Luxoft Holding Delivers a Quarterly Win

By Steve SymingtonMarketsFool.com

Luxoft Holding(NYSE: 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.

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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.

Image source: Getty Images.

Luxoft Holding results: The raw numbers

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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:

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.

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