DOX Amdocs Ltd

Expects Fiscal 2017 Revenue Growth of 2.0-6.0% YoY

Amdocs Limited (NASDAQ:DOX) today reported that for its fourth fiscal quarter ended September 30, 2016, revenue was $940.7 million, up 1.1% or $10.5 million sequentially from the third fiscal quarter of 2016 and up 1.5% as compared to last year’s fourth fiscal quarter. Revenue for the fourth fiscal quarter of 2016 includes a negative impact from foreign currency movements of approximately $2 million relative to the third quarter of fiscal 2016. The Company's GAAP net income for the fourth quarter of fiscal 2016 was $95.7 million, or $0.64 per diluted share, compared to GAAP net income of $91.1 million, or $0.59 per diluted share, in the prior fiscal year’s fourth quarter. Net income on a non-GAAP basis was $132.4 million, or $0.89 per diluted share, compared to non-GAAP net income of $130.4 million, or $0.84 per diluted share, in the fourth quarter of fiscal 2015. Non-GAAP net income excludes amortization of purchased intangible assets and other acquisition-related costs and equity-based compensation expenses of $36.7 million, net of related tax effects, in the fourth quarter of fiscal 2016, and excludes such amortization and other acquisition-related costs, nonrecurring restructuring charges associated with the acquisition of the Comverse BSS assets and equity-based compensation expenses of $39.2 million, net of related tax effects, in the fourth quarter of fiscal 2015. 

“Our fourth quarter performance was solid and culminated in a stronger second half along the lines we predicted a year ago. North America showed further signs of stabilization, while Europe and Rest of World delivered strong double-digit growth for the full year notwithstanding normal fluctuations in customer activity in Q4. Late in the quarter, we expanded our digital capabilities with the combined acquisitions of Pontis, Brite:Bill and Vindicia for roughly $260 million in cash. We also delivered on our plan to return 100% of free cash flow to shareholders in the second half of the fiscal year, consistent with our ongoing commitment to the disciplined and proactive allocation of cash,” said Eli Gelman, president and chief executive officer of Amdocs Management Limited.

Gelman continued, “During the fourth quarter we expanded our activities with several important customers. In Latin America, Telefónica selected the Amdocs Data Hub as the next logical step in the quad-play transformation project we are supporting at its Vivo operations in Brazil.  The Amdocs solution extracts and analyzes large volumes of customer data from a wide range of operational platforms and will give Telefónica Brazil the business insights needed to react quickly to changing market dynamics. In the Philippines, Globe Telecom selected Amdocs Revenue Guard for automated, analytics-driven revenue assurance, a service that builds on the market-leading technology we secured through our acquisition of cVidya in January 2016.”

Gelman concluded, “We enter fiscal 2017 focused on building the engines to support our customers in strategic areas such as digital modernization, the enterprise segment, Pay TV and network function virtualization. With the visibility provided by our record 12-month backlog we are targeting full year non-GAAP earnings per share growth of 4.5% to 8.5% while monitoring various macro and industry specific risks, including the impact of consolidation activity in North America. Finally, we are pleased to announce a planned increase in the quarterly cash dividend of nearly 13% to 22 cents per share, payable in April 2017 if approved by shareholders at the annual meeting in January 2017. This marks the fourth consecutive year that our Board has approved an increase in the dividend and further demonstrates our confidence in the future success of Amdocs.”

Financial Discussion of Fourth Fiscal Quarter ResultsFree cash flow was $125 million for the fourth quarter of fiscal 2016, comprised of cash flow from operations of $153 million, less $28 million in net capital expenditures and other.

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 $3.17 billion at the end of the fourth quarter of fiscal 2016, up $60 million from the end of the prior quarter, with approximately half of the increase due to acquisitions.

Fiscal Year 2016 ResultsFor the fiscal year ended September 30, 2016, revenue increased by 2.0% to $3.7 billion. The Company's GAAP net income in fiscal 2016 was $409.3 million, or $2.71 per diluted share, compared to GAAP net income of $446.2 million, or $2.85 per diluted share, in fiscal 2015. Fiscal 2016 net income on a non-GAAP basis was $540.1 million, or $3.57 per diluted share (excluding amortization of purchased intangible assets and other acquisition-related costs and equity-based compensation expenses of $130.8 million, net of related tax effects), compared to non-GAAP net income of $529.7 million, or $3.38 per diluted share, in fiscal 2015 (excluding amortization of purchased intangible assets and other acquisition-related costs, nonrecurring restructuring charges associated with the acquisition of the Comverse BSS assets, changes in fair value of certain acquisition-related liabilities and equity-based compensation expenses of $83.5 million, net of related tax effects).

