Amdocs Limited (DOX) 4 Aug 222022 Q3 Earnings call transcript

Ladies and gentlemen, thank you for standing by and welcome to the Q3 2022 Amdocs Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] It is now my pleasure to introduce, Head of Investor Relations, Matt Smith.

Thank you operator.

need slide your X I disclaimer to begin, on statement of we to attention call our Before the presentation. some are with and information that that forward-looking GAAP. that we Amdocs' notes of not certain today and comments It financial discuss may SEC statements filings and as prepared subject uncertainties risks is will to described in our be in accordance

Sheffer, our copy remarks recap our And of for today's and will Shuky you outlook performance commenting always and we'll we made on Financial release, are our reconciliations you our following fiscal presentation, strategic financial which quarter will Shuky on information today regarding Management will Form on agenda, finish use third which have will of this Chief and earnings of and to Amdocs measures, more call. update Operating the financial of the can today's financial conclusion quarter provide will immediately on be including of Officer. providing a found are posted a furnished today's For the Executive business achievements the guidance. Relations website. and as measures XXXX we growth the be refer our these Tamar we President also on On executing on today's section continued To Shuky of SEC me after, with which be also non-GAAP Officer call the of with against call, third Rapaport-Dagim, framework. financial progress Limited; by our and additional Investor Participating Tamar prepared support details Chief earnings X-K.

pro to trends on And metrics where will certain the it financial divested over forma I'll to business financial with you underlying of sense of December comments Shuky. refer As provide which excluding XX, a market, we that on our a turn today with basis impact open reminder the applicable to a XXXX.

afternoon performance, automation. to to expertise good the cloud network of and modernization financial today. our Matt, I'm us a strategic our strong across on pillars product services reflecting growth call for everyone and digital Thanks quarter adoption, joining XG monetization, report demand third core happy solid and

see highlights billion you QX, at we the which currency compared with delivered Adjusting of As of unfavorable headwind for XX.X% up the slide revenue revenue on from record foreign as X, in midpoint can guidance assumptions. despite other $X.XX was currency was year-over-year.

consecutive sales growth XX ago robust ski maintained we momentum, year of a up backlog $X.XX and Additionally, the to quarter months fifth billion, a roughly translates living of double-digit record XX% from indicator. year-over-year the which in

line, was bottom and better share quarter a the we cost non-GAAP on access we for the share midpoint for successfully aspects of pressures, achieved revenue, foreign currency per guidance. targets per across profitability which earnings markets non-GAAP continued $X.XX, and focus navigated which successfully diluted On of our inflation-related of earnings Overall, financial the operational than volatile business. despite our delivered with our all we a

X. slide to turning Now

business global highlights Let QX North yet record in performance. led another me of quarter key our begin was activity address our operating the strong To by America.

fiber is to monitoring digital to is and to the While committed initiatives XG journey their potential rollout remain network the most closely our believe Amdocs monetization, we're customers to central uncertain in respect environment headwinds, cloud delivering and global macroeconomic we the which strategic innovation automation. and modernization, the and of

PPS as UK Adjusting growth to showed ramp of we North book Europe movements, In recent continue second for and half strategic a for signs Europe started awarded Vodafone Amdocs. currency addition like customer for in acceleration, as engine to as to up, grow America, projects various AT&T's long-term and Tamar we large with touch another years, QX to engagement also say momentum. like sales five was an and quarter as We relationship robust T-Mobile services additional our strengthen are expanded for will that we Wireless, later. managed affiliates. Cricket on long-standing happy of Group customers quarters

Additionally, of including Excel execution more which Germany, we follow-on selected and them customers, including our project multi-year digital projects. was part footprint for transformation behalf milestones services launch Consisting which of transformation XX Amdocs the on million enables highlight. enhanced as operating experiences. other digital successfully integration customers further to Vodafone many than digital with has major Indonesia, another a innovative managed our We for of operators customer grew QX project deployed in

In executing millions our quad-play fresh of we QX. of bring to the BSS, enable investment platforms relation in customer customers, across we reached products committee Additionally, R&D to in our to cloud our subscribers full Brazilian Vivo. innovation Reflecting to variable them multi-lines order we are deliver by to further transformation, to interactions. continuously on Telefonica covered more cities increased all combine

pillars Slide orchestration announced Headquarter ingredient of X. to and a we next own network fiscal XXXX highly expected OSI is to innovative of OSI to broad and our UK agreement to of which to that service power and the capabilities cloud. Service platform in a Additionally, executing deals Amdocs forward portfolio first space, the generation on track while and networks. assurance gross talented complements race assurance of differentiated core of in on quarter automation, of definitive detail network $XXX other to range OSI experiences network a represent team network close combining the Mycom with deliver move strategic in Mycom by OSI staff-based the we the XG. in to acquire to is OSI our the complementary Mycom end-to-end recent expertise a is within key XG being and therefore million intelligent Mycom look a key for that expand on include Mycom are cloud three cash platforms. create our and unique

automation customer with multiple we as take four shown network extend presentment Beginning Services, bill a and further our At pillar on recent Wireless, leveraging progress growth we products quarter. technology. against new testing, to Slide XG, Cricket Now, AT&T's its look American our at cloud, X. digital of wins this secured North executing customers. digital development Amdocs enterprise let's operations expanded strategy T-Mobile closer our and Cloud our cloud-native with USA

service business boosting provides solution personalize cost-effective cloud-based driving each engagement increasing eco-friendly a to customer all satisfaction, while and Our message to the an footprint. to

network. to telcos next-generation virtualized on-demand with by Additionally, connectivity showcased our Moreover, support of to Group, to which and digital. consumer other X.X Amdocs and and models. concept new this XG, AWS was to Web networks during unlock DISH launch rollout. the fully XG reducing collaboration mobile to and enables selected recently with more of the metaverse DISH significantly derive completed exciting interoperable intelligent, and Telekom a an of experiences the cloud Switching This we Austria towards revenue we demonstrates for stand-alone by proof new for In XG commercial AX with time potential market, open the with and streams such monetization enterprises. innovative AX ability

Vodafone the operator. of This this project further production and and We Amdocs large touch efficiency Germany are new technology Germany with digital multi-year has deepens strength Amdocs businesses. follows we accelerate in under announce across all to the major improve chosen by will experiences and its won lines further strategic to transformation launch across deal consolidated XXXX operating harmonize initial relationship transformation customer project points different Vodafone that excited an that with under a

is that happy expanding are support we build presented business Additionally, its Amdocs service to Comcast solution customers.

deliver that continue Amdocs times automation. our business orbit to small A to service orders, network satellite of services to operators' and connectivity from world's form SCS with we improve time the access benefit to allowing activity We the Moving tools. operation operator, SCS new orchestration of excited of of -- solution selected handover product provide faster across large additional enhanced we're customers experienced line scope some end-to-end during connectivity, more QX. and reduce to time for turnaround of form

its Amdocs policy selected América charging countries in in in Additionally, products Móvil several Latin latest deliver America. to

to the and other Among this including major Oi others. Brazil properties. licensed of and of growing delivery of platform, hotel Media that catalog agreement a and a this is to have and platform. with Amdocs Media content and enabled Exelcom offering ownership well which the subscription Mexico, flexibility will MarketONE to NTT as chosen UK content flexible by Finally, access let recently on-demand a comment premium powered a with including hotel seamless Vubiquity signed this on cloud-based with scalability list multiyear the the industry, customer, gaming which USA, the premium operators launch Amdocs personalized expanded me Virgin major hospitality brands, quarter a groups, Edison quickly in provider MarketONE content new SaaS collaborated Two, deal is for content deals, service for that as of resort streaming Media vast latest a Interactive T-Mobile multi-year its provide

to payment Worldwide turnkey Vindicia subscription-based Additionally, solution. ACI is provide merchants with with collaborating integrated

slide Now turning outlook to on our XX. financial

work, essential connectivity a hybrid XG while still monitoring a that engagement… environments strategic investment heart before, technology services, in believe provider potential mentioned streams needs I that and at revenue our believe of we cornerstone product and in to closely and much with business of global macroeconomic enables and headwinds, reaching the are as of the be highly customer aligned the supporting model unique we education, multiyear society, services in a confident As April. We early that to our key more. cloud-driven stages we customers, to environment cycle, recurring long-term continues will of Amdocs the entertainment More are mission-critical uncertain broadly,

