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Second Quarter Results for Fiscal 2019
May 14, 2019
Raises Fiscal 2019 GAAP Diluted EPS Growth Outlook to 33.0%-41.0% YoY
Raises Fiscal 2019 Non-GAAP Diluted EPS Growth Outlook to 4.5%-8.5% YoY
Second Quarter Fiscal 2019 Highlights
- Revenue of
$1,020 million , above the midpoint of the$995-$1,035 million guidance range - GAAP diluted EPS of
$0.90 , above the $0.75-$0.83 guidance range - Non-GAAP diluted EPS of
$1.06 , at the high end of the$1.00-$1.06 guidance range - GAAP operating income of
$150 million ; GAAP operating margin of 14.7% - Non-GAAP operating income of
$178 million ; non-GAAP operating margin of 17.4% - Quarterly free cash flow of
$148 million , comprised of cash flow from operations of$169 million , less$21 million in net capital expenditures and other; normalized free cash flow of$145 million (1) - Twelve-month backlog of
$3.39 billion , up$20 million sequentially - The board of directors approved a quarterly cash dividend of
$0.285 per share to be paid onJuly 19, 2019
“We are pleased to report a strong performance for our second fiscal quarter, which included record revenue, solid profitability and diluted non-GAAP earnings per share in line with the high-end of our guidance. Additionally, our quarterly cash collection was healthy as we continued to meet key delivery milestones related to the many transformation projects we are progressing for our customers. As such, we remain on-track to achieve our normalized free cash flow target of approximately
Sheffer continued, “At the core of Amdocs’ market leadership and future growth is our ability to continuously innovate and bring new offerings to market. Along these lines, we recently launched our Open 5G suite at
Sheffer concluded, “Looking towards our fiscal second half, we are encouraged by our record 12-month backlog which reflects the high win rate we are seeing across business lines such as Pay TV, media and managed services. Additionally, we see an attractive pipeline of opportunities ahead of us, which further supports our confidence in the near term outlook. With these factors in mind, we now expect to deliver diluted non-GAAP earnings per share growth in the range of 4.5% to 8.5% for the full fiscal year 2019, which represents an increase of approximately 150 basis points over our previous guidance.”
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 2019 was
Returning Cash to Shareholders
- Quarterly Cash Dividend Program: On
May 14, 2019 , the Board approved the Company’s next quarterly cash dividend payment of$0.285 per share and setJune 28, 2019 as the record date for determining the shareholders entitled to receive the dividend, which will be payable onJuly 19, 2019 . - Share Repurchase Activity: Repurchased
$120 million of ordinary shares during the second quarter of fiscal 2019.
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 2019 Outlook
- Revenue of approximately
$1,005-$1,045 million , assuming approximately$2 million sequential negative impact from foreign currency fluctuations as compared to the second quarter of fiscal 2019 - GAAP diluted EPS of approximately
$0.82-$0.90 - Non-GAAP diluted EPS of approximately
$1.08-$1.14 , excluding amortization of purchased intangible assets and other acquisition-related costs, changes in certain acquisitions related liabilities measured at fair value, and approximately$0.05-$0.07 per share of equity-based compensation expense, net of related tax effects.
Full Year Fiscal 2019 Outlook
- Expects revenue growth of 1.8%-3.8% year-over-year as reported compared with 0.5%-4.5% year-over-year previously
- Expects revenue growth of 3.0%-5.0% year-over-year on a constant currency basis, the midpoint of which is unchanged compared with 2.0%-6.0% year-over-year previously
- Full year fiscal 2019 revenue guidance incorporates an expected negative impact from foreign currency fluctuations of about 1.2% year-over-year compared with a negative impact of about 1.5% year-over-year previously
- Expects GAAP diluted earnings per share growth of roughly 33.0%-41.0% year-over-year compared with 29.0%-38.0% year-over-year previously
- Expects non-GAAP diluted earnings per share growth of roughly 4.5%-8.5% year-over-year compared with 3.0%-7.0% year-over-year previously, excluding amortization of purchased intangible assets and other acquisition-related costs, changes in certain acquisitions related liabilities measured at fair value, and approximately
$0.24-$0.28 per share of equity-based compensation expense, net of related tax effects - Reiterates free cash flow guidance of approximately
$500 million , comprised of cash flow from operations, less net capital expenditures and other, and normalized free cash flow of approximately$600 million
Our third fiscal quarter 2019 and full year fiscal 2019 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 and normalized 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 certain acquisition-related liabilities measured at fair value;
- non-recurring and unusual charges;
- equity-based compensation expense; and
- tax effects related to the above.
