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Second Quarter Results for Fiscal 2018

Expects Fiscal 2018 GAAP Diluted EPS Growth Outlook of 0.0%-6.0% YoY

Reiterates Fiscal 2018 Non-GAAP Diluted EPS Growth Outlook of 4.0%-8.0% YoY 

Second Quarter Fiscal 2018 Highlights

  • Closed the previously announced acquisition of Vubiquity for $224 million in cash and acquired UXP Systems for $80 million in cash
  • Revenue of $992 million, within the $960-$1,000 million guidance range; revenue included a positive impact from foreign currency movements relative to the first quarter of fiscal 2018, and contributions from M&A  consummated this quarter
  • GAAP diluted EPS of $0.70, above the midpoint of the $0.65-$0.73 guidance range
  • Non-GAAP diluted EPS of $0.95, above the midpoint of the $0.91-$0.97 guidance range
  • GAAP operating income of $132 million; GAAP operating margin of 13.3%
  • Non-GAAP operating income of $172 million; non-GAAP operating margin of 17.3%
  • Free cash flow of $3 million, comprised of cash flow from operations of $114 million, less $111 million in net capital expenditures and other, of which $81 million related to the multi-year development of the new campus. Excluding the campus investment, normalized free cash flow was $84 million in the second quarter of fiscal 2018
  • Twelve-month backlog of $3.32 billion, up $60 million sequentially
  • Quarterly cash dividend of $0.25 per share, to be paid on July 20, 2018

ST. LOUIS, May 10, 2018 (GLOBE NEWSWIRE) -- Amdocs Limited (NASDAQ:DOX) today reported operating results for the three months ended March 31, 2018.

“We are pleased to report solid results for our second fiscal quarter which included double-digit growth in Europe and record revenue in Rest of World. Our operating profitability was stable and we grew our 12-month backlog to another new high. Additionally, we extended our technology leadership with the launch of AmdocsOne at Mobile World Congress and we utilized our cash to close on the acquisitions of Vubiquity, as well as UXP Systems, a leader in User Lifecycle Management solutions,” said Eli Gelman, president and chief executive officer of Amdocs Management Limited.

Gelman continued, “Rest of World was a highlight of the quarter as we focused on project execution and securing new awards. In Southeast Asia, we commenced the ramp-up of the seven-year project and managed services agreement we signed with PLDT earlier in Q2. Additionally, we made an important step in Africa where we were selected to provide our revenue assurance capabilities to Safaricom, a major mobile network operator in Kenya with nearly 30 million subscribers.”

Gelman concluded, “We enter Q3 on-track to deliver a stronger second half, although we are of course monitoring the many moving parts affecting our outlook, including those resulting from consolidation activity currently in progress across our main operating regions. Additionally, we are focused on our execution and profitability, which combined with expected normalized free cash flow generation of approximately $500 million for the full year, leaves us well positioned to deliver diluted non-GAAP earnings per share growth in the range of 4% to 8% in fiscal 2018.”

Revenue

  • Revenue for the second fiscal quarter ended March 31, 2018 was $992.3 million, up 1.5% or $14.6 million sequentially from the first fiscal quarter of 2018 and up 2.7% as compared to last year’s second fiscal quarter. Revenue for the second fiscal quarter of 2018 includes a positive impact from foreign currency movements of approximately $5 million relative to the first quarter of fiscal 2018 and contributions from M&A consummated in the second fiscal quarter. 

Net Income and Earnings Per Share

The Company's GAAP net income for the second quarter of fiscal 2018 was $101.7 million, or $0.70 per diluted share, compared to GAAP net income of $112.6 million, or $0.76 per diluted share, in the prior fiscal year’s second quarter. Net income on a non-GAAP basis was $137.4 million, or $0.95 per diluted share, compared to non-GAAP net income of $139.2 million, or $0.94 per diluted share, in the second quarter of fiscal 2017.

