Please ensure Javascript is enabled for purposes of website accessibility

Luxoft Holding Delivers a Quarterly Win

By Steve Symington – Updated May 24, 2017 at 12:46AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

But light guidance left shares declining today. Here's what investors need to know.

Luxoft Holding (LXFT) announced strong fiscal fourth-quarter results on Monday, after the market closed. Similar to its modest post-earnings drop in February, shares of the software development specialist fell 3.6% on Tuesday as investors absorbed the news.

Keeping in mind that shares are still up more than 12% so far in 2017, let's take a closer look at how Luxoft ended its fiscal year, as well as what we should expect from the company going forward.

Two software engineers working together on source code.

Image source: Getty Images.

Luxoft Holding results: The raw numbers

Metric

Fiscal Q4 2016*

Fiscal Q4 2015

Year-Over-Year Growth

GAAP revenue

$204.1 million

$169.2 million

20.6%

GAAP net income

$13.7 million

$14.6 million

(6.2%)

GAAP earnings per diluted share

$0.40

$0.43

(7%)

Data source: Luxoft Holding. *For the quarter ended March 31, 2017.

What happened with Luxoft Holding this quarter?

  • Revenue climbed 22% on a constant-currency basis.
  • On an adjusted (non-GAAP) basis -- which excludes items such as stock-based compensation and acquisition expenses -- net income climbed 14.4% year over year to $21.5 million. Adjusted earnings per diluted share increased 12.5% to $0.63.
  • Quarterly adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) increased 10.2% to $29.2 million.
  • That brought full fiscal-year revenue to $785.6 million, with adjusted EBITDA of $133.8 million, or 17% of revenue, and adjusted earnings per diluted share of $2.89.
  • Luxoft's full-year guidance -- which was reiterated last quarter -- called for full fiscal-year revenue of at least $781 million, adjusted EBITDA margin of 17% to 19%, and adjusted earnings of at least $2.85 per share.
  • Revenue by industry vertical included:
    • 0.5% growth in financial services revenue to $116 million.
    • 29.5% growth from automotive and transport to $29.4 million.
    • 132.6% growth in telecom revenue to $23.1 million.
    • 61.4% growth from technology to $14.5 million.
    • $9.6 million in revenue from the recently broken-out healthcare market.
    • 17.3% growth in travel and aviation to $6.1 million.
    • 20.4% growth from energy to just over $4 million.
    • $1.4 million in revenue from all other market verticals.
  • Top-three and top-five client concentration has declined roughly 10% over the past year. Luxoft's top 10 accounts now represent roughly 66% of total revenue, down from 74% a year ago.
  • Productivity (annualized revenue) per engineer climbed 2.5% year over year to $78,265.
  • The company generated free cash flow of $98 million this fiscal year.

What management had to say

Luxoft CEO Dmitry Loschinin stated:

We are pleased to report solid operating and financial results for the fourth quarter and the full year ended March 31, 2017. They reflect strong positive fundamental improvements in our client dynamic and business composition, such as strong growth of [high potential accounts], substantial decline in client and vertical concentration, and diversification of our client base. We have been successfully executing on several transformational initiatives, investing consistently to become a more effective agile global company, capable of competing for bigger deals and serving a wider variety of clients in various markets. [...] During the past year we closed three strategic acquisitions, expanded in key geographies, and launched a new healthcare and life-sciences vertical -- all while maintaining high pace of top-line growth, preserving our margins, staying free of long-term debt and generating healthy levels of free cash flow.

Looking forward

For the full fiscal year ending March 31, 2018, Luxoft expects revenue of at least $943 million, good for growth of at least 20% year over year. Luxoft also anticipates that adjusted EBITDA margin will remain steady in the 17% to 19% range, which should translate to GAAP EPS of at least $1.90 and adjusted EPS of at least $3.26. By comparison -- and though we don't typically pay close attention to Wall Street's demands -- consensus estimates called for higher adjusted earnings of $3.48 per share on revenue of $968 million.

Combined with Luxoft's year-to-date share-price appreciation, this explains the market's immediate muted negative reaction. At the same time, Luxoft's chosen verbiage leaves some wiggle room for the company to over-deliver on its guidance. So all things considered, I think Luxoft investors should be pleased with their company's progress as it kicks off a new fiscal year.

Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Luxoft Holding. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Nearly 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Luxoft Holding Stock Quote
Luxoft Holding
LXFT

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
370%
 
S&P 500 Returns
119%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.