highly look trusted them we has fact, partner, this new goal. in In a achieve the XG for to as Amdocs believe and a service growth relevant opportunities help area, been name positioned, better provider

that of supported customer delight and pro delivers fiscal on and recently constant seen. well service pipeline remain industry-leading providers with XXXX. Tying customers roughly portfolio, currency on helping to management sustainability. product top-level opportunities, XX%, growth the track full amazing improve accelerated revenue cloud environment the rich we around of Consistent have deliver and more world this basis services cost together everything view, XX, reduces on continue we of to is to we efficiency, a see interaction, strong for forma year experiences, Slide demand and a operate customer their by many the Our

our of non-GAAP which strong Similarly, are growth, we meet XX% XXXX. trying visibility with is performance. shareholder to forma earnings full double-digit year by for running. year-to-date And for total per deliver roughly pro a a are we the on fiscal X% second and XX-month to for financial guidance yield of our Our returns top, the share expected roughly positioned backlog, a dividend year to, underpinned diluted record

let first-ever following as corporate for analysts webinar the investors, Tamar, June. social platform me to publication ESG and responsibility highlight XXXX we our our its which in ESG in over new handing report, to Before use XXXX for its

our user, seriously. end know, and community you their our employees As take our our investors responsibility to course very of the we wider customers, and

call the and unique to the the thank partners, innovative of content, technical this to designing, and for to and talented the Given where base world. connected global reality. inclusion, communities. purpose experience. great the enrich into death recently in I provides work we with our products ideas example, creative improve a diverse let to society, for I shareholders technology, well-being user platform them her XXX for like lives worldwide and complete progress a solution provided together includes remarks. This call Amdocs would and thank delivering right of we that the working the our and new and diversity amazing platform, to like opportunity, take corporate incredibly Vubiquity all employees, the employees, hearing, to which Tamar community With million and of premium turn better potentially to and to believe acknowledge of the all for me digital communities inclusion promote of and focus turning customers, a the and their quality, on of technology Media, our that, sustainable people. working a curation of sign over out create people our creativity a with exclusively devotion, is in studios, and end-to-end hard streaming innovative, and representing personalizing bolus sign Vubiquity's our provide of content to language

Thank joining us. Shuky, hello you you, everyone. and Thank for

pro forma As reminder, a my exclude December XX, on which XXXX. comments will a refer of the financial divested certain on impact today to which basis, we OpenMarket, financial metrics

to currency yet movements second unfavorable XXXX. QX relative our of slide another on highlights happy in record million guidance the a results, already our half foreign to was America. first financial revenue up guidance we quarter recorded, at Record of driven $X.XX which follow of performance midpoint as $X North year-over-year assumptions our was compared I'm the from delivered. strong to primarily performance revenue approximately despite very QX billion, impact XX. of Turning quarter by third fiscal with X.X% an and

fourth Additionally, revenue of better in currency forma quarter was pro revenue a ago, currency from constant up the on year constant XX% consecutive marking X.X% growth a than basis.

foreign showed as acceleration revenue impacted for During our awards additional recent currency ramp-up the headwinds performance of QX, in. which primarily signs Europe. Adjusting of in project initial kicked

down Moving income the statement.

was to margin to year Our XX.X% focus tools period, quarter of the other of our consistent investments and implementation including we labor continue QX a efficiency. competitive automation non-GAAP offset and of with operating ago as effects the ongoing with the excellence, designed relentless accelerated R&D and environment on operational improve prior sophisticated

pleased rather again than market is that to strategy program and protect As stability the currency volatile has free are generation effective cash proven and this we for our a our once flow for revenue QX. currency of reminder, designed foreign hedging

non-GAAP diluted bottom a non-GAAP full year $X.XX. which the the effective expected of rate EPS for fiscal midpoint to of guidance above the tax rate which tax annual quarter, the of was range. was was the XX.X%, to range $X.XX non-GAAP was end included EPS third fiscal towards of of of GAAP EPS of our high the for Diluted $X.XX $X.XX line, end our high as above guidance XX% On the non-GAAP effective XX% guidance Diluted XXXX. we

year $X.XX second On slide a XX. $XX to was million which XX% high a up basis third ago. momentum by Moving XX backlog months quarter from was the a sales backlog as XX of to sequential months translated record the during to compared up Robust billion, quarter.