Financial Outlook Amdocs expects that revenue for the first quarter of fiscal 2017 will be approximately $935-$975 million. Embedded within this guidance is an immaterial sequential impact from foreign currency fluctuations as compared to the fourth quarter of fiscal 2016. This 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 that it cannot predict all possible outcomes, including those resulting from AT&T’s proposed merger with Time Warner or from other current and potential customer consolidation activity in North America.

Amdocs estimates GAAP diluted earnings per share for the first fiscal quarter of 2017 will be $0.59-$0.67. Diluted earnings per share on a non-GAAP basis for the first quarter of fiscal 2017 is expected to be $0.87-$0.93, excluding amortization of purchased intangible assets and other acquisition-related costs and approximately $0.09-$0.10 per share of equity-based compensation expense, net of related tax effects.

Quarterly Cash Dividend ProgramOn November 8, 2016, the Board approved the Company’s next quarterly cash dividend payment of $0.195 per share and set December 30, 2016 as the record date for determining the shareholders entitled to receive the dividend, which will be payable on January 13, 2017. The Board also approved an increase in the Company’s quarterly cash dividend payment to $0.22 per share, which is anticipated to be paid in April 2017, provided that the increase is approved by shareholders at the January 2017 annual general meeting of shareholders.

Conference Call Details Amdocs will host a conference call on November 8, 2016 at 5:00 p.m. Eastern Time to discuss the Company's fourth fiscal quarter and fiscal year 2016 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 97721633. The call will also be carried live on the Internet via the Amdocs website, www.amdocs.com.

Amdocs Analyst & Investor BriefingAmdocs will host an Analyst and Investor briefing on Wednesday, December 14 at the NASDAQ market site headquarters in New York City’s midtown. Please contact investor relations for further details and check our investor relations website several days in advance for details on how to access the live webcast.

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 interest and other expense, 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 fair value of certain acquisition-related liabilities;
• nonrecurring restructuring charges associated with the Comverse acquisition;
• 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. 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 interest and other expense, net, 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 associated with the acquisition of the Comverse BSS assets, 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 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, interest and other expense, net, 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.

About AmdocsAmdocs is the market leader in customer experience software solutions and services for the world’s largest communications, entertainment and media service providers.  For more than 30 years, Amdocs solutions, which include BSS, OSS, network control, optimization and network functions virtualization, coupled with professional and managed services, have accelerated business value for its customers by simplifying business complexity, reducing costs and delivering a world-class customer experience.

The Amdocs portfolio enables service providers to capture the world of digital immediacy by operating across digital dimensions to engage customers with personalized, omni-channel experiences; creating a diversified business to capture new revenue streams; becoming data empowered to make business and operational decisions based on insight-based and predictive analytics; and achieving service agility to accelerate the fast rollout of new technologies and hybrid network services.

Amdocs and its 25,000 employees serve customers in over 90 countries. Listed on the NASDAQ Global Select Market, Amdocs had revenue of $3.7 billion in fiscal 2016.

Amdocs: Embrace Challenge, Experience Success.

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, 2015 filed on December 10, 2015 and our Form 6-K furnished for the first quarter of fiscal 2016 on February 16, 2016, for the second quarter of fiscal 2016 on May 17, 2016 and for the third quarter of fiscal 2016 on August 8, 2016.

AMDOCS LIMITED
Consolidated Statements of Income
(in thousands, except per share data)
		Three months ended								Fiscal year ended
		September 30,								September 30,
			2016				2015				2016				2015
Revenue		$	940,656			$	926,776			$	3,718,229			$	3,643,538
Operating expenses:
Cost of revenue			611,107				603,105				2,408,040				2,349,488
Research and development			61,043				65,900				252,292				254,944
Selling, general and administrative			117,030				111,191				464,883				440,085
Amortization of purchased intangible assets and other			32,979				23,880				109,873				70,073
Restructuring charges			-				13,000				-				13,000
			822,159				817,076				3,235,088				3,127,590
Operating income			118,497				109,700				483,141				515,948
Interest and other income (expense), net			649				(1,375	)			1,557				(2,544	)
Income before income taxes			119,146				108,325				484,698				513,404
Income taxes			23,437				17,195				75,367				67,241
Net income		$	95,709			$	91,130			$	409,331			$	446,163
Basic earnings per share		$	0.65			$	0.60			$	2.74			$	2.89
Diluted earnings per share		$	0.64			$	0.59			$	2.71			$	2.85
Basic weighted average number of shares outstanding			147,281				152,601				149,168				154,423
Diluted weighted average number of shares outstanding			148,984				155,201				151,176				156,809
Cash dividends declared per share		$	0.195			$	0.170			$	0.755			$	0.665

