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Fourth Quarter Results for Fiscal 2018

 Record Quarterly Revenue of $1 Billion

Expects Fiscal 2019 Revenue Growth of 2.0%-6.0% YoY in Constant Currency

Quarterly Cash Dividend to be Raised From $0.25 to $0.285 Per Share 

Fourth Quarter Fiscal 2018 Highlights

  • Revenue of $1 billion, slightly above the midpoint of the $980-$1,020 million guidance range including a negative impact from foreign currency movements of approximately $5 million relative to the third quarter of fiscal 2018. Revenue guidance had included a negative sequential impact from foreign currency fluctuations of approximately $5 million as compared to the third quarter of fiscal 2018
  • GAAP diluted EPS of $0.31, below the $0.71-$0.79 guidance range, primarily due to a non-recurring charge of $0.36 per diluted share incurred to settle a previously disclosed long-running legal dispute, and changes in certain acquisitions related liabilities measured at fair value of $0.06 per diluted share, net of tax effect
  • Non-GAAP diluted EPS of $0.99, above the midpoint of the $0.95-$1.01 guidance range
  • GAAP operating income of $69 million; GAAP operating margin of 6.9%
  • Non-GAAP operating income of $173 million; non-GAAP operating margin of 17.2%
  • Normalized quarterly free cash flow of $89 million, comprised of cash flow from operations of $115 million, less $34 million in net capital expenditures and other, and excluding payments of non-recurring charges and the multi-year development of the new campus in total amount of $8 million
  • Normalized full year free cash flow of $428 million, comprised of cash flow from operations of $557 million, less $232 million in net capital expenditures and other, and excluding payments of non-recurring charges and the multi-year development of the new campus in total amount of $103 million
  • Twelve-month backlog of $3.36 billion, up $30 million sequentially
  • Quarterly cash dividend of $0.25 per share, to be paid on January 18, 2019
  • The board of directors also approved an increase in the Company’s quarterly cash dividend payment from $0.25 per share to $0.285 per share, anticipated to be paid in April 2019, subject to shareholder approval at the January 2019 annual meeting

ST. LOUIS, Nov. 08, 2018 (GLOBE NEWSWIRE) -- Amdocs Limited (NASDAQ: DOX) today reported operating results for the three months ended September 30, 2018.

“We are pleased to report solid results in our fourth fiscal quarter. Revenue was slightly above the midpoint of our guidance and reflected normal customer fluctuations in North America, continued growth in Rest of World and our best quarter in more than a decade in Europe. At the operating level, our profitability was stable as we focused on consistent project execution and delivery. Overall, we wrapped up fiscal 2018 with full year non-GAAP diluted earnings per share growth of 6.1%, which is in line with the midpoint of the guidance range of 4.0% to 8.0% that we issued last November,” said Shuky Sheffer, president and chief executive officer of Amdocs Management Limited.

Sheffer continued, “Our sales momentum remained healthy in Q4 as we continued to penetrate new customers and new geographies with significant project and managed services awards. Among the highlights, we won our first ever transformation award with TIM, the largest communications provider in Italy, that further expands our customer footprint in this key European market. We also strengthened our position at PLDT in the Philippines where we signed a six-year managed IT infrastructure deal that adds to the seven-year, $300 million managed transformation agreement that we signed only earlier this year”. 

“Looking at the year ahead, the visibility of our record 12-month backlog points to an improved rate of revenue growth as we enable and support the continuous digital, media and network transformations of our customers. Taking everything in to consideration, we expect non-GAAP diluted earnings per share growth in the range of 3.0% to 7.0% in fiscal 2019. Moreover, we plan to further improve the total return we provide to shareholders by raising our quarterly dividend payment by 14% to 28.5 cents per share, subject to shareholders approval at the annual meeting in January 2019.”

Revenue

Revenue for the fourth fiscal quarter ended September 30, 2018 was $1.0 billion, up $0.4 million sequentially from the third fiscal quarter of 2018 and up 2.3% as compared to last year’s fourth fiscal quarter. Revenue for the fourth fiscal quarter of 2018 includes a negative impact from foreign currency movements of approximately $5 million relative to the third quarter of fiscal 2018.

