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 and nine months ended December 31, 2015.
Highlights – Three Months Ended December 31, 2015
- US GAAP revenue on the reported basis amounted to $171.9 million, an increase of 18.0% year over year and 6.4% sequentially
- US GAAP revenue on the constant currency basis amounted to $181.4 million, an increase of 24.5% year over year and 7.7% sequentially
- Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $32.8 million and EBITDA margin was 19.1%, compared to $35.6 million and 24.4% in the year ago quarter and $37.0 million and 22.9% sequentially
- Diluted earnings per share (EPS) on a US GAAP basis was $0.52, compared to $0.73 in the year-ago quarter and $0.67 sequentially
- Diluted EPS on a non-GAAP basis was $0.72, compared to $0.81 in the year-ago quarter, and $0.84 sequentially
Highlights – Nine Months Ended December 31, 2015
- US GAAP revenue amounted to $481.5 million, an increase of 25.7% year over year
- US GAAP revenue on the constant currency basis amounted to $518.4 million, an increase of 35.3% year over year
- Adjusted EBITDA was $96.9 million and EBITDA margin was 20.1%, compared to $79.0 million and 20.6% for the same period last year
- Diluted EPS on a US GAAP basis was $1.62, compared to $1.64 in the nine months of last year
- Diluted EPS on a non-GAAP basis was $2.16, compared to $1.82 in the nine months of last year
- High Potential Account group generated revenues in access of $110 million, an increase of over 170% year over year
- Top customer client concentration decreased 9.9% year over year
- Productivity per engineer reached $77,208, an increase of 3.6% vs. the same period a year ago
Revenue for the three months ended December 31, 2015 increased to $171.9 million, up 18.0% from $145.8 million for the same period a year ago, and 6.4% sequentially. Adjusted EBITDA was $32.8 million with corresponding margins of 19.1%, as compared to $35.6 million and 24.4%, respectively, in the year ago quarter, and $37.0 million and 22.9% sequentially. US GAAP net income was $18.0 million, or $0.52 per diluted share, compared to $23.9 million and $0.73 per diluted share for the same period a year ago, and $23.0 million and $0.67 sequentially. Non-GAAP net income was $24.8 million, or $0.72 per diluted share, compared to $26.6 million and $0.81 per diluted share for the same period a year ago, and $28.6 million and $0.84 sequentially. Reconciliations between non-GAAP financial measures and US GAAP operating results and diluted EPS are included at the end of this release.
Revenue for the nine months ended December 31, 2015 increased to $481.5 million, up 25.7% from $383.2 million for the same period a year ago. US GAAP net income was $55.7 million, or $1.62 per diluted share, compared to $54.1 million and $1.64 per diluted share for the same period a year ago. Non-GAAP net income was $74.0 million, or $2.16 per diluted share, compared to $60.2 million and $1.82 per diluted share for the same period a year ago.
“Our company has delivered another quarter of strong organic growth and profitability, fully in line with our expectations. We are witnessing a paradigm shift in the way information technology industry operates and IT services are being consumed,” said Dmitry Loschinin, CEO and President of Luxoft. He added: “We believe that the offerings that we have in each domain of our expertise are extremely relevant for demand of today’s clients. That is the main reason our pipeline remains resilient and supports strong financial and operating performance of Luxoft each quarter. While customer concentration with our top client has decreased by 6% on the sequential basis and about 10% year over year, our second largest client and many other top 10 accounts delivered outstanding performance. One of our new automotive High Potential Accounts (HPAs) has been developing very well and entered top 10 list as of the end of this quarter. Our HPA group as a whole delivered 177% year over year growth for the past nine months and is on track to deliver at least 25% of our annual top line at the end of this financial year. Over the past three months we added two new HPAs, one of which is a premier U.S.-based computer data storage provider and hard disk drive manufacturers in the world. The other is an Asian multinational conglomerate operating in telecom space, among others. Furthermore, Luxoft went through another stage of expansion: we forged new partnerships with QNX, expanded our geographic presence in Germany and Poland, and opened new locations in Sweden and Luxembourg. We are pleased with the progress of the financial year 2016 and look forward to realizing new opportunities that lie ahead in 2017 and beyond.”
Virtually all of Luxoft’s key verticals delivered strong performance during the course of the year with Automotive and Transport, Technology and Financial Services delivering most robust annual growth of 39%, 36% and 29%, respectively. For the same period, the Company generated historically steady revenue growth across its core geographies: revenues generated in the U.K. increased 50.5%, Swiss revenues increased 93.9%, and German revenues increased 34.6% compared to the year-ago quarter. Luxoft finished the first nine months of this financial year with 10,589 employees, of which 8,818 were delivery professionals, who continued to drive average productivity during this period to another record – in excess of $77,200 per engineer or 3.6% annual growth. Attrition remained at the historically normal level of 10.3%. The effective tax rate for the nine months ended December 31, 2015 was 14.5%, in line with 14%-15% expected range for current fiscal year.
“We are excited to present a set of solid financial results to our shareholders. Luxoft continues to make strides for expansion and constant improvements in our offerings, expertise, management, engineering delivery and geographical footprint. As has been the case during the challenging years of 2008-2009 and 2012, Luxoft continues to deliver double-digit organic growth on a cumulative basis, despite expected quarterly volatility and material foreign currency headwinds. Our offerings and solutions successfully resonate through economic cycles with the needs of clients globally and we hope it will continue. Growth in the Automotive & Transport vertical over the past quarter, which amounted to 13.9% of the firm’s revenue as of December 31, 2015, up from 10.6% last quarter, is a highlight of Luxoft’s quarterly performance. This quarter we also made a series of improvements on the balance sheet front, which resulted in higher levels of operating and free cash flows and improved days sales outstanding (DSO) dynamic. I am especially glad to highlight that our staff growth continues to down-pace revenue growth, while delivering another solid hike in productivity by 3.6% to cross $77,000 in revenue per engineer,” said Roman Yakushkin, Chief Financial Officer.
Outlook for the Year Ending March 31, 2016:
The Company is confirming the following guidance for the financial year ending March 31, 2016:
- Revenue is expected to reach at least $645.5 million, an increase of at least 24.0% year over year. In constant currency terms the management increase guidance to 28% year over year increase.
- EBITDA margin adjusted for stock-based compensation is expected to be in the range of 17.0% – 19.0%.
- Fully diluted EPS is expected to reach at least $2.05 on a US GAAP basis; fully diluted EPS is expected to reach at least $2.60 on a non-GAAP basis.
- EPS is based on an estimated weighted average of 34,159,416 diluted shares.
- The management expects to end the financial year with the effective tax rate between 14.3% and 15%.
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