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Second Quarter Results for Fiscal 2017
May 09, 2017
Record Quarterly Revenue of $966M
Expects Fiscal 2017 Revenue Growth of 3.5-5.5% YoY in Constant Currency
Reiterates Fiscal 2017 Non-GAAP Diluted EPS Growth Outlook of 4.5-8.5% YoY
Second Quarter Fiscal 2017 Highlights
- Revenue of
$966 million , above the midpoint of the$940-$980 million guidance range including a positive impact from foreign currency movements of approximately$3 million relative to the first quarter of fiscal 2017 - Diluted GAAP EPS of
$0.76 , above the$0.66-$0.74 guidance range mainly due to gains as a result of changes in fair value of certain acquisition-related liabilities - Diluted non-GAAP EPS of
$0.94 , above the midpoint of the$0.90-$0.96 guidance range
- GAAP operating income of
$134 million ; GAAP operating margin of 13.8% - Non-GAAP operating income of
$166 million ; non-GAAP operating margin of 17.2% - Free cash flow of
$81 million - Twelve-month backlog of
$3.21 billion , up$30 million sequentially
- Quarterly cash dividend of
$0.22 per share to be paid onJuly 14, 2017
“We are pleased with our performance in the second fiscal quarter, during which we maintained our relentless focus on execution to produce record revenue and stable profitability. Indeed, we successfully delivered on dozens of transformation project milestones during Q2, a key highlight of which was the go-live of a single real-time convergent charging system for
Gelman continued, “Regarding our strategic growth engines, we have made important additional progress in network functions virtualization (NFV), an area in which
Gelman concluded, “We enter the second fiscal half with a demonstrated ability to bring customer value through the strength of our unique business model. With the visibility provided by our record 12-month backlog we are on-track to meet our financial targets for the full fiscal year. These include free cash flow generation of approximately
Revenue
Revenue for the second fiscal quarter ended
Net Income and Earnings Per Share
The Company's GAAP net income for the second quarter of fiscal 2017 was
Returning Cash to Shareholders
- Quarterly Cash Dividend Program: On
May 9, 2017 , the Board approved the Company’s next quarterly cash dividend payment of$0.22 per share and setJune 30, 2017 as the record date for determining the shareholders entitled to receive the dividend, which will be payable onJuly 14, 2017 . - Share Repurchase Activity: Repurchased
$80 million of ordinary shares during the second quarter of fiscal 2017.
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
Third Quarter fiscal 2017 Outlook
- Revenue of approximately
$945-$985 million , including an immaterial sequential impact from foreign currency fluctuations as compared to the second quarter of fiscal 2017 - Diluted GAAP EPS of approximately
$0.69-$0.77 - Diluted non-GAAP EPS of approximately
$0.93-$0.99 , excluding amortization of purchased intangible assets and other acquisition-related costs and approximately$0.06-$0.07 per share of equity-based compensation expense, net of related tax effects
Full Year Fiscal 2017 Outlook
- Expects revenue growth of 3.5-5.5% year-over-year on a constant currency basis compared with previous guidance of 2.5-6.5% year-over-year
- Expects revenue growth of 3.0-5.0% year-over-year as reported, including an anticipated negative impact from foreign currency movements of approximately 0.5% year-over-year and compared with previous guidance of 1.5-5.5% year-over-year, which included an anticipated negative impact from foreign currency movements of approximately 1.0% year-over-year
- GAAP diluted earnings per share growth of roughly 5.0-11.0% year-over-year
- Non-GAAP diluted earnings per share growth of roughly 4.5-8.5% year-over-year
Our third fiscal quarter 2017 and full year fiscal 2017 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,
Conference Call Details
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 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;
- 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.
