Q2 2024 Amdocs Ltd Earnings Call
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I would now like to hand the conference over to Matt Smith, head of investor relations. Please go ahead.
Thank you, operator. Before we begin, I need to call your attention to our disclaimer statement on slide two of the presentation. It knows that some of our comments today may be forward-looking statements and are subject to risks and uncertainties, including as described in ANDOX's SEC filings, and that we will discuss certain financial information that is not prepared in accordance with GAAP.
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 6K.
Participating on the call with me today are Shuki Sheffer, President and Chief Executive Officer of Amdox Management Limited, and tomorrow, Rappapur de Guim, Chief Financial and Operating Officer.
To support today's earnings call, 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, Shuki will recap our business and financial achievements for the second quarter fiscal 2024, and we'll also update you on the continued progress we've made executing against our strategic growth framework, including Gen A.I and our continued sales, momentum in cloud.
Shuki will finish by discussing our financial outlook for the full fiscal year 2024, after which tomorrow will provide additional details on our second quarter financial performance, our forward guidance, and also our continued commitment to the SG. So with that, I'll turn it over to Shuki.
Thanks, Matt, and good afternoon to everyone joining us on the call today.
Let me begin by thanking our amazing employees around the world who every day work with our customer to deliver successful project execution and deployment,
seamless mission critical IT operation support, and cutting edge innovation built on MD MDUC's unique blend of telco industry expertise, generative AI leadership, and cloud-native native agility.
The collective effort of Amdoc's talented people are reflected in our sole financial results for the second fiscal quarter. The key highlight of which are shown on slide 7.
Within an environment of persistent macro uncertainty and industry pressure, we achieved record revenue of $1.25 billion, up 2.0% from an ego in constant currency, and slightly better than the midpoint of guidance.
Non-gap operating margin by 60 basis points, iroverr, and 30 basis points sequentially, driven by our ongoing initiative to accelerate postability.
Non-gap earning per share was $1.56, consistent with the midput of our expectation, and we closed Q2 with record 12-month backlog of $4.3 billion up approximately 3% from a year ago.
I believe our record 12 months backlog reflects MDOC's market leadership and healthy sales momentum as we are repeatedly chosen as the technology partner best equipped to support our customer next-gen multi-year modernization investments.
Slide 8 highlights some of the key achievements in Q2.
In North America, during Q2, we continue to expand our product and services offering at AT&T.
In addition, I am very pleased to report that we just signed a significant five-year deal at AT&T.
which expands our activities in new cloud domain, as well as extends our engagement with AT&T in the consumer domain throughout 2029.
A team mobile, we secured additional awards to support its ongoing modernization and strategy to provide market-leading consumer and B2B customer experiences.
Charter signed a five years continuous modernization agreement to leverage MDOC's customer experience suite to unlock business enhancement and new revenue opportunities. And Comcast Business continued to modernize and expand adoption of OMDAX B2B platform across their product offering.
Additionally, we expand our international footprint, winning a new digital transformation project with JECOM in Japan.
an important connectivity and network automation related deals at Colt in the UK, and a major service provider from provider in Southeast Asia.
Antoc subscription and content management offering also gained further worldwide traction in Q2.
Under subscription marketplace was selected by Virgin MediaO2 in the UK, and various affiliates of CK Hatchison Group, the platform was recently deployed at Foxtall in Australia.
MPV Japan, a leading Japanese content service on by Paramount, selected Amdo's ubiquity to deliver future-ready entertainment experiences to customers by managing the end-to-end content lifecycle from programming to broadcasts.
And Starhub, Singapore's leading telecommunication and digital TV service provider conducted the migration of their TV services for set of boxes, smart TVs, mobile and web utilizing ubiquities solution for their entire subscriber base.
Regarding project execution,
Q2 was another quarter of successful milestone deployment, which includes a major upgrade for Verizon to the latest version of our catalog one.
We also completed the unified single BSS and OSS platform for a leading service provider in Ireland, which ensures the retirement of several IT legacy system while delivering on the promise of a seamless customer experiences across both the BSS and OSSSS suites.
And we enable the possible migration of approximately 55 million subscribers for Turk operation in Thailand.
Achievement such of this will enforce Amdok's unmatched reputation for consistent delivery and provide a foundation on which to further extend our market leadership by winning future project awards and by growing our manned services business with new logos and existing customers alike.
For instance,
We recently expanded our multi-year agreement with a major service provider to include full cloud managed services and operation. And we signed expanded long-term managed services agreement to support the strategic objectives of Rogers in Canada.
which recently emerged with show, and called it in the UK, following its acquisition of Lumen's in Mayah business last year.
Overall, I believe our Q2 performance demonstrate MDOC's strong market position and the technological leadership we are bringing in strategic domain like generative AI, which we are important incorporating into our platform.
This was evident at Mobile War Congress in Barcelona this February , where I was extremely encouraged by the high level of customer engagement and positive strategic feedback were received
During the hundreds of C-level and senior management meetings, my team and I hosted during the Winklong show.
Now, moving to slide 9. I would like to review our growth strategy, which is designed to power service providers delivery of seamless next generation services by accelerant in the journey to the cloud, across all major cloud providers.
Creating seamless digital experiences by transforming customer journeys for consumer and V2B.
Monetizing the future market potential of 5G standalone network, fixed wireless access in fiber with innovative services,
and delivering dynamic connected experiences by streamline and automating complex network ecosystems.
Let me begin so on slide 10 with generative AI, which for past 12 months has been a top strategic priority for MDOCs. During Q2, we continue to execute against the three pillars of our generative AI strategy.
The first of which was to equip Amdhaw flagship CS24 with CS co-pilot, a set of embedded Gen.A.A.A.A.A.A.A.A.S., powered by M.A.'s. This suite is soon to be deployed in production at several customers.
Second, we are focused on accelerating the introduction of new Gen. Gen.A.U.A.A.A.A.A.A.A.A.A. A.A.A.
The prioritization of which is based on the highest value of opportunities. For example, working with several leading service provider, we are piloting billing care and conversational selling capabilities.
Early results indicate promising improvements in both the customer and agent experiences, driving meaningful reductions in time to address customer issues and improving NPS.
In the third pillar, we are pleased to see fruits of our work with Nvidia, and to expand our collaboration with Australia, including Microsoft and AWS.
With Nvidia, we unveiled meaningful progress towards carrier-scale production imperatives
including reducing token consumption by as much of 60%, reduce query latency by as much as 80%, and improving response accuracy by up to 30%.
