LONDON, November 15, 2018 -- Luxoft Holding, Inc (NYSE:LXFT), a global IT service provider, today announced results for the three months ended September 30, 2018.

Highlights — Three months ended September 30, 2018

  • Revenue of $228.4 million, up 0.2% year-over-year and up 7.3% sequentially
  • Net income of $14.4 million, compared to $18.4 million in the year-ago quarter and diluted EPS of $0.43, compared to $0.54 in the year-ago quarter
  • Adjusted EBITDA of $36.6 million and adjusted EBITDA margin of 16.0%, compared to $38.6 million and 16.9% in the year-ago quarter
  • Non-GAAP diluted EPS of $0.74, compared to $0.82 in the year-ago quarter
  • As of September 30, 2018, total number of employees was 12,897; Annual revenue per billable engineer was $83,043, up 0.4% from the prior year.

Note: Reconciliations of non-GAAP to GAAP measures are included at the end of the release.

“Our second quarter results demonstrate continued execution of our strategic priorities and transformational initiatives," said Dmitry Loschinin, Luxoft’s CEO and President. "We continue to diversify our revenue and re-align our focus and resources to the highest growth opportunities. Growth in Financial Services remains healthy, despite challenges in the Investment Banking sector, while our leading Automotive solutions continue to drive strong customer demand. We remain sharply focused on enhancing our Digital solutions in order to advance our competitive position and meet the evolving needs of our clients."

"Looking ahead, we remain focused on advancing our transformation and building a stronger and more diversified company. While we expect some headwinds during the second half of the year, we are confident that further execution of our strategy will strengthen our long-term growth profile and position us to deliver increasing shareholder returns."


Second Quarter Key Operating Highlights

 

  • Revenue generated in APAC and Europe grew 64.7% and 16.8% year over year, respectively.
  • Expanding global presence and growth outside of Financial Services is meaningfully reducing client concentration.
  • Revenue by line of business was 54.9% Financial Services, 23.1% Digital Enterprise and 22.0% Automotive.
  • Top Two1 accounts amounted to 30.2% of revenue, representing a 5.2 percentage-point decrease over the prior year.
  • Top Five accounts amounted to 43.4% of revenue, an annual 3.3 percentage-point decrease, and Top Ten accounts amounted to 54.3% of revenue, a 3.3 percentage point decrease.

1Top two accounts are UBS and Deutsche Bank and are included in our Financial Services line of business.


Third Quarter Fiscal 2019 Outlook

     

  • Revenue is expected to be in the range of $230-$235M
  • Adjusted EBITDA is expected to be in the range of 14% to 15%
  • Diluted GAAP EPS is expected to be in the range of $0.29 to $0.37
  • Non-GAAP EPS is expected to be in the range of $0.62 to $0.69

Conference Call Information

The Company will host a conference call to review the results on Thursday, November 15th, 2018 at 8:00 a.m. ET. To participate, please dial 877-407-8293 or 201-689-8349 (outside the U.S.) or access the live webcast here.

A replay will be available two hours after the call at http://investor.luxoft.com or by dialing 877-660-6853 or 201-612-7415 (outside the U.S.) and entering the conference ID 13683917. The replay will be available until November 29, 2018.

About Luxoft

Luxoft (NYSE:LXFT) is a global IT service provider of innovative technology solutions that delivers measurable business outcomes to multinational companies. Its offerings encompass strategic consulting, custom software development services, and digital solution engineering. Luxoft enables companies to compete by leveraging its multi-industry expertise in the financial services, automotive, communications, and healthcare & life sciences sectors. Its managed delivery model is underpinned by a highly-educated workforce, allowing the Company to continuously innovate upwards on the technology stack to meet evolving digital challenges.

Luxoft has approximately 12,900 employees across 42 offices in 22 countries within five continents, with its operating headquarters office in Zug, Switzerland. For more information, please visit the website.