For the fiscal year ended September 30, 2018, revenue increased by 2.8% to $4.0 billion.

Net Income and Earnings Per Share

The Company's GAAP net income for the fourth quarter of fiscal 2018 was $44.3 million, or $0.31 per diluted share, compared to GAAP net income of $107.2 million, or $0.73 per diluted share, in the prior fiscal year’s fourth quarter. GAAP net income for the fourth quarter of fiscal 2018 includes a non-recurring charge of a loss of $0.36 per diluted share, net of tax effect incurred to settle a previously disclosed long-running legal dispute. Net income on a non-GAAP basis was $140.2 million, or $0.99 per diluted share, compared to non-GAAP net income of $137.4 million, or $0.94 per diluted share, in the fourth quarter of fiscal 2017. Non-GAAP net income excludes amortization of purchased intangible assets and other acquisition-related costs, changes in certain acquisitions related liabilities measured at fair value, equity-based compensation expenses of $12.9 million, and non-recurring charges of a loss incurred to settle a previously disclosed long-running legal dispute, net of related tax effects, in the fourth quarter of fiscal 2018.

The Company's GAAP net income in fiscal 2018 was $354.4 million, or $2.47 per diluted share, compared to GAAP net income of $436.8 million, or $2.96 per diluted share, in fiscal 2017. Fiscal 2018 net income on a non-GAAP basis was $579.6 million, or $4.03 per diluted share, compared to non-GAAP net income of $560.6 million, or $3.80 per diluted share, in fiscal 2017.

Returning Cash to Shareholders

  • Quarterly Cash Dividend Program: On November 8, 2018, the Board approved the Company’s next quarterly cash dividend payment of $0.25 per share and set December 31, 2018 as the record date for determining the shareholders entitled to receive the dividend, which will be payable on January 18, 2019. The Board also approved an increase in the Company’s quarterly cash dividend payment to $0.285 per share, which is anticipated to be paid in April 2019, provided that the increase is approved by shareholders at the January 2019 annual general meeting of shareholders.
  • Share Repurchase Activity: Repurchased $90 million of ordinary shares during the fourth 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 $3.36 billion at the end of the fourth quarter of fiscal 2018, up $30 million from the end of the prior quarter.

First Quarter Fiscal 2019 Outlook

  • Revenue of approximately $990-$1,030 million, assuming an immaterial sequential impact from foreign currency fluctuations as compared to the fourth quarter of fiscal 2018
  • GAAP diluted EPS of approximately $0.67-$0.75
  • Non-GAAP diluted EPS of approximately $0.95-$1.01, excluding amortization of purchased intangible assets and other acquisition-related costs, changes in certain acquisitions related liabilities measured at fair value, and approximately $0.09-$0.11 per share of equity-based compensation expense, net of related tax effects Expected non-GAAP effective tax rate above the high-end of the annual target range of 13%-17% in the first quarter fiscal 2019

Full Year Fiscal 2019 Outlook

  • Revenue growth of 1.0%-5.0% year-over-year
  • Revenue growth of 2.0%-6.0% year-over-year on a constant currency basis
  • Full year fiscal 2019 revenue guidance incorporates an expected negative impact from foreign currency fluctuations of about 1.0% year-over-year
  • GAAP diluted earnings per share growth of roughly 29.0%-38.0% year-over-year
  • Non-GAAP diluted earnings per share growth of roughly 3.0%-7.0% year-over-year, excluding amortization of purchased intangible assets and other acquisition-related costs, changes in certain acquisitions related liabilities measured at fair value,  and approximately $0.22-$0.30 per share of equity-based compensation expense, net of related tax effects

Our first fiscal quarter 2019 and full year fiscal 2019 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 T-Mobile’s proposed merger with Sprint, or from other current and potential customer consolidation activity.