 

AMDOCS LIMITED
Selected Financial Metrics
(in thousands, except per share data)
		Three months ended								Fiscal year ended
		September 30,								September 30,
			2016				2015				2016				2015
Revenue		$	940,656			$	926,776			$	3,718,229			$	3,643,538
Non-GAAP operating income			161,078				156,917				635,714				618,675
Non-GAAP net income			132,360				130,353				540,116				529,700
Non-GAAP diluted earnings per share		$	0.89			$	0.84			$	3.57			$	3.38
Diluted weighted average number of shares outstanding			148,984				155,201				151,176				156,809

 

AMDOCS LIMITED
Reconciliation of Selected Financial Metrics from GAAP to Non-GAAP
(in thousands)
		Three months endedSeptember 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		$	611,107		$	-			$	(4,802		)	$	-			$	606,305
Research and     development			61,043			-				(929		)		-				60,114
Selling, general and    administrative			117,030			-				(3,871		)		-				113,159
Amortization of   purchased intangible   assets and other			32,979			(32,979		)		-				-				-
Total operating expenses			822,159			(32,979		)		(9,602		)		-				779,578
Operating income			118,497			32,979				9,602				-				161,078
Income taxes			23,437			-				-				5,930				29,367
Net income		$	95,709		$	32,979			$	9,602			$	(5,930		)	$	132,360

 

	Three months endedSeptember 30, 2015
				Reconciliation items
	GAAP			Amortization of purchased intangible assets and other			Equity based compensation expense			Restructuring charges			Tax effect			Non-GAAP
Operating expenses:
Cost of revenue	$	603,105		$	-		$	(3,854	)	$	-		$	-		$	599,251
Research and  development		65,900			-			(830	)		-			-			65,070
Selling, general and    administrative		111,191			-			(5,653	)		-			-			105,538
Amortization of   purchased intangible  assets and other		23,880			(23,880	)		-			-			-			-
Restructuring charges		13,000			-			-			(13,000	)		-			-
Total operating expenses		817,076			(23,880	)		(10,337	)		(13,000	)		-			769,859
Operating income		109,700			23,880			10,337			13,000			-			156,917
Income taxes		17,195			-			-			-			7,994			25,189
Net income	$	91,130		$	23,880		$	10,337		$	13,000		$	(7,994	)	$	130,353

 

	AMDOCS LIMITED
	Reconciliation of Selected Financial Metrics from GAAP to Non-GAAP
	(in thousands)
				Fiscal year endedSeptember 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			$	2,408,040				$	-				$	(18,249					)	$	-				$	2,389,791
	Research and    development				252,292					-					(3,742					)		-					248,550
	Selling, general and    administrative				464,883					-					(20,709					)		-					444,174
	Amortization of   purchased intangible   assets and other				109,873					(109,873			)		-							-					-
	Total operating expenses				3,235,088					(109,873			)		(42,700					)		-					3,082,515
	Operating income				483,141					109,873					42,700							-					635,714
	Income taxes				75,367					-					-							21,788					97,155
	Net income			$	409,331				$	109,873				$	42,700						$	(21,788			)	$	540,116

 

	Fiscal year endedSeptember 30, 2015
					Reconciliation items
	GAAP				Amortization of purchased intangible assets and other			Equity based compensation expense				Restructuring charges			Changes in fair value of certain acquisition-related liabilities			Tax effect			Non-GAAP
Operating expenses:
Cost of revenue	$	2,349,488			$	-		$	(15,621		)	$	-		$	24,906		$	-		$	2,358,773
Research and  development		254,944				-			(3,400		)		-			-			-			251,544
Selling, general and    administrative		440,085				-			(25,539		)		-			-			-			414,546
Amortization of   purchased   intangible assets   and other		70,073				(70,073	)		-				-			-			-			-
Restructuring charges		13,000				-			-				(13,000	)		-			-			-
Total operating   expenses		3,127,590				(70,073	)		(44,560		)		(13,000	)		24,906			-			3,024,863
Operating income		515,948				70,073			44,560				13,000			(24,906	)		-			618,675
Interest and other   expense, net		2,544				-			-				-			3,921			-			6,465
Income taxes		67,241				-			-				-			-			15,269			82,510
Net income	$	446,163			$	70,073		$	44,560			$	13,000		$	(28,827	)	$	(15,269	)	$	529,700

 

