Q1 2025 Amdocs Ltd Earnings Call
Speaker Change: Please OTHER Lindsey Graham On Hermann Neumann Onn Michele Onn Richard onn Fran onn onn Price Rhodes onn
Speaker Change: Thank you Jonathan before we begin I need to call your attention to our disclaimer statement on slide two of the presentation and noticed that some of our comments today may be forward looking statements and are subject to risks and uncertainties, including those described in Amdocs SEC filings and that we will discuss certain financial information that is not prepared in accordance with GAAP.
Speaker Change: 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 FCC.
Kay: Thanks Kay.
Shooting Shaffer: Participating on the call with me today are shooting Shaffer, President and Chief Executive Officer of Amdocs Management Limited and support Tomorrow Rappaport, the Gam, Chief financial and operating officer.
Shooting Shaffer: To support today's earnings call, we are providing a presentation, which can be found on the investor Relations section of our website.
Shooting Shaffer: And as always a copy of today's prepared remarks will also be hosted immediately following the conclusion of this call on today's agenda shoot you a recap of our business and financial achievements for the first quarter and full fiscal year 2025, and we will update you on our continued progress we've made executing against our strategic growth framework, including Gen AI and our continued sales.
Shooting Shaffer: You mentioned being cloud she couldn't finish by discussing our financial outlook for the full year fiscal 'twenty five after waste tomorrow will provide additional details on our first quarter financial performance and our forward guidance and as we've communicated previously shoe came tomorrow will also can pass certain financial metrics on a pro forma basis, which adjust prior fiscal year 'twenty 'twenty four.
Shooting Shaffer: Do you by approximately 600 million to reflect the phase out of certain low margin noncore business activities, which were substantially already faced in the first quarter of fiscal 'twenty five without any type of a shaky.
Speaker Change: Thanks, Matt and everyone.
Shooting Shaffer: Joining us on the call today.
Shooting Shaffer: Thanks to the commitment and dedication of Amdocs employees around the world fiscal 2025 got off to a solid start as we continue to deliver the cloud digital agenda AI based solution that service provider needs to grow revenue improving efficiency and drive immersive net generation custom.
Shooting Shaffer: Experiences in the agenda for millions of consumers and businesses every day.
Shooting Shaffer: Reviewing the financial highlights on slide six.
Shooting Shaffer: First quarter revenue was 1.11 billion slightly above the midpoint of guidance adjusting for a negative foreign currency movements, which are more than we anticipated.
Shooting Shaffer: Profitability jumped by 310 basis points year over year, and 250 basis points sequentially, reflecting the phase out of certain noncore low margin business activities now ongoing initiatives to drive efficiency gains.
Shooting Shaffer: non-GAAP, earning per share was $1 six $6 exceeding the midpoint of guidance and we close Q1 was a healthy 12 months backlog of $4, one 4 billion and acceleration of roughly $18 million sequentially and an increase of approximately two 7% from a year.
Shooting Shaffer: To go on a pro forma basis.
Shooting Shaffer: Our 12 months backlog position reflects among other civil a key win this quarter is highlighted on slide seven.
Shooting Shaffer: It also America, we expanded our activities with AT&T in data and intelligence and increased support for AT&T cricket.
Shooting Shaffer: We are also leading a billing system consolidation at Bell, Canada, and recently began collaborating with Dreamworks animation.
Shooting Shaffer: On the international front, we saw continued sales momentum in cloud.
Shooting Shaffer: Adding to the five year modernization and be assessed <unk> deal, we announced with Vodafone, Italy last quarter. We recently secured a new cloud ops agreement with Vodafone Zico in Nederland, and amortization and cloud migration Awards at Citi Montenegro at Deutsche Telekom subsidiary.
Shooting Shaffer: From the standpoint of execution, we are supporting allows a number of customer projects, including some of the largest automation globally.
Shooting Shaffer: Demonstrating our best in class deployment capabilities, we continue progressing major transformation of customer like AT&T T mobile bell or gels, Comcast Fidelity Telefonica, Chile during Q1 and support the success of platform launches for <unk> and one in Singapore and obtuse in Australia.
Shooting Shaffer: I'm also proud of our managed services operation, which deliver flawless mission critical support for customers over the peak retail volume periods of Black Friday, and the holiday season.
Shooting Shaffer: So remind you managed services support the high level of business visibility for Amdocs, reflecting the combination of a multi year customer engagements recurring revenue streams.
Shooting Shaffer: And your rate of close to 100% over the time.
