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Second Quarter Results for Fiscal 2017

Record Quarterly Revenue of $966M

Expects Fiscal 2017 Revenue Growth of 3.5-5.5% YoY in Constant Currency

Reiterates Fiscal 2017 Non-GAAP Diluted EPS Growth Outlook of 4.5-8.5% YoY 

Second Quarter Fiscal 2017 Highlights

  • Revenue of $966 million, above the midpoint of the $940-$980 million guidance range including a positive impact from foreign currency movements of approximately $3 million relative to the first quarter of fiscal 2017
  • Diluted GAAP EPS of $0.76, above the $0.66-$0.74 guidance range mainly due to gains as a result of changes in fair value of certain acquisition-related liabilities
  • Diluted non-GAAP EPS of $0.94, above the midpoint of the $0.90-$0.96 guidance range
  • GAAP operating income of $134 million; GAAP operating margin of 13.8%
  • Non-GAAP operating income of $166 million; non-GAAP operating margin of 17.2%
  • Free cash flow of $81 million
  • Twelve-month backlog of $3.21 billion, up $30 million sequentially
  • Quarterly cash dividend of $0.22 per share to be paid on July 14, 2017

ST. LOUIS, May 09, 2017 (GLOBE NEWSWIRE) -- Amdocs Limited (NASDAQ:DOX) today reported operating results for the three months ended March 31, 2017.

“We are pleased with our performance in the second fiscal quarter, during which we maintained our relentless focus on execution to produce record revenue and stable profitability. Indeed, we successfully delivered on dozens of transformation project milestones during Q2, a key highlight of which was the go-live of a single real-time convergent charging system for KT Corporation, South Korea’s largest quad-play service provider. At the same time, we continued to see healthy rates of service renewals among long-standing Amdocs and former Comverse customers, which we believe demonstrates the unique combination of industry-leading innovation and dependability we have consistently brought to service providers over the years,” said Eli Gelman, president and chief executive officer of Amdocs Management Limited.

Gelman continued, “Regarding our strategic growth engines, we have made important additional progress in network functions virtualization (NFV), an area in which Amdocs is one of the first technology companies to invest and lead. Earlier in Q2, Linux Foundation announced the creation of the Open Network Automation Platform (ONAP), a majority of which is based on open ECOMP code that Amdocs co-developed in collaboration with AT&T. Moreover, we believe ONAP is fast becoming the de facto standard for NFV which will help to accelerate industry adoption by communication service providers. Along these lines, we are today excited to report that Amdocs has been selected by Bell Canada as the strategic partner to co-develop its Network Service Orchestrator (NSO) platform and to help integrate ONAP components into Bell’s NSO platform. This partnership supports Bell Canada’s focus on leading broadband service innovation and reducing time to market for new virtual enterprise services.”

Gelman concluded, “We enter the second fiscal half with a demonstrated ability to bring customer value through the strength of our unique business model. With the visibility provided by our record 12-month backlog we are on-track to meet our financial targets for the full fiscal year. These include free cash flow generation of approximately $500 million, a majority of which we still plan to return to shareholders in fiscal 2017 while retaining capacity for M&A as opportunities arise.”

Revenue

Revenue for the second fiscal quarter ended March 31, 2017 was $966.0 million, up 1.2% or $11.3 million sequentially from the first fiscal quarter of 2017 and up 4.3% as compared to last year’s second fiscal quarter. Revenue for the second fiscal quarter of 2017 includes a positive impact from foreign currency movements of approximately $3 million relative to the first quarter of fiscal 2017. Revenue was at the midpoint of Amdocs’ guidance, excluding foreign currency movements.

Net Income and Earnings Per Share

The Company's GAAP net income for the second quarter of fiscal 2017 was $112.6 million, or $0.76 per diluted share, compared to GAAP net income of $107.7 million, or $0.71 per diluted share, in the prior fiscal year’s second quarter. Net income on a non-GAAP basis was $139.2 million, or $0.94 per diluted share, compared to non-GAAP net income of $140.2 million, or $0.92 per diluted share, in the second quarter of fiscal 2016. 

Returning Cash to Shareholders

  • Quarterly Cash Dividend Program: On May 9, 2017, the Board approved the Company’s next quarterly cash dividend payment of $0.22 per share and set June 30, 2017 as the record date for determining the shareholders entitled to receive the dividend, which will be payable on July 14, 2017.
  • Share Repurchase Activity: Repurchased $80 million of ordinary shares during the second quarter of fiscal 2017.

