DOX
$66.31
Amdocs Ltd Ord
$.16
.24%
Earnings Details
3rd Quarter June 2018
Tuesday, July 31, 2018 4:01:00 PM
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Summary

Amdocs Guides Earnings Below Estimates

Amdocs Ltd Ord (DOX) reported 3rd Quarter June 2018 earnings of $0.97 per share on revenue of $1.0 billion. The consensus earnings estimate was $0.97 per share on revenue of $1.0 billion. Revenue grew 3.7% on a year-over-year basis.

The company said it expects fourth quarter non-GAAP earnings of $0.95 to $1.01 per share on revenue of $980.0 million to $1.02 billion. The current consensus earnings estimate is $1.02 per share on revenue of $1.02 billion for the quarter ending September 30, 2018.

Amdocs Ltd is a provider of software products and services to the communications, media and entertainment industry. It provides software and services solutions in North America and Europe.

Results
Reported Earnings
$0.97
Earnings Whisper
-
Consensus Estimate
$0.97
Reported Revenue
$1.00 Bil
Revenue Estimate
$1.01 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Amdocs Limited Reports Third Quarter Fiscal 2018 Results

Record Quarterly Revenue Exceeding $1B for First Time

Expects Fiscal 2018 GAAP Diluted EPS Growth Outlook of (3.0)%-0.0% YoY

Expects Fiscal 2018 Non-GAAP Diluted EPS Growth Outlook of 5.0%-7.0% YoY 

Third Quarter Fiscal 2018 Highlights

  • Revenue of $1 billion, at the midpoint of the $990-$1,030 million guidance range adjusting for the negative impact from foreign currency movements of approximately $9 million relative to the second quarter of fiscal 2018. Revenue guidance had included a minimal sequential impact from foreign currency fluctuations
  • GAAP diluted EPS of $0.64, below the $0.71-$0.81 guidance range due to nonrecurring restructuring charges, net of tax effects
  • Non-GAAP diluted EPS of $1.03, at the midpoint of the $1.00-$1.06 guidance range
  • GAAP operating income of $106 million; GAAP operating margin of 10.5%
  • Non-GAAP operating income of $174 million; non-GAAP operating margin of 17.3%
  • Free cash flow of $128 million, comprised of cash flow from operations of $164 million, less $36 million in net capital expenditures and other
  • Twelve-month backlog of $3.33 billion, up $10 million sequentially
  • Quarterly cash dividend of $0.25 per share, to be paid on October 19, 2018

ST. LOUIS, July 31, 2018 (GLOBE NEWSWIRE) -- Amdocs Limited (NASDAQ:DOX) today reported operating results for the three months ended June 30, 2018.

"We are pleased to report a solid performance in our third fiscal quarter. Revenue exceeded $1 billion for the first time in our history and was in line with the midpoint of our guidance adjusting for currency. On a regional basis, North America showed some early signs of stabilization while Europe and Rest of World delivered solid year-over-year growth that reflected the benefit of recent customer awards and our continued focus on project delivery and execution,” said Eli Gelman, president and chief executive officer of Amdocs Management Limited.

Gelman continued, “Q3 included positive developments relating to Network Functions Virtualization (NFV). First, we are today excited to announce that Amdocs is supporting the commercial availability of Comcast’s software-defined wide area networking (SD-WAN) service for enterprise businesses which leverages Amdocs’ leading NFV portfolio of orchestration, fulfillment and automation capabilities. Second, Telstra has partnered with Amdocs to implement a next generation OSS platform for its B2B line of business that will enable Telstra’s network domains to evolve toward virtualization while minimizing the impact to its existing support systems.”

Gelman concluded, “We enter the fourth fiscal quarter encouraged by our recent win rate, which remains strong and well balanced across our various business lines, recent acquisitions and operating regions. Naturally, we continue to monitor the many moving parts affecting our outlook, but with our record 12-month backlog and focus on execution we are on-track to deliver diluted non-GAAP earnings per share growth in the mid-to-high single digit range for the seventh consecutive year.”

Revenue

Revenue for the third fiscal quarter ended June 30, 2018 was $1.0 billion, up 1.0% or $9.9 million sequentially from the second fiscal quarter of 2018 and up 3.7% as compared to last year’s third fiscal quarter. Revenue for the third fiscal quarter of 2018 includes a negative impact from foreign currency movements of approximately $9 million relative to the second quarter of fiscal 2018. Revenue was at the midpoint of Amdocs’ guidance, excluding the negative impact of foreign currency movements.