Shooting Shaffer: Along these lines, we recently extended our managed services agreements with Comcast Xfinity mobile Comcast business and travel Chile is tomo will reference in our remarks.
Shooting Shaffer: Moving to slide eight let me provide some recent examples regarding our multi pillar growth strategy, which is designed to provide our customers with the market, leading innovation and technology they need to accelerate the journey to the cloud.
Shooting Shaffer: Digitally transform the customer experience for consumers and B to B.
Shooting Shaffer: Monetize the future market potential of next generation networks and deliver dynamic connected experiences by streamlining automation complex network systems.
Shooting Shaffer: And to simplify and.
Shooting Shaffer: It accelerates the adoption of generative AIE.
Shooting Shaffer: Beginning on slide nine cloud continues to drive strong sales momentum as the market increasingly recognized amdocs unique ability to support complex multiyear cloud journeys.
Shooting Shaffer: For instance, at the waterfront zebra in the Netherlands, we are providing cloud operation services in Phoenix is an extension to the amortization of the cloud migration project, we announced last year.
Shooting Shaffer: <unk> has also been selected by city, Montenegro, and Deutsche Telekom subsidiary to upgrade and migrate to the cloud in its existing amdocs charging ordering and CRM system.
Shooting Shaffer: We believe cloud will remain important growth engine for amdocs in the foreseeable future is the most service providers are yet to fully adopt the cloud and many more still in the evaluation stage of the Jeremy.
Shooting Shaffer: Overall, we are on track to deliver double digit growth in cloud the gain this year supported by our market leading position strong end to end cloud offering and a rich pipeline of opportunities.
Moving to slide 10, supporting the digital modernization requirements of our customer remains an important growth engine for amdocs as demonstrated or from any recent awards.
Shooting Shaffer: In Canada <unk>.
Shooting Shaffer: <unk> is working closely with public mobile one of Taylor's morbidity brands to enhance the digital experience of their self service application.
Shooting Shaffer: <unk> wonderful stylus allowed us to communication providers is enhanced enterprise customer experiences by offering a more agile and responsive way to engage and support customer sort of deployment of amdocs customer experience suites.
Speaker Change: AT&T, Mexico extended its agreement with Amdocs for the market's one platform expanding capabilities to include a new marketplace that we will accelerate OTT resale demonstrate continued trust in amdocs ability to derive modernization and monetization.
Speaker Change: I'm also pleased to announce the Dreamworks animation is collaborating with Amdocs on an advanced platform that will streamline production workflows east complexities efficiency manage hundreds of thousands of digital assets enable and Dreamworks animation to better meet the demands of its production pipeline.
Speaker Change: Additionally, we remain delighted by the rapid adoption of connect X.
Speaker Change: Cloud based telco in the box solution powered by AWS.
Speaker Change: To enable digital experiences and it's <unk> and NV No services connect X was recently chosen by <unk> in Nigeria and service provider. This deal adds to connect ex existing customers such as AT&T and there is reason wireless in the U S. We meeting when it team.
Speaker Change: Brazil and mainland digital in South Africa.
Turning to monetization on slide 11, Ams is delivering cutting edge technology to help service providers monetize next generation network investment, including wireless strategy stand alone fixed wireless access and fiber.
Speaker Change: In Canada I am pleased to report is Amdocs is collaborating with Vale to unify their billing system into a single cohesive platform.
Speaker Change: We also extended our collaboration or collaboration with Opdivo, one of Midlands largest telecom providers.
Speaker Change: Under this long term agreement Amdocs, we transform these customer charging system into fully converts and cloud based charging solution, enabling <unk> to rapidly introduce new and innovative services to daily users and users.
Speaker Change: Mr Awards add to our existing list of modernization projects, including our previously announced five year deal to transform the mobile and fixed line of big to see billing system of Altus deferral, one of France's leading telecom provider.
Speaker Change: Moving to <unk>.
Speaker Change: Work automation on slides 12.
Speaker Change: And as is supporting the design and build out of fiber networks investment in the U S and globally with our next generation fiber offering.
Speaker Change: This includes Qualcomm consulting and other expertise, we have acquired to grow our capabilities and strengthen our relationship with existing and emerging fiber customers.
Speaker Change: They like.
Speaker Change: Last quarter, we said the leading provider of fiber optic Internet services in the U S has chosen amdocs to effectively manage and streamline complex fiber rollouts.
Speaker Change: As a further example of our growing a commission in the market bright speed U S. Based fiber broadband telecom provider has selected Amdocs resource manager to operate its network inventory improving their processes.