Investor Inquires
Tracy Krumme
Vice President, Investor Relations
212-964-9900 ext. 2460
IR@luxoft.com
Media Inquiries
Robert Maccabe
Director, Public Relations
+44 (0)20 3828 2346
Press@luxoft.com
Twitter: @Luxoft

 

 

 


 



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. 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 forwardlooking 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 revenue 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, 2018 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 forwardlooking 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)


As of September 30, 2018
As of March 31, 2018
(Unaudited)
Assets
Current assets
Cash and cash equivalents
$ 100,382 $ 104,357
Restricted cash, current
1,901 70
Trade accounts receivable, net of allowance for doubtful accounts of $1,399 at September 30, 2018 and $1,232 at March 31, 2018
184,627 186,991
Unbilled revenue
37,610 33,310
Work-in-progress
7,102 3,734
Due from related parties
1,078 1,272
VAT and other taxes receivable
3,889 4,082
Advances issued
2,172 1,777
Other current assets
8,671 8,041
Total current assets
$347,432 $343,634
Non-current assets
Restricted cash, non-current
1,691 2,775
Deferred tax assets
5,877 4,349
Property and equipment, net
50,858 52,739
Intangible assets, net
103,541 106,368
Goodwill
102,228 88,908
Other non-current assets
5,231 5,047
Total non-current assets
$269,426 $260,186
Total assets
$616,858 $603,820
Liabilities and shareholders’ equity
Current liabilities
Short-term borrowings
$ 11,627 $ 856
Accounts payable
22,294 25,964
Accrued liabilities
42,563 49,593
Deferred revenue
4,616 4,105
Due to related parties
73 14
Taxes payable
23,833 22,916
Payable on derivative financial instruments
515 776
Payable for acquisitions, current
4,936 6,415
Other current liabilities
2,674 2,302
Total current liabilities
$113,131 $112,941
Deferred tax liability, non-current
8,211 10,830
Payable for acquisitions, non-current
2,652 2,895
Other non current liabilities
5,833 7,205
Total liabilities
$129,827 $133,871
Shareholders’ equity
Share capital (80,000,000 shares authorized; 33,695,454 issued and outstanding with no par value as at September 30, 2018, and 80,000,000 shares authorized; 34,063,981 issued and outstanding with no par value as at March 31, 2018)
Additional paid-in capital
150,069 155,456
Common stock held in treasury, at cost (91,983 shares as of September 30, 2018; 61,874 shares as of March 31, 2018)
(4,460)
(3,424)
Retained earnings
344,937 320,521
Accumulated other comprehensive loss
(3,547)
(2,636)
Total shareholders’ equity attributable to the Group
$486,999 $469,917
Non-controlling interest
32 32
Total equity
$487,031 $469,949
Total liabilities and equity
$616,858 $603,820


LUXOFT HOLDING, INC
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands of US dollars, except share and per share amounts)


 

 

For the three months ended September 30,

 

For the six months ended September 30,

 

 

2018

 

2017

 

2018

 

2017

 

 

(Unaudited)

 

(Unaudited)

Sales of services

 

$

228,411

 

 

$

228,030

 

 

$

441,201

 

 

$

437,272

 

Operating expenses

 

 

 

 

 

 

 

 

Cost of services (exclusive of depreciation and amortization)

 

140,631

 

 

139,305

 

 

277,998

 

 

274,904

 

Selling, general and administrative expenses

 

59,864

 

 

58,199

 

 

116,573

 

 

116,262

 

Depreciation and amortization

 

10,969

 

 

9,915

 

 

21,739

 

 

20,645

 

Gain from revaluation of contingent liability

 

(145

)

 

(870

)

 

(145

)

 

(2,090

)

Operating income

 

17,092

 

 

21,481

 

 

25,036

 

 

27,551

 

Other income and expenses

 

 

 

 

 

0

 

 

Interest income/ (loss), net

 

(77

)

 

42

 

 

(111

)

 

59

 

Unwinding of discount for contingent liability, income/ (loss)

 

(32

)

 

103

 

 

(99

)

 

(698

)

Other income, net

 

433

 

 

457

 

 

1,131

 

 

946

 

Gain/ (loss) from derivative financial instruments

 

469

 

 

(3

)

 

1,321

 

 

89

 

Net foreign exchange loss

 

(836

)

 

(356

)

 

(4,290

)

 

1,124

 

Income before income taxes

 

17,049

 

 

21,724

 

 

22,988

 

 

29,071

 

Income tax expense

 

(2,638

)