And with AWS, we have partnered to integrate AWS Gen AI tools into our AMAGE platform, to fuel innovation across telco domains from network operation to customer experience.
Lastly, we continue to work with Microsoft and Open AI across our portfolio.
To summarize, we believe Amdocs has a leading role to play as a dominant industry technology enabler capable of helping service providers to fully harness the power of generative AI and deliver real-world value and savings.
Moving to slide 11. Strong cell momentum continues in clouds.
which is on track for double digital revenue growth this year, as we advance our customer cloud strategy with our unique end-to-end product and services and fully accountable immigration model.
A great example is AT&T Mexico.
which has successfully transitioned its Amdoc's customer experience suite systems to Oracle Cloud infrastructure, OCI.
thereby enabling flexibility and capacity growth, reduce operational cost and state-of-the-art cloud infrastructure that will allow it to provide superior services, security and customer experiences.
Amdox is also collaborating with Australia's OpTUS to modernize the Amdox customer experience suite, making a significant step in Optus, marking a significant step in Optus modernization journey.
Two things.
Moving to slide 11, strong sales momentum continues and clouds.
As mentioned, we also just signed a significant five-year deal to expand our cloud activities in AT&T to a new domain.
Which is on track for double digit revenue growth this year.
We advanced our customer cloud strategy with a unique end to end product and services and fully accountable immigration model.
In this program, we will leverage the technology capabilities of Astadia, which we acquired last November .
A great example is AT&T, Mexico, which has successfully transitioned its amdocs customer experience suite systems to Oracle cloud infrastructure, OCI, thereby enabling flexibility and capacity grow reduce operational costs and state of the art cloud infrastructure that will allow you to pull.
As a reminder of study technology supports highly sophisticated cloud migration.
Moving the digital modernization on slide 12.
Amdocs has been chosen as a key partner to modernize and accelerate the digital transformation of JCOM, a leading provider of communication and broadcasting services in the competitive Japanese markets.
<unk> superior services security and customer experiences.
Amdocs is also collaborating with Australia as obtuse to modernize the amdocs customer experience suite, making a significant step in obtuse, marking a significant step in op towards monetization journey.
to drive operational efficiencies, elevate customer experiences, and unlock new monetization opportunities.
I can also report positive demand for connect X.
MDOCSAS cloud native platform that is powered by generative AI.
As mentioned, we also just signed a significant five year deal to expand our cloud activities in AT&T to a new domain.
This enable MV&Os or any company to seamlessly launch a digital connectivity brand on the cloud.
In this program, we will leverage the technology capabilities of our study, which we acquired last November.
Adding to existing customers like Fee Network in Spain and Melon in South Africa, ConnectX was recently selected by Winni-Tin in Brazil to provide the necessary BSS capabilities for a newly established MV&E, providing digital services to its multiple MV&Os.
As a reminder, our status technology supports highly sophisticated cloud migration.
Moving the digital modernization on slide 12.
DOCSIS will be chosen as the key partner to modernize and accelerate the digital transformation of J com, a leading provider of communication and broadcasting services in the competitive Japan's market to drive operational efficiencies elevate customer experiences and outlook new monetization opportunities.
Similarly, we see growing customer appetite for Amdoc subscription marketplace, a SaaS-based scalable platform that seamlessly enables service providers to deliver OTT and digital consumer services straight to their customers.
Recently, C.K. Hutchinson selected Amdoc subscription marketplace to enable various group operating companies in Europe to launch additional entertainment and other digital services, together with its core offering, providing an extremely aggregated and convenient experience for its customer as one-stop shop for digital subscription.
I can also report positive demand for connect ex Amdocs SaaS cloud native platform that is powered by <unk> <unk>.
Enable envy nodes or any company to seamlessly launched a digital connectivity brand on the cloud.
Adding to existing customer like for network in Spain, and Malone in South Africa Kinetics was recently selected by winning in Brazil to provide the necessary BSS capabilities for our newly established <unk> knee, providing digital services to its multiple <unk>.
Subsequent market place were also selected by Virgin Media 2 in the UK to launch NextGen streaming and gaming services for its mobile customer and was recently deployed for Foxel in Australia.
thereby extending the customer leads, which already includes Team Mobile US and AT&T in Mexico.
Similarly, we see growing customer appetite for Amdocs subscription marketplace SaaS based scalable platform that seamlessly enable service providers to deliver OTT and digital consumer services straight to their core customers.
Switching to advanced connectivity and the modernization of 5G and fiber network on site 13, I am pleased to announce an expanded collaboration with Colt, a digital infrastructure company in the UK.
Recently, CK Hutch install selected Amdocs subscription marketplace to enable various group operating companies in Europe to launch additional infotainment and other digital services together with its core offering providing an extremely aggregated and convenient experience for its customers as one stop shop for <unk>.
Court will leverage MDOC's legal and transformation inventory management services to streamline its inventory process
enhance agility, and accelerated time to market for new services, bundle and upsell strategies to drive greater revenue generation and competitive advantage in the wholesale and enterprise B2B markets.
Turning to slide 14.
Digital subscription.
<unk> marketplace will also selected by Virgin media in the UK to launch negligence streaming and gaming services for its mobile customer and was recently deployed for folks in Australia.
Amdoc is positioned for growth in the network automation, leveraging expertise, and unique end-to-end offering.
In South Africa, we are deploying Amdoxlaw Native Helix Service Assurance Suite to modernize Celsius Service Assurance
Thereby extending the customer leads which already includes T mobile U S and AT&T Mexico.
making a significant step in transformation this service provider faulted performance and management, and driving streamlined assurance processes with the power of artificial intelligence and machine learning.
Switching to advanced connectivity and the amortization of <unk> and fiber network of <unk> I am pleased to announce an expanded collaboration with called a digital infrastructure company in the UK.
Notably, this deal follows MDox acquisition of TEOCAL service assurance business last year, providing another example of the way in which the use MNA is a tool to accelerate our growth strategies.
<unk> leverage Amdocs digital transformation inventory management services to streamline its inventory process enhanced agility and accelerate time to market for new services bundle in absolute strategies to drive greater revenue generation and competitive advantage in the wholesale and enterprise between markets.
Additionally, major service provider in Southeast Asia recently selected Amdocs to deliver our end-to-end service orchestration solution as an important component of its customer OSS and cloud monetization program.
