LXFT
$32.50
Luxoft Holding
($.64)
(1.93%)
Earnings Details
2nd Quarter September 2018
Thursday, November 15, 2018 6:55:00 AM
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Summary

Luxoft Holding Beats but Guides Lower

Luxoft Holding (LXFT) reported 2nd Quarter September 2018 earnings of $0.74 per share on revenue of $228.4 million. The consensus earnings estimate was $0.63 per share on revenue of $229.4 million. The Earnings Whisper number was $0.61 per share. Revenue grew 0.2% on a year-over-year basis.

The company said it expects third quarter non-GAAP earnings of $0.62 to $0.69 per share on revenue of $230.0 million to $235.0 million. The current consensus earnings estimate is $0.75 per share on revenue of $254.8 million for the quarter ending December 31, 2018.

Luxoft Holding Inc provides software development services and IT solutions to its multinational clients. Its product line encompasses Horizon, Twister and iStockTrack.

Results
Reported Earnings
$0.74
Earnings Whisper
$0.61
Consensus Estimate
$0.63
Reported Revenue
$228.4 Mil
Revenue Estimate
$229.4 Mil
Growth
Earnings Growth
Revenue Growth
Guidance
Power Rating
Grade
Earnings Release

Luxoft Reports Results for Second Quarter Fiscal 2019

LONDON, Nov. 15, 2018 (GLOBE NEWSWIRE) -- Luxoft Holding, Inc (NYSE:LXFT), a global IT service provider, today announced results for the three months ended September 30, 2018.

Highlights — Three months ended September 30, 2018

  • Revenue of $228.4 million, up 0.2% year-over-year and up 7.3% sequentially
  • Net income of $14.4 million, compared to $18.4 million in the year-ago quarter and diluted EPS of $0.43, compared to $0.54 in the year-ago quarter
  • Adjusted EBITDA of $36.6 million and adjusted EBITDA margin of 16.0%, compared to $38.6 million and 16.9% in the year-ago quarter
  • Non-GAAP diluted EPS of $0.74, compared to $0.82 in the year-ago quarter
  • As of September 30, 2018, total number of employees was 12,897; Annual revenue per billable engineer was $83,043, up 0.4% from the prior year.

Note: Reconciliations of non-GAAP to GAAP measures are included at the end of the release.

"Our second quarter results demonstrate continued execution of our strategic priorities and transformational initiatives," said Dmitry Loschinin, Luxoft’s CEO and President. "We continue to diversify our revenue and re-align our focus and resources to the highest growth opportunities. Growth in Financial Services remains healthy, despite challenges in the Investment Banking sector, while our leading Automotive solutions continue to drive strong customer demand. We remain sharply focused on enhancing our Digital solutions in order to advance our competitive position and meet the evolving needs of our clients."

"Looking ahead, we remain focused on advancing our transformation and building a stronger and more diversified company. While we expect some headwinds during the second half of the year, we are confident that further execution of our strategy will strengthen our long-term growth profile and position us to deliver increasing shareholder returns."

Second Quarter Key Operating Highlights

  • Revenue generated in APAC and Europe grew 64.7% and 16.8% year over year, respectively.
  • Expanding global presence and growth outside of Financial Services is meaningfully reducing client concentration. Revenue by line of business was 54.9% Financial Services, 23.1% Digital Enterprise and 22.0% Automotive.
  • Top Two1 accounts amounted to 30.2% of revenue, representing a 5.2 percentage-point decrease over the prior year.
  • Top Five accounts amounted to 43.4% of revenue, an annual 3.3 percentage-point decrease, and Top Ten accounts amounted to 54.3% of revenue, a 3.3 percentage point decrease.

1 Top Two accounts are UBS and Deutsche Bank and are included in our Financial Services line of business.

Third Quarter Fiscal 2019 Outlook

  • Revenue is expected to be in the range of $230-$235M.
  • Adjusted EBITDA is expected to be in the range of 14% to 15%.
  • Diluted GAAP EPS is expected to be in the range of $0.29 to $0.37.
  • Non-GAAP EPS is expected to be in the range of $0.62 to $0.69.

