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Third Quarter Results for Fiscal 2018

Record Quarterly Revenue Exceeding $1B for First Time

Expects Fiscal 2018 GAAP Diluted EPS Growth Outlook of (3.0)%-0.0% YoY

Expects Fiscal 2018 Non-GAAP Diluted EPS Growth Outlook of 5.0%-7.0% YoY 

Third Quarter Fiscal 2018 Highlights

  • Revenue of $1 billion, at the midpoint of the $990-$1,030 million guidance range adjusting for the negative impact from foreign currency movements of approximately $9 million relative to the second quarter of fiscal 2018. Revenue guidance had included a minimal sequential impact from foreign currency fluctuations
  • GAAP diluted EPS of $0.64, below the $0.71-$0.81 guidance range due to nonrecurring restructuring charges, net of tax effects
  • Non-GAAP diluted EPS of $1.03, at the midpoint of the $1.00-$1.06 guidance range
  • GAAP operating income of $106 million; GAAP operating margin of 10.5%
  • Non-GAAP operating income of $174 million; non-GAAP operating margin of 17.3%
  • Free cash flow of $128 million, comprised of cash flow from operations of $164 million, less $36 million in net capital expenditures and other
  • Twelve-month backlog of $3.33 billion, up $10 million sequentially
  • Quarterly cash dividend of $0.25 per share, to be paid on October 19, 2018

ST. LOUIS, July 31, 2018 (GLOBE NEWSWIRE) -- Amdocs Limited (NASDAQ:DOX) today reported operating results for the three months ended June 30, 2018.

"We are pleased to report a solid performance in our third fiscal quarter. Revenue exceeded $1 billion for the first time in our history and was in line with the midpoint of our guidance adjusting for currency. On a regional basis, North America showed some early signs of stabilization while Europe and Rest of World delivered solid year-over-year growth that reflected the benefit of recent customer awards and our continued focus on project delivery and execution,” said Eli Gelman, president and chief executive officer of Amdocs Management Limited.

Gelman continued, “Q3 included positive developments relating to Network Functions Virtualization (NFV). First, we are today excited to announce that Amdocs is supporting the commercial availability of Comcast’s software-defined wide area networking (SD-WAN) service for enterprise businesses which leverages Amdocs’ leading NFV portfolio of orchestration, fulfillment and automation capabilities. Second, Telstra has partnered with Amdocs to implement a next generation OSS platform for its B2B line of business that will enable Telstra’s network domains to evolve toward virtualization while minimizing the impact to its existing support systems.”

Gelman concluded, “We enter the fourth fiscal quarter encouraged by our recent win rate, which remains strong and well balanced across our various business lines, recent acquisitions and operating regions. Naturally, we continue to monitor the many moving parts affecting our outlook, but with our record 12-month backlog and focus on execution we are on-track to deliver diluted non-GAAP earnings per share growth in the mid-to-high single digit range for the seventh consecutive year.”

Revenue

Revenue for the third fiscal quarter ended June 30, 2018 was $1.0 billion, up 1.0% or $9.9 million sequentially from the second fiscal quarter of 2018 and up 3.7% as compared to last year’s third fiscal quarter. Revenue for the third fiscal quarter of 2018 includes a negative impact from foreign currency movements of approximately $9 million relative to the second quarter of fiscal 2018. Revenue was at the midpoint of Amdocs’ guidance, excluding the negative impact of foreign currency movements.

Net Income and Earnings Per Share

The Company's GAAP net income for the third quarter of fiscal 2018 was $91.5 million, or $0.64 per diluted share, compared to GAAP net income of $119.3 million, or $0.81 per diluted share, in the prior fiscal year’s third quarter. Net income on a non-GAAP basis was $147.5 million, or $1.03 per diluted share, compared to non-GAAP net income of $150.4 million, or $1.02 per diluted share, in the third quarter of fiscal 2017. Non-GAAP net income excludes amortization of purchased intangible assets and other acquisition-related costs, nonrecurring restructuring charges primarily associated with recently completed acquisitions and internal business realignment actions in North America, and equity-based compensation expenses of $10.5 million, net of tax effects, in the third quarter of fiscal 2018.