Free cash flow equals cash generated by operating activities less net capital expenditures and other, and normalized free cash flow is adjusted to exclude net capital expenditures related to the new campus development, payments for previously expensed restructuring charges and a legal dispute settlement. 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 certain acquisition-related liabilities measured at fair value, non-recurring and unusual charges, 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.
Contact:
Head of Investor Relations
314-212-8328
E-mail: dox_info@amdocs.com
(1) Please refer to the Selected Financial Metrics tables below
Consolidated Statements of Income
(in thousands, except per share data)
Three months ended | Six months ended | |||||||||||
March 31, | March 31, | |||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||
Revenue | $ | 1,019,657 | $ | 992,340 | $ | 2,031,712 | $ | 1,970,051 | ||||
Operating expenses: | ||||||||||||
Cost of revenue | 658,613 | 646,587 | 1,321,181 | 1,289,784 | ||||||||
Research and development | 66,765 | 64,926 | 135,451 | 133,103 | ||||||||
Selling, general and administrative | 120,463 | 120,199 | 242,323 | 238,867 | ||||||||
Amortization of purchased intangible assets and other | 23,641 | 28,801 | 49,485 | 54,327 | ||||||||
869,482 | 860,513 | 1,748,440 | 1,716,081 | |||||||||
Operating income | 150,175 | 131,827 | 283,272 | 253,970 | ||||||||
Interest and other expense, net | 1,866 | 239 | 344 | 118 | ||||||||
Income before income taxes | 148,309 | 131,588 | 282,928 | 253,852 | ||||||||
Income taxes | 24,030 | 29,861 | 56,957 | 35,252 | ||||||||
Net income | $ | 124,279 | $ | 101,727 | $ | 225,971 | $ | 218,600 | ||||
Basic earnings per share | $ | 0.90 | $ | 0.71 | $ | 1.63 | $ | 1.52 | ||||
Diluted earnings per share | $ | 0.90 | $ | 0.70 | $ | 1.62 | $ | 1.51 | ||||
Basic weighted average number of shares outstanding | 138,183 | 143,030 | 138,918 | 143,487 | ||||||||
Diluted weighted average number of shares outstanding | 138,698 | 144,390 | 139,612 | 144,882 | ||||||||
Cash dividends declared per share | $ | 0.285 | $ | 0.250 | $ | 0.535 | $ | 0.470 | ||||
Selected Financial Metrics
(In thousands, except per share data)
Three months ended | Six months ended | |||||||||||
March 31, | March 31, | |||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||
Revenue | $ | 1,019,657 | $ | 992,340 | $ | 2,031,712 | $ | 1,970,051 | ||||
Non-GAAP operating income | 177,762 | 171,760 | 352,611 | 340,824 | ||||||||
Non-GAAP net income | 147,008 | 137,350 | 284,826 | 291,816 | ||||||||
Non-GAAP diluted earnings per share | $ | 1.06 | $ | 0.95 | $ | 2.04 | $ | 2.01 | ||||
Diluted weighted average number of shares outstanding | 138,698 | 144,390 | 139,612 | 144,882 | ||||||||
Free Cash Flows and Normalized Free Cash Flow
(In thousands)
Three months ended | Six months ended | |||||||||||||||
March 31, | March 31, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Net Cash Provided by Operating Activities | $ | 168,629 | $ | 113,728 | $ | 278,279 | $ | 278,329 | ||||||||
Purchases of property and equipment, net (*) | (20,650 | ) | (110,347 | ) | (57,928 | ) | (162,126 | ) | ||||||||
Other | - | (110 | ) | - | (110 | ) | ||||||||||
Free Cash Flow | 147,979 | 3,271 | 220,351 | 116,093 | ||||||||||||
Payments for legal dispute settlement | - | - | 55,000 | - | ||||||||||||
Payments for previously expensed restructuring charges | 4,314 | - | 10,939 | - | ||||||||||||
Net capital expenditures related to the new campus development (*) | (7,670 | ) | 81,213 | (5,616 | ) | 94,031 | ||||||||||
Normalized Free Cash Flow | $ | 144,623 | $ | 84,484 | $ | 280,674 | $ | 210,124 | ||||||||
(*) The amounts under "Purchase of property and equipment, net”, and the amounts under “Net capital expenditures related to the new campus development” include proceeds of