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
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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 LIMITED | |||||||||||||||
Consolidated Statements of Income | |||||||||||||||
(in thousands, except per share data) |
|||||||||||||||
Three months ended | Six months ended | ||||||||||||||
March 31, | March 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenue | $ | 966,009 | $ | 925,935 | $ | 1,920,736 | $ | 1,847,440 | |||||||
Operating expenses: | |||||||||||||||
Cost of revenue | 621,737 | 600,116 | 1,242,571 | 1,195,684 | |||||||||||
Research and development | 67,303 | 63,711 | 127,293 | 126,198 | |||||||||||
Selling, general and administrative | 114,465 | 114,474 | 238,544 | 234,022 | |||||||||||
Amortization of purchased intangible assets and other | 28,723 | 27,487 | 56,954 | 51,854 | |||||||||||
832,228 | 805,788 | 1,665,362 | 1,607,758 | ||||||||||||
Operating income | 133,781 | 120,147 | 255,374 | 239,682 | |||||||||||
Interest and other (expense) income, net | (468 | ) | 1,460 | (3,231 | ) | (205 | ) | ||||||||
Income before income taxes | 133,313 | 121,607 | 252,143 | 239,477 | |||||||||||
Income taxes | 20,753 | 13,887 | 41,790 | 30,915 | |||||||||||
Net income | $ | 112,560 | $ | 107,720 | $ | 210,353 | $ | 208,562 | |||||||
Basic earnings per share | $ | 0.77 | $ | 0.72 | $ | 1.43 | $ | 1.39 | |||||||
Diluted earnings per share | $ | 0.76 | $ | 0.71 | $ | 1.42 | $ | 1.37 | |||||||
Basic weighted average number of shares outstanding | 146,595 | 149,924 | 146,706 | 150,279 | |||||||||||
Diluted weighted average number of shares outstanding | 147,954 | 151,948 | 148,168 | 152,502 | |||||||||||
Cash dividends declared per share | $ | 0.220 | $ | 0.195 | $ | 0.415 | $ | 0.365 | |||||||
AMDOCS LIMITED | ||||||||||||
Selected Financial Metrics | ||||||||||||
(in thousands, except per share data) | ||||||||||||
Three months ended | Six months ended | |||||||||||
March 31, | March 31, | |||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||
Revenue | $ | 966,009 | $ | 925,935 | $ | 1,920,736 | $ | 1,847,440 | ||||
Non-GAAP operating income | 165,997 | 157,950 | 330,082 | 314,822 | ||||||||
Non-GAAP net income | 139,164 | 140,165 | 272,731 | 272,185 | ||||||||
Non-GAAP diluted earnings per share | $ | 0.94 | $ | 0.92 | $ | 1.84 | $ | 1.78 | ||||
Diluted weighted average number of shares outstanding | 147,954 | 151,948 | 148,168 | 152,502 |
AMDOCS LIMITED | ||||||||||||||||
Reconciliation of Selected Financial Metrics from GAAP to Non-GAAP | ||||||||||||||||
(in thousands) | ||||||||||||||||
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 | ||
Three months ended | ||||||||||||||||||
March 31, 2016 | ||||||||||||||||||
Reconciliation items | ||||||||||||||||||
GAAP | Amortization of purchased intangible assets and other |
Equity based compensation expense |
Tax effect | Non-GAAP | ||||||||||||||
Operating expenses: | ||||||||||||||||||
Cost of revenue | $ | 600,116 | $ | - | $ | (4,917 | ) | $ | - | $ | 595,199 | |||||||
Research and | ||||||||||||||||||
development | 63,711 | - | (1,018 | ) | - | 62,693 | ||||||||||||
Selling, general and | ||||||||||||||||||
administrative | 114,474 | - | (4,381 | ) | - | 110,093 | ||||||||||||
Amortization of | ||||||||||||||||||
purchased intangible | ||||||||||||||||||
assets and other | 27,487 | (27,487 | ) | - | - | - | ||||||||||||
