OpenText Swings to Profit in Q2, Raises Guidance

OpenText (TSE: OTEX) (NASDAQ: OTEX) has raised its guidance for Fiscal 2022 after posting a profit and higher revenues in the second quarter.

The Canadian company specializing in digital document management and data exchange beat analysts’ estimates.

Revenue & Earnings

Revenue came in at $876.8 million in the three months ended December 31, up 2.5% from $855.6 million. Cloud revenue increased 4.1% to $364.9 million.

The technology company earned a profit attributable to shareholders $88.3 million ($0.32 per share) in Q2 2022, compared with a loss of $65.5 million (-$0.24 per share) in Q2 2021.

Adjusted earnings fell 7% to $242 million ($0.89 per share) from $260.5 million ($0.95 per share) in the second quarter of 2021.

OpenText was expected to earn $0.89 per share in adjusted earnings on $872.3 million in revenue.

The company expects Fiscal 2022 results to include cloud growth of up to 10% and total revenue growth of up to 4%.

Management Commentary

OpenText CEO & CTO Mark J. Barrenechea said, “We delivered another robust quarter of organic growth driven by demand for OpenText Cloud Editions, closed the Zix acquisition, and we are raising our Fiscal 2022 target model to include cloud growth of up to 10% and total revenue growth of up to 4%. The first half of Fiscal 2022 provides demonstrable progress towards our Fiscal 2024 aspirations to include up to 4% organic growth.”

“I am very pleased with OpenText’s performance in Q2. We delivered $343.5 million of adjusted EBITDA and $206 million in free cash flows while purchasing Zix Corporation for $896 million,” said Madhu Ranganathan, OpenText EVP, CFO. 

Wall Street’s Take

Following the results, BMO Capital analyst Thanos Moschopoulos kept a Buy rating on OTEX and a C$67.20 price target. This implies 13.8% upside potential.

Overall, the consensus on the Street is that OTEX is a Strong Buy, based on three Buys and one Hold.

The average OpenText price target of C$67.21 implies upside potential of about 14% from current levels.

TipRanks’ Smart Score

OTEX scores a 4 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock returns are likely to be in line with the overall market.

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