Amdocs(DOX) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Record revenue of $1.15 billion for Q2 2022, marking a 10.1% year-over-year increase, driven by strong performance in North America and sequential growth in Europe and the rest of the world [31] - Non-GAAP earnings per share (EPS) of $1.54, exceeding the high end of guidance, primarily due to a lower-than-anticipated non-GAAP effective tax rate of 1.6% