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Third Quarter Results for Fiscal 2016
Jul 26, 2016
Reiterates FY16 Non-GAAP Diluted EPS Growth Towards the Midpoint of the
Key highlights:
- Third fiscal quarter revenue of
$930 million , at the midpoint of the$910-$950 million guidance range. As we anticipated, foreign currency movements positively affected revenue by approximately$5 million relative to the second quarter of fiscal 2016. - Diluted GAAP EPS of
$0.70 for the third fiscal quarter, in line with the high-end of the$0.63-$0.71 guidance range - Third fiscal quarter diluted non-GAAP EPS of
$0.90 , at the high-end of the$0.84-$0.90 guidance range (non-GAAP EPS excludes amortization of purchased intangible assets and other acquisition-related costs, and equity-based compensation expense, net of related tax effects) - Third fiscal quarter GAAP operating income of
$125 million ; non-GAAP operating income of$160 million ; non-GAAP operating margin of 17.2% - Free cash flow of
$117 million for the third fiscal quarter - Repurchased
$123 million of ordinary shares during the third fiscal quarter - Twelve-month backlog of
$3.11 billion at the end of the third fiscal quarter, up$10 million from the end of the second quarter of fiscal 2016 - The board of directors approved a
$0.195 per share quarterly cash dividend to be paid onOctober 21, 2016 - Fourth quarter fiscal 2016 guidance: Expected revenue of approximately
$920-$960 million . Expected diluted GAAP EPS of approximately$0.66-$0.74 . Expected diluted non-GAAP EPS of approximately$0.85-$0.91 (which excludes amortization of purchased intangible assets and other acquisition-related costs and approximately$0.05-$0.06 per share of equity-based compensation expense, net of related tax effects) - Full year fiscal 2016 guidance: Reiterates fiscal 2016 non-GAAP diluted earnings per share growth towards the midpoint of the guidance range of 3.5-7.5% year-over-year, including the impact of share repurchase activity anticipated over the course of the fiscal year. Reiterates fiscal 2016 revenue growth, on a constant currency basis, slightly below the midpoint of the guidance range of 2.0-6.0% year-over-year, and reported revenue growth slightly below the midpoint of the guidance range of 0.5-4.5% year-over-year, including a negative impact from foreign currency movements of approximately 1.5% year-over-year
“We are pleased with our third fiscal quarter performance, which included ongoing signs of stabilization in
Gelman continued, “As we discussed last quarter,
Gelman concluded, “We enter our fourth fiscal quarter encouraged by our sales momentum and record backlog although we remain cognizant of the many moving parts affecting our outlook. These include the ongoing challenges of the global macroeconomic and industry environment in which we operate. We are laser-focused on our execution and profitability and we are committed to returning roughly 100% of our free cash flow to shareholders over the second half of fiscal 2016. Taking all these factors into consideration, we are reiterating our expectation for diluted non-GAAP earnings per share growth towards the midpoint of our previously guided range of 3.5% to 7.5% for the full fiscal year.”
Financial Discussion of Third Fiscal Quarter Results
Free cash flow was
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
Financial Outlook
Quarterly Cash Dividend Program
On
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 interest and other expense, net, 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;
- 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 | Nine months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Revenue | $ | 930,133 | $ | 907,897 | $ | 2,777,573 | $ | 2,716,762 | ||||||||
Operating expenses: | ||||||||||||||||