Net Income and Earnings Per Share

The Company's GAAP net income for the third quarter of fiscal 2018 was $91.5 million, or $0.64 per diluted share, compared to GAAP net income of $119.3 million, or $0.81 per diluted share, in the prior fiscal year’s third quarter. Net income on a non-GAAP basis was $147.5 million, or $1.03 per diluted share, compared to non-GAAP net income of $150.4 million, or $1.02 per diluted share, in the third quarter of fiscal 2017. Non-GAAP net income excludes amortization of purchased intangible assets and other acquisition-related costs, nonrecurring restructuring charges primarily associated with recently completed acquisitions and internal business realignment actions in North America, and equity-based compensation expenses of $10.5 million, net of tax effects, in the third quarter of fiscal 2018.

Returning Cash to Shareholders

  • Quarterly Cash Dividend Program: On July 31, 2018, the Board approved the Company’s next quarterly cash dividend payment of $0.25 per share and set September 28, 2018 as the record date for determining the shareholders entitled to receive the dividend, which will be payable on October 19, 2018.
  • Share Repurchase Activity: Repurchased $90 million of ordinary shares during the third 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 $3.33 billion at the end of the third quarter of fiscal 2018, up $10 million from the end of the prior quarter.

Fourth Quarter Fiscal 2018 Outlook

  • Revenue of approximately $980-$1,020 million, including a negative sequential impact from foreign currency fluctuations of approximately $5 million as compared to the third quarter of fiscal 2018
  • Diluted GAAP EPS of approximately $0.71-$0.79. The impact on diluted GAAP EPS of the acquisitions during fiscal year 2018 is subject to finalization of the purchase price allocation and other acquisition-related costs.
  • Diluted non-GAAP EPS of approximately $0.95-$1.01, 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 tax effects. Expected non-GAAP effective tax rate above the high-end of the annual target range of 13%-17% in the fourth quarter fiscal 2018

Full Year Fiscal 2018 Outlook

  • Revenue growth of 2.2%-3.2% year-over-year as reported compared with previous guidance of 2.3%-4.3% year-over-year
  • Revenue growth of 1.7%-2.7% year-over-year on a constant currency basis compared with previous guidance of 1.3%-3.3% year-over-year
  • Full year fiscal 2018 revenue guidance incorporates an expected positive impact from foreign currency fluctuations of about 0.5% year-over-year, compared with previous guidance for a positive impact of about 1.0%
  • Expects GAAP diluted earnings per share growth of roughly (3.0)%-0.0% year-over-year compared with previous guidance of 0.0%-6.0%, primarily due to nonrecurring restructuring charges primarily associated with recently completed acquisitions and internal business realignment actions in North America. The impact on diluted GAAP EPS of acquisition activity in fiscal year 2018 is subject to finalization of the purchase price allocation and other acquisition-related costs
  • Non-GAAP diluted earnings per share growth of roughly 5.0%-7.0% year-over-year compared with previous guidance of 4.0%-8.0%. Non-GAAP diluted earnings per share excludes amortization of purchased intangible assets and other acquisition-related costs, nonrecurring restructuring charges primarily associated with recently completed acquisitions and internal business realignment actions in North America, and approximately $0.26-$0.28 per share of equity-based compensation expense, net of tax effects. Expected non-GAAP effective tax rate to remain within the same target range of 13%-17% for the full year fiscal 2018

Our fourth 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 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 July 31, 2018 at 5:00 p.m. Eastern Time to discuss the Company's third 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 8127189. 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.

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 primarily associated with internal business realignment actions in North America, changes in fair value of certain acquisition-related liabilities, equity-based compensation expense and 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 $3.9 billion in fiscal 2017. 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 and for the second quarter of fiscal 2018 on May 21, 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  Nine months ended
   June 30, June 30,
    2018  2017  2018  2017
          
Revenue  $1,002,198 $966,695 $2,972,249 $2,887,431
          
Operating expenses:         
Cost of revenue   650,569  628,640  1,940,353  1,871,211
Research and development   72,729  67,118  205,832  194,411
Selling, general and administrative   116,396  113,997  355,263  352,541
Amortization of purchased intangible assets and other  26,929  27,028  81,256  83,982
Restructuring charges   30,057  -  30,057  -
    896,680  836,783  2,612,761  2,502,145
Operating income   105,518  129,912  359,488  385,286
          
Interest and other (expense) income, net   (3,212)  1,152  (3,330)  (2,079)
Income before income taxes   102,306  131,064  356,158  383,207
          
