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32% Growth in Diluted Non-GAAP Earnings Per Share to $0.49; Diluted GAAP Earnings Per Share of $0.39
St. Louis, MO - July 19, 2006 - Amdocs Limited (NYSE: DOX) today reported that for the quarter ended June 30, 2006, revenue was $626.4 million, an increase of 23.5% from last year's third quarter. Excluding acquisition-related costs, which include amortization of purchased intangible assets and the write-off of in-process research and development and excluding equity-based compensation expense, net of related tax effects, of $20.6 million, net income on a non-GAAP basis was $106.2 million, or $0.49 per diluted share, compared to non-GAAP net income, excluding $1.7 million of acquisition-related costs net of related tax effects, of $78.8 million, or $0.37 per diluted share, in the third quarter of fiscal 2005. The Company's net income was $85.6 million, or $0.39 per diluted share, compared to net income of $77.1 million, or $0.36 per diluted share, in the third quarter of fiscal 2005. Free cash flow, defined as cash flow from operations less net capital expenditures and principal payments on capital leases, was $94 million in the quarter.
"We are pleased to again report record revenues and increasing profitability," said Dov Baharav, chief executive officer of Amdocs Management Limited. "We see demand in the market, which continues to be driven by service providers' need to address competition, consolidation and convergence. We have strengthened our presence in the digital content area with our acquisition of Qpass and we are expanding our OSS activities with our pending acquisition of Cramer. Amdocs is positioned as the only vendor that can provide an end-to-end solution, from business support systems -- or BSS -- to OSS, for the leading services providers. This will put us in the leading position to benefit from the growth opportunities as service providers transform their organizations in order to offer new products and services. We are confident that our success in 2006 will continue as we look towards fiscal 2007."
During the third quarter, Amdocs new business included 11 key wins, across geographies and lines of business. Amdocs expanded its relationship with Rogers Communications, which will install Amdocs CRM across its cable, wireless and telecom lines of business as part of a rollout of an integrated customer management strategy. In Australia, Telstra has selected Amdocs as one of the key vendors for an OSS transformational program. In the United States, Amdocs was awarded several projects related to assisting customers in their consolidation and integration of acquisitions. In broadband cable and satellite, a customer has signed a contract extension. Several other customers, including some new logos, have chosen Amdocs for CRM, Amdocs Partner Management and mediation projects.
Amdocs expects that revenue for the fourth quarter of fiscal 2006 will be approximately $657 million. Diluted earnings per share on a non-GAAP basis for the fourth quarter are expected to be $0.49, excluding acquisition-related costs and the impact of approximately $0.04-$0.05 per share of equity-based compensation expense, net of related tax effects. Diluted GAAP EPS is expected to be approximately $0.41-$0.42. This guidance excludes any potential impact of the pending acquisition of Cramer. Amdocs expects that it may incur a one-time charge in its fourth fiscal quarter to account for certain costs related to the Cramer acquisition.
Preliminary fiscal 2007 guidance: Expected revenue of approximately $2.880-$2.980 billion and diluted non-GAAP EPS of $2.06-$2.16, which excludes acquisition-related costs and approximately $0.19-$0.22 per share of equity-based compensation expense, net of related tax effects. This guidance includes the expected impact of the pending acquisition of Cramer. Amdocs expects to provide guidance for diluted GAAP EPS after the purchase price accounting for the acquisition is completed.
Amdocs will host a conference call on July 19, 2006 at 5 p.m. Eastern Time to discuss the Company's third quarter results. The call will be carried live on the Internet via www.InvestorCalendar.com and the Amdocs website, www.amdocs.com.
Non-GAAP Financial Measures
This release includes non-GAAP diluted earnings per share and other non-GAAP line items from the Non-GAAP Consolidated Statements of Income, including non-GAAP cost of service, non-GAAP research and development, non-GAAP selling, general and administrative, non-GAAP operating income, non-GAAP income before income taxes, non-GAAP income taxes and non-GAAP net income. These non-GAAP measures exclude the following items:
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 and the Non-GAAP Consolidated Statements of Income 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 non-GAAP line items from the Non-GAAP Consolidated Statements of Income, including non-GAAP cost of service, non-GAAP research and development, non-GAAP selling, general and administrative, non-GAAP operating income, non-GAAP income before income taxes, non-GAAP income taxes and non-GAAP net income, 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.
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, in-process research and development write-off, 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 Amdocs. In addition, Amdocs believes that significant groups of investors exclude these non-cash expenses in reviewing its results and those of its competitors, because the amounts of the expenses between companies can vary greatly depending on the assumptions used by an individual company in determining the amounts of the expenses.
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 service, research and development, selling, general and administrative, operating income, income before income taxes, 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.
Amdocs combines innovative software and services with deep business knowledge to accelerate implementation of integrated customer management by the world's leading service providers. By delivering a comprehensive portfolio of software and services that spans the customer lifecycle, Amdocs enables service companies to deliver an intentional customer experience™, which results in stronger, more profitable customer relationships. Service providers also benefit from a rapid return on investment, lower total cost of ownership and improved operational efficiencies. A global company with revenue of more than $2 billion in fiscal 2005, Amdocs has over 14,000 employees and serves customers in more than 50 countries around the world. 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, the Company specifically disclaims any obligation to do so. These and other risks are discussed at greater length in the Company's filings with the Securities and Exchange Commission, including in our Annual Report on Form 20-F, filed on December 28, 2005 and our quarterly 6-K furnished on February 15 and May 15, 2006.
Thomas G. O'Brien
Treasurer and Vice President of Investor Relations