Q4 2020 Amdocs Ltd Earnings Call
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It's now my pleasure to introduce head of Investor Relations, Matt Smith.
[music]. Thank you operator before we begin I would like to point out that during this call. We will discuss certain financial information that is not prepared in accordance we got the company's management uses this financial information in its internal analysis in order to exclude the effects of acquisitions and other significant items that may have a disproportionate.
Fact in a particular period Accordingly management believes that isolating the effects of such events enables management and investors to consistently analyze the critical components and results of operations of the company's business and to have a meaningful comparison to prior periods 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 FCC on form 6K also this call includes information that constitutes forward looking statements. Although we we although we believe the expectations reflected in such forward looking statements are based upon reasonable assumptions, we can give no assurance that our expectations will be obtained or that any deviations will not be me.
To me all such statements involve risks and uncertainties that may cause future results to differ from those anticipated. These risks include but are not limited to the effects of general economic conditions, the duration and severity of the COVID-19 pandemic and its impact on the global economy and such other risks as discussed in our earnings release today and the greater.
Thanks in the Companys filings with the Securities and Exchange Commission, including in our annual report on form 20-F for the fiscal year ended September 32019 filed on December 16, 2019, and our form 6K furnished with the first quarter fiscal 20 on February 18, 2020 for the second fiscal quarter or fiscal 20 on May 18.
In 2020 and for the third quarter fiscal 2020 on August 17, 2020, Amdocs may elect to update these forward looking statements at some point in the future. However, the company specifically disclaims any obligation to do so participating on the call with me today are Shuki Schaeffer, President and Chief Executive Officer, Vandex Management limited and Tomorrow.
Before the game joint Chief financial and operating Officer. Finally, a copy of today's prepared remarks will be posted on the Investor Relations section if I'm DOCSIS website. Following the conclusion of this earnings call and with that I'll turn it over they should be.
Thank you, Matt and good afternoon to everyone joining us for false piece of water them constantly.
I want to begin by reviewing unfortunately full year operating performance after which I plan to address some important strategic steps that we're taking talks and EBITDA longtime also on Fiveg and the cloud.
And that was quick summary of our financial outlook for fiscal 2021, including our expectations for fossil based revenue and non-GAAP diluted earnings per share was in the year ahead.
I'm pleased to report record fourth quarter results, which include the victim to sequential revenue falls in one of the additional operating highlights we delivered consistent execution.
And then it's all of the investments made since they've improved stability and achieve a best ever quarter for cash collections and we don't get going go up and then make me also pleased to see the acceleration says moment, it's reflected in our nickel 12 month backlog, which grew $140 million sequentially and three points.
But let's say you believe you defaults water.
After the full fiscal year 2000 Levy grew 2%. This we bolted why not get buildings don't show was up 23% year over year also reach rather they hired and well didn't invite guidance we provided.
Ability to generate modest living an ethnic was doing a global pandemic is a testament to this class of technology and I'll point out that services model and the visibility provided by our solid based highly recurring revenue streams, usually getting revenues accounted for roughly three quarters of total revenue in fiscal 2000.
Hello, Fortunately reach flows for a minute services engagement with.
Customer under multiyear agreements.
Other pool saw stable business model and the ability to meet our customer commitments, we generated normalized free cash flow of $527 million, physical 2020, which exceeded our initial target of $480 million for the.
On the whole I part of our financial performance in fiscal 2020, which was made possible by the parents employees to whom I am grateful for that extra older people push on leasing and commitments while the ongoing funding. Additionally, lets me to let me again, thank our customers for their continued profit have those.
But no to ensure their essential services the wore me and this difficult time.
Let me provide some color regarding our original business opportunities.
Beginning with North America, we finished a positive year, we shouldn't go to better than expected gross agency and contribution from M&A across the border region. We supported the stuff. You did you did you have customer like Comcast business, we open well open Mozilla reassess and almost as possible are being implemented to automate.
In sleep lines escape into end of customer lifecycle.
The government outlook in North America, each of those market dynamics are favorable and supportive of Bulls sobi providers will continue to be strategic investment. He did get them live nation media Fiveg, the cloud, including an 18 last quarter. We said, it's Ed docs to stop the Borgata modernize the consumer mobility domain.
We are encouraged by positive signs.
They told me. This failure is demonstrated by two they use the ATM is selected all five dissolution to quickly lounge and monetize exciting new Fiveg services.
The gaming mobile future runs out at the vehicle to vehicle communication they bought shares in much more detail.
These de leverage five do you want to position capabilities form we said that would be one of openness and highlights the way in which we are collaborating with 80, a D to bring you back to Fiveg experience for the future.
T mobile we continue our strategic pharmacy walking helped them as sort of a base to support T mobile strategic domain of fostering media enterprise B to B Fiveg network and more in those sectors like GE I'm just is collaborating with T. Mobile in audio that's one of the founding partners the five geopolitical base.
