Amdocs Limited Reports Quarterly Revenue of $754 Million

Key highlights:

- First quarter revenue of $754 million increased by 1.6% over the prior year's first quarter, below guidance of $785-$810 million

- First quarter non-GAAP operating income of $136 million; non-GAAP operating margin of 18.0%, up 30 basis points compared to first quarter fiscal 2008

- First quarter diluted non-GAAP EPS of $0.55, excluding acquisition-related costs, restructuring and in-process R&D charges and equity-based compensation expense, net of related tax effects, in line with guidance

- Diluted GAAP EPS of $0.35 for the quarter, which included an $0.08 per share impact related to a restructuring charge and an in-process R&D write-off

- Strong free cash flow of $111 million for the quarter, comprised of cash flow from operations of $141 million less $30 million in net capital expenditures

- 12-month backlog of $2.40 billion at the end of the first quarter

- Second quarter fiscal 2009 guidance: Expected revenue of approximately $700-$720 million and diluted non-GAAP EPS of $0.47-$0.51, excluding acquisition-related costs and approximately $0.05-$0.06 per share of equity-based compensation expense, net of related tax effects. Diluted GAAP EPS is expected to be approximately $0.34-$0.39

ST. LOUIS, Jan. 21 /PRNewswire-FirstCall/ -- Amdocs Limited (NYSE: DOX) today reported that for its fiscal first quarter ended December 31, 2008, revenue was $753.8 million, an increase of 1.6% from last year's first quarter. Net income on a non-GAAP basis was $116.3 million, or $0.55 per diluted share, compared to non-GAAP net income of $123.3 million, or $0.56 per diluted share, in the first quarter of fiscal 2008. Non-GAAP net income excludes amortization of purchased intangible assets, equity-based compensation expenses, the write-off of acquired in-process research and development and restructuring charges of $42 million, net of related tax effects, in the first quarter of fiscal 2009 and excludes such amortization and equity-based compensation expenses of $27.6 million, net of related tax effects, in the first quarter of fiscal 2008. The Company's GAAP net income for the first quarter of fiscal 2009 was $74.2 million, or $0.35 per diluted share, compared to GAAP net income of $95.7 million, or $0.44 per diluted share, in the prior year's first quarter.

"The first quarter of fiscal 2009 was a difficult start for Amdocs as macro-economic conditions continued to worsen and sales cycles lengthened across our business," said Dov Baharav, chief executive officer of Amdocs Management Limited. "Service providers reacted more quickly than we expected as the quarter progressed by reducing their spending and delaying some new projects. Additionally, foreign exchange remains a headwind in fiscal 2009, and was slightly more of a drag on revenue in the first quarter than we had anticipated. As a result, our revenue in the first quarter was up only 1.6% over the prior year's first quarter and we are disappointed with this relative to our expectations. We believe the Company made prudent decisions to control costs over the course of the quarter and, as a result, Amdocs delivered on our operating margin, non-GAAP earnings per share and cash flow targets."

Baharav continued, "To date, we are not experiencing project cancellations, but the pace of deal signings has slowed and we expect the market will remain difficult until global spending trends in communications and credit market conditions stabilize. For the second quarter of fiscal 2009, Amdocs expects that revenue will be approximately $700-$720 million which anticipates slower close rates on new projects and mostly stable trends in our recurring base of business. This outlook assumes foreign exchange rates observed in early January persist throughout the quarter and that economic conditions continue to weaken but do not deteriorate materially from what we see today. While we cannot give guidance for the second half of fiscal 2009 at this time, we are managing our expenses under the assumption that revenue for the year could be down as much as 9%-12% relative to fiscal year 2008, with foreign currency effects contributing roughly 3% of the decline."

Baharav concluded, "These are difficult times for our industry and for Amdocs, but we remain encouraged by our long-term prospects. We serve the largest, strongest service providers in the world, supporting their mission-critical activities in long-term relationships including managed services. Service providers are continuing to invest in their businesses and commit to new projects, although at a relatively slower pace today. In the meantime, we are managing with discipline to protect margins and cash flow, and we continue to invest in the growth drivers that will strengthen our market-leading position as the economy recovers."

In the first quarter Amdocs had several wins across lines of business and geographies. These wins include new business in each of our four focus areas for growth: cable/satellite, managed services, emerging markets and OSS, including the examples below.

Cable/satellite

  • Amdocs signed a multi-year contract with Rogers Communications Inc. to deploy new products and services from the Amdocs CES 7.5 portfolio to support its quad-play operations, including cable. This new agreement expands the relationship to include an enterprise-wide billing, ordering, and service management platform. Over a 10-year relationship with Rogers, Amdocs has supported Rogers' wireless billing system and also recently completed an enterprise-wide CRM deployment.
  • Another North American cable provider enhanced its billing system with Amdocs Document Designer.

Managed Services

  • Amdocs signed a new, four-year managed services agreement with a North American wireless customer to support and maintain an existing Amdocs installation.

Emerging markets and OSS

  • During the quarter, Amdocs won new contracts to provide solutions in the following product categories and geographic regions: OSS for a new customer in Latin America; CRM for a customer in the Commonwealth of Independent States region; and pre-paid billing for a new customer in Asia Pacific.

As reported, GAAP EPS per diluted share for the first quarter of fiscal 2009 was $0.35. Non-GAAP EPS per diluted share was $0.55 for the quarter (excluding acquisition-related costs which include amortization of purchased intangible assets, and excluding restructuring charges, the write-off of acquired in-process research and development and equity-based compensation expense, net of related tax effects). The restructuring charges consist primarily of severance and other employment-related obligations incurred in connection with Amdocs' measures designed to align its operational structure to its expected future activities and to improve efficiency. In addition to this charge, there was an in-process research and development write-off of $5.6 million related to the acquisition of ChangingWorlds. The strengthening of the U.S. dollar against other currencies in the quarter was responsible for approximately $30 million of the decrease in first quarter revenue as compared to revenue in the fourth quarter of fiscal 2008.

12-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 $2.40 billion at the end of the first quarter of fiscal 2009.

Financial Outlook

Amdocs expects that revenue for the second quarter of fiscal 2009 will be approximately $700-$720 million. Amdocs expects diluted earnings per share on a non-GAAP basis for the second quarter to be $0.47-$0.51, excluding acquisition-related costs and approximately $0.05-$0.06 per share of equity-based compensation expense, net of related tax effects. Amdocs estimates GAAP diluted earnings per share for the second quarter will be $0.34-$0.39.

Amdocs will host a conference call on January 21, 2009 at 5 p.m. Eastern Time to discuss the Company's first quarter results. The call will be carried live on the Internet via www.InvestorCalendar.com and the Amdocs website, www.amdocs.com.

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 service, non-GAAP research and development, non-GAAP selling, general and administrative, non-GAAP operating income, non-GAAP operating margin, non-GAAP income taxes and non-GAAP net income. These non-GAAP measures exclude the following items:

  • amortization of purchased intangible assets;
  • in-process research and development write-off;
  • restructuring 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. 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 service, non-GAAP research and development, non-GAAP selling, general and administrative, non-GAAP operating income, non-GAAP operating margin, non-GAAP income taxes and non-GAAP net income, 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, in-process research and development write-off and other, restructuring charges, 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 non-cash expenses in reviewing its results and those of its competitors, because the amounts of the expenses between companies can vary greatly depending on the assumptions used by an individual company in determining the amounts of the expenses.

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 service, research and development, selling, general and administrative, operating income, 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 Amdocs

Amdocs is the market leader in customer experience systems innovation, enabling world-leading service providers to deliver an integrated, innovative and the intentional customer experience(TM) - at every point of service. Amdocs provides solutions that deliver customer experience excellence, combining the software, service and expertise to help its customers execute their strategies and achieve service, operational and financial excellence. A global company with revenue of $3.16 billion in fiscal 2008, Amdocs has more than 17,000 employees and serves customers in more than 50 countries around the world. 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, the Company specifically disclaims any obligation to do so. These and other risks are discussed at greater length in the Company's filings with the Securities and Exchange Commission, including in our Annual Report on Form 20-F for the fiscal year ended September 30, 2008 filed on December 8, 2008.

