• Revenue: $1.11 billion for Q1, up 1.7% year over year on a pro forma constant currency basis.
• Profitability: Increased by 310 basis points year over year and 250 basis points sequentially.
• Non-GAAP Earnings Per Share: $1.66, exceeding the midpoint of guidance.
• 12 Months Backlog: $4.14 billion, an increase of approximately 2.7% year over year on a pro forma basis.
• Managed Services Revenue: $729 million in Q1, representing 66% of total revenue.
• Free Cash Flow: $101 million before restructuring payments; $78 million after restructuring payments.
• Cash Balance: Approximately $349 million at the end of Q1.
• Shareholder Returns: $198 million returned through share repurchases and dividends in Q1.
• Operating Margin: Non-GAAP operating margin of 21.2% for Q1.
• Full-Year Revenue Growth Guidance: 1% to 4.5% on a pro forma constant currency basis.
• Non-GAAP Diluted EPS Growth Guidance: 6.5% to 10.5% for fiscal 2025.

• Warning! GuruFocus has detected 4 Warning Signs with EA.

Release Date: February 04, 2025

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

Positive Points

• Amdocs Ltd (NASDAQ:DOX) reported first-quarter revenue of $1.11 billion, slightly above the midpoint of guidance, despite negative foreign currency impacts.
• Profitability improved significantly, with a 310 basis point year-over-year increase in non-GAAP operating margin, driven by the phaseout of low-margin business activities.
• The company achieved a healthy 12-month backlog of $4.14 billion, reflecting an $80 million sequential increase and a 2.7% year-over-year growth on a pro forma basis.
• Amdocs Ltd (NASDAQ:DOX) continues to see strong sales momentum in cloud services, with double-digit growth expected in this segment for the year.
• The company has expanded its managed services agreements, maintaining a near 100% renewal rate, which supports recurring revenue streams and business visibility.

Negative Points

• Reported revenue declined by 10.9% from a year ago due to the phaseout of certain business activities.
• Europe showed weaker performance, mainly due to timing differences between project roll-offs and new deal ramp-ups, though growth is expected to resume next quarter.
• The company faces ongoing macroeconomic, geopolitical, and operational uncertainties, which could impact future performance.
• Despite a strong pipeline, there is uncertainty about the timing of deal closures and revenue recognition, particularly in the AI and cloud segments.
• The company's growth rate of 1.7% in pro forma constant currency is considered low, with expectations for acceleration in future quarters.

Q & A Highlights

Q: Is there something changing in the marketplace that's driving the pipeline of significant projects? A: Shuky Sheffer, President & CEO, noted that while there isn't a definitive change in the market, the pipeline is rich with mature deals across all geographies and growth domains. Amdocs is focusing on closing these deals to start recognizing revenue this year.

Q: Are you seeing an improvement in spending on legacy projects, or is the focus more on cloud and new projects? A: Shuky Sheffer, President & CEO, stated that the focus is more on new projects such as cloud, BSS transformation, and digital modernization, rather than legacy systems.

Q: Can you break down the 1.7% growth in pro forma constant currency for Q1, and what could change to increase growth sustainably? A: Tamar Rapaport-Dagim, CFO & COO, explained that the growth is expected to accelerate, with a 12-month backlog showing a 3.5% increase. The growth will come from ramping up new deals and converting a strong pipeline into additional deals, with cloud continuing to perform well.

Q: What are the trends within your large customer group, especially with big service providers? A: Tamar Rapaport-Dagim, CFO & COO, highlighted that Amdocs is active across multiple activities with large customers like AT&T, and is expanding into new geographies and with new customers. The focus is on diversifying activities and expanding Managed Services.

Q: Regarding AI, what are the challenges in landing big deals, and what is the potential impact on carriers? A: Shuky Sheffer, President & CEO, mentioned that the focus is on preparing data for generative AI use cases. Challenges include ensuring data readiness and proving ROI. Amdocs is seeing progress in data domain activities and expects acceleration in signing deals.

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