I should live which is focused on helping service providers like celanese away when fiveg investments CLO, it's computing loyalty and new customer experiences fine.
Finally, we have won a notable new projects with a north American banking group well, we've been selected as a bottom it talks a lot of its customer experience and digital transformation across its operation.
These de leveraging the proven capability is a project or two.
I wish to remind you is a digital consultancy, we acquired in fiscal 2018, so its design and excuse leaving a methodology is of course different about because combined with other fossil mission expertise. We look forward to teaming with these financial services leader to frame the design development and deliberately well the very best expressed.
The customers and employees.
Moving to you what we.
We delivered our best ever wants to which include new de Wayne and ongoing political activity. We some of the Allegion larger service providers like Vodafone, Germany, you know in Spain.
Before we maintain a high recently that includes the digital transformation of was it a bunch of regalia cloud based provisioning if I do really well just shouting distance sky UK and the signing of our first project in what do you mean, it's there was a deal that three okay.
He will that be Dick wanted a media.
Speaking to the extended its partnership with U.S. telecom to provide content licensing your processing and was selected to provide content services under the multiyear agreements that was the AG I you will be in a few years. Because you also successfully completed a significant encompass technology politics will sky and Virgin media, we invite process over a third party.
The hours of Sky folk are you, which do cost and to be able to meet its IP deals. The platform, we have a big which is a W. As CLO.
Regarding the year ahead, we expect it to sustain gross you walk by executing against our healthy backlog and further expanding our customer footprint throughout the region.
Turning to the rest of the world sequential Blessed improved slightly in the fourth quarter. They must blend of technology leadership in Fiveg, we successfully deployed capital of one.
Kt Corporation in South Korea. Additionally, edgeview plus one of the fastest growing fiveg telecom provider in South Korea is selected I'll discuss it a one CLO.
Nike solution to accelerate the launch of new Fiveg services, enabling you to end customers to benefit for more frequent services innovation and Ive the planes and buttons you minutes every says reaching new multi year agreement with any of the other thing to me good Kaufmann small, but important to customers to amdocs modem dig it up.
The system wanting but see telefonica vivo extended an existing multiyear agreement with an expansion of scope to include the Amdocs data management solution.
Regarding to your head you do that.
So the war the quarterly trends are likely to fluctuate, especially has the activity in southeast Asia ongoing buckle Chillers in Latin America in the political indication of customer activity across the entire region.
So some of those my regional comments I believe we extended our market leadership in default he's got water Oh, many project wins reflect unique innovation, we are bringing in this strategic domain customer male focusing the spending.
One such domains the telecom industry journey to the cloud, which we believe is approaching a tipping point is service provider invest to realize the increasing agility speed of innovation fast time to market and the reduced cost of ownership that is needed to meet the business demand of today.
It's it doesn't cost them a pop now I'm just is highly differentiated by technology and pull that lit services model, which uniquely position us to accelerate a dangerously journey to the cloud.
I've got to be assessed always says is in the very heart of the customer experiences of more than 350 communication service providers worldwide.
He doesnt mean, an intimate understanding of the communication and biomet and expertise needed to have service provider transformed the way they woke Kelley.
Carrier grade cloud make you'd be a so-so assess boardex are best in class and well always investing to bring fresh innovation using their books. These CAC. The airports did the cost of the enhanced platform life agility and shorten the customer time to maybe.
I'm not scissor lift the grades of services, which we offer every customer is ready and tailor made journey to the cloud. These services include consultancy regulation on monetization services for new and legacy Abdelbeset known Amdocs BSS or is this application as well as supporting customers cloud native application development.
Incorporate they thing it does capabilities. Additionally, I'm dose offer an end to end accountability for the customer cloud operation, including secured optimize hybrid cloud perforation package on the mall taught you next generation cloud operation I was agreement the.
But I think you have other cloud offering is well positioned in the market by demonstrated as demonstrated by 18 de selection of opening charging solution, which is designed to speed up its move to the cloud in addition to monetizing to Fiveg.
Additionally, many other new existing customers already choosing to modernize on amdocs use the cloud native products, including global telephone telecom on Spain and wonderful job.
Looking ahead, we see an expanding pipeline of opportunities as the wall premium service provide those formulas in accelerated their cloud strategies. This policy will be implemented gradually in the coming years, all the way each time, we believe endorsed addressable markets for cloud services, we go to be billions of dollars.
To accelerate the market potential in those schools, we have today happy to announce it you want to use the disagreements with AAMC to deliver integrated cloud native yes. This offering in jointly Butte and promote a white label services to help customers would be great and modernized they'll see.
System utilizing best in class plus capabilities.
Look forward to working closely with all of us as well with other folks like Microsoft Azure and Google cloud to ensure that we are providing the journey to the cloud for all current and future as discussed on those.
