Two weeks after a harshly critical report by Spruce Point Capital, which specializes in short selling of shares, sent Amdocs Ltd.'s (NYSE: DOX) tumbling 10%, the company responded to the report for the first time with general comments by CEO Shuky Sheffer.
He said, "We believe the report is misleading and that numerous statements in it are inaccurate. Moreover, the report was prepared without any previous interaction with Amdocs and its management team. We do not intend to comment any further on the short seller. The best response is to remain focused on our execution and performance, as we have every confidence in our strategic direction, our competitive position and our financial practices. We welcome constructive input from shareholders, and look forward to engaging with them as we continue to deliver on our strategy for growth and value creation."
Amdocs, which provides IT solutions and systems to communications companies, has a $7.8 billion market cap. The company published its financial results for the first US fiscal quarter of 2019 yesterday, after the end of trading. The results were within the company's guidance range and matched the analysts' revenue forecasts, although falling slightly short of their profit forecasts. Amdocs posted $1.01 billion in revenue in the first quarter, 3.5% more than in the first quarter of 2018, with growth in all geographic regions. GAAP net profit was $102 million, compared with $117 million in the corresponding quarter, while non-GAAP net profit, which excludes various accounting items, reached $138 million, down 10.8%, compared with the corresponding quarter in the preceding year. Profit per share amounted to $0.98, $0.01 less than the analysts' forecasts.
Amdocs generated $110 million in cash flow from current activity in the first quarter, ending the quarter with $459 million in cash, after using $99 million to buy back its own shares during the quarter. The company will distribute a $39.8 million dividend in April, amounting to $0.285 per share.
Amdocs's orders backlog for the coming year totaled $3.37 billion at the end of the quarter. The company's guidance lists $995 million-$1.035 billion in revenue for the second quarter, similar to the analysts' forecasts of $1.02 billion and 0.3-4.3% more than in the corresponding quarter in the preceding year. Amdocs's guidance for non-GAAP profit is $1-1.06 per share, amounting to $141-150 million; the midpoint of this range is lower than the analysts' forecasts of $1.06 profit per share.
Amdocs downwardly revised its guidance for the year because of the negative effect of currency exchange rates. The company now expects growth in comparison with 2018 to be 0.5-4.5%, compared with its earlier guidance of 1-5% growth. Its guidance for non-GAAP net profit remained unchanged at 3-7% higher than in 2018.
"We are pleased to report solid results for the beginning of the financial year, with first quarter revenue above the midpoint of our guidance range," Sheffer said when the results were published. "Revenue in North America was higher than in the corresponding quarter in the preceding year, while we are supporting modernization needs in the digital sector for many of our customers in the communications, television, payment, and media industries. Europe gave us another solid quarter, taking into account adaptations for the negative effect of exchange rate fluctuations. At the operational level, we had another quarter with stable profits, reflecting the effect of factors such as substantial cash flow from repeat revenue, the ability to change and adapt our global model to software delivery projects, and our constant effort to improve efficiency."
Published by Globes, Israel business news - en.globes.co.il - on February 6, 2019
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