Conference Call Details
Amdocs will host a conference call on November 8, 2018 at 5:00 p.m. Eastern Time to discuss the Company's fourth 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 4072429. 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 certain acquisition-related liabilities measured at fair value;
  • non-recurring and unusual 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, nonrecurring restructuring charges, nonrecurring and unusual charges related to a loss incurred to settle a previously disclosed long-running legal dispute, changes in certain acquisition-related liabilities measured at fair value, 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 communications and media companies of all sizes, accelerating the industry’s dynamic and continuous digital transformation. With a rich set of innovative solutions, long-term business relationships with 350 communications and media providers, and technology and distribution ties to 600 content creators, Amdocs delivers business improvements to drive growth. Amdocs and its 25,000 employees serve customers in over 85 countries. Listed on the NASDAQ Global Select Market, Amdocs had revenue of $4.0 billion in fiscal 2018. For more information, visit Amdocs at www.amdocs.com.

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, the second quarter of fiscal 2018 on May 21, 2018 and for the third quarter of fiscal 2018 on August 15, 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   Fiscal year ended
    September 30,     September 30,
      2018       2017       2018       2017  
                 
Revenue   $ 1,002,588     $ 979,724     $ 3,974,837     $ 3,867,155  
                 
Operating expenses:                
Cost of revenue     654,923       636,445       2,595,276       2,507,656  
Research and development     70,783       64,686       276,615       259,097  
Selling, general and administrative     125,830       120,237       481,093       472,778  
Amortization of purchased intangible assets and other     27,233       26,309       108,489       110,291  
Non-recurring charges     55,000       -       85,057       -  
      933,769       847,677       3,546,530       3,349,822  
Operating income     68,819       132,047       428,307       517,333  
                 
Interest and other (expense) income, net     (3,436 )     (2,342 )     (6,766 )     (4,421 )
Income before income taxes     65,383       129,705       421,541       512,912  
                 
Income taxes     21,117       22,496       67,145       76,086  
Net income   $ 44,266     $ 107,209     $ 354,396     $ 436,826  
Basic earnings per share   $ 0.31     $ 0.74     $ 2.49     $ 2.99  
Diluted earnings per share   $ 0.31     $ 0.73     $ 2.47     $ 2.96  
Basic weighted average number of shares outstanding     140,760       144,764       142,422       146,017  
Diluted weighted average number of shares outstanding     141,872       146,141       143,703       147,431  
Cash dividends declared per share   $ 0.250     $ 0.220     $ 0.970     $ 0.855  
                                 
                                 

AMDOCS LIMITED
Selected Financial Metrics
(in thousands, except per share data)

    Three months ended   Fiscal year ended
    September 30,   September 30,
      2018     2017     2018     2017
                 
Revenue   $ 1,002,588   $ 979,724   $ 3,974,837   $ 3,867,155
                 
Non-GAAP operating income     172,606     168,197     687,020     665,472
                 
Non-GAAP net income     140,230     137,419     579,593     560,590
                 
Non-GAAP diluted earnings per share   $ 0.99   $ 0.94   $ 4.03   $ 3.80
                 
Diluted weighted average number of shares outstanding     141,872     146,141     143,703     147,431
                         
                         

AMDOCS LIMITED
Reconciliation of Selected Financial Metrics from GAAP to Non-GAAP
(in thousands)

  Three months ended
September 30, 2018
    Reconciliation items  
  GAAP Amortization of purchased intangible assets and other Equity based compensation expense Changes in certain acquisitions related liabilities measured at fair value Non-recurring charges Tax effect

 
Non-GAAP
Operating expenses:              


Cost of revenue
$ 654,923 $ -   $ (3,752 )

$


      (8,658


)
$ -   $ -   $ 642,513
Research and development   70,783   -     (813 )   -     -     -     69,970
Selling, general and administrative   125,830   -     (8,331 )   -     -     -     117,499
Amortization of purchased intangible assets and other   27,233   (27,233 )   -     -     -     -     -
Non-recurring charges   55,000   -     -     -     (55,000 )   -     -
Total operating expenses   933,769   (27,233 )   (12,896 )   (8,658 )   (55,000 )   -     829,982
               
Operating income   68,819   27,233     12,896     8,658     55,000     -     172,606
               
Income taxes   21,117   -     -     -     -     7,822     28,940
               
Net income $ 44,266 $ 27,233   $ 12,896   $ 8,658   $ 55,000   $ (7,822 ) $ 140,230
                                       


