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Good day and thank you for standing by. Welcome to the Amdocs Third Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised, today's call is being recorded. I would like to hand the conference over to your speaker today Matthew Smith. Please go ahead.

Thank you, Kevin. Before we begin, I need to call your attention to our disclaimer statement on slide 2 of the presentation. Some of our comments today may be forward-looking statements and are subject to risks and uncertainties, including as described in Amdocs' SEC filings, and that we will discuss certain financial information that is not prepared in accordance with GAAP. For more information regarding our use of non-GAAP financial measures, including reconciliations of these measures, we refer you to today's earnings release, which will also be furnished with the SEC on Form 6K. Participating on the call with me today are Shuky Sheffer, President and Chief Executive Officer of Amdocs Management Ltd.; and Tamar Rapaport Dagim, Chief Financial and Chief Operating Officer. To support today's earnings call, we are providing a presentation, which can be found on the Investor Relations section of our website, and as always, a copy of today's prepared remarks will also be posted immediately following the conclusion of this call. On today's agenda, Shuky will recap our business and financial achievements for the third quarter fiscal 2024, and will update you on the continued progress we've made executing against our strategic growth framework, including generative AI and our continued sales momentum in cloud. Shuky will finish by discussing our financial outlook for the fall year fiscal 2024, after which Tamar will provide additional details on our third quarter financial performance, our forward guidance, and our continued commitment to ESG. And with that, I'll turn it over to Shuky.

Thanks, Matt, and good afternoon to everyone joining us on the call today. I'm pleased to report solid results for our third fiscal quarter and would like to thank our employees globally for their commitment to helping our customers provide seamless connectivity and amazing user experience to billions of end users each day. The key financial highlights of the quarter can be found on slide 7. Q2 revenue was a record $1.25 billion, up nearly 2% from a year ago in constant currency, and in line with the midpoint of our guidance after adjusting for unfavorable foreign currency movements. Notably, non-GAP operating margin was 18.6%, was the highest in many years, rising by 80 basis points year over year and 20 basis points sequentially as we continue to benefit from our ongoing margin expansion initiatives. Non-GAP earning per share was $1.62, consistent with the higher end of our expectation, and we ended Q3 with a record-setting 12-month backlog of $4.25 billion, up approximately 3% from a year ago. Demonstrating our confidence in Amdocs’ unique business model and the future success of the company, we also increased our pace of buyback activity in Q3, repurchasing approximately $169 million of Amdocs’ shares. Turning to Q3 operational highlights on slide 8. Demand for Amdocs’ cloud solution remained especially strong, highlighted by the significant five-year cloud deal we recently announced with AT&T and newly signed partnership agreements to support the long-term cloud migration journeys at TELUS in Canada and Vodafone

Thank you, Shuky, and hello, everyone. Thank you for joining us. I'm pleased with our solid financial results for the third fiscal quarter as detailed on slide 18. With record Q3 revenue of approximately $1.25 billion, up 1.8% year-over-year in constant currency. On a reported basis, revenue increased 1.1% from a year ago and was consistent with the midpoint of guidance, adjusting for a negative impact from foreign currency movements of approximately $5 million compared to our guidance assumptions. From a geographical perspective, North America declined slightly as compared with a year ago, but grew on a sequential basis. Europe was weaker, mainly reflecting timing differences between a natural roll-off of completed projects and a gradual ramp-up of new deal awards. The rest of the world delivered another record quarter with revenue growth of nearly 13% from a year ago. Shifting down the income statement, our non-GAAP operating margins were 18.6% for the third quarter, the highest in many years. Non-GAAP operating margin improved by 80 basis points from a year ago and 20 basis points sequentially, reflecting our continuous drive to improve operational excellence through disciplined resource management, automation, sophisticated tools, and leveraging AI, including generative AI, to push for more cost savings and higher efficiencies across the board. Interest and other expenses amounted to roughly $7 million in the third quarter and reflected adverse foreign currency movements in the quarter. On the bottom line, non-GAAP diluted EPS of $1.62 was the higher end of guidance and included a non-GAAP effective tax rate of 16.7%, which was consistent with the higher end of our annual target range of 13% to 17%. Diluted GAAP EPS was $1.21 for the third fiscal quarter. This includes a restructuring charge of approximately $15 million, or $0.11 per share, without which diluted GAAP EPS would have been at the high end of the guidance range of $1.24 to $1.32. We'll provide more context around the restructuring charge when I discuss our financial outlook later. Moving to slide 19, 12 months' backlog was a record $4.25 billion, up approximately $2.7 billion from a year ago, and $20 million sequentially. Our 12 months' backlog reflects a positive mix of projects, awards, managed services, renewals, and expansions with existing customers and new logos and has traditionally served as a new leading indicator of our business. As an additional point, note that 12 months' backlog includes less than a full year impact from the significant new deal we recently signed with AT&T, reflecting the phased ramp-up of activities expected under the current plan of execution. Turning to slide 20, managed services revenue was a record $741 million in Q3, up nearly 3% from a year ago, and equivalent to roughly 59% of total revenue. Managed services revenue was mainly driven by ongoing ramp of mission-critical support activities with new logos and long-standing customers, such as the extended multi-year engagement we announced with Rogers last quarter that included an expansion into new domains like data and testing services and more. Managed services growth is also supported by our customers' migration to the cloud, as proven by our recently signed agreements with TELUS in Canada and Vodafone

Thank you, Tamar. As I said earlier, I am pleased with our solid third quarter results. And while we continue to operate in a challenging demand environment, we remain well-positioned to monetize a healthy pipeline of opportunities across cloud, generative AI, and our other strategic domains by leveraging our market-leading portfolio, best-in-class execution, and highly talented people. With that, we are happy to take your questions.

