AMDOCS LTD Q1 FY2025 earnings call

• Business started solidly in fiscal 2025 with cloud digital gen AI-based solutions driving growth. First quarter revenue slightly above guidance midpoint. Profitability jumped. 12-months backlog was $4.14 billion. - Key wins in North America: expanded with AT&T, leading billing system consolidation at Bell Canada, collaborating with DreamWorks Animation. International: continued cloud sales momentum with deals like VodafoneZiggo and CT Montenegro. - Cloud sales momentum: on track for double-digit growth, supporting complex multi-year cloud journeys. - Digital modernization: recent awards in Canada, Australia, AT&T Mexico, collaboration with DreamWorks Animation, rapid adoption of connectX. - Monetization: collaborating with Bell, Odido, etc., to accelerate provider monetization of next-generation networks. - Network automation: supporting fiber network build-outs, recognition in the market with deals like Brightspeed. - Generative AI: introduced copilot capabilities, enhanced amAIz platform, acquired PROFINET, launched generative AI experience center, exceeded 10 generative AI PoCs.

First quarter revenue was $1.11 billion, slightly above the midpoint of guidance. Adjusting for negative foreign currency movements, it was up 1.7% year-over-year in pro forma constant currency. Revenue from managed services was $729 million in the first fiscal quarter, up 0.9% from a year ago, and managed services increased to roughly 66% of total revenue in Q1. Cloud continues to drive strong sales momentum with double-digit growth expected for the year. Non-GAAP operating margin was 21.2% in Q1, up 310 basis points year-over-year and 250 basis points sequentially, reflecting the phase-out of low margin business activities and operating improvement initiatives.

• Reiterated mid of fiscal 2025 revenue growth guidance of between 1% to 4.5% on a pro forma constant currency basis, including double-digit growth in cloud. - On track to deliver non-GAAP operating margins within 21.2% to 21.7% in fiscal 2025. - Non-GAAP diluted EPS outlook of 6.5% to 10.5% in fiscal 2025. - Expect revenue of between $1.105 billion to $1.145 billion in the second fiscal quarter, midpoint equating to $15 million sequential acceleration despite negative currency impact.

Operating environment remains challenging with macroeconomic, geopolitical, business, and operational uncertainties. Foreign currency fluctuations can impact profitability and cash flow generation. Difficulty in predicting all possible scenarios regarding market conditions and customer commitments.

Q: George Notter asked about the pipeline of projects and what's driving it, and if there's a change in the marketplace.

A: Shuky Sheffer said the pipeline is rich with mature deals across geographies and growth engine domains, and they're putting effort to close them.

Q: Tim Horan asked about improvement in spending on legacy vs new projects and AI's impact on carriers.

A: Shuky Sheffer said it's more on new stuff like cloud, OSS, BSS transformation, etc. Tamar Rapaport-Dagim added focus is on selling new stuff. Shuky Sheffer talked about AI's role in foundation, data preparation, and seeing acceleration in adoption.

Q: Tal Liani asked about growth breakdown and what could change growth trajectory.

A: Tamar Rapaport-Dagim said 12-month backlog is a leading indicator, cloud continues to perform well, and they expect pickup in growth.

Q: Shlomo Rosenbaum asked about backlog growth, acquisition impact, and gating factors for AI deals.

A: Tamar Rapaport-Dagim talked about backlog composition, acquisition not significantly changing initial guidance, and gating factors for AI deals related to data readiness and customer comfort.