Luxoft Holding, Inc Reports Results for Three Months and Full Financial Year Ended March 31, 2016

LONDON--(BUSINESS WIRE)-- 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 and a full financial year ended March 31, 2016.

Highlights – Three Months Ended March 31, 2016

  • US GAAP revenue amounted to $169.2 million, an increase of 23.2% year over year and an increase of 24.1% year over year on a constant currency basis
  • Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $26.5 million and EBITDA margin was 15.7%, compared to $19.8 million and 14.4% in the year-ago quarter
  • Diluted EPS on a US GAAP basis was $0.43, compared to $0.27 in the year-ago quarter
  • Diluted EPS on a non-GAAP basis was $0.56, compared to $0.46 in the year-ago quarter

Highlights – Financial Year Ended March 31, 2016

  • US GAAP revenue amounted to $650.8 million, an increase of 25.0% year over year and an increase of 31.5% on a constant currency basis
  • Adjusted EBITDA was $123.5 million, an increase of 25.0% year over year
  • Cash flow from operating activities amounted to $105.4 million, or 16.2% of revenue, and an increase of 38.2% year over year
  • Free cash flow amounted to $80.1 million, or 12.3% of revenue, and an increase of 34.7% year over year
  • Diluted earnings per share (EPS) on a US GAAP basis was $2.06, compared to $1.91 last year
  • Diluted EPS on a non-GAAP basis was $2.72, compared to $2.28 last year
  • Employee productivity increased by 3.7% to $76,400 per delivery engineer

Revenue for the three months ended March 31, 2016 increased to $169.2 million, up 23.2% from $137.4 million for the same period a year ago, and decreased 1.6% sequentially, reflecting the normal seasonality of the business. Adjusted EBITDA was $26.5 million with corresponding margins of 15.7%, as compared to $19.8 million and 14.4%, respectively, in the year ago quarter. US GAAP net income was $14.6 million, or $0.43 per diluted share, compared to $9.0 million and $0.27 per diluted share for the same period a year ago, and $18.0 million and $0.52 sequentially. Non-GAAP net income was $18.8 million, or $0.56 per diluted share, compared to $15.1 million and $0.46 per diluted share for the same period a year ago, and $24.8 million and $0.72 sequentially.

Revenue for the full financial year ended March 31, 2016 increased to $650.8 million, up 25.0% from $520.5 million a year ago. US GAAP net income was $70.3 million, or $2.06 per diluted share, compared to $63.1 million and $1.91 per diluted share a year ago. Non-GAAP net income was $92.9 million, or $2.72 per diluted share, compared to $75.4 million and $2.28 per diluted share a year ago. Reconciliations between non-GAAP financial measures and US GAAP operating results and diluted EPS are included at the end of this release. The Company’s balance sheet remains strong, supported by operating cash flows increase of 38.2% year over year, free cash flow increase to 12.3% of revenue, and absence of long-term debt.

“We are pleased to report that our business has been experiencing strong momentum on the business and operational fronts”, said Dmitry Loschinin, Luxoft’s CEO and President. “We have posted a solid increase in revenues and earnings, while decreasing client concentration and rebalancing sources of our revenue growth from the top customer to other prominent high potential accounts. During the past year we enhanced our vertical offerings, expanded our centers of expertise, and added premium services, including advisory, platform architecture selection, packaged software services, and technology consulting. We continue to expand our global footprint and augment our strong presence in various regions of the E.U. with additional delivery centers to ensure timely and effective services to the clients around the globe. Based on our current outlook for the business for the next 18-24 months, we are excited at the possibility to cross $1 billion in revenues for the year ending March 31, 2018.”

Five of Luxoft’s six verticals experienced revenue growth, with Automotive and Transport, Financial Services, and Technology delivering the strongest performance: 37.1%, 28.5% and 21.6% growth, respectively, on a year over year basis. The company also exhibited solid performance across all of its core revenue-generating geographies: revenues generated in Switzerland increased 117.5%, the U.K. revenues increased 39.8%, and German revenues increased 33.4%, as compared to last financial year. The company finished the year with 11,087 employees, of which 9,239 were delivery professionals, who continued to drive average productivity to $76,400 per engineer, which represents an annual increase of 3.7%. The average delivery headcount increased by 20.7% as compared to the financial year ended March 31, 2015, which is 4.3% slower than the revenue growth for the same period. Employee attrition stood at 10.3%. The effective tax rate for the full financial year ended March 31, 2016 was 14.7%.