Conference Call Information

The Company will host a conference call to review the results on Thursday, November 15th, 2018 at 8:00 a.m. ET. To participate, please dial 877-407-8293 or 201-689-8349 (outside the U.S.) or access the live webcast here.

A replay will be available two hours after the call at http://investor.luxoft.com or by dialing 877-660-6853 or 201-612-7415 (outside the U.S.) and entering the conference ID 13683917. The replay will be available until November 29, 2018.

About Luxoft

Luxoft (NYSE:LXFT) is a global IT service provider of innovative technology solutions that delivers measurable business outcomes to multinational companies. Its offerings encompass strategic consulting, custom software development services, and digital solution engineering. Luxoft enables companies to compete by leveraging its multi-industry expertise in the financial services, automotive, communications, and healthcare & life sciences sectors. Its managed delivery model is underpinned by a highly-educated workforce, allowing the Company to continuously innovate upwards on the technology stack to meet evolving digital challenges.

Luxoft has approximately 12,900 employees across 42 offices in 22 countries within five continents, with its operating headquarters office in Zug, Switzerland. For more information, please visit the website.

Investor InquiresMedia Inquiries
Tracy KrummeRobert Maccabe
Vice President, Investor RelationsDirector, Public Relations
212-964-9900 ext. 2460+44 (0)20 3828 2346
IR@luxoft.comPress@luxoft.com
 Twitter: @Luxoft

Non-GAAP Financial Measures

To supplement our financial results presented in accordance with US GAAP, this press release includes the following measures defined by the Securities and Exchange Commission as non-GAAP financial measures: earnings before interest, tax, depreciation and amortization (EBITDA); adjusted EBITDA; non-GAAP net income; non-GAAP diluted Earnings per share (EPS) and Free Cash Flow (FCF). EBITDA is calculated as earnings before interest, tax, depreciation and amortization, where interest includes unwinding of the discount rate for contingent liabilities. Non-GAAP net income and non-GAAP EPS exclude stock-based compensation expense, amortization of fair value adjustments to intangible assets and impairment thereof and other acquisitions related costs that may include changes in the fair value of contingent consideration liabilities. Non-GAAP diluted EPS are calculated as non-GAAP net income divided by weighted average number of diluted shares. Free Cash Flow is calculated as operating cash flow less capital expenditure which consists of purchases of property, plant and equipment and intangible assets as defined in the cash flow statement.

We adjust our non-GAAP financial measures to exclude stock based compensation, because it is a non-cash expense. We also adjust our non-GAAP financial measures to exclude the change in fair value of contingent consideration, because we believe these expenses are not indicative of what we consider to be normal course of operations. Our non-GAAP financial measures are adjusted to exclude amortization of purchased intangible assets in order to allow management and investors to evaluate our results from operating activities as if these assets have been developed internally rather than acquired in a business combination. Finally, we adjust our non-GAAP financial measures to exclude acquisition-related costs, which comprise payments to consulting firms as well as fees paid upon successful completion of acquisition; as well as certain incentive payments for members of management of the acquired companies as provided for in the acquisition agreements. These payments are based on performance of the acquired businesses and are classified as part of management compensation rather than part of purchase consideration. These costs vary with the size and complexity of each acquisition and are generally inconsistent in amount and frequency, and therefore, we believe that they may not be indicative of the size and volume of future acquisition-related costs.

We provide these non-GAAP financial measures because we believe that they present a better measure of our core business and management uses them internally to evaluate our ongoing performance. Accordingly, we believe that these non-GAAP measures are useful to investors in enhancing and understanding of our operating performance. These non-GAAP measures should be considered in addition to, and not as a substitute for, comparable US GAAP measures. The non-GAAP results and a full reconciliation between US GAAP and non-GAAP results are provided in the accompanying tables at the end of this press release.