                                  AMDOCS LIMITED
                        Consolidated Statements of Income
                       (in thousands, except per share data)

                                                    Three months ended
                                                       December 31,
                                                  ----------------------
                                                   2008             2007
                                                  ------           ------
    Revenue:
      License                                    $44,601          $26,217
      Service                                    709,238          716,033
                                                 -------          -------
                                                 753,839          742,250
    Operating expenses:
      Cost of license                                991              774
      Cost of service                            484,051          470,741
      Research and development                    56,229           56,015
      Selling, general and administrative         90,265           97,665
      Amortization of purchased intangible
       assets                                     20,254           21,753
      Restructuring charges and in-process
       research and development (1)               20,780                -
                                                 -------          -------
                                                 672,570          646,948
                                                 -------          -------
    Operating income                              81,269           95,302

    Interest income and other, net                 2,235            8,816
                                                 -------          -------
    Income before income taxes                    83,504          104,118

    Income taxes                                   9,257            8,454
                                                 -------          -------
    Net income                                   $74,247          $95,664
                                                 =======          =======
    Basic earnings per share                       $0.37            $0.46
                                                 =======          =======
    Diluted earnings per share (2)                 $0.35            $0.44
                                                 =======          =======
    Basic weighted average number of shares
     outstanding                                 202,454          208,109
                                                 =======          =======
    Diluted weighted average number of shares
     outstanding                                 212,271          222,039
                                                 =======          =======

    (1) Restructuring charges and in-process research and development for
        the three months ended December 31, 2008 includes restructuring
        charges of $15,140, and in-process research and development of
        $5,640.

    (2) To reflect the impact of assumed conversion of the convertible notes,
        $864 and $985, representing interest expense and amortization of
        issuance costs, were added back to net income for the three months
        ended December 31, 2008 and 2007 respectively, for the purpose of
        computing diluted earnings per share.




                                 AMDOCS LIMITED
                           Selected Financial Metrics
                      (in thousands, except per share data)



                                                    Three months ended
                                                        December 31,
                                                  ----------------------
                                                   2008            2007
                                                  ------          ------

    Revenue                                     $753,839        $742,250

    Non-GAAP operating income                    135,720         131,271

    Non-GAAP net income                          116,250         123,290

    Non-GAAP diluted earnings per share (1)        $0.55           $0.56

    Diluted weighted average number of shares
     outstanding                                 212,271         222,039

    (1) To reflect the impact of assumed conversion of the convertible
        notes, $864 and $985, representing interest expense and amortization
        of issuance costs, were added back to net income for the three months
        ended December 31, 2008 and 2007 respectively, for the purpose of
        computing diluted earnings per share.





                                    AMDOCS LIMITED
          Reconciliation of Selected Financial Metrics from GAAP to Non-GAAP
                                    (in thousands)

                                  Three months ended
                                  December 31, 2008
               ---------------------------------------------------------------

                                       Reconciliation items
                         ----------------------------------------------
                          Amortization  Restructuring
                              of        charges and    Equity
                           purchased    in-process     based
                           intangible   research and compensation Tax   Non-
                     GAAP    assets     development   expense    effect GAAP
               ---------------------------------------------------------------
    Operating
     expenses:
     Cost of
      license  $      991  $      -     $    -     $    -   $      -  $    991
     Cost of
      Service     484,051         -          -     (5,711)         -   478,340
     Research and
      development  56,229         -          -     (1,062)         -    55,167
     Selling,
      general
      and
      admini-
      strative    90,265          -          -     (6,644)         -    83,621
     Amortization
      of purchased
      intangible
      assets      20,254    (20,254)         -          -          -         -
     Restructuring
      charges and
      in-process
      research
      and
      development 20,780         -     (20,780)         -          -         -
               ---------------------------------------------------------------
    Total
     operating
     expenses    672,570    (20,254)   (20,780)   (13,417)         -   618,119
               ---------------------------------------------------------------
    Operating
     income      81,269      20,254     20,780     13,417          -   135,720
               ---------------------------------------------------------------

