Amdocs Ltd. (DOX), software and service provider to the communication service industry, Wednesday reported an increase in first quarter profit, helped by lower operating expenses on lower cost of service and restructuring charges, even as revenues dropped about 3.9%. Earnings for the quarter topped Street estimates, as did revenues. Looking ahead, the company provided its guidance for the second quarter, in line with current Street expectations.
The Chesterfield, Missouri based company's first -quarter net income increased to $88.4 million or $0.43 per share from $74.2 million or $0.35 per share a year ago.
On a non-GAAP basis, net income for the first quarter dipped to $113.1 million from $116.3 million in the comparable quarter last year. Earnings per share for the quarter was $0.55, flat with the prior-year quarter. On average, 16 analysts polled by Thomson Reuters estimated earnings of $0.53 per share for the quarter. Analysts' estimate typically exclude one time special items.
Non-GAAP net income for the first quarter excludes amortization of purchased intangible assets and equity-based compensation expenses of $24.8 million and excludes such amortization, in-process research and development write-off, restructuring charges and equity-based compensation expenses of $42.0 million in the first quarter of fiscal 2009.
In the preceding fourth quarter, Amdocs reported a net income of $85.8 million or $0.42 per share, compared to $82.7 million or $0.38 per share in the prior-year's fourth quarter. Net income, on a non-GAAP basis, was $109.2 million or $0.53 per share, compared to $117.2 million or $0.54 per share, in the fourth quarter of fiscal 2008.
Revenues for the first quarter decreased 3.9% to $724.81 million from $753.84 million in the prior year quarter. Analysts expected revenues of $715.54 million for the quarter.
In the previous fourth quarter, the company's revenue declined to $707.41 million from $825.27 million in the prior-year quarter.
For the quarter under review, service revenue dipped to $700.66 million from $709.24 million a year ago. License segment revenue decreased to $24.15 million from $44.60 million in the comparable quarter last year.
Operating income rose to $99.15 million from $81.27 million in the year-earlier quarter, as operating expenses dropped to $625.66 million from $672.57 million a year ago. The decline in operating expenses was due to the absence of restructuring charges and in-process research and development expenses of $20.78 million recorded in the first quarter of fiscal 2009, lower cost of service, which decreased to $462.22 million from $484.05 million, and lower research and development expenses, which dropped to $50.11 million from $56.23 million last year.
Commenting on the first quarter results, Dov Baharav, chief executive officer of Amdocs said, "We are encouraged by our performance in the first fiscal quarter of 2010 as our business benefited from a continued improvement in demand, strong execution, and modestly more favorable foreign exchange rates."
"As anticipated, managed services remains an area of strength for Amdocs... Additionally, activity has improved in our project-oriented businesses, and we are increasingly optimistic that Europe has stabilized," Baharav added.
The company had cash and cash equivalents of $776.78 million at the end of the first quarter, compared to $623.26 million at the end of the prior-year quarter.
Twelve-month backlog, which includes anticipated revenue related to contracts, estimated revenue from managed services contracts, letters of intent, maintenance and estimated on-going support activities, was $2.425 billion at the end of the first quarter of fiscal 2010.
Looking forward to the second quarter, Amdocs expects earnings on a non-GAAP basis in the range of $0.52 - $0.56 per share, excluding acquisition-related costs and $0.04-$0.05 per share of equity-based compensation expense, net of related tax effects. Amdocs estimates GAAP earnings for the second quarter to be in the range of $0.40 to $0.45 per share. Second-quarter revenues are anticipated between $730 and $750 million.
Analysts currently expect the company to earn $0.54 per share for the second quarter, on revenues of $725.40 million.
Commenting on the second quarter performance, Baharav said, "As we emerge from the economic crisis, we feel even better about our competitive position than when we entered. We have improved our operating efficiencies and cost competitiveness, yet we have continued investing in innovation, exemplified by yesterday's launch of Amdocs CES 8. These efforts, combined with our superior business model, are driving our success in winning new business globally with large and emerging service providers alike. Given our market position and the improved demand outlook, we are guiding to sequential revenue growth again in the second fiscal quarter, and we are now internally planning for sequential revenue growth of roughly 1-2% to persist throughout fiscal 2010."
DOX closed Wednesday's regular trading at $28.52, up $0.02 or 0.07%, on a volume of 0.85 million shares on the New York Stock Exchange.
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