Forward-Looking Statements

In addition to historical information, this release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements include information about possible or assumed future results of our business and financial condition, as well as the results of operations, liquidity, plans and objectives. In some cases, you can identify forward-looking statements by terminology such as "believe," "may," "estimate," "continue," "anticipate," "intend," "should," "plan," "expect," "predict", potential," or the negative of these terms or other similar expressions. These statements include, but are not limited to, statements regarding: the persistence and intensification of competition in the IT industry; the future growth of spending in IT services outsourcing generally and in each of our industry verticals, application outsourcing and custom application development and offshore research and development services; the level of growth of demand for our services from our clients; the level of increase in revenue from our new clients; seasonal trends and the budget and work cycles of our clients; general economic and business conditions in our locations, including geopolitical instability and social, economic or political uncertainties, particularly in Russia and Ukraine, and any potential sanctions, restrictions or responses to such conditions imposed by some of the locations in which we operate; the levels of our concentration of revenues by vertical, geography, by client and by type of contract in the future; the expected timing of the increase in our corporate tax rate, or actual increases to our effective tax rate which we may experience from time to time; our expectations with respect to the proportion of our fixed price contracts; our expectation that we will be able to integrate and manage the companies we acquire and that our acquisitions will yield the benefits we envision; the demands we expect our rapid growth to place on our management and infrastructure; the sufficiency of our current cash, cash flow from operations, and lines of credit to meet our anticipated cash needs; the high proportion of our cost of services comprised of personnel salaries; our plans to introduce new products for commercial resale and licensing in addition to providing services; our anticipated joint venture with one of our clients; and our continued financial relationship with IBS Group Holding limited and its subsidiaries including expectations for the provision and purchase of services and purchase and lease of equipment; and other factors discussed under the heading "Risk Factors" in the Annual Report on Form 20-F for the year ended March 31, 2018 and other documents filed with or furnished to the Securities and Exchange Commission. Except as required by law, we undertake no obligation to publicly update any forward-looking statements for any reason after the date of this press release whether as a result of new information, future events or otherwise.

 
LUXOFT HOLDING, INC
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of US dollars, except share amounts)
 
  As of September 30, 2018 As of March 31, 2018
  (Unaudited)  
Assets    
Current assets    
Cash and cash equivalents $100,382  $104,357 
Restricted cash, current 1,901  70 
Trade accounts receivable, net of allowance for doubtful accounts of $1,399 at September 30, 2018 and $1,232 at March 31, 2018 184,627  186,991 
Unbilled revenue 37,610  33,310 
Work-in-progress 7,102  3,734 
Due from related parties 1,078  1,272 
VAT and other taxes receivable 3,889  4,082 
Advances issued 2,172  1,777 
Other current assets 8,671  8,041 
Total current assets $347,432  $343,634 
Non-current assets    
Restricted cash, non-current 1,691  2,775 
Deferred tax assets 5,877  4,349 
Property and equipment, net 50,858  52,739 
Intangible assets, net 103,541  106,368 
Goodwill 102,228  88,908 
Other non-current assets 5,231  5,047 
Total non-current assets 269,426  260,186 
Total assets 616,858  603,820 
Liabilities and shareholders’ equity    
Current liabilities    
Short-term borrowings 11,627  856 
Accounts payable 22,294  25,964 
Accrued liabilities 42,563  49,593 
Deferred revenue 4,616  4,105 
Due to related parties 73  14 
Taxes payable 23,833  22,916 
Payable on derivative financial instruments 515  776 
Payable for acquisitions, current 4,936  6,415 
Other current liabilities 2,674  2,302 
Total current liabilities $113,131  $112,941 
Deferred tax liability, non-current 8,211  10,830 
Payable for acquisitions, non-current 2,652  2,895 
Other non current liabilities 5,833  7,205 
Total liabilities $129,827  $133,871 
Shareholders’ equity    
Share capital (80,000,000 shares authorized; 33,695,454 issued and outstanding with no par value as at September 30, 2018, and 80,000,000 shares authorized; 34,063,981 issued and outstanding with no par value as at March 31, 2018)    
Additional paid-in capital 150,069  155,456 
Common stock held in treasury, at cost (91,983 shares as of September 30, 2018; 61,874 shares as of March 31, 2018) (4,460) (3,424)
Retained earnings 344,937  320,521 
Accumulated other comprehensive loss (3,547) (2,636)
Total shareholders’ equity attributable to the Group $486,999  $469,917 
Non-controlling interest 32  32 
Total equity $487,031  $469,949 
Total liabilities and equity $616,858  $603,820 
         