Cost of revenue | 601,249 | 592,366 | 1,796,933 | 1,746,383 | ||||||||||||
Research and development | 65,051 | 62,598 | 191,249 | 189,044 | ||||||||||||
Selling, general and administrative | 113,831 | 108,128 | 347,853 | 328,894 | ||||||||||||
Amortization of purchased intangible assets and other |
25,040 | 18,078 | 76,894 | 46,193 | ||||||||||||
805,171 | 781,170 | 2,412,929 | 2,310,514 | |||||||||||||
Operating income | 124,962 | 126,727 | 364,644 | 406,248 | ||||||||||||
Interest and other income (expense), net | 1,113 | (1,044 | ) | 908 | (1,169 | ) | ||||||||||
Income before income taxes | 126,075 | 125,683 | 365,552 | 405,079 | ||||||||||||
Income taxes | 21,015 | 17,901 | 51,930 | 50,046 | ||||||||||||
Net income | $ | 105,060 | $ | 107,782 | $ | 313,622 | $ | 355,033 | ||||||||
Basic earnings per share | $ | 0.71 | $ | 0.70 | $ | 2.09 | $ | 2.29 | ||||||||
Diluted earnings per share | $ | 0.70 | $ | 0.69 | $ | 2.06 | $ | 2.26 | ||||||||
Basic weighted average number of shares outstanding |
148,844 | 154,101 | 149,802 | 155,037 | ||||||||||||
Diluted weighted average number of shares outstanding |
150,726 | 156,581 | 151,912 | 157,352 | ||||||||||||
Cash dividends declared per share | $ | 0.195 | $ | 0.170 | $ | 0.560 | $ | 0.495 |
AMDOCS LIMITED | ||||||||||||||||
Selected Financial Metrics | ||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Revenue | $ | 930,133 | $ | 907,897 | $ | 2,777,573 | $ | 2,716,762 | ||||||||
Non-GAAP operating income | 159,814 | 155,305 | 474,636 | 461,758 | ||||||||||||
Non-GAAP net income | 135,571 | 131,215 | 407,756 | 399,347 | ||||||||||||
Non-GAAP diluted earnings per share | $ | 0.90 | $ | 0.84 | $ | 2.68 | $ | 2.54 | ||||||||
Diluted weighted average number of shares outstanding |
150,726 | 156,581 | 151,912 | 157,352 |
AMDOCS LIMITED | ||||||||||||||||||||||
Reconciliation of Selected Financial Metrics from GAAP to Non-GAAP | ||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||
|
Three months ended June 30, 2016 |
|||||||||||||||||||||
Reconciliation items |
||||||||||||||||||||||
GAAP | Amortization of purchased intangible assets and other |
Equity based compensation expense |
Tax effect |
Non-GAAP | ||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||
Cost of revenue | $ | 601,249 | $ | - | $ | (4,406 | ) | $ | - | $ | 596,843 | |||||||||||
Research and development |
65,051 | - | (953 | ) | - | 64,098 | ||||||||||||||||
Selling, general and administrative |
113,831 | - | (4,453 | ) | - | 109,378 | ||||||||||||||||
Amortization of purchased intangible assets and other |
25,040 | (25,040 | ) | - | - | - | ||||||||||||||||
Total operating expenses | 805,171 | (25,040 | ) | (9,812 | ) | - | 770,319 | |||||||||||||||
Operating income | 124,962 | 25,040 | 9,812 | - | 159,814 | |||||||||||||||||
Income taxes | 21,015 | - | - | 4,341 | 25,356 | |||||||||||||||||
Net income | $ | 105,060 | $ | 25,040 | $ | 9,812 | $ | (4,341 | ) | $ | 135,571 | |||||||||||
Three months ended June 30, 2015 |
|||||||||||||||
Reconciliation items | |||||||||||||||
GAAP | Amortization of purchased intangible assets and other |
Equity based compensation expense |
Tax effect |
Non-GAAP | |||||||||||
Operating expenses: | |||||||||||||||
Cost of revenue | $ | 592,366 | $ | - | $ | (3,786 | ) | $ | - | $ | 588,580 | ||||
Research and development |
62,598 | - | (816 | ) | - | 61,782 | |||||||||
Selling, general and administrative |
108,128 | - | (5,898 | ) | - | 102,230 | |||||||||
Amortization of purchased intangible assets and other |
18,078 | (18,078 | ) | - | - | - | |||||||||
Total operating expenses | 781,170 | (18,078 | ) | (10,500 | ) | - | 752,592 | ||||||||
Operating income | 126,727 | 18,078 | 10,500 | - | 155,305 | ||||||||||
Income taxes | 17,901 | - | - | 5,145 | 23,046 | ||||||||||
