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Third Quarter Results for Fiscal 2019
Aug 07, 2019
Record Quarterly Revenue of
Raises Fiscal 2019 GAAP Diluted EPS Growth Outlook to 37.0%-41.0% YoY
Raises Fiscal 2019 Non-GAAP Diluted EPS Growth Outlook to 6.2%-7.8% YoY
Third Quarter Fiscal 2019 Highlights
- Revenue of
$1,025 million , at the midpoint of the$1,005-$1,045 million guidance range - GAAP diluted EPS of
$0.96 , above the$0.82-$0.90 guidance range including the benefit of a lower GAAP effective tax rate - Non-GAAP diluted EPS of
$1.19 , above the$1.08-$1.14 guidance range including the benefit of a lower non-GAAP effective tax rate - GAAP operating income of
$142 million ; GAAP operating margin of 13.9% - Non-GAAP operating income of
$177 million ; non-GAAP operating margin of 17.3% - Quarterly free cash flow of
$129 million , comprised of cash flow from operations of$165 million , less$36 million in net capital expenditures and other; normalized free cash flow of$143 million (1) - Twelve-month backlog of
$3.40 billion , up$10 million sequentially
- The board of directors approved a quarterly cash dividend of
$0.285 per share to be paid onOctober 25, 2019
“We are pleased to report solid Q3 results which included record revenue, stable profitability, healthy free cash flow and our best-ever quarter in managed services. Among the Q3 regional highlights, we announced today that
Sheffer continued, “Highlighting our commitment to be the leading independent provider of network services for 5G and the new generation of open cloud networks, we are today excited to announce the acquisition of
Sheffer concluded, “We are pleased with our operational and financial execution for the fiscal year to date, and we enter our fourth quarter with strong sales momentum as we continue to bring the innovative solutions that our customers need to modernize, automate and digitize their business. Taking everything into consideration, we are on-track to meet our full year targets for constant currency revenue growth and normalized free cash flow. Moreover, we now expect to deliver diluted non-GAAP earnings per share growth in the range of 6.2% to 7.8% for the full fiscal year 2019, the midpoint of which represents an increase of approximately 50 basis points over our previous guidance.”
Revenue
Revenue for the third fiscal quarter ended
Net Income and Earnings Per Share
The Company's GAAP net income for the third quarter of fiscal 2019 was
Returning Cash to Shareholders
- Quarterly Cash Dividend Program: On
August 7, 2019 , the Board approved the Company’s next quarterly cash dividend payment of$0.285 per share and setSeptember 30, 2019 as the record date for determining the shareholders entitled to receive the dividend, which will be payable onOctober 25, 2019 . - Share Repurchase Activity: Repurchased
$89 million of ordinary shares during the third 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
Fourth Quarter Fiscal 2019 Outlook
- Revenue of approximately
$1,015-$1,055 million , assuming approximately$2 million sequential positive impact from foreign currency fluctuations as compared to the third quarter of fiscal 2019, and a partial quarter revenue contribution from the acquisition ofTTS Wireless which closed earlier this week - GAAP diluted EPS of approximately
$0.81-$0.89 . The impact of the acquisition ofTTS Wireless on GAAP diluted EPS will not be known until afterAmdocs completes the purchase price allocation - Non-GAAP diluted EPS of approximately
$1.04-$1.10 , 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. The impact of the acquisition ofTTS Wireless on Amdocs’ non-GAAP diluted earnings per share is expected to be neutral in the fourth quarter of fiscal 2019
Full Year Fiscal 2019 Outlook
- Expects revenue growth of 2.4%-3.4% year-over-year as reported compared with 1.8%-3.8% year-over-year previously
- Expects revenue growth of 3.6%-4.6% year-over-year on a constant currency basis, the midpoint of which is slightly higher compared with 3.0%-5.0% 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, consistent with our previous expectation
- Expects GAAP diluted earnings per share growth of roughly 37.0%-41.0% year-over-year compared with 33.0%-41.0% year-over-year previously. The impact of the acquisition of
TTS Wireless on GAAP diluted EPS will not be known until afterAmdocs completes the purchase price allocation - Expects non-GAAP diluted earnings per share growth of roughly 6.2%-7.8% year-over-year compared with 4.5%-8.5% 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, approximately
$0.24-$0.26 per share of equity-based compensation expense and other, net of related tax effects. The impact of the acquisition ofTTS Wireless on Amdocs’ non-GAAP diluted earnings per share is expected to be neutral in fiscal year 2019, and neutral in the first full year after closing thereafter - 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 fourth 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,
Appointment of Board Member
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 interest and other expenses, net, 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;
- other; 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, payments for legal dispute settlement, and payments of acquisition related liabilities. 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, other 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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About
For more information, visit
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 | Nine months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Revenue | $ | 1,024,704 | $ | 1,002,198 | $ | 3,056,416 | $ | 2,972,249 | ||||||||
Operating expenses: | ||||||||||||||||
Cost of revenue | 664,862 | 650,569 | 1,986,043 | 1,940,353 | ||||||||||||
Research and development | 68,376 | 72,729 | 203,827 | 205,832 | ||||||||||||
Selling, general and administrative | 125,088 | 116,396 | 367,411 | 355,263 | ||||||||||||
Amortization of purchased intangible assets and other | 24,058 | 26,929 | 73,543 | 81,256 | ||||||||||||
Restructuring charges | - | 30,057 | - | 30,057 | ||||||||||||
882,384 | 896,680 | 2,630,824 | 2,612,761 | |||||||||||||
Operating income | 142,320 | 105,518 | 425,592 | 359,488 | ||||||||||||
Interest and other expense, net | 3,959 | 3,212 | 4,303 | 3,330 | ||||||||||||
Income before income taxes | 138,361 | 102,306 | 421,289 | 356,158 | ||||||||||||
Income taxes | 6,913 | 10,776 | 63,870 | 46,028 | ||||||||||||
Net income | $ | 131,448 | $ | 91,530 | $ | 357,419 | $ | 310,130 | ||||||||
Basic earnings per share | $ | 0.96 | $ |
0.64 | $ | 2.59 | $ |
2.17 | ||||||||
Diluted earnings per share | $ | 0.96 | $ | 0.64 | $ | 2.58 | $ | 2.15 | ||||||||
Basic weighted average number of shares outstanding | 136,541 | 141,972 | 138,126 | 142,982 | ||||||||||||
Diluted weighted average number of shares outstanding | 137,082 | 143,196 | 138,769 | 144,320 | ||||||||||||
Cash dividends declared per share | $ | 0.285 | $ | 0.250 | $ | 0.820 | $ | 0.720 |
Selected Financial Metrics
(In thousands, except per share data)
Three months ended | Nine months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Revenue | $ | 1,024,704 | $ | 1,002,198 | $ | 3,056,416 | $ | 2,972,249 | ||||||||
Non-GAAP operating income | 177,289 | 173,590 | 529,900 | 514,414 | ||||||||||||
Non-GAAP net income | 163,126 | 147,547 | 447,952 | 439,363 | ||||||||||||
Non-GAAP diluted earnings per share | $ | 1.19 | $ | 1.03 | $ | 3.23 | $ | 3.04 | ||||||||
Diluted weighted average number of shares outstanding | 137,082 | 143,196 | 138,769 | 144,320 |
Free Cash Flows and Normalized Free Cash Flow
(In thousands)
Three months ended | Nine months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Net Cash Provided by Operating Activities | $ | 164,473 | $ | 163,571 | $ | 442,752 | $ | 441,900 | ||||||||
Purchases of property and equipment, net (*) | (35,833 | ) | (35,127 | ) | (93,761 | ) | (197,253 | ) | ||||||||