Turning to slide 14.
And finally, through its collaboration with AmDocs, SCS announced that O3B, M-Power, its second-generation, Medium-Earth orbit, software-enabled satellite system, is now operational and poised to deliver connectivity services worldwide.
<unk> is positioned for growth in the network automation, leveraging our expertise and unique end to end offering in South Africa. We are deploying amdocs cloud native Hejlik service assurance suite to modernize <unk> service assurance, making a significant step in transformation. This service provider faulted performance and management and drive.
Amdix provides support with its industry-leading OSS solution, encompassing orchestration, inventory, and service assurance systems.
<unk> streamlined assurance processes with the power of artificial intelligence and machine learning.
Now turning to slide 15. Let me say a few words about our market position as we enter the fiscal second half.
Notably this deal follows Amdocs acquisition of Dr Call Service assurance business last year, providing another example of the way in which to use M&A as a tool to accelerate our growth strategies.
To begin, we continue to operate within a challenging environment of macro uncertainty and user pressure.
Having said that,
As the preferred technology partner for modernization, we continue to see healthy market demand for AMDOVD's innovative product and services around our strategic pillars,
Additionally, major service provider in Southeast Asia recently selected Amdocs to deliver our end to end service orchestration solution is an important component of its customer Oss and cloud monetization program.
with all together should support another year of double-dit revenue growth in cloud this year.
And finally, so its collaboration with Amdocs SCS announced that all three be empower its second generation medium Earth orbit software enabled satellite system is now operational and poised to deliver connectivity services worldwide.
Amdok's market win rate remains high and I'm encouraged by the great progress advancing multiple gen AI use cases engagements, which were supporting in collaboration with industry leaders such as Nvidia, Microsoft and AWS and several flagship customers.
And this provides support with its industry, leading <unk> solution encompassing orchestration inventory and service assurance systems.
Altogether, we expect quarterly revenue growth to accelerate sequentially in the fiscal second half, albeit at a more moderate rate than we initially anticipated, mainly due to a slower pace of pipeline to sales conversion.
Now turning to slide 15, let me say few words about our market position as we enter the fiscal second half.
To begin we continue to operate within a challenging environment of macro uncertainty and industry pressure <unk>.
Wrapping everything together on slide 16.
Having said that as the preferred technology partner for modernization, we continue to see healthy market demand for amdocs innovative product and services around our strategic pillars with another with altogether should support another year of double digit revenue growth in cloud this year.
We now expect revenue growth of between 1.7 to 3.7% on a percent on a constant currency basis in fiscal 24.
And we are on track to deliver accelerated profitability improvement in fiscal 2024, reflecting our constant focus on operational excellence initiatives to improve business efficiency.
<unk> market win rate remains high and I am encouraged by the great progress advancing multiple Jenny I use cases engagements, which we are supporting in collaboration with industry leaders, such as Nvidia, Microsoft and AWS and several flagship customer.
Overall, we are now
expected fully non-gap diluted earning per share growth of between 7% and 11% which combined
With our dividend yield of approximately 2% position us to deliver double digit expected total share of returns for the fourth rate year in the fiscal 2024. With that, let me turn the call to Tamar for your remarks.
Altogether, we expect quarterly revenue growth to accelerate sequentially in the fiscal second half, albeit at a more moderate rate than we initially anticipated mainly due to a slower pace of pipeline to sales comparison.
Thank you, Shuki, and hello everyone. Thank you for joining us.
Wrapping everything together on slide 16.
And please with our solid financial performance in the second piece of quarter, the highlights of which you can see on slide 18.
We now expect revenue growth of between one 7% to three 7% on a constant currency basis in fiscal 'twenty for <unk>.
Record Q2 revenue of approximately $1.246 billion was up to percent year over year and constant currency.
And we are on track to deliver accelerated profitability improvements in fiscal 2024, reflecting our constant focus on operational excellence initiatives to improve business efficiency.
And our reported basis, revenue increased 1.8% year of a year and a slightly above the midpoint of guidance, including an immaterial impact from foreign currency movements compared to our guidance assumptions.
Overall, we are now.
Expected full year non-GAAP diluted earnings per share growth of between 7% and 11%, which combined with our dividend yield of approximately 2% positioning us to deliver double digit expected total shareholder returns for the fourth straight year in the fiscal 2024.
On a sequential basis, revenue included an impact on foreign currency movements of approximately $2 million.
From a geographical perspective, North America declined 0.7% from a year ago, primarily due to a slower pipeline to cell conversion.
This was offset by a healthy growth of 8% year-over-year in Europe and a record quarter in the rest of the world, which increased 7% as projects and managed services activities ramped up with various customers.
Tomorrow: With that let me turn the call to tomorrow for our remarks.
Tomorrow: Thank you <unk> and Hello, everyone. Thank you for joining us.
Tomorrow: I am pleased with our solid financial performance in the second fiscal quarter, the highlights of which you can see on slide 18.
Moving down the income statement, I'm proud to report a non-gap operating margin of 18.4% in the second quarter, the highest in many years.
Tomorrow: Record Q2 revenue of approximately 124 6 billion was up 2% year over year in constant currency and a reported basis revenue increased one 8% year over year and was slightly above the midpoint of guidance, including an immaterial impact from foreign currency movements compared to our guidance assumptions.
NANGAP operating margin rose 60 basis points from a year ago and 30 basis points sequentially,
driven by our continued initiatives to improve operational excellence for discipline resource management, the ongoing adoption of automation and sophisticated tools, and the implementation of AI to drive additional cost and efficiency improvements across our business.
Tomorrow: On a sequential basis revenue included an impact from foreign currency movements of approximately $2 million.
From a geographical perspective, North America declined 7% from a year ago, primarily due to a slower pipeline to sell through version.
Interest and other expenses amounted to roughly $8 million in the second quarter as we continue to see
some adverse foreign currency movements in the quarter.
Tomorrow: This was offset by healthy growth of 8% year over year in Europe, and a record quarter in rest of the world, which increased 7% as projects and managed services activities ramped up with various customers.
On the bottom line, NANGAP diluted EPS of $1.56 was at the midpoint of guidance and included a non-gap effective tax rate of 17.2%, roughly in line with the high end of our annual target range of 13 to 17%.
