• Record Revenue: $5 billion for fiscal 2024, up 2.7% in constant currency.
• Non-GAAP Operating Margin: 18.4%, an improvement of 60 basis points year-over-year.
• Non-GAAP EPS Growth: 9% for fiscal 2024.
• Q4 Revenue: Approximately $1.26 billion, up 2.1% year-over-year in constant currency.
• Q4 Non-GAAP Operating Margin: 18.7%, up 90 basis points year-over-year.
• Free Cash Flow: $694 million for fiscal 2024 before restructuring payments.
• Managed Services Revenue: $2.9 billion in fiscal 2024, up 1.7% from the prior year.
• Cloud Revenue: Accounted for roughly 25% of total revenue in fiscal 2024.
• 12-Month Backlog: $4.06 billion at the end of Q4, up 2.5% year-over-year on a pro forma basis.
• Fiscal 2025 Revenue Growth Outlook: 1% to 4.5% in constant currency on a pro forma basis.
• Fiscal 2025 Non-GAAP Operating Margin Outlook: 21.1% to 21.7%.
• Fiscal 2025 Non-GAAP EPS Growth Outlook: 6.5% to 10.5%.

• Warning! GuruFocus has detected 3 Warning Signs with IRIX.

Release Date: November 12, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Amdocs Ltd (NASDAQ:DOX) achieved record revenue of $5 billion for fiscal year 2024, marking a 2.7% increase in constant currency.
• The company reported double-digit growth in cloud services, which now account for approximately 25% of total revenue.
• Amdocs Ltd (NASDAQ:DOX) maintained a high renewal rate and expanded multiyear engagements with Tier 1 operators in various regions.
• The company returned over 100% of free cash flow to shareholders through share repurchases and dividends.
• Amdocs Ltd (NASDAQ:DOX) expects its non-GAAP operating margin to surpass 21% for the first time in fiscal 2025, indicating improved profitability.

Negative Points

• The company is phasing out several low-margin, non-core business activities, which will impact reported revenue for fiscal 2025.
• Amdocs Ltd (NASDAQ:DOX) faces a continuously challenging demand environment, which affects the conversion of pipeline opportunities into deals.
• The company reported a modest revenue growth of only 0.2% in North America for the fourth quarter.
• There is a gap between the growth rates of free cash flow (3.5%) and earnings (8.5%), raising questions about cash conversion efficiency.
• Amdocs Ltd (NASDAQ:DOX) anticipates restructuring charges related to its current program, which may affect future financial performance.

Q & A Highlights

Q: How integrated were the businesses being phased out with other units, and how difficult will it be to carve them out? Also, why is there a gap between the growth rates of free cash flow and earnings? A: The businesses being phased out were not heavily integrated with other units, and we've been planning this transition to ensure minimal disruption. Regarding the gap between free cash flow and earnings growth, they don't always track one-to-one due to various factors, but we are confident in our business's ability to convert earnings to cash effectively. Historically, our conversion rates have been strong, and we expect this to continue.

Q: Can you discuss the overall demand environment and how it compares to previous years? A: The demand environment remains strong, particularly in cloud services, where we've seen double-digit growth. While there is no significant change from previous quarters, we continue to see a robust pipeline and high win rates in managed services and new transformations. The demand for cloud-related services is particularly strong, and we are well-positioned to capitalize on these opportunities.

Q: What is the expected cadence of revenue growth for fiscal year 2025, and how should we think about the trajectory of the business? A: We expect revenue growth of 1% to 4.5% on a pro forma basis, excluding the phased-out businesses. This reflects our confidence in the conversion of our pipeline into revenue. While the exact trajectory can vary, we anticipate an acceleration in revenue growth throughout the year, driven by strong sales momentum and execution.

Q: How do you view the spending environment for 2025, and what are your expectations for customer willingness to invest in projects? A: We don't see a deterioration in the spending environment compared to 2024, but we also don't see a significant recovery. The demand remains stable, with strong interest in cloud services and managed services renewals. While some legacy systems face headwinds, our cloud growth engine is performing well, and we are optimistic about our ability to capture opportunities as they arise.

Q: Are you concerned about customers transitioning to point solutions from competitors when moving to the cloud? A: We are confident in our retention rates and believe our position in cloud operations is strong. Our cloud services often expand our role with customers, as we manage both the systems and cloud infrastructure. This comprehensive approach enhances our value proposition and strengthens our customer relationships.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.