Q4 2021 Amdocs Ltd Earnings Call
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Good day and thank you for standing by what goes to the Q4 2021 Amdocs earnings conference call.
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As a reminder, this conference is being recorded I would now like to turn the conference over to your host Mr. Matthew Smith head of Investor Relations for Amdocs.
You may now begin thank.
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 with GAAP. The company's management uses this information in its internal analysis in order to exclude the effects of acquisitions and other significant items that may have a disproportionate effect in a particular period Accordingly managed middle 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 SEC on form six.
Okay.
Also this call includes information that constitutes forward looking statements. 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 material such statements involve risks and uncertainties that may cause future results to differ from those anticipated. These risks include but are.
We're 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 at greater length in the company's filings with the Securities and Exchange Commission, including in our annual report on form 20-F for the fiscal year ended September 32020 filed on December 14 2000.
'twenty and our form 6K furnished for the first quarter of fiscal 'twenty. One on February 16, 21 and for the second quarter of fiscal 2021 on May 24, 21 and for the third quarter of fiscal 2021 on August 16, 2021, Amdocs may elect to update these forward looking statements at some point in the future. However, the company.
<unk> disclaims any obligation to do so.
Participating on the call with me today are shooting chefs, our president and Chief Executive Officer of Amdocs Management Limited and Tomorrow Rapid Board again joint Chief financial and operating officer.
To support our earnings call today and in the future. 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 shaky will provide an update on our recent strategic process progress and business performance and tomorrow, if you offer.
Financial results and outlook for fiscal year 2022, and finally, we invite you to join US for our fiscal 2022 analyst and Investor business update which will be a virtual event webcast live on Friday November 5th at 930 Eastern time. Please visit the Investor Relations section of our website for more information and with that I'll turn this over to shoot.
Thanks, Matt and good afternoon to everyone joining us on the call today is Matt mentioned today, we are going to.
Today and going forward, we are providing an early presentation a law signed our remarks, we hope you find this additional information helpful. In understanding of our company is investment opportunity.
I will start todays call by recapping, our business and financial achievements for the full fiscal year 'twenty one.
Second I will update you on the main pillar strategic growth framework and the significant progress we've made with key obvious from the past quarter. Finally, I will wrap up by summarizing our expectation for another deal for certain goals in fiscal 2022, after which tomorrow will provide the detail on our financial performance and outlook.
As well as perspective on the overall environment 12 month backlog and capital deployment.
As a reminder, our comments today will refer to certain financial metrics on a pro forma basis, where applicable to provide you with a sense of the underlying business trends, excluding the financial impact of the open market, which we divested on December 31st 2020.
I'm on slide seven.
Let me begin by saying that that could not be proud they will put the accumulated fiscal 2021.
This was a pivotal year in which we began to see the results of our strategy to drive accelerated revenue growth and much got it belongs to a global base of tenants and employees and experienced leadership team.
Operating hybrid model amid a global pandemic, our people execute exceptionally well this year to meet the mission critical requirements of our customer and they did so while embracing our culture of continuous learning mentally in upstream.
And I'm also proud we constantly found ways to demonstrate our corporate purpose and values such as Michael Vaughan its support for the communities in which we live and work.
As an example in the Philippines, we recently rented projects to improve digital access and skin interlude federal communities, which included employees voluntarily hundreds of hours to develop.
Are you planning technology and that scaling webinar tailor made to the needs of the thousands of students for more than 25 school. This is just one inspiring story about dominion's amdocs.
I'd like to take this opportunity to talk knowledge and to take all our people and the commitment the commitment.
PVC and dedication they've shown walking together to serve our customers partners communities and one another over the last year.
I am confident we have the talent spirit and values to achieve even more in the future.
Moving to slide eight let me address the operational and financial highlights for fiscal year 2021.
I believe amdocs in an exciting inflection point of accelerated revenue growth and it's worth taking a moment to quickly recap some of the key factors, which have led us to this point.
First we have set up an investment in research and development by more than 10% in fiscal year total to two one to further position us as the market leader with the best technology, and most relevant offering to support our customer investments in industry Megatrends, including digital money is when you need them.
Mineralization journey to the cloud and five G SEC.
Second we divested a noncore asset open market and execute our strategic acquisition of openness in August 2020, and solid group in March 2021, and further to further accelerate our technology capabilities and services, particularly one five G. In the club.
Finally, we signed a competitive advantage and establish ourselves as the industry, leading transformation partner to build the nexgen platform.
Basketball suites include multiple project awards at AT&T. This is modernization Windsor three okay, and the Zika transformation win with an excellent hybrid cloud operation, we are accelerating for T mobile under a multiyear managed services agreement.
All in all we finished the year.
2000, and doesn't want a strong business and financial position you can see from the highlights on slide nine.
We delivered pro forma revenue growth of 7% in constant currency in fiscal <unk>, one driven by healthy customer activity closely North America, Europe and rest of the world our sales.
Momentum continue through the fourth quarter, which ended up is the vertical personal backlog of $3 7 billion up 10, 5% for many years ago on a pro forma basis.
We improved non-GAAP operation margin by 30 basis points and achieve a number of customer milestone, which.
Which will convert into record cash collections in the record normalized free cash flow generation of $869 million for the full year.
We delivered on our targets for double digit total shareholder return in fiscal.
Lindsay one, including the fit or the pro forma non-GAAP earnings per share growth of nearly 10% plus our dividend.
Now turning to slide 10, let me update you on the recent progress against our strategic imperatives. As a reminder, we the simple and clear strategy to bring market, leading innovation to support our customers' critical business needs and to provide an amazing experience to consumers and enterprises in one.
Journey to the cloud to accelerate cloud adoption across all platform customer base, two five G monetization to support exciting new <unk> use cases, three digital modernization to enhance customer experience and transform operation full network automation to the lithium and ultimately dynamic real.
Time network based services jointly.
During Q4, we made significant progress across each of these pillars.
In cloud we are thrilled that AT&T is selected us for Nexgen cloud operation of its business support system evolution VLCC under the long term agreements.
You see the technology modernization and simplification program focused on increasing speed to market in both customer experience and long term cost efficiency effectiveness.
He announced Amdocs is involved in the process of modernizing AT&T consumer mobility domain and this new it would expand this activity under the new VLCC agreement Amdocs will provide its deep set of cloud native products and Nextgen cloud operation under a long term agreement Moab the project will be run on a micro.
So for sure starting with At&t's consumer basis units, which includes mobility broadband and Iot.
Additionally, I am pleased to share that AT&T is extended through 2026. The managed services agreement signed in 2008 two.
2019 for the consumer demand.
Moving to five G monetization amdocs remains at the forefront of the industry walking with leading service providers to enable new and exciting <unk> experiences.
Thank you Paul we are selected by Orange to provide business support system for new first five Standalone experimental cloud network launched in July in France in 2021, Amdocs engaging dozens of new five year operational monetization projects across multiple countries and customers, including AT&T.