Speaker Change: It's an additional highlight amdocs as <unk> successfully completed the lab certification of Sapphire Rapids for rerun, enabling horizon to increase capacity and reduce compute power consumption during rollouts.
Speaker Change: Turning to slide 13, Amdocs is laser focused on helping service providers to unlock the transformative potential of <unk> to.
Speaker Change: Stock Undocks recently introduced additional copilot capabilities for B to B customer care and commerce in our latest <unk> quarterly releases.
Speaker Change: We've also unveiled enhance generative add capabilities in the MH platform featuring Gen AI agents to support next level customer engagement and <unk>.
Speaker Change: Mexico agenda capabilities across scales and sales demand.
Speaker Change: To further extend our position as a leader in data AI in generative AI. We've recently completed the acquisition of <unk> net a data Sciences engineering and intelligence company based in Czech Republic.
Speaker Change: This acquisition is an important building block in our offering but practically our data engine AI services capabilities, helping us to address the rapidly growing demand for data.
Speaker Change: <unk> services in telecom and beyond.
Speaker Change: As to our sales progress.
Speaker Change: Etisalat in the UAE is a flagship customer profile amazed platform and we continue to work with them to expand their use cases and deploy them to better support their customers, including in building care knowledge management and more.
Speaker Change: Similarly, AT&T, we are supporting a longstanding partner to create improved experiences for their cost for the customer is leverage adjunctive air capabilities to improve customer care.
Speaker Change: Amdocs has historically provided data and in AG services to many of our customers, including T mobile and globe Telecom in the Philippines.
Speaker Change: Adoption of generative AI has created a new wave of demand for data related services spanning data readiness to bespoke G&A I use cases development to Po.
Speaker Change: To proof of concept this quarter, we successfully executed more than 10, Gerrity VII poc's as global provider, thereby adding while expanding pipeline of deal opportunities.
Speaker Change: Finally, we have launched our generative AI experience center in Dallas, together, with Nvidia and Microsoft to showcase and re imagine what's possible for our customers. This facility will allow us to Horst and a global customer and showcase the leading capabilities that can transform their businesses.
Turning to slide 14, let me say a few words about <unk>.
Speaker Change: The operating environment, which will remain which has remained challenging and mostly unchanged over the last several quarters.
Speaker Change: To begin we remain extremely confident in a relatively rare disease business model, including managed services, which support highly recurring revenue streams and strong level of business visibility under a multi year customer engagements.
Speaker Change: Actually we believe we retain an ample room to improve our long term revenue growth within our large addressable market of nearly $60 billion in size.
Speaker Change: I am also excited.
Speaker Change: The reach and encouraging deal pipeline in front of US. This pipeline includes several large and mature businesses opportunities, which we are working hard to accelerate and convert to formally awards by leveraging our pedigree of innovation telco specific Gen AI solution consistent track record of execution.
Speaker Change: Mission critical operational expertise and an unrivaled ability to support our customer growth efficiency and industry consolidation strategies is to start with <unk> partners.
Speaker Change: Wrapping everything together on slide 15.
Speaker Change: We're reiterating the meat of our fiscal 2025 revenue growth guidance of between 1% to four 5% on a pro forma constant currency basis, which included another year of double digit growth in the cloud.
Speaker Change: We're also on track to deliver double digit expected total shareholder return for the first is running in fiscal 2025, assuming the midpoint of our non-GAAP diluted earnings per share outlook of between six 5% to 10, 5% plus our dividend yield.
Tamara: With that let me turn the call to Tamara for her remarks.
Tamara: Thank you <unk> and Hello, everyone. Thank you for joining us.
Tamara: Before I begin in today's comments I will compare certain financial metrics on pro forma basis, which adjust prior fiscal year 2024 revenue by approximately $600 million to reflect the phase out of certain low margin non core business activities, which were substantially already seen in the first quarter of fiscal 2025.
To further assist your modeling the regional mix of this revenue was similar to the overall company.
Tamara: And it contributed roughly $150 million per quarter.
Tamara: Now echoing sugar sentiments I am pleased with our solid financial results for the first fiscal quarter as detailed on slide 17.
Tamara: Q1 revenue of approximately one point $11 billion was up one 7% year over year and pro forma constant currency and was slightly higher than the midpoint of our guidance after adjusting for negative foreign currency movements of approximately $6 million compared to our guidance assumptions.
Tamara: Reflecting the phase out of certain business activities reported revenue declined by 10, 9% from a year ago.
Tamara: Revenue from recently completed acquisitions, including portion it was immaterial this quarter as profit had closed at the end of December.