Other | - | (213 | ) | - | (323 | ) | ||||||||||
Free Cash Flow | 128,640 | 128,231 | 348,991 | 244,324 | ||||||||||||
Payments for legal dispute settlement | - | - | 55,000 | - | ||||||||||||
Payments for previously expensed restructuring charges |
3,455 | - | 14,394 | - | ||||||||||||
Net capital expenditures related to the new campus development (*) | 3,410 | 980 | (2,206 | ) | 95,011 | |||||||||||
Payments of acquisition related liabilities | 7,667 | - | 7,667 | - | ||||||||||||
Normalized Free Cash Flow | $ | 143,172 | $ | 129,211 | $ | 423,846 | $ | 339,335 |
(*) 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 June 30, 2019 |
|||||||||||||||||||
Reconciliation items | |||||||||||||||||||
GAAP | Amortization of purchased intangible assets and other | Equity-based compensation expense | Changes in certain acquisition related liabilities measured at fair value | Other | Tax effect | Non-GAAP | |||||||||||||
Operating expenses: | |||||||||||||||||||
Cost of revenue | $ | 664,862 | $ | - | $ | (5,080 | ) | $ | (2,076 | ) | $ | - | $ | - | $ | 657,706 | |||
Research and development | 68,376 | - | (608 | ) | - | - | - | 67,768 | |||||||||||
Selling, general and administrative | 125,088 | - | (3,147 | ) | - | - | - | 121,941 | |||||||||||
Amortization of purchased intangible assets and other | 24,058 | (24,058 | ) | - | - | - | - | - | |||||||||||
Total operating expenses | 882,384 | (24,058 | ) | (8,835 | ) | (2,076 | ) | - | - | 847,415 | |||||||||
Operating income | 142,320 | 24,058 | 8,835 | 2,076 | - | - | 177,289 | ||||||||||||
Interest and other expense, net | 3,959 | - | - | - | (2,025 | ) | - | 1,934 | |||||||||||
Income taxes | 6,913 | - | - | - | - | 5,316 | 12,229 | ||||||||||||
Net income | $ | 131,448 | $ | 24,058 | $ | 8,835 | $ | 2,076 | $ | 2,025 | $ | (5,316 | ) | $ | 163,126 | ||||
Three months ended June 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 | 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 |
Reconciliation of Selected Financial Metrics from GAAP to Non-GAAP
(In thousands)
Nine months ended June 30, 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 | Other | Tax effect |
Non-GAAP | |||||||||||||
Operating expenses: | |||||||||||||||||||
Cost of revenue | $ | 1,986,043 | $ | - | $ | (15,261 | ) | $ | (199 | ) | $ | - | $ | - | $ | 1,970,583 | |||
Research and development | 203,827 | - | (1,957 | ) | - | - | - | 201,870 | |||||||||||
Selling, general and administrative | 367,411 | - | (13,348 | ) | - | - | - | 354,063 | |||||||||||
Amortization of purchased intangible assets and other | 73,543 | (73,543 | ) | - | - | - | - | - | |||||||||||
Total operating expenses |
2,630,824 | (73,543 | ) | (30,566 | ) | (199 | ) | - | - | 2,526,516 | |||||||||
Operating income | 425,592 | 73,543 | 30,566 | 199 | - | - | 529,900 | ||||||||||||
Interest and other expense, net | 4,303 | - | - | - | (2,025 | ) | - | 2,278 | |||||||||||
Income taxes | 63,870 | - | - | - | - | 15,800 | 79,670 | ||||||||||||
Net income | $ | 357,419 | $ | 73,543 | $ | 30,566 | $ | 199 | $ | 2,025 | $ | (15,800 | ) | $ | 447,952 | ||||
Nine months ended June 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 | 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 |
Condensed Consolidated Balance Sheets
(In thousands)
As of | ||||||||
June 30, 2019 |
September 30, 2018 |
|||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash, cash equivalents and short-term interest-bearing investments | $ | 457,707 | $ | 519,216 | ||||
Accounts receivable, net, including unbilled of $206,285 and $263,997, respectively | 952,891 | 971,502 | ||||||
Prepaid expenses and other current assets | 235,644 | 229,999 | ||||||
Total current assets | 1,646,242 | 1,720,717 | ||||||
Property and equipment, net | 492,718 | 496,585 | ||||||
Goodwill and other intangible assets, net | 2,648,395 | 2,710,144 | ||||||
Other noncurrent assets | 447,264 | 420,369 | ||||||
