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Amdocs (DOX) Q3 Earnings and Revenues Top Estimates, Up Y/Y

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Amdocs (DOX - Free Report) reported solid third-quarter fiscal 2021 results on Wednesday, wherein its revenues and earnings surpassed the respective Zacks Consensus Estimate and marked significant year-over-year improvements. The company reported third-quarter non-GAAP earnings of $1.35 per share, which beat the consensus mark of $1.18 and came way higher than management’s previous guided range of $1.14-$1.20.

The bottom-line results also marked a year-over-year improvement of 26.2%, mainly driven by increased revenues, efficient cost management and benefits from the favorable impact of certain tax-optimization strategies across some of its operating jurisdiction.

Revenues of $1.07 billion marginally outpaced the consensus mark of $1.06 billion and came in above the mid-point of its earlier guided range of $1.04-$1.08 billion. Compared with the year-ago quarter, revenues were up 3.9% on a reported basis and 1.9% on a constant currency basis.

The year-over-year increase in the top line reflects benefits from accelerated multi-year investments around 5G modernization and cloud migration by customers. Positive impact of favorable foreign-currency fluctuations of approximately $3 million also boosted quarterly revenues.

Amdocs Limited Price, Consensus and EPS Surprise Amdocs Limited Price, Consensus and EPS Surprise

Amdocs Limited price-consensus-eps-surprise-chart | Amdocs Limited Quote

Quarterly Details

North America revenues (64.3% of total revenues) of $686.1 million remained flat, year over year.

Europe revenues (14.6% of total revenues) of $155.7 million increased 7.1%, year over year. Rest of the World revenues (21.1% of total revenues) grew 15.2%, year over year, to $224.5 million.

Managed services revenues climbed 7.6%, year over year, to $650.5 million.

The company ended the fiscal third quarter with a 12-month backlog of $3.59 billion, up $50 million, sequentially, and 10.8%, year on year.

Non-GAAP research & development expenses, as a percentage of revenues, expanded 70 basis points (bps) on a year-over-year basis to 7.5%.

However, non-GAAP selling, general & administrative expenses, as a percentage of revenues, flared up 60 bps year over year to 10.8%.

Operating margin expanded 50 bps year over year to 17.6%.

Balance Sheet and Cash Flow

Amdocs had cash and short-term investments of $1.05 billion as of Jun 30, 2021, compared with $1.16 billion as of Mar 31, 2021.

Net cash provided by operating activities was $189.9 million, down from the $536.2 million recorded in the previous quarter and up from the $186.7 million seen in the year-ago period.

Free cash flow was $139.6 million compared with the previous quarter’s $133 million and the year-earlier quarter’s $145.4 million.

During the fiscal third quarter, the company repurchased shares worth $90 million. Amdocs’ board also approved a quarterly cash dividend payment of 36 cents per share. The dividends will be paid out on Oct 29 to the shareholders of record date as of Sep 30, 2021.

Guidance

Buoyed by the better-than-expected fiscal third-quarter results, Amdocs raised its fiscal 2021 outlook. The company now anticipates revenues of 2.3-3.3% compared with the previous forecast of1-4%. At cc, revenues are projected to grow in the band of 1.3-2.3% year over year versus the earlier projection of 0-3%.

The updated fiscal 2021 outlook continues to reflect the divestiture of the OpenMarket business and positive foreign-currency impact of 1%.

Adjusted earnings are now estimated to grow between 7.6% and 9%, up from the 6-9% projected earlier.

For the fiscal fourth quarter, the company projects revenues between $1,065 million and $1,105 million and adjusted earnings in the range of $1.13-$1.19 per share.

Zacks Rank & Stocks to Consider

Amdocs currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the broadCadence Design Systems (er technology sector include Microsoft (MSFT - Free Report) , Cadence Design Systems (CDNS - Free Report) and Texas Instruments (TXN - Free Report) , all carrying a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The long-term earnings growth rate for Microsoft, Cadence Design and Texas Instruments is currently pegged at 11.5%, 11.7% and 9.3%, respectively.