Thank you. [Operator Instructions] Our first question comes from Timothy Horan with Oppenheimer. Your line is open.

Thanks, guys. I wanted to focus on AI, the contract win, and I think that was separate from maybe the trial that you did with the contact center. I guess on the contact center, can you just talk about how large the trial was, how extensive it was, and those sounded like some pretty amazing results. Have you been able to replicate them in other places, or do you think you can roll it out relatively quickly? Any more color you can give around the AI contract win would be great. Thanks.

Regarding this award, this is a very significant global operator that has many opcos. The initial deal actually consisted of us implementing an infrastructure. It's called the Amdocs amAIz platform, and then setting up the first use case to one of these. This is the initial deal with the prospect to continue enhancing to more and more what we call super agents or use cases in this specific opco and then to other opcos. As we mentioned, we are doing it with a partnership with NVIDIA. Regarding the operator in North America, this is a good example how we, using our technology, actually were able to build what we call super agents, especially for the care center that increases the productivity of the call center agent by tens of percent, extremely accurate. By the way, we are doing similar, proof of concept like this with other large operators in the world. The call center operation is highly mission critical, so our customers want to make sure that this is working consistently in this type of accurate and become like another mission critical system as part of a call center. We assume that they will start to implement these tools across the call centers. This is going to completely disrupt the call center operation because it means that you can take a relatively young or a relatively new CSR that is working in a call center and immediately bring into capabilities and experience someone is working three, four years in the call center. We believe our customers will use it not just obviously to take the cost saving, but it's also going to increase the quality of the call center, call any time, consumer satisfaction, and we believe that this technology is going to disrupt all the call centers of all our customers.

Are you doing that in partnership with Microsoft still or any other partners there?

We have many partners in this domain. I think this specific one we are doing with NVIDIA, but at the same time we are running several proof of concept with Microsoft and others, so we are very diverse from this perspective.

Our next question comes from George Notter with Jeffries. Your line is open.

Hi there. Thanks a lot, guys. I guess I wanted to ask about just the overall spending environment. If I go back the last few quarters, there's been a running narrative of customers focusing on transformation projects versus traditional projects. I think you guys talked about different M&A deals kind of slowing decision-making down, slower to close type situations. Can you just talk about the bigger picture here, what you're seeing, and is there an opportunity to maybe see the business reaccelerate if those conditions get better? Thanks.

What we're seeing is on the one hand, customers looking for ways to transform. Some of them, as we said in the past, decide to take kind of the bigger approach of taking out legacy and putting in new. Some of our large North American and European customers, for example, are going with this. Many more customers are actually looking for the gradual modernization path, which is something we cater to very well given the fact our portfolio is modular, given the fact we are allowing them different ways to modernize and take the journey to the cloud, whether they want to put the new stack in place or whether they want to take the classic existing applications and make them cloud enabled. We can have them with the migration to the cloud and many other activities around that. Having said that, we do see more scrutiny in decision making. We do see a tougher environment in terms of the pace in which those decisions are being taken. Our win rate continues to be very high. The relevancy of our offering remains very strong. In terms of the consolidations, overall, I would say consolidation in the industry is a good thing for us. We've been historically benefiting from these situations, as typically when carriers in the market consolidate, they're looking to provide a different value proposition to their customers. We are coming with a very strong experience in supporting them in doing that. We provide the systems that they need, but in the short term, sometimes when there is a situation, let's take the example if you sell a lot, which is a customer of ours in North America, as they are waiting for the regulator to approve the acquisition by T-Mobile, naturally they will not put a lot of money into a long-term investment. We do see this kind of phenomena from time to time, but I would say generally speaking, looking back on merger activities between T-Mobile and Sprint, merger activities that are happening. One of the big transformations we are running right now is Vodafone Germany, for example, that has been acquiring different assets along the years, and we're helping them to build one stack to support their line of business. If I need to generalize, we are typically enjoying consolidation in the industry, even though sometimes in the short term it may create some delays in some investments.

Got it. Any insights into maybe when some of these effects might come off? Is it just a question of the business environment? Is it a question of elections? The M&A part, I guess, certainly.

I think it's about the business environment as a whole. I'm not talking just about the U.S., I'm talking globally. We've been seeing this scrutiny that I've mentioned, this phenomenon. I think it's about the business environment as a whole in terms of the pace and the pickup of investments that we are looking for. Again, there could be some specifics of some examples of a carrier in a specific situation, but I think it's more about the business demand overall and how we should see that unfolding as we move along.

