Open Text says first-quarter revenues grew 40 per cent as profits rose

Open Text Corp. (TSX:OTC) said Wednesday that first-quarter profits more than doubled as its corporate software business was boosted by soaring performance in cloud computing.

Canada’s largest software company, which reports in U.S. dollars, said that net income rose to US$64.7 million, or 53 cents per diluted share, compared with $30.6 million or 26 cents per share a year ago.

Adjusted earnings were 97 cents per share, an improvement over 69 cents per share in the prior-year period.

Total revenue grew 40 per cent to US$453.8 million from $324.5 million.

The results mark the strongest first-quarter performance in the company’s history and were reached despite a tougher economy, chief executive Mark Barrenechea said during a conference call with analysts.

Cloud services revenue continued its strong performance, growing 260 per cent to $150 million, which matched the rate of increase in the previous quarter.

Open Text has been focused on growing its cloud services business as more customers migrate their infrastructure online.

The division had a gross margin of 61.3 per cent in the quarter and has proven to be “highly profitable,” Barrenechea said.

However, he told investors he was “not satisfied” with results from licence revenues, which grew six per cent compared with a year ago, reaching $58.6 million.

He said Open Text would have delivered double-digit growth in the division if it weren’t for pressures facing the global economy.

“Geopolitical and economic issues began to grow and accumulate and ultimately had an effect on customer buying behaviour,” Barrenechea said.

“We believe it is prudent to assume these issues will continue over the short term and thus, we’ll prioritize more on value while this uncertainty is present.”

Customer support revenue was up nine per cent.

Open Text, which started as a technology spinoff from the University of Waterloo in 1991 with four employees, now has more than 8,000 workers worldwide.

During the quarter, Open Text worked with customers that included the Alberta government’s Ministry of Justice, Talisman Energy (TSX:TLM) and Canada Mortgage and Housing Corp.

Shares of the company, which released its results after markets closed, have risen nearly 25 per cent this year. Its shares ended $1.18 lower at $60.96 Wednesday on the Toronto Stock Exchange.

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