 
LUXOFT HOLDING, INC
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands of US dollars, except share and per share amounts)
 
  For the three months ended September 30, For the six months ended September 30,
  2018 2017 2018 2017
         
  (Unaudited) (Unaudited)
Sales of services $228,411  $228,030  $441,201  $437,272 
Operating expenses        
Cost of services (exclusive of depreciation and amortization) 140,631  139,305  277,998  274,904 
Selling, general and administrative expenses 59,864  58,199  116,573  116,262 
Depreciation and amortization 10,969  9,915  21,739  20,645 
Gain from revaluation of contingent liability (145) (870) (145) (2,090)
Operating income 17,092  21,481  25,036  27,551 
Other income and expenses     0  
Interest income/ (loss), net (77) 42  (111) 59 
Unwinding of discount for contingent liability, income/ (loss) (32) 103  (99) (698)
Other income, net 433  457  1,131  946 
Gain/ (loss) from derivative financial instruments 469  (3) 1,321  89 
Net foreign exchange loss (836) (356) (4,290) 1,124 
Income before income taxes 17,049  21,724  22,988  29,071 
Income tax expense (2,638) (3,284) (3,879) (4,314)
Net income $14,411  $18,440  $19,109  $24,757 
Net income attributable to the non-controlling interest        
Net income attributable to the Group $14,411  $18,440  $19,109  $24,757 
Basic EPS per Class A and Class B ordinary share        
Net income attributable to the Group per ordinary share $0.43  $0.55  $0.57  $0.74 
Weighted average ordinary shares outstanding 33,606,144  33,570,633  33,816,836  33,537,185 
Diluted EPS per Class A and Class B ordinary share        
Diluted net income attributable to the Group per ordinary share $0.43  $0.54  $0.56  $0.72 
Diluted weighted average ordinary shares outstanding 33,736,322  34,116,417  33,883,981  34,206,683 
             


 
LUXOFT HOLDING, INC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands of US dollars)
 
  For the three months ended September 30, For the six months ended September 30,
  2018 2017 2018 2017
         
  (Unaudited) (Unaudited)
Net income $14,411  $18,440  $19,109  $24,757 
Other comprehensive income (loss), net of tax        
Gains/(losses) on derivative instruments, net of tax effect of $(6) and $(21); $(157) and $72 151  80  1,155  (653)
Translation adjustments with no tax effects (220) 690  (2,066) 1,360 
Total other comprehensive income (69) 770  (911) 707 
Comprehensive income $14,342  $19,210  $18,198  $25,464 
Comprehensive income (loss) attributable to the non-controlling interest        
Comprehensive income attributable to the Group $14,342  $19,210  $18,198  $25,464 
                 


 
LUXOFT HOLDING, INC
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
(In thousands of US dollars)
 
