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Third Quarter Results for Fiscal 2017
Aug 02, 2017
Record Quarterly Revenue of $967M
Expects Fiscal 2017 Revenue Growth of 3.5-4.5% YoY in Constant Currency
Expects Fiscal 2017 Non-GAAP Diluted EPS Growth Outlook of 5.5-7.5% YoY
Third Quarter Fiscal 2017 Highlights
- Revenue of
$967 million , slightly above the midpoint of the$945-$985 million guidance range - Diluted GAAP EPS of
$0.81 , above the$0.69-$0.77 guidance range, including the benefit of a lower GAAP effective tax rate - Diluted non-GAAP EPS of
$1.02 , above the$0.93-$0.99 guidance range, including the benefit of a lower non-GAAP effective tax rate - GAAP operating income of
$130 million ; GAAP operating margin of 13.4% - Non-GAAP operating income of
$167 million ; non-GAAP operating margin of 17.3% - Free cash flow of
$134 million , comprised of cash flow from operations of$162 million , less$28 million in net capital expenditures and other - Twelve-month backlog of
$3.22 billion , up$10 million sequentially - Quarterly cash dividend of
$0.22 per share to be paid onOctober 20, 2017
“We delivered a solid performance in Q3 which included another quarter of record revenue and our highest level of profitability in recent years.
Gelman continued, “Our sales momentum was also strong in Q3 as we sustained a high win rate that included some important contract renewals, as well as several key awards in highly strategic areas. Among the highlights, I am pleased to report that we secured a significant enterprise B2B award with a new customer in the North American Pay TV market, and a definitive agreement with Australia’s
Gelman concluded, “We are encouraged by our strong sales momentum in the last several quarters which we believe indicates our ability to predict and invest in the future requirements of service providers, often many quarters in advance of their needs. Of course, we are closely monitoring the many moving parts affecting our near term outlook but with our year-to-date financial performance and the visibility of our record 12-month backlog we enter Q4 on track to deliver expected total returns to our shareholders in the mid-to-high single digits in fiscal 2017.”
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 2017 was
Returning Cash to Shareholders
- Quarterly Cash Dividend Program: On
August 2, 2017 , the Board approved the Company’s next quarterly cash dividend payment of$0.22 per share and setSeptember 29, 2017 as the record date for determining the shareholders entitled to receive the dividend, which will be payable onOctober 20, 2017 . - Share Repurchase Activity: Repurchased
$90 million of ordinary shares during the third 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
Fourth Quarter fiscal 2017 Outlook
- Revenue of approximately
$955-$995 million , including an immaterial sequential impact from foreign currency fluctuations as compared to the third quarter of fiscal 2017 - Diluted GAAP EPS of approximately
$0.68-$0.76 - Diluted non-GAAP EPS of approximately
$0.91-$0.97 , 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. This range reflects a non-GAAP effective tax rate in the fourth fiscal quarter above our annual target range of 13% to 17%
Full Year Fiscal 2017 Outlook
- Expects revenue growth of 3.5-4.5% year-over-year on a constant currency basis compared with previous guidance of 3.5-5.5% year-over-year
- Expects revenue growth of 3.5-4.5% year-over-year as reported compared with previous guidance of 3.0-5.0% year-over-year
- GAAP diluted earnings per share growth of roughly 7.0-10.0% year-over-year
- Non-GAAP diluted earnings per share growth of roughly 5.5-7.5% year-over-year compared with previous guidance of 4.5-8.5% year-over-year
Our fourth 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,
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 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.
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
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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.
AMDOCS LIMITED | |||||||||||||
Consolidated Statements of Income | |||||||||||||
(In thousands, except per share data) | |||||||||||||
Three months ended | Nine months ended | ||||||||||||
June 30, | June 30, | ||||||||||||
2017 | 2016 | 2017 |
2016 | ||||||||||
Revenue | $ | 966,695 | $ | 930,133 | $ | 2,887,431 | $ | 2,777,573 | |||||
Operating expenses: | |||||||||||||
Cost of revenue | 628,640 | 601,249 | 1,871,211 | 1,796,933 | |||||||||
Research and development | 67,118 | 65,051 | 194,411 | 191,249 | |||||||||
Selling, general and administrative | 113,997 | 113,831 | 352,541 | 347,853 | |||||||||
Amortization of purchased intangible assets and other | 27,028 | 25,040 | 83,982 | 76,894 | |||||||||
836,783 | 805,171 | 2,502,145 | 2,412,929 | ||||||||||
Operating income | 129,912 | 124,962 | 385,286 | 364,644 | |||||||||
Interest and other income (expense), net | 1,152 | 1,113 | (2,079 | ) | 908 | ||||||||
Income before income taxes | 131,064 | 126,075 | 383,207 | 365,552 | |||||||||
Income taxes | 11,800 | 21,015 | 53,590 | 51,930 | |||||||||
Net income | $ | 119,264 | $ | 105,060 | $ | 329,617 | $ | 313,622 | |||||
Basic earnings per share | $ | 0.82 | $ | 0.71 | $ | 2.25 | $ | 2.09 | |||||
Diluted earnings per share | $ | 0.81 | $ | 0.70 | $ | 2.23 | $ | 2.06 | |||||
Basic weighted average number of shares outstanding | 145,904 | 148,844 | 146,439 | 149,802 | |||||||||
Diluted weighted average number of shares outstanding | 147,259 | 150,726 | 147,865 | 151,912 | |||||||||
Cash dividends declared per share | $ | 0.220 | $ | 0.195 | $ | 0.635 | $ | 0.560 | |||||
AMDOCS LIMITED | ||||||||||||
Selected Financial Metrics | ||||||||||||
(in thousands, except per share data) | ||||||||||||
Three months ended | Nine months ended | |||||||||||
June 30, | June 30, | |||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||
Revenue | $ | 966,695 | $ | 930,133 | $ | 2,887,431 | $ | 2,777,573 | ||||
Non-GAAP operating income | 167,193 | 159,814 | 497,275 | 474,636 | ||||||||
Non-GAAP net income | 150,440 | 135,571 | 423,171 | 407,756 | ||||||||
Non-GAAP diluted earnings per share | $ | 1.02 | $ | 0.90 | $ | 2.86 | $ | 2.68 | ||||
Diluted weighted average number of shares outstanding | 147,259 | 150,726 | 147,865 | 151,912 | ||||||||
AMDOCS LIMITED | ||||||||||||||
Reconciliation of Selected Financial Metrics from GAAP to Non-GAAP | ||||||||||||||
(in thousands) | ||||||||||||||
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 | |||
Three months ended June 30, 2016 |
|||||||||||||
Reconciliation items |
|||||||||||||
GAAP | Amortization of purchased intangible assets and other |
Equity based compensation expense |
Tax effect |
Non-GAAP | |||||||||
Operating expenses: | |||||||||||||
Cost of revenue | $ | 601,249 | $ | - | $ | (4,406 | ) | $ | - | $ | 596,843 | ||
Research and development | 65,051 | - | (953 | ) | - | 64,098 | |||||||
Selling, general and administrative | 113,831 | - | (4,453 | ) | - | 109,378 | |||||||
Amortization of purchased intangible assets and other | 25,040 | (25,040 | ) | - | - | - | |||||||
Total operating expenses | 805,171 | (25,040 | ) | (9,812 | ) | - | 770,319 | ||||||
Operating income | 124,962 | 25,040 | 9,812 | - | 159,814 | ||||||||
Income taxes | 21,015 | - | - | 4,341 | 25,356 | ||||||||
Net income | $ | 105,060 | $ | 25,040 | $ | 9,812 | $ | (4,341 | ) | $ | 135,571 | ||
AMDOCS LIMITED | ||||||||||||||||
Reconciliation of Selected Financial Metrics from GAAP to Non-GAAP | ||||||||||||||||
(in thousands) | ||||||||||||||||
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 | ||
Nine months ended June 30, 2016 |
|||||||||||||
Reconciliation items |
|||||||||||||
GAAP | Amortization of purchased intangible assets and other |
Equity based compensation expense |
Tax effect |
Non-GAAP | |||||||||
Operating expenses: | |||||||||||||
Cost of revenue | $ | 1,796,933 | $ | - | $ | (13,447 | ) | $ | - | $ | 1,783,486 | ||
Research and development | 191,249 | - | (2,813 | ) | - | 188,436 | |||||||
Selling, general and administrative | 347,853 | - | (16,838 | ) | - | 331,015 | |||||||
Amortization of purchased intangible assets and other | 76,894 | (76,894 | ) | - | - | - | |||||||
Total operating expenses | 2,412,929 | (76,894 | ) | (33,098 | ) | - | 2,302,937 | ||||||
Operating income | 364,644 | 76,894 | 33,098 | - | 474,636 | ||||||||
Income taxes | 51,930 | - | - | 15,858 | 67,788 | ||||||||
Net income | $ | 313,622 | $ | 76,894 | $ | 33,098 | $ | (15,858 | ) | $ | 407,756 | ||
AMDOCS LIMITED | ||||||
Condensed Consolidated Balance Sheets | ||||||
(in thousands) | ||||||
As of | ||||||
June 30, 2017 |
September 30, 2016 |
|||||
ASSETS | ||||||
Current assets | ||||||
Cash, cash equivalents and short-term interest-bearing investments | $ | 963,039 | $ | 1,095,723 | ||
Accounts receivable, net, including unbilled of $174,898 and $134,122, respectively | 893,386 | 818,531 | ||||
Prepaid expenses and other current assets | 228,611 | 186,137 | ||||
Total current assets | 2,085,036 | 2,100,391 | ||||
Equipment and leasehold improvements, net | 336,791 | 331,728 | ||||
Goodwill and other intangible assets, net | 2,395,253 | 2,493,166 | ||||
Other noncurrent assets | 476,537 | 406,070 | ||||
Total assets | $ | 5,293,617 | $ | 5,331,355 | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||
Current liabilities | ||||||
Accounts payable, accruals and other | $ | 1,053,303 | $ | 992,679 | ||
Short-term financing arrangements | - | 200,000 | ||||
Deferred revenue | 123,866 | 173,331 | ||||
Total current liabilities | 1,177,169 | 1,366,010 | ||||
Other noncurrent liabilities | 534,759 | 511,784 | ||||
Shareholders’ equity | 3,581,689 | 3,453,561 | ||||
Total liabilities and shareholders’ equity | $ | 5,293,617 | $ | 5,331,355 | ||
AMDOCS LIMITED | ||||||||
Consolidated Statements of Cash Flows | ||||||||
(in thousands) | ||||||||
Nine months ended June 30, | ||||||||
2017 | 2016 | |||||||
Cash Flow from Operating Activities: | ||||||||
Net income | $ | 329,617 | $ | 313,622 | ||||
Reconciliation of net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 163,533 | 159,792 | ||||||
Equity-based compensation expense | 34,698 | 33,098 | ||||||
Deferred income taxes | 7,201 | (14,254 | ) | |||||
Excess tax benefit from equity-based compensation | (3,716 | ) | (5,682 | ) | ||||
(Gain) loss from short-term interest-bearing investments | (144 | ) | 294 | |||||
Net changes in operating assets and liabilities, net of amounts acquired: | ||||||||