Returning Cash to Shareholders

  • Quarterly Cash Dividend Program: On May 10, 2018, the Board approved the Company’s next quarterly cash dividend payment of $0.25 per share and set June 29, 2018 as the record date for determining the shareholders entitled to receive the dividend, which will be payable on July 20, 2018.
  • Share Repurchase Activity: Repurchased $120 million of ordinary shares during the second quarter of fiscal 2018.

Twelve-month Backlog
Twelve-month backlog, which includes anticipated revenue related to contracts, estimated revenue from managed services contracts, letters of intent, maintenance and estimated on-going support activities, was $3.32 billion at the end of the second quarter of fiscal 2018, up $60 million from the end of the prior quarter.

Third Quarter Fiscal 2018 Outlook

  • Revenue of approximately $990-$1,030 million, including an immaterial sequential impact from foreign currency fluctuations as compared to the second quarter of fiscal 2018. Third quarter fiscal 2018 guidance incorporates full quarter contributions from recently closed acquisitions
  • Diluted GAAP EPS of approximately $0.71-$0.81. The impact on diluted GAAP EPS of the acquisition of Vubiquity and UXP Systems is subject to finalization of the purchase price allocation and of the anticipated acquisition-related expenses related to operating adjustments, restructuring charges and other acquisition-related costs.
  • Diluted non-GAAP EPS of approximately $1.00-$1.06, excluding amortization of purchased intangible assets and other acquisition-related costs and approximately $0.05-$0.07 per share of equity-based compensation expense, net of related tax effects. Expected non-GAAP effective tax rate around the low-end of the annual target range of 13%-17% in the third quarter fiscal 2018

Full Year Fiscal 2018 Outlook

  • Expects revenue growth of 2.3%-4.3% year-over-year as reported compared with previous guidance of 0.0%-4.0% year-over-year
  • Expects revenue growth of 1.3%-3.3% year-over-year on a constant currency basis compared with previous guidance of (1.0%)-3.0% year-over-year
  • Full year fiscal 2018 revenue guidance incorporates an incremental revenue contribution of more than 1% from Vubiquity on both a constant currency and reported basis, and an expected positive impact from foreign currency fluctuations of about 1% year-over-year
  • Expects GAAP diluted earnings per share growth of roughly 0.0%-6.0% year-over-year. The impact on diluted GAAP EPS of the acquisition of Vubiquity and UXP Systems is subject to finalization of the purchase price allocation and of the anticipated expenses related to operating adjustments, restructuring charges and other acquisition-related costs
  • Reiterates Non-GAAP diluted earnings per share growth of roughly 4.0%-8.0% year-over-year, excluding amortization of purchased intangible assets and other acquisition-related costs and approximately $0.26-$0.29 per share of equity-based compensation expense, net of related tax effects. Expected non-GAAP effective tax rate to remain within the same target range of 13%-17% for the full year fiscal 2018
  • The impact of recent acquisitions on Amdocs’ diluted non-GAAP earnings per share (excluding amortization of purchased intangible assets, restructuring charges, other acquisition-related costs and equity based compensation expense, net of related tax effects) is expected to be neutral in fiscal year 2018, and accretive thereafter

Our third fiscal quarter 2018 and full year fiscal 2018 outlook takes into consideration the Company’s expectations regarding macro and industry specific risks and various uncertainties and certain assumptions that we will discuss on our earnings conference call. However, Amdocs notes market dynamics continue to shift rapidly and that it cannot predict all possible outcomes, including those resulting from AT&T’s proposed merger with Time Warner, T-Mobile’s proposed merger with Sprint, or from other current and potential customer consolidation activity in North America. 