Mobile, Okay, Verizon Korea, Telecom operation, <unk>, plus square and others.
<unk> Standalone networks, our lunch around the globe, we expect growing number of service providers received the benefit of Amdocs expertise unlocking the monetization potential of five G by creating new capabilities unique business model and game changing opportunities.
Turning to digital modernization, we continue to see strong business momentum with several new wins this quarter, we expanded our relationship with freedom to ramp up new digital services for its consumers.
And customers.
Stomach, Kazakhstan under the surface use agreements.
We expanded our strategic collaboration with Globe Telecom in the Philippines to provide the Amdocs catalog and common suite to improve digital experiences for its mobile and fixed line customers.
Finally, this quarter, we continue to build the growth momentum will file network automation offering by successfully providing an end to end service orchestration solution for OSB is the world's leading global satellite operator will enable ses to support customer.
We service innovation and delivery agility for satellite based hybrid and open cloud Mitchell.
Further expansion of the industry, leading collaboration between the two companies Amdocs has also been engaged by ECS to provide the network service assurance solution.
We have extended our strategic partnership with Globe Telecom to include Amdocs service and network automation suite to power global cloud and.
In digital to network automation journey as quickly and easily.
With that backdrop, let me turn to slide 11, and our fiscal year 2022 outlook. We believe we are in the early innings of a multiyear five G and cloud driven investments and transformation cycle, we see a rich pipeline of opportunities the critical communication industry to enable our customers to create amazing.
<unk> for consumers and enterprises worldwide.
We are laser focused on converting these opportunities to backlog growth in the coming quarters, leveraging our cutting edge technology will support the future roadmap of our customers and further further extend our competitive lead in the market.
The Houston tracked vehicles, and the highest skilled customers, sending tenant base delivering value to our customers around the world.
Thank them everything together, we expect to deliver accelerated revenue growth of 38%, assuming the midpoint of our guidance on a pro forma constant currency basis in fiscal 2023.
Moreover, we are positioned to deliver a double digit expected total shareholder return for the second year running in fiscal 'twenty, two including pro forma non-GAAP diluted earnings per share growth of 10%, assuming the midpoint of our guidance range and our dividend yield of 2% based on the new quarterly rate of <unk>.
$39.05 per share, which proposed for the shareholder approval.
Our upcoming annual meeting in January.
With that let me turn the call to tomorrow for our remarks.
Thank you <unk> and Hello, everyone. Thank you for joining us as a reminder, my comments today will refer to certain financial metrics on a pro forma basis, which exclude the financial impact of open market, which we divested on December 31st line planning.
Turning to slide 13, I would like to Echo <unk> comments that.
We are very proud of our financial performance for the fourth quarter and fiscal year 2021.
Let me start with US please call fourth quarter performance.
Q4 revenue of 1 billion online was up 10, 2% year over year on a pro forma constant currency basis.
Led by our best ever quarter in North America.
Revenue was above the midpoint of guidance, despite an unfavorable impact from foreign currency fluctuations of $5 million relative to guidance.
Moving down the income statement.
Q4, non-GAAP operating margin of 17, 5% was in line with the high end of our long term target range and improved by 30 basis points from a year ago as accelerated R&D investments were more than offset by a focus on operational excellence.
The divestiture of open markets.
On the bottom line diluted non-GAAP EPS was $1 16 in Q4, which was consistent with the midpoint of our guidance range as.
As we have said in the past our non-GAAP effective tax rate.
May fluctuate throughout the course of the fiscal year.
In the fourth fiscal quarter non-GAAP effective tax rate was 22% above the high end of our annual target range of 13% to 17%, but consistent with our expectations.
For the full fiscal year 2021, we reported an effective tax rate of 15, 4%, which was within our annual target range.
Diluted GAAP EPS was <unk> 97 for the fourth fiscal quarter above the midpoint of the guidance range of 91 to 99.
Summarizing fiscal year 2021, we delivered accelerated revenue growth of 7% on a pro forma constant currency basis, which was ahead of our original guidance for the year.
This outperformance was primarily due to a stronger than expected performance in our core business.
As well as a small contribution from the acquisitions of sourced ATK include bridge, which we executed during the year.
On the bottom line non-GAAP diluted earnings per share growth accelerated to nine 8% on a pro forma basis in fiscal year 2021.
Driven by the fastest pace of revenue growth and improved non-GAAP operating margin and the benefit of our share repurchase activity during the year.
Moving to slide 14, the strong sales momentum of the last several quarters continued in Q4, resulting in record high 12 months backlog of $3 69 billion, which was up 10, 5% from year ago on a pro forma basis.
On a sequential basis 12 months backlog rose by $100 million.
As compared to June 30.
12 month backlog is traditionally serves as a good leading indicator of our business, having consistently average around 80% of forward looking 12 months revenue over the years.
Q4 was also a healthy quarter for managed services, where revenue grew from a year ago equating to roughly 59% of total revenue.
A multiyear managed services engagements underpins the resiliency of our business with recurring revenue streams high renewal rates and expanded activities with existing customers, including into Nexgen cloud operations.
For instance, in addition to the AT&T deal the chunky discount this quarter BT group has renewed its relationship with Amdocs for a further three years to maintain develop and enhance the BSS platform for Bt's E. Glenn.
Turning to the balance sheet and cash flow as you can see in slide 15, we are pleased to say that our great progress in achieving project milestones for our customers is translating to invoicing and strong cash collections.
This is reflected in DSL 73 days, which decreased by two days year over year and decreased by six days sequentially in Q4.
Moreover, our deferred revenue remained in a healthy position for the fourth fiscal quarter.
Altogether, we generated normalized free cash flow of $172 million in the fourth fiscal quarter.
For the full fiscal year normalized free cash flow of $869 million was significantly better than our prior guidance and equated to a conversion ratio relative to our non-GAAP net income of 140%.
Well above our long term average of roughly 100%.
Overall, we ended the year with a strong cash balance of approximately $966 million, including.
Aggregate borrowings are processed $650 million.
Our balance sheet is strong and with ample liquidity, we expect to be in a good position to continue to support our ongoing business needs, while retaining the capacity to fund our future strategic growth investments as and when the right opportunities arise.
Additionally, we remain committed to maintaining our investment grade credit ratings.
Turning to capital allocation on slide 16 for.
For the fiscal 2021, we returned $857 million to shareholders, including $177 million in annual cash dividend payments.
For the year, we deployed $680 million towards share repurchases, which included the net proceeds received from the divestiture of open market and.
And we also accelerated our buyback program in Q4, they purchased a $140 million during the quarter.
Looking ahead to fiscal 2022, we expect normalized free cash flow of approximately $650 million.
Our outlook roughly assumed 100% conversion rate of non-GAAP net income and excludes anticipated capex of about $131 million as we complete the development of our new Israeli capital.
Regarding our capital allocation in fiscal year 2022, we expect to return the majority of our normalized free cash flow to shareholders.
Dividends for which we are pleased to announce the proposed increase of roughly 10% in a quarter.
Quarterly dividend.