Returning Cash to Shareholders

  • Quarterly Cash Dividend Program: On July 31, 2018, the Board approved the Company’s next quarterly cash dividend payment of $0.25 per share and set September 28, 2018 as the record date for determining the shareholders entitled to receive the dividend, which will be payable on October 19, 2018.
  • Share Repurchase Activity: Repurchased $90 million of ordinary shares during the third quarter of fiscal 2018.

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 $3.33 billion at the end of the third quarter of fiscal 2018, up $10 million from the end of the prior quarter.

Fourth Quarter Fiscal 2018 Outlook

  • Revenue of approximately $980-$1,020 million, including a negative sequential impact from foreign currency fluctuations of approximately $5 million as compared to the third quarter of fiscal 2018
  • Diluted GAAP EPS of approximately $0.71-$0.79. The impact on diluted GAAP EPS of the acquisitions during fiscal year 2018 is subject to finalization of the purchase price allocation and other acquisition-related costs.
  • Diluted non-GAAP EPS of approximately $0.95-$1.01, excluding amortization of purchased intangible assets and other acquisition-related costs and approximately $0.05-$0.07 per share of equity-based compensation expense, net of tax effects. Expected non-GAAP effective tax rate above the high-end of the annual target range of 13%-17% in the fourth quarter fiscal 2018

Full Year Fiscal 2018 Outlook

  • Revenue growth of 2.2%-3.2% year-over-year as reported compared with previous guidance of 2.3%-4.3% year-over-year
  • Revenue growth of 1.7%-2.7% year-over-year on a constant currency basis compared with previous guidance of 1.3%-3.3% year-over-year
  • Full year fiscal 2018 revenue guidance incorporates an expected positive impact from foreign currency fluctuations of about 0.5% year-over-year, compared with previous guidance for a positive impact of about 1.0%
  • Expects GAAP diluted earnings per share growth of roughly (3.0)%-0.0% year-over-year compared with previous guidance of 0.0%-6.0%, primarily due to nonrecurring restructuring charges primarily associated with recently completed acquisitions and internal business realignment actions in North America. The impact on diluted GAAP EPS of acquisition activity in fiscal year 2018 is subject to finalization of the purchase price allocation and other acquisition-related costs
  • Non-GAAP diluted earnings per share growth of roughly 5.0%-7.0% year-over-year compared with previous guidance of 4.0%-8.0%. Non-GAAP diluted earnings per share excludes amortization of purchased intangible assets and other acquisition-related costs, nonrecurring restructuring charges primarily associated with recently completed acquisitions and internal business realignment actions in North America, and approximately $0.26-$0.28 per share of equity-based compensation expense, net of tax effects. Expected non-GAAP effective tax rate to remain within the same target range of 13%-17% for the full year fiscal 2018

Our fourth fiscal quarter 2018 and full year fiscal 2018 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 T-Mobile’s proposed merger with Sprint, or from other current and potential customer consolidation activity in North America.

Conference Call Details
Amdocs will host a conference call on July 31, 2018 at 5:00 p.m. Eastern Time to discuss the Company's third quarter of fiscal 2018 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 8127189. 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 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;
  • nonrecurring restructuring charges;
  • equity-based compensation expense; and
  • tax effects.

