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Fourth Quarter Results for Fiscal 2018
Nov 08, 2018
Record Quarterly Revenue of
Expects Fiscal 2019 Revenue Growth of 2.0%-6.0% YoY in Constant Currency
Quarterly Cash Dividend to be Raised From
Fourth Quarter Fiscal 2018 Highlights
- Revenue of
$1 billion , slightly above the midpoint of the$980-$1,020 million guidance range including a negative impact from foreign currency movements of approximately$5 million relative to the third quarter of fiscal 2018. Revenue guidance had included a negative sequential impact from foreign currency fluctuations of approximately$5 million as compared to the third quarter of fiscal 2018 - GAAP diluted EPS of
$0.31 , below the$0.71-$0.79 guidance range, primarily due to a non-recurring charge of$0.36 per diluted share incurred to settle a previously disclosed long-running legal dispute, and changes in certain acquisitions related liabilities measured at fair value of$0.06 per diluted share, net of tax effect - Non-GAAP diluted EPS of
$0.99 , above the midpoint of the$0.95-$1.01 guidance range - GAAP operating income of
$69 million ; GAAP operating margin of 6.9% - Non-GAAP operating income of
$173 million ; non-GAAP operating margin of 17.2% - Normalized quarterly free cash flow of
$89 million , comprised of cash flow from operations of$115 million , less$34 million in net capital expenditures and other, and excluding payments of non-recurring charges and the multi-year development of the new campus in total amount of$8 million - Normalized full year free cash flow of
$428 million , comprised of cash flow from operations of$557 million , less$232 million in net capital expenditures and other, and excluding payments of non-recurring charges and the multi-year development of the new campus in total amount of$103 million - Twelve-month backlog of
$3.36 billion , up$30 million sequentially - Quarterly cash dividend of
$0.25 per share, to be paid onJanuary 18, 2019 - The board of directors also approved an increase in the Company’s quarterly cash dividend payment from
$0.25 per share to$0.285 per share, anticipated to be paid inApril 2019 , subject to shareholder approval at theJanuary 2019 annual meeting
“We are pleased to report solid results in our fourth fiscal quarter. Revenue was slightly above the midpoint of our guidance and reflected normal customer fluctuations in
Sheffer continued, “Our sales momentum remained healthy in Q4 as we continued to penetrate new customers and new geographies with significant project and managed services awards. Among the highlights, we won our first ever transformation award with TIM, the largest communications provider in
“Looking at the year ahead, the visibility of our record 12-month backlog points to an improved rate of revenue growth as we enable and support the continuous digital, media and network transformations of our customers. Taking everything in to consideration, we expect non-GAAP diluted earnings per share growth in the range of 3.0% to 7.0% in fiscal 2019. Moreover, we plan to further improve the total return we provide to shareholders by raising our quarterly dividend payment by 14% to
Revenue
Revenue for the fourth fiscal quarter ended
For the fiscal year ended
Net Income and Earnings Per Share
The Company's GAAP net income for the fourth quarter of fiscal 2018 was
The Company's GAAP net income in fiscal 2018 was
Returning Cash to Shareholders
- Quarterly Cash Dividend Program: On
November 8, 2018 , the Board approved the Company’s next quarterly cash dividend payment of$0.25 per share and setDecember 31, 2018 as the record date for determining the shareholders entitled to receive the dividend, which will be payable onJanuary 18, 2019 . The Board also approved an increase in the Company’s quarterly cash dividend payment to$0.285 per share, which is anticipated to be paid inApril 2019 , provided that the increase is approved by shareholders at theJanuary 2019 annual general meeting of shareholders. - Share Repurchase Activity: Repurchased
$90 million of ordinary shares during the fourth 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
First Quarter Fiscal 2019 Outlook
- Revenue of approximately
$990-$1,030 million , assuming an immaterial sequential impact from foreign currency fluctuations as compared to the fourth quarter of fiscal 2018 - GAAP diluted EPS of approximately
$0.67-$0.75 - Non-GAAP diluted EPS of approximately
$0.95-$1.01 , excluding amortization of purchased intangible assets and other acquisition-related costs, changes in certain acquisitions related liabilities measured at fair value, and approximately$0.09-$0.11 per share of equity-based compensation expense, net of related tax effects Expected non-GAAP effective tax rate above the high-end of the annual target range of 13%-17% in the first quarter fiscal 2019
Full Year Fiscal 2019 Outlook
- Revenue growth of 1.0%-5.0% year-over-year
- Revenue growth of 2.0%-6.0% year-over-year on a constant currency basis
- Full year fiscal 2019 revenue guidance incorporates an expected negative impact from foreign currency fluctuations of about 1.0% year-over-year
- GAAP diluted earnings per share growth of roughly 29.0%-38.0% year-over-year
- Non-GAAP diluted earnings per share growth of roughly 3.0%-7.0% year-over-year, excluding amortization of purchased intangible assets and other acquisition-related costs, changes in certain acquisitions related liabilities measured at fair value, and approximately
$0.22-$0.30 per share of equity-based compensation expense, net of related tax effects
Our first 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, 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.