Net income | $ | 107,782 | $ | 18,078 | $ | 10,500 | $ | (5,145 | ) | $ | 131,215 | ||||
AMDOCS LIMITED | |||||||||||||||||||||
Reconciliation of Selected Financial Metrics from GAAP to Non-GAAP | |||||||||||||||||||||
(in thousands) | |||||||||||||||||||||
|
Nine months ended June 30, 2016 |
||||||||||||||||||||
Reconciliation items |
|||||||||||||||||||||
GAAP | Amortization of purchased intangible assets and other |
Equity based compensation expense |
Tax effect |
Non-GAAP | |||||||||||||||||
Operating expenses: | |||||||||||||||||||||
Cost of revenue | $ | 1,796,933 | $ | - | $ | (13,447 | ) | $ | - | $ | 1,783,486 | ||||||||||
Research and development |
191,249 | - | (2,813 | ) | - | 188,436 | |||||||||||||||
Selling, general and administrative |
347,853 | - | (16,838 | ) | - | 331,015 | |||||||||||||||
Amortization of purchased intangible assets and other |
76,894 | (76,894 | ) | - | - | - | |||||||||||||||
Total operating expenses | 2,412,929 | (76,894 | ) | (33,098 | ) | - | 2,302,937 | ||||||||||||||
Operating income | 364,644 | 76,894 | 33,098 | - | 474,636 | ||||||||||||||||
Income taxes | 51,930 | - | - | 15,858 | 67,788 | ||||||||||||||||
Net income | $ | 313,622 | $ | 76,894 | $ | 33,098 | $ | (15,858 | ) | $ | 407,756 | ||||||||||
Nine months ended June 30, 2015 |
|||||||||||||||||||||||
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 | $ | 1,746,383 | $ | - | $ | (11,767 | ) | $ | 24,906 | $ | - | $ | 1,759,522 | ||||||||||
Research and development |
189,044 | - | (2,570 | ) | - | - | 186,474 | ||||||||||||||||
Selling, general and administrative |
328,894 | - | (19,886 | ) | - | - | 309,008 | ||||||||||||||||
Amortization of purchased intangible assets and other |
46,193 | (46,193 | ) | - | - | - | - | ||||||||||||||||
Total operating expenses | 2,310,514 | (46,193 | ) | (34,223 | ) | 24,906 | - | 2,255,004 | |||||||||||||||
Operating income | 406,248 | 46,193 | 34,223 | (24,906 | ) | - | 461,758 | ||||||||||||||||
Interest and other expense, net |
1,169 | - | - | 3,921 | - | 5,090 | |||||||||||||||||
Income taxes | 50,046 | - | - | - | 7,275 | 57,321 | |||||||||||||||||
Net income | $ | 355,033 | $ | 46,193 | $ | 34,223 | $ | (28,827 | ) | $ | (7,275 | ) | $ | 399,347 |
AMDOCS LIMITED | ||||||||
Condensed Consolidated Balance Sheets | ||||||||
(in thousands) | ||||||||
As of |
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June 30, | September 30, | |||||||
2016 | 2015 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash, cash equivalents and short-term interest-bearing investments | $ | 1,124,938 | $ | 1,354,012 | ||||
Accounts receivable, net, including unbilled of $111,866 and $80,197, respectively |
738,063 | 714,784 | ||||||
Deferred income taxes | - | 150,733 | ||||||
Prepaid expenses and other current assets | 188,837 | 158,633 | ||||||
Total current assets | 2,051,838 | 2,378,162 | ||||||
Equipment and leasehold improvements, net | 308,799 | 309,320 | ||||||
Goodwill and other intangible assets, net | 2,251,191 | 2,301,610 | ||||||
Other noncurrent assets | 385,931 | 335,560 | ||||||
Total assets | $ | 4,997,759 | $ | 5,324,652 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable, accruals and other | $ | 939,610 | $ | 945,033 | ||||
Short-term financing arrangements | - | 220,000 | ||||||
Deferred revenue | 152,513 | 198,470 | ||||||
Total current liabilities | 1,092,123 | 1,363,503 | ||||||
Other noncurrent liabilities | 471,853 | 554,307 | ||||||
Shareholders’ equity | 3,433,783 | 3,406,842 | ||||||
Total liabilities and shareholders’ equity | $ | 4,997,759 | $ | 5,324,652 |
____________
Due to the early adoption of Accounting Standard Update 2015-17, starting the first quarter of fiscal year 2016, all deferred tax assets and liabilities are classified as noncurrent on the balance sheet. Prior balance sheets were not retrospectively adjusted.