Tamara: On a regional basis, North America, and rest of the world delivered year over year growth in our pro forma constant currency basis.
Tamara: Europe was weaker mainly reflecting timing differences between natural roll off of completed projects and the gradual ramp up of new deal Awards. So we expect Europe to go back to growth next quarter.
Tamara: Shifting down the income statement, we are proud to report the significant jump in profitability. This quarter non-GAAP operating margin of 21, 2% was up 310 basis points year over year, and 250 basis points sequentially.
Tamara: Similarly, reflecting the end of low margin business activities and the ongoing benefit of our operating improvement initiatives.
Tamara: Interest and other expenses amounted to roughly <unk> 4 million in the first quarter, reflecting a gain on the sale of an equity investment mainly offset by adverse foreign currency movements.
Tamara: As a reminder, our foreign currency hedging program is designed to protect our profitability and free cash flow generation as long as it is cost effective to hedge.
Tamara: On the bottom line non-GAAP diluted EPS of $1 66 was <unk> <unk> above the midpoint of guidance at <unk>.
Tamara: The non-GAAP effective tax rate of 19, 6%, which as we expected was this quarter above our annual target range of 15 to 17.
Tamara: Diluted GAAP EPS was $1 33 for the first fiscal quarter above our guidance range of one two to $1 $29.
Tamara: Turning to slide 18 revenue for managed services was $729 million in the first fiscal quarter up.
Tamara: 9% from a year ago.
Tamara: Reflecting the phase out of certain business activities managed services increased to roughly 66% of total revenue in Q1, thus improving our level of business visibility and resilience.
Tamara: During Q1, we continued to sign new managed services agreements, including the multiyear cloud docs deal with Vodafone Ziegel in the Netherlands, which you referenced earlier.
Tamara: We're also maintaining our historical renewal rate of close to 100% with existing managed services customers.
As an example, Alex renew the development in managed services engagement across Comcast Xfinity mobile and Comcast business.
Tamara: We also recently extended our managed services engagement with cloud in Chile.
Tamara: Turning to balance sheet and cash flow highlights on slide 19, DSO of 81 days increased by six days year over year, and seven days sequentially, reflecting normal fluctuations in business activity.
Tamara: The sequential increase in Unbilled receivables net of deferred revenue.
Tamara: $33 million in Q1, obligating, both short term and long term balances.
Tamara: As a reminder, the net difference between Unbilled 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.
Tamara: This quarters increase is primarily attributable to ramp up and execution of our mainframe to cloud deal and AT&T, which we announced last may.
Tamara: Reflecting strong execution free cash flow before restructuring payments was $101 million in Q1.
Tamara: Including the restructuring payments of $23 million reported free cash flow was $78 million.
Tamara: Overall, we ended Q1 with a healthy cash balance of approximately $349 million and aggregate borrowings of roughly $650 million, providing ample liquidity to support our ongoing business needs, while retaining the capacity to fund our future strategic growth.
Tamara: Turning to capital allocation on slide 20, we repurchased $144 million of our shares in the first quarter and paid cash dividends of $54 million.
Tamara: Overall, we returned a total of $198 million to shareholders through share repurchases and dividends in Q1.
Tamara: Looking ahead, we are reiterating our free cash flow target of between $710 million to $730 million in fiscal 2025, which is before payments either our current restructuring program.
Tamara: Free cash flow outlook equates to a conversion rate of more than 90% relative to expected non-GAAP net income and translates to a healthy free cash flow yield of roughly 7%.
Tamara: Relative to Amdocs current market capitalization.
Tamara: Additionally, we remind you that free cash flow in the second fiscal quarter is typically lower due to the timing of annual bonus payments.
Tamara: Regarding our capital allocations in fiscal year 2025, we expect to return the majority of our free cash flow to shareholders.
Tamara: Moving to slide 21.
Tamara: 12 months backlog was $4, one 4 billion at the end of Q1 and acceleration of $80 million sequentially and up $2 seven from a year ago on a pro forma basis.
Tamara: To provide you with additional data point, given the significant foreign currency movements impacting this quarter 12.
Tamara: 12 month backlog was up three 5% from a year ago on a pro forma constant currency basis.
Tamara: Supporting our expectation for an acceleration in quarterly year over year revenue growth on a pro forma constant currency basis from Q2.
Tamara: Following the phase out of certain business activities, we expect 12 months backlog to represent roughly 90% of forward looking revenue.
Tamara: Further underscoring the importance of this metric is a leading indicator of our business.