So the new rate of $39 five personnel subsea.
Subject to shareholder approval at the annual meeting in January.
Now turning to the outlook on slide 17.
The prevailing level of macroeconomic business and operational uncertainty surrounding the magnitude of the duration of COVID-19 pandemic, including its novel strains remains elevated the midpoint of our fourth quarter and full year fiscal 2022 revenue guidance reflects what we consider to be the most likely outcome.
Based on the information we have today.
We cannot predict all possible scenarios.
With that said, we believe the business acceleration of last year will continue in fiscal 2022.
With revenue expected to grow by approximately 6% to 10% year over year on a pro forma constant currency basis.
We also expect to generate growth across all three of our key geographical regions.
Oh Anil outlook includes first fiscal quarter revenue within the range of <unk>.
<unk> eight O.
<unk> 8 billion to $1 12 billion.
On a reported basis, we expect full year revenue growth in the range of three 7% to seven 7% year over year.
Which anticipates, an unfavorable foreign currency impact of approximately 30 basis points year over year.
Moving down the income statement, we anticipate quarterly non-GAAP operating margins to track roughly in line with the midpoint of our new annual target range of 17, two to 17, 8%.
This outlook continues to assume an accelerated pace of R&D investment to support our customers in line with our strategy.
Last with a constant focus on achieving operational excellence.
Below the operating line, we anticipate this foreign currency fluctuations will continue to impact on non-GAAP net interest and other expense.
In the range of a few million dollars on a quarterly basis.
We expect that our non-GAAP effective tax rate will remain within an unchanged annual target range of 13% to 17% for the full fiscal year 2022.
But above the high end of that range for Q1.
Bringing everything together, we expect non-GAAP diluted earnings per share growth in the range of 8% to 12% on a pro forma basis for the full year fiscal 2022.
On a reported basis, we expect to deliver full year diluted GAAP.
Full year diluted non-GAAP EPS growth of six 3% three year over year.
Overall, we expect to deliver double digit total shareholder returns for the second year running in fiscal 2022, including the 10% mid point of our pro forma non-GAAP, earning per share growth guidance.
So that's a dividend yield of roughly 2% based on the newly proposed quarterly cash payments of $39.05 per share.
With that back to you shortly thank you tomorrow before we go to Q&A, Let me take a moment to say that I'm excited to invite you all to join us for the virtual business object. This coming Friday, which we are hoping to provide investors and analysts within the appreciation of the strong foundation, we have built over the past.
Yields ended position Amdocs for continued success in an increasingly digital world.
Look forward to discussing Amdocs strategy and our unique competitive advantage that will support accelerated growth and the continued success into the future with that we're happy to take your questions operator.
Okay.
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Standby, while we compile the Q&A roster.
First question comes from the line of Jackson Ader of GBM. Your line is open.
Oh great.
For taking my questions guys.
All right.
Yes, first one any additional.
Additional comment you can provide on that.
Either adjusted or reported cash flow.
Just given the.
The strength in revenue.
Bind with maybe cash flow performance double clicking on that would be great.
Sure so.
As we've always said the business model. We have is the Boston its ability to generate first of all healthy earnings, but then convert over time earnings to cash roughly on par.
And starting this year, we did expect that to be a stronger year and if you'll recall we started the year and then we raise the numbers twice.
They started with a very strong first quarter well a part of the story there was the signing of a multiyear strategic deal with T. Mobile that also contributed.
Two monetization in some.
On payments as part of this the signed deal and then doing the year, we continue to see record high from quarter to quarter and definitely for the yields at all in terms of the number of deployments we achieved through our customers.
That translates into achieving many invoicing milestones and in turn of course, turning that invoices into collection in the bank. So I'm pleased to say that.
It's a result of a lot of focus that we have although many years.
On the cycle, we call deal to cash.
That has to do with many things, we do as a company and very strong execution and deliverable to our customers.
Okay, Great and then maybe shaky as we think about.
Yeah.
The very largest customers that you have right.
Very large carriers in telecom, how should we expect maybe growth from those customers.
Typically North America should look like in <unk>.
Fiscal 'twenty, two maybe relative to either the rest of the world or some of your customers that are just a little bit smaller.
As we said in the prepared remarks.
See growth in all geographies obviously.
Size of the customer North America like T mobile and AT&T. These guys out there as we mentioned before.
So beginning of investment cycle, there can be the <unk> could be more but I think.
Some of the deal that we signed and closed the wall into UK.
A large operator in Europe, and Vodafone and <unk>.
File.
But we are pleased to see that the mega trends that we discussed we traveled to five G.
Turning to the cloud utilization is pretty similar across the world and we see really great momentum, which is reflected also in another very strong backlog.
Two increase in backlog.
So I think definitely.
Because of the size of the.
Operator in North America with shovel, the probably the biggest in the world. The deposit go bigger, but we see lots of big projects around the world. Maybe just added color. If you look on the $100 million sequential improvement in 12 month backlog in Q4.
It's pretty much in line with the split of revenue, we see within nuts between North America and internationally. So it's broad based it's healthy naturally as Lucas said.
Very happy to see that all over the place in.
Concentrated just in one region.
Okay, Great makes sense. Thank you very much.
Thank you.
Alright next question comes from the line of Tom Project.
Of Stifel. Your line is open.
Hi, its Matt on for Tom.
I just wanted to start I guess.
Getting back on the cash flow is thinking about how strong they have been and going forward. The forecast for next year can you just talk a little bit more about the kind of steep decline given the guide for full year 'twenty two.
Could you just repeat the last sentence decline.
Thank you Brian.
It's like a projected 500.
Unfortunately, I have not found the patent to convert over time low cash <unk>.
And seriously I think that over time, you should expect us to convert at par, meaning 100% now we we had a very strong year and very happy about that 140% conversion rate. The oldest side. It's more sustained yes look we always say, it's not sustainable to be in that performance I think that 100% conversion rates we have projected.
For 2022, why being at the highest close late I can remember so over a decade.
While continuing to protect margins, while continuing to deliver double digit earnings per share growth. I think this is a very balanced package in terms of how we continue to invest in growth you mentioned continuing to invest in R&D et cetera, while obviously protecting the margins and continue to see that growth.
<unk>, but I agree with the amount we did not find the magic to convert smaller.
<unk> earnings and this is really it was an exceptional year from his perspective.
Got it and then speaking of growth sure talking about the strategic domain and those growth pillars.
Our digital and cloud et cetera.
You see like in the current environment.
Carriers are embracing those to generate $3, 7% to seven 7% revenue growth for next year or do more of these carriers need to embrace the movement and get onboard to kind of reach that goal.
I think that.
What's nice about.
These mega trends that I don't think there is some type of discretion.
Every customer of Amdocs in the world in order to be successful in this new era has to transition to <unk> has to be digitized and has to go to the cloud. So this is and by the way we see it.
All of the budgets of our customers are actually funnel to these domains because the key critical factors to their success in the future.