Given XX overall over good XX years. having work as of months traditionally revenue leading of a our forward-looking nature months averaged of the our included, backlog business, has around indicator consistently served the XX%

XX% was Managed roughly total XX. in from Services record XX% Revenue up year accounted about of of slide QX. million, ago revenue. to and a a Turning quarter delivered $XXX for

our engagements Services transformation which business projects include relationship renew of activities, renewal our existing revenue Our A customer example recurring multiyear high leveraging the streams, ensure Managed Cricket as to experience ability and prime and of technologies long-standing Shuky the Cricket earlier. highlighted This extends business latest Moreover, relationship an cloud-native incident management Wireless is proven expands next-generation with sometimes successfully expanded Cricket's new relationship deal customers. digital include expand with our years. five underpin agreement our our the for catalog, rates, our additional possible and for AT&T to and with to resiliency may best customers.

Turning DSO you by QX. customers to the successful large one those sequentially America of a North quarter in in the and and flow as the The slide increase and days three subsequent invoicing balance sheet days of can in day primarily see timing DSOs, reflects number XX deliveries on of milestone differences by between and customers. triggered year-over-year cash XX. achieved in by payment milestones the increased

and cash target revenue million of compared year ago. as flow receivables of We free cash including $XXX with Overall, us the million full of fiscal generated year of aggregate roughly positive million. with improved difference balance to net positioning our we deferred quarter normal the a XXXX. the ended unbilled $XXX $XX $XXX approximately Additionally, achieve million by for $XXX the strong of million borrowings

position in $XXX in OSI fiscal support capacity of remains to growth XXXX. the ongoing strategic in sheet our of strong the balance expect close needs, fund expect our while business retaining quarter and we investments. continue to lines, acquisition we to million good to liquidity, Along be with cash roughly future a ample the MYCOM first those Our to to

capital XX. allocation to on Turning slide

million we in repurchased shares quarter. normalized normalized $XXX XXX% full third share see of in XXX% of more our of of our now consideration and dividend than $XXX the can you more flow. expect cash ongoing dividend Including the our flow into equating free we returned shareholders first the to program, quarterly fiscal QX, million, XXXX. in payments payments cash slightly to Taking repurchase cash $XX million year for shareholders cash return to free we chart, than As to

momentum roughly of cash $XXX equates flow free It While strong fiscal X% in expected free million in to also business, conversion our rate experiencing represents of non-GAAP XXX% a to XXXX we roughly are cash of of relative income. flow net outlook market our normalized a growth current healthy Amdocs yield capitalization.

given our Over may the the that year. any long-term XXX% free in long-term, cash we you of remind or above of range below normalized conversion slightly fluctuate flow average

previous new additional our relation normalized development is primarily in about our payments an our campus. to anticipated we've point fiscal As fiscal of timing the $XXX to into have the fiscal This free excludes outlook guidance of XXXX million. for moved due raised year million of less of Israel which flow our free reported to outlook than roughly XXXX cash $XXX CapEx cash $XXX million, now Accordingly, flow XXXX.

Now, slide turning on to our outlook XX.

we full earlier, the to fourth be predict we but we including mentioned what possible uncertainty, monitoring the of reflects are and business fiscal the consider today, of remains quarter macroeconomic scenarios. level COVID-XX year the which the Shuky to XXXX we all respect likely outcomes operational information magnitude As most based cannot and have guidance revenue with and elevated The prevailing closely pandemic. duration on

a the midpoint full revenue We X.X% range XX.X%. of fiscal guidance line new track growth of XX% constant year our in on to pro to currency deliver of basis, on are XXXX forma roughly with

our the on three Additionally, basis of rest XXXX. a fiscal of America, constant in of world North in operating we expect growth regions continue currency each and to Europe

on the represents year which unfavorable points. outlook within of to expect an range fourth points anticipates guidance of our the of revenue currency On of basis, as we to expectation consistent a a billion based quarter revenue midpoint year-over-year annual internal analysis. year-over-year $X.XXX our with most billion, foreign Our basis X.X% with full the likely basis range which fiscal now our reported includes previous outcome of approximately XXX X.X% of midpoint XX $X.XXX impact compared