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, nonrecurring restructuring charges, nonrecurring and unusual charges related to a loss incurred to settle a previously disclosed long-running legal dispute, changes in certain acquisition-related liabilities measured at fair value, 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
Consolidated Statements of Income
(in thousands, except per share data)
Three months ended | Fiscal year ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Revenue | $ | 1,002,588 | $ | 979,724 | $ | 3,974,837 | $ | 3,867,155 | ||||||||
Operating expenses: | ||||||||||||||||
Cost of revenue | 654,923 | 636,445 | 2,595,276 | 2,507,656 | ||||||||||||
Research and development | 70,783 | 64,686 | 276,615 | 259,097 | ||||||||||||
Selling, general and administrative | 125,830 | 120,237 | 481,093 | 472,778 | ||||||||||||
Amortization of purchased intangible assets and other | 27,233 | 26,309 | 108,489 | 110,291 | ||||||||||||
Non-recurring charges | 55,000 | - | 85,057 | - | ||||||||||||
933,769 | 847,677 | 3,546,530 | 3,349,822 | |||||||||||||
Operating income | 68,819 | 132,047 | 428,307 | 517,333 | ||||||||||||
Interest and other (expense) income, net | (3,436 | ) | (2,342 | ) | (6,766 | ) | (4,421 | ) | ||||||||
Income before income taxes | 65,383 | 129,705 | 421,541 | 512,912 | ||||||||||||
Income taxes | 21,117 | 22,496 | 67,145 | 76,086 | ||||||||||||
Net income | $ | 44,266 | $ | 107,209 | $ | 354,396 | $ | 436,826 | ||||||||
Basic earnings per share | $ | 0.31 | $ | 0.74 | $ | 2.49 | $ | 2.99 | ||||||||
Diluted earnings per share | $ | 0.31 | $ | 0.73 | $ | 2.47 | $ | 2.96 | ||||||||
Basic weighted average number of shares outstanding | 140,760 | 144,764 | 142,422 | 146,017 | ||||||||||||
Diluted weighted average number of shares outstanding | 141,872 | 146,141 | 143,703 | 147,431 | ||||||||||||
Cash dividends declared per share | $ | 0.250 | $ | 0.220 | $ | 0.970 | $ | 0.855 | ||||||||
Selected Financial Metrics
(in thousands, except per share data)
Three months ended | Fiscal year ended | |||||||||||
September 30, | September 30, | |||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||
Revenue | $ | 1,002,588 | $ | 979,724 | $ | 3,974,837 | $ | 3,867,155 | ||||
Non-GAAP operating income | 172,606 | 168,197 | 687,020 | 665,472 | ||||||||
Non-GAAP net income | 140,230 | 137,419 | 579,593 | 560,590 | ||||||||
Non-GAAP diluted earnings per share | $ | 0.99 | $ | 0.94 | $ | 4.03 | $ | 3.80 | ||||
Diluted weighted average number of shares outstanding | 141,872 | 146,141 | 143,703 | 147,431 | ||||||||
Reconciliation of Selected Financial Metrics from GAAP to Non-GAAP
(in thousands)
Three months ended September 30, 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 | Non-recurring charges | Tax effect |
Non-GAAP | |||||||||||||
Operating expenses: | |||||||||||||||||||
Cost of revenue |
$ | 654,923 | $ | - | $ | (3,752 | ) | $ |
(8,658 |
) |
$ | - | $ | - | $ | 642,513 | |||
Research and development | 70,783 | - | (813 | ) | - | - | - | 69,970 | |||||||||||
Selling, general and administrative | 125,830 | - | (8,331 | ) | - | - | - | 117,499 | |||||||||||
Amortization of purchased intangible assets and other | 27,233 | (27,233 | ) | - | - | - | - | - | |||||||||||
Non-recurring charges | 55,000 | - | - | - | (55,000 | ) | - | - | |||||||||||
Total operating expenses | 933,769 | (27,233 | ) | (12,896 | ) | (8,658 | ) | (55,000 | ) | - | 829,982 | ||||||||
Operating income | 68,819 | 27,233 | 12,896 | 8,658 | 55,000 | - | 172,606 | ||||||||||||
Income taxes | 21,117 | - | - | - | - | 7,822 | 28,940 | ||||||||||||
Net income | $ | 44,266 | $ | 27,233 | $ | 12,896 | $ | 8,658 | $ | 55,000 | $ | (7,822 | ) | $ | 140,230 | ||||
Three months ended September 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 |