    Income
     Taxes        9,257           -          -          -     12,448    21,705
               ---------------------------------------------------------------
    Net income $ 74,247     $20,254     $20,780    $13,417  $(12,448) $116,250
               ---------------------------------------------------------------



                                 Three months ended
                                  December 31, 2007
               ---------------------------------------------------------------
                                       Reconciliation items
                              ------------------------------------

                               Amortization
                                    of
                                Purchased    Equity-based
                                intangible   compensation   Tax
                         GAAP     assets       expense     effect   Non-GAAP
                    ----------------------------------------------------------

    Operating expenses:
    Cost of license  $    774    $     -       $     -    $     -   $    774
    Cost of service   470,741          -        (6,282)         -    464,459
    Research and
     Development       56,015          -        (1,376)         -     54,639
    Selling, general
     and
     administrative    97,665          -        (6,558)         -     91,107
    Amortization of
     purchased
     intangible
     assets            21,753    (21,753)            -          -          -
                  ----------------------------------------------------------
    Total operating
     Expenses         646,948    (21,753)      (14,216)         -    610,979
                  ----------------------------------------------------------
    Operating income   95,302     21,753        14,216          -    131,271
                  ----------------------------------------------------------
    Income taxes        8,454          -             -      8,343     16,797
                  ----------------------------------------------------------
    Net income       $ 95,664    $21,753       $14,216    $(8,343)  $123,290
                  ----------------------------------------------------------



                                    AMDOCS LIMITED
                       Condensed Consolidated Balance Sheets
                                    (in thousands)


                                                           As of
                                               ------------------------------
                                               December 31,     September 30,
                                                  2008               2008
                                              -------------     -------------
    ASSETS

    Current assets
    Cash, cash equivalents and short-term
     interest-bearing investments               $1,279,827        $1,244,378
    Accounts receivable, net, including
     unbilled of $54,926 and $48,264
     respectively                                  539,968           573,764
    Deferred income taxes and taxes receivable      93,932            84,515
    Prepaid expenses and other current assets      104,506           102,930
                                              -------------     -------------
      Total current assets                       2,018,233         2,005,587

    Equipment, vehicles and leasehold
     improvements, net                             302,941           317,081
    Goodwill and other intangible assets, net    1,831,449         1,796,922
    Other noncurrent assets                        441,720           459,473
                                              -------------     -------------
    Total assets                                $4,594,343        $4,579,063
                                              =============     =============

    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current liabilities
    Accounts payable and accruals                 $608,591          $600,285
    Short-term portion of capital lease
     obligations and other financing arrangements    4,435             1,660
    Deferred revenue                               150,368           197,851
    Deferred income taxes and taxes payable         40,022            30,228
                                              -------------     -------------
      Total current liabilities                    803,416           830,024

    0.50% Convertible notes                        350,000           450,000
    Long-term loan                                 100,000                 -
    Noncurrent liabilities and other               467,324           493,848
    Shareholders' equity                         2,873,603         2,805,191
                                              -------------     -------------
    Total liabilities and shareholders'
     equity                                     $4,594,343        $4,579,063
                                              =============     =============




                                      AMDOCS LIMITED
                          Consolidated Statements of Cash Flows
                                      (in thousands)


                                            Three months ended December 31,
                                            -------------------------------
                                                2008                2007
                                            -----------         -----------

