The Gory Details on OpenText's Double Miss

OpenText (Nasdaq: OTEX  ) reported earnings on April 24. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended March 31 (Q3), OpenText missed estimates on revenues and missed estimates on earnings per share.

Compared to the prior-year quarter, revenue expanded significantly. Non-GAAP earnings per share grew significantly. GAAP earnings per share dropped significantly.

Gross margins grew, operating margins grew, net margins shrank.

Revenue details
OpenText reported revenue of $337.7 million. The 14 analysts polled by S&P Capital IQ foresaw revenue of $344.8 million on the same basis. GAAP reported sales were 16% higher than the prior-year quarter's $292.3 million.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.

EPS details
EPS came in at $1.26. The 15 earnings estimates compiled by S&P Capital IQ predicted $1.30 per share. Non-GAAP EPS of $1.26 for Q3 were 25% higher than the prior-year quarter's $1.01 per share. GAAP EPS of $0.44 for Q3 were 25% lower than the prior-year quarter's $0.59 per share.

Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 71.1%, 20 basis points better than the prior-year quarter. Operating margin was 13.7%, 220 basis points better than the prior-year quarter. Net margin was 7.6%, 430 basis points worse than the prior-year quarter. (Margins calculated in GAAP terms.)

Looking ahead
Next quarter's average estimate for revenue is $363.5 million. On the bottom line, the average EPS estimate is $1.44.

Next year's average estimate for revenue is $1.38 billion. The average EPS estimate is $5.61.

Investor sentiment
The stock has a four-star rating (out of five) at Motley Fool CAPS, with 191 members out of 213 rating the stock outperform, and 22 members rating it underperform. Among 65 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 57 give OpenText a green thumbs-up, and eight give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on OpenText is hold, with an average price target of $66.27.

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Seth Jayson had no position in any company mentioned here at the time of publication. You can view his stock holdings here. He is co-advisor of Motley Fool Hidden Gems, which provides new small-cap ideas every month, backed by a real-money portfolio. The Motley Fool recommends Open Text. The Motley Fool owns shares of Open Text. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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