“This is our 16th consecutive year of strong revenue growth and profitability. We are encouraged by the performance of the business underpinned by an increasing demand for our services and solutions from a global customer base. Key themes revolve around regulatory and compliance and standardization in the financial sector and various disruptive technology-related themes in the automotive, embedded development and telecom sectors,” stated Roman Yakushkin, Chief Financial Officer. “Our company continues to consistently increase quality of its balance sheet, including maintaining virtually no debt, and excellent free cash flow generation capabilities. That positions us well for future M&A activity, ongoing investments into R&D, and other factors to secure recurring long-term growth for the company for years to come. ”

Outlook for the Financial Year Ending March 31, 2017

  • Revenue is expected to be at least $780.9 million, an increase of at least 20.0% year over year, of which at least 15% growth to be organic
  • Adjusted EBITDA margin is expected to be in the range of 17.0% - 19.0%
  • Diluted EPS is expected to be at least $2.10 on a US GAAP basis and at least $2.85 on a non-GAAP basis
  • EPS is based on an estimated weighted average of 34,144,982 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, May 13, 2016 to review the financial and operational performance of the company for the above-mentioned periods.

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://services.choruscall.com/links/lxft160513. 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# 13635345. The replay will be available from two hours as of the end of the call and up to 11:59 p.m. EDT on May 27, 2016. 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. Luxoft’s solutions are based on its proprietary products and platforms that directly impact its clients’ business outcomes and efficiently deliver continuous innovation. The Company develops its solutions and delivers its services from 28 dedicated delivery centers worldwide. It has over 11,000 employees across 32 offices in 17 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). 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 adjusted EBITDA less capital expenditure, change in working capital and income tax. 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 their 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, 2015 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 STATEMENTS OF COMPREHENSIVE INCOME


(In thousands of US dollars)

 
 

For the three
months ended
March 31,

  For the year ended

March 31,

2016   2015   2016   2015
(unaudited)   (unaudited)
   
Sales of services $169,209 $137,352 $650,752 $520,548
Operating expenses
Cost of services (exclusive of depreciation and amortization) 103,496 82,056 379,331 293,960
Selling, general and administrative expenses 48,202 35,340 171,707 128,952
Depreciation and amortization 6,703 5,084 23,814 16,834
Loss from revaluation of contingent liability (3,356)   170   (2,511)   1,166
Operating income 14,164   14,702   78,411   79,636
 
Other income and expenses
Interest income/(expense), net 149 (30) 121 (543)
Other gain, net 2,346 243 3,947 1,430
Gain from foreign currency exchange contracts (1,019) 261 1,321
Net foreign exchange loss 1,524   (5,144)   (381)   (8,867)
Income before income taxes 17,164 9,771 82,359 72,977
Income tax expense (2,572)   (729)   (12,108)   (9,828)
Net income $14,592   $9,042   $70,251   $63,149
Net income attributable to the non-controlling interest              
Net income attributable to the Group $14,592   $9,042   $70,251   $63,149
 
Other comprehensive income, net of tax (1,855)   (482)   (2,281)   (425)
Comprehensive income $12,737 $8,560 $67,970 $62,724
 

Comprehensive income (loss) attributable to the non-
controlling interest

     
Comprehensive income attributable to the Group $12,737   $8,560   $67,970   $62,724
 
Basic EPS per Class A and Class B ordinary share
Net income attributable to the Group per ordinary share 0.44   0.28   2.13   1.93
Weighted average ordinary shares outstanding 33,140,451   32,822,757   32,949,807   32,790,711
 
Diluted EPS per Class A and Class B ordinary share

Diluted net income attributable to the Group per
ordinary share

0.43   0.27   2.06   1.91
Diluted weighted average ordinary shares outstanding 33,865,865 33,173,531 34,088,214 33,111,753
 

     

LUXOFT HOLDING , INC

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands of US dollars except share amounts)

 

As of March 31,
2016
(unaudited)

  As of March 31,

2015

Assets
Current assets
Cash and cash equivalents $ 108,545 $ 45,593

Trade accounts receivable, net of allowance for doubtful accounts of $79 at March 31,
2016 and $1,299 at March 31, 2015

131,204 102,269
Unbilled revenue 16,081 34,269
Work-in-progress 1,595 1,449
Due from related parties 2,180 1,121
VAT and other taxes receivable 1,814 2,403
Deferred tax assets 1,595 1,864
Advances issued 2,413 3,467
Other current assets   3,333       2,685  
Total current assets   268,760       195,120  
 
Non-current assets
Deferred tax assets 1,579 1,518
Property and equipment, net 46,072 34,727
Intangible assets, net 43,364 42,946
Goodwill 30,444 29,620
Other non-current assets   4,066       2,638  
Total non-current assets   125,525       111,449  
Total assets $ 394,285     $ 306,569  
 
