Luxoft Holding, Inc (NYSE:LXFT), a leading provider of software
development services and innovative IT solutions to a global client
base, today announced results for the three months ended June 30,
2017.
Highlights – Three Months Ended June 30, 2017
- US GAAP revenue amounted to $209.2
million, an increase of 17.5% year over year
- Adjusted earnings before interest,
taxes, depreciation and amortization (EBITDA) were $26.4 million
and adjusted EBITDA margin was 12.6%, compared to $29.6 million and
16.6% in the year-ago quarter
- Diluted EPS on a US GAAP basis was
$0.18, compared to $0.42 in the year-ago quarter
- Diluted EPS on a non-GAAP basis was
$0.50, compared to $0.62 in the year-ago quarter
- As of June 30, 2017, the total number
of employees was 12 814, revenue per billable engineer has
increased to $75.9 thousand.
Revenue for the three months ended June 30, 2017 increased to
$209.2 million, up 17.5% from $ 178.0 million for the same period a
year ago, and increased 2.5% sequentially. Adjusted EBITDA was
$26.4 million with corresponding margins of 12.6%, as compared to
$29.6 million and 16.6%, respectively, in the year ago quarter. US
GAAP net income was $6.3 million, or $0.18 per diluted share,
compared to $14.1 million and $0.42 per diluted share for the same
period a year ago, and $13.7 million and $0.40 sequentially.
Non-GAAP net income was $17.1 million, or $0.50 per diluted share,
compared to $21.0 million and $0.62 per diluted share for the same
period a year ago, and $21.5 million and $0.63 sequentially.
Reconciliations between non-GAAP financial measures and US GAAP
operating results and diluted EPS are included at the end of this
release.
"We posted a top line growth for the quarter below 20%, impacted
by the expected deceleration in the top two accounts. Additional
headwinds came from seasonal weakness, decision making slowdown in
the financial services vertical, and softer growth within two large
M&A-related customers, affected by their internal
reorganizations. Despite of that, outside of the top two accounts
the business posted a strong annual growth in excess of 55%. We are
expanding offerings in Automotive, Healthcare and Digital
Enterprise, where we see demand for high complexity digital
innovation and cloud deployments, which is a part of our current
backlog,” said Dmitry Loschinin, Luxoft's CEO and President. “As we
continue to diversify our business, we are pleased to see success
across a broad client base and a further increase in our revenue
per billable employee, while top 3 client concentration decreases
16% year over year. Financial year 2018 is a pivotal year for our
company, with a lot of moving parts, some challenges, yet really
exciting changes and business opportunities."
The company’s following verticals experienced revenue growth,
with Telecom and Automotive delivering the strongest performance of
157.1% and 38.0%, respectively, on a year over year basis.
Financial Services decreased 7.3%, compared to the year ago
quarter.
The company exhibited solid performance across the following
core revenue-generating geographies: revenues generated in North
America increased 66.3% and revenues generated in Europe increased
23.4%. This quarter the company changed its methodology for
reporting revenue breakdown by geography, merging some of the
locations previously reported on the stand-alone basis. This
methodology will be consistently applied going forward.
"We are pleased to report good double digit growth in the first
quarter, most of which was delivered by strong performance of high
potential accounts, which comprise 37% of total revenues for this
period. This year we continue seeing some headwinds on our gross
margin side, primarily driven by investments associated with
development of our high potential accounts, which, while growing in
revenue concentration, have not yet reached firm-wide average gross
margin levels. Our profitability is also affected by rebalancing of
the client portfolio and initially lower margin accounts that
usually come from the acquisitions," stated Evgeny Fetisov, Chief
Financial Officer. "We have a solid pipeline of new opportunities
and a continued strong performance of the HPA base, now consisting
of 50 accounts. Thus, we expect the pace of organic growth to
improve as compared to last year to above 30% outside of top 2
accounts. In the upcoming quarters we also anticipate to post
improved adjusted EBITDA and net income."
Outlook for the Financial Year Ending March 31, 2018
- Revenue is expected to be at least $920
MM, revised down from originally announced $943 million, which
represents an increase of at least 17.1% year over year
- Adjusted EBITDA margin is expected to
be in the range of 15.5% - 16.5%, revised from previous guidance of
17.0% - 19.0%
- Diluted EPS on GAAP basis is expected
to be at least $1.53, and diluted EPS on a non-GAAP basis at least
$2.85
- EPS is based on an estimated weighted
average of 35,051 thousand diluted shares
Conference Call Information
A conference call will be conducted with the members of Luxoft's
senior management at 8:00 a.m. EDT on Friday, August 11, 2017 to
review the financial and operational performance of the company for
the above-mentioned period.