Tomorrow: Moving down to income statement I'm proud to report a non-GAAP operating margin was 18, 4% in the second quarter the highest in many years.
diluted GAP-EPS,
was $1.1.1 for the second fiscal quarter. This included a restructuring charge of $33 million or $24 per share, without which diluted gap EPS would have been at the midpoint of our guidance range of $121219.
Tomorrow: non-GAAP operating margin rose 60 basis points from a year ago, and 30 basis points sequentially driven by our continued initiatives to improve operational excellence through disciplined resource management, the ongoing adoption of automation and sophisticated tools and implementation of AI to drive additional cost and efficiency improvements.
I'll provide more context around the restructuring charge when I discuss a financial outlook later.
Tomorrow: Across our business.
Moving to slide 19, 12 months backlog was a record of 4 billion.23.
Tomorrow: Interest and other expenses amounted to roughly $8 million in the second quarter as we continue to see.
Up approximately 3% from a year ago and $20 million sequentially. A 12-month backlog reflects healthy sales momentum, which I'm pleased to say included new deals spread around the globe and a positive mix of renewal and expansion with existing customers and new logos.
Tomorrow: Some adverse foreign currency movements in the quarter.
Tomorrow: On the bottom line non-GAAP diluted EPS of $1 56 was at the midpoint of guidance and included a non-GAAP effective tax rate of 17, 2% roughly in line with the high end of our annual target range of 13% to 17%.
To be clear, the significant new deal at AT&T that we just signed is not included in the Q2, 12-month backlog.
Tomorrow: Diluted GAAP EPS.
Tomorrow: It was $1 <unk> for the second fiscal quarter. This included a restructuring charge of $33 million or 24 per share.
As a reminder, a 12 months backlog is roughly averaged around 80% of forward-looking 12-month revenue over the years and has therefore traditionally served as a good leading indicator of our business.
Tomorrow: Without which diluted GAAP EPS would have been at the midpoint of our guidance range of $1 21 to $129.
Tomorrow: I'll provide more context around the restructuring charge when I discussed.
Turning to slide 20, Mata Services revenue was approximately $720 million up slightly from a year ago as we gradually ramped up new and expanded customer engagements eroded in recent quarters.
Tomorrow: Financial outlook later.
Tomorrow: Moving to slide 1912 months backlog was a record of $4 billion 23.
Tomorrow: Up approximately 3% from a year ago and $20 million sequentially.
Accounting for roughly 58% of total revenue in Q2, managed services support the resiliency of our business with highly recurring revenue streams and a near 100% renewal rate on existing customer agreements.
Tomorrow: 12 months backlog of reflect healthy sales momentum, which I'm pleased to say included new deal spread around the globe and a positive mix of renewal and expansion with existing customers and new logos.
Ashuki referenced earlier, Rogers in Canada has expanded this existing collaboration with Amdox, signing a multi-year managed services extension agreement.
Tomorrow: To be clear the significant new deal at AT&T that we just signed is not included in.
Tomorrow: In Q2 12 months backlog.
Demonstrating Amdoc's proven ability to support the market consolidation strategies of our customers, we also find an extended multi-year management agreement with Colt in the UK, under which Amdocs will provide migration services and consolidate inventory systems
Tomorrow: As a reminder, at 12 month backlog is roughly averaged around 80% of forward looking 12 month revenue over the years and is therefore traditionally served as a good leading indicator of our business.
Tomorrow: Turning to slide 20 managed services revenue was approximately $720 million up slightly from a year ago, as we gradually ramped up new and expanded customer engagements eroded.
Following its acquisition of Blumen's in your business.
I'm also happy to report that the major Southeast Asian service provider has extended and expanded its partnership with DAMDOC's remote and year BSS MAN Services Agreement, including full cloud meta services and operations.
Tomorrow: In recent quarters.
Tomorrow: Accounting for roughly 58% of total revenue in Q2 managed services support the resiliency of our business with highly recurrent revenue streams, and a near 100% renewal rate on existing customer agreements.
This expansion also includes managing over 100 multa-man non-and-ox apps across multiple public clouds, private clouds, and on-prem.
Now, turning to the balance sheet and cash flow highlights on slide 21. DSO of 76 days increased by two days year over year in Q2, and on a sequential basis, DASO increased by one day.
Tomorrow: As Yogi referenced earlier Rogers in Canada has expanded its existing collaboration with Amdocs signing a multiyear managed services extension agreement.
Tomorrow: Demonstrating amdocs proven ability to support the market consolidation strategies of our customers. We also signed an expanded multi year managed services agreement with call. It in the UK and in which Amdocs will provide migration services and consolidate inventory system. Following its acquisition of Blue Man EMEA business.
The sequential second quarter change in unbilled receivables net of deferred revenue was $70 million in Q2, aggregating the short-term and long-term balances.
As a reminder, the net difference between unbuilded receivables and deferred revenue fluctuates from quarter to quarter in line with normal business activities, as well as our progress on significant multi-year transformation programs we are currently running in North America.
Tomorrow: I'm also happy to report that the major Southeast Asian service provider is extended and expanded its partnership with Amdocs for multiyear BSS managed services agreement, including full cloud managed services and operations.
Tomorrow: This expansion also includes managing over 100 multi domain non amdocs app across multiple public clouds private clouds and on Prem.
We generated free cash flow of $113 million in Q2, comprised of cash flow from operations of approximately $133 million, less $20 million in net capital expenditures.
Tomorrow: Now turning to the balance sheet and cash flow highlights on slide 21.
Free cashier reflects the seasonal timing of fiscal year 2023 bonus payments, which typically occur in the second fiscal quarter.
Tomorrow: DSO of 76 days increased by two days year over year in Q2 and on a sequential basis DSO increased by one day.
Also note that adjusting for restructuring payments of approximately $7 million, reported free cash would have been $120 million in second quarter.
Tomorrow: The sequential second quarter change in Unbilled receivables net of deferred revenue was $70 million in Q2, aggregating the short term and long term balances.
Overall, we ended Q2 with a strong down sheet, including a healthy cash balance of approximately $544 million and aggregate borrowings of roughly $650 million.
Tomorrow: As a reminder, the net difference between Unbilled receivables and deferred revenue fluctuates from quarter to quarter in line with normal business activities.
Tomorrow: As well as our progress on significant multi year transformation programs. We are currently running in North America.
We have ample liquidity to support our ongoing business needs while retaining the capacity to fund our future strategic growth.
Tomorrow: We generated free cash flow of $113 million in Q2 comprised of cash flow from operations of approximately $133 million.