It's part of another move to focus on those strategic domains, we have today starting to agreements for the divestiture or open market and other subsidiary for 300 million dollar cash received from being a company, which one equity partner you department to institutional investors.
Those of you follow the Amdocs why why me no open market, it's the leading provider of mobile messaging solutions to enterprises, including global one way into way SMS MMS in other application to person messaging solution with this transaction I know seems divesting nonstrategic assets.
Being laser focus on our core strategic growth initiatives.
We expect to complete the divestiture of open market. We see the next few months and we played too we tell the majority of the net proceeds to shareholders by way of follow.
Certainly shows it bounces.
Turning finally to our outlook for the year ahead, let me remind you that we are making that type of less uncertainty regarding the spread and the severity of the Cobi 19 pandemic EBITDA adverse effects on the global economy remains having said that we expect our revenue was constant currency will accelerate.
Thanks to 3.5% to 7.5% and physical 2021, which is more than twice the rate of last year.
Confidence in the outlook supported by the visibility to file Nickeled 12 months backlog as well as the expanding new pipeline, we see across all strategic wars domains more of them. We are positioned to deliver expected total shareholder return of almost 10%. If you think about 2021, including non-GAAP.
Earnings per share was 5% to 9% plus I'll leave it there.
With that let me turn the cost of the mouth for a remote.
Thank you sure.
Fourth fiscal quarter revenue onto a billion a five was slightly above the midpoint of our expectations of one or 2 billion to 1.6 billion.
Jackie quite positive impact from foreign currency of approximately $7 million compared to a guidance assumptions and a partial quarter from our recent acquisition of Openedge, which was not included in the fourth quarter guidance range.
On a reported basis revenue performance included the positive impact from foreign currency fluctuations of approximately $11 billion relative to the third fiscal quarter of 2020.
Our fourth fiscal quarter non-GAAP operating margin was 17.2% above the midpoint of our long term target range of six and a half to 17 and a half dozen.
Consistent with our guidance that we will protect profitability despite little bit 19 related challenges.
Below the operating line non-GAAP net interest and other expense was $7 million in Q4, the mix of which include interest expense related to the shorter boring in the fourth quarter interest for the 10 year bond issue and the impact of foreign currency fluctuations.
For forward looking purposes, we expect this foreign currency fluctuations will continue to impact our non-GAAP net interest and other expense line in the range of a few million dollars on a quarterly basis.
Diluted GAAP EPS was 1.1 $3 in Q4 above our guidance range of 116 to 122.
Consistent with guidance, our non-GAAP effective tax rate of 6.5% in the fourth fiscal quarter was below our annual time between just helping to 17%.
Diluted GAAP EPS was a dollar and one cents for the fourth fiscal quarter.
The midpoint of our guidance range of 95 to the dollar tree sense.
Free cash flow was $1.5 million in Q4.
Comprise of cash from operations of approximately 205 million, let's 60 million in net capital expenditures and other.
No one asked free cash flow was 161 million in the fourth fiscal quarter for the full fiscal year 2020 normalized free cash flow was $527 million.
This exceeded our initial target of 480 million for the year and reflected the better than expected conversion rates on the hundreds and 8% relative to non-GAAP net income in the second half.
Please refer to the reconciliation table provided in our Q4 earnings release for an explanation of the differences between online and reported free cash flow in the quarter and for the past periods.
Well lets talk collection in Q4 Dsos of 75 days decreased by 12 days year over year and down by 10 days as compared to the prior fiscal quarter we.
We remind you that the is still may fluctuate from quarter to quarter.
The sequential gap between Unbilled receivable and deferred revenue narrowed by two regions compared to the third fiscal quarter 2020, reflecting a decrease in total EBIT receivable of 2 million any material change in total deferred revenue short and long term debt.
I think to a year ago, the gap narrowed by $28 million.
I, just think that gap a primary due to the timing of contract specific milestones relating to transformation projects will deliver for our customers.
Moving forward you should expect that with receivables until the deferred revenue to fluctuate from quarter to quarter in line with normal.
Moving on a 12 month backlog was a record 3 billion point 62 at the end of the fourth quarter up 140 million sequentially from the end of the prior quarter and equivalent to you will be a growth of roughly 3.7%.
This record high sequential growth. The 12 month backlog is mainly a result of new awards across existing and new logos and a better because a few thousand million dollars of opening backlog is this number.
As a reminder, we believe our 12 month backlog continues to serve as a good leading indicator of our forward looking revenue and we are pleased to see supporting visibility of over 80% entering the new fiscal year.
I'm pleased to report another record quarter for managed services arrangements, which comprise roughly 58% of total revenue.
This performance reflects timing you would raise the growing adoption of our managed transformation model and the continued expansion of activities within existing customers.
Our cash balance at the end of the first fiscal quarter was approximately 984 million include absolutely boring of seven and 50.