  Three months ended
September 30, 2017
    Reconciliation items  
  GAAP Amortization of
purchased intangible
assets and other
Equity based
compensation expense
Tax effect

 
Non-GAAP
Operating expenses:          


Cost of revenue
$ 636,445 $ -   $ (4,481 ) $ -   $ 631,964
Research and development   64,686   -     (822 )   -     63,864
Selling, general and administrative   120,237   -     (4,538 )   -     115,699
Amortization of purchased intangible assets and other   26,309   (26,309 )   -     -     -
Total operating expenses   847,677   (26,309 )   (9,841 )   -     811,527
           
Operating income   132,047   26,309     9,841     -     168,197
           
Income taxes   22,496   -     -     5,940     28,436
           
Net income $ 107,209 $ 26,309   $ 9,841   $ (5,940 ) $ 137,419
                           
                           

AMDOCS LIMITED
Reconciliation of Selected Financial Metrics from GAAP to Non-GAAP
(in thousands)

  Fiscal year ended
September 30, 2018
    Reconciliation items  
  GAAP Amortization of
purchased intangible
assets and other
Equity based compensation expense Changes in certain acquisitions related liabilities measured at fair value Non-recurring charges Tax effect

 
Non-GAAP
Operating expenses:              
Cost of revenue $ 2,595,276 $ -   $ (18,253 ) $ (17,692 ) $ -   $ -   $ 2,559,331
Research and development   276,615   -     (3,477 )   -     -     -     273,138
Selling, general and administrative   481,093   -     (25,746 )   -     -     -     455,347
Amortization of purchased intangible assets and other   108,489   (108,489 )   -     -     -     -     -
Non-recurring charges   85,057   -     -     -    

(85,057


)
  -     -
Total operating expenses   3,546,530   (108,489 )   (47,476 )   (17,692 )  

(85,057


)
  -     3,287,816
               
Operating income   428,307   108,489     47,476     17,692     85,057     -     687,020
               
Income taxes   67,145   -     -     -     -     33,517     100,662
               
Net income $ 354,396 $ 108,489   $ 47,476   $ 17,692   $ 85,057   $ (33,517 ) $ 579,593
                                       


  Fiscal year ended
September 30, 2017
    Reconciliation items  
  GAAP Amortization of
purchased intangible
assets and other
Equity based compensation expense Changes in certain acquisitions related liabilities measured at fair value Tax effect

 
Non-GAAP
Operating expenses:            
 

Cost of revenue
$  2,507,656 $      -   $    (19,215 ) $      6,691   $     -   $ 2,495,132 
Research and development   259,097   -     (3,536 )   -     -     255,561
Selling, general and administrative   472,778   -     (21,788 )   -     -     450,990
Amortization of purchased intangible assets and other   110,291   (110,291 )   -     -     -     -
Total operating expenses   3,349,822   (110,291 )   (44,539 )   6,691     -       3,201,683
             
Operating income   517,333   110,291     44,539     (6,691 )   -     665,472
             
Income taxes   76,086   -     -     -     24,375     100,461
             
Net income $   436,826 $      110,291   $        44,539   $     (6,691 ) $     (24,375 ) $ 560,590
                                 

AMDOCS LIMITED
Condensed Consolidated Balance Sheets
 (in thousands)

  As of
    September 302018   September 30, 2017
         
ASSETS        
         
Current assets        
Cash, cash equivalents and short-term interest-bearing investments   $    519,216   $    979,608
Accounts receivable, net, including unbilled of $263,997 and $229,695, respectively     971,502     865,068
Prepaid expenses and other current assets     229,999     203,810
  Total current assets     1,720,717     2,048,486
         
Property and equipment, net     496,585     355,685
Goodwill and other intangible assets, net     2,710,144     2,398,535
Other noncurrent assets     420,369     476,674
Total assets   $   5,347,815   $   5,279,380
         
