Amdocs (DOX) Q2 Earnings & Revenues Top Estimates, View Up

Amdocs Limited (NASDAQ:DOX) reported second-quarter fiscal 2019 results, wherein the top line and bottom line beat estimates.

Quarterly non-GAAP earnings came in at $1.06 per share, up from 95 cents in the year-ago quarter. The bottom line also beat the Zacks Consensus Estimate of $1.03. The figure matched the high end of the company’s guided range of $1 to $1.06.

Revenues for the reported quarter came in at $1.020 billion, beating the consensus estimate of $1.016 billion, and improving 2.8% year over year. The top line also came within the company’s guided the range of $995-$1.035 billion.

Continued flow of new customers, penetration into new regions and awards for projects and managed services drove revenue growth. A positive impact of nearly $2 million year over year in foreign currency movements was a tailwind.

Quarter Details

Region wise, revenues from North America (62.2% of total) were $634.2 million, up 1.6% from the year-ago quarter driven by digital modernization requirements of many of Amdocs’ communications, Pay TV and media customers. Europe (14.8%) recorded revenues of $151 million, up 1.6%. Rest of the World (13%) generated revenues of $234.5 million, up 6.8%.

During the quarter, Amdocs worked with T-Mobile (NYSE:S) and Sprint (NYSE:S) , assuming the planned merger proceeds. Recently, Amdocs announced that it is rolling out the DigitalONE platform to modernize and accelerate Sprint’s digital transformation.

Amdocs’ partnership with AT&T (NYSE:T) remains strong. Growth areas within AT&T Mobile, such as Cricket prepaid in Mexico, saw significant value addition by Amdocs during the quarter.

Deal wins, including the one with Veon and a Tier 1 service provider in Spain, drove revenue growth in Europe. Additionally, in France, the company won a key modernization project for a major operator. Extension of managed services agreements with several customers, including Vodafone (LON:VOD) Hungary, and partnerships with Capita plc to provide digital business systems were tailwinds.

Revenues from Rest of the World were driven by the ramp up of new activities in APAC country, such as the Philippines, Malaysia, Australia and Latin America.

During the quarter, Amdocs was chosen by Telefonica (MC:TEF) to support the launch of eSIM equipped smartphone and other devices for Vivo in Brazil.

Additionally, the company was selected as a strategic partner to digitally transform the billing system and the processes of Safaricom enterprise billing division, based in Nairobi.

Moreover, Amdocs was selected to support the digital business of certain areas of India’s entertainment platform, Eros Now.

Management is optimistic about the 12-month backlog that reached $3.39 billion at the end of the quarter, increasing $20 million sequentially. The company continued to aid digital, media and network transformations of its clients, which improved its revenue growth rate.

Margins and Operating Metrics

The company incurred non-GAAP operating expenses of $842 million, up 2.6% from the year-ago quarter.

Non-GAAP operating income increased 3.5% to $177.8 million.

Operating margin of 17.4% for the quarter expanded 10 basis points year over year.

Balance Sheet & Cash Flow

As of Mar 31, 2018, Amdocs had cash, cash equivalents and short-term interest-bearing investments of $449.7 million compared with $458.7 million recorded in the prior quarter.

During the fiscal second quarter, the company repurchased shares worth $120 million. Also, its board of directors recently approved payment of a quarterly dividend of $0.285 per share. The dividend will be paid on Jul 19, 2019.

Outlook

For third-quarter fiscal 2019, Amdocs expects revenues in the range of $1.005-$1.045 billion, and adjusted earnings per share in the band of $1.08 to $1.14.

For fiscal 2019, the company raised its revenue guidance on a reported basis. It now expects revenues to grow 1.8-3.8% year over year compared with 0.5-4.5% rise expected earlier.

Amdocs also revised its revenue guidance on a constant currency basis. It expects revenue growth between 3% and 5% compared with 2-6% projected earlier. This guidance takes into account 1.2% year-over-year negative impact of foreign exchange fluctuations.

The company continues to expect non-GAAP earnings per share growth of 4.55-8.5% year over year, up from the earlier guided range of 3-7% rise.

Amdocs currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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