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 effective tax rate, 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, nonrecurring restructuring charges primarily associated with internal business realignment actions in North America, changes in fair value of certain acquisition-related liabilities, equity-based compensation expense and 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 communications and media companies of all sizes, accelerating the industry’s dynamic and continuous digital transformation. With a rich set of innovative solutions, long-term business relationships with 350 communications and media providers, and technology and distribution ties to 600 content creators, Amdocs delivers business improvements to drive growth. Amdocs and its 25,000 employees serve customers in over 85 countries. Listed on the NASDAQ Global Select Market, Amdocs had revenue of $3.9 billion in fiscal 2017. For more information, visit Amdocs at www.amdocs.com.
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, 2017 filed on December 11, 2017 and our Form 6-K furnished for the first quarter of fiscal 2018 on February 12, 2018 and for the second quarter of fiscal 2018 on May 21, 2018.

Contact:
Matthew Smith
Head of Investor Relations
Amdocs
314-212-8328
E-mail: dox_info@amdocs.com

                 AMDOCS LIMITED                    

Consolidated Statements of Income
(in thousands, except per share data)

      Three months ended   Nine months ended
      June 30,   June 30,
       2018    2017    2018    2017
                   
Revenue     $ 1,002,198   $ 966,695   $ 2,972,249   $ 2,887,431
                   
Operating expenses:                  
Cost of revenue       650,569     628,640     1,940,353     1,871,211
Research and development       72,729     67,118     205,832     194,411
Selling, general and administrative       116,396     113,997     355,263     352,541
Amortization of purchased intangible assets and other     26,929     27,028     81,256     83,982
Restructuring charges       30,057     -     30,057     -
        896,680     836,783     2,612,761     2,502,145
Operating income       105,518     129,912     359,488     385,286
                   
Interest and other (expense) income, net       (3,212)     1,152     (3,330)     (2,079)
Income before income taxes       102,306     131,064     356,158     383,207
                   
Income taxes       10,776     11,800     46,028     53,590
Net income     $ 91,530   $ 119,264   $ 310,130   $ 329,617
Basic earnings per share     $ 0.64   $ 0.82   $ 2.17   $ 2.25
Diluted earnings per share     $ 0.64   $ 0.81   $ 2.15   $ 2.23
Basic weighted average number of shares outstanding     141,972     145,904     142,982     146,439
Diluted weighted average number of shares outstanding     143,196     147,259     144,320     147,865
Cash dividends declared per share    $ 0.250   $ 0.220   $ 0.720   $ 0.635
                           

AMDOCS LIMITED

Selected Financial Metrics
(in thousands, except per share data)

        Three months ended   Nine months ended
        June 30,   June 30,
         2018    2017    2018    2017
                     
Revenue       $ 1,002,198   $ 966,695   $ 2,972,249   $ 2,887,431
                     
Non-GAAP operating income         173,590     167,193     514,414     497,275
                     
Non-GAAP net income         147,547     150,440     439,363     423,171
                     
Non-GAAP diluted earnings per share     $ 1.03   $ 1.02   $ 3.04   $ 2.86
                     
Diluted weighted average number of shares outstanding     143,196     147,259     144,320     147,865
                             

AMDOCS LIMITED

Reconciliation of Selected Financial Metrics from GAAP to Non-GAAP
 (in thousands)

    Three months ended
June 30, 2018
      Reconciliation items  
    GAAP Amortization of purchased intangible assets and other Equity based compensation expense Changes in fair value of certain acquisition-related liabilities Restructuring charges Tax effect Non-GAAP
Operating expenses:                
Cost of revenue   $ 650,569   - $ (5,074) $ (572) $ - $ - $ 644,923
Research and development   72,729   -   (1,071)   -   -   -   71,658
Selling, general and administrative   116,396   -   (4,369)   -   -   -   112,027
Amortization of  purchased intangible assets and other   26,929   (26,929)   -   -   -   -   -
Restructuring charges     30,057   -   - -   (30,057)   -   -
Total operating expenses     896,680   (26,929)   (10,514)   (572)   (30,057)   -   828,608
                 