And by the way. This is I said this is broadly but this is not just that it's called at the U S facility that the handful five G deployment comparing a you always following in APAC is falling is it vehicles pollo, so, but but we see this across the course of the world and second this is not.
Like Q1 of.
This would be these mega trends I think it will stay for several years because it will take a lot of time until the industry would be able to convert to <unk> G completed decision journey indefinitely. They move to the cloud, which is really really at the beginning.
Got it thanks.
Thank you.
Again, ladies and gentlemen, if you have a question at this time. Please press the star and the number one key on your attach toned pallet filing.
Please limit yourself to one question and one follow up.
Your next question comes from Tal <unk> of.
Your line is open.
Hi, guys. Thanks for the question Doug.
The growth acceleration, we're seeing this year.
We are seeing growth acceleration across our company to sell to carriers and cloud.
I want to understand the longevity and the sustainability of the growth acceleration, meaning can you discuss whether this is these are just projects that maybe were on hold during COVID-19 or anything that was delayed and now being deployed versus projects, who are starting a long term cycle things you have done and translate into long term growth can you give.
So did with color on the growth acceleration thanks, Hi.
Definitely.
These mega trends are here to stay for several years.
By the way all these project like a multiyear projects.
To transform companies and the size of the.
T mobile AT&T in Vodafone It takes years and and it will take a lot of time until the.
With all the new <unk> use cases and opportunities are going are being developed as we speak. So the short answer to your question. These these mega trends of Haynesville stay full way for several years and these projects are not a one year project a long term project.
This will take some time to deploy to deploy them. It doesn't matter you can say medium sized telco.
Very big this project takes time and as I mentioned before we are just starting so it's not that the so the investment cycle is cleaning. The early you said early innings today, yes.
Got it.
And last quarter Schulke in your remarks, you spoke a lot about cloud and in the meantime, since then we've seen cloud companies announcing on big spending plans.
Can you talk about the cloud.
And your your participation there and whether the investment in the network that we're seeing and we've seen.
Other telecom names telecom equipment names talking about the cloud investment. So so how do you participate at these big projects that we're seeing.
And.
We are participating in this in this week.
What we call.
Cloud journey in different aspects. The first one is all of these transformational deals we do and are building a new consumer spectral AT&T is being done on our cloud native.
<unk>, one which is the latest and greatest.
And plot.
Platform.
<unk> monetization.
And as I mentioned this was built from the ground up.
Cloud <unk> in all of our deployments, though on the cloud some of them already granted some of them on Azure also.
We are working with the cloud partners. So this is the first.
Angle to win the cloud secondly, we are involved in several customer activity of taking application it could be amdocs legacy application, all non amdocs application lift and shift into the cloud. So this is another activity that we do which is growing all.
All the time.
So in this case, it's not as it's not for modernization, but taking the application with platform them and moving and link them to the cloud. This third activity on the cloud is cloud ops as we announced this quarter you can see what's happened to AT&T. Initially one and then we awarded to do the consumer domain on our next generation suite.
And this quarter, we announced the deal which is the third pillar doing <unk>. So doing all the operation in the cloud environment. So I think that's it.
We have a lot of.
But we are the market leader by the way in all these three domains and are seeing that too.
The journey to the cloud.
We presented for us.
Very nice billings.
Great.
<unk>.
Your next question comes from Ashwin <unk>.
Sure.
Your line is open.
Sure.
Hi, there how are you guys.
Hey.
My question is with regards to the supply of talent.
Obviously, many ICU services companies have been talking about that you had brought up the Nike services companies.
Many companies have been talking about.
Particularly high end technology talent the sharp supply.
Any commentary from you guys. This is affecting affecting you guys.
Somehow protected because you have a wider net to cast any thoughts there would be great.
Thanks, Ashwin, so yes naturally.
The company that see that people in the center of what we do we are very focused on our talent.
And we are looking at it from several directions first of all as the company itself went in the last couple of years into major re platforming of our products into cloud native.
Desktops et cetera, we definitely invested in risk, killing and continuously do so we are scaling and creating new opportunities for our employees and that comes on top of the fact that our unique business model, where we both developed products deployed them and then operate them in their it environments of our customers provides multiple career opportunities for people.
<unk> debt.
Are there unique relative to companies that then just self initial certain kinds of capabilities.
Put on top of that of course, the global scale the ability to make an impact on an industry that settled the orange.
Productivity of society that gets into the sense of purpose that is so important to our employees.
I would say that in addition to that we'll continue to sing in defense that not only how do we attract new employees because that's obviously important how do we make our existing employees rituals everyday to come to work with the real truly physically to the office.
And see the opportunity to make an impact and to enjoy the casino development in Amdocs and we do a lot of things around that on top of that of course, the regular things out to onboard effectively employees all over the world now to do it and by the way.
Awards on that how we effectively onboard employees into the company how do we create learning platforms et cetera et cetera. So yes, it's a topic that we are very well.
Engaged in to remind you we have a global delivery model, we have access to talent markets all over the world.
We are leveraging that capability as well of course and on top of all of that being a technology company, we're continuously focusing on how to create automation and tools to move into automated flows of what's called no touch activities whatever does not have to be done by people and focus the peak.
Therefore on the new innovation and the new capabilities that are being built.
Got it. Thank you for that and then the other question is.
As you talk about sort of early innings of multiyear <unk> and cloud based data transformation cycle.
The way I think of that as it comes through is mainly project driven.
So is that going to kind of affect your project driven versus managed services mix and does that have an impact on the overall financial model.
So we are very happy to see this.
Cycle with many customers are adopting our new.
Products and technology and deploying it through the form of what you call the project, but at the same time, we just announced today. An example of the customer that selected us AT&T selected us for this deployment cycle and building all the next Gen stats for consumer mobility on the Amdocs products and at the same time now.
Selecting us to widen the cloud all of these applications in that environment. So we are continuously seeing that pull through ashwin that we like so much of entering a new cycle of investment with project, and then moving fast and adding to it.
The recurring revenue stream that comes with the managed services.
I believe that we will continue to see that model of what we are proud about what you call. It the accountability model of Amdocs, what we can do both we can bring the best product cutting edge.
Knowledge having.
Having the customers building does future on Amdocs and at the same time enabled them to rely on amdocs to one it for them.
They would like of course to choose us for managed services and we continue to see also very high close to 100% renewal renewal rate on the existing managed services engagement. So it's hard to predict exactly. The racial specific financial question, what's the ratio between the largest revenue in managed services engagement hospital data that we see both growing.
And Thats great.
Okay understood. Thank you.
Thanks Ashwin.
Yes.
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Please limit yourself to one question and one follow up.
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Thank you very much for joining us this evening and for your interest in Amdocs. We look forward to hearing from you in the coming days and of course seeing you at our analyst event on Friday without have a great evening and we'll conclude the call. Thanks.
Yeah.
This concludes today's conference call. Thank you for your participation and have a wonderful day you may now disconnect.
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Good day and thank you for finding by what goes to the Q4 2021 Amdocs earnings conference call.