  For the six months ended September 30,
  2018 2017
     
  (Unaudited)
Operating activities    
Net income $19,109  $24,757 
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 21,739  20,645 
Deferred tax benefit (265) (1,711)
Gain from derivative financial instruments (1,321) (89)
Net foreign exchange (gain)/ loss 4,290  (1,124)
Provision for doubtful accounts 215  622 
Gain from revaluation of contingent liability (145) (2,090)
Unwinding of discount for contingent liability, loss 99  698 
Share-based compensation 14,208  14,237 
Other 111   
Changes in operating assets and liabilities:    
Trade accounts receivable and unbilled revenue (2,532) (45,423)
Work-in-progress (3,772) 732 
Due to and from related parties 233  234 
Accounts payable and accrued liabilities (7,948) (4,114)
Deferred revenue 625  2,604 
Changes in other assets and liabilities 4,798  (792)
Net cash provided by operating activities 49,444  9,186 
Investing activities    
Purchases of property and equipment (10,997) (11,332)
Purchases of intangible assets (1,856) (2,127)
Acquisitions, net of cash acquired (19,590) (32,685)
Net cash used in investing activities (32,443) (46,144)
Financing activities    
Proceeds from/ Net repayment of short-term borrowings 10,353  (138)
Acquisition of business, deferred consideration (3,604) (12,707)
Repayment of capital lease obligations (1,842) (69)
Repurchases of common stock (21,022) (2,017)
Net cash used in financing activities (16,115) (14,931)
Effect of exchange rate changes on cash and cash equivalents and restricted cash (4,114) (103)
Net decrease in cash, cash equivalents and restricted cash (3,228) (51,992)
Cash, cash equivalents and restricted cash at beginning of period 107,202  114,957 
Cash, cash equivalents and restricted cash at end of period $103,974  $62,965 
         

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets:

  
 As of
 September 30, 2018 March 31, 2018
 (Unaudited)  
Cash and cash equivalents$100,382  $104,357 
Restricted cash, current1,901  70 
Restricted cash, non-current1,691  2,775 
Total restricted cash3,592  2,845 
Total cash, cash equivalents and restricted cash$103,974  $107,202 
        


     
Luxoft Holding, Inc
Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Measures (Unaudited)
(In thousands of US dollars, except per share amounts and percentages)
     
  For the three months ended September 30, For the six months ended September 30,
  2018 2018   2018 2018 2018   2018
  GAAP Adjustments   Non-GAAP GAAP Adjustments   Non-GAAP
Operating income 17,092  12,058  (a) 29,150  25,036  23,011  (a) 48,047 
Operating margin 7.5% 5.3%   12.8% 5.7% 5.2%   10.9%
Net income 14,411  10,691  (b) 25,102  19,109  20,516  (b) 39,625 
Diluted earnings per share $0.43      $0.74  $0.56      $1.17 
                           


     
  For the three months ended September 30, For the six months ended September 30,
  2017 2017   2017 2017 2017   2017
  GAAP Adjustments   Non-GAAP GAAP Adjustments   Non-GAAP
Operating income 21,481  10,715  (a) 32,196  27,551  22,619  (a) 50,170 
Operating margin 9.4% 4.7%   14.1% 6.3% 5.2%   11.5%
Net income 18,440  9,596  (b) 28,036  24,757  20,399  (b) 45,156 
Diluted earnings per share $0.54      $0.82  $0.72      $1.32 
                           


 
Luxoft Holding, Inc
Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Measures (Unaudited)
(In thousands of US dollars, except per share amounts and percentages)
     
  For the three months ended September 30, For the six months ended September 30,
(a) 2018 2017 2018 2017
Adjustments to GAAP operating income        
Stock-based compensation expense $8,022  $6,185  $14,208  $14,237 
Amortization of purchased intangible assets 3,574  3,657  7,534  8,030 
Gain from revaluation of contingent liability (145) (870) (145) (2,090)
Acquisition related costs 607  1,743  1,414  2,442 
Total Adjustments to GAAP income from operations: $12,058  $10,715  $23,011  $22,619 
                 


  For the three months ended September 30, For the six months ended September 30,
(b) 2018 2017 2018 2017
Adjustments to GAAP net income        
Stock-based compensation expense $8,022  $6,185  $14,208  $14,237 
Amortization of purchased intangible assets 3,574  3,657  7,534  8,030 
Gain from revaluation of contingent liability and unwinding of discount for contingent liability (113) (973) (46) (1,392)
Acquisition related costs 607  1,743  1,414  2,442 
Tax effect of the adjustments (1,399) (1,016) (2,594) (2,918)
Total Adjustments to GAAP net income : $10,691  $9,596  $20,516  $20,399 
                 