To participate in the conference call please dial 877-407-8293
(for domestic U.S. callers) or 201-689-8349 (for international
callers). A live webcast will also be available during the call and
can be accessed at
http://edge.media-server.com/m/p/ek9zw46c/lan/en. Participants,
please access the website at least 10 minutes prior to the call to
register and follow the instructions provided on the website to
download and install the necessary applications.
If you are unable to join our live event, a replay will be
available by dialing 877-660-6853 (for domestic U.S. callers) or
201-612-7415 (for international callers) and entering the
conference ID# 13666208. The replay will be available from two
hours as of the end of the call and up to 11:59 p.m. EDT on August
25, 2017. The replay will also be available at Luxoft's Investor
Relations portal for 14 days following the call.
About Luxoft
Luxoft Holding, Inc (NYSE:LXFT) is a leading provider of
software development services and innovative IT solutions to a
global client base consisting primarily of large multinational
corporations. Luxoft's software development services consist of
core and mission critical custom software development and support,
product engineering and testing, and technology consulting. Through
its services and solutions, Luxoft helps clients improve their
competitive position by increasing efficiency, optimizing costs,
and enabling changes through disruptive digital technologies that
enhance end-user experience and shorten time-to-market.. The
Company develops its solutions and delivers its services from 35
dedicated delivery centers worldwide. It has over 12 800 employees
across 40 cities and 19 countries in North America, Mexico, Western
and Eastern Europe, Asia Pacific, and South Africa. Luxoft is
incorporated in Tortola, British Virgin Islands, has its operating
headquarters office in Zug, Switzerland and is listed on the New
York Stock Exchange. For more information, please visit
http://www.luxoft.com.
Non-GAAP Financial Measures
To supplement our financial results presented in accordance with
US GAAP, this press release includes the following measures defined
by the Securities and Exchange Commission as non-GAAP financial
measures: earnings before interest, tax, depreciation and
amortization (EBITDA); adjusted EBITDA; non-GAAP net income;
non-GAAP diluted Earnings per share (EPS) and Free Cash Flow (FCF).
EBITDA is calculated as earnings before interest, tax, depreciation
and amortization, where interest includes unwinding of the discount
rate for contingent liabilities. Prior year amounts were amended
accordingly. Non-GAAP net income and non-GAAP EPS exclude
stock-based compensation expense, amortization of fair value
adjustments to intangible assets and impairment thereof and other
acquisitions related costs that may include changes in the fair
value of contingent consideration liabilities. Non-GAAP diluted EPS
are calculated as non-GAAP net income divided by weighted average
number of diluted shares. Free Cash Flow is calculated as operating
cash flow less capital expenditure which consists of purchases of
property, plant and equipment and intangible assets as defined in
the cash flow statement.
We adjust our non-GAAP financial measures to exclude stock based
compensation, because it is a non-cash expense. We also adjust our
non-GAAP financial measures to exclude the change in fair value of
contingent consideration, because we believe these expenses are not
indicative of what we consider to be normal course of operations.
Our non-GAAP financial measures are adjusted to exclude
amortization of purchased intangible assets in order to allow
management and investors to evaluate our results from operating
activities as if these assets have been developed internally rather
than acquired in a business combination. Finally, we adjust our
non-GAAP financial measures to exclude acquisition-related costs,
which comprise payments to consulting firms as well as fees paid
upon successful completion of acquisition; as well as certain
incentive payments for members of management of the acquired
companies as provided for in the acquisition agreements. These
payments are based on performance of the acquired businesses and
are classified as part of management compensation rather than part
of purchase consideration. These costs vary with the size and
complexity of each acquisition and are generally inconsistent in
amount and frequency, and therefore, we believe that they may not
be indicative of the size and volume of future acquisition-related
costs.
We provide these non-GAAP financial measures because we believe
that they present a better measure of our core business and
management uses them internally to evaluate our ongoing
performance. Accordingly, we believe that these non-GAAP measures
are useful to investors in enhancing and understanding of our
operating performance. These non-GAAP measures should be considered
in addition to, and not as a substitute for, comparable US GAAP
measures. The non-GAAP results and a full reconciliation between US
GAAP and non-GAAP results are provided in the accompanying tables
at the end of this press release.