other Moving our the with continues annual target investment accelerated track down of statement, margins non-GAAP line outlook pace in non-GAAP few balanced impact range on XX.X% operating to roughly quarterly strategy, operating fiscal anticipate in we focus assume currency a continue of in an million with Below interest net lines to This to our the anticipate and of on our we the line the the will R&D quarter. range fourth our line a constant dollars operational that midpoint in of basis. foreign with fluctuations excellence. to income XX.X% expense

previously we end fourth the that XX% expect fiscal to range quarter effective in anticipated, As of our target will million. above tax non-GAAP annual our be rate the of XX%

fiscal return our that, Shuky. in back XXXX, yield. With second diluted earnings on share growth Overall of our midpoint for per everything range. share firmly reported shareholders' share guidance the non-GAAP together, non-GAAP within the XX.X% target of fiscal per midpoint approximately For roughly basis we we forma XXXX be deliver the XX% XX.X% running our year-over-year. pro our full growth on guidance to annual the of pro with expect you to we to XX.X%. we of fiscal our earnings roughly full non-GAAP to double-digit per dividend non-GAAP are total year a the On to guidance year track for XXXX, in the diluted plus X.X% consistent XX% expect assuming growth earnings rate of to line tax of the range meet Bringing track with range of guidance year our of are forma for effective

Tamar. Thanks

we remarks Operator? level are that, you overall stalled on year we With deliver happy our QX. take remain to targets. from we we strategy in probably ability questions, our As of have and execution confident the to in and today, pleased momentum full can And are financial tell your

Horan Thank you. with first Tim our [Operator Instructions] question from comes And line the of Oppenheimer.

cloud you cloud? Good just bit intensity competitive little quantify customers guys. with if Thanks now? you like that provide a the a bit you within can think what's more little Maybe your you Thank for talk you. maybe the Could can flexibility? more And quarter. Hi. signs of you on

Hi Tim.

that reduction talk not we cloud, I about TCO when about think it's only.

when that much value holistic the think more I look that. to we at beyond cloud, moving it's the

come coming capabilities opportunity much more is are is faster to much much recovery. much disaster for to for environment, Ability also resilient Time more and a You market is there with new more faster. cost And to obviously innovation secure. reduction. much

cost I TCO talk not just as of reduction. with reduction. our So to and the much we far just are cloud, the the customer when all about broader we a value on by journey is than proposition mentioned It's talking the

can you these like, intensity, about And products? competitive who do compete talk the you with

customer you the Amdocs the that's don't you extremely for And customers. immigration different customers I'm of or of leader first migration that partners think if about that platform the about talk existing cloud I I I and the Amdocs choice actually this. by in can other enabled this trying don't do Amdocs moving I humble. from is when one tell we -- to are to you to which Because all platform far are from taking doing an thinking that all the any best Amdocs, be the our it's and see customer, we think, cloud Amdocs to a market something

-- we of cloud relationship. know our mentioned activity because our a are capabilities, because non-Amdocs system. do talk also before, only of both the we And When understand in think one we I we think our and I that as systems.

Accenture competition. in is there in be in obviously world, the This is Over world. order to the there Infosys

all we on think are top add I stock consultant we it can On that acquired we strong not capabilities of have. know-how a that with the very based coming consultant. know-how with you organic

non-Amdocs application, cloud. extremely to in we industry take the application, in think that to very, competitive think but well-positioned are are I I very So that we Amdocs also the

native. addition clarify out migrating to everything applications bring to we about is want cloud the what to just cloud, in Shuky existing I our said shop of that R&D

on our it's first architecture want to all them cloud customer their a it's they through but modernization or goes and with product. deploy definition a making ready to Amdocs the terms private they public modernization call whenever cloud cloud, on-prem, in whenever is native selecting of native software cloud the by whether So go

a them comment. T-Mobile, in view are design transformation All in cloud and AT&T, the It's by very in good all Vodafone, mobile in consumer new platforms. platform the today you native of

there the going to are cloud. transformation this all So

Thank you.

our you. the from mute question with Ashwin check comes Ashwin, your next Pardon line of And Thank me, Shirvaikar button. Citi. please

please. moment One Okay.

Our next question line with Tal Bank comes of America. the from Liani of

Can you hear me, Houston?

Tal. Hi,

Hey, Tal.

question have it's don't quarter I have a straightforward. the because on I question a on the environment.