Reconciliation of Selected Financial Metrics from GAAP to Non-GAAP
(In thousands)
Three months ended March 31, 2019 |
|||||||||||||||||||
Reconciliation items | |||||||||||||||||||
GAAP | Amortization of purchased intangible assets and other |
Equity based compensation expense |
Changes in certain acquisitions related liabilities measured at fair value |
Tax effect |
Non-GAAP | ||||||||||||||
Operating expenses: | |||||||||||||||||||
Cost of revenue | $ | 658,613 | $ | - | $ | (5,330 | ) | $ | 5,668 | $ | - | $ | 658,951 | ||||||
Research and development | 66,765 | - | (584 | ) | - | - | 66,181 | ||||||||||||
Selling, general and administrative | 120,463 | - | (3,700 | ) | - | - | 116,763 | ||||||||||||
Amortization of purchased intangible assets and other | 23,641 | (23,641 | ) | - | - | - | - | ||||||||||||
Total operating expenses | 869,482 | (23,641 | ) | (9,614 | ) | 5,668 | - | 841,895 | |||||||||||
Operating income | 150,175 | 23,641 | 9,614 | (5,668 | ) | - | 177,762 | ||||||||||||
Income taxes | 24,030 | - | - | - | 4,858 | 28,888 | |||||||||||||
Net income | $ | 124,279 | $ | 23,641 | $ | 9,614 | $ | (5,668 | ) | $ | (4,858 | ) | $ | 147,008 | |||||
Three months ended March 31, 2018 |
|||||||||||||||||||
Reconciliation items | |||||||||||||||||||
GAAP | Amortization of purchased intangible assets and other |
Equity based compensation expense |
Changes in certain acquisitions related liabilities measured at fair value |
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 | ||||||
Reconciliation of Selected Financial Metrics from GAAP to Non-GAAP
(In thousands)
Six months ended March 31, 2019 |
|||||||||||||||||||||
Reconciliation items |
|||||||||||||||||||||
GAAP | Amortization of purchased intangible assets and other |
Equity based compensation expense |
Changes in certain acquisitions related liabilities measured at fair value |
Tax effect |
Non-GAAP | ||||||||||||||||
Operating expenses: | |||||||||||||||||||||
Cost of revenue | $ | 1,321,181 | $ | - | $ | (10,181 | ) | $ | 1,877 | $ | - | $ | 1,312,877 | ||||||||
Research and development | 135,451 | - | (1,349 | ) | - | - | 134,102 | ||||||||||||||
Selling, general and administrative | 242,323 | - | (10,201 | ) | - | - | 232,122 | ||||||||||||||
Amortization of purchased intangible assets and other | 49,485 | (49,485 | ) | - | - | - | - | ||||||||||||||
Total operating expenses | 1,748,440 | (49,485 | ) | (21,731 | ) | (1,877 | ) | - | 1,679,101 | ||||||||||||
Operating income | 283,272 | 49,485 | 21,731 | 1,877 | - | 352,611 | |||||||||||||||
Income taxes | 56,957 | - | - | - | 10,484 | 67,441 | |||||||||||||||
Net income | $ | 225,971 | $ | 49,485 | $ | 21,731 | $ | 1,877 | $ | (10,484 | ) | $ | 284,826 | ||||||||
|
|||||||||||||||||||||
Six months ended March 31, 2018 |
|||||||||||||||||||||
Reconciliation items | |||||||||||||||||||||
GAAP | Amortization of purchased intangible assets and other |
Equity based compensation expense |
Changes in certain acquisitions related liabilities measured at fair value |
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 | |||||
Condensed Consolidated Balance Sheets
(In thousands)
As of |
||||||
March 31, 2019 |
September 30, 2018 |
|||||
ASSETS | ||||||
Current assets | ||||||
Cash, cash equivalents and short-term interest-bearing investments | $ | 449,696 | $ | 519,216 | ||
Accounts receivable, net, including unbilled of $193,926 and $263,997, respectively | 958,854 | 971,502 | ||||
Prepaid expenses and other current assets | 230,140 | 229,999 | ||||
Total current assets | 1,638,690 | 1,720,717 | ||||
Property and equipment, net | 487,407 | 496,585 | ||||
Goodwill and other intangible assets, net | 2,671,558 | 2,710,144 | ||||
Other noncurrent assets | 436,059 | 420,369 | ||||