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 $3.21 billion at the end of the second quarter of fiscal 2017, up $30 million from the end of the prior quarter.

Third Quarter fiscal 2017 Outlook

  • Revenue of approximately $945-$985 million, including an immaterial sequential impact from foreign currency fluctuations as compared to the second quarter of fiscal 2017
  • Diluted GAAP EPS of approximately $0.69-$0.77
  • Diluted non-GAAP EPS of approximately $0.93-$0.99, excluding amortization of purchased intangible assets and other acquisition-related costs and approximately $0.06-$0.07 per share of equity-based compensation expense, net of related tax effects

Full Year Fiscal 2017 Outlook

  • Expects revenue growth of 3.5-5.5% year-over-year on a constant currency basis compared with previous guidance of 2.5-6.5% year-over-year
  • Expects revenue growth of 3.0-5.0% year-over-year as reported, including an anticipated negative impact from foreign currency movements of approximately 0.5% year-over-year and compared with previous guidance of 1.5-5.5% year-over-year, which included an anticipated negative impact from foreign currency movements of approximately 1.0% year-over-year
  • GAAP diluted earnings per share growth of roughly 5.0-11.0% year-over-year
  • Non-GAAP diluted earnings per share growth of roughly 4.5-8.5% year-over-year

Our third fiscal quarter 2017 and full year fiscal 2017 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 AT&T’s proposed merger with Time Warner or from other current and potential customer consolidation activity in North America.

Conference Call Details 

Amdocs will host a conference call on May 9, 2017 at 5:00 p.m. Eastern Time to discuss the Company's second quarter of fiscal 2017 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 98211383. 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 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. 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 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, 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 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 the world’s most successful communications and media companies. As our customers reinvent themselves, we enable their digital and network transformation through innovative solutions, delivery expertise and intelligent operations. Amdocs and its 25,000 employees serve customers in over 85 countries. Listed on the NASDAQ Global Select Market, Amdocs had revenue of $3.7 billion in fiscal 2016.

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, 2016 filed on December 12, 2016 and our Form 6-K furnished for the first quarter of fiscal 2017 on February 13, 2017.


 

AMDOCS LIMITED
Consolidated Statements of Income
(in thousands, except per share data)
 
    Three months ended   Six months ended
    March 31,   March 31,
    2017   2016   2017   2016
             
Revenue   $ 966,009     $ 925,935   $ 1,920,736     $ 1,847,440  
                 
Operating expenses:                
Cost of revenue     621,737       600,116     1,242,571       1,195,684  
Research and development     67,303       63,711     127,293       126,198  
Selling, general and administrative     114,465       114,474     238,544       234,022  
Amortization of purchased intangible assets and other     28,723       27,487     56,954       51,854  
      832,228       805,788     1,665,362       1,607,758  
Operating income     133,781       120,147     255,374       239,682  
                 
Interest and other (expense) income, net     (468 )     1,460     (3,231 )     (205 )
Income before income taxes     133,313       121,607     252,143       239,477  
                 
Income taxes     20,753       13,887     41,790       30,915  
Net income   $ 112,560     $ 107,720   $ 210,353     $ 208,562  
Basic earnings per share   $ 0.77     $ 0.72   $ 1.43     $ 1.39  
Diluted earnings per share   $ 0.76     $ 0.71   $ 1.42     $ 1.37  
Basic weighted average number of shares outstanding     146,595       149,924     146,706       150,279  
Diluted weighted average number of shares outstanding     147,954       151,948     148,168       152,502  
Cash dividends declared per share   $ 0.220     $ 0.195   $ 0.415     $ 0.365  
                               


AMDOCS LIMITED
Selected Financial Metrics
(in thousands, except per share data)
 
    Three months ended   Six months ended
    March 31,   March 31,
    2017   2016   2017   2016
                 
Revenue   $ 966,009   $ 925,935   $ 1,920,736   $ 1,847,440
                 
Non-GAAP operating income     165,997     157,950     330,082     314,822
                 
Non-GAAP net income     139,164     140,165     272,731     272,185
                 
Non-GAAP diluted earnings per share   $ 0.94   $ 0.92   $ 1.84   $ 1.78
                 
Diluted weighted average number of shares outstanding     147,954     151,948     148,168     152,502