Turning to the capital allocation on slide 22, we repurchased $115 million of our shares in the second quarter and paid cash dividends of $51 million.
Tomorrow: $20 million and net capital expenditures.
Overall, fiscal year to date, we return the total of $376 million to shareholders for shareholder for sherry purchases and dividends.
Tomorrow: Free cash flow reflects the seasonal timing of fiscal year 2023 bonus payments, which typically occur in the second fiscal quarter.
For the full fiscal year 2024, we now expect free cash flow of approximately $700 million, excluding recharging payments of approximately $23 million made in the first fiscal half of the year, and additional payments to anticipate will be made in the second half.
Tomorrow: Also note that adjusting for restructuring payments of approximately $7 million reported free cash flow would have been $120 million in second quarter.
Tomorrow: Overall, we ended Q2 with a strong balance sheet, including a healthy cash balance of approximately $544 million in.
As compared with our previous outlook of approximately $750 million.
Tomorrow: In aggregate borrowings of roughly $650 million.
This change mainly reflects the timing of collections related to payment milestones of certain projects which are program and deployment dependent.
Tomorrow: We have ample liquidity to support our ongoing business needs, while retaining the capacity to fund our future strategic growth.
Tomorrow: Turning to the capital allocation on slide 22, we repurchased $115 million of our shares in the second quarter and paid cash dividends of $51 million.
A free cash flow outlook equates to an expected conversion rate of over 90% relative to non-gap net income in fiscal 2024 and represent a healthy free cash flow yield of roughly 7% relative to AMDOX's current market capitalization.
Tomorrow: Overall fiscal year to date, we returned a total of $376 million to shareholders through share repurchases and dividends.
Regarding our capital allocations in fiscal year 2024, we expect to return the majority of our free cash to shareholders.
Tomorrow: For the full fiscal year 2024, we now expect free cash flow of approximately $700 million.
Now, turning to a revenue outlook on slide 23, we are continuing to closely monitor the prevailing level of macroeconomic, geopolitical, business and operational uncertainty, which remain elevated in the current business environment.
Tomorrow: Excluding recharged, excluding restructuring payments of approximately 23 million made in the first fiscal half of the year and.
Tomorrow: And additional payments, we anticipate will be made in the second half.
Tomorrow: As compared with our previous outlook of approximately $750 million.
That's the third quarter and full year fiscal 2024 financial guidance reflects what we consider to be the most likely outcome based on the information we have today, but we cannot predict all possible scenarios.
Tomorrow: This change mainly reflects the timing of collections related to payment milestones of certain project, which our program and deployment dependent.
To begin, we expect quarterly revenue growth to accelerate on the sequential basis in the second fiscal half of the year, albeit more moderately than we initially expected.
Tomorrow: Our free cash flow outlook equates to an expected conversion rate of over 90% relative to non-GAAP net income in fiscal 2024 and represent a healthy free cash flow yield of roughly 7% relative to amdocs current market capitalization.
This change primarily reflects lower than anticipated pipeline to sales conversion, mainly due to persistent sacro uncertainty in industry pressure.
Tomorrow: Regarding our capital allocations in fiscal year 2024, we expect to return the majority of our free cash flow to shareholders.
As we are often asked about it, let me say that our change in revenue outlook is not the result of signed project cancellation, nor have we seen further deterioration in spending related to legacy system announcements.
Tomorrow: Now turning to our revenue outlook on slide 23, we are continuing to closely monitor the prevailing level of macroeconomic geopolitical business and operational certainty, which remain elevated in the current business environment.
headwinds from which we continue to estimate at roughly 3% in fiscal 2024.
Tomorrow: That's the third quarter and full year fiscal 2024 financial guidance reflects what we consider to be the most likely outcome based on the information we have today, but we cannot predict all possible scenarios.
Altogether, we now expect revenue growth of between 1.7 to 3.7% year over year on constant currency basis in fiscal 2024, the midpoint of which is roughly 50 basis points lower than our previous outlook of 1.2 to 5.2%.
Tomorrow: To begin we expect quarterly revenue growth to accelerate on a sequential basis in the second fiscal half of the year, albeit more moderately than we initially expected.
Our annual outlook includes third fiscal quarter revenue within a range of 1.235 billion to 1.275 billion and assumes an immaterial sequential impact from foreign currency fluctuations as compared to Q2.
Tomorrow: This change primarily reflects lower than anticipated pipeline to sales conversion, mainly due to persistent macro uncertainty and industry pressure.
Tomorrow: As we are often asked about is let me say that our change in revenue outlook is not the result of signed project cancellations nor have we seen further deterioration in spending related to legacy system enhancements.
On a reported basis, we now expect full-year revenue growth in the range of 1.6 to 3.6% year over year, as compared with 1.1 to 5.1% previously.
This outlook incorporates an unfavorable impact from foreign currency fluctuation of approximately 10 basis point year over year and changed on our previous assumptions.
Tomorrow: Winds from which we continue to estimate that roughly 3% in fiscal 2024.
Tomorrow: Altogether, we now expect revenue growth of between $1 72 to three 7% year over year on constant currency basis in fiscal 2024, the midpoint of which is roughly 50 basis points lower than our previous outlook of $1 two to five 2%.
Moving down the income statement, we are on pace to achieve non-gap operating margin within our annual target range of 18.1 to 18.7 percent, as shown on slide 24.
For your modeling purposes, we expect our man gap operating margin to be stronger in the second fiscal half of the year than it was in the first two quarters.
Tomorrow: Our annual outlook includes third fiscal quarter revenue within a range of 1.2.
Tomorrow: <unk>, three 5 billion to $1 $275 billion and assumes an immaterial sequential impact from foreign currency fluctuations as compared to Q2.
As to the long term, we are relentlessly focused on improving the company's cost structure and productivity.
Leveraging our unique business model, we are utilizing operational excellence as well as technology to fulfill our commitment to profitable growth.
Tomorrow: On a reported basis, we now expect full year revenue growth in the range of one 6% to three 6% year over year as compared with one 1% to five 1% previously.
Through GenaI presenting a new wave of innovation and capabilities, we are proactively assessing our investment priorities in strategic areas, rebalancing our workforce to the needs of the future and our site strategy, and optimizing resources such as technology, infrastructure, and workspace.
Tomorrow: This outlook incorporates an unfavorable impact from foreign currency fluctuation of approximately 10 basis points year over year unchanged on our previous assumption.
