Luxoft Holding (NYSE:LXFT) announced fiscal third-quarter 2019 results on Wednesday, including a small year-over-year sales decline as the company pushes forward with its strategic customer-diversification initiatives. Of course, Luxoft's performance this quarter was overshadowed by its impending acquisition by IT services and solutions leader DXC Technology (NYSE:DXC) -- a $2 billion deal that sent Luxoft stock skyrocketing 80% when it was announced early last month.

But the acquisition is still subject to regulatory approval. So in the meantime, let's look at how Luxoft started the second half of its fiscal year.

Chess board with half-black, half-white pawn in center (M&A concept)

Image source: Getty Images.

Luxoft Holding results: The raw numbers

Metric

Fiscal Q3 2019*

Fiscal Q3 2018

Year-Over-Year Growth (Decline)

GAAP revenue

$230.4 million

$236.6 million

(2.6%)

GAAP net income

$10.8 million

$20.6 million

(47.6%)

GAAP earnings per diluted share

$0.32

$0.60

(46.7%)

Data source: Luxoft Holding. *For the three months ended Dec. 31, 2018.  

What happened with Luxoft Holding this quarter?

  • On Jan. 7, 2019, Luxoft agreed to be acquired by DXC for $59 per share in cash -- an 86% premium from the previous trading day's closing price. The acquisition is expected to close by June 2019 pending regulatory review, after which Luxoft will maintain its brand and operate as a subsidiary of DXC.
  • Revenue was near the low end of Luxoft's guidance provided in November, which called for a range of $230 million to $235 million.
  • On an adjusted (non-GAAP) basis, which excludes items like stock-based compensation and acquisition costs, Luxoft's net income arrived at $0.61 per share, down from $0.89 in the same year-ago period.
  • Adjusted EBITDA declined 18.5% year over year, to $32.6 million.
  • By industry vertical:
    • Financial services revenue declined 15.8% to $116.3 million.
    • Digital enterprise revenue fell 7.7% to $57.3 million.
    • Automotive revenue grew 55.8% to $56.8 million.
  • Annual revenue per billable engineer declined 1.7% year over year to $83,923.
  • Luxoft's top two accounts, UBS and Deutsche Bank, represented 24.9% of total revenue, down 9.5 percentage points from the same year-ago period.
  • Luxoft's top five accounts were 39% of revenue (down 7 percentage points from a year ago), and its top 10 accounts were 50.9% of revenue (down 6.3 percentage points).

What management had to say

Luxoft CEO Dmitry Loschinin said:

First off, I'd like to express my excitement about the proposed acquisition of Luxoft by DXC Technology. The Luxoft board is committed to maximizing shareholder value, and we believe that this acquisition is a win-win for both DXC's and Luxoft's customers, employees, and stakeholders. Our shared vision of digital transformation makes this strategic combination a great fit. DXC's strong reputation will enable us to cross-sell our offerings across a much larger client portfolio, while DXC will gain a stronger competitive edge in the execution of end-to-end digital projects. While we undergo the regulatory review processes, Luxoft remains an independent company focused on continued diversification and growth. We are advancing our transformation and executing the strategy we've laid out in past quarters. Our third-quarter results demonstrate our progress on these initiatives, with results largely in line with our guidance.

Looking forward

Given its pending acquisition by DXC, Luxoft did not hold a subsequent conference call and is not providing guidance.

Still, this was a reasonably solid quarter for the company ahead of its acquisition. So even in the unlikely scenario that regulators opt not to approve the transaction -- and with shares currently trading within 1.4% of the agreed acquisition price -- shareholders who've decided to hold on can take solace knowing Luxoft continues to execute its strategic initiatives in the meantime.