OpenText (TSX:OTC), which has grown primarily through acquisition, is in the midst of refocusing its sales efforts to drive try and drive organic growth. But Cantor Fitzgerald Canada analyst Blair Abernethy says he is “remaining cautious” about those prospects. (All figures in U.S.)
Yesterday, OpenText reported its Q4 and fiscal 2014 financial results. For the fourth quarter, the company earned $107.7-million on revenue of $494.0-million, a topline that bested last year’s Q4 by 42%.
CEO Mark Barrenechea broke down the quarter.
“Our focus on enterprise information management is well aligned to the strategic priorities of our customers. We delivered record quarterly and full fiscal year results, including full fiscal year total revenues of $1,625-million, up 19 per cent, licence of $309-million, up 11 per cent, and operating cash flows of $417-million, up 31 per cent year over year,” he said. “For fiscal 2015, we are committed to unlocking further value, growth and leadership for our customers, partners and shareholders through focused execution, utilizing our intelligent growth business system.”
Abernethy says OpenText beat his estimates on revenue and on the higher margin license revenue. He expected a topline of $486-million and license revenue of $84.1-million, which was handily beaten by the $99.1-million the company delivered. While the analyst recognizes management’s efforts to drive organic growth to above 10%, he says he wants to see signs of more consistent organic license growth.
Abernethy today increased his organic license growth estimate to north of 5%, which he says reflects “improving product traction since the Red Oxygen release last Fall.” He also upped his estimates on earnings and revenue for fiscal 2015. He now expects OpenText will post adjusted EPS of $3.72 on revenue of 1.93-billion, up from $3.65 and $1.894-billion, respectively.
In a research update to clients this morning, Abernethy maintained his “Hold” rating on OpenText, while raising his “Fair Value” range on the stock to $50-$55, up from $48-$52.