Total operating expenses | 805,788 | (27,487 | ) | (10,316 | ) | - | 767,985 | |||||||||||
Operating income | 120,147 | 27,487 | 10,316 | - | 157,950 | |||||||||||||
Income taxes | 13,887 | - | - | 5,358 | 19,245 | |||||||||||||
Net income | $ | 107,720 | $ | 27,487 | $ | 10,316 | $ | (5,358 | ) | $ | 140,165 | |||||||
AMDOCS LIMITED | |||||||||||||||||
Reconciliation of Selected Financial Metrics from GAAP to Non-GAAP | |||||||||||||||||
(in thousands) | |||||||||||||||||
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 |
Six months ended | |||||||||||||||||
March 31, 2016 | |||||||||||||||||
Reconciliation items | |||||||||||||||||
GAAP | Amortization of purchased intangible assets and other |
Equity based compensation expense |
Tax effect | Non-GAAP | |||||||||||||
Operating expenses: | |||||||||||||||||
Cost of revenue | $ | 1,195,684 | $ | - | $ | (9,041 | ) | $ | - | $ | 1,186,643 | ||||||
Research and | |||||||||||||||||
development | 126,198 | - | (1,860 | ) | - | 124,338 | |||||||||||
Selling, general and | |||||||||||||||||
administrative | 234,022 | - | (12,385 | ) | - | 221,637 | |||||||||||
Amortization of | |||||||||||||||||
purchased intangible | |||||||||||||||||
assets and other | 51,854 | (51,854 | ) | - | - | - | |||||||||||
Total operating expenses | 1,607,758 | (51,854 | ) | (23,286 | ) | - | 1,532,618 | ||||||||||
Operating income | 239,682 | 51,854 | 23,286 | - | 314,822 | ||||||||||||
Income taxes | 30,915 | - | - | 11,517 | 42,432 | ||||||||||||
Net income | $ | 208,562 | $ | 51,854 | $ | 23,286 | $ | (11,517 | ) | $ | 272,185 | ||||||
AMDOCS LIMITED | ||||||
Condensed Consolidated Balance Sheets | ||||||
(in thousands) | ||||||
As of |
||||||
March 31, 2017 |
September 30, 2016 |
|||||
ASSETS | ||||||
Current assets | ||||||
Cash, cash equivalents and short-term interest-bearing investments | $ | 1,149,454 | $ | 1,095,723 | ||
Accounts receivable, net, including unbilled of $150,934 and $134,122, respectively | 844,631 | 818,531 | ||||
Prepaid expenses and other current assets | 223,838 | 186,137 | ||||
Total current assets | 2,217,923 | 2,100,391 | ||||
Equipment and leasehold improvements, net | 331,523 | 331,728 | ||||
Goodwill and other intangible assets, net | 2,423,886 | 2,493,166 | ||||
Other noncurrent assets | 442,633 | 406,070 | ||||
Total assets | $ | 5,415,965 | $ | 5,331,355 | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||
Current liabilities | ||||||
Accounts payable, accruals and other | $ | 1,001,456 | $ | 992,679 | ||
Short-term financing arrangements | 200,000 | 200,000 | ||||
Deferred revenue | 149,537 | 173,331 | ||||
Total current liabilities | 1,350,993 | 1,366,010 | ||||
Other noncurrent liabilities | 512,056 | 511,784 | ||||
Shareholders’ equity | 3,552,916 | 3,453,561 | ||||
Total liabilities and shareholders’ equity | $ | 5,415,965 | $ | 5,331,355 | ||
AMDOCS LIMITED | ||||||||
Consolidated Statements of Cash Flows | ||||||||
(in thousands) | ||||||||
Six months ended March 31, | ||||||||
2017 | 2016 | |||||||
Cash Flow from Operating Activities: | ||||||||
Net income | $ | 210,353 | $ | 208,562 | ||||
Reconciliation of net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 109,038 | 104,225 | ||||||
Equity-based compensation expense | 24,445 | 23,286 | ||||||
Deferred income taxes | 16,889 | (7,614 | ) | |||||
Excess tax benefit from equity-based compensation | (2,929 | ) | (5,248 | ) | ||||
