Open Text profit jumps, misses estimates
Open Text (OTC-T), Canada's largest software company, posted a 30 percent jump in quarterly profit on strong sales growth on Wednesday but missed analyst expectations as its margins came under pressure.
The Waterloo, Ontario-based company reported an adjusted net profit of $52.5 million US, or 90 cents a share, on revenue of $263.0 million in its third quarter ended March 31.
Analysts, on average, had expected Open Text to earn 97 cents a share on revenue of $249.7 million, according to Thomson Reuters I/B/E/S.
The company, which sells software applications to help workers collaborate on corporate information, made $67.8 million from licensing—a measure of future demand—compared with $79.2 million in the prior quarter and up 37 percent from the same period a year ago.
That licensing figure beat all estimates in a Reuters poll of 14 analysts.
"They delivered well on the top line ... however there was a big acceleration in the growth of operating expenses," said Susquehanna Financial analyst Derrick Wood, noting that margins fell on a year-on-year basis for the first time in six quarters.
"It's possible that the recent acquisition of MetaStorm is more dilutive than people expected," Wood said.
Open Text closed a deal in February to buy smaller rival MetaStorm, which it has said would help it bolster mobile services for clients looking to administer business processes via smartphones and tablet computers.
The MetaStorm deal followed the purchase of document management software company StreamServe in October.
Open Text said its adjusted operating margin was 24.4 percent, missing its fiscal 2010 target model of 25-30 percent.
The company has the second-largest share of the market for enterprise content management systems after IBM Corp. Its partners include tech infrastructure vendors SAP AG, Microsoft Corp. and Oracle Corp.
Shares in Open Text have jumped more than 30 percent since the start of the year, helped by surprisingly strong numbers posted in early February.