Tamara: Now turning to our revenue outlook on slide 22, we are continuing to closely monitor the prevailing level of macroeconomic geopolitical business and operational certainty, which remains elevated in the current business environment.
Tamara: That's the second quarter and full fiscal year 2025 financial guidance reflects what we consider to be the most likely outcome.
Tamara: Based on the information we have today, but we cannot predict all possible scenarios.
Tamara: Beginning with the top line, we are reiterating our guidance for revenue growth of between 1% and four 5% on a pro forma constant currency basis for the full fiscal year 2025.
Tamara: Including another year of double digit growth in cloud.
Tamara: As a reminder, our annual guidance already assume revenue contribution from inorganic deal activity. This year, some of which we already completed in Q1.
Tamara: After the second fiscal quarter, we expect revenue of between $1 105 billion to $1 145 billion, the midpoint of which equates to a healthy acceleration of roughly $15 million sequentially.
Tamara: This is despite an assumed negative sequential impact of roughly $3 million from foreign currency fluctuations as compared with the rates prevailing at the end of our first fiscal quarter 2025 on December 31.
Tamara: Moving down the income statement, we are on track to produce non-GAAP operating margins within our guidance range of 21, 2% to 21, 7% in fiscal 2025.
Tamara: The midpoint of which equates to a substantial increase of roughly 300 basis points as compared with the prior fiscal year.
Tamara: The midpoint of our full year margin outlook assumes roughly 230 basis points of improvement from phase out of business activities and then another 60 to 70 basis points, resulting from our continued focus on operational excellence automation and the gradual implementation of generative AI.
Tamara: Below the operating line foreign currency fluctuations and hedging costs are expected to impact non-GAAP net interest and other expense by roughly several million dollars on a quarterly basis.
Tamara: We expect our non-GAAP effective tax rate for fiscal 2025 to be within an annual target range of 15% to 17% for the full fiscal year 2025 and for Q2, specifically within this annual range.
Tamara: Bringing everything together on slide 24, we are positioned to deliver non-GAAP diluted earnings per share growth of six 5% to 10, 5% in fiscal 2025.
Tamara: Midpoint of which support the fifth consecutive year of double digit expected total shareholders' return when including a dividend yield of more than 2%.
Tamara: Before turning it back to show game proud to announce the tablet has been included in the 2020 for S&P Dow Jones Sustainability Index North America for the sixth year in a row.
Tamara: With over 3500 companies reviewed globally. We believe this achievement underscores our efforts and focus on principles of ESG and the continual integration of sustainability throughout our organization.
Tamara: We are proud to stand among the best in class in our industry and on behalf of sugar and myself wed like to thank our dedicated employees.
Tamara: The way they support our customers and our communities each day.
Tamara: With that back to you as shocking extra mile.
Tamara: With our fiscal 2025 off to a solid start we are reiterating the full year revenue guidance based or based on our healthy 12 months backlog position and the reach an encouraging pipeline of opportunities ahead of US. We are also on track to deliver for ongoing margin improvement and robust.
Tamara: Going to cash conversion federal supporting our commitment to deliver another year of double digit expected total shareholder return.
Tamara: With that we're happy to take your questions.
Speaker Change: Certainly and our first question for today comes from the line of George Notter from Jefferies. Your question. Please.
George Notter: Hi, guys. Thank you very much I wanted to ask.
Speaker Change: You were talking about I think at different points in your monologue the.
Speaker Change: Our pipeline of projects that are significant that are out. There is there is there something changing in the marketplace that is driving that pipeline could you talk about the genre of customers or types of projects that you are seeing any more details on that would be great. Thanks.
Speaker Change: Yes.
Speaker Change: Not sure that we can declare now that there is a change of the market, but but the reality is that the pipeline is very rich mature deals and this is across all geographies and the different.
Speaker Change: Gross engine domain of Amdocs.
Speaker Change: And I think that we are now putting a lot of effort.
Speaker Change: To close this deal translated to deals.
Speaker Change: In a way that we can close them and start to ramp up and recognize the revenue in this year, but we do but we are encouraged by the pipeline and the fact that it's not limited to one geography and it's across.
Speaker Change: All the all the areas we are operating.
Speaker Change: If I go back to the fall I think and talking with you guys. You were talking a bit more about how it was getting hard to close deals and get customers to commit and get projects moving it sounds like theres been a change in the environment I guess I'm just pushing back here I'm wondering what's changed it's just driving that improvement or is that.
Speaker Change: Something that.