Tomorrow: Moving down the income statement, we are on pace to achieve non-GAAP operating margin within our annual target range of $18. One to 18, 7% as shown on slide 24.
With that in mind, during Q2, we took some initial actions under a new restructuring plan, resulting in the previously mentioned charge of $33 million that was mainly comprised of employee severance and benefits arrangements.
Tomorrow: For your modeling purposes, we expect our non-GAAP operating margin to be stronger in the second fiscal half of the year than it was in the first two quarters.
We expect to continue to execute on our structuring plan over the next several quarters, and further updates will be provided as we move along.
Tomorrow: As to the long term, we are relentlessly focused on improving the company's cost structure and productivity less.
Bringing everything together on slide 25, we now expect non-gap diluted earning per share growth in the range of 7 to 11% for the full year of fiscal 2024, the 9% midpoint of which is roughly 100 basis points lower than our previous outlook.
Tomorrow: Leveraging our unique business model, we are utilizing operational excellence as well as technology to fulfill our commitment to profitable growth.
Tomorrow: <unk> presenting a new wave of innovation and capabilities, we are proactively assessing our investment priorities and strategic areas.
The change in EPS outlook is primarily driven by slower top line growth and the impact of below-delined items, including foreign currency fluctuations and hedging costs, which will anticipate will impact non-gap net interest and other expense in the range of several million dollars on a quarterly basis.
Tomorrow: Balancing our workforce to the needs of the future in our site strategy and optimizing resources, such as technology infrastructure and workspace.
Tomorrow: With that in mind. During Q2, we took some initial actions under a new restructuring plan, resulting in the previously mentioned charge of $33 million.
Additionally, we expect our NANGAP effective tax rates to be within our unchanged annual target range of 13 to 17 percent for the full year fiscal 2021.
Tomorrow: Mainly comprised of employee severance and benefits arrangements.
For your modeling purposes, we expect to be at the high end of this range in Q3 and towards the low end in Q4.
Tomorrow: We expect to continue to execute on our structuring plan over the next several quarters and further updates will be provided as we move along.
Overall, we are on track to deliver expected double-digit total shoulders return for the fourth year running in fiscal 2024, including our outlook for non-gap earning per share growth, plus our dividend yield of approximately 2%.
Tomorrow: Bringing everything together on slide 25, we now expect non-GAAP diluted earnings per share growth in the range of 7% to 11% for the full year fiscal 2024 nine.
Tomorrow: A 9% midpoint of which is roughly 100 basis points lower than our previous outlook.
Before handing back to Shuki, let me mention this year's Mobile World Congress at which we received great recognition from our customers and partners for Amdox initiatives to positively impact the community, the communications industry, and the communities we serve.
Tomorrow: The change in EPS outlook is primarily driven by slower top line growth and the impact of below the line items, including foreign currency fluctuations and hedging costs, which we anticipate will impact non-GAAP net interest and other expense in the range of several million dollars on a quarterly basis.
Among many highlights, Andox was named
The TM Forum moonshot catalyst winner for our innovative carbon footprint catalog offering, an AI-based product catalog we've developed in collaboration with our partners,
Tomorrow: Additionally, we expect our non-GAAP effective tax rate to be within our unchanged annual target range of 13% to 17% for the full year fiscal 2024.
to enable CSPs to understand the impact of scope 3 emissions and to provide the same to their customers for informed decision making.
Tomorrow: For your modeling purposes, we expect to be at the high end of this range in Q3 and towards the low end in Q4.
I was also delighted by the positive feedback we received following a roundtable, elevating women in Gen. Which brought together some of the industry's most visionary women leaders to discuss the challenging gender gap created by Gen.
Tomorrow: Overall, we are on track to deliver expected double digit total shareholder return for the fourth year running in fiscal 2024, including our outlook for non-GAAP, earning per share growth plus our dividend yield of approximately 2%.
and to explore collaborative opportunities that will help shape the future of women in technology and society.
Tomorrow: Before handing back to Shokhin Leslie mentioned this years mobile World Congress, which we received great recognition from our customers and partners.
These and other initiatives demonstrates Amdoch's ongoing commitment to being an ESG industry leader, as reflected by our recent inclusion in the prestigious S&P Global Sustainability Yearbook,
Tomorrow: Amdocs initiatives to positively impact the community the communications industry and the communities we serve.
Tomorrow: Among many highlights amdocs was named the.
for 24, and our fourth consecutive gold rating award are the Kovadis for achieving an overall ESG score in the 95th percentile.
Tomorrow: <unk> moonshot catalyst, we therefore, our innovative carbon footprint catalog offering an AI based product catalog with developed in collaboration with our partners to enable CSP to understand the impact of scope three emissions into providing the same to their customers. So informed decision making.
With that, Dr. Yoshogi.
Thank you, Tomah.
As I said in my prepared remarks, I am pleased with our solid second quarter results.
While the operating environment remains challenging, I believe our market leadership, rich pipeline of opportunities, focus execution, and commitment to operational accesses, position us to deliver a force conservative year of double digit expected total sharehold return in fiscal 24.
Tomorrow: I was also delighted by the positive feedback we received following a round table elevating women in journey II.
Tomorrow: Which brought together some of the industry's most visionary women leaders to discuss the challenging gender gap created by Gen AI.
Tomorrow: And to explore collaborative opportunities that will help shape the future of women in technology and society.
With that, we are happy to take your questions.
As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press 1-1 again.
Tomorrow: These and other initiatives demonstrates amdocs ongoing commitment to being an ESG industry leader as reflected by our recent inclusion in the prestigious S&P global sustainability yearbook for 2024, and our fourth consecutive gold rating award at <unk> for achieving an overall ESG score in the 95 percentile.
In the interest of time, we ask that you limit yourself to one question and one follow-up.
Our first question comes from the line of George Nauter with Jeffries.
Speaker Change: With that back to you shortly.
Speaker Change: Thank you Tamara.
Tomorrow: <unk> said in my prepared remarks, I am pleased with our solid second quarter results and while the operating environment remains challenging I believe our market leadership reached pipeline of opportunities focus execution and commitment to operational excellence position us to deliver the fourth consecutive year with double digit expected.
Hi, guys, thanks very much. I guess I wanted to start by asking about the reduction in expectations for top line, I guess, 50 basis points at the midpoint.
I think I heard you say it's not due to the trade-offs that customers are looking at between modernizations and legacy type upgrades.