Operating income     105,518   26,929   10,514   572   30,057   -   173,590
                 
Income taxes     10,776   -   -   -   -   12,055   22,831
                 
Net income   $ 91,530 $ 26,929 $ 10,514 $ 572 $ 30,057 $ (12,055) $ 147,547
                               


    Three months ended
June 30, 2017
      Reconciliation items  
    GAAP Amortization of purchased
intangible assets and other
Equity based
compensation expense
Tax effect Non-GAAP
Operating expenses:            
Cost of revenue   $ 628,640 $ - $ (4,763) $ - $ 623,877
Research and development   67,118   -   (914)   -   66,204
Selling, general and administrative   113,997   -   (4,576)   -   109,421
Amortization of purchased intangible assets and other   27,028   (27,028)   -   -   -
Total operating expenses     836,783   (27,028)   (10,253)   -   799,502
             
Operating income     129,912   27,028   10,253   -   167,193
             
Income taxes     11,800   -   -   6,105   17,905
             
Net income   $ 119,264 $ 27,028 $ 10,253 $ (6,105) $ 150,440
                       

AMDOCS LIMITED

Reconciliation of Selected Financial Metrics from GAAP to Non-GAAP
(in thousands)

    Nine months ended
June 30, 2018
      Reconciliation items  
    GAAP Amortization
of purchased intangible assets and other
Equity based compensation expense Changes in fair value of certain acquisition-related liabilities Restructuring
charges
Tax effect Non-GAAP
Operating expenses:                
Cost of revenue   $ 1,940,353 $ -   $ (14,502)   $ (9,033)   $ -   $ -   $ 1,916,818
Research and development   205,832   -     (2,664)     -     -     -     203,168
Selling, general and administrative   355,263   -     (17,414)     -     -     -     337,849
Amortization of purchased intangible assets and other   81,256   (81,256)     -     -     -     -     -
Restructuring charges     30,057   -     -     -     (30,057)     -     -
Total operating expenses     2,612,761   (81,256)     (34,580)     (9,033)     (30,057)     -     2,457,835
                 
Operating income     359,488   81,256     34,580     9,033     30,057     -     514,414
                 
Income taxes     46,028   -     -     -     -     25,693     71,721
                 
Net income   $ 310,130 $ 81,256   $ 34,580   $ 9,033   $ 30,057   $ (25,693)   $ 439,363
                                         


    Nine months ended
June 30, 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             1,871,211 $ - $ (14,734) $ 6,691 $ - $ 1,863,168
Research and development       194,411   -   (2,714)   -   -   191,697
Selling, general and administrative       352,541   -   (17,250)   -   -   335,291
Amortization of purchased intangible assets
and other
      83,982   (83,982)   -   -   -   -
Total operating expenses         2,502,145   (83,982)   (34,698)   6,691   -   2,390,156
               
Operating income         385,286   83,982   34,698   (6,691)   -   497,275
               
Income taxes         53,590   -   -   -   18,435   72,025
               
Net income   $     329,617 $ 83,982 $ 34,698 $ (6,691) $ (18,435) $ 423,171
                               

AMDOCS LIMITED

Condensed Consolidated Balance Sheets
 (in thousands)

  As of
    June 30, 
2018
  September 30, 
2017
         
ASSETS        
         
Current assets        
Cash, cash equivalents and short-term interest-bearing investments   $ 561,041   $ 979,608
Accounts receivable, net, including unbilled of $248,938 and $229,695, respectively     982,213     865,068
Prepaid expenses and other current assets     236,988     203,810
Total current assets     1,780,242     2,048,486
         
Property and equipment, net     476,126     355,685
Goodwill and other intangible assets, net     2,751,266     2,398,535
Other noncurrent assets     435,834     476,674
Total assets   $ 5,443,468   $ 5,279,380
         
