Q: Please comment on the Open Text earnings report. What does the market not like about it?
5i Research Answer:
EPS of 94c matched estimates. Revenue of $1.44B was 1% better than expected. EBITDA of $463.7M was 1.4% short of consensus. Profit rose 71%, and it announced a share buyback, but guidance was not nearly as strong as expected, and this has already prompted several broker downgrades. Essentially, F2025 guidance was pushed out into F2026. In BMO's downgrade it expressed concern about OTEX's buyback vs paying down debt, and weak organic growth. The decline today has brought down the valuation to 6X earnings, but certainly the forecast is some cause for concern. We will need to review this a bit more over the weekend.