Our September 30 balance sheet reflects the acquisition of open it for net consideration of roughly 190 million in cash.
We remain comfortable with our balance sheet and believe that we have ample liquidity to support our ongoing business needs, while retaining the capacity to fund strategic growth investments and when the right opportunities arise.
Additionally, we are committed to maintaining our investment grade credit rating.
During the fourth fiscal quarter, you repurchased $91 million of ordinary shares under our current authorization.
As of September 30, we had roughly $678 million of authorized capacity for share repurchases. We've not stated expiration date, which will execute at the company's discretion going forward.
Now turning to the outlook the prevailing level of macroeconomic and business uncertainty surrounding the magnitude and direction of the company can pandemic remains elevated.
The midpoint of our revenue guidance reflects what we consider to be the most likely outcomes based on the information we have today, but we cannot predict all possible scenarios and really really view the outlook may be impacted my feeling is that customers continue to evaluate double digit business priorities and future pace of investment.
As an additional points on Q1 and full fiscal year 2021 outlook still includes open market does the transaction is not yet closed.
Where applicable guidance you much who will provide pro forma revenue non-GAAP earnings per share guidance, which excludes open market for the fiscal year 2020 and 2021.
The divestiture no open market is expected to close within the next few months following which we will update our full year fiscal 2021 oclock.
With that said, we expect revenue for the first fiscal quarter of 21 to be within a range of opinion 0.05, My 2 billion below nine cents.
Our Q1 revenue guidance anticipates, an immaterial sequential impact from foreign currency fluctuations.
Regarding the full fiscal year 2021, we expect to deliver accelerated revenue growth in the range of 4% to 8% year over year as reported this outlook includes the positive impact from foreign currency fluctuations of approximately half a person when you will be you and roughly 1.5 points of growth.
Yes, we will connect.
To provide you with additional color on our growth projections, we expect the ramp up of customer activity to contribute to an acceleration is delayed viewing of yield growth in the second fiscal half of the year.
We are also pleased with the fact growth is expected to generate to be generated across all three of our key geographical regions.
On a constant currency basis, we expect to deliver total revenue growth in the range of roughly 3.5% to 7.5% you'll deal.
We anticipate our non-GAAP operating margins to be consistent with the higher end of our unchanged target range of 6.5% to 17.5%, although the full fiscal year 2021.
As we continue to operate within the environment of doubling pandemic, we remain focused on protecting our profitability, while maintaining consistent execution has eclipsing R&D investments to support our future growth strategy.
We expect the first fiscal quarter diluted non-GAAP appears to be within the range of $1.90 $2.50.
It's actually Q1, we expect the non-GAAP effective tax rate to be slightly above the high end of the annual range of 70% to 70%.
That's good.
I felt fiscal quarter non-GAAP EPS guidance incorporates an expected average look check count roughly 132 million shares.
We excluded the impact of incremental future share buyback activity during the first fiscal quarter as the levels of activity will depend on market conditions.
For the full fiscal year, we expect to deliver diluted non-GAAP EPS growth of 5% to 9% you'll be home.
We expect our non-GAAP effective tax rate to be within our idle time between two stepped in to 17% for the full fiscal year 2021.
The EBITDA woken it on Amdocs non-GAAP diluted earnings per share is expected to be neutral in the schools that the euro 2021 and accretive thereafter.
No phone basis, giving effect to the open market divestiture, we expect to achieve the same revenue and non-GAAP diluted earnings per share growth in fiscal 2021, assuming the majority of the net proceeds were used to accelerate our share repurchase program in the remaining quarters of the fiscal year post closing.
We expect normalized free cash flow for fiscal 21, with approximately $620 million, which is equivalent to a conversion rate of roughly 100% relative to our expectations for non-GAAP net income.
We expect reported free cash flow for fiscal years, when one of approximately $470 million.
Reporters Picasso includes Aptwo hundred million. So you have 250 million anticipated expenditures in relation to the development of our new campus in Israel and other license.
As an additional point, we expect fiscal 2001 to be picky of capital expenditure for the new companies.
Regarding our capital allocation plans, we expect to return to shareholders in the form of dividends and share repurchases. The majority of our normalized free cash flow in fiscal 2021.
Melissa we will carefully assess the deployment of capital in fiscal 2021, having regard to the status of the movies and people damage the outlook for M&A financial markets the prevailing industry conditions.
Finally, we are pleased to announce the proposed 10% increase in our quarterly dividend to a new rate of 36 cents dot shell. So called her which is approved by shareholders at the annual meeting Agenone.
You could pull it out and we think in general it would yield about 2.4% on the common show Fyfe, well field, taking the dividend increase into consideration, we expect the sum of our diluted non-GAAP EPS growth midpoint.
Last dividend yield to equate to a total shareholder return of almost 10% in fiscal 2020.
