, Application Modernization and Connectivity (AMC) business for $2.275 billion. Following this divestiture, OpenText will retain IT operations management, application development and modernization, cybersecurity, and AI analytics from Micro Focus. This strategic move is designed to optimize OpenText's portfolio and focus on high-growth areas. Artificial intelligence (AI) is seen as a significant growth opportunity for OpenText, driving cloud bookings growth. The company has launched an AI product called Aviator, which is available across all business pillars. OpenText is leveraging its large installed base and existing customer relationships to drive AI adoption, positioning itself for further expansion in this area. Financially, OpenText plans to use the proceeds from the AMC divestiture to reduce debt, aiming to bring its net leverage ratio below 3x. Once leverage covenants allow, the company intends to implement a share buyback program. OpenText has increased its annual cloud bookings growth guidance to 25-30% and expects 7-9% revenue growth in fiscal 2026. This strategic financial management is designed to enhance shareholder value while supporting ongoing business growth. The near term Revenue and Operating Income trend appears to be encouraging, with double digit % growth over the last 3 years, and it appears that the company is coming out of a funk following a period of major acquisitions and divestment. Open Text Price Revenue and Operating Income Chart Guru Holdings of OpenText Ray Dalio's Bridgewater, Brandes Investment, Grantham, Greenblatt and Royce have holdings in Open Text. Most of the gurus are value investors while Ray Dalio (Trades, Portfolio) is more of a "macro" investor. Open Text Guru Trades Chart Jarislowsky, Fraser Ltd (JFL Global) is one of the largest institutional shareholders of OpenText Corporation. They own about 7.14% of the outstanding shares. JFL Global which is based in Montreal is a long term investor and emphasizes quality business's with sustainable competitive advantage. Mackenzie Financial Corporation a Toronto based deep value investor holds 2.07% of the outstanding stock. Conclusion OpenText is still in a period of transition after its transformative acquisition of Microfocus and divestment of AMC. It's basically now transitioning from being an acquirer towards an emphasis on organic growth focused on cloud and Software as a Service (Saas). OpenText's has a large TAM to aim for and a long runway for growth. It also has a very large and sticky legacy business which brings in reliable cash flows from lucrative and renewing customer support services. The company's FCF yield is nearly 10%. Open Text Cash and Debt Chart Given the deleveraging following the AMC divestment the company's balance sheet is now in better shape (with debt/equity of 1.58) and the company is poised to return cash to the company via stock buybacks. I expect the stock should offer steady growth in the years ahead. OpenText is a rare undervalued stock and an established dividend payer, a rarity in the software industry.
Bloomberg
26-02-2025
- Business
- Bloomberg
EQB's Chadwick Westlake to Join Open Text as Finance Chief
Open Text Corp. hired banking executive Chadwick Westlake as its next chief financial officer. Westlake, who will step down as CFO of Equitable Bank owner EQB Inc. next week, is set to join Waterloo, Ontario-based Open Text on March 5, according to a statement Wednesday. Westlake succeeds the software firm's current CFO, Madhu Ranganathan.
Yahoo
07-02-2025
- Business
- Yahoo
Open Text Corp (OTEX) Q1 2025 Earnings Call Highlights: Exceeding Expectations Amidst Challenges
Revenue: $1.27 billion in Q1, within the range of $1.25 billion to $1.3 billion. Adjusted EBITDA: 35% in Q1, reflecting operational efficiency. Adjusted EPS: $0.93, exceeding expectations. Cloud Revenue: $457 million, up 1.3% year over year. Cloud Bookings: $133.5 million, up 10.3% year over year. ARR (Annual Recurring Revenue): $1.052 billion, down 1.1% when adjusted for divestiture. GAAP Net Income: $84.4 million, with a 32% diluted EPS. GAAP Gross Margin: 71.7%, up from 71.4% year over year. Non-GAAP Gross Margin: 75.8%, reflecting investments in AI and cloud infrastructure. Operating Cash Flow: Negative $77.8 million, impacted by onetime tax payment. Free Cash Flow: Negative $117.1 million in Q1. Net Renewal Rate (NRR): 94% for the cloud business. Share Buyback: 7.72 million shares repurchased at an average price of $30.43. Fiscal '25 Revenue Target: $5.3 billion to $5.4 billion. Fiscal '25 Free Cash Flow Target: $575 million to $625 million. Warning! GuruFocus has detected 3 Warning Signs with OTEX. Release Date: February 06, 2025 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Open Text Corp (NASDAQ:OTEX) exceeded expectations in adjusted EBITA and adjusted EPS for Q1 fiscal 2025. The company reported a 35% year-over-year growth in adjusted EBITA, showcasing sustained efficiency gains. Open Text Corp (NASDAQ:OTEX) achieved its largest Q1 of enterprise cloud bookings in history, up 10% year-over-year. The company reaffirmed its fiscal 2025 targets, projecting total revenues of $5.3 billion to $5.4 billion. Open Text Corp (NASDAQ:OTEX) is making strong investments in its enterprise and SMB go-to-market strategies, enhancing customer success and strategic partnerships. Q1 total revenue of $1.269 billion was down 11% year-over-year, or down 1.8% when adjusted for the AMC divestiture. The company reported negative $77.8 million in operating cash flows and negative $117.1 million in free cash flows for the quarter. Q2 is expected to be a tougher year-over-year comparison due to the large AMC contribution and license revenue from IP rights in the previous year. Cloud revenue growth was subdued in Q1, with only a 1.3% increase, reflecting typical seasonality. The company faces challenges in the developer segment, requiring further work to drive growth in this area. Q: Can you provide insights into the current demand environment and any shifts in deal activity? A: Mark Barrenechea, CEO, stated that the demand environment is stable despite global volatility. The company anticipates a stronger second half due to the upcoming release of Titanium X, their largest software and cloud release. They are also seeing increased demand for their new SMB platform and security offerings. Q: What gives you confidence in achieving your second-half targets? A: Barrenechea highlighted several factors: the on-track delivery of Titanium X, full sales force capacity, a 20% year-over-year increase in pipeline for the second half, and the internal deployment of AI tools to enhance sales efficiency. Q: How is Project Athena progressing, and what are the early results? A: Barrenechea explained that Project Athena is focused on developer productivity, with early feedback being positive. The project aims to generate applications on top of Open Text's API services, with the first production apps expected by April 2025. Q: Can you discuss the impact of AI and Microsoft Copilot on customer adoption patterns? A: Barrenechea noted that AI is becoming a standard feature, akin to a search button, with 15 aviators and over 100 agents integrated into Titanium X. The company is making steady progress in embedding AI across its offerings, which is expected to support bookings and cloud revenue growth. Q: What are the key drivers for cloud revenue growth in fiscal 2025? A: Barrenechea identified three main drivers: customer adoption of SaaS capabilities in Titanium X, revenue contributions from AI and aviators, and product-specific growth, particularly in security with XTR as a service. For the complete transcript of the earnings call, please refer to the full earnings call transcript. This article first appeared on GuruFocus. Sign in to access your portfolio