Liabilities and shareholders’ equity
Current liabilities
Short-term borrowings $ 460 $ 1,333
Accounts payable 8,266 9,700
Accrued liabilities 27,231 19,860
Deferred revenue 5,048 9,843
Due to related parties 518 508
Taxes payable 22,532 17,840
Payables for acquisitions, current 5,595 9,158
Other current liabilities   3,979       920  
Total current liabilities   73,629       69,162  
 
Deferred tax liability, non-current 5,380 4,935
Payables for acquisitions, non-current 11,786 13,964
Other non-current liabilities   1,757       384  
Total liabilities   92,552       88,445  
 
Shareholders’ equity

Share capital (80,000,000 shares authorized; 33,188,894 issued and outstanding with no
par value as at March 31, 2016, and 80,000,000 shares authorized; 32,851,345 issued
and outstanding with no par value as at March 31, 2015)

Additional paid-in capital 107,477 89,173
Less: Common stock held in treasury, at cost (March 31, 2016—35,579 shares) (2,665 )
Retained earnings 200,870 130,619
Accumulated other comprehensive loss   (3,981 )     (1,700 )
Total shareholders’ equity attributable to the Group   301,701       218,092  
Non-controlling interest   32       32  
Total equity   301,733       218,124  
Total liabilities and equity $ 394,285     $ 306,569  
 

   

LUXOFT HOLDING , INC

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW

 

(In thousands of US dollars except share amounts)

 
For the Years ended March 31,
2016 2015
(unaudited)  
Operating activities
Income from operations $ 70,251 $ 63,149
 

Adjustments to reconcile net income to net cash provided by operating
activities:

Depreciation and amortization 23,814 16,834
Deferred tax expense (benefit) (902 ) (1,167 )
Foreign currency exchange contracts (loss)/income (261 ) (412 )
Loss on foreign exchange 381 8,867
Provision for doubtful accounts 311 805
Loss/(Gain) from revaluation of contingent liability (2,511 ) 1,166
Share-based compensation 17,745 5,783
 
Changes in operating assets and liabilities:
Trade accounts receivable (10,261 ) (32,450 )
Work-in-progress (146 ) 3,271
Due to and from related parties (1,084 ) 575
Accounts payable (2,842 ) (5,035 )
Accrued liabilities 7,658 (527 )
Deferred revenue (4,222 ) 6,468
Changes in other assets and liabilities   7,458     8,951  
Net cash provided by operating activities   105,389     76,278  
 
Investing activities
Purchases of property and equipment (24,171 ) (14,232 )
Purchases of intangible assets (5,069 ) (3,868 )
Proceeds from disposal of property and equipment 40 77
Acquisitions, net of cash acquired   (3,525 )   (24,257 )
Net cash used in investing activities   (32,725 )   (42,280 )
 
Financing activities
Net repayment of short-term borrowings (880 ) (18,594 )
Acquisition of business, deferred consideration (6,126 ) (2,747 )
Repurchases of common stock (1,774 )
Repayment of capital lease obligations (124 ) (38 )
Dividend paid (18 )
Overdraft facilities, net       (598 )
Net cash used in financing activities   (8,904 )   (21,995 )
 
Effect of exchange rate changes on cash and cash equivalents   (808 )   (3,913 )
Net increase in cash and cash equivalents 62,952 8,090
Cash and cash equivalents at beginning of year   45,593     37,503  
Cash and cash equivalents at end of period $ 108,545   $ 45,593  
 

     

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 March 31, Year Ended March 31,
2016 2016 2016 2016 2016 2016
GAAP Adjustments Non-GAAP GAAP Adjustments Non-GAAP
Operating income 14,164 4,688 (a) 18,852 78,411 24,856 (a) 103,267
Operating margin 8.4 % 2.8 % 11.1 12.0 % 3.8 % 15.9 %
Net income 14,592 4,250 (b) 18,842 70,251 22,605 (b) 92,856
Diluted earnings per share $ 0.43 $ 0.56 $ 2.06 $ 2.72
   
Three Months Ended March 31, Year Ended March 31,
2015 2015 2015 2015 2015 2015
GAAP Adjustments Non-GAAP GAAP Adjustments Non-GAAP
Operating income 14,702 6,642 (a) 21,344 79,636 13,555 (a) 93,191
Operating margin 10.7 % 4.84 % 15.54 % 15.3 % 2.6 % 17.9 %
Net income 9,042 6,103 (b) 15,145 63,149 12,229 (b) 75,378
Diluted earnings per share $ 0.27 $ 0.46 $ 1.91 $ 2.28
     