With that we can turn back to the operator, and we are happy to take your questions.
Thank you.
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And we ask that you please limit yourself to one question and one follow up.
Our first question comes from lineup will power with Baird.
Okay, great. Thanks for taking the questions and great to see the expectation for accelerated revenue growth next year. Maybe my first question is on just that.
You know as you look at your digital transformation I Wonder if you could just talk broadly about the trends you're seeing from the service providers, you know why now and what's driving those efforts and.
What are the pieces that could get you towards the higher end of that revenue growth guidance versus some of the areas of potential caution that might lead to lower it.
Hi, it shows that I think that the.
The reason for the further growth so actually we see a lot of demand in three different areas. First one is you mentioned beautiful summation I think koby 19.
Sort of like this so we see pretty much as you can see said the color across all geographies and.
People want to change the only way to engagement with the consumer to be complete do you decide the best experience. The second one is fiveg.
Dominee bundles America, everyone is betting fiveg fiveg requires new monetization capabilities, obviously, you're charging for policy systems that we believed that is required and will definitely be the open its acquisition.
We have the best product in the market and the third one is the Jones with the cloud. This is something that as I mentioned in the script is accelerating all our customer male EBITDA process. All before so we've seen they already the immigration process moving to the cloud coming with a very robust offering for the job.
For the cloud for every epilepsies them, most new system, a legacy system and we believe this.
This trend will say moving the whole a system to the cloud will accelerate and we see ourselves as a man.
Contributive to the agenda for the cloud, obviously is going to be up sort of way to resolve a partnership we say that when you ask the between us today.
Okay, and maybe for Mike.
Follow up just coming back to open that it seems like that's already generating some nice opportunities. So just love to kind of hear what you know what you're hearing from your carrier customers now that's been closed for a couple of months How's the integration going as you look at that 1.5% revenue growth contribution for fiscal 21 does that include the new.
Do you know ATM t. when it any more color there.
It.
First let's think that.
Everyone. If you want to move to fiveg into actually to get value divide Gtx will you need to have good you'll charging policy.
Possibly your policy system and result for there to be a bringing cloud native solution, both for charging and together with policy. So we see lots of demand.
We had a very nice.
When rates.
In Q1, we announced some of it.
Sure in Q4, we not specific including 18, P., which probably the largest one we.
We see ongoing demand across all regions fulfill these type of food it.
Product.
And to your question is regarding his eightninety using that to get the answer is yes, but we are very pleased with the P.M.I.A., we see immediate traction.
We are able to bring the open it solution to the oil and discuss the mill. So if.
A combination of the great product with great incumbency and customer across the world It proves to be very successful.
Okay, great. Thank you.
Thank you.
And our next question comes from the line of show Oh Oppenheimer.
Thank you good afternoon to kick Amar and Matt Congrats on achieving some record milestones.
Okay also on congrats on.
One of the many contract.
You've announced I want also to ask about specifically QINTI given its largest customer world can you go with your expanding product portfolio.
Do you think there is some you know the visions or sales grew at a continued can penetrate further or or approach with your service or that are currently not under service.
First of all that we are operating in many domains 80, Indeed, I mean, obviously the consumer domain in the in the broadband users.
He is.
82, Mexico International domain in the data domain. So we are now in the media also oversees our active you auto media.
So I think we see progress in all domain, but they seem to be the main.
I would say opportunity that we see you say as we reported last quarter is that we have started the more the consumer mobility.
Transformation 18 feet.
This is a strategic project for us it confused by go best New product no top of between the announcement. This quarter. We also good use of charging solution and policy from it from me from Openedge.
If you can hear a TV in the ATP announcements its looks like the Fiveg and mobility in general is a main growth engine.
For waiting and see a movie I'm very happy to support a TMT.
Pushing this a new solution to help them, obviously to be very successful with the new five g. offering.
Got it and my follow up is today.
Tomorrow.
When we when we look at the quarterly revenues when we factor out when we exclude the old print contribution I'd, even foreign exchange. So they did revenues to grow sequentially.
Yeah, absolutely okay on and was even ahead of the midpoint of guidance absent those reasons. So.
Well this was the factor contributing.
Nicely, even taking out open it and taking out the positive impact sometimes back to where I had the midpoint of guidance range.
And then as we said break it down to where after one quarter, we tend to see commercial growth that this was another record quarter for us so to to make it simple sequentially $20 million without open it and we've held the FX and the FX and open it came about.
Understood.
That's again on on those milestones goods.
Good job.
Thank you.
Thank you.
And our next question comes from the line of Ashwin Shirvaikar with Citi.
How should he had tomorrow congratulations on the quarter.
I.
Yes.
Wanted to get some clarification the whole to 8% growth it's good to see.
Is there any catch up in that in that outlook from sort of the slow down earlier this year or is that sort of more of a mandate based on a modest growth rate based on you.