Accounts receivable | (73,033 | ) | (4,163 | ) | ||||
Prepaid expenses and other current assets | (1,258 | ) | (21,423 | ) | ||||
Other noncurrent assets | (60,949 | ) | 11,070 | |||||
Accounts payable, accrued expenses and accrued personnel | 75,178 | 37,261 | ||||||
Deferred revenue | (38,817 | ) | (68,749 | ) | ||||
Income taxes payable | (7,726 | ) | 12,263 | |||||
Other noncurrent liabilities | 12,520 | 14,397 | ||||||
Net cash provided by operating activities | 437,104 | 467,526 | ||||||
Cash Flow from Investing Activities: | ||||||||
Payments for purchase of equipment and leasehold improvements, net | (98,565 | ) | (101,372 | ) | ||||
Proceeds from sale of short-term interest-bearing investments | 218,395 | 264,357 | ||||||
Purchase of short-term interest-bearing investments | (218,772 | ) | (269,143 | ) | ||||
Net cash paid for acquisitions | - | (24,993 | ) | |||||
Other | (10,022 | ) | (20,109 | ) | ||||
Net cash used in investing activities | (108,964 | ) | (151,260 | ) | ||||
Cash Flow from Financing Activities: | ||||||||
Borrowings under financing arrangements | 200,000 | - | ||||||
Payments under financing arrangements | (400,000 | ) | (220,000 | ) | ||||
Repurchase of shares | (250,231 | ) | (323,751 | ) | ||||
Proceeds from employee stock options exercised | 75,763 | 67,890 | ||||||
Payments of dividends | (89,522 | ) | (80,468 | ) | ||||
Excess tax benefit from equity-based compensation and other | 3,716 | 5,677 | ||||||
Net cash used in financing activities | (460,274 | ) | (550,652 | ) | ||||
Net decrease in cash and cash equivalents | (132,134 | ) | (234,386 | ) | ||||
Cash and cash equivalents at beginning of period | 768,660 | 1,035,573 | ||||||
Cash and cash equivalents at end of period | $ | 636,526 | $ | 801,187 | ||||
AMDOCS LIMITED | |||||||||||||||
Supplementary Information | |||||||||||||||
(in millions) | |||||||||||||||
Three months ended |
|||||||||||||||
June 30, 2017 |
March 31, 2017 |
December 31, 2016 |
September 30, 2016 |
June 30, 2016 |
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North America | $ | 637.9 | $ | 636.3 | $ | 628.0 | $ | 626.2 | $ | 591.8 | |||||
Europe | 125.2 | 115.4 | 118.5 | 118.9 | 126.3 | ||||||||||
Rest of the World | 203.6 | 214.3 | 208.2 | 195.6 | 212.0 | ||||||||||
Total Revenue | $ | 966.7 | $ | 966.0 | $ | 954.7 | $ | 940.7 | $ | 930.1 | |||||
Three months ended |
|||||||||||||||
June 30, 2017 |
March 31, 2017 |
December 31, 2016 |
September 30, 2016 |
June 30, 2016 |
|||||||||||
Managed Services Revenue | $ | 496.3 | $ | 511.1 | $ | 494.2 | $ | 478.5 | $ | 479.2 | |||||
Three months ended |
|||||||||||||||
June 30, 2017 |
March 31, 2017 |
December 31, 2016 |
September 30, 2016 |
June 30, 2016 |
|||||||||||
Customer Experience Systems | $ | 954.8 | $ | 948.6 | $ | 937.9 | $ | 924.9 | $ | 908.1 | |||||
Directory | 11.9 | 17.4 | 16.8 | 15.8 | 22.0 | ||||||||||
Total Revenue | $ | 966.7 | $ | 966.0 | $ | 954.7 | $ | 940.7 | $ | 930.1 | |||||
As of |
|||||||||||||||
June 30, 2017 |
March 31, 2017 |
December 31, 2016 |
September 30, 2016 |
June 30, 2016 |
|||||||||||
12-Month Backlog | $ | 3,220 | $ | 3,210 | $ | 3,180 | $ | 3,170 | $ | 3,110 | |||||
Contact:Matthew Smith Head of Investor RelationsAmdocs 314-212-8328 E-mail: dox_info@amdocs.com