AMDOCS LIMITED
Condensed Consolidated Balance Sheets
(in thousands)
		As of
		September 30, 2016				September 30, 2015
ASSETS
Current assets
Cash, cash equivalents and short-term interest-bearing investments		$	1,095,723			$	1,354,012
Accounts receivable, net, including unbilled of $134,122 and $80,197, respectively			818,531				714,784
Deferred income taxes			-				150,733
Prepaid expenses and other current assets			186,137				158,633
Total current assets			2,100,391				2,378,162
Equipment and leasehold improvements, net			331,728				309,320
Goodwill and other intangible assets, net			2,493,166				2,301,610
Other noncurrent assets			406,070				335,560
Total assets		$	5,331,355			$	5,324,652
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable, accruals and other		$	992,679			$	945,033
Short-term financing arrangements			200,000				220,000
Deferred revenue			173,331				198,470
Total current liabilities			1,366,010				1,363,503
Other noncurrent liabilities			511,784				554,307
Shareholders’ equity			3,453,561				3,406,842
Total liabilities and shareholders’ equity		$	5,331,355			$	5,324,652

____________

Due to the early adoption of Accounting Standard Update 2015-17, starting the first quarter of fiscal year 2016, all deferred tax assets and liabilities are classified as noncurrent on the balance sheet. Prior balance sheets were not retrospectively adjusted. 

AMDOCS LIMITED
Consolidated Statements of Cash Flows
(in thousands)
		Fiscal year ended September 30,
			2016				2015
Cash Flow from Operating Activities:
Net income		$	409,331			$	446,163
Reconciliation of net income to net cash provided by operating activities:
Depreciation and amortization			211,791				174,795
Equity-based compensation expense			42,700				44,560
Deferred income taxes			(2,315	)			(26,887	)
Excess tax benefit from equity-based compensation			(6,913	)			(5,949	)
Loss from short-term interest-bearing investments			407				476
Net changes in operating assets and liabilities, net of amounts acquired:
Accounts receivable			(70,859	)			39,829
Prepaid expenses and other current assets			(11,164	)			22,690
Other noncurrent assets			2,587				7,406
Accounts payable, accrued expenses and accrued personnel			59,982				63,894
Deferred revenue			(49,828	)			2,434
Income taxes payable			10,112				23,474
Other noncurrent liabilities			24,403				(20,263	)
Net cash provided by operating activities			620,234				772,622
Cash Flow from Investing Activities:
Payments for purchase of equipment and leasehold improvements, net			(130,086	)			(120,503	)
Proceeds from sale of short-term interest-bearing investments			361,960				252,818
Purchase of short-term interest-bearing investments			(370,742	)			(250,184	)
Net cash paid for acquisitions			(283,450	)			(263,193	)
Other			(18,533	)			1,408
Net cash used in investing activities			(440,851	)			(379,654	)
Cash Flow from Financing Activities:
Borrowings under financing arrangements			200,000				220,000
Payments under financing arrangements			(220,000	)			(210,000	)
Repurchase of shares			(413,422	)			(454,020	)
Proceeds from employee stock options exercised			89,600				78,206
Payments of dividends			(109,304	)			(100,790	)
Excess tax benefit from equity-based compensation			6,913				5,949
Other			(83	)			(9	)
Net cash used in financing activities			(446,296	)			(460,664	)
Net decrease in cash and cash equivalents			(266,913	)			(67,696	)
Cash and cash equivalents at beginning of period			1,035,573				1,103,269
Cash and cash equivalents at end of period		$	768,660			$	1,035,573

AMDOCS LIMITED
Supplementary Information
(in millions)
		Three months ended
		September 30, 2016				June 30, 2016				March 31, 2016				December 31, 2015				September 30, 2015
North America		$	626.2			$	591.8			$	586.4			$	576.7			$	626.6
Europe			118.9				126.3				139.2				128.9				115.3
Rest of the World			195.6				212.0				200.3				215.9				184.9
Total Revenue		$	940.7			$	930.1			$	925.9			$	921.5			$	926.8

 

		Three months ended
		September 30, 2016				June 30, 2016				March 31, 2016				December 31, 2015				September 30, 2015
Managed Services Revenue		$	478.5			$	479.2			$	501.1			$	487.6			$	466.6

 

		Three months ended
		September 30, 2016				June 30, 2016				March 31, 2016				December 31, 2015				September 30, 2015
Customer Experience Systems			924.9				908.1				902.3				894.4				899.4
Directory			15.8				22.0				23.6				27.1				27.4
Total Revenue		$	940.7			$	930.1			$	925.9			$	921.5			$	926.8

 

		As of
		September 30, 2016				June 30, 2016				March 31, 2016				December 31, 2015				September 30, 2015
12-Month Backlog		$	3,170			$	3,110			$	3,100			$	3,090			$	3,080

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