Thank you.

Thanks, George.

[Operator Instructions] Our next question comes from Tal Liani with Bank of America. Your line is open.

Hi, guys. I'm in a public space. I'm whispering.

Hi, Tal. We can hear you well.

Good. You and the entire bus here hearing me. I have two questions. Number one is the $20 million increase in backlog, is it related to the AT&T contract that you spoke about last quarter? The second question is much more philosophical. If I look at the last 40 quarters or 10 years or 8 years or 7 years, the needs of carriers never changed. The story changes, but the need to do what you're providing never changes. It's always high in the priority. But when I look at the quarters, there were many more quarters where you grew 2% a year versus quarters that you grew 6% or 8% a year. When I look at your growth rate over the last few quarters, four quarters ago you were at 6.5% growth year over year, and now you're guiding to 1.4% growth, which is more in line with the averages or more in line with what we've seen the last 10 years. The question I have is, and again it's philosophical, but I want to understand what drives it? Can the environment support growth of 6% to 10%, as you said three years ago? Can the project and what the carriers are doing, can it support growth that is higher than 2% to 3%? If that's the case, then what drives the growth to accelerate over the next few years? Thanks.

Considering the fact that you are in a public space, it's a relatively long question. Let me try with the second one. I think that the difference, if you compare us previously, and I think that at the time, I think we have maybe one or two growth engines, and today we have five. Not all of them are working at the same pace. For example, we highlight again and again the journey to the cloud engine that is more than 20% of our revenue and growing double digits. Obviously, when we expand it to others, so the total addressable market that we're operating today is much higher comparing to what we had maybe 10 years ago. But I think that what we are saying is that in the normal demand environment, which is not the situation right now, we believe we can go back to single digit growth. In the current demand environment, there is some industry pressure, macroeconomic pressure, interest rates, and other customers are cutting CapEx because of this and focusing on free cash flow and other things that the industry, by the way, maybe also some other things are going through given the current pressures. It will be difficult for us. It will be more in the range that you mentioned historically, but we believe with some support from the macro and some in the main condition, we can get back to what you call more close to middle single digit like 5% in this area. Regarding the backlog part of it, maybe Tamara.

Naturally we always during the quarter, the backlog by recognizing revenue and sign many new deals. So it's definitely part of it. I think the interesting point to make here is that we are talking about a 12-month backlog. The reason I made the comment that the current 12-month backlog does not reflect the full year of this deal because as planned and as expected, we do not take effective control of that operation of that IT environment immediately. It takes time. We need to learn the environment. We need to transition. We need to set up certain capacities. So we do not have full 12 months yet of that deal reflected in the number we're reporting as of June 30. Everything, I can assure you, is going well according to plan. We will definitely see the full run rate of that in the middle of probably calendar 2025.

Back to your first question, normal demand environment, I think we can get close back to the mid-single digit growth rate right now with the industry and everyone is under pressure. I think it will be tougher and you would expect more of the historical level of revenue growth.

Great. Thank you.

One moment for our next question. Our next question comes from William Power with Baird. Your line is open.

Great. Thanks. It's Yanni Samoilis on for Will. Thanks for taking the question. Just to follow up on some of the comments you were making a second ago about the spending environment in the market generally. When we're thinking about what growth might look like in fiscal ‘25, at this point it sounds like we should be expecting similar growth as fiscal ‘24 or are there any near-term drivers I guess other than an improved spending environment that would lead you to expect some re-acceleration? Any guideposts or directional color would be great.

We're not guiding yet for 2025, but we were trying to give some more color how we see the environment. Typically, for example, our 12-month backlog is a good leading indicator. Don't take it literally as I'm telling you now. Okay, if 12-month backlog grew 2.7%, that's the growth next year. I think what you're seeing is hoovering around these levels right now and we need more change in the demand environment to see an acceleration. That's the message we're trying to get across.

Thanks, that's helpful. Should we expect continued accelerated buybacks or do you expect M&A to become a more significant use of cash next year? Any outlook on that front?

First of all, I would say, generally speaking, I believe we have the capacity and we are always trying to do both. I don't think it's one versus the other. At the same time, M&A is something we're always looking at. There's always a pipeline that we're actively evaluating but it's harder to predict the pace and the specific deals that will mature to closing. We've been very consistent with our buyback. You've seen us out there always and also believing in ourselves, of course, and in the story of Amdocs, we definitely think that the cash allocation back to shareholders through buyback is definitely an important vehicle. At the same time, we are going to look for M&A and we will probably do more M&A in our strategic domain. I think the simple answer, both, and I don't think that one should be on account of the other necessarily.

Makes sense. Thank you very much.

Thanks.

I'm not showing any further questions at this time. I'd like to turn the call back over to Matt for any closing remarks.

Thanks, Kevin, and thanks everyone for joining today. If you do have any additional questions, please reach out to us here in the IR group and we look forward to speaking with you soon. Have a great night.