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Why Shares of Open Text Are Surging Today

By Timothy Green - Feb 1, 2018 at 12:01PM

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Strong growth driven by acquisitions helped the software company blow past analyst estimates.

What happened

Shares of Open Text (OTEX -1.84%) jumped Thursday after the software company reported its fiscal second-quarter results. Open Text reported double-digit revenue and earnings growth, handily beating analyst estimates on both fronts. The stock was up about 16% at noon EST.

So what

Open Text reported second-quarter revenue of $734.4 million, up 35% year over year and $45.6 million higher than the average analyst estimate. Revenue from cloud services and subscriptions jumped 18.9% to $208.1 million, while customer support revenue rose 40.3% to $308.1 million. License revenue jumped 38.3% to $135.2 million, and professional service and other revenue rose 65.2% to $83 million.

The Open Text logo against a colorful background.

Image source: Open Text.

Non-GAAP EPS came in at $0.76, up from $0.54 in the prior-year period and $0.13 better than analysts were expecting. Adjusted operating margin was 36.5% during the quarter, and the company produced operating cash flows of $165 million.

In addition to beating analyst estimates, Open Text updated its adjusted operating margin target. The company now sees a range of 36% to 40% in 2021, up from a range of 34% to 38% in 2020.

Now what

Open Text CEO Mark Barrenechea sees continued acquisitions as the best path forward. "Mergers and Acquisitions continue to be our leading growth driver and by utilizing the OpenText Business System, we are well positioned for future M&A opportunities within the EIM market," Barrenechea said.

Analysts are expecting Open Text to produce 19% revenue growth for fiscal year 2018, which ends in June.

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Open Text Corporation Stock Quote
Open Text Corporation
$38.49 (-1.84%) $0.72

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