$ | 636,445 | $ | - | $ | (4,481 | ) | $ | - | $ | 631,964 | ||
Research and development | 64,686 | - | (822 | ) | - | 63,864 | |||||||
Selling, general and administrative | 120,237 | - | (4,538 | ) | - | 115,699 | |||||||
Amortization of purchased intangible assets and other | 26,309 | (26,309 | ) | - | - | - | |||||||
Total operating expenses | 847,677 | (26,309 | ) | (9,841 | ) | - | 811,527 | ||||||
Operating income | 132,047 | 26,309 | 9,841 | - | 168,197 | ||||||||
Income taxes | 22,496 | - | - | 5,940 | 28,436 | ||||||||
Net income | $ | 107,209 | $ | 26,309 | $ | 9,841 | $ | (5,940 | ) | $ | 137,419 | ||
Reconciliation of Selected Financial Metrics from GAAP to Non-GAAP
(in thousands)
Fiscal year ended September 30, 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 | Non-recurring charges | Tax effect |
Non-GAAP | |||||||||||||
Operating expenses: | |||||||||||||||||||
Cost of revenue | $ | 2,595,276 | $ | - | $ | (18,253 | ) | $ | (17,692 | ) | $ | - | $ | - | $ | 2,559,331 | |||
Research and development | 276,615 | - | (3,477 | ) | - | - | - | 273,138 | |||||||||||
Selling, general and administrative | 481,093 | - | (25,746 | ) | - | - | - | 455,347 | |||||||||||
Amortization of purchased intangible assets and other | 108,489 | (108,489 | ) | - | - | - | - | - | |||||||||||
Non-recurring charges | 85,057 | - | - | - | (85,057 |
) |
- | - | |||||||||||
Total operating expenses | 3,546,530 | (108,489 | ) | (47,476 | ) | (17,692 | ) | (85,057 |
) |
- | 3,287,816 | ||||||||
Operating income | 428,307 | 108,489 | 47,476 | 17,692 | 85,057 | - | 687,020 | ||||||||||||
Income taxes | 67,145 | - | - | - | - | 33,517 | 100,662 | ||||||||||||
Net income | $ | 354,396 | $ | 108,489 | $ | 47,476 | $ | 17,692 | $ | 85,057 | $ | (33,517 | ) | $ | 579,593 | ||||
Fiscal year ended September 30, 2017 |
||||||||||||||||
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 |
$ | 2,507,656 | $ | - | $ | (19,215 | ) | $ | 6,691 | $ | - | $ | 2,495,132 | |||
Research and development | 259,097 | - | (3,536 | ) | - | - | 255,561 | |||||||||
Selling, general and administrative | 472,778 | - | (21,788 | ) | - | - | 450,990 | |||||||||
Amortization of purchased intangible assets and other | 110,291 | (110,291 | ) | - | - | - | - | |||||||||
Total operating expenses | 3,349,822 | (110,291 | ) | (44,539 | ) | 6,691 | - | 3,201,683 | ||||||||
Operating income | 517,333 | 110,291 | 44,539 | (6,691 | ) | - | 665,472 | |||||||||
Income taxes | 76,086 | - | - | - | 24,375 | 100,461 | ||||||||||
Net income | $ | 436,826 | $ | 110,291 | $ | 44,539 | $ | (6,691 | ) | $ | (24,375 | ) | $ | 560,590 | ||
Condensed Consolidated Balance Sheets
(in thousands)
As of | ||||||
September 30, 2018 | September 30, 2017 | |||||
ASSETS | ||||||
Current assets | ||||||
Cash, cash equivalents and short-term interest-bearing investments | $ | 519,216 | $ | 979,608 | ||
Accounts receivable, net, including unbilled of $263,997 and $229,695, respectively | 971,502 | 865,068 | ||||
Prepaid expenses and other current assets | 229,999 | 203,810 | ||||
Total current assets | 1,720,717 | 2,048,486 | ||||
Property and equipment, net | 496,585 | 355,685 | ||||
Goodwill and other intangible assets, net | 2,710,144 | 2,398,535 | ||||
Other noncurrent assets | 420,369 | 476,674 | ||||
Total assets | $ | 5,347,815 | $ | 5,279,380 | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||
Current liabilities | ||||||
Accounts payable, accruals and other | $ | 1,162,543 |
$ | 1,059,855 | ||
Deferred revenue | 132,414 | 113,091 | ||||
Total current liabilities | 1,294,957 | 1,172,946 | ||||
Other noncurrent liabilities | 560,816 | 532,364 | ||||
Total Amdocs Limited Shareholders’ equity | 3,448,879 | 3,574,070 | ||||
Noncontrolling interests | 43,163 | - | ||||
Total equity | $ | 3,492,042 | $ | 3,574,070 | ||