Conference Call Details
Amdocs will host a conference call on May 10, 2018 at 5:00 p.m. Eastern Time to discuss the Company's second quarter of fiscal 2018 results. To participate, please dial +1 (844) 513-7152, or +1 (508) 637-5600 outside the United States, approximately 15 minutes before the call and enter passcode 4175387. The call will also be carried live on the Internet via the Amdocs website, www.amdocs.com

Non-GAAP Financial Measures
This release includes non-GAAP diluted earnings per share and other non-GAAP financial measures, including free cash flow, non-GAAP cost of revenue, non-GAAP research and development, non-GAAP selling, general and administrative, non-GAAP operating income, non-GAAP operating margin, non-GAAP income taxes, non-GAAP effective tax rate, non-GAAP net income and non-GAAP diluted earnings per share growth. These non-GAAP measures exclude the following items:

  • amortization of purchased intangible assets and other acquisition-related costs;
  • changes in fair value of certain acquisition-related liabilities;
  • nonrecurring restructuring charges;
  • equity-based compensation expense; and
  • tax effects related to the above.

These non-GAAP financial measures are not in accordance with, or an alternative for, generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles. Amdocs believes that non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with Amdocs’ results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate Amdocs’ results of operations in conjunction with the corresponding GAAP measures.

Amdocs believes that the presentation of non-GAAP diluted earnings per share and other financial measures, including free cash flow, non-GAAP cost of revenue, non-GAAP research and development, non-GAAP selling, general and administrative, non-GAAP operating income, non-GAAP operating margin, non-GAAP income taxes, non-GAAP effective tax rate, non-GAAP net income and non-GAAP diluted earnings per share growth when shown in conjunction with the corresponding GAAP measures, provides useful information to investors and management regarding financial and business trends relating to its financial condition and results of operations, as well as the net amount of cash generated by its business operations after taking into account capital spending required to maintain or expand the business.

For its internal budgeting process and in monitoring the results of the business, Amdocs’ management uses financial statements that do not include amortization of purchased intangible assets and other acquisition-related costs, changes in fair value of certain acquisition-related liabilities, equity-based compensation expense and related tax effects. Amdocs’ management also uses the foregoing non-GAAP financial measures, in addition to the corresponding GAAP measures, in reviewing the financial results of Amdocs. In addition, Amdocs believes that significant groups of investors exclude these items in reviewing its results and those of its competitors, because the amounts of the items between companies can vary greatly depending on the assumptions used by an individual company in determining the amounts of the items.

Amdocs further believes that, where the adjustments used in calculating non-GAAP diluted earnings per share are based on specific, identified amounts that impact different line items in the Consolidated Statements of Income (including cost of revenue, research and development, selling, general and administrative, operating income, income taxes and net income), it is useful to investors to understand how these specific line items in the Consolidated Statements of Income are affected by these adjustments. Please refer to the Reconciliation of Selected Financial Metrics from GAAP to Non-GAAP tables below.

Supporting Resources

About Amdocs
Amdocs is a leading software and services provider to the world’s most successful communications and media companies. As our customers reinvent themselves, we enable their digital and network transformation through innovative solutions, delivery expertise and intelligent operations. Amdocs and its 25,000 employees serve customers in over 85 countries. Listed on the NASDAQ Global Select Market, Amdocs had revenue of $3.9 billion in fiscal 2017.

For more information, visit Amdocs at www.amdocs.com.

This press release includes information that constitutes forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995, including statements about Amdocs’ growth and business results in future quarters. Although we believe the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that our expectations will be obtained or that any deviations will not be material. Such statements involve risks and uncertainties that may cause future results to differ from those anticipated. These risks include, but are not limited to, the effects of general economic conditions, Amdocs’ ability to grow in the business markets that it serves, Amdocs’ ability to successfully integrate acquired businesses, adverse effects of market competition, rapid technological shifts that may render the Company's products and services obsolete, potential loss of a major customer, our ability to develop long-term relationships with our customers, and risks associated with operating businesses in the international market. Amdocs may elect to update these forward-looking statements at some point in the future; however, Amdocs specifically disclaims any obligation to do so. These and other risks are discussed at greater length in Amdocs’ filings with the Securities and Exchange Commission, including in our Annual Report on Form 20-F for the fiscal year ended September 30, 2017 filed on December 11, 2017 and our Form 6-K furnished for the first quarter of fiscal 2018 on February 12, 2018.