Total assets | $ | 5,234,619 | $ | 5,347,815 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable, accruals and other | $ | 1,067,065 | $ | 1,162,543 | ||||
Deferred revenue | 115,963 | 132,414 | ||||||
Total current liabilities | 1,183,028 | 1,294,957 | ||||||
Other noncurrent liabilities | 523,906 | 560,816 | ||||||
Total Amdocs Limited Shareholders’ equity | 3,485,332 | 3,448,879 | ||||||
Noncontrolling interests | 42,353 | 43,163 | ||||||
Total equity | 3,527,685 | 3,492,042 | ||||||
Total liabilities and equity | $ | 5,234,619 | $ | 5,347,815 |
Consolidated Statements of Cash Flows
(In thousands)
Nine months ended June 30, |
||||||||
2019 | 2018 | |||||||
Cash Flow from Operating Activities: | ||||||||
Net income | $ | 357,419 | $ | 310,130 | ||||
Reconciliation of net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 155,258 | 157,421 | ||||||
Equity-based compensation expense | 30,566 | 34,580 | ||||||
Deferred income taxes | (9,455 | ) | 7,947 | |||||
Loss from short-term interest-bearing investments | 538 | 1,324 | ||||||
Net changes in operating assets and liabilities, net of amounts acquired: | ||||||||
Accounts receivable, net | 22,721 | (81,690 | ) | |||||
Prepaid expenses and other current assets | 4,655 | (21,796 | ) | |||||
Other noncurrent assets | 3,370 | 2,006 | ||||||
Accounts payable, accrued expenses and accrued personnel | (79,232 | ) | 42,374 | |||||
Deferred revenue | (36,192 | ) | 21,221 | |||||
Income taxes payable, net | (4,605 | ) | (15,428 | ) | ||||
Other noncurrent liabilities | (2,291 | ) | (16,189 | ) | ||||
Net cash provided by operating activities | 442,752 | 441,900 | ||||||
Cash Flow from Investing Activities: | ||||||||
Purchases of property and equipment, net (*) | (93,761 | ) | (197,253 | ) | ||||
Proceeds from sale of short-term interest-bearing investments | 51,473 | 302,949 | ||||||
Purchase of short-term interest-bearing investments | - | (76,037 | ) | |||||
Net cash paid for acquisitions | (8,782 | ) | (352,599 | ) | ||||
Other | 1,116 | (2,414 | ) | |||||
Net cash used in investing activities | (49,954 | ) | (325,354 | ) | ||||
Cash Flow from Financing Activities: | ||||||||
Borrowings under financing arrangements | - | 120,000 | ||||||
Payments under financing arrangements | - | (120,000 | ) | |||||
Repurchase of shares | (308,036 | ) | (329,593 | ) | ||||
Proceeds from employee stock options exercised | 25,706 | 76,236 | ||||||
Payments of dividends | (108,886 | ) | (98,929 | ) | ||||
Investment by noncontrolling interests, net | (4,776 | ) | 47,013 | |||||
Payment of contingent consideration from a business acquisition | (7,470 | ) | - | |||||
Other | (331 | ) | (323 | ) | ||||
Net cash used in financing activities | (403,793 | ) | (305,596 | ) | ||||
Net decrease in cash and cash equivalents | (10,995 | ) | (189,050 | ) | ||||
Cash and cash equivalents at beginning of period | 418,783 | 649,611 | ||||||
Cash and cash equivalents at end of period | $ | 407,788 | $ | 460,561 |
(*) The amounts under "Purchase of property and equipment, net”, include proceeds of
Supplementary Information
(In millions)
Three months ended | |||||||||||||||
June 30, 2019 |
March 31, 2019 |
December 31, 2018 |
September 30, 2018 |
June 30, 2018 |
|||||||||||
North America | $ | 643.9 | $ | 634.2 | $ | 660.5 | $ | 638.2 | $ | 644.8 | |||||
Europe | 145.5 | 151.0 | 146.1 | 150.6 | 139.3 | ||||||||||
Rest of the World | 235.3 | 234.5 | 205.5 | 213.8 | 218.1 | ||||||||||
Total Revenue | $ | 1,024.7 | $ | 1,019.7 | $ | 1,012.1 | $ | 1,002.6 | $ | 1,002.2 |
Three months ended | |||||||||||||||
June 30, 2019 |
March 31, 2019 |
December 31, 2018 |
September 30, 2018 |
June 30, 2018 |
|||||||||||
Managed Services Revenue | $ | 578.1 | $ | 559.5 | $ | 525.5 | $ | 508.9 | $ | 515.0 |
As of | |||||||||||||||
June 30, 2019 |
March 31, 2019 |
December 31, 2018 |
September 30, 2018 |
June 30, 2018 |
|||||||||||
12-Month Backlog | $ | 3,400 | $ | 3,390 | $ | 3,370 | $ | 3,360 | $ | 3,330 |
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