What is driving Open Text Corp (NASDAQ: OTEX) stock

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Open Text Corp (NASDAQ: OTEX) stock rose over 2.1% in the pre-market session of January 31st, 2020 (as of 8:03 am GMT-5; Source: Google finance) after the company posted better than expected results for the second quarter of FY 20. Annual Recurring Revenues (ARR) rose to a record $570.8 million, which is up 7.8% year-over-year, representing 73% of total revenues, due to Cloud Services and Subscriptions revenues of $250.2 million, which increased significantly by 14.1% year-over-year.  Further, OTEX bought Carbonite, Inc., provider of cloud-based subscription data protection, backup, disaster recovery and endpoint security to small and medium-sized businesses and consumers. Due to the addition of Carbonite, the company have a strategic market-opportunity to bring Information Management (IM) to all sizes of customers, from the largest of enterprises, governments, mid-size companies, small companies, and consumers.

Furthermore, OpenText has also announced a restructuring plan that will impact the global workforce and consolidate certain real estate facilities to further streamline the operations, inclusive of Carbonite.   The anticipated cost is projected to be approximately $26 million to $34 million. These restructuring activities are expected to be completed by the end of Fiscal 2021, and once completed, OpenText expects the annualized cost savings to be of approximately $37 million to $41 million. The company expects any savings realized during the remainder of Fiscal 2020 to be largely offset by one-time Carbonite integration costs. As OpenText is integrating the acquisition, the company project a one-time deferred revenue adjustment that will result in a reduction in Carbonite revenue. In addition to this deferred revenue adjustment impact, the company projects Carbonite revenue contribution to be down for the next few quarters due to typical integration activities, and then normalize to historical levels thereafter.

OTEX in the second quarter of FY 20 has reported the adjusted earnings per share of 84 cents, beating the analysts’ estimates for the adjusted earnings per share of 78 cents, according to the Zacks Consensus Estimate. The company had reported the adjusted revenue growth of 6.3 percent to $771.56 million in the second quarter of FY 20, beating the analysts’ estimates for revenue by 2.38%.

Additionally, the company has declared on January 29, 2020 a cash dividend of $0.1746 per common share. The record date for this dividend is February 28, 2020 and the payment date is March 20, 2020.

Meanwhile, the key customer wins in the quarter included PFU Limited, the Ministry of Justice Rhineland-Palatinate, thyssenkrupp AG, the Netherlands Ministry of Economic Affairs and Climate Policy, Lewis Rice, Kodak Alaris, Shinkai Transport Systems, Ltd. and Morneau Shepell.

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