The sort of growth Open Text (TSX:OTC) showed in its Q2 results this morning is no accident, it’s supported by strong industry trends that the company is capitalizing on, says Global Maxfin Capital analyst Ralph Garcea.
This morning, Open Text reported its Q2, 2014 results. The Waterloo-based company posted EBITDA of $112.6-million and adjusted earnings of $1.58 on revenue of $363.5-million. The street had been expecting earnings of $1.50 on a topline of $352.5-million. The company’s stock has responded to the beat, midway through the TSX trading day Open Text was up 11.9%.
CEO Mark Barrenechea commented on the quarter.
“The Open Text product lineup has never been stronger with our enterprise suites for EIM, AppWorks for developers and now GXS for B2B integration,” he said. “We are committed to leading enterprise information management with the best products and cloud-based services. The Open Text Cloud now manages over 16 billion transactions per year, approximately 600,000 trading partners and 40,000 customers. I am pleased with our progress that includes 7-per-cent year-over-year licence growth.”
Garcea notes that Open Text saw strong demand in license revenues, particularly in the financials services and public sector verticals. The Global Maxfin analyst says the company is gaining operating leverage not only from recent acquisitions, but from upcoming product cycles. In a research update to clients this morning, Garcea maintained his BUY rating, but increased his one-year price target to $125, up twenty dollars from his previous target of $105.
Garcea says the reason Open Text is winning business for three reasons. First there is tremendous growth in unstructured data in organizations. Second, these organizations need to manage their content across multiple platforms and cloud services. Lastly, there has been an increase in compliance driven requirements. Open Text, says Garcea, has developed industry specific solutions to these problems that have become critical to its Fortune 1000 clients.