AMDOCS LIMITED | ||||||||
Consolidated Statements of Cash Flows | ||||||||
(in thousands) | ||||||||
Nine months ended June 30, | ||||||||
2016 | 2015 | |||||||
Cash Flow from Operating Activities: | ||||||||
Net income | $ | 313,622 | $ | 355,033 | ||||
Reconciliation of net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 159,792 | 123,136 | ||||||
Equity-based compensation expense | 33,098 | 34,223 | ||||||
Deferred income taxes | (14,254 | ) | (22,797 | ) | ||||
Excess tax benefit from equity-based compensation | (5,682 | ) | (4,040 | ) | ||||
Loss from short-term interest-bearing investments | 294 | 275 | ||||||
Net changes in operating assets and liabilities, net of amounts acquired: | ||||||||
Accounts receivable | (4,163 | ) | (22,081 | ) | ||||
Prepaid expenses and other current assets | (21,423 | ) | 12,612 | |||||
Other noncurrent assets | 11,070 | 1,310 | ||||||
Accounts payable, accrued expenses and accrued personnel | 37,261 | 78,395 | ||||||
Deferred revenue | (68,749 | ) | 6,597 | |||||
Income taxes payable | 12,263 | 18,498 | ||||||
Other noncurrent liabilities | 14,397 | (15,314 | ) | |||||
Net cash provided by operating activities | 467,526 | 565,847 | ||||||
Cash Flow from Investing Activities: | ||||||||
Payments for purchase of equipment and leasehold improvements, net | (101,372 | ) | (91,501 | ) | ||||
Proceeds from sale of short-term interest-bearing investments | 264,357 | 180,758 | ||||||
Purchase of short-term interest-bearing investments | (269,143 | ) | (184,724 | ) | ||||
Net cash paid for acquisitions | (24,993 | ) | (8,099 | ) | ||||
Other | (20,109 | ) | 931 | |||||
Net cash used in investing activities | (151,260 | ) | (102,635 | ) | ||||
Cash Flow from Financing Activities: | ||||||||
Payments under financing arrangements | (220,000 | ) | (210,000 | ) | ||||
Repurchase of shares | (323,751 | ) | (272,211 | ) | ||||
Proceeds from employee stock options exercised | 67,890 | 62,951 | ||||||
Payments of dividends | (80,468 | ) | (74,663 | ) | ||||
Excess tax benefit from equity-based compensation | 5,682 | 4,040 | ||||||
Other | (5 | ) | (7 | ) | ||||
Net cash used in financing activities | (550,652 | ) | (489,890 | ) | ||||
Net decrease in cash and cash equivalents | (234,386 | ) | (26,678 | ) | ||||
Cash and cash equivalents at beginning of period | 1,035,573 | 1,103,269 | ||||||
Cash and cash equivalents at end of period | $ | 801,187 | $ | 1,076,591 |
AMDOCS LIMITED | ||||||||||||||||||||
Supplementary Information | ||||||||||||||||||||
(in millions) | ||||||||||||||||||||
Three months ended | ||||||||||||||||||||
June 30, | March 31, | December 31, | September 30, | June 30, | ||||||||||||||||
2016 | 2016 | 2015 | 2015 | 2015 | ||||||||||||||||
North America | $ | 591.8 | $ | 586.4 | $ | 576.7 | $ | 626.6 | $ | 623.1 | ||||||||||
Europe | 126.3 | 139.2 | 128.9 | 115.3 | 102.3 | |||||||||||||||
Rest of the World | 212.0 | 200.3 | 215.9 | 184.9 | 182.5 | |||||||||||||||
Total Revenue | $ | 930.1 | $ | 925.9 | $ | 921.5 | $ | 926.8 | $ | 907.9 | ||||||||||
Three months ended | ||||||||||||||||||||
June 30, | March 31, | December 31, | September 30, | June 30, | ||||||||||||||||
2016 | 2016 | 2015 | 2015 | 2015 | ||||||||||||||||
Managed Services Revenue | $ | 479.2 | $ | 501.1 | $ | 487.6 | $ | 466.6 | $ | 460.6 | ||||||||||
Three months ended | ||||||||||||||||||||
June 30, | March 31, | December 31, | September 30, | June 30, | ||||||||||||||||
2016 | 2016 | 2015 | 2015 | 2015 | ||||||||||||||||
Customer Experience | $ | 908.1 | $ | 902.3 | $ | 894.4 | $ | 899.4 | $ | 883.7 | ||||||||||
Systems | ||||||||||||||||||||
Directory | 22.0 | 23.6 | 27.1 | 27.4 | 24.2 | |||||||||||||||
Total Revenue | $ | 930.1 | $ | 925.9 | $ | 921.5 | $ | 926.8 | $ | 907.9 | ||||||||||
As of | ||||||||||||||||||||
June 30, | March 31, | December 31, | September 30, | June 30, | ||||||||||||||||
2016 | 2016 | 2015 | 2015 | 2015 | ||||||||||||||||
12-Month Backlog | $ | 3,110 | $ | 3,100 | $ | 3,090 | $ | 3,080 | $ | 3,010 | ||||||||||
Contact:Matthew Smith Head of Investor RelationsAmdocs 314-212-8328 E-mail: dox_info@amdocs.com