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Analysts call the quarterly financial results “mixed” as company looks to leverage their recent acquisition.

This week OpenText reported its quarterly results – after announcing its purchase of software vendor Micro Focus some time ago.

For its fiscal 2023 second quarter, OpenText reported earnings before costs of $0.89 per share. In other words, the company’s earnings are flat from last year. Analysts had expected somewhat better earnings per share of $1.05. The company’s revenue rose 2.4%, to $897.4 million.

OpenText’s cloud services and subscriptions rose 12% year-over-year in the quarter, to $408.7 million, while customer support revenue fell 18%, to $316.5 million. Total annual recurring revenue edged up 3.6%, to $725.2 million.

Adjusted earnings before interest, taxes, depreciation and amortization fell 3.3% year-over-year, to $645 million. Free cash flow dropped 30%, to $258.6 million.

Leveraging the Micro Focus acquisition

In presenting the OpenText financial results, the company’s executive team stressed the fact that this quarter represented “eight consecutive quarters of cloud organic and ARR organic growth in constant currency”.

Mark J. Barrenechea, OpenText CEO & CTO, also commented on the recent purchase of Micro Focus. “Customers are looking to gain the Information Advantage, and we are excited to expand our offerings with Micro Focus products to include Cybersecurity, Application Automation and Modernization, AI & Analytics, and Digital Operations Management”, he said. “As one of the world’s largest software and cloud businesses, OpenText powers and protects information to elevate every person and every organization to be their best. We welcome Micro Focus customers, partners and employees to OpenText. We expect to have Micro Focus on our operating model within six full quarters or sooner.”

Madhu Ranganathan, OpenText EVP, CFO, also commented. “We enter 2023 with tremendous momentum and an expanded Information Management market”, he said. “OpenText’s cash flow profile is strong. We remain committed to successfully executing our $400 million cost savings plan and achieving a consolidated net leverage ratio of less than 3x within eight full quarters or sooner.”

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