Luxoft Holding (LXFT +0.00%) announced fiscal first-quarter 2019 results early Wednesday, including modest top-line growth and the sustained gradual diversification away from its two largest accounts.
Still, similar to last quarter's report in late May, the software-development specialist once again offered forward guidance that left the market wanting more. With shares down around 6% in response, let's take a closer look at what Luxoft had to say.
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Luxoft Holding results: The raw numbers
| Metric |
Fiscal Q1 2019* |
Fiscal Q1 2018 |
Year-Over-Year Growth |
|---|---|---|---|
|
GAAP revenue |
$212.8 million |
$209.2 million |
1.7% |
|
GAAP net income |
$4.7 million |
$6.3 million |
(25.4%) |
|
GAAP earnings per diluted share |
$0.14 |
$0.18 |
(22.2%) |
DATA SOURCE: LUXOFT HOLDING. *FOR THE THREE MONTHS ENDED JUNE 30, 2018.
What happened with Luxoft Holding this quarter?
- Revenue arrived slightly above the midpoint of Luxoft's own guidance, which called for a range of $210 million to $215 million.
- On an adjusted (non-GAAP) basis -- which excludes items like equity compensation -- net income declined 14% to $14.5 million, or $0.43 per diluted share, above consensus estimates for adjusted earnings of $0.33 per share.
- Adjusted EBITDA declined 9.8% to $23.8 million.
- By industry vertical:
- Financial services revenue grew 4.1% to $118.1 million.
- Digital enterprise revenue declined 16.3% to $50.8 million.
- Automotive revenue grew 25.1% to $43.9 million.
- Annual revenue per billable engineer grew 4% year over year to $78,979.
- Luxoft's top two accounts represented 31.7% of revenue, down from 34.9% of total sales in last year's fiscal Q1.
- Luxoft made two small strategic acquisitions during the quarter, including design and innovation firm Smashing Ideas and automotive software company Objective Software.
What management had to say
Luxoft CEO Dmitry Loschinin stated:
We're off to a solid start this fiscal year with first quarter results largely ahead of our expectations. We continue to transform our business through revenue diversification, allocation of resources to the highest-margin digital opportunities, and implementation of cost reduction efforts to strengthen our margin profile. Excluding Top Two accounts (DB & UBS), consolidated revenue increased 6.8% and Financial Services' revenue increased 25.4%. This was our 14th consecutive quarter of over 20% year-over-year growth in Financial Services, excluding Top-Two accounts, which speaks to the increasing value of our solutions, current market trends and our continued path for long-term growth.
Looking forward
For the current second quarter of fiscal 2019, Luxoft anticipates revenue of $225 million to $230 million, compared to $228 million in the same year-ago period and well below consensus predictions for sales of roughly $236 million. This marks a mild disappointment for shareholders considering that last quarter, management suggested the company would see growth accelerate as the fiscal year progressed.
Still, Loschinin remained optimistic, adding: "We are committed to executing on our strategic priorities for fiscal 2019. I am confident we are taking the right steps to build a strong foundation for long-term sustainable growth and increasing shareholder returns."
Given its decelerating growth in the meantime, though, it's no surprise to see Luxoft stock declining today.