LIABILITIES AND SHAREHOLDERS’ EQUITY        
         
Current liabilities        
Accounts payable, accruals and other     1,176,102     1,059,855
Deferred revenue     142,655     113,091
Total current liabilities     1,318,757     1,172,946
Other noncurrent liabilities     561,842     532,364
Total Amdocs Limited Shareholders’ equity     3,519,706     3,574,070
Noncontrolling interests     43,163     -
Total equity   $ 3,562,869   $ 3,574,070
Total liabilities and equity   $ 5,443,468   $ 5,279,380
             

AMDOCS LIMITED
Consolidated Statements of Cash Flows
(in thousands)

    Nine months ended June 30,
      2018     2017
         
Cash Flow from Operating Activities:        
Net income   $ 310,130   $ 329,617
Reconciliation of net income to net cash provided by operating activities:        
Depreciation and amortization     157,421     163,533
Equity-based compensation expense     34,580     34,698
Deferred income taxes     7,947     7,201
Excess tax benefit from equity-based compensation     -     (3,716)
Loss (gain)  from short-term interest-bearing investments     1,324     (144)
Net changes in operating assets and liabilities, net of amounts acquired:        
Accounts receivable     (81,690)     (73,033)
Prepaid expenses and other current assets     (21,796)     (1,258)
Other noncurrent assets     2,006     (60,949)
Accounts payable, accrued expenses and accrued personnel     42,374     75,178
Deferred revenue     21,221     (38,817)
Income taxes payable     (15,428)     (7,726)
Other noncurrent liabilities     (16,189)     12,520
Net cash provided by operating activities     441,900     437,104
         
Cash Flow from Investing Activities:        
Purchase of property and equipment     (197,253)     (98,565)
Proceeds from sale of short-term interest-bearing investments     302,949     218,395
Purchase of short-term interest-bearing investments     (76,037)     (218,772)
Net cash paid for acquisitions     (352,599)     -
Other     (2,414)     (10,022)
Net cash used in investing activities     (325,354)     (108,964)
         
Cash Flow from Financing Activities:        
Borrowings under financing arrangements     120,000     200,000
Payments under financing arrangements     (120,000)     (400,000)
Repurchase of shares     (329,593)     (250,231)
Proceeds from employee stock options exercised     76,236     75,763
Payments of dividends     (98,929)     (89,522)
Investment by noncontrolling interests, net     47,013     -
Excess tax benefit from equity-based compensation and other     -     3,716
Other     (323)     -
Net cash used in financing activities     (305,596)     (460,274)
         
Net decrease in cash and cash equivalents     (189,050)     (132,134)
Cash and cash equivalents at beginning of period     649,611     768,660
Cash and cash equivalents at end of period   $ 460,561   $ 636,526
             

AMDOCS LIMITED
Supplementary Information
(in millions)

    Three months ended
    June 30,
2018
  March 31,
 2018
  December 31,
2017
  September 30,
2017
  June 30,
2017
North America   $ 644.8   $ 624.2   $ 643.0   $ 644.1   $ 637.9
Europe     139.3     148.6     133.7     129.8     125.2
Rest of the World     218.1     219.5     201.0     205.8     203.6
Total Revenue   $ 1,002.2   $ 992.3   $ 977.7   $ 979.7   $ 966.7


    Three months ended
    June 30,
2018
  March 31,
 2018
  December 31,
2017
  September 30,
2017
  June 30,
2017
 
Managed Services Revenue   $ 515.0   $ 508.9   $ 518.7   $ 503.8   $ 496.3  


    Three months ended
    June 30,
2018
  March 31,
2018
  December 31,
2017
  September 30,
2017
  June 30,
2017
Customer Experience
Systems
    991.0     980.7     965.9     967.7     954.8
Directory     11.2     11.6     11.8     12.0     11.9
Total Revenue   $ 1,002.2   $ 992.3   $ 977.7   $ 979.7   $ 966.7


    As of
    June 30,
2018
  March 31,
2018
  December 31,
2017
  September 30,
2017
  June 30,
2017
12-Month Backlog   $    3,330   $    3,320   $    3,260   $    3,250   $    3,220
                               

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