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Second Quarter Results for Fiscal 2018
May 10, 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 onJuly 20, 2018
“We are pleased to report solid results for our second fiscal quarter which included double-digit growth in
Gelman continued, “Rest of World was a highlight of the quarter as we focused on project execution and securing new awards. In
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
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
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 setJune 29, 2018 as the record date for determining the shareholders entitled to receive the dividend, which will be payable onJuly 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
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,
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 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.
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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About
For more information, visit
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.
Contact:
Head of Investor Relations
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 |
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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 |