Contact:
Matthew Smith
Head of Investor Relations
Amdocs 314-212-8328
E-mail: dox_info@amdocs.com

                                             

 
 
AMDOCS LIMITED
 
Consolidated Statements of Income
(in thousands, except per share data)
 
    Three months ended   Six months ended
    March 31,   March 31,
    2018   2017   2018   2017
                         
Revenue   $ 992,340   $ 966,009   $ 1,970,051   $ 1,920,736
                         
Operating expenses:                        
Cost of revenue     646,587     621,737     1,289,784     1,242,571
Research and development     64,926     67,303     133,103     127,293
Selling, general and administrative     120,199     114,465     238,867     238,544
Amortization of purchased intangible assets and other     28,801     28,723     54,327     56,954
      860,513     832,228     1,716,081     1,665,362
Operating income     131,827     133,781     253,970     255,374
                         
Interest and other expense, net     239     468     118     3,231
Income before income taxes     131,588     133,313     253,852     252,143
                         
Income taxes     29,861     20,753     35,252     41,790
Net income   $ 101,727   $ 112,560   $ 218,600   $ 210,353
Basic earnings per share   $ 0.71   $ 0.77   $ 1.52   $ 1.43
Diluted earnings per share   $ 0.70   $ 0.76   $ 1.51   $ 1.42
Basic weighted average number of shares outstanding     143,030     146,595     143,487     146,706
Diluted weighted average number of shares outstanding     144,390     147,954     144,882     148,168
Cash dividends declared per share   $ 0.250   $ 0.220   $ 0.470   $ 0.415
                         
                         


AMDOCS LIMITED
Selected Financial Metrics
(in thousands, except per share data)
 
    Three months ended   Six months ended
    March 31,   March 31,
      2018     2017     2018     2017
                         
Revenue   $ 992,340   $ 966,009   $ 1,970,051   $ 1,920,736
                         
Non-GAAP operating income     171,760     165,997     340,824     330,082
                         
Non-GAAP net income     137,350     139,164     291,816     272,731
                         
Non-GAAP diluted earnings per share   $ 0.95   $ 0.94   $ 2.01   $ 1.84
                         
Diluted weighted average number of shares outstanding     144,390     147,954     144,882     148,168
                         
                         


AMDOCS LIMITED
Reconciliation of Selected Financial Metrics from GAAP to Non-GAAP
 (in thousands)
 
      Three months ended
  March 31, 2018
   
    Reconciliation items  
  GAAP  Amortization of
purchased
intangible assets
and other
Equity based
compensation
expense
Changes in fair
value of certain
acquisition-
related liabilities
Tax effect Non-GAAP
Operating expenses:                                
Cost of revenue $ 646,587 $ -   $ (4,727 ) $ (574 ) $ -   $ 641,286
Research and
 development
  64,926   -     (769 )   -     -     64,157
Selling, general and 
 administrative
  120,199   -     (5,062 )   -     -     115,137
Amortization of
 purchased
 intangible assets
 and other
  28,801   (28,801 )   -     -     -     -
Total operating expenses   860,513   (28,801 )   (10,558 )   (574 )   -     820,580
                                 
Operating income   131,827   28,801     10,558     574     -     171,760
                                 
Income taxes   29,861   -     -     -     4,310     34,171
                                 
Net income $ 101,727 $ 28,801   $ 10,558   $ 574   $ (4,310 ) $ 137,350
                                 
                                 
 
 
 
 
    Three months ended
  March 31, 2017
   
    Reconciliation items  
  GAAP Amortization of
purchased
intangible assets
and other
Equity based
compensation
expense

Changes in fair
value of certain
acquisition-
related liabilities
Tax effect

 
Non-GAAP
Operating expenses:            
Cost of revenue $ 621,737 $ -   $ (4,973 ) $ 6,691   $ -   $ 623,455
Research and
 development
  67,303   -     (901 )   -     -     66,402
Selling, general and 
 administrative
  114,465   -     (4,310 )   -     -     110,155
Amortization of
 purchased
 intangible assets
 and other
  28,723   (28,723 )   -     -     -     -
Total operating expenses   832,228   (28,723 )   (10,184 )   6,691     -     800,012
                                 
