Luxoft Holding, Inc Reports Results for Three Months Ended June 30, 2015

Luxoft Holding, Inc (NYSE:LXFT), a leading provider of software development services and innovative IT solutions to a global client base, today announced results for the three months ended June 30, 2015.

Highlights – Three Months Ended June 30, 2015

• US GAAP revenue amounted to $148.1 million, an increase of 31.8% year over year on the reporting currency basis and 45.6% increase on the constant currency basis.
• Earnings before interest, taxes, depreciation and amortization (EBITDA) adjusted for stock based compensation and for change in fair value of contingent consideration was $27.2 million and EBITDA margin was 18.4%, compared to $19.1 million and 17.0%, respectively, in the year-ago quarter.
• Adjusted EBITDA increased 42.5% year over year and net income increased 16.2% year over year.
• Non-GAAP Net Income amounted to $20.6 million, an increase of 40.9% year over year.
• Diluted earnings per share (EPS) on a US GAAP basis was $0.43, compared to $0.38 in the year-ago quarter.
• Diluted EPS on a non-GAAP basis was $0.61, compared to $0.45 in the year-ago quarter.

Revenue for the three months ended June 30, 2015 increased to $148.1 million, up 31.8% from $112.3 million for the same period a year ago in the reporting currency and up 45.6% for the same period a year ago in constant currency. EBITDA adjusted for stock based compensation and for change in fair value of contingent consideration was $27.2 million and corresponding EBITDA margin was 18.4%, as compared to $19.1 million and 17.0%, respectively, in the year-ago quarter. US GAAP net income was $14.6 million, or $0.43 per diluted share, compared to $12.6 million and $0.38 per diluted share for the same period a year ago. Non-GAAP Net Income was $20.6 million, or $0.61 per diluted share, compared to $14.6 million and $0.45 per diluted share for the same period a year ago. Reconciliations between non-GAAP financial measures and US GAAP operating results and diluted EPS are included at the end of this release.

"We are excited to announce the results of another strong quarter for our company,” said Dmitry Loschinin, President and Chief Executive Officer. "The start to the new financial year has been supported by the powerful momentum we have built during 2015 by means of several strategic acquisitions, solid achievements from our Luxoft Global Upgrade program and continued investments into our engineering expertise and solutions. The underlying premise of our M&A strategy has proven to work and our growth, in addition to customary organic forces, is also being fueled by realized synergies from the companies that we have recently added into the Luxoft family. We have diversified our top ten-client list, measurably decreased client concentration and anchored more high potential engagements in financial services, telecom, technology and automotive domains. We are confidently looking to the year ahead, and we are excited to realize all of the opportunities currently available to Luxoft. Therefore, we are pleased to increase our revenue guidance for the year ending March 31, 2016 to at least 23% year over year growth.”

The Company’s core verticals continued to produce healthy annual growth with financial services posting 38% growth, technology posting 59% growth, telecom posting 21% growth, and automotive and transport posting 24% growth. The core revenue generating geographies experienced double digit growth during the past quarter, as compared to the same period a year ago: revenues generated in the U.K. increased 56%, revenues generated in Germany increased 18%. The revenues generated in the U.S. moderately grew by 6% as its overall impact was diminished by M&A activity in Western Europe. As of June 30, 2015, the total number of employees was 9,535, while attrition continued to decrease to the lower portion of the historical range of 9.9%.

Outlook for The Year Ending March 31, 2016:

The Company is increasing its original revenue and EPS guidance for the financial year ending March 31, 2016:

• Revenue is expected to reach at least $640.3 million, an increase of at least 23.0% year over year, compared to at least $625.0 million, an increase of at least 20.0% year over year and 26% year over year in constant currency.
• EBITDA margin adjusted for stock-based compensation is expected to be in the range of 17.0% - 19.0%.
• Fully diluted EPS is expected to reach at least $2.02 on a US GAAP basis, compared to $2.00 previously; fully diluted EPS is expected to reach at least $2.55 on a non-GAAP basis, compared to at least $2.52 previously.
• EPS is based on an estimated weighted average of 34,057,503 diluted shares. The number of diluted shares has increased as compared to 33, 606,018 diluted shares announced earlier, due to larger amount of shares expected to be issued under the stock option program based on the significantly appreciated stock price.

"Our Company has delivered a strong start to the new financial year 2016. As always, around 90% of our top-line growth is comprised of recurring revenues from clients with whom we have strong relationships. Our operating and financial performance metrics remain solid," said Roman Yakushkin, Chief Financial Officer. "We have been increasing our adjusted EBITDA margins while carefully managing our cost base. We have expanded our recruiting capabilities and enhanced our presence in the three core delivery hubs within the European Union: Romania, Poland and Bulgaria by 40%, 168% and 297% respectively since June 30, 2014, while reducing our exposure in Ukraine down to 38% of the total engineering staff and in Russia to 23% of the total engineering staff. Finally, we have increased yet again our productivity, which has now approached $75,000 per engineer – a significant difference versus our immediate peers. We are delighted with the results and the opportunity to raise our guidance for the end of the financial year ending March 31, 2016, encouraged by a number of strong quarters that we believe lie ahead.”