    Cash Flow from Operating Activities:
    Net income                                $ 74,247            $ 95,664
    Reconciliation of net income to net
     cash provided by operating activities:
     Depreciation and amortization              48,762              46,706
     In-process research and development         5,640                   -
     (Gain) loss on sale of equipment              (41)                106
     Equity-based compensation expense          13,417              14,216
     Deferred income taxes                         744              (9,192)
     Gain on repurchase of convertible notes    (2,112)                  -
     Excess tax benefit from equity-based
      Compensation                                  (1)                (65)
     Loss (gain) from short-term
      interest-bearing investments               1,442                (332)
    Net changes in operating assets and
     liabilities, net of amounts acquired:
     Accounts receivable                        34,495             (64,121)
     Prepaid expenses and other current assets     900              (2,449)
     Other noncurrent assets                    18,461              (7,345)
     Accounts payable, accrued expenses
      and accrued personnel                     24,885               4,516
     Deferred revenue                          (50,011)             17,168
     Income taxes payable                       (4,614)             (5,560)
     Noncurrent liabilities and other          (24,928)              3,834
                                             -----------         -----------
    Net cash provided by operating activities  141,286              93,146
                                             -----------         -----------

    Cash Flow from Investing Activities:
    Proceeds from sale of equipment,
     vehicles and leasehold improvements           123                 284
    Payments for purchase of equipment,
     vehicles and leasehold improvements       (30,235)            (34,509)
    Proceeds from sale of short-term
     interest-bearing investments              113,570             155,018
    Purchase of short-term interest-bearing
     investments                              (248,538)           (176,149)
    Net cash paid for acquisition              (55,543)             (9,069)
                                             -----------         -----------
    Net cash used in investing activities     (220,623)            (64,425)
                                             -----------         -----------

    Cash Flow from Financing Activities:
    Borrowing under long-term financing
     arrangements                              100,000                   -
    Repurchase of convertible notes            (97,888)                  -
    Repurchase of shares                       (20,014)            (69,332)
    Proceeds from employee stock options
     exercised                                   1,109               6,444
    Borrowing under short-term financing
     arrangements                                  540                   -
    Excess tax benefit from equity-based
     compensation                                    1                  65
                                             -----------         -----------
    Net cash used in financing activities      (16,252)            (62,823)
                                             -----------         -----------

    Net decrease in cash and cash equivalents  (95,589)            (34,102)
    Cash and cash equivalents at beginning
     of period                                 718,850             615,501
                                             -----------         -----------
    Cash and cash equivalents at end
     of period                                $623,261            $581,399
                                             ===========         ===========

    Supplementary Cash Flow Information
    Cash paid for:
      Income taxes, net of refunds             $9,730              $22,118
      Interest                                    267                  537



                                       AMDOCS LIMITED
                                  Supplementary Information
                                       (in millions)

                  ----------------------------------------------------------
                                       Three months ended
                  ----------------------------------------------------------
                  December 31, September 30, June 30, March 31, December 31,
                      2008         2008        2008      2008        2007
                  ------------ ------------- -------- --------- ------------
     North America     $561.6        $558.7   $570.5    $541.5       $500.6
     Europe             111.4         150.9    133.0     135.8        128.4
     Rest of World       80.8         115.7    116.8      97.0        113.3
                  ------------ ------------- -------- --------- ------------
    Total Revenue      $753.8        $825.3   $820.3    $774.3       $742.3
                  ============ ============= ======== ========= ============


                  ----------------------------------------------------------
                                       Three months ended
                  ----------------------------------------------------------
                  December 31, September 30, June 30, March 31, December 31,
                     2008          2008        2008      2008       2007
                  ------------ ------------- -------- --------- ------------
     Customer
      Experience
     Systems           $701.0        $756.5   $756.9    $708.2       $672.8
     Directory           52.8          68.8     63.4      66.1         69.5
                  ------------ ------------- -------- --------- ------------
    Total Revenue      $753.8        $825.3   $820.3    $774.3       $742.3
                  ============ ============= ======== ========= ============

                  ----------------------------------------------------------
                                               As of
                  ----------------------------------------------------------
                   December 31, September 30, June 30, March 31, December 31,
                      2008         2008         2008     2008       2007
                  ------------ ------------- -------- --------- ------------
    12-Month
     Backlog      $      2,400 $       2,420 $  2,420 $   2,360 $      2,300
                  ------------ ------------- -------- --------- ------------

SOURCE Amdocs Limited



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