(3,284

)

 

(3,879

)

 

(4,314

)

Net income

 

$

14,411

 

 

$

18,440

 

 

$

19,109

 

 

$

24,757

 

Net income attributable to the non-controlling interest

 

 

 

 

 

 

 

 

Net income attributable to the Group

 

$

14,411

 

 

$

18,440

 

 

$

19,109

 

 

$

24,757

 

Basic EPS per Class A and Class B ordinary share

 

 

 

 

 

 

 

 

Net income attributable to the Group per ordinary share

 

$

0.43

 

 

$

0.55

 

 

$

0.57

 

 

$

0.74

 

Weighted average ordinary shares outstanding

 

33,606,144

 

 

33,570,633

 

 

33,816,836

 

 

33,537,185

 

Diluted EPS per Class A and Class B ordinary share

 

 

 

 

 

 

 

 

Diluted net income attributable to the Group per ordinary share

 

$

0.43

 

 

$

0.54

 

 

$

0.56

 

 

$

0.72

 

Diluted weighted average ordinary shares outstanding

 

33,736,322

 

 

34,116,417

 

 

33,883,981

 

 

34,206,683

 




LUXOFT HOLDING, INC

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands of US dollars)



 

 

For the three months ended September 30,

 

For the six months ended September 30,

 

 

2018

 

2017

 

2018

 

2017

 

(Unaudited)

 

(Unaudited)

Net income

 

$

14,411

 

 

$

18,440

 

 

$

19,109

 

$

24,757

 

Other comprehensive income (loss), net of tax

 

 

 

 

 

 

 

 

Gains/(losses) on derivative instruments, net of tax effect of $(6) and $(21); $(157) and $72

 

151

 

 

80

 

 

1,155

 

 

(653

)

Translation adjustments with no tax effects

 

(220

)

 

690

 

 

(2,066

)

 

1,360

 

Total other comprehensive income

 

(69

)

 

770

 

 

(911

)

 

707

 

Comprehensive income

 

$

14,342

 

 

$

19,210

 

 

$

18,198

 

 

$

25,464

 

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

 

 

 

 

 

 

 

 

Comprehensive income attributable to the Group

 

$

14,342

 

 

$

19,210

 

 

$

18,198

 

 

$

25,464

 



LUXOFT HOLDING, INC
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
(In thousands of US dollars)





 

 

For the six months ended September 30,

 

 

2018

 

2017

 

 

(Unaudited)

Operating activities

 

 

 

 

Net income

 

$

19,109

 

 

$

24,757

 

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

 

 

 

 

Depreciation and amortization

 

21,739

 

 

20,645

 

Deferred tax benefit

 

(265

)

 

(1,711

)

Gain from derivative financial instruments

 

(1,321

)

 

(89

)

Net foreign exchange (gain)/ loss

 

4,290

 

 

(1,124

)

Provision for doubtful accounts

 

215

 

 

622

 

Gain from revaluation of contingent liability

 

(145

)

 

(2,090

)

Unwinding of discount for contingent liability, loss

 

99

 

 

698

 

Share-based compensation

 

14,208

 

 

14,237

 

Other

 

111

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

Trade accounts receivable and unbilled revenue

 

(2,532

)

 

(45,423

)

Work-in-progress

 

(3,772

)

 

732

 

Due to and from related parties

 

233

 

 

234

 

Accounts payable and accrued liabilities

 

(7,948

)

 

(4,114

)

Deferred revenue

 

625

 

 

2,604

 

Changes in other assets and liabilities

 

4,798

 

 

(792

)

Net cash provided by operating activities

 

49,444

 

 

9,186

 

Investing activities

 

 

 

 

Purchases of property and equipment

 

(10,997

)

 

(11,332

)

Purchases of intangible assets

 

(1,856

)

 

(2,127

)

Acquisitions, net of cash acquired

 

(19,590

)

 

(32,685

)

Net cash used in investing activities

 

(32,443

)

 

(46,144

)

Financing activities

 

 

 

 

Proceeds from/ Net repayment of short-term borrowings

 

10,353

 

 

(138

)

Acquisition of business, deferred consideration

 

(3,604

)

 

(12,707

)

Repayment of capital lease obligations

 