Conference Call Information:

Luxoft Holding, Inc will host a conference call on August 13, 2015 at 8:00 a.m. EDT to discuss its financial results for the three months ended June 30, 2015. To access the conference call, please dial 877-407-8293 (for domestic U.S. callers) or 201-689-8349 (for international callers). A live webcast will also be available during the call and can be accessed at http://services.choruscall.com/links/lxft150813. Participants, please access the website at least 10 minutes prior to the call to register and follow the instructions provided on the website to download and install the necessary applications. If you are unable to join our live event, a replay will be available by dialing 877-660-6853 (for domestic U.S. callers) or 201-612-7415 (for international callers) and entering the conference ID# 13614409. The replay will be available from two hours as of the end of the call and up to 11:59 p.m. EDT on August 27^th, 2015. The replay will also be available at Luxoft’s Investor Relations portal for 14 days following the call.

About Luxoft:

Luxoft Holding, Inc. (NYSE:LXFT US) is a leading provider of software development services and innovative IT solutions to a global client base consisting primarily of large multinational corporations. Luxoft’s software development services consist of core and mission critical custom software development and support, product engineering and testing, and technology consulting. Luxoft’s solutions are based on its proprietary products and platforms that directly impact its clients’ business outcomes and efficiently deliver continuous innovation. The Company develops its solutions and delivers its services from 24 dedicated delivery centers worldwide. It has over 9,500 employees across 27 offices in 15 countries in North America, Mexico, Western and Eastern Europe, Asia Pacific, and South Africa. Luxoft is incorporated in Tortola, British Virgin Islands, has its operating headquarters office in Zug, Switzerland and is listed on the New York Stock Exchange. For more information, please visit http://www.luxoft.com.

Non-GAAP Financial Measures:

To supplement our financial results presented in accordance with US GAAP, this press release includes the following measures defined by the Securities and Exchange Commission as non-GAAP financial measures: earnings before interest, tax, depreciation and amortization (EBITDA); adjusted EBITDA; non-GAAP net income; and non-GAAP diluted Earnings per share (EPS). Non-GAAP net income and non-GAAP EPS exclude stock-based compensation expense, amortization of fair value adjustments to intangible assets and impairment thereof and other acquisitions related costs, that may include changes in the fair value of contingent consideration liabilities. Non-GAAP diluted EPS are calculated as non-GAAP net income divided by weighted average number of diluted shares. We provide these non-GAAP financial measures because we believe that they present a better measure of our core business and management uses them internally to evaluate our ongoing performance. Accordingly, we believe that these non-GAAP measures are useful to investors in enhancing and understanding of our operating performance. These non-GAAP measures should be considered in addition to, and not as a substitute for, comparable US GAAP measures. The non-GAAP results and a full reconciliation between US GAAP and non-GAAP results are provided in the accompanying tables at the end of this press release.

Forward-Looking Statements:

In addition to historical information, this release contains "forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements include information about possible or assumed future results of our business and financial condition, as well as the results of operations, liquidity, plans and objectives. In some cases, you can identify forward-looking statements by terminology such as "believe," "may," "estimate," "continue," "anticipate," "intend," "should," "plan," "expect," "predict," "potential," or the negative of these terms or other similar expressions. These statements include, but are not limited to, statements regarding: the persistence and intensification of competition in the IT industry; the future growth of spending in IT services outsourcing generally and in each of our industry verticals, application outsourcing and custom application development and offshore research and development services; the level of growth of demand for our services from our clients; the level of increase in revenues from our new clients; seasonal trends and the budget and work cycles of our clients; general economic and business conditions in our locations, including geopolitical instability and social, economic or political uncertainties, particularly in Russia and Ukraine, and any potential sanctions, restrictions or responses to such conditions imposed by some of the locations in which we operate; the levels of our concentration of revenues by vertical, geography, by client and by type of contract in the future; the expected timing of the increase in our corporate tax rate; our expectations with respect to the proportion of our fixed price contracts; our expectation that we will be able to integrate and manage the companies we acquire and that our acquisitions will yield the benefits we envision; the demands we expect our rapid growth to place on our management and infrastructure; the sufficiency of our current cash, cash flow from operations, and lines of credit to meet our anticipated cash needs; the high proportion of our cost of services comprised of personnel salaries; our plans to introduce new products for commercial resale and licensing in addition to providing services; our anticipated joint venture with one of our clients; IBS Group Holding Limited and its subsidiaries divesting all or a portion of its ownership interest in us; and our continued financial relationship with IBS Group Holding limited and its subsidiaries including expectations for the provision and purchase of services and purchase and lease of equipment; and other factors discussed under the heading "Risk Factors" in the Annual Report on the Form 20-F for the year ended March 31, 2015 and other documents filed with the Securities and Exchange Commission. Except as required by law, we undertake no obligation to publicly update any forward-looking statements for any reason after the date of this press release whether as a result of new information, future events or otherwise. Except as required by law, we undertake no obligation to publicly update any forward-looking statements for any reason after the date of this press release whether as a result of new information, future events or otherwise.

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