Operating income   133,781   28,723     10,184     (6,691 )   -     165,997
                                 
Income taxes   20,753   -     -     -     5,612     26,365
                                 
Net income $ 112,560 $ 28,723   $ 10,184   $ (6,691 ) $ (5,612 ) $ 139,164
                                 
                                 


AMDOCS LIMITED
Reconciliation of Selected Financial Metrics from GAAP to Non-GAAP
 (in thousands)
 
      Six months ended
March 31, 2018
   
    Reconciliation items  
  GAAP Amortization
of purchased
intangible
assets and other
Equity based
compensation
expense
Changes in fair
value of certain
acquisition-
related
liabilities
Tax effect

 
One-time
tax benefit
relating to
the new
U.S. tax
legislation
Non-GAAP
Operating expenses:              
Cost of revenue $ 1,289,784 $ -   $ (9,425 ) $ (8,464 ) $ -   $ -   $ 1,271,895
Research and
  development
  133,103   -     (1,593 )   -           -     131,510
Selling, general and 
 administrative
  238,867   -     (13,045 )   -           -     225,822
Amortization of
 purchased
 intangible assets
 and other
  54,327   (54,327 )   -     -           -     -
Total operating expenses   1,716,081   (54,327 )   (24,063 )   (8,464 )         -     1,629,227
                                       
Operating income   253,970   54,327     24,063     8,464           -     340,824
                                       
Income taxes   35,252   -     -     -     10,688     2,950     48,890
                                       
Net income $ 218,600 $ 54,327   $ 24,063   $ 8,464   $ (10,688 ) $ (2,950 ) $ 291,816
                                       
                                       


      Six months ended
  March 31, 2017
   
    Reconciliation items  
  GAAP Amortization
of purchased
intangible
assets and
other
Equity based
compensation
expense
Changes in fair
value of certain
acquisition-
related
liabilities
Tax effect

 
Non-GAAP
Operating expenses:            
Cost of revenue $ 1,242,571 $ -   $ (9,971 ) $ 6,691   $ -   $ 1,239,291
Research and
  development
  127,293   -     (1,800 )   -     -     125,493
Selling, general and 
  administrative
  238,544   -     (12,674 )   -     -     225,870
Amortization of
  purchased
  intangible assets
  and other
  56,954   (56,954 )   -     -     -     -
Total operating expenses   1,665,362   (56,954 )   (24,445 )   6,691     -     1,590,654
                                 
Operating income   255,374   56,954     24,445     (6,691 )   -     330,082
                                 
Income taxes   41,790   -     -     -     12,330     54,120
                                 
Net income $ 210,353 $ 56,954   $ 24,445   $ (6,691 ) $ (12,330 ) $ 272,731
                                 
                                 


AMDOCS LIMITED
Condensed Consolidated Balance Sheets
(in thousands)
 
  As of
    March 31,
2018
  September 30, 
2017
             
ASSETS            
             
Current assets            
Cash, cash equivalents and short-term interest-bearing investments   $ 666,843   $ 979,608
Accounts receivable, net, including unbilled of $249,377 and $229,695, respectively     972,279     865,068
Prepaid expenses and other current assets     221,825     203,810
Total current assets     1,860,947     2,048,486
             
Property and equipment, net     471,818     355,685
Goodwill and other intangible assets, net     2,780,956     2,398,535
Other noncurrent assets     465,270     476,674
Total assets   $ 5,578,991   $ 5,279,380
             
LIABILITIES AND EQUITY            
             
Current liabilities            
             
Accounts payable, accruals and other   $ 1,141,799   $ 1,059,855
Short-term financing arrangements     120,000     -
Deferred revenue     128,556     113,091
Total current liabilities     1,390,355     1,172,946
Other noncurrent liabilities     582,419     532,364
Total Amdocs Limited Shareholders’ equity     3,563,054     3,574,070
Noncontrolling interests     43,163     -
Total equity   $ 3,606,217   $ 3,574,070
Total liabilities and equity   $ 5,578,991   $ 5,279,380
             
