Are you interested in application software investing? If so, you might want to pay close attention to the following: Right now, shares of Luxoft Holdings, Inc. (NYSE:$LXFT) are tumbling. On Friday, as of 11:15 a.m. EDT, the software engineering company’s shares were down 28.2%. Why? It can all be traced back to the company’s depressing fiscal first quarter 2018 results, which revealed troublesome trends, as well as a softened guidance for the year.
In the report, we see that Luxoft’s quarterly revenue increased 17.5% year over year to $209.2 million, while adjusted net income per share dropped 19.4% to $0.50.
Even though Luxoft doesn’t tend to provide quarterly financial guidance, investors were expecting the company to report higher adjusted earnings of $0.75 per share on revenue of $213.5 million.
What Caused The Unfortunate Fiscal First Quarter 2018 Results?
According to CEO Dmitry Loschinin, the cause of these results is a combination of the following: an expected deceleration from the company’s top two accounts, seasonal weakness, a decline in the financial services segment (revenue fell 6.7% to $113.5 million), and slower growth amongst the reconstruction of two massive M&A-centric clients.
With that said, we do have to give Luxoft some credit. The company did witness revenue from clients outside of its top two increase 55% year over year. Additionally, Luxoft’s top-three client concentration dropped 16% from 2016’s fiscal first quarter.
To top it off, Luxoft drove strong growth in its smaller digital (increased 30% to $25.8 million), automotive (increased 38% to $35.1 million), telecom (increased 157% to $25.5 million) verticals.
Now What’s Going to Happen?
Regardless of the increase in revenue from clients outside its top two, it was not enough to stop Luxoft from cutting its full-year outlook. As of right now, Luxoft forecasts fiscal 2018 revenue to be roughly $920 million, which is down from guidance announced last quarter for roughly $943 million.
In addition, Luxoft expects GAAP earnings per diluted share to come in at $1.53, which is down from $1.90, and adjusted earnings per share of roughly $2.85, which is down from $3.26.
Overall, it’s fair to say that this was a pretty painful quarter for the company despite the sun breaking through for a few minutes on what would have primarily been a cloudy, stormy day. With this, we can’t blame the market for backing away from the company’s stock today.
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