AMDOCS LIMITED
Reconciliation of Selected Financial Metrics from GAAP to Non-GAAP
 (in thousands) 
             
  Three months ended
  March 31, 2017
    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 $ 621,737 $ -   $ (4,973 ) $ 6,691   $ -   $ 623,455
Research and                                
development   67,303   -     (901 )   -     -     66,402
Selling, general and            
administrative   114,465   -     (4,310 )   -     -     110,155
Amortization of                                
purchased intangible                                
assets and other   28,723   (28,723 )   -     -     -     -
Total operating expenses   832,228   (28,723 )   (10,184 )   6,691     -     800,012
             
Operating income   133,781   28,723     10,184     (6,691 )   -     165,997
             
Income taxes   20,753   -     -     -     5,612     26,365
             
Net income $ 112,560 $ 28,723   $ 10,184   $ (6,691 ) $ (5,612 ) $ 139,164
             

 

    Three months ended  
    March 31, 2016  
      Reconciliation items      
    GAAP Amortization of
purchased
intangible assets
and other
  Equity based
compensation
expense
  Tax effect   Non-GAAP  
Operating expenses:                    
Cost of revenue   $ 600,116 $ -     $ (4,917 )   $ -     $ 595,199  
Research and                                    
development     63,711   -       (1,018 )     -       62,693  
Selling, general and                    
administrative     114,474   -       (4,381 )     -       110,093  
Amortization of                                    
purchased intangible                                    
assets and other     27,487   (27,487 )     -       -       -  
Total operating expenses     805,788   (27,487 )     (10,316 )     -       767,985  
                     
Operating income     120,147   27,487       10,316       -       157,950  
                     
Income taxes     13,887   -       -       5,358       19,245  
                     
Net income   $ 107,720 $ 27,487     $ 10,316     $ (5,358 )   $ 140,165  
                     


AMDOCS LIMITED  
Reconciliation of Selected Financial Metrics from GAAP to Non-GAAP  
 (in thousands)  
   
  Six months ended  
  March 31, 2017  
    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 $ 1,242,571 $ -   $ (9,971 ) $ 6,691   $ -   $ 1,239,291  
Research and                                  
development   127,293   -     (1,800 )   -     -     125,493  
Selling, general and              
administrative   238,544   -     (12,674 )   -     -     225,870  
Amortization of              
purchased intangible              
assets and other   56,954   (56,954 )   -     -     -     -  
Total operating expenses   1,665,362   (56,954 )   (24,445 )   6,691     -     1,590,654  
               
Operating income   255,374   56,954     24,445     (6,691 )   -     330,082  
               
Income taxes   41,790   -     -     -     12,330     54,120  
               
Net income $ 210,353 $ 56,954   $ 24,445   $ (6,691 ) $ (12,330 ) $ 272,731  

 

  Six months ended  
  March 31, 2016  
    Reconciliation items      
  GAAP Amortization of
purchased
intangible
assets and other
  Equity based
compensation
expense
  Tax effect   Non-GAAP  
Operating expenses:                  
Cost of revenue $ 1,195,684 $ -     $ (9,041 )   $ -     $ 1,186,643  
Research and                                  
development   126,198   -       (1,860 )     -       124,338  
Selling, general and                                  
administrative   234,022   -       (12,385 )     -       221,637  
Amortization of                                  
purchased intangible                                  
assets and other   51,854   (51,854 )     -       -       -  
Total operating expenses   1,607,758   (51,854 )     (23,286 )     -       1,532,618  
                   
Operating income   239,682   51,854       23,286       -       314,822  
                   
Income taxes   30,915   -       -       11,517       42,432  
                   
Net income $ 208,562 $ 51,854     $ 23,286     $ (11,517 )   $ 272,185  
                   


AMDOCS LIMITED
Condensed Consolidated Balance Sheets
 (in thousands)
 
    As of
    March 31,
2017
  September 30,
2016
         
ASSETS        
         
Current assets        
Cash, cash equivalents and short-term interest-bearing investments   $ 1,149,454   $ 1,095,723
Accounts receivable, net, including unbilled of $150,934 and $134,122, respectively     844,631     818,531
Prepaid expenses and other current assets     223,838     186,137
Total current assets     2,217,923     2,100,391
         
Equipment and leasehold improvements, net     331,523     331,728
Goodwill and other intangible assets, net     2,423,886     2,493,166
Other noncurrent assets     442,633     406,070
Total assets   $ 5,415,965   $ 5,331,355
             