             


AMDOCS LIMITED
Consolidated Statements of Cash Flows
(in thousands)
 
    Six months ended March 31,
    2018   2017
                 
Cash Flow from Operating Activities:                
Net income   $ 218,600     $ 210,353  
Reconciliation of net income to net cash provided by operating activities:                
Depreciation and amortization     102,900       109,038  
Equity-based compensation expense     24,063       24,445  
Deferred income taxes     (3,584 )     16,889  
Excess tax benefit from equity-based compensation     -       (2,929 )
loss (Gain)  from short-term interest-bearing investments     1,195       (17 )
Net changes in operating assets and liabilities, net of amounts acquired:                
Accounts receivable, net     (77,359 )     (25,092 )
Prepaid expenses and other current assets     (9,509 )     (10,926 )
Other noncurrent assets     (10,606 )     (42,294 )
Accounts payable, accrued expenses and accrued personnel     23,103       25,101  
Deferred revenue     8,600       (19,932 )
Income taxes payable, net     8,675       (8,813 )
Other noncurrent liabilities     (7,749 )     (469 )
Net cash provided by operating activities     278,329       275,354  
                 
Cash Flow from Investing Activities:                
Purchase of property and equipment     (162,126 )     (69,906 )
Proceeds from sale of short-term interest-bearing investments     207,738       144,920  
Purchase of short-term interest-bearing investments     (76,037 )     (145,737 )
Net cash paid for acquisitions     (352,599 )     -  
Other     (3,446 )     1,671  
Net cash used in investing activities     (386,470 )     (69,052 )
                 
Cash Flow from Financing Activities:                
Borrowings under financing arrangements     120,000       200,000  
Payments under financing arrangements     -       (200,000 )
Repurchase of shares     (239,779 )     (160,232 )
Investment by noncontrolling interest, net     47,013       -  
Proceeds from employee stock options exercised     65,631       62,368  
Payments of dividends     (63,294 )     (57,299 )
Excess tax benefit from equity-based compensation and other     (110 )     2,929  
Net cash used in financing activities     (70,539 )     (152,234 )
                 
Net (decrease) increase in cash and cash equivalents     (178,680 )     54,068  
Cash and cash equivalents at beginning of period     649,611       768,660  
Cash and cash equivalents at end of period   $ 470,931     $ 822,728  
                 
                 



AMDOCS LIMITED
Supplementary Information
 (In millions)
                               
    Three months ended
    March 31,
 2018
  December 31,
2017
  September 30,
2017
  June 30,
2017
  March 31,
 2017
North America   $ 624.2   $ 643.0   $ 644.1   $ 637.9   $ 636.3
Europe     148.6     133.7     129.8     125.2     115.4
Rest of World     219.5     201.0     205.8     203.6     214.3
Total Revenue   $ 992.3   $ 977.7   $ 979.7   $ 966.7   $ 966.0
                               


    Three months ended
    March 31,
 2018
  December 31,
2017
  September 30,
2017
  June 30,
2017
  March 31,
 2017
Managed Services Revenue   $   508.9   $   518.7   $   503.8   $   496.3   $   511.1
                               


    Three months ended
    March 31,
2018
  December 31,
2017
  September 30,
2017
  June 30,
2017
  March 31,
2017
Customer Experience
Solutions 
  $ 980.7   $ 965.9   $ 967.7    $ 954.8    $ 948.6
Directory     11.6     11.8     12.0     11.9     17.4
Total Revenue   $   992.3   $   977.7   $   979.7   $   966.7   $   966.0
                               


    As of
    March 31,
2018
  December 31,
2017
  September 30,
2017
  June 30,
2017
  March 31,
2017
12-Month Backlog   $   3,320   $   3,260   $   3,250   $   3,220   $   3,210

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