Total assets | $ | 5,233,714 | $ | 5,347,815 | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||
Current liabilities | ||||||
Accounts payable, accruals and other | $ | 1,061,922 | $ | 1,162,543 | ||
Deferred revenue | 151,717 | 132,414 | ||||
Total current liabilities | 1,213,639 | 1,294,957 | ||||
Other noncurrent liabilities | 527,288 | 560,816 | ||||
Total Amdocs Limited Shareholders’ equity | 3,450,434 | 3,448,879 | ||||
Noncontrolling interests | 42,353 | 43,163 | ||||
Total equity | 3,492,787 | 3,492,042 | ||||
Total liabilities and equity | $ | 5,233,714 | $ | 5,347,815 | ||
Consolidated Statements of Cash Flows
(In thousands)
Six months ended March 31, |
||||||||
2019 | 2018 | |||||||
Cash Flow from Operating Activities: | ||||||||
Net income | $ | 225,971 | $ | 218,600 | ||||
Reconciliation of net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 101,853 | 102,900 | ||||||
Equity-based compensation expense | 21,731 | 24,063 | ||||||
Deferred income taxes | 4,395 | (3,584 | ) | |||||
Loss from short-term interest-bearing investments | 513 | 1,195 | ||||||
Net changes in operating assets and liabilities, net of amounts acquired: | ||||||||
Accounts receivable, net | 14,806 | (77,359 | ) | |||||
Prepaid expenses and other current assets | 8,758 | (9,509 | ) | |||||
Other noncurrent assets | 359 | (10,606 | ) | |||||
Accounts payable, accrued expenses and accrued personnel | (84,922 | ) | 23,103 | |||||
Deferred revenue | (1,107 | ) | 8,600 | |||||
Income taxes payable, net | (6,640 | ) | 8,675 | |||||
Other noncurrent liabilities | (7,438 | ) | (7,749 | ) | ||||
Net cash provided by operating activities | 278,279 | 278,329 | ||||||
Cash Flow from Investing Activities: | ||||||||
Purchases of property and equipment, net (*) | (57,928 | ) | (162,126 | ) | ||||
Proceeds from sale of short-term interest-bearing investments | 50,609 | 207,738 | ||||||
Purchase of short-term interest-bearing investments | - | (76,037 | ) | |||||
Net cash paid for acquisitions | (8,331 | ) | (352,599 | ) | ||||
Other | 398 | (3,446 | ) | |||||
Net cash used in investing activities | (15,252 | ) | (386,470 | ) | ||||
Cash Flow from Financing Activities: | ||||||||
Borrowings under financing arrangements | - | 120,000 | ||||||
Repurchase of shares | (219,214 | ) | (239,779 | ) | ||||
Proceeds from employee stock options exercised | 11,499 | 65,631 | ||||||
Payments of dividends | (69,801 | ) | (63,294 | ) | ||||
Investment by noncontrolling interests, net | (4,776 | ) | 47,013 | |||||
Other | (323 | ) | (110 | ) | ||||
Net cash used in financing activities | (282,615 | ) | (70,539 | ) | ||||
Net decrease in cash and cash equivalents | (19,588 | ) | (178,680 | ) | ||||
Cash and cash equivalents at beginning of period | 418,783 | 649,611 | ||||||
Cash and cash equivalents at end of period | $ | 399,195 | $ | 470,931 | ||||
(*) The amounts under "Purchase of property and equipment, net”, include proceeds of
Supplementary Information
(In millions)
Three months ended | |||||||||||||||
March 31, 2019 |
December 31, 2018 |
September 30, 2018 |
June 30, 2018 |
March 31, 2018 |
|||||||||||
North America | $ | 634.2 | $ | 660.5 | $ | 638.2 | $ | 644.8 | $ | 624.2 | |||||
Europe | 151.0 | 146.1 | 150.6 | 139.3 | 148.6 | ||||||||||
Rest of the World | 234.5 | 205.5 | 213.8 | 218.1 | 219.5 | ||||||||||
Total Revenue | $ | 1,019.7 | $ | 1,012.1 | $ | 1,002.6 | $ | 1,002.2 | $ | 992.3 |
Three months ended | |||||||||||||||
March 31, 2019 |
December 31, 2018 |
September 30, 2018 |
June 30, 2018 |
March 31, 2018 |
|||||||||||
Managed Services Revenue | $ | 559.5 | $ | 525.5 | $ | 508.9 | $ | 515.0 | $ | 508.9 |
As of | |||||||||||||||
March 31, 2019 |
December 31, 2018 |
September 30, 2018 |
June 30, 2018 |
March 31, 2018 |
|||||||||||
12-Month Backlog | $ | 3,390 | $ | 3,370 | $ | 3,360 | $ | 3,330 | $ | 3,320 |