Speaker Change: He was not the case, what can you tell us there. Thanks.
Speaker Change: But I think.
Speaker Change: I can answer this question better next quarter.
Speaker Change: But definitely the pipeline is very encouraging.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Thank you and our next question.
Speaker Change: Comes from the line of Tim Horan from Oppenheimer. Your question. Please.
Tim Horan: Just back on the pipeline question.
Speaker Change: Are you seeing an improvement in spending on some of the legacy projects that had.
Tim Horan: Hold down a lot last year or is it more.
On the cloud side with us.
Speaker Change: Accelerating.
Speaker Change: Yes.
Speaker Change: Now it's more on the on the new stuff it's cloud.
Speaker Change: Oss project BSS transformation digital modernization, so it's not on the legacy it's much more on the new stuff.
Speaker Change: Do you think the legacy might kick back in at some point or.
Speaker Change: Is pretty committed to the new store.
Speaker Change: Just a reminder, that when we said lets just say at the time, we talked about the level of enhancements of legacy of existing systems in the same customers that are investing in transformation and building the nextgen with that so.
Speaker Change: We're not counting on the fact that they will start accelerating investment in the current system of record while they are building the future system right. We prefer and we always said that that they invest in their future with us. So our focus is on selling the new stuff.
Speaker Change: And all the great offering we have and the innovation, we are investing in 12, and then and and and bringing that to the table. When we have the dialogue with the customer. This is where the focus is and this is where we want to see the conversion of this pipeline two additional deals.
Speaker Change: To your question the pipeline is by far for all the new stuff.
Speaker Change: And you mentioned.
Speaker Change: Ken Cooper concept projects for AI can you give a little maybe more update.
Speaker Change: What are you personally think AI engine for the carriers cannot materially lowered our expenses over time improved quality and.
Speaker Change: Maybe tried some new revenues.
Speaker Change: What's the kind of take the implemented.
Speaker Change: So what we see right now is the.
Speaker Change: Yeah.
Speaker Change: Acceleration Molina foundation, meaning as we discussed this before and share that with you.
Speaker Change: In order to make.
Speaker Change: The best use of generative right technology, you need to make sure you have the right data in place. So we see more activities in the.
Speaker Change: In this domain in that large customer preparing all the data for all the general Gentiva use cases.
Speaker Change: Joseph use cases, we see different.
It related to <unk> to cover is upsell so we.
Speaker Change: We are trying to I said, we're trialing with our customers.
Speaker Change: And we hope, we'll see a more closure of new deals.
Speaker Change: In the next quarters.
Speaker Change: Thank you.
Speaker Change: Thank you and our next question comes from the line of <unk> <unk> from Bank of America. Your question. Please.
Speaker Change: Okay.
Speaker Change: Hi.
Speaker Change: Hi, Doug.
Speaker Change: I have my question is about general growth.
Speaker Change: And it's more specifics about breaking down the growth when I when.
Speaker Change: When I look at your numbers and I tried to take kind of birds eye view.
Speaker Change: One 7% growth on a on a.
Speaker Change: Like to like.
Speaker Change: Yes.
Speaker Change: Not that this kind of the momentum we would like to see.
Speaker Change: And the question is.
Speaker Change: First of all.
Speaker Change: If I break it down and I tried to understand okay cloud contributed what happened with service providers, what happened to be customers versus smaller customers.
Speaker Change: Can you break down this one 7% better understand.
Speaker Change: What are the components of it so that.
Speaker Change: We can link it to the future and to make sure of the question about the future is.
Speaker Change: What could change such that growth could be on a sustainable basis at the higher level.
Speaker Change: And what are the things that youre working on today that could change the growth trajectory because.
Speaker Change: 2% is kind of low average, it's not even at the midpoint average.
Speaker Change: So that is a great point and if you think about Q1, specifically the growth on pro forma constant currency was $1 seven but we are already indicating.
Speaker Change: So different leading indicators for example, the 12 months backlog and this is Mike was important for us to give the color on the real growth of the 12 months backlog being three 5% because this is indeed leading to that.
Speaker Change: Fact, we can start seeing acceleration of the growth and if you look at the midpoint.
Speaker Change: That's our guidance for Q2 with $15 million sequentially up, but if I'm, adding back the currency impact, it's more like 20 million up.
Speaker Change: Close to $20 million up so you can definitely see the beginning of an acceleration of that growth.
Speaker Change: <unk> three point something percent.
Speaker Change: Try that overall midpoint for the year is $2 seven but if you look on the trend during the year, how we're seeing it we are seeing starting to see the pick up and this pickup in acceleration in the growth that we should see through the quarters is coming from these new things there.