You know what your one and the booking strength you've seen in other words based on some of these trends, which seem to be multiyear trends you permanently ratcheting up to a.
You know solidly mid single type of range.
So I ashwin.
I don't think we can cause a catch up in the sense that as you know most of our revenue is not such that you. Just you know at least on the license and recognized for its more of a fundamental change in the.
The pace of finding and winning deals and that is sitting now a man and multi quarters. If not here I want these deals are multi year.
So we are very pleased to see this momentum and across regions, which is the really important.
Now looking into multi year outlook I think it's a bit premature given the environment that we're at say can we rebate on omnicam consistent basins now that when you go to the 6% this range, but we'll definitely seeing the growth drivers Bill when you look on the multiple growth drivers.
We have and the fact that the.
Many of them are performing well.
He of course, it's the it's a much healthier based of fact of quote opportunity and then when we look on a matter for example, the cloud is just beginning the tipping point is now we feel that the journey to the cloud of the communication service providers accelerating so by law.
Product portfolios be cloud native for some years now so it means that everything that goes out of the R&D shop is my definition cloud native they'll continue to see acceleration into opportunities also helping service providers.
Most of the cloud, including legacy applications that they have an only companies of course is that the pedigree with that we have in helping them do that including the all the way to cloud operation is a great opportunity with addressable market in the billions of dollars that you'll just starting to tap into itself.
I I think it's a combination between moment show both drivers like digital transformation, but the Columbian helping to accelerate then we have this fiveg that that's what you mentioned is a way ahead of the curve in the North American market in South Korea with York lagging and then probably less so on and we see that momentum coming in April.
And the cloud journey to build accelerating as we speak so I think there's enough firepower for multiyear growth now guiding to specific numbers, maybe a bit too soon to do.
Got it now that that color is very helpful.
And then in obviously we've seen.
What a number of years.
Industry consolidation related uncertainty in the North American market.
You know with the the team always completed merger, which then what sort of.
Opportunities it is kind of how you're getting you know.
I know, there's not full clarity, but are you getting.
Incremental.
Incremental CLO collateral then Eddie with regards to the opportunity there can you perhaps discuss that.
So as we discussed before where today, we have the they obviously.
The new do more by using your system to run what used to be spreads.
Obviously metro and also the magenta brand dose.
Okay.
T mall by prior to the merger.
We will very active.
To support the pre merger activity in helping you do more by to get ready for the one and so far it looks it was very successful transition.
Yes, so I see and I think as I mentioned before we came in we enjoy a very strategic partnership with the new T mobile.
I think we have the right.
What I can services to support would that mean all domain name.
Strategic goals as the clarify just a couple of weeks ago into earning release. The obviously, we will continue to go up in the possibly domain.
We continue to growing the.
Obviously, they want to continue to going to be to be.
We are also having good activity within the media domain. It definitely is though pushing called into the building to Fiveg network. Also we are very active there. We have good he said discussion with them about what is next for them.
And then we'd be happy to report that you make more progress, but as I said before we are enjoying a very strategic and productive relationship with them and we have ongoing engagement with them about what would be the rightful there for the future.
Thank you.
Thank you.
Our next question comes from the line of Tom Roderick with Stifel.
[noise] Shuki had tomorrow, Hey, Matt. Thank you for taking my question great to hear from you.
So shuki I'd love to hear a little bit more about the AAMC partnership I mean, he's the cloud journey is very clearly a potential growth driver, we're starting to see telcos finally sort of embrace that for a variety of reasons, whether it's their data moving into the cloud or or its just time modernize but would love to hear a little bit more just on the go to market aspect of this.
Partnership.
Yeah can you talk about how you might be going to market with a ws.
Which products are sort of optimize today to run on top of that and then how you think some of here you know either whether it's tier one or tier twos think about.
The the the opportunity to move sort of quickly to that that cloud based partnership. Thank you.
Okay.
So am I, saying that they took a combination of a obviously of amdocs that we ever Greg incumbency in every end customer in the world is looking in some shape or form to move to the cloud and as Tomorrow mentioned before all new portfolio is a is a cloud native.
At the same time, we develop immigration pass for every angle Scott them, regardless of their profit on that he is using an example, you asked which I believe is that probably the leader in this market, so far, especially the service provider with cloud capabilities tools and engines.
Obviously this partnership.
Looking together and talking to go to customers to see how bolsa files can bring the biggest value.
It's a sad leveraging all day.
AAMC unique capabilities and so obviously understanding of the market and the go to market. These are very optimistic.
Proposition value proposition that include it.
Consultancy, a continual migration to the cloud.
The cloud operation in most cases, if we stop is ivas operation between on premise and cloud.
Absolutely what we call cloud.