At this time all participants are in a listen only mode.
Later, we will conduct a question and answer session and instructions will follow at that time.
If anyone should do quite assistance during the conference. Please press Star then zero on your attach tone telephones.
As a reminder, this conference is being recorded.
I would now like to hand, the conference over to your host Mr. Matthew Smith head of Investor Relations for Amdocs.
Mr. Smith, you may now begin.
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 with GAAP. The company's management uses this information in its internal analysis in order to exclude the effects of acquisitions and other significant items that may have a disproportionate effect in a particular period.
What do you really manage metal 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 finished with the SEC on form 6K.
Also this call includes information that constitutes forward looking statements. 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 material such statements involve risks and uncertainties that may cause future results to differ from those anticipated. These risks include but.
We're 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 at greater length in the company's filings with the Securities and Exchange Commission, including in our annual report on form 20-F for the fiscal year ended September 32020 filed on December 14th.
'twenty and our form 6K furnished for the first quarter of fiscal 'twenty. One on February 16 in 'twenty, one and for the second quarter of fiscal 2021 on May 24, 21 and for the third quarter of fiscal 2021 on August 16, 2021, I'm Docs may elect to update these forward looking statements at some point in the future. However, the company.
<unk> disclaims any obligation to do so.
Participating on the call with me today are <unk>, President and Chief Executive Officer of Amdocs Management Limited and Tomorrow, Rappaport again joint Chief financial and operating officer.
To support our earnings call today and in the future. 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 <unk> will provide an update on our recent strategic process progress and business performance and Tomorrow will review, our financial results and outlook for fiscal year 2022, and finally, we invite you to join US for our fiscal 2022 analyst and Investor business update which will be a virtual event webcast live on Friday November 5th at 930 Eastern time.
<unk>.
Visit the Investor Relations section of our website for more information and with that I'll turn it over to Judy.
Thanks, Matt and good afternoon to everyone joining us on the call today, It's Matt mentioned today, we are going.
Today and going forward, we are providing an early presentation a long signed our remarks, we hope you find this additional information helpful in understanding our company its investment opportunity.
I will start todays call by recapping, our business and financial achievements for the full fiscal year 2021.
Second I will update you on the main pillar strategic growth framework and the significant progress we've made with key audit from the past quarter. Finally, I want to wrap up by summarizing our expectation for another real successes both in fiscal 2022, after which demand will provide the detail on our financial performance and outlook.
As well as perspective on the overall environment 12 month backlog and capital deployment.
And as a reminder, our comments today will refer to certain financial metrics on a pro forma basis, where applicable to provide you with a sense of the underlying business trends, excluding the financial impact of the open market, which we divested on December 31st 2020.
I'm on slide seven.
Let me begin by saying that that could not be prouder of our achievements in fiscal 2021.
This was a pivotal year in which we began to see the results of our strategy to drive accelerated revenue growth and much get it belongs to a global base of tenants and employees and experienced leadership team.
Operating hybrid model amid a global pandemic, our people execute exceptionally well this year to meet the mission critical requirements of our customers and they did so while embracing our culture of continuous mentally and ups kidney.
I'm also proud we constantly found ways to demonstrate our corporate purpose and values such as by providing support for the communities in which we live and work.
As an example in the Philippines, we recently rented projects to improve digital access and scale in peripheral communities, which included employees voluntarily hundreds of hours to develop capital planning technology and Upskilling webinar tailor made to the needs of the thousands of students from more than 25. This is just one inspiring story.
Among the many of the Amdocs.
I'd like to take a supposedly two drug knowledge and to take all our people and the commitment for the commitments because activity and dedication they've shown walking together to serve our customers partners communities and one another over the last year and I am confident we have the talent spirit and values to achieve even more in the future.
Moving to slide eight let me address the operational and financial highlights for fiscal year 2021.
Believe amdocs in an exciting inflection point of accelerated revenue growth and it's worth taking a moment to quickly recap some of the key factors, which have led us to this point.
First we have set up our investment in research and development by more than 10% in fiscal year 2021 to further position us as the market leader with the best technology, and most relevant offering to support our customer investments in industry Megatrends, including digital.
The organization journey to the cloud and <unk>.
Second we divested a noncore asset open market and execute our strategic acquisition of openness in August 2020, and solid group in March 2021, and further to further accelerate our technology capabilities and services with proceeds of one five <unk> in the cloud.
Finally, we signed a competitive advantage and establish ourselves as the industry, leading transformation partner to build the Nexgen platform. Great example of wage include multiple project Awards AT&T. This is modernization Windsor to UK and Zika transformation win with an excellent hybrid cloud operation.
Accelerating 14 mobile under a multiyear managed services agreement.
All in all we finished the year 2019, wanting the strong business and financial position you can see from the highlights on slide nine.
We delivered pro forma revenue growth of 7% in constant currency in fiscal in two <unk>, one driven by healthy customer activity across North America, Europe and rest of the world.
Sales momentum continue through the fourth quarter, which ended up with a record backlog of $3 7 billion up 10, 5% from either go on a pro forma basis.
We improved non-GAAP operation margin by 30 basis points and achieved our highest ever number of customer milestone.
Which will convert into record cash collections and record normalized free cash flow generation of $869 million for the full year.
Level, we delivered on our targets for double digit total shareholder return in fiscal 'twenty, one, including accelerated pro forma non-GAAP earnings per share growth of nearly 10% plus our dividend.
Now turning to slide 10, let me update you on the recent progress against our strategic imperatives. As a reminder, we the simple and clear growth strategy to bring market, leading innovation to support our customers' critical business needs and to provide an amazing experience to consumers.
Surprises in one journey to the cloud to accelerate cloud adoption across all platform customer base, two five <unk> monetization to support exciting new <unk> use cases trade digital modernization to enhance customer experience and saw some operation.
<unk> network automation to deliver an ultimate dynamic real time network based services.
During Q4, we made significant progress across each of these pillars.
In cloud we are thrilled that AT&T has selected us for next Gen and cloud operations of its business support system evolution VLCC under the long term agreements VLCC, the technology modernization and simplification program focused on increasing speed to market in both customer experience and long term cost efficiencies.
Effectiveness.
We announced Amdocs is involved in the process of modernizing AT&T consumer mobility domain and this new award expanded activity under.
Although the new VLCC agreement Amdocs will provide its deep set of cloud native products and Nextgen cloud operation under a long term agreement Mooresville. The project will be run on Microsoft Azure, starting with At&t's consumer business unit, which includes mobility broadband and Iot Adil.
Additionally, I am pleased to share that AT&T is extended through 2026. The managed services agreement signed in 2008 two.
2019 for the consumer demand.
Moving to five G monetization amdocs remains at the forefront of the industry working with leading service providers to enable new and exciting <unk> experiences.
During Q4, we were selected by Orange to provide business support system for your first five Standalone experimental cloud network launch in July in France. In total 31, amdocs engaging dozens of new <unk> operation amortization projects across multiple countries and customers, including AT&T.