LIABILITIES AND SHAREHOLDERS’ EQUITY        
         
Current liabilities        
Accounts payable, accruals and other   1,162,543
  1,059,855
Deferred revenue     132,414     113,091
  Total current liabilities     1,294,957     1,172,946
Other noncurrent liabilities     560,816     532,364
Total Amdocs Limited Shareholders’ equity     3,448,879     3,574,070
Noncontrolling interests     43,163     -
Total equity   $   3,492,042   $   3,574,070
Total liabilities and equity   $   5,347,815   $   5,279,380

AMDOCS LIMITED
Consolidated Statements of Cash Flows
(in thousands)

    Fiscal year ended September 30,
      2018       2017  
         
Cash Flow from Operating Activities:        
Net income   $   354,396     $   436,826  
Reconciliation of net income to net cash provided by operating activities:        
  Depreciation and amortization     207,394       214,885  
  Equity-based compensation expense     47,476       44,539  
  Deferred income taxes     21,398       6,551  
Excess tax benefit from equity-based compensation     -       (4,666 )
  Loss from short-term interest-bearing investments     1,324       9  
Net changes in operating assets and liabilities, net of amounts acquired:        
  Accounts receivable     (67,198 )     (41,075 )
  Prepaid expenses and other current assets     (18,736 )     11,002  
  Other noncurrent assets     9,674       (52,667 )
  Accounts payable, accrued expenses and accrued personnel     25,348       72,049  
  Deferred revenue     7,650       (50,230 )
  Income taxes payable     (22,759 )     (15,145 )
  Other noncurrent liabilities     (8,718 )     14,034  
Net cash provided by operating activities     557,249       636,112  
         
Cash Flow from Investing Activities:        
Purchase of property and equipment     (231,146 )     (133,392 )
Proceeds from sale of short-term interest-bearing investments     303,090       278,066  
Purchase of short-term interest-bearing investments     (76,037 )     (281,983 )
Net cash paid for acquisitions     (355,142 )     (18,064 )
Other     (3,157 )     (29,940 )
Net cash used in investing activities     (362,392 )     (185,313 )
         
Cash Flow from Financing Activities:        
Borrowings under financing arrangements     120,000       200,000  
Payments under financing arrangements     (120,000 )     (400,000 )
Repurchase of shares     (419,228 )     (340,597 )
Proceeds from employee stock options exercised     81,280       87,586  
Payments of dividends     (134,292 )     (121,503 )
Investment by noncontrolling interests, net     47,013      
Excess tax benefit from equity-based compensation and other     -       4,666  
Other     (458 )     -  
Net cash used in financing activities     (425,685 )     (569,848 )
         
Net decrease in cash and cash equivalents     (230,828 )     (119,049 )
Cash and cash equivalents at beginning of period     649,611       768,660  
Cash and cash equivalents at end of period   $   418,783     $   649,611  
                 

AMDOCS LIMITED
Supplementary Information
 (in millions)

    Three months ended
    September 30,
2018
  June 30,
2018
  March 31,
 2018
  December 31,
2017
  September 30,
2017
North America   $ 638.2   $ 644.8   $ 624.2   $ 643.0   $ 644.1
Europe     150.6     139.3     148.6     133.7     129.8
Rest of the World     213.8     218.1     219.5     201.0     205.8
Total Revenue   $ 1,002.6   $ 1,002.2   $ 992.3   $ 977.7   $ 979.7


    Three months ended
    September 30,
2018
  June 30,
2018
  March 31,
 2018
  December 31,
2017
  September 30,
2017
Managed Services Revenue   $ 508.9   $ 515.0   $ 508.9   $ 518.7   $ 503.8


    Three months ended
    September 30,
2018
  June 30,
2018
  March 31,
2018
  December 31,
2017
  September 30,
2017
Customer Experience Systems   $ 992.5   $  991.0   $ 980.7   $ 965.9   $  967.7
Directory     10.1     11.2     11.6     11.8     12.0
Total Revenue   $ 1,002.6   $ 1,002.2   $ 992.3   $ 977.7   $ 979.7


    As of
    September 30,
2018
  June 30,
2018
  March 31,
2018
  December 31,
2017
  September 30,
2017
12-Month Backlog   $ 3,360   $ 3,330   $ 3,320   $ 3,260   $ 3,250

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