Yesterday, after market close, Amdocs Limited (DOX) declared better than expected financial results for the first quarter of fiscal 2010. Total revenue of $724.8 million was down 3.9% year-over-year but up sequentially by 2.5%. First quarter revenue was also above the Zacks Consensus Estimate of $716 million. Top-line improvement was mainly due to strong demand for managed services and a modestly favorable foreign exchange rate. 

Quarterly net income, on a GAAP basis was $88.4 million or 43 cents per share compared to a net income of $74.2 million or 35 cents in the prior-year quarter. However, first quarter 2010 adjusted (excluding special items) EPS was 51 cents, well above the Zacks Consensus Estimate of 49 cents. This was primarily due to a continuous effort taken by management to streamline its cost structure. 

Cost of sales in the reported quarter was $462.7 million, an improvement of 4.6% year-over-year. As a result, gross margin in the reported quarter was 36.8% compared to 36.4% in the year-ago quarter. Quarterly operating expenses were $163, down 13.1% year-over-year. At the end of the reported quarter, total order backlog was $2,425 million compared to $2,385 million at the end of the pervious quarter. 

During the first quarter, Amdocs generated $193.5 million of cash from operations compared to $141.3 million in the prior-year quarter. Quarterly free cash flow (cash flow from operations less capital expenditures) was $169.7 million compared to $111 million in the prior-year quarter. At the end of the first quarter of fiscal 2010, the company had more than $1,292 million of cash and marketable securities and no outstanding debt on its balance sheet compared to $1,280 million of cash and marketable securities and $450 million of outstanding debt at the end of the prior-year quarter. 

Segment Wise Results 

Service revenue was $700.7 million, down 1.2% year-over-year. License revenue was $24.2 million, down 45.9% year-over-year. Technologically, Customer Experience revenue was $678.4 million, down 3.2% year-over-year. Systems Directory revenue was $46.4 million, down 12.1% year-over-year. Geographically, North America generated $547.6 million (down 2.5% year-over-year) of first quarter 2010 revenue, Europe generated $89.5 million (down 19.7% year-over-year), and the Rest of World generated the remaining $87.7 million (up 8.5% year-over-year). 

New Contract Wins 

During the first quarter 2010, Amdocs expanded its existing deal with AT&T (T) to provide applications management services for AT&T’s wireline customer care, billing, ordering and wholesale platforms from early 2010. This is the expansion of the contract between the two companies that started in 2007 and will close in 2017. Amdocs also extended its existing managed services and professional services contract with Bell Canada (BCE) for an additional five years through 2017. In the same quarter, Amdocs added three new customers to its managed services portfolio. 

Future Financial Outlook 

Management is expecting second quarter 2010 revenue to be within the range of $730 million – $750 million. Non-GAAP EPS, excluding acquisition-related cost and equity based compensation, is forecasted in the range of $0.52-$0.56. Equity-based compensation is expected at approximately $0.04-$0.05 per share. EPS, on a GAAP basis, is expected to be within the range of $0.40 – $0.45. Management also predicted that the company’s top-line will increase by roughly 1%-2% sequentially throughout fiscal 2010. 

The share price of Amdocs was up 28 cents (0.98%) to $28.80 in after market trade on NYSE.
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