In mobile to UK, Verizon <unk> Telecom operation, <unk>, plus gorilla and others.
<unk> Standalone networks, our launch around the globe, we expect growing number of service providers, we see the benefit of Amdocs expertise for unlocking the monetization potential of <unk> G by creating new capabilities unique business model and game changing opportunities.
Turning to digital modernization, we continue to see strong business momentum with several new wins this quarter, we expanded our relationship with <unk> to ramp up new digital services for its consumers and.
<unk> customers <unk>.
Stomach as Stan under the seven yield agreements, we expanded our strategic collaboration with Globe Telecom in the Philippines to provide the Amdocs catalog and E Commerce suite to improve digital experiences for its mobile and fixed line customer.
Finally, this quarter, we continued to build the growth momentum of our network automation offering by successfully providing an end to end service orchestration solution for SCS, the world's leading global satellite operator will enable ses to support customer.
We service innovation and delivery agility for satellite based hybrid and open cloud network.
In a further expansion of the industry, leading collaboration between the two companies Amdocs has also been engaged by ECS to provide the network service assurance solution.
We have extended our strategic partnership with Globe Telecom to include Amdocs service and network automation suite to power global cloud and.
And digital to network automation, Jeremy as quickly and easily.
With that backdrop, let me turn to slide 11, and our fiscal year 2022 outlook. We believe we are in the early innings of a multiyear five G and cloud driven investments and transformation cycle, we see a rich pipeline of opportunities the critical communication industry to enable our customers to create amazing it is.
Appearances for consumers and enterprises.
We are laser focused on converting these opportunities to backlog growth in the coming quarters, leveraging our cutting edge technology, which supports the future roadmap of our customers and further further extend our competitive lead in the market.
<unk> track record and the highest scale customers suddenly tenant base delivering value to our customers around the world.
Tying in everything together, we expect to deliver accelerated revenue growth of roughly 8%, assuming the midpoint of our guidance on a pro forma causes the constant currency basis in fiscal 2023.
Moreover, we are positioned to deliver a double digit expected total shareholder return for the second lean and running in fiscal 'twenty, two including pro forma non-GAAP diluted earnings per share growth of 10%, assuming the midpoint of our guidance range and our dividend yield of 2% based on the new quarterly rate of <unk>.
Nine five cents per share, which proposed for the shareholders' approval at our upcoming annual meeting in January with that let me turn the call to Tamara for her remarks.
Thank you <unk> and Hello, everyone. Thank you for joining us as a reminder, my comments today will refer to certain financial metrics on a pro forma basis, which exclude the financial impact of open market, which we divested on December 31st lien plenty.
Turning to slide 13, I would like to Echo <unk> comments.
That we are very proud of our financial performance for the fourth quarter and fiscal year 2021.
Let me start with US please call fourth quarter performance.
Q4 revenue of 1 billion online was up 10, 2% year over year on a pro forma constant currency basis.
It was led by our best ever quarter in North America.
Revenue was above the midpoint of guidance, despite an unfavorable impact from foreign currency fluctuations of $5 million relative to guidance.
Moving down the income statement.
Q4, non-GAAP operating margin of 17, 5% was in line with the high end of our long term target range and improved by 30 basis points from a year ago as accelerated R&D investments were more than offset by a focus on operational excellence and the divestiture of open markets.
On the bottom line diluted non-GAAP EPS was $1 16 in Q4, which was consistent with the midpoint of our guidance range as.
As we have said in the past our non-GAAP effective tax rate may fluctuate throughout the course of the fiscal year.
In the fourth fiscal quarter non-GAAP effective tax rate was 22% above the high end of our annual target range of 13% to 17%, but consistent with our expectations.
For the full fiscal year 2021, we reported an effective tax rate of 15, 4%, which was within our annual target range.
Diluted GAAP EPS was <unk> 97 for the fourth fiscal quarter above the midpoint of the guidance range of 91 to 99.
Summarizing fiscal year 2021, we delivered accelerated revenue growth of 7% on a pro forma constant currency basis, which was ahead of our original guidance for the year.
This outperformance was primarily due to a stronger than expected performance in our core business.
As well as a small contribution from the acquisitions of sourced a became clear bridge, which we executed during the year.
On the bottom line non-GAAP diluted earnings per share growth accelerated to nine 8% on a pro forma basis in fiscal year 2021.
Driven by the faster pace of revenue growth and improved non-GAAP operating margin and the benefit of our share repurchase activity during the year.
Moving to slide 14, the strong sales momentum of the last several quarters continued in Q4, resulting in record high 12 months backlog of $3 $69 billion, which was up 10, 5% from year ago on a pro forma basis.
On a sequential basis 12 months backlog rose by $100 million as compared to June 30.
12 month backlog is traditionally serves as a good leading indicator of our business, having consistently averaged around 80% of forward looking 12 months revenue over the years.
Q4 was also a healthy quarter for managed services.
Revenue grew from a year ago, equating to roughly 59% of total revenue.
A multiyear managed services engagements underpin the resiliency of our business with recurring revenue streams high renewal rates and expanded activities with existing customers, including into Nexgen cloud operations.
For instance, in addition to the AT&T deal that Youll be discussed this quarter BT group has renewed its relationship with Amdocs for a further three years to maintain develop and enhance the BSS platform for Bt's E. Glenn.
Turning to the balance sheet and cash flow as you can see in slide 15, we are pleased to say that our great progress in achieving project milestones for our customers is translating to invoicing and strong cash collections.
This is reflected in DSL 73 days, which decreased by two days year over year and decreased by six days sequentially in Q4.
However, our deferred revenue remained in a healthy position for the fourth fiscal quarter.
Altogether, we generated normalized free cash flow of $172 million in the fourth fiscal quarter.
For the full fiscal year normalized free cash flow of $869 million was significantly better than our prior guidance and equated to a conversion ratio relative to our non-GAAP net income of 140% well above our long term average of roughly 100%.
Overall, we ended the year with a strong cash balance of approximately $966 million.
Including aggregate borrowings have processed $650 million.
Our balance sheet is strong and with ample liquidity, we expect to be in a good position to continue to support our ongoing business needs, while retaining the capacity to fund our future strategic growth investments as and when the right opportunities arise.
Additionally, we remain committed to maintaining our investment grade credit ratings.
Turning to capital allocation on slide 16 for.
For the fiscal 2021, we returned $857 million to shareholders, including $177 million in annual cash dividend payments.
For the year, we deployed $680 million towards share repurchases, which included the net proceeds received from the divestiture of open market and we also accelerated our buyback program in Q4, they purchasing $140 million during the quarter.
Looking ahead to fiscal 2022, we expect normalized free cash flow of approximately $650 million.
Our outlook roughly assumed 100% conversion rate of non-GAAP net income and excludes anticipated capex of about $131 million as we complete the development of our new Israeli capital.
Regarding our capital allocation in fiscal year 2022, we expect to return the majority of anomalous free cash flow to shareholders.
