Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
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What:Shares of Open Text Corporation fell as much as 9.7% early Wednesday, then partially recovered to trade down around 6% as of 1 p.m. after the enterprise information management software company reported weaker-than-expected first-quarter results.
So what: Quarterly revenue increased 1% year over year to $447.6 million, which translated to a 21.4% decline in adjusted earnings per diluted share to $0.66. Analysts, on average, were expecting earnings of $0.90 per share on sales of $479.3 million.
Now what: To its credit, OpenText's revenue would have climbed 8% had it not been for continued significant foreign currency exchange headwinds. Recurring revenue also climbed 4% year over year (10% in constant currencies) to $383.6 million, while cloud services revenue rose 12% (17% on a constant-currency basis) year over year to $143.8 million. OpenText also generated solid operating cash flow of $143.1 million, and raised its quarterly dividend by 16% to $0.20 per share.
OpenText CEO Mark Barrenechea further noted the company closed seven iX deals over $1 million apiece, "the benefit of which we will see in our future ongoing cloud revenues." Barrenechea went on, "Our products and services are resonating with enterprise customers and OpenText is well positioned to lead the digital transformation in the cloud."
As a result -- and considering foreign exchange challenges shouldn't last forever and aren't indicative of deeper problems with OpenText's business -- I think patient investors should still be able to benefit as OpenText's long-term thesis continues to unfold.
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The article Why Open Text Corporation Stock Dropped Today originally appeared on Fool.com.
Steve Symington owns shares of Apple. The Motley Fool recommends Apple and Open Text. The Motley Fool owns shares of Apple and 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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