Forward-Looking Statements
In addition to historical information, this release contains
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, Section 27A of the
Securities Act of 1933, and Section 21E of the Securities Exchange
Act of 1934. These forward-looking statements include information
about possible or assumed future results of our business and
financial condition, as well as the results of operations,
liquidity, plans and objectives. In some cases, you can identify
forward-looking statements by terminology such as "believe," "may,"
"estimate," "continue," "anticipate," "intend," "should," "plan,"
"expect," "predict," "potential," or the negative of these terms or
other similar expressions. These statements include, but are not
limited to, statements regarding: the persistence and
intensification of competition in the IT industry; the future
growth of spending in IT services outsourcing generally and in each
of our industry verticals, application outsourcing and custom
application development and offshore research and development
services; the level of growth of demand for our services from our
clients; the level of increase in revenues from our new clients;
seasonal trends and the budget and work cycles of our clients;
general economic and business conditions in our locations,
including geopolitical instability and social, economic or
political uncertainties, particularly in Russia and Ukraine, and
any potential sanctions, restrictions or responses to such
conditions imposed by some of the locations in which we operate;
the levels of our concentration of revenues by vertical, geography,
by client and by type of contract in the future; the expected
timing of the increase in our corporate tax rate, or actual
increases to our effective tax rate which we may experience from
time to time; our expectations with respect to the proportion of
our fixed price contracts; our expectation that we will be able to
integrate and manage the companies we acquire and that our
acquisitions will yield the benefits we envision; the demands we
expect our rapid growth to place on our management and
infrastructure; the sufficiency of our current cash, cash flow from
operations, and lines of credit to meet our anticipated cash needs;
the high proportion of our cost of services comprised of personnel
salaries; our plans to introduce new products for commercial resale
and licensing in addition to providing services; our anticipated
joint venture with one of our clients; and our continued financial
relationship with IBS Group Holding limited and its subsidiaries
including expectations for the provision and purchase of services
and purchase and lease of equipment; and other factors discussed
under the heading "Risk Factors" in the Annual Report on Form 20-F
for the year ended March 31, 2017 and other documents filed with or
furnished to the Securities and Exchange Commission. Except as
required by law, we undertake no obligation to publicly update any
forward-looking statements for any reason after the date of this
press release whether as a result of new information, future events
or otherwise.
LUXOFT HOLDING, INC
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands of US dollars, except share
amounts)
June 30, As of March 31, 2017
2017 (Unaudited) Assets Current assets
Cash and cash equivalents $ 98,267 $ 109,558 Restricted cash,
current 4,071 4,000
Trade accounts receivable, net of
allowance for doubtful accountsof $715 at June 30, 2017 and $435 at
March 31, 2017
144,904
144,862
Unbilled revenue 29,121 14,454 Work-in-progress 6,063 2,805 Due
from related parties 948 1,084 VAT and other taxes receivable 1,746
1,732 Advances issued 3,216 2,740 Other current assets 6,434
5,224
Total current assets 294,770
286,459 Non-current assets Restricted
cash, non-current 1,399 1,399 Deferred tax assets 4,208 3,423
Property and equipment, net 47,544 49,571 Intangible assets, net
116,142 120,430 Goodwill 76,918 76,918 Other non-current assets
8,477 9,007
Total non-current assets
254,688 260,748 Total assets $
549,458 $ 547,207 Liabilities and
shareholders’ equity Current liabilities Short-term
borrowings $ 646 $ 633 Accounts payable 18,253 24,402 Accrued
liabilities 39,055 38,513 Deferred revenue 9,075 3,815 Due to
related parties 549 460 VAT and other taxes payable 19,379 21,283
Payable under foreign exchange contracts 3,007 295 Payable for
acquisitions, current 16,740 17,221 Other current liabilities