(1,842

)

 

(69

)

Repurchases of common stock

 

(21,022

)

 

(2,017

)

Net cash used in financing activities

 

(16,115

)

 

(14,931

)

Effect of exchange rate changes on cash and cash equivalents and restricted cash

 

(4,114

)

 

(103

)

Net decrease in cash, cash equivalents and restricted cash

 

(3,228

)

 

(51,992

)

Cash, cash equivalents and restricted cash at beginning of period

 

107,202

 

 

114,957

 

Cash, cash equivalents and restricted cash at end of period

 

$

103,974

 

 

$

62,965

 



The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets:


 

As of

 

September 30, 2018

 

March 31, 2018

 

(Unaudited)

 

 

Cash and cash equivalents

$

100,382

 

 

$

104,357

 

Restricted cash, current

1,901

 

 

70

 

Restricted cash, non-current

1,691

 

 

2,775

 

Total restricted cash

3,592

 

 

2,845

 

Total cash, cash equivalents and restricted cash

$

103,974

 

 

$

107,202

 

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)



 

 

For the three months ended September 30,

 

For the six months ended September 30,

 

 

2018

 

2018

 

 

 

2018

 

2018

 

2018

 

 

 

2018

 

 

GAAP

 

Adjustments

 

 

 

Non-GAAP

 

GAAP

 

Adjustments

 

 

 

Non-GAAP

Operating income

 

17,092

 

 

12,058

 

 

(a)

 

29,150

 

 

25,036

 

 

23,011

 

 

(a)

 

48,047

 

Operating margin

7.5

%

 

5.3

%

 

 

 

12.8

%

 

5.7

%

 

5.2

%

 

 

 

10.9

%

Net income

 

14,411

 

 

10,691

 

 

(b)

 

25,102

 

 

19,109

 

 

20,516

 

 

(b)

 

39,625

 

Diluted earnings per share

 

$

0.43

 

 

 

 

 

 

$

0.74

 

 

$

0.56

 

 

 

 

 

 

$

1.17

 

 

 

For the three months ended September 30,

 

For the six months ended September 30,

 

 

2017

 

2017

 

 

 

2017

 

2017

 

2017

 

 

 

2017

 

 

GAAP

 

Adjustments

 

 

 

Non-GAAP

 

GAAP

 

Adjustments

 

 

 

Non-GAAP

Operating income

 

21,481

 

 

10,715

 

 

(a)

 

32,196

 

 

27,551

 

 

22,619

 

 

(a)

 

50,170

 

Operating margin

 

9.4

%

 

4.7

%

 

 

 

14.1

%

 

6.3

%

 

5.2

%

 

 

 

11.5

%

Net income

 

18,440

 

 

9,596

 

 

(b)

 

28,036

 

 

24,757

 

 

20,399

 

 

(b)

 

45,156

 

Diluted earnings per share

 

$

0.54

 

 

 

 

 

 

$

0.82

 

 

$

0.72

 

 

 

 

 

 

$

1.32

 

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)


 

 

For the three months ended September 30,

 

For the six months ended September 30,

(a)

 

2018

 

2017

 

2018

 

2017

Adjustments to GAAP operating income

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

$

8,022

 

 

$

6,185

 

 

$

14,208

 

 

$

14,237

 

Amortization of purchased intangible assets

 

3,574

 

 

3,657

 

 

7,534

 

 

8,030

 

Gain from revaluation of contingent liability

 

(145

)

 

(870

)

 

(145

)

 

(2,090

)

Acquisition related costs

 

607

 

 

1,743

 

 

1,414

 

 

2,442

 

Total Adjustments to GAAP income from operations:

 

$

12,058

 

 

$

10,715

 

 

$

23,011

 

 

$

22,619

 


 

 

For the three months ended September 30,

 

For the six months ended September 30,

(b)

 

2018

 

2017

 

2018

 

2017

Adjustments to GAAP net income

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

$

8,022

 

 

$

6,185

 

 

$

14,208

 

 

$

14,237

 

Amortization of purchased intangible assets

 

3,574

 

 

3,657

 

 

7,534

 

 

8,030

 

Gain from revaluation of contingent liability and unwinding of discount for contingent liability