Tomorrow: Total shareholder return in fiscal 'twenty four.
but rather, you know, slower milestones associated with billing. Can you talk about this? Is this something that's more like execution related for Amdocs? Is it something maybe where customers are slowing down the progress on specific projects or any more detail there would be great? Thanks.
Speaker Change: With that we're happy to take your questions.
Tomorrow: As a reminder to ask a question. Please press star one one on your telephone to wait for your name to be announced.
Tomorrow: To withdraw your question. Please press star one again.
Tomorrow: In the interest of time, we ask that you limit yourself to one question and one follow up.
Hi, George. Let me correct you. We didn't say that the impact of the 50 basis point of the revenue growth is related to milestone.
Tomorrow: Yes.
Tomorrow: Our first question comes from the line of George Notter with Jefferies.
We said that we see in some cases that the time it takes to convert
George Charles Notter: Hi, guys. Thanks, very much I guess I wanted to start by asking you about the reduction in expectations for top line I guess 50 basis points at the midpoint.
dealing the pipeline to sell and then to start to execute, take some longer. I think a good example is the significant AT&T that we just mentioned.
George Charles Notter: I think I heard you say its not do too.
This is something that in the walk for a lot of time,
We thought that we'd be able to close it early in Q2. Eventually, we just closed it in the last week. So this is a good example of a very good deal to Amdocs and definitely for IT&T, very significant, that it took such more time. So it's not related to a project milestone, is the fact that – and by the way, there are some other very important and significant deal that we are working right now.
Speaker Change: The trade offs that customers are looking at between Modernizations and legacy type upgrades.
Speaker Change: Book router slower milestones associated with billing can you talk about this is this something that's more like execution related for Amdocs is it something maybe where customers are slowing down the progress on specific projects or any more detail there would be great. Thanks.
It takes us a bit more time that we anticipated at the beginning of the year to close this deal, but we are not losing engine deal and the pipeline is very rich. It's more like how we convert, especially the large deal from pipeline to sell.
Speaker Change: Hi, George Let me correct, you, we didn't say that the impact of the 50 basis points of the revenue growth is related to milestones.
Speaker Change: We said that we see in some cases that.
Speaker Change: The time it takes to convert.
Just to clarify the comments on the milestones was in the context of free cash flow expectations for the year.
Speaker Change: The deal in the pipeline to sell and then to start to execute take some longer I think a good example is the significant AT&T that we just mentioned.
where there, you know, some specific miles of moving a bit ahead, pushing forward our ability to collect that in the fourth quarter of the year and actually pushing that into next year. But again, I don't think it's a collectability issue. It's more a matter of shifting timeline.
Speaker Change: This is something thats in the work for a lot of time.
Speaker Change: We sold it will be able to close early in Q2. Eventually we just closed within the last week. So this is a good example of a very good deal to Amdocs and definitely for AT&T.
Speaker Change: Significant.
Got it. Okay. And then as I think about your business, you're around 83% of next 12-month sales and backlog, I guess.
Speaker Change: It took us more time, so we're not it's not related to a project milestone is the fact that the and by the way there are some other very important and significant deal that we're working right now.
is I thought about your visibility as a company. I guess I tended to think about your pipeline being pretty full for the subsequent three quarters and then
Speaker Change: It takes us a bit more time than we anticipated at the beginning of the year to close this deal, but we're not losing anything deal and the pipeline is very rich it's more like how we convert.
you know, four quarters out is really the revenue that you're chasing and projects that you're kind of filling out. So I guess I'm a little confused around, you know, why we're seeing shortfalls in the next quarter or two.
Speaker Change: And especially the large deal too from move from pipeline to sell just to.
Speaker Change: Hi, the comment on the milestones.
Speaker Change: In the context of our free cash flow expectations for the year.
because of this pipeline effect.
Speaker Change: Were there some specific milestones moving a bit ahead.
In any given quarter, even in current quarter, we don't have 100% coverage by a backlog. It's a very nice visibility.
Speaker Change: Pushing forward our ability to collect that in the fourth quarter of the year and actually pushing that into next year, but but again I don't think its a collectibility issue. It's all a matter of shifting timeline.
And you're right that as we look closer,
On timeline, the visibility is better, but still there are specific deals that have to be signed in order to fulfill the rest of the revenue. I would say that on top of that,
Speaker Change: Got it okay.
Speaker Change: And then as I think about.
Speaker Change: Your business you are around 83% of next 12 months sales in backlog I guess because.
When we are talking about 12 months back, it's not just about having something signed already, it's about predicting exactly how this signed business is converting into revenue in the next 12 months.
Speaker Change: As I thought about your visibility as a company.
Speaker Change: I guess I tend to think about your pipeline being pretty full for the subsequent three quarters and then.
Speaker Change: Four quarters out is really the revenue that you are chasing and projects that you're kind of filling out.
This time, this is not the major change that happened. I'm just clarifying in general that as part of our prediction cycle, thinking about what we have signed already, we always have to also look on the plan of records,
Speaker Change: So I guess I'm a little confused around.
Speaker Change: Why we're seeing.
Speaker Change: Shortfalls in the next quarter or two.
on certain projects, et cetera. But to be more specific to the reason now, it was more about conversion of things that were still in the pipeline and the pace in which they are being signed. And then from the point of signing, again, it's not an immediate recognition.
Speaker Change: Because of this pipeline effect.
Speaker Change: In any given quarter or even in current quarter, we don't have 100% covered by backlog with the very nice visibility and Youre right.
Speaker Change: We look closer.
Based on our business, from the point of signing a deal, it's how you start to ramp up and you deal
Speaker Change: Timeline, the visibility is better but still the specific deals that has to be signed in order to fulfill the rest of the revenue I will say that on top of that when we're talking about 12 months backlog. We it's not just about having something signs already it's about predicting exactly how this signed business.
So this has changed a bit, the view that we have on the second half of the year, but the pattern that we expected of acceleration sequentially, both in Q3 and then in Q4 is still the case, is just going to be a bit more moderate than we originally expected.
Okay, very helpful. Thank you very much. Thank you, George.
Speaker Change: This is converting into revenue in the next 12 months this.
Speaker Change: This time this is not the major change that happened I'm just clarifying in general.
As a reminder, that is star 1-1 to ask a question.
Speaker Change: That is part of our predictions side thinking about what we have signed already we always have to also look on the plan of record on certain projects et cetera, but to be more specific to the reason now it was more about conversion of things that we're still in the pipeline and the pace in which they are being signed and then from the <unk>.
