Open Text Corp reports 21.4% Net Income growth while 1.5% Revenue decline
27.07.2016 • About Open Text Corp (
$OTC) • By InTwits
Open Text Corp reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EBITDA Margin is expanding: 33.5% in FY2016 vs. 31.8% in FY2015 vs. 26.5% in FY2012
- Open Text Corp has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.9%. At the same time it's a lot of higher than industry average of 1.7%.
- CAPEX is quite volatile: 70.0 in FY2016, 77.0 in FY2015, 42.3 in FY2014, 23.1 in FY2013, 25.8 in FY2012
- The company has business model with average profitability: ROIC is at 10.1%
- It operates with high leverage: Net Debt/EBITDA is 1.4x while industry average is -4.9x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Open Text Corp ($OTC) key annual financial indicators
| mln. $ | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 1,207 | 1,363 | 1,625 | 1,852 | 1,824 | -1.5% |
| Gross Profit | 874 | 971 | 1,183 | 1,254 | 1,250 | -0.3% |
| SG&A | 372 | 398 | 488 | 536 | 485 | -9.6% |
| EBITDA | 320 | 396 | 487 | 589 | 611 | 3.7% |
| Net Income | 125 | 149 | 218 | 234 | 284 | 21.4% |
Balance Sheet
|
|---|
| Cash | 560 | 470 | 428 | 700 | 1,284 | 83.4% |
| Short Term Debt | 41 | 52 | 63 | 8 | 8 | 0.0% |
| Long Term Debt | 555 | 514 | 1,257 | 1,549 | 2,138 | 38.0% |
Cash flow
|
|---|
| Capex | 26 | 23 | 42 | 77 | 70 | -9.1% |
Ratios
|
|---|
| Revenue growth | 16.9% | 12.9% | 19.2% | 14.0% | -1.5% | |
| EBITDA growth | 14.5% | 23.7% | 22.8% | 21.0% | 3.7% | |
| Gross Margin | 72.4% | 71.2% | 72.8% | 67.7% | 68.5% | 0.8% |
| EBITDA Margin | 26.5% | 29.1% | 30.0% | 31.8% | 33.5% | 1.7% |
| Net Income Margin | 10.4% | 10.9% | 13.4% | 12.7% | 15.6% | 2.9% |
| SG&A, % of revenue | 30.8% | 29.2% | 30.0% | 29.0% | 26.6% | -2.4% |
| CAPEX, % of revenue | 2.1% | 1.7% | 2.6% | 4.2% | 3.8% | -0.3% |
| ROIC | 9.7% | 11.1% | 12.7% | 11.3% | 10.1% | -1.2% |
| ROE | 11.3% | 11.8% | 14.6% | 13.5% | 14.9% | 1.4% |
| Net Debt/EBITDA | 0.1x | 0.2x | 1.8x | 1.5x | 1.4x | -0.0x |
Open Text Corp ($OTC) key quoterly financial indicators
| mln. $ | FY16Q1 | FY16Q2 | FY16Q3 | FY16Q4 | YoY change |
|---|
P&L
|
|---|
| Revenue | 435 | 465 | 441 | 484 | -4.2% | -0.5% | -1.6% | 0.2% |
| EBITDA | 137 | 170 | 148 | 156 | -14.0% | 2.0% | 27.7% | 6.1% |
| Net Income | 41 | 88 | 69 | 86 | -36.1% | 18.0% | 159.7% | 25.6% |
Balance Sheet
|
|---|
| Cash | 691 | 726 | 877 | 1,284 | 40.3% | 33.7% | 43.1% | 83.4% |
| Short Term Debt | 8 | 8 | 8 | 8 | -87.1% | -87.7% | -49.4% | 0.0% |
| Long Term Debt | 1,578 | 1,576 | 1,574 | 2,138 | 26.9% | 28.5% | -0.5% | 38.0% |
Ratios
|
|---|
| Gross Margin | 72.3% | 70.0% | 67.9% | 68.4% | 0.7% | 1.7% | 1.9% | -0.4% |
| EBITDA Margin | 31.5% | 36.5% | 33.6% | 32.3% | -3.6% | 0.9% | 7.7% | 1.8% |
| Net Income Margin | 9.5% | 18.8% | 15.7% | 17.9% | -4.7% | 3.0% | 9.7% | 3.6% |
Revenue and profitability
Open Text Corp's Revenue decreased slightly on 1.5%. Annual revenue decline showed slowdown in FY16Q4 - revenue showed almost no change in FY16Q4. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 1.7 pp from 31.8% to 33.5% in FY2016.
Gross Margin increased slightly on 0.85 pp from 67.7% to 68.5% in FY2016. SG&A as a % of Revenue decreased on 2.4 pp from 29.0% to 26.6% in FY2016.
Net Income marign increased on 2.9 pp from 12.7% to 15.6% in FY2016.
Capital expenditures (CAPEX) and working capital investments
In FY2016 Open Text Corp had CAPEX/Revenue of 3.8%. Open Text Corp's CAPEX/Revenue increased on 2.1 pp from 1.7% in FY2013 to 3.8% in FY2016. For the last three years the average CAPEX/Revenue was 3.5%.