This includes dividends for which we are pleased to announce the proposed increase of roughly 10% in our quarterly dividend.
So a new rate of 39, 5%.
Subject to shareholder approval at the annual meeting in January.
Now turning to the outlook on slide 17.
The prevailing level of macroeconomic business and operational uncertainty surrounding the magnitude of the duration of COVID-19 pandemic, including its novel strains remains elevated the midpoint of our fourth quarter and full year fiscal 2022 revenue guidance reflects what we consider to be the most likely outcome.
Based on the information we have today.
We cannot predict all possible scenarios.
With that said, we believe the business acceleration of last year will continue in fiscal 2022.
With revenue expected to grow by approximately 6% to 10% year over year on a pro forma constant currency basis.
We also expect to generate growth across all three of our key geographical regions.
Our annual outlook includes first fiscal quarter revenue within the range of <unk>.
One.
<unk> 8 billion to $1 12 billion.
On a reported basis, we expect full year revenue growth in the range of three 7% to seven 7% year over year.
Which anticipates, an unfavorable foreign currency impact of approximately 30 basis points year over year.
Moving down the income statement, we anticipate quarterly non-GAAP operating margin to track roughly in line with the midpoint of the new annual target range of 17, two to 17, 8%.
This also continues to assume an accelerated pace of R&D investment to support our customers in line with our strategy.
With a constant focus on achieving operational excellence.
Below the operating line, we anticipate this foreign currency fluctuations will continue to impact on non-GAAP net interest and other expense.
In the range of a few million dollars on a quarterly basis.
We expect that our non-GAAP effective tax rate will remain within an unchanged annual target range of 13% to 17% for the full fiscal year 2022, but above the high end of that range for Q1.
Bringing everything together, we expect non-GAAP diluted earnings per share growth in the range of 8% to 12% on a portfolio basis for the full year fiscal 2022.
On a reported basis, we expect to deliver full year diluted GAAP.
Full year diluted non-GAAP EPS growth of six 3% three year over year.
Overall, we expect to deliver double digit total shareholder returns for the second year running in fiscal 2022, including the 10% midpoint of our pro forma non-GAAP, earning per share growth guidance.
Our dividend yield of roughly 2% based on the newly proposed quarterly cash payments of $39.05 per share.
With that back to you shortly thank you Tamara before we go to Q&A, Let me take a moment to say that I'm excited to invite you all to join us for the virtual business object. This coming Friday, which we are hoping to provide investors and analysts within the appreciation of the strong foundation, we have built over the past several.
Yields in this position Amdocs for continued success in an increasingly digital world. We look forward to discussing amdocs strategy and our unique competitive advantage that will support accelerated growth and the continued success into the future.
With that we're happy to take your questions operator.
Okay.
Ladies and gentlemen, if you have a question at this time. Please press star and then one key on your tax Pelon telephone once again, you will need to press Star and then the number one key on your Touchtone telephone.
Request that you limit yourself to one question and one follow up if your question has been answered or you wish to remove yourself from the queue. Please press the pound key.
By while we compile the Q&A roster.
First question comes from the line of Jackson.
Jackson ear of GBM Your line is open.
Oh, great. Thanks for taking my questions guys.
Yes, first one on <unk>.
Additional comment you can provide on.
Either adjusted or reported cash flow and just given the.
The strength in revenue.
Bind with maybe cash flow performance double clicking on that would be great.
Sure so.
As we've always said the business model, we have is robust and its ability to generate first of all healthy earnings, but then convert over time earnings to cash roughly on par.
And starting this year, we did expect that to be a stronger year and if you'll recall we started the year and then we raise the numbers twice.
It started with a very strong first quarter well a part of the story there was the signing of the multiyear strategic deal with T. Mobile that also contributed.
Monetization in some.
<unk> payment as part of this signed deal and then doing the year, we continued to see a record high for quarter to quarter and definitely for the yields at all in terms of the number of deployments we achieved through our customers.
That translates into achieving many invoicing milestones and in turn of course, turning that invoices into collection in the bank. So I'm pleased to say that.
It's a result of a lot of focus that we have although many years.
On the cycle, we call deal to cash.
Has to do with many things, we do as a company and very strong execution and deliverables to our customers.
Okay, Great and then maybe shaky as we think about.
The very largest customers that you have that kind of.
Very large carriers in telecom, how should we expect maybe growth from those customers.
Typically North America should look like in <unk>.
Fiscal 'twenty, two maybe relative to either the rest of the world or some of your customers that are just a little bit smaller.
Sure.
As we said in the prepared remarks.
We see growth in all geographies obviously.
The size of the customers North America like T mobile and AT&T have you guys outlined as we mentioned before.
So.
Beginning of investment cycle definitely the <unk> could be more but I think.
Some of the deal that we've signed and closed the wall and three okay.
A large operator in Europe, and Vodafone and <unk>.
Its file.
But we are pleased to see that the mega trends that we discussed in Charlotte <unk> journey to the cloud utilization is pretty similar across the world and we see really great momentum, which is reflected also in another very strong backlog.
<unk> increase in backlog, so I think definitely.
Because of the size of the.
Operator in North America, which are probably the biggest in the world as opposed to go bigger, but we see a lot of big projects around the World languages has added color. If you look on the $100 million sequential improvement in 12 month backlog in Q4.
It's pretty much in line with the split of revenue, we see within nuts between North America and internationally. So it's broad based it's healthy naturally a stroke is set.
Very happy to see that all over the place and not concentrated just in one region.
Okay, Great makes sense. Thank you very much.
<unk>.
Alright next question comes from the line of Tom Roderick.
Your line is open.
Hi, Max Clauson, a ton per ton.
Wanted to start I guess getting back on the cash flows thinking about how strong they have been and going forward. The forecast for next year can you just talk a little bit more about the kind of steep decline given the guide for full year 'twenty two.
Could you just repeat the last sentence in decline.
Yes, Brian.
Hi, good projected 500.
Unfortunately, I have not found the patent to convert over time low cash <unk>.
And seriously I think that over time, you should expect us to convert at par, meaning 100% now we we had a very strong year and very happy about that with 140% conversion rate the oldest serving small sustain yes, but we always say, it's sustainable to be in that performance I think that 100% conversion rates we are projecting.
<unk> for 2022, why being the highest drove slate I can remember so over a decade.
While continuing to protect margins, while continuing to deliver double digit earnings per share growth. I think this is a very balanced package in terms of how we continue to invest in growth we mentioned continuing to.
Second R&D et cetera, while obviously protecting the margins and continuing to see that growth acceleration, but the again with the amount we did not find the magic to convert smaller.
More cash and earnings and this is really was an exceptional vehicle diesel space.
Got it and then speaking of growth should be talking about the strategic domain and the great pillars digital.
Digital and cloud et cetera.
You see like in the current environment.
Enough carriers are embracing those to generate three 7% to seven 7% revenue growth for next year or do more of these carriers need to embrace the movement and get onboard to kind of reach that goal.
I think that what's nice about.
These mega trends that I don't think there is some type of discretion.