Our next question comes from the line of William Power with Baird.
Okay, thanks. I guess probably a question for Shuki. I'm just, I'm interested
And, you know, thoughts around, you know, generative AI, you know, it feels like you put a lot of the pieces, you know, in place, whether it's ES 24, the relationships with the VIDIA, Microsoft, you know, et cetera.
Speaker Change: Finding again, it's not an immediate recognition based on our business from the point of signing a deal. It's how you start to ramp up a new deal.
Speaker Change: So this is changed a bit the view that we have in the second half of the year, but the pattern that we expected of acceleration sequentially. Both in Q3 and then in Q4 is still the case is just going to be a bit more moderate than we originally expected.
What's it going to take, I guess, or what are the next kind of catalyst to kind of turn that degenerative AI capabilities into revenue? Is it that the telcos have to get their data organized, cataloged, get the right quality in place, and how long does that take?
Speaker Change: Got it okay very helpful. Thank you very much.
Speaker Change: Thanks George.
You know, what kind of needs to happen, I guess, to start, you know, actually generating revenue for you all here?
Speaker Change: As a reminder, that is star one one to ask a question.
I mean, this technology is evolving. I mean, you cannot even compare what we had a quarter ago, what we have today. But typically, since this is a completely new domain for our customers, usually this type of engagement starting with proof of concept.
Speaker Change: Our next question comes from the line of William Power with Baird.
William Verity Power: Okay. Thanks.
William Verity Power: I guess, probably a question for shortly.
William Verity Power: I'm interested.
William Verity Power: And thoughts around generative AI it feels like you've put a lot of the pieces in place for CES 24, our relationships with Microsoft.
So let me speak, we are engaged with many proof of concept.
with the customer trying to define the best use case
getting some traction, we convinced that we are getting the right accuracy. So this is where we are right now. We are in the process of converting some of this
William Verity Power: Et cetera.
William Verity Power: Yes.
William Verity Power: Whats it going to take I guess or what are the next kind of catalyst.
a proof of concept to deal and sign them. So it's moving nicely, but this is where we are right now. We have many proof of concepts because when you deploy this technology, and let's say you want to take some decision regarding your call center workforce.
William Verity Power: Turning to degenerative AI capabilities into revenue is it the.
Speaker Change: But the telcos have to get their data organized catalog to get the right quality in place and how long does that take and what kind of needs to happen I guess to start actually generating revenue for you all here.
Speaker Change: I mean that this technology is evolving I mean, you cannot even comparable what we had a quarter ago towards we have today, but typically this is a completely new domain for our customers.
assuming that, let's say, this technology, this copilot can, let's say, gave an impact of 10% of the workforce of the
of the call center, you want to be really sure that this is mission critical already, that it's provided the right accuracy and it's giving you the right accuracy, as I mentioned. So this is why, as I said, we have many, many,
Speaker Change: Usually this type of engagement starting with proof of concept.
Speaker Change: As we speak we are engaged with many proof of concept.
Speaker Change: With the customer trying to define.
Speaker Change: The best use case.
Speaker Change: Getting some traction.
Speaker Change: We are convinced that we are getting direct accuracy. So this is where we are right now we are in the process of converting some of this.
a proof of concept, Boeing with many different customers globally, and I'm sure that they will slowly convert to real deal.
Speaker Change: Pro forma called subdue deal and sign them. So it's moving nicely, but this is where we are right now we have many proof of concept because when you when you deploy this technology and let's say you want to take some decision regarding Europe.
Okay, yeah, that makes sense.
And I guess for your second question, you know, looking at North America,
It was a bit weaker overall, I guess, underperform the other geographies. Does that come back just to the prior kind of, you know, legacy, you know, spending comments? No, no, no, not to talk. Anything else you call out there?
Speaker Change: Call Center workforce.
Speaker Change: Assuming that let's say this technology to say pilots.
Speaker Change: Let's say given impact of 10% of the workforce.
No, no, not at all. I mean, it's, it's a, it's a, I will start in the Mallet, it's,
Speaker Change: The call Center, you want to be really sure that this is a mission critical already that is provide the right accuracy.
It's related to the same impact. I mean, some of the significant deals that we are working right now, by the way, we talked about AT&T that was signed, are in North America. So it's not really, we don't see any more deterioration in the legacy that we discussed in the beginning of the year. It's more of the same pattern that we see some
Speaker Change: Giving you the right.
Speaker Change: Right.
Speaker Change: Accuracy as I mentioned so this is why as I said, we have many many.
Speaker Change: A proof of concept Boeing as many different customer globally.
Speaker Change: And I'm sure that they will slowly convert to <unk>.
a slow conversion of a pipeline to deals mainly on the large deals.
Speaker Change: Okay, Yeah that makes sense.
Speaker Change: And then I guess my second question.
Okay, thank you.
Thank you.
Speaker Change: At North America.
As a reminder, that is star 1-1 to ask a question at this time.
Speaker Change: It was a bit weaker.
Speaker Change: Overall, I guess underperformed the other geographies does that come back just to the prior kind of <unk>.
Speaker Change: Legacy <unk>.
Speaker Change: Pending comments.
I'm showing no further questions in queue at this time. I'd like to turn the call back to Matt Smith for closing remarks.
Speaker Change: Not.
Speaker Change: Anything else you'd call out there.
Speaker Change: No not at all I mean, it's it says I will start and some are related it's related to the sandbox I mean, some of the significant deals that we are working right now by the way. We took the <unk> are in North America. So it's not really we don't see any are any more deterioration in the legacy that we that we discussed at the beginning of.
Thanks, operator, and thanks everyone for joining today. As always, if you have any additional questions, just reach out to us here in the IR group, and we look forward to speaking with you soon. Have a great night.
This concludes today's conference call. Thank you for participating. You may now disconnect.
Speaker Change: It's more of the same pattern that we see some.
Speaker Change: Slow conversion of.
Speaker Change: Pilot two deals mainly on the large deal.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you.
Speaker Change: As a reminder that is star one one to ask a question at this time.
Speaker Change: I'm showing no further questions in queue at this time I'd like to turn the call back to Matt Smith for closing remarks.
Matthew E. Smith: Thanks, operator, and thanks, everyone for joining today as always if you have any additional questions just reach out to us here in the IR group and we look forward to speaking with you soon have a great night.
Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.
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