Some of the what the you questions correlation slowdown business the with we're is getting about historical and have Amdocs customers. economic any is between

you can spending So And the like cycle? things cancellations and previous environment? Thanks. correlation about own new the or orders, or have pushouts downturns if in speak orders on economic then address between view environment, you your seen the what's maybe of

Hi, I forget and customers. to two our simplify Tal if If start main add I will something. it, I want will Tamar with activities have we

operation Services organization. The the the monetization -- of is systems. Managed mission-critical the one all current mean stop all the hold. our you not It on or These first a this I is run that large is very on systems. something one are can

the was I So, our this At history this the the highest have we biggest of same announced number XXXX in of ever of the don't even and project reflected is in also impacted. extremely time, that in recall backlog, as we pandemic solid the downturn company. -- business

automation, that far are are say discretionary. monetization, do network every are these strategic not to same they you today immune, time probably not is that touched. our meaning one transformation, projects they we doing projects Now, to are the as can when But I'm discussions spend so on the but discretionary are you last digital projects saying customers before I by at the XXX% be the mentioned that different XG projects that in

the So, are program future. to I spending as can strategic this we tell are more cautious while the you customers much growth and on that they Tamar? the see so continues that to right now some strategic

more Crisis of and we even everything pipeline. that on quantification, one Managed we was back downturns looking the it in slower just been about not Shuky is for currency terms out signing There many, critical in have seen was there this one full Services new this renewal projects pretty of alone. was the the down What has new X% everything reported of years not only more been year. we basis, XXX% XX mission to a story, portfolio in X% that been projects. close secured mentioned. been a Managed we've projects. for pipeline have only revenue I'm the tougher pace Financial seen situations. in quarter the typically with was in have new Yes, give all much been the down and of customers year Pandemic, getting constant XXXX, To continuing. crisis financial years. of even now On rate top cancellation XXXX One of quarter meaning the a talks though, already our cycles projects is in year, have in are have And then incumbent in exactly while because slower Managed we've phenomenon continued. and including with was smaller, that that same If last have happens Services signing projects. Services, pace many But the of we projects slower Shuky

So combination. the I feel that

mentioned which year-over-year. I No, what. is mean we XX% backlog, that's got another record as we

strong very in a see we momentum sales. So

and fact think the high recurring fact nature we customers customers I So mission-critical investing our the systems around is in revenue what the that portion our that combination are of a very for investors. us do I in cloud, would our and XG more thesis model for us of the also, say, a strategic news with for et their a domains of to investment sustainable cetera business is unique creating

Got it.

the was short This answer Tal.

this final Is hiring? are what can plan? any just to to do for What is, slow hire you or year? continue second hiring? plans Are with us kind question -- to address about planning of you down you The hiring do your talk uncertainty, to you -- question your according do economic to maybe

come will line and lower growing I to So less order grow with our in achieve but hire and we net we staff, staff. growth, need are the to our people prefer bottom frankly that we that this are growth speaking, this continuing that to attrition is

where where focused have while board where talk about I as how the access need how we we in where picture do talent about do to possible considerations growing. cost terms our fast talked it are thinking employees, balance productiveness. global that global model delivery do we to very into and we think hire, skills, in effectively make the also it et on are customers, past provide we of the to And and proximity We structure, about, go Many terms cetera. are we in of as vis-à-vis we to to we which do

So we to considerations on. these all are focus continue

current in have a that hope will attrition, the the improve companies that retention that reduce and world, last conditions this on aspect a rate us in the the months, by other that the come tech help Like with we macro With we will challenge bit. the hope down has been employees. many XX and

stop not hiring. did we But

sure. not hiring stop did for we No,

We are growing.

If reported this you we on actually employees prior higher the quarter versus a of noticed number one.

a much great congrats quarter. so Perfect. and on Thanks

Tal, you. thank

questions further this Thank you. at showing no time. I'm And

Head the back for So with that, any to Relations, Smith Matt hand remarks. I'll over closing of call Investor

with Amdocs. Thanks days. you the any and the we'll Have great out from us that, everybody call. to interest And a look group always, questions. Relations forward hearing the conclude please reach call in today in everyone. the additional for with evening coming as Investor your for here joining And do We to in

call. Ladies for you Thank and may gentlemen, this disconnect. conference you now participating concludes today's and