LIABILITIES AND SHAREHOLDERS’ EQUITY            
             
Current liabilities            
Accounts payable, accruals and other   $ 1,001,456   992,679
Short-term financing arrangements     200,000     200,000
Deferred revenue     149,537     173,331
Total current liabilities     1,350,993     1,366,010
Other noncurrent liabilities     512,056     511,784
Shareholders’ equity     3,552,916     3,453,561
Total liabilities and shareholders’ equity   $ 5,415,965   $ 5,331,355
             


AMDOCS LIMITED
Consolidated Statements of Cash Flows
(in thousands)
 
    Six months ended March 31,
      2017       2016  
         
Cash Flow from Operating Activities:        
Net income   $ 210,353     $ 208,562  
Reconciliation of net income to net cash provided by operating activities:        
Depreciation and amortization     109,038       104,225  
Equity-based compensation expense     24,445       23,286  
Deferred income taxes     16,889       (7,614 )
Excess tax benefit from equity-based compensation     (2,929 )     (5,248 )
(Gain) loss from short-term interest-bearing investments     (17 )     445  
Net changes in operating assets and liabilities, net of amounts acquired:        
Accounts receivable     (25,092 )     (23,061 )
Prepaid expenses and other current assets     (10,926 )     (28,684 )
Other noncurrent assets     (42,294 )     3,352  
Accounts payable, accrued expenses and accrued personnel     25,101       27,784  
Deferred revenue     (19,932 )     (3,023 )
Income taxes payable     (8,813 )     2,416  
Other noncurrent liabilities     (469 )     14,233  
Net cash provided by operating activities     275,354       316,673  
         
Cash Flow from Investing Activities:        
Payments for purchase of equipment and leasehold improvements, net     (69,906 )     (67,289 )
Proceeds from sale of short-term interest-bearing investments     144,920       191,648  
Purchase of short-term interest-bearing investments     (145,737 )     (199,988 )
Net cash paid for acquisitions     -       (24,993 )
Other     1,671       (20,602 )
Net cash used in investing activities     (69,052 )     (121,224 )
         
Cash Flow from Financing Activities:        
Borrowings under financing arrangements     200,000       -  
Payments under financing arrangements     (200,000 )     (220,000 )
Repurchase of shares     (160,232 )     (200,608 )
Proceeds from employee stock options exercised     62,368       59,060  
Payments of dividends     (57,299 )     (51,262 )
Excess tax benefit from equity-based compensation and other     2,929       5,244  
Net cash used in financing activities     (152,234 )     (407,566 )
         
Net increase (decrease) in cash and cash equivalents     54,068       (212,117 )
Cash and cash equivalents at beginning of period     768,660       1,035,573  
Cash and cash equivalents at end of period   $ 822,728     $ 823,456  
                 


AMDOCS LIMITED
Supplementary Information
 (in millions)
                     
    Three months ended
    March 31,   December 31,   September 30,   June 30,    March 31,
    2017   2016   2016   2016   2016
North America   $ 636.3   $ 628.0   $ 626.2   $ 591.8   $ 586.4
Europe     115.4     118.5     118.9     126.3     139.2
Rest of the World     214.3     208.2     195.6     212.0     200.3
Total Revenue   $ 966.0   $ 954.7   $ 940.7   $ 930.1   $ 925.9
                     
                     
    Three months ended
    March 31,   December 31,   September 30,   June 30,    March 31,
    2017   2016   2016   2016   2016
Managed Services Revenue   $ 511.1   $ 494.2   $ 478.5   $ 479.2   $ 501.1
                     
                     
    Three months ended
    March 31,   December 31,   September 30,   June 30,    March 31, 
    2017   2016   2016    2016   2016
Customer Experience   $ 948.6   $ 937.9   $ 924.9   $ 908.1   $ 902.3
Systems                    
Directory     17.4     16.8     15.8     22.0     23.6
Total Revenue   $ 966.0   $ 954.7   $ 940.7   $ 930.1   $ 925.9
                     
                     
    As of
    March 31,   December 31,   September 30,   June 30,    March 31, 
    2017   2016   2016   2016   2016
12-Month Backlog   $ 3,210   $ 3,180   $ 3,170   $ 3,110   $ 3,100
                     
Contact:
Matthew Smith
Head of Investor Relations
Amdocs
314-212-8328
E-mail: dox_info@amdocs.com