Every customer of Amdocs in the world.
Order to be successful in this new era.
To transition to <unk> has to be digital and have to do to go to the cloud. So this is and by the way we see that.
All of the budgets of our customers are actually funnel to these domains because the key critical factors to their success in the future.
And by the way this as I said. This is broadly this is not just that it's clear that the U S is a little bit ahead for <unk> deployment comparing <unk>. Following in APAC is falling is it vehicles polo so.
But we see this across the course of the World and second this is not.
Like a one off.
<unk>.
With this mega trends of useful say for several years, because it will take a lot of time until the industry would be able to convert to <unk> completed decision journey and definitely the most of the cloud which is really really at the beginning.
Got it thanks.
Thank you.
Okay.
Again, ladies and gentlemen, if you have a question at this time. Please press the star and the number one key on your Touchtone Calix filing.
Please limit yourself to one question and one follow up.
Your next question comes from Tal <unk> of.
Your line is open.
Hi, guys. Thanks for the question Doug.
The.
Growth acceleration, we're seeing this year.
We are seeing growth acceleration across the company to sell to carriers and cloud.
I wanted to understand the longevity and the sustainability of the growth acceleration, meaning can you discuss whether this is these are just projects that may be where our whole during COVID-19 or anything that was delayed and now being deployed versus projects, who are starting a long cycle things you have done and translate into long term growth can you give me.
So little bit color on the growth acceleration thanks, Hi.
Definitely.
These mega trends are here to stay for several years and by the way all of these projects.
A multiyear projects.
To transform companies and the size of.
T mobile AT&T Vodafone it takes years and and it will take a lot of time until.
All the new <unk> use cases and opportunities are going are being developed as we speak.
So the short answer to your question. This mega trends are here to stay for way for several years and these projects are not a one year project a long term project.
That will take some time to deploy to deploy them it doesn't matter.
The medium sized telco will very big this project takes time and as I mentioned before we are just starting so it's not that the so the investment cycle is cleaning. The early you said early innings today, yes.
Got it.
And last quarter Schulke in your remarks, you spoke a lot about cloud and in the meantime, since then we've seen cloud companies announcing on big Big spending plans can.
Can you talk about the cloud.
And your your participation there and whether the investment in the network that we're seeing and we've seen other.
Other telecom names telecom equipment names talking about be cloud investment. So so how do you participate at these big projects that we're seeing.
And.
We are participating in this in this.
What we call.
Cloud journey different aspects. The first one is all of these transformational deals we do and are building a new consumer spec for AT&T is being done on our cloud native.
<unk>, one which is the latest and greatest.
And the platform for.
For monetization.
And as I mentioned this was built from the ground up.
Cloud native and all of our deployments on the cloud some of them already what are some of them on Azure. So we are working with the cloud partners. So this is the first.
Angle too.
To the cloud secondly, we're involved in several customer in activity of taking application it could be amdocs legacy application all non amdocs application in lift and shift to the cloud. So this is another activity that we do which is growing all.
All the time.
So in this case is not as it's not full modernization, but taking the application with platform them and moving and lift them to the cloud. This sales activity on the cloud is cloud ops as we announced this quarter you should see what's happened to AT&T. Initially one and then we awarded to do the consumer domain on our next generation suite for <unk>.
And this quarter, we announced the deal which is the third pillar doing cloud world. So doing all the operation in the cloud environment, So I think that.
We have a lot of.
But we are the market leader by the way in all these three domains and are seeing that.
The journey to the cloud.
Represents for us.
Very nice.
Great.
Your next question comes from Ashwin <unk>.
Sure.
Your line is now open.
Sure.
Hi, there how are you guys.
Hey.
My question is with regards to the supply of talent.
Obviously, many IP services companies have been talking about that UN guarding the Nike services companies.
Many companies have been talking about.
Particularly high end technology talent being short supply.
Any commentary from you guys is this affecting affecting you guys.
How protected because you have a wider net to cast any thoughts there would be great.
Thanks, Ashwin, so yes naturally.
The company that see that people in the center of what we do we are very focused on our talent.
And we are looking at it from several directions first of all as the company itself went in the last couple of years into major re platforming of our products into cloud native.
Desktops et cetera, we definitely invested in lift scaling and continuously do so with scaling and creating new opportunities for our employees and that comes on top of the fact that our unique business model, where we both developed products deploy them and then operate them in their it environments of our customers provides multiple career opportunities for people.
Will that are very unique relative to companies that then just self initial certain kinds of capabilities.
Put on top of that of course, the global scale the ability to make an impact on an industry that settled the art.
Productivity of society that gets into the sense of purpose that is so important to our employees.
I would say that in addition to that we'll continue to sing in the sense that not only how do we attract new employees because that will be important how do we make our existing employees rituals everyday to come to work, where the real truly physically into the office.
And see the opportunity to make an impact and to enjoy their casino development in Amdocs and we do a lot of things around that on top of that of course, the regular things out to onboard effectively employees all over the world Dow to do it and by the way.
Awards on that how we effectively onboard employees into the company how do we create learning platforms et cetera et cetera. So yes, it's a topic that we are very well.
Engaged in to remind you we have a global delivery model, we have access to talent markets all over the world.
And we're leveraging that capability as well of course and on top of all of that being a technology company, we're continuously focusing on how to create automation and tools to move into automated flows of what's called no touch activities whatever does not have to be done by people and focus the <unk>.
Therefore on the new innovation and the new capabilities that are being built.
Got it. Thank you for that and then the other question is.
As you talk about sort of early innings of multiyear <unk> and cloud based data transformation cycle.
I think of that as it comes through is mainly project driven work is that going to kind of affect your project driven versus managed services mix and does that have an impact on the overall financial model.
So we are very happy to see this.
Cycle with many customers are adopting our new.
Product, so new technology and deploying it to the foremost what you call the project, but at the same time, we just announced today. An example of a customer that selected us AT&T selected us for this deployment cycle and building all the next Gen stats for consumer mobility on the Amdocs products and at the same time now.
Selecting us to one the cloud off of these applications in their environment. So we are continuously seeing that pull ashwin that we like so much of entering a new cycle of investment with project, and then moving fast and adding to it.
The recurring revenue stream that comes with the managed services.
I believe that we will continue to see that model of look we are proud about what you call. It the accountability model of Amdocs, what we can do both we can bring the best product cutting edge technology, having our customers building does future on Amdocs and at the same time enabled them to rely on amdocs to run it for them.
They would like of course to choose us for managed services and we continue to see also very high close to 100% renewal renewal rate on the existing managed services engagement. So it's hard to predict exactly the ratio Phil specific financial question, what's the ratio between logic revenue in managed services engagement Harsco predictors, we see both.
And Thats great.
Okay understood. Thank you.
Thanks Ashwin.
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Thank you very much for joining us this evening and for your interest in Amdocs. We look forward to hearing from you in the coming days and of course seeing you at our analyst event on Friday without have a great evening and we'll conclude the call. Thanks.
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