Speaker Change: Ramp up of the new deals that we won as well as expectation mall in the second half of the year of course to continue and close more deals so with 90% visibility the tobacco presents yes, a lot of that we know exactly how it's going to happen and it's a matter of converting the deals we already have in hand executing on them in the classroom their venue.
Speaker Change: And some of that will come from additional conversion from their strong pipeline into new deals and executing on them.
Speaker Change: Cloud continues to perform very nicely, we feel very good about the ability to continue with double digit growth in cloud.
Speaker Change: So that momentum is there and as we said before we believe that we will start seeing some pick up from all of those great <unk> and great. There I would say early deals with customers also starting to see some G&A activities I don't think that's going to be a huge number 2025, but definitely they start contributing to revenue growth as well.
Speaker Change: Great. Thanks Timur.
Speaker Change: Thanks, So much and I have is about just to understand your large customer exposure. So you spoke about.
Speaker Change: A limitation of a deal that you wanted to AT&T.
Speaker Change: Can you as much as you can provide numbers kind of or trends within your.
Speaker Change: Big customers can you talk about any concentration you had in the past and any projects that are ending projects that are starting kind of if I focus on the big customers that you have been that represent I don't remember the current number it used to be about 60% of revenues.
Speaker Change: What are the trends within that group the group of giant service providers.
Speaker Change: So first of all we definitely see it costs.
Speaker Change: It allows customers different buying centers. They just wanted to underline that it's not one monolithic contract that drives the business. We are active for example, an AT&T across multiple activities modernizing their next generation consumer way and stack building new capabilities around cricket doing staffing AT&T Mexico.
Speaker Change: CECO.
Speaker Change: It goes down.
Speaker Change: No.
Speaker Change: It's more diversified than just a name of course eventually AT&T is a big name, but for US. It means many activities with different decision makers different buying centers there.
Speaker Change: I wanted to add that beyond our top two customers with whom we are building significant new transformations and seeing the activity.
Speaker Change: We are continuing to push forward on moving into new geographies New names. We mentioned last quarter. For example, a significant win with the NTT in Japan, that's a new country in which we are building a business, it's a very big market, but for us. It's a new it's a new market. So we'll continue to look.
Speaker Change: North America, how we're expanding geographically now back to North America beyond the fact that we have two large customers. We are continuing to penetrate and expand relationships with other significant big names. For example, charter that we continue to see the momentum with <unk>.
Speaker Change: And we feel there is opportunity to grow within North America, We mentioned in the prepared remarks, a new consolidation project of the billing activities of Bell, Canada Bell, Canada is a meaningful customer.
Speaker Change: We are very proud to be the ones that are consolidated for them the different platforms.
Speaker Change: Definitely the list goes beyond just <unk>.
The two largest names where we continue to work very very nicely with <unk> in expanding the type of business that we have with customers and to remind you. We are also continuing to look into ways to expand our managed services portfolio while.
Speaker Change: Having nearly 100% renewal with existing customers. We serve under managed services, we continue to push forward in adding more and more customers into this offering which I think is really important because that brings us an edge in terms of both providing them the value proposition the full accountability of Ams.
Speaker Change: Dogs are not only providing new innovation and deploying it but then supporting them in ongoing.
Speaker Change: Operations and cloud ops, which is another good example of how we expanded in Vodafone Netherlands for example.
Speaker Change: After completing a successful transformation into the cloud now moving and expanding with managed services into cloud ops just to give you some flavor of how we're thinking about expanding our existing customer base as well as moving forward with more around new.
Speaker Change: And new logos, such as NTT in Japan.
Speaker Change: But back.
Speaker Change: Back to two large names, yes, we have been working for many years with those two large customers and continue to see opportunities to support them in their new needs.
Speaker Change: Thank you. Thank you.
Shlomo Rosenbaum: Thank you and our next question comes from the line of Shlomo Rosenbaum from Stifel. Your question. Please.
Shlomo Rosenbaum: Hi, Thank you very much.
Speaker Change: Should we I just wanted to ask you again about the growth in the backlog and seems great do we have kind of a leading indicator that something stepping up.
It's a backlog were kind of stripping out some of the exited business I believe in is there anything unusual that we should think about this back all the way to think about the backlog after you're exiting some of the business is there any more pronounced seasonality in any of it and then just the step up and backlog were there some particular types of Khan.
Speaker Change: Tracts that drove the growth sequentially moving it up <unk> 80 million.