Return on investment
The company operates at good ROE (14.94%) while ROIC is low (10.10%). ROIC decreased slightly on 1.2 pp from 11.3% to 10.1% in FY2016. ROE increased slightly on 1.4 pp from 13.5% to 14.9% in FY2016.
Leverage (Debt)
Company's Net Debt / EBITDA is 1.4x and Debt / EBITDA is 3.5x. Net Debt / EBITDA decreased on 0.045x from 1.5x to 1.4x in FY2016. Debt jumped on 37.8% while cash surged on 83.4%.
Management team
Mark J Barrenechea is a the company's CEO. Mark J Barrenechea is a founder and has spent 6 years at the company. Open Text Corp's CFO is John M Doolittle. John M Doolittle has 4 years tenure at the company.
Appendix 1: Peers in Technology
Below you can find Open Text Corp benchmarking vs. other companies in Technology industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Intrinsyc Technologies Corp ($ITC) | | -21.7% | 70.8% | 24.5% | 39.2% |
| ProntoForms Corp ($PFM) | | 75.4% | 43.9% | 46.4% | 28.2% |
| Kinaxis Inc ($KXS) | | 30.3% | 15.2% | 30.3% | 27.0% |
| NexJ Systems Inc ($NXJ) | | 4.3% | -12.6% | 19.7% | 17.3% |
| Constellation Software Inc/Canada ($CSU) | | 35.9% | 37.9% | 10.1% | 15.6% |
| |
|---|
| Median (12 companies) | | 0.3% | 13.3% | 11.5% | 12.7% |
|---|
Top companies by Gross margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Constellation Software Inc/Canada ($CSU) | 86.2% | 85.5% | 86.1% | 86.2% | 87.1% |
| ProntoForms Corp ($PFM) | 96.1% | 98.1% | 98.0% | 79.4% | |
| Espial Group Inc ($ESP) | 77.5% | 81.7% | 78.5% | 74.3% | 74.7% |
| Halogen Software Inc ($HGN) | 72.0% | 74.8% | 71.8% | 73.8% | 76.2% |
| Kinaxis Inc ($KXS) | 71.8% | 70.4% | 70.4% | 71.8% | 69.1% |
| |
|---|
| Median (12 companies) | 71.8% | 55.6% | 61.9% | 61.9% | 71.9% |
|---|
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Wi-LAN Inc ($WIN) | 40.9% | 12.2% | 56.2% | 53.2% | 57.8% |
| Kinaxis Inc ($KXS) | 18.7% | 23.0% | 19.2% | 28.0% | 17.6% |
| Constellation Software Inc/Canada ($CSU) | 20.9% | 20.1% | 21.8% | 25.2% | 26.0% |
| Intrinsyc Technologies Corp ($ITC) | -10.5% | -38.8% | 2.2% | 10.8% | |
| Mitel Networks Corp ($MNW) | 10.2% | 10.0% | 7.0% | 7.7% | |
| |
|---|
| Median (14 companies) | 0.9% | 3.9% | 4.4% | 0.1% | 7.1% |
|---|
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Kinaxis Inc ($KXS) | 2.9% | 2.3% | 5.0% | 4.7% | 5.0% |
| Halogen Software Inc ($HGN) | 4.9% | 9.0% | 8.4% | 2.9% | 2.6% |
| Espial Group Inc ($ESP) | 1.6% | 0.2% | 1.9% | 2.1% | 1.5% |
| ProntoForms Corp ($PFM) | 1.1% | 0.8% | 3.6% | 1.9% | |
| Critical Control Energy Services Corp ($CCZ) | | 0.5% | 1.0% | 1.6% | |
| |
|---|
| Median (14 companies) | 1.1% | 1.1% | 1.2% | 1.2% | 1.0% |
|---|
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Constellation Software Inc/Canada ($CSU) | 45.9% | 22.4% | 24.7% | 38.5% | 40.5% |
| Kinaxis Inc ($KXS) | | 61.8% | 63.6% | 44.0% | 22.6% |
| Halogen Software Inc ($HGN) | | -28.4% | -45.9% | -40.5% | 12.6% |
| Wi-LAN Inc ($WIN) | 2.6% | -7.6% | 8.9% | 7.4% | 8.4% |
| NexJ Systems Inc ($NXJ) | | -44.6% | -19.8% | -13.9% | 4.5% |
| |
|---|
| Median (14 companies) | -7.5% | -17.5% | 0.5% | -1.2% | 8.4% |
|---|
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Mitel Networks Corp ($MNW) | 3.7x | 3.8x | 2.6x | 6.2x | |
| Pivot Technology Solutions Inc ($PTG) | | -0.4x | 1.1x | 4.8x | |
| Constellation Software Inc/Canada ($CSU) | 0.0x | 1.6x | 0.6x | 0.4x | -0.0x |
| Wi-LAN Inc ($WIN) | -4.9x | -12.1x | -2.3x | -1.7x | -2.0x |
| Kinaxis Inc ($KXS) | 1.9x | 4.7x | -4.2x | -3.9x | -6.3x |
| |
|---|
| Median (7 companies) | 0.9x | 1.5x | -0.8x | -1.7x | -6.3x |
|---|