(Gain) loss from short-term interest-bearing investments | (17 | ) | 445 | |||||
Net changes in operating assets and liabilities, net of amounts acquired: | ||||||||
Accounts receivable | (25,092 | ) | (23,061 | ) | ||||
Prepaid expenses and other current assets | (10,926 | ) | (28,684 | ) | ||||
Other noncurrent assets | (42,294 | ) | 3,352 | |||||
Accounts payable, accrued expenses and accrued personnel | 25,101 | 27,784 | ||||||
Deferred revenue | (19,932 | ) | (3,023 | ) | ||||
Income taxes payable | (8,813 | ) | 2,416 | |||||
Other noncurrent liabilities | (469 | ) | 14,233 | |||||
Net cash provided by operating activities | 275,354 | 316,673 | ||||||
Cash Flow from Investing Activities: | ||||||||
Payments for purchase of equipment and leasehold improvements, net | (69,906 | ) | (67,289 | ) | ||||
Proceeds from sale of short-term interest-bearing investments | 144,920 | 191,648 | ||||||
Purchase of short-term interest-bearing investments | (145,737 | ) | (199,988 | ) | ||||
Net cash paid for acquisitions | - | (24,993 | ) | |||||
Other | 1,671 | (20,602 | ) | |||||
Net cash used in investing activities | (69,052 | ) | (121,224 | ) | ||||
Cash Flow from Financing Activities: | ||||||||
Borrowings under financing arrangements | 200,000 | - | ||||||
Payments under financing arrangements | (200,000 | ) | (220,000 | ) | ||||
Repurchase of shares | (160,232 | ) | (200,608 | ) | ||||
Proceeds from employee stock options exercised | 62,368 | 59,060 | ||||||
Payments of dividends | (57,299 | ) | (51,262 | ) | ||||
Excess tax benefit from equity-based compensation and other | 2,929 | 5,244 | ||||||
Net cash used in financing activities | (152,234 | ) | (407,566 | ) | ||||
Net increase (decrease) in cash and cash equivalents | 54,068 | (212,117 | ) | |||||
Cash and cash equivalents at beginning of period | 768,660 | 1,035,573 | ||||||
Cash and cash equivalents at end of period | $ | 822,728 | $ | 823,456 | ||||
AMDOCS LIMITED | |||||||||||||||
Supplementary Information | |||||||||||||||
(in millions) | |||||||||||||||
Three months ended | |||||||||||||||
March 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||
2017 | 2016 | 2016 | 2016 | 2016 | |||||||||||
North America | $ | 636.3 | $ | 628.0 | $ | 626.2 | $ | 591.8 | $ | 586.4 | |||||
Europe | 115.4 | 118.5 | 118.9 | 126.3 | 139.2 | ||||||||||
Rest of the World | 214.3 | 208.2 | 195.6 | 212.0 | 200.3 | ||||||||||
Total Revenue | $ | 966.0 | $ | 954.7 | $ | 940.7 | $ | 930.1 | $ | 925.9 | |||||
Three months ended | |||||||||||||||
March 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||
2017 | 2016 | 2016 | 2016 | 2016 | |||||||||||
Managed Services Revenue | $ | 511.1 | $ | 494.2 | $ | 478.5 | $ | 479.2 | $ | 501.1 | |||||
Three months ended | |||||||||||||||
March 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||
2017 | 2016 | 2016 | 2016 | 2016 | |||||||||||
Customer Experience | $ | 948.6 | $ | 937.9 | $ | 924.9 | $ | 908.1 | $ | 902.3 | |||||
Systems | |||||||||||||||
Directory | 17.4 | 16.8 | 15.8 | 22.0 | 23.6 | ||||||||||
Total Revenue | $ | 966.0 | $ | 954.7 | $ | 940.7 | $ | 930.1 | $ | 925.9 | |||||
As of | |||||||||||||||
March 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||
2017 | 2016 | 2016 | 2016 | 2016 | |||||||||||
12-Month Backlog | $ | 3,210 | $ | 3,180 | $ | 3,170 | $ | 3,110 | $ | 3,100 | |||||
Contact:Matthew Smith Head of Investor RelationsAmdocs 314-212-8328 E-mail: dox_info@amdocs.com