Speaker Change: <unk>.
Speaker Change: Just is there any more color you can give into the growth in this backlog.
Speaker Change: Thanks Sterling for the question I'll try to give some additional color there.
Speaker Change: Don't have typically seasonality.
Speaker Change: <unk> basis in the back book, specifically this quarter the $80 million sequentially.
Speaker Change: First of all it's comparing apples to apples the bulk of this is on a pro forma basis after the phase out activity.
Speaker Change: It's comparing apples to apples in terms of the sets of numbers. When we look on the composition of the increase in backlog is a combination of several new deals.
Speaker Change: Of the fact that we are enjoying now in the 12 months backlog of full year already of dimension to cloud deal with AT&T that we are ramping up on execution and before that it was just lower than the full 12 months.
Speaker Change: And the fact that we have some contribution to backlog coming from processing at the recent acquisition and so I would say take.
Speaker Change: Taking all of that into consideration I'm very happy with the composition that we stay in there.
Speaker Change: And also broad based in terms of the geographies the coty business to the backlog, which is always great to have.
Speaker Change: And the $80 million does not Luckily we have some headwind 80 million is after a headwind from currencies. That's why we are saying that.
Speaker Change: The constant currency pro forma numbers, three 5% rather than the $2 seven that is.
Speaker Change: Unfortunately, absorbing that currency impact. So if you want to compare to the $2 seven midpoint of growth on revenue three 5%, obviously being higher is a sign of acceleration.
Speaker Change: Okay.
Speaker Change: Just on the acquisition of appropriate acquisition.
Speaker Change: You know as we're looking at the organic growth in the business.
Speaker Change: If you factor in both the currency and the appropriate it would the midpoint of the revenue guidance be going down.
Speaker Change: If you did not have that acquisition.
Speaker Change: And how much does that acquisition, adding to the.
Speaker Change: The backlog so we can kind of look at things a little bit on an apples to apples basis.
Speaker Change: So as we've said in the beginning of the we've factored already into the initial guidance for the year Sal acquisition and this is part of kind of fulfilling on that promise.
Speaker Change: I just want to emphasize it's not incremental to what we thought in the beginning of their it's actually now putting a name to the plan.
Speaker Change: In terms of the contribution to the backlog it was part of the contribution.
Speaker Change: I don't think it's such a big part of it I would say probably less than half is coming from the impact of M&A and the rest is organic.
Speaker Change: Yes.
Speaker Change: Okay, and then if I can squeeze in one more just on the AI side.
Speaker Change: P O.
Speaker Change: And what do you think is the.
Speaker Change: Is the gating factor to kind of landing a big deal or is it the readiness on the client side is it getting more comfortable with whats offered is proven.
Speaker Change: Proving out.
Speaker Change: Enough return on investment given the risk in terms of changing there.
Speaker Change: The way that they operate can you just talk a little bit about that.
Speaker Change: It's a it depends I mean.
Speaker Change: First of all as I said, we see some acceleration in the data domain and by the way. This was the rationale also.
Speaker Change: The acquisition of orphan and because preparing the data in a way that can support generally or use cases. This is a lot of work.
Speaker Change: So we usually see a lot of progress.
Speaker Change: We mentioned that we do a lot of <unk> and AT&T.
Speaker Change: The other very large customers.
Speaker Change: The adoption.
Speaker Change: Some of these you know it was a lot of activities in the call Center, sometimes call center or a union isn't it. So it's not that simple to you know too.
Speaker Change: I think it's a it's starting to get to the maturity level that you can put a tool like this in order to dwell quanta percent accurate because you start to when you put it in the hands of <unk>.
Speaker Change: Customer care representative you don't want to make sure that it is effective.
Speaker Change: We talked very precise so.
And it's become so we've.
Speaker Change: We start to feel some maturity.
Speaker Change: And we believe we will see some acceleration in signing deals the deals that we've already signed we citadel expanding for example, you mentioned that is allowed to start with just a couple of use cases, it becomes a much more broader than that so we see there whenever we were lending a deal its working well and we see some acceleration.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you. This does conclude the question and answer session of today's program I'd like to hand, the program back to Matt Smith for any further remarks.
Matt Smith: Thanks, Jonathan and thanks, everyone for joining us. This evening if you do have any additional questions just reach out to us here in the IR group and with that have a great night. Thanks a lot.
Matt Smith: Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
Matt Smith: Okay.
Matt Smith: [music].
Matt Smith: Okay.
Matt Smith: Okay.
Matt Smith: Okay.