  For the three months ended September 30, For the six months ended September 30,
  2018 2017 2018 2017
Net income $14,411  $18,440  $19,109  $24,757 
Adjusted for:        
Interest (income)/ loss 77  (42) 111  (59)
Unwinding of discount for contingent liability, (income)/ loss 32  (103) 99  698 
Income tax 2,638  3,284  3,879  4,314 
Depreciation and Amortization 10,969  9,915  21,739  20,645 
EBITDA $28,127  $31,494  $44,937  $50,355 
Adjusted for        
Stock based compensation 8,022  6,185  14,208  14,237 
Gain from revaluation of contingent liability (145) (870) (145) (2,090)
Acquisition related costs 607  1,743  1,414  2,442 
Adjusted EBITDA $36,611  $38,552  $60,414  $64,944 
                 


 
Luxoft Holding, Inc
Schedule of supplemental information
(Unaudited)
(In thousands; except percentages)
     
  Revenue for the three months ended September 30, Revenue for the six months ended September 30,
  2018 2017 2018 2017
Client location Amount % of sales Amount % of sales Amount % of sales Amount % of sales
North America $72,639  31.8% $78,835  34.6% $140,786  31.9% $158,661  36.3%
Europe (excl. U.K.) 79,488  34.8% 68,033  29.8% 152,650  34.6% 133,534  30.5%
U.K. 45,455  19.9% 52,164  22.9% 90,855  20.6% 100,293  22.9%
APAC 16,470  7.2% 10,002  4.4% 29,738  6.7% 17,027  3.9%
Russia 11,381  5.0% 17,872  7.8% 21,699  4.9% 25,434  5.8%
Other 2,978  1.3% 1,124  0.5% 5,473  1.3% 2,323  0.6%
Total $228,411  100.0% $228,030  100.0% $441,201  100.0% $437,272  100.0%
                             


     
  Revenue for the three months ended September 30, Revenue for the six months ended September 30,
  2018 2017 2018 2017
Line of Business Amount % of sales Amount % of sales Amount % of sales Amount % of sales
Financial Services $125,384  54.9% $129,174  56.6% $243,473  55.2% $242,644  55.5%
Digital Enterprise 52,725  23.1% 58,868  25.9% 103,484  23.4% 119,276  27.3%
Automotive 50,302  22.0% 39,988  17.5% 94,244  21.4% 75,352  17.2%
Total $228,411  100.0% $228,030  100.0% $441,201  100.0% $437,272  100.0%
                             


 
LUXOFT HOLDING, INC.
Reconciliations of Non-GAAP Forward-looking Financial Measures
to Comparable GAAP Forward-looking Measures
(Unaudited)
(In thousands of US dollars, except share, per share amounts and percentages)
 
 Three Months Ended
December 31, 2018
Revenue$230,000 
  
Net income$9,918 
Adjusted for: 
Interest expense and unwinding of discount for contingent liability40 
Income tax1,943 
Depreciation and Amortization11,546 
EBITDA$23,448 
Adjusted for: 
Stock based compensation7,524 
Change in fair value of contingent consideration 
Acquisition related costs1,158 
Adjusted EBITDA$32,130 
Adjusted EBITDA margin14.0%
  
Net income$9,918 
Adjusted for: 
Stock-based compensation expense7,524 
Amortization of purchased Intangible assets3,869 
Change in fair value of contingent consideration 
Unwinding of discount rate for contingent liability, loss30 
Acquisition related costs1,158 
Tax effect of the adjustments(1,650)
Total adjustments to Net income$10,931 
Adjusted Net income$20,849 
Diluted weighted average ordinary shares outstanding33,805,337 
Adjusted EPS$0.62 
    


   
  Three Months Ended
December 31, 2018
  GAAP Adjustments Non-GAAP
Net income $9,918  $10,931  $20,849 
Diluted earnings per share $0.29    $0.62 
           

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Source: Luxoft Holding, Inc