1,920 2,025
Total current liabilities
108,624 108,647 Deferred tax liability,
non-current 16,609 16,907 Contingent payable for software
acquisition, non-current 19,818 32,206 Other non-current
liabilities 2,624 2,629
Total liabilities
147,675 160,389 Shareholders’
equity
Share capital (80,000,000 shares
authorized; 33,690,359 issued andoutstanding with no par value as
at June 30, 2017, and 80,000,000shares authorized; 33,540,034
issued and outstanding with no par valueas at March 31, 2017)
—
—
Additional paid-in capital 143,820 133,192
Common stock held in treasury, at cost
(122,013 shares as ofJune 30, 2017; 93,813 shares as of March 31,
2017)
(7,945)
(6,028)
Retained earnings 269,825 263,508 Accumulated other comprehensive
loss (3,949) (3,886)
Total shareholders’ equity
attributable to the Group 401,751
386,786 Non-controlling interest 32
32 Total equity 401,783
386,818 Total liabilities and equity $
549,458 $ 547,207
LUXOFT HOLDING, INC
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME
(In thousands of US dollars, except share
and per share amounts)
For the three months ended June 30,
2017 2016 Unaudited
Sales of services $ 209,242 $
178,049 Operating expenses Cost of services
(exclusive of depreciation and amortization) 135,599 105,752
Selling, general and administrative expenses 58,063 48,924
Depreciation and amortization 10,730 7,235 Gain from revaluation of
contingent liability (1,220) (400)
Operating
income 6,070 16,538 Other
income and expenses Interest income, net 17 32 Unwinding of
discount rate for contingent liability (801) (117) Other gains, net
489 407 Gain from foreign currency exchange contract 92 391 Net
foreign exchange gain/ (loss) 1,480 (667)
Income
before income taxes 7,347 16,584 Income tax
expense (1,030) (2,504)
Net income $
6,317 $ 14,080 Net (income)/loss attributable
to the non-controlling interest — —
Net income
attributable to the Group $ 6,317 $
14,080 Basic EPS per Class A and Class B ordinary
share Net income attributable to the Group per ordinary
share $ 0.19 $ 0.42 Weighted
average ordinary shares outstanding 33,503,344
33,199,856 Diluted EPS per Class A and
Class B ordinary share Diluted net income attributable to
the Group per ordinary share $
0.18
$ 0.42 Diluted weighted average ordinary shares
outstanding 34,297,049 33,875,832
LUXOFT HOLDING, INC
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME
(In thousands of US dollars)
For the three months ended June 30, 2017
2016 Unaudited Net income $
6,317 $ 14,080 Other comprehensive
income/(loss) income, net of tax (Losses)/gains on derivative
instruments, net of tax effect of $(102) and $144
(733)
863
Translation adjustments with no tax effects 670 (905)
Total
other comprehensive loss (63) (42)
Comprehensive income 6,254
14,038 Comprehensive income (income)/loss
attributable to the non-controlling interest
—
—
Comprehensive income attributable to the Group $
6,254 $ 14,038
LUXOFT HOLDING, INC
CONDENSED CONSOLIDATED STATEMENT OF
CASH FLOW
(In thousands of US dollars)
For the three months ended ended June 30,
2017 2016 (unaudited) Operating
activities Income from operations
$ 6,317
$ 14,080 Adjustments to reconcile net income
to net cash provided by operating activities: Depreciation and
amortization 10,730 7,235 Deferred tax benefit (917) (281) Foreign
currency exchange contracts income (92) (391) (Income)/ loss on
foreign exchange (1,480) 667 Provision for doubtful accounts 267
233 Gain from revaluation of contingent liability (1,220) (400)
Unwinding of discount rate for contingent liability 801 117
Share-based compensation 8,052 4,860 Changes in operating
assets and liabilities: Trade accounts receivable and unbilled
revenue (12,257) (1,042) Work-in-progress (3,258) (1,170) Due to
and from related parties 225 273 Accounts payable and accrued
liabilities (986) 8,003 Deferred revenue 5,253 (30) Changes in
other assets and liabilities (1,192) 501
Net cash provided by
operating activities 10,243 32,655
Investing activities Purchases of property and equipment
(6,285) (3,169) Purchases of intangible assets (1,038) (909)
Net
cash used in investing activities (7,323) (4,078)
Financing activities (Net repayment)/proceeds from of
short-term borrowings (13) 143 Acquisition of business, deferred
consideration (12,707) (4,207) Repurchases of common stock (1,982)
(930) Repayment of capital lease obligations (58) (15)
Net cash
used in financing activities (14,760) (5,009)