Income taxes   10,776  11,800  46,028  53,590
Net income  $91,530 $119,264 $310,130 $329,617
Basic earnings per share  $0.64 $0.82 $2.17 $2.25
Diluted earnings per share  $0.64 $0.81 $2.15 $2.23
Basic weighted average number of shares outstanding  141,972  145,904  142,982  146,439
Diluted weighted average number of shares outstanding  143,196  147,259  144,320  147,865
Cash dividends declared per share  $0.250 $0.220 $0.720 $0.635
              

AMDOCS LIMITED

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

    Three months ended  Nine months ended
    June 30, June 30,
     2018  2017  2018  2017
           
Revenue   $1,002,198 $966,695 $2,972,249 $2,887,431
           
Non-GAAP operating income    173,590  167,193  514,414  497,275
           
Non-GAAP net income    147,547  150,440  439,363  423,171
           
Non-GAAP diluted earnings per share  $1.03 $1.02 $3.04 $2.86
           
Diluted weighted average number of shares outstanding  143,196  147,259  144,320  147,865
               

AMDOCS LIMITED

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

  Three months ended
June 30, 2018
   Reconciliation items 
  GAAPAmortization of purchased intangible assets and otherEquity based compensation expenseChanges in fair value of certain acquisition-related liabilitiesRestructuring chargesTax effectNon-GAAP
Operating expenses:        
Cost of revenue $650,569 -$(5,074)$(572)$-$-$644,923
Research and development 72,729 - (1,071) - - - 71,658
Selling, general and administrative 116,396 - (4,369) - - - 112,027
Amortization of  purchased intangible assets and other 26,929 (26,929) - - - - -
Restructuring charges  30,057 - -- (30,057) - -
Total operating expenses  896,680 (26,929) (10,514) (572) (30,057) - 828,608
         
Operating income  105,518 26,929 10,514 572 30,057 - 173,590
         
Income taxes  10,776 - - - - 12,055 22,831
         
Net income $91,530$26,929$10,514$572$30,057$(12,055)$147,547
                


  Three months ended
June 30, 2017
   Reconciliation items 
  GAAPAmortization of purchased
intangible assets and other
Equity based
compensation expense
Tax effectNon-GAAP
Operating expenses:      
Cost of revenue $628,640$-$(4,763)$-$623,877
Research and development 67,118 - (914) - 66,204
Selling, general and administrative 113,997 - (4,576) - 109,421
Amortization of purchased intangible assets and other 27,028 (27,028) - - -
Total operating expenses  836,783 (27,028) (10,253) - 799,502
       
Operating income  129,912 27,028 10,253 - 167,193
       
Income taxes  11,800 - - 6,105 17,905
       
Net income $119,264$27,028$10,253$(6,105)$150,440
            

AMDOCS LIMITED

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

  Nine months ended
June 30, 2018
   Reconciliation items 
  GAAPAmortization
of purchased intangible assets and other
Equity based compensation expenseChanges in fair value of certain acquisition-related liabilitiesRestructuring
charges
Tax effectNon-GAAP
Operating expenses:        
Cost of revenue $1,940,353$- $(14,502) $(9,033) $- $- $1,916,818
Research and development 205,832 -  (2,664)  -  -  -  203,168
Selling, general and administrative 355,263 -  (17,414)  -  -  -  337,849
Amortization of purchased intangible assets and other 81,256 (81,256)  -  -  -  -  -
Restructuring charges  30,057 -  -  -  (30,057)  -  -
Total operating expenses  2,612,761 (81,256)  (34,580)  (9,033)  (30,057)  -  2,457,835
         
Operating income  359,488 81,256  34,580  9,033  30,057  -  514,414
         
Income taxes  46,028 -  -  -  -  25,693  71,721
         
Net income $310,130$81,256 $34,580 $9,033 $30,057 $(25,693) $439,363
                     


  Nine months ended
June 30, 2017
   Reconciliation items 
  GAAPAmortization of
purchased intangible assets and other
Equity based compensation expenseChanges in fair value of certain acquisition-related liabilitiesTax effect

 
Non-GAAP
Operating expenses:       
Cost of revenue         1,871,211$-$(14,734)$6,691$-$1,863,168
Research and development   194,411 - (2,714) - - 191,697
Selling, general and administrative   352,541 - (17,250) - - 335,291
Amortization of purchased intangible assets
and other
   83,982 (83,982) - - - -
Total operating expenses    2,502,145 (83,982) (34,698) 6,691 - 2,390,156
        
Operating income    385,286 83,982 34,698 (6,691) - 497,275
        
Income taxes    53,590 - - - 18,435 72,025
        
Net income $  329,617$83,982$34,698$(6,691)$(18,435)$423,171
                

AMDOCS LIMITED

Condensed Consolidated Balance Sheets
 (in thousands)