Total liabilities and equity | $ | 5,347,815 | $ | 5,279,380 |
Consolidated Statements of Cash Flows
(in thousands)
Fiscal year ended September 30, | ||||||||
2018 | 2017 | |||||||
Cash Flow from Operating Activities: | ||||||||
Net income | $ | 354,396 | $ | 436,826 | ||||
Reconciliation of net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 207,394 | 214,885 | ||||||
Equity-based compensation expense | 47,476 | 44,539 | ||||||
Deferred income taxes | 21,398 | 6,551 | ||||||
Excess tax benefit from equity-based compensation | - | (4,666 | ) | |||||
Loss from short-term interest-bearing investments | 1,324 | 9 | ||||||
Net changes in operating assets and liabilities, net of amounts acquired: | ||||||||
Accounts receivable | (67,198 | ) | (41,075 | ) | ||||
Prepaid expenses and other current assets | (18,736 | ) | 11,002 | |||||
Other noncurrent assets | 9,674 | (52,667 | ) | |||||
Accounts payable, accrued expenses and accrued personnel | 25,348 | 72,049 | ||||||
Deferred revenue | 7,650 | (50,230 | ) | |||||
Income taxes payable | (22,759 | ) | (15,145 | ) | ||||
Other noncurrent liabilities | (8,718 | ) | 14,034 | |||||
Net cash provided by operating activities | 557,249 | 636,112 | ||||||
Cash Flow from Investing Activities: | ||||||||
Purchase of property and equipment | (231,146 | ) | (133,392 | ) | ||||
Proceeds from sale of short-term interest-bearing investments | 303,090 | 278,066 | ||||||
Purchase of short-term interest-bearing investments | (76,037 | ) | (281,983 | ) | ||||
Net cash paid for acquisitions | (355,142 | ) | (18,064 | ) | ||||
Other | (3,157 | ) | (29,940 | ) | ||||
Net cash used in investing activities | (362,392 | ) | (185,313 | ) | ||||
Cash Flow from Financing Activities: | ||||||||
Borrowings under financing arrangements | 120,000 | 200,000 | ||||||
Payments under financing arrangements | (120,000 | ) | (400,000 | ) | ||||
Repurchase of shares | (419,228 | ) | (340,597 | ) | ||||
Proceeds from employee stock options exercised | 81,280 | 87,586 | ||||||
Payments of dividends | (134,292 | ) | (121,503 | ) | ||||
Investment by noncontrolling interests, net | 47,013 | |||||||
Excess tax benefit from equity-based compensation and other | - | 4,666 | ||||||
Other | (458 | ) | - | |||||
Net cash used in financing activities | (425,685 | ) | (569,848 | ) | ||||
Net decrease in cash and cash equivalents | (230,828 | ) | (119,049 | ) | ||||
Cash and cash equivalents at beginning of period | 649,611 | 768,660 | ||||||
Cash and cash equivalents at end of period | $ | 418,783 | $ | 649,611 | ||||
Supplementary Information
(in millions)
Three months ended | |||||||||||||||
September 30, 2018 |
June 30, 2018 |
March 31, 2018 |
December 31, 2017 |
September 30, 2017 |
|||||||||||
North America | $ | 638.2 | $ | 644.8 | $ | 624.2 | $ | 643.0 | $ | 644.1 | |||||
Europe | 150.6 | 139.3 | 148.6 | 133.7 | 129.8 | ||||||||||
Rest of the World | 213.8 | 218.1 | 219.5 | 201.0 | 205.8 | ||||||||||
Total Revenue | $ | 1,002.6 | $ | 1,002.2 | $ | 992.3 | $ | 977.7 | $ | 979.7 |
Three months ended | |||||||||||||||
September 30, 2018 |
June 30, 2018 |
March 31, 2018 |
December 31, 2017 |
September 30, 2017 |
|||||||||||
Managed Services Revenue | $ | 508.9 | $ | 515.0 | $ | 508.9 | $ | 518.7 | $ | 503.8 |
Three months ended | |||||||||||||||
September 30, 2018 |
June 30, 2018 |
March 31, 2018 |
December 31, 2017 |
September 30, 2017 |
|||||||||||
Customer Experience Systems | $ | 992.5 | $ | 991.0 | $ | 980.7 | $ | 965.9 | $ | 967.7 | |||||
Directory | 10.1 | 11.2 | 11.6 | 11.8 | 12.0 | ||||||||||
Total Revenue | $ | 1,002.6 | $ | 1,002.2 | $ | 992.3 | $ | 977.7 | $ | 979.7 |
As of | |||||||||||||||
September 30, 2018 |
June 30, 2018 |
March 31, 2018 |
December 31, 2017 |
September 30, 2017 |
|||||||||||
12-Month Backlog | $ | 3,360 | $ | 3,330 | $ | 3,320 | $ | 3,260 | $ | 3,250 |