Effect of exchange rate changes on cash and cash equivalents
549 (325)
Net (decrease)/ increase in cash and cash
equivalents (11,291) 23,243 Cash and cash
equivalents at beginning of year 109,558 108,545
Cash and cash equivalents at end of period $
98,267 $ 131,788
Luxoft Holding, Inc
Reconciliations of Non-GAAP Financial Measures to Comparable
GAAP Measures (Unaudited) (In thousands of US dollars, except
per share amounts and percentages)
Three Months Ended
June 30, 2017 2017 2017 GAAP
Adjustments Non-GAAP Operating income 6,070
11,904 (a) 17,974 Operating margin 2.9 % 5.7 %
8.6 %
Net income 6,317 10,803
(b) 17,120 Diluted earnings per share $ 0.18
$ 0.50
Three Months Ended June 30, 2016
2016 2016 GAAP Adjustments
Non-GAAP Operating income 16,538 7,817 (a)
24,355 Operating margin 9.3 % 4.4 % 13.7 %
Net
income 14,080 6,942 (b)
21,022 Diluted earnings per share $ 0.42 $ 0.62
Luxoft Holding, Inc
Reconciliations of Non-GAAP Financial
Measures to Comparable GAAP Measures
(Unaudited)
(In thousands of US dollars, except per share amounts and
percentages)
Three Months Ended June 30,
(a) 2017 2016 Adjustments to GAAP operating
income Stock-based compensation expense $ 8,052 $ 4,860
Amortization of purchased Intangible assets 4,373 2,107 Gain from
revaluation of contingent liability (1,220) (400) Acquisition
related costs 699 1,250
Total Adjustments to GAAP
income from operations: $ 11,904 $
7,817 Three Months Ended June 30,
(b) 2017 2016 Adjustments to GAAP net
income Stock-based compensation expense $ 8,052 $ 4,860
Amortization of purchased Intangible assets 4,373 2,107
Gain from revaluation of contingent
liability and unwindingof discount rate for contingent
liability
(419)
(283)
Acquisition related costs 699 1,250 Tax effect of the adjustments
(1,902) (992)
Total Adjustments to GAAP net
income $ 10,803 $ 6,942
Three Months Ended June 30, 2017
2016 Net income $ 6,317 $
14,080 Adjusted for: Interest Income (17) (32) Unwinding of
discount rate for contingent liability 801 117 Income tax 1,030
2,504 Depreciation and Amortization 10,730 7,235
EBITDA $ 18,861 $ 23,904
Adjusted for Stock-based compensation 8,052 4,860 Gain from
revaluation of contingent liability (1,220) (400) Acquisition
related costs 699 1,250
Adjusted EBITDA
$ 26,392 $ 29,614
Luxoft Holding, Inc
Schedule of supplemental
information
(Unaudited)
(In thousands; except percentages)
Revenue for the three Months
Ended June 30, 2017 2016 Client
location Amount % of sales Amount % of
sales North America $ 79,826 38.2 % $ 47,996 27.0 % Europe
(excl. UK) 65,501 31.3 % 53,065 29.8 % UK 48,129 23.0 % 61,120 34.3
% Russia 7,562 3.6 % 6,945 3.9 % APAC 7,025 3.4 % 7,849 4.4 % Other
1,199 0.5 % 1,074 0.6 %
Total $
209,242 100.0 % $ 178,049
100.0 %
Revenue for the three Months Ended June
30,
2017 2016 Industry vertical
Amount % of sales Amount % of sales
Financial Services $ 113,470 54.2 % $ 122,367 68.7 % Automotive and
transport 35,134 16.8 % 25,452 14.3 % Digital 25,831 12.3 % 19,872
11.2 % Telecom 25,543 12.2 % 9,934 5.6 % Healthcare 8,733 4.2 % — —
% Other 531 0.3 % 424 0.2 %
Total $
209,242 100.0 % $ 178,049
100.0 %
LUXOFT HOLDING, INC
Reconciliations of Non-GAAP
Forward-looking Financial Measures
to Comparable GAAP Forward-looking
Measures
(Unaudited)
(In thousands of US dollars, except share,
per share amounts and percentages)
Year EndedMarch 31, 2018 Revenue
$ 920,000 Net income $
53,488 Adjusted for: Interest Expense (242) Income tax 8,707
Depreciation and Amortization 46,359
EBITDA $
108,312 Adjusted for: Stock based compensation 29,501 Loss
from revaluation of contingent liability 682 Acquisition related
costs 5,248
Adjusted EBITDA $ 143,743 Adjusted
EBITDA margin 15.6 %
Net income $
53,488 Adjusted for: Stock-based compensation expense 29,501
Amortization of purchased Intangible assets 19,681 Loss from
revaluation of contingent liability 682 Acquisition related costs
5,248 Tax effect of the adjustments (8,672)
Total adjustments to
Net Income $ 46,440 Adjusted Net Income
$ 99,928 Diluted weighted average ordinary shares
outstanding 35,051,297
Adjusted EPS $ 2.85
Year Ended March 31, 2018 GAAP
Adjustments Non-GAAP Net income
$ 53,488 $ 46,440 $
99,928 Diluted earnings per share $ 1.53 $ 2.85
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170810006288/en/
Luxoft Holding, IncAlina V. Plaia, +1-212-964-9900 ext.
2404Vice-President of Global Communications &
IROIR@luxoft.com
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