Three Months Ended
March 31,
Year Ended

March 31,

(a) 2016   2015 2016   2015
Adjustments to GAAP operating income:
Stock-based compensation expense $ 3,983 $ 3,699 $ 17,745 $ 5,783
Amortization of purchased Intangible assets 1,858 1,718 7,419 5,103
Loss from revaluation of contingent liability (3,356) 170 (2,511) 1,166
Acquisition related costs 2,203 1,055 2,203 1,503
Total Adjustments to GAAP operating income: $ 4,688 $ 6,642 $ 24,856 $ 13,555
     
Three Months Ended
March 31,
Year Ended

March 31,

(b) 2016   2015 2016   2015
Adjustments to GAAP net income
Stock-based compensation expense $ 3,142 $ 3,699 $ 16,904 $ 5,783
Amortization of purchased Intangible assets 1,417 1,271 5,660 4,105
Loss from revaluation of contingent liability (2,292) 183 (1,942) 1,010
Acquisition related costs 1,983 950 1,983 1,331
Total Adjustments to GAAP net income $ 4,250 $ 6,103 $ 22,605 $ 12,229
     
Three Months Ended
March 31,
Year Ended

March 31,

 
2016   2015 2016   2015
Net income $ 14,592 $ 9,042 $ 70,251 $ 63,149
Adjusted for:
Interest Expense (149) 30 (121) 543
Income tax 2,572 729 12,108 9,828
Depreciation and Amortization 6,703 5,084 23,814 16,834
EBITDA $ 23,718 $ 14,885 $ 106,052 $ 90,354
Adjusted for
Stock based compensation 3,983 3,699 17,745 5,783
Change in fair value of contingent consideration (3,356) 170 (2,511) 1,166
Acquisition related costs 2,203 1,055 2,203 1,503
Adjusted EBITDA $ 26,548 $ 19,809   123,489 $ 98,806
 

 

LUXOFT HOLDING, INC

Schedule of supplemental information (unaudited)

 

(In thousands, except percentages)

 
Revenue for the three Months Ended March 31,
  2016 2015
Client location Amount   % of sales Amount   % of sales
U.S. 53,420 31.6 % 47,702 34.7 %
UK 51,526 30.5 % 45,517 33.1 %
Germany 24,211 14.3 % 18,559 13.5 %
Switzerland 8,712 5.1 % 3,178 2.3 %
Russia 6,523 3.9 % 7,325 5.3 %
Singapore 2,936 1.7 % 2,850 2.1 %
Rest of Europe 16,116 9.5 % 8,461 6.2 %
Other 5,765 3.4 % 3,760 2.8 %
Total 169,209 100 % 137,352 100 %
   
Revenue for the year ended March 31,
2016 2015
Client location Amount   % of sales Amount   % of sales
U.S. 202,855 31.2 % 204,541 39.3 %
UK 223,566 34.4 % 159,866 30.7 %
Germany 86,332 13.3 % 64,723 12.4 %
Russia 32,748 5.0 % 36,022 6.9 %
Switzerland 23,489 3.6 % 10,800 2.1 %
Singapore 10,154 1.6 % 15,216 2.9 %
Rest of Europe 48,944 7.5 % 22,109 4.2 %
Other 22,664 3.4 % 7,271 1.5 %
Total 650,752 100 % 520,548 100 %
   
Revenue for the three Months Ended March 31,
2016 2015
Industry vertical Amount   % of sales Amount   % of sales
Financial Services 115,330 68.2 % 90,173 65.7 %
Automotive and transport 22,740 13.4 % 17,212 12.5 %
Technology 8,989 5.3 % 10,323 7.5 %
Telecom 9,927 5.9 % 8,994 6.5 %
Travel and Aviation 7,429 4.4 % 7,142 5.2 %
Energy 3,358 2.0 % 3,118 2.3 %
Other 1,436 0.8 % 390 0.3 %
Total 169,209 100 % 137,352 100 %
   
Revenue for the year ended March 31,
2016 2015
Industry vertical Amount   % of sales Amount   % of sales
Financial Services 446,138 68.6 % 347,215 66.7 %
Automotive and transport 78,698 12.1 % 57,400 11.0 %
Technology 42,398 6.5 % 34,862 6.7 %
Telecom 37,200 5.7 % 33,683 6.5 %
Travel and Aviation 29,232 4.5 % 32,747 6.3 %
Energy 12,873 2.0 % 12,164 2.3 %
Other 4,213 0.6 % 2,477 0.5 %
Total 650,752 100 % 520,548 100 %

Luxoft Holding, Inc
Alina V. Plaia, +1-212-964-9900 ext. 2404
Vice-President, Global Communications & IRO
IR@luxoft.com
or
Kristen A. Soroka, +1-212-964-9900 ext. 2290
Investor Relations Analyst
ksoroka@luxoft.com

Source: Luxoft Holding, Inc