 As of
  June 30
2018
 September 30
2017
     
ASSETS    
     
Current assets    
Cash, cash equivalents and short-term interest-bearing investments $561,041 $979,608
Accounts receivable, net, including unbilled of $248,938 and $229,695, respectively  982,213  865,068
Prepaid expenses and other current assets  236,988  203,810
Total current assets  1,780,242  2,048,486
     
Property and equipment, net  476,126  355,685
Goodwill and other intangible assets, net  2,751,266  2,398,535
Other noncurrent assets  435,834  476,674
Total assets $5,443,468 $5,279,380
     
LIABILITIES AND SHAREHOLDERS’ EQUITY    
     
Current liabilities    
Accounts payable, accruals and other  1,176,102  1,059,855
Deferred revenue  142,655  113,091
Total current liabilities  1,318,757  1,172,946
Other noncurrent liabilities  561,842  532,364
Total Amdocs Limited Shareholders’ equity  3,519,706  3,574,070
Noncontrolling interests  43,163  -
Total equity $3,562,869 $3,574,070
Total liabilities and equity $5,443,468 $5,279,380
       

AMDOCS LIMITED
Consolidated Statements of Cash Flows
(in thousands)

  Nine months ended June 30,
   2018  2017
     
Cash Flow from Operating Activities:    
Net income $310,130 $329,617
Reconciliation of net income to net cash provided by operating activities:    
Depreciation and amortization  157,421  163,533
Equity-based compensation expense  34,580  34,698
Deferred income taxes  7,947  7,201
Excess tax benefit from equity-based compensation  -  (3,716)
Loss (gain)  from short-term interest-bearing investments  1,324  (144)
Net changes in operating assets and liabilities, net of amounts acquired:    
Accounts receivable  (81,690)  (73,033)
Prepaid expenses and other current assets  (21,796)  (1,258)
Other noncurrent assets  2,006  (60,949)
Accounts payable, accrued expenses and accrued personnel  42,374  75,178
Deferred revenue  21,221  (38,817)
Income taxes payable  (15,428)  (7,726)
Other noncurrent liabilities  (16,189)  12,520
Net cash provided by operating activities  441,900  437,104
     
Cash Flow from Investing Activities:    
Purchase of property and equipment  (197,253)  (98,565)
Proceeds from sale of short-term interest-bearing investments  302,949  218,395
Purchase of short-term interest-bearing investments  (76,037)  (218,772)
Net cash paid for acquisitions  (352,599)  -
Other  (2,414)  (10,022)
Net cash used in investing activities  (325,354)  (108,964)
     
Cash Flow from Financing Activities:    
Borrowings under financing arrangements  200,000  200,000
Payments under financing arrangements  (200,000)  (400,000)
Repurchase of shares  (329,593)  (250,231)
Proceeds from employee stock options exercised  76,236  75,763
Payments of dividends  (98,929)  (89,522)
Investment by noncontrolling interests, net  47,013  -
Excess tax benefit from equity-based compensation and other  -  3,716
Other  (323)  -
Net cash used in financing activities  (305,596)  (460,274)
     
Net decrease in cash and cash equivalents  (189,050)  (132,134)
Cash and cash equivalents at beginning of period  649,611  768,660
Cash and cash equivalents at end of period $460,561 $636,526
       

AMDOCS LIMITED
Supplementary Information
(in millions)

  Three months ended
  June 30,
2018
 March 31,
 2018
 December 31,
2017
 September 30,
2017
 June 30,
2017
North America $644.8 $624.2 $643.0 $644.1 $637.9
Europe  139.3  148.6  133.7  129.8  125.2
Rest of the World  218.1  219.5  201.0  205.8  203.6
Total Revenue $1,002.2 $992.3 $977.7 $979.7 $966.7


  Three months ended
  June 30,
2018
 March 31,
 2018
 December 31,
2017
 September 30,
2017
 June 30,
2017
 
Managed Services Revenue $515.0 $508.9 $518.7 $503.8 $496.3 


  Three months ended
  June 30,
2018
 March 31,
2018
 December 31,
2017
 September 30,
2017
 June 30,
2017
Customer Experience
Systems
  991.0  980.7  965.9  967.7  954.8
Directory  11.2  11.6  11.8  12.0  11.9
Total Revenue $1,002.2 $992.3 $977.7 $979.7 $966.7


  As of
  June 30,
2018
 March 31,
2018
 December 31,
2017
 September 30,
2017
 June 30,
2017
12-Month Backlog $   3,330 $   3,320 $   3,260 $   3,250 $   3,220
                

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Source: Amdocs Management LTD