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Amdocs Reports Fiscal Q2 Revenues of $992M

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ST. LOUIS, Mo. -- Amdocs Limited (NASDAQ:DOX) today reported operating results for the three months ended March 31, 2018.

Second quarter fiscal 2018 highlights:

Closed the previously announced acquisition of Vubiquity for $224 million in cash and acquired UXP Systems for $80 million in cash Revenue of $992 million, within the $960-$1,000 million guidance range; revenue included a positive impact from foreign currency movements relative to the first quarter of fiscal 2018, and contributions from M&A consummated this quarter

GAAP diluted EPS of $0.70, above the midpoint of the $0.65-$0.73 guidance range

Non-GAAP diluted EPS of $0.95, above the midpoint of the $0.91-$0.97 guidance range

GAAP operating income of $132 million; GAAP operating margin of 13.3% Non-GAAP operating income of $172 million; non-GAAP operating margin of 17.3%

Free cash flow of $3 million, comprised of cash flow from operations of $114 million, less $111 million in net capital expenditures and other, of which $81 million related to the multi-year development of the new campus. Excluding the campus investment, normalized free cash flow was $84 million in the second quarter of fiscal 2018

Twelve-month backlog of $3.32 billion, up $60 million sequentially Quarterly cash dividend of $0.25 per share, to be paid on July 20, 2018

“We are pleased to report solid results for our second fiscal quarter which included double-digit growth in Europe and record revenue in Rest of World. Our operating profitability was stable and we grew our 12-month backlog to another new high. Additionally, we extended our technology leadership with the launch of AmdocsOne at Mobile World Congress and we utilized our cash to close on the acquisitions of Vubiquity, as well as UXP Systems, a leader in User Lifecycle Management solutions,” said Eli Gelman, president and chief executive officer of Amdocs Management Limited.

Gelman continued, “Rest of World was a highlight of the quarter as we focused on project execution and securing new awards. In Southeast Asia, we commenced the ramp-up of the seven-year project and managed services agreement we signed with PLDT earlier in Q2. Additionally, we made an important step in Africa where we were selected to provide our revenue assurance capabilities to Safaricom, a major mobile network operator in Kenya with nearly 30 million subscribers.”

Gelman concluded, “We enter Q3 on-track to deliver a stronger second half, although we are of course monitoring the many moving parts affecting our outlook, including those resulting from consolidation activity currently in progress across our main operating regions. Additionally, we are focused on our execution and profitability, which combined with expected normalized free cash flow generation of approximately $500 million for the full year, leaves us well positioned to deliver diluted non-GAAP earnings per share growth in the range of 4% to 8% in fiscal 2018.”

Revenue

Revenue for the second fiscal quarter ended March 31, 2018 was $992.3 million, up 1.5% or $14.6 million sequentially from the first fiscal quarter of 2018 and up 2.7% as compared to last year’s second fiscal quarter. Revenue for the second fiscal quarter of 2018 includes a positive impact from foreign currency movements of approximately $5 million relative to the first quarter of fiscal 2018 and contributions from M&A consummated in the second fiscal quarter.

Net Income and Earnings Per Share

The Company's GAAP net income for the second quarter of fiscal 2018 was $101.7 million, or $0.70 per diluted share, compared to GAAP net income of $112.6 million, or $0.76 per diluted share, in the prior fiscal year’s second quarter. Net income on a non-GAAP basis was $137.4 million, or $0.95 per diluted share, compared to non-GAAP net income of $139.2 million, or $0.94 per diluted share, in the second quarter of fiscal 2017.

Returning Cash to Shareholders

Quarterly Cash Dividend Program: On May 10, 2018, the Board approved the Company’s next quarterly cash dividend payment of $0.25 per share and set June 29, 2018 as the record date for determining the shareholders entitled to receive the dividend, which will be payable on July 20, 2018.

Share Repurchase Activity: Repurchased $120 million of ordinary shares during the second 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 $3.32 billion at the end of the second quarter of fiscal 2018, up $60 million from the end of the prior quarter.

Third Quarter Fiscal 2018 Outlook

Revenue of approximately $990-$1,030 million, including an immaterial sequential impact from foreign currency fluctuations as compared to the second quarter of fiscal 2018. Third quarter fiscal 2018 guidance incorporates full quarter contributions from recently closed acquisitions

Diluted GAAP EPS of approximately $0.71-$0.81. The impact on diluted GAAP EPS of the acquisition of Vubiquity and UXP Systems is subject to finalization of the purchase price allocation and of the anticipated acquisition-related expenses related to operating adjustments, restructuring charges and other acquisition-related costs.

Diluted non-GAAP EPS of approximately $1.00-$1.06, 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 related tax effects. Expected non-GAAP effective tax rate around the low-end of the annual target range of 13%-17% in the third quarter fiscal 2018

Full Year Fiscal 2018 Outlook

Expects revenue growth of 2.3%-4.3% year-over-year as reported compared with previous guidance of 0.0%-4.0% year-over-year

Expects revenue growth of 1.3%-3.3% year-over-year on a constant currency basis compared with previous guidance of (1.0%)-3.0% year-over-year

Full year fiscal 2018 revenue guidance incorporates an incremental revenue contribution of more than 1% from Vubiquity on both a constant currency and reported basis, and an expected positive impact from foreign currency fluctuations of about 1% year-over-year

Expects GAAP diluted earnings per share growth of roughly 0.0%-6.0% year-over-year. The impact on diluted GAAP EPS of the acquisition of Vubiquity and UXP Systems is subject to finalization of the purchase price allocation and of the anticipated expenses related to operating adjustments, restructuring charges and other acquisition-related costs

Reiterates Non-GAAP diluted earnings per share growth of roughly 4.0%-8.0% year-over-year, excluding amortization of purchased intangible assets and other acquisition-related costs and approximately $0.26-$0.29 per share of equity-based compensation expense, net of related tax effects. Expected non-GAAP effective tax rate to remain within the same target range of 13%-17% for the full year fiscal 2018

The impact of recent acquisitions on Amdocs’ diluted non-GAAP earnings per share (excluding amortization of purchased intangible assets, restructuring charges, other acquisition-related costs and equity based compensation expense, net of related tax effects) is expected to be neutral in fiscal year 2018, and accretive thereafter

Our third 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 AT&T’s proposed merger with Time Warner, T-Mobile’s proposed merger with Sprint, or from other current and potential customer consolidation activity in North America.

Amdocs Ltd. (NYSE: DOX)

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