Operation, which is actually the next generation of managed services that we used to do on the on premise. So I think there is a greater engagement between the teams and I believe that both companies can actually when we say taking the existence of the cloud I think that.
This partnership we definitely can accelerate it.
Yeah outstanding looks really interesting and then apologies were juggling a few things over here. So you may have talked a little bit more about this in the Q and a section, but the Comcast arrangement seems very interesting you've been making it a great a great headway with a you know I know they've been a longtime customer on the commercial side more recently it seems like you've been making some great headway can.
You talk a little bit more about what's new and incremental as part of this you know updating of their BSS and assess stack.
We are operating income costing several domains today.
Operating income customer experience your worldwide, so that means that they're going to jump off from there, which is going very nicely for Comcast.
We're also involves operating doing doses domain in the network domain.
And the one that we actually discussed in Scottsdale is is obviously the the next generation B to B platform that we are building we've.
With Comcast and starting to way to deploy nationwide and the whole enterprise domain is a major growth engine to focus.
And we are very happy in supporting them in this domain.
Excellent Tomorrow, just really quick for you I think you mentioned it on the call already but I'm not sure I quite wrote it down properly opened its contribution in the quarter for revenue and then just it was a contribution to the backlog this quarter as well [laughter] Kim did you reveal those.
So openedge direct contribution in Q4 numbers was roughly $10 million than that for about two months.
No just the clothing.
And we didn't back or we have few dozens of millions of dollars. So even if you take out the open it.
The contribution to the back of its been extremely high command New deal Awards Bolton.
Both in existing and new logos.
Wonderful really helpful. Thank you I appreciate it.
Thank you.
Thank you.
And our next question comes from the line of Jackson Adder with JP Morgan.
Great. Thanks for taking my questions guys.
First one on the on the 18 T. Five g. when we opened that how should we think about the the revenue recognition for these types of wins is that is it similar to a price time subscriber aware.
Someone who is a 18 tiet subscriber and then they also are one of these gamers that uses one of the new Fiveg.
Services, how how should we think about this expanding the pie for you guys.
So when we think about them the opportunity of taking open it to our customer base.
Open at on a standalone basis was more of a pure product play.
Were they mainly made the revenue from my standpoint maintenance and a bit of professional services when we come to our customers. We can sell them much more realistic solution, including additional capabilities around that so you should think about it all the time or something but yes, we will enjoy from the license pricing the subscriber evolve.
You and capacity that is licensed in April, but the opportunity to take.
A share of the wallet spend by our customers around the product itself is much bigger for the services and then the whole opportunities open to us without disabilities that would be the deployment itself would be then all kinds of services around the migration from existing.
And they would like to do so.
All the way to a full operation of the system on behalf of the customer.
And accordingly, I will be the revenue so again it depends on the type of the deal come at Nichols mission fun.
Okay, Great and then just did a similar to Tom just a clarifying question on the open market that's sure.
Again, how much revenue or maybe.
Maybe did that contribute to amdocs in fiscal 2020, so we can get a sense for next year as well.
So to make life simple for you Oh, we made it very clear that on a pro forma basis.
If we take out.
Open market in 2020, and 2021, we can support the same growth outlook that we provided.
For 21, both on the topline and earning per share Intel.
In terms of the revenue of the open market, we sell the open market of all the lastly, onex revenue not just for 12 months.
Again based on our current.
Current expectations and.
And we think it's a good pricing obviously lets me do you find that they'll make sense, but I think the most important thing from our point of view is that.
This is in the context of our whole focus was in being laser focused on my wall strategy and that really find that on cloud fiveg et cetera.
And open market, while being a great assets and one that's going to be to topics for many years was a non core asset for us.
Okay. Thank you thanks for the simplicity. Thanks.
Thanks.
Your next question comes from the line of Tal Liani with Bank of America.
Hi, guys I want to I want to ask a question on margin. So I see that margins are coming down.
This quarter next quarter, so first I want to understand.
The reasons for the margin the slight margin pressure versus the street and then.
What's the outlook or how do you see margins kind of Grupo Wolfmother, you know you were selling who.
Operating margin.
Operator operating margin so.
Then we went up from 17.1 to 17.2 sequentially.
And and as we said.
On a long you know taking the look on margins, we think that the no changes of 10 basis points up down it's not something we would look.
You know, we too much attention into a you think the overarching message is.
We believe margin should be on the higher end of the 16 happened 17 happened 2021, we continue to focus on protecting margins and that.
While investing more in R&D, which means that the that is going to be on account of efficiencies otherwise so.
We're actually feeling very comfortable with the ability to maintain these kinds of margins I don't see it going down definitely not got it.
Oh, maybe my spreadsheet wasn't good but gross margin was 34 at the street was at roughly 35 34.8 is there. So the question is is there any oh.
The new deals that you have in it.
Heading into a fiveg cycle and some of the deals that you spoke about the steinmann and announced.
Are there any is there any structural margin pressure coming from the new deals or what you could see with Fiveg Rollouts next year.
No I don't think the structural margin change, yes, you're right on both margins and 34% and those who is always.
So no more focus on the operating margin and gross margin stand alone.
But I don't see any and structural changes in the way we look at it it's usually more of a combination of how we are seeing ramp up of a new logo deals know Neal a country penetration of Phil's time deployment the offering.
This is a more mature customers, most notably calling revenue that's kind of you know really generalizing. It. So we don't think there's anything unique in the fiveg they'll say the domain that should put any pressure on margins.
So my next question is maybe for Sean here Tomorrow.
It's a very general question.
You've done great things on the P. and now buying companies going after new businesses et cetera, and the growth is still only 2% year over year growth for this quarter is only 2.2%.
When you look forward and you look into the opportunities next year.
Some of the big customers are no longer cutting spending as they were in the last two years et cetera.
How do you think growth could look like and recovery types.
And what are your targets for a sustainable growth.
Once we get into 2021 spending improves then you go into then you start benefiting from from all the initiatives you're going after.
Okay. Thanks for the question, we mentioned in our prepared remarks, we actually expect an acceleration in growth in 2021.
The average midpoint for the year, there's going to be 5.5% on constant currency, 6% reported basis.
During the year, we expect acceleration.
So you can understand from that that we believe we exit two yield 2021 on a high note.
We see the backlog we entered the year with.
Finding us strong visibility of over 80% in achieving that in addition to that we see a strong pipeline.
So we feel that we can more than double the goal for the year. We just ended India live is coming ahead as a result of multiple more fibers that we see among the most continuation of digital transformation and acceleration of that falling coffee than a lot of customers around.
The world is understand the benefit of that the Fiveg journey.
As well as the tipping point, where things are exactly where they are very bullish on that similar to the group also say, 6% midpoint on the other bullish on it.
Portland the base so.
Actually a small mentioned we.
We more than double the growth rate and the.
And we feel very comfortable with the accelerated growth.
Great I joined the call a little bit later, so I apologize.
Okay.
Your next question comes from the line of Tabby Rosner with Barclays.
Hi, This is Chris Reimer on for Kelly. Thank you for taking my question I.
I wanted to touch on managed services and.
Having recorded record revenues this quarter.
Looking at the driving forces behind that growth if you could pick any geography.
Customers are more keen or I'm more interested in having you back into the transformation and how would you quantify the opportunity to grow managed services among your client base.
Thanks.
We see services.
Any more the globally and it it starts a diligent with North America well.
Well, we still have the largest base of managed services engagement, but over the last couple of years, we've expanded with the managed services model and both in Europe, and the rest of the world.
And.
The interesting part here is that while it's maybe.
I only gears.
Usually to develop a managed services engagement with the customer requires many years of relationship building. The trial before we manage to a win and managed services engagement with an existing customer relationship in the lease of.
Two to three years, we're actually seeing that more than what we call managed transformation.
As a very successful one also penetrating new customers and what we mean by management information that we sell to a customer both in license to use the old I saw from Quebec deploying this product into the customer environment and then operating.
That's for the customers through the whole thing.
The value proposition of our great software portfolio as well as the Comfortability model, we can provide on making the system going live as well as operating is on a pretty fine keeping guidance. The later and that model has been successful in selling into several new logos and listened to yield a great examples of p. entity.
In Philippines.
We signed a deal recently with the weekly pay for example that was a new local slots again managed transformation. So that is enabling the golf. In addition to the fact that we we have a very high the mutilated expansion within existing customers.
No we believe managed services as the modest.
Should continue to drive both smart.
Okay.
A follow up.
Keep in mind.
Hi.
Thank you.
The recent expansion into media.
How do you identify maybe any other addressable verticals like complementing our existing portfolio.
Yes interesting question. So he we announced this growth is a.
A deal that we signed with the loudest financial Institute, the United States and actually in this deal we have a leveraging.
Capabilities in digital consultancy office project to a company that we acquired a couple of years ago.
And although the really like the fact that we have a great.
Well people design late capabilities, revealing to capabilities in the digital domain.
And so we are not saying that the obviously, we all the existing to the to the banking industry, but do we see some traction.
Also from other belt because two of the.
And these are consulting capabilities.
Uh huh.
Okay. Thank you very much.
Thank you.
Last call, ladies and gentlemen, if you have any more questions. Please press star one on your telephone.
Once again to ask a question please press star one.
And I'm showing no further questions. So with that I will turn the call back over to head of Investor Relations, Matt Smith for any further remarks.
Yes. Thank you very much for joining our call. This evening and for your interest in Amdocs. We look forward to hearing from you in the coming days and if you do have any additional questions. Please call. The Investor Relations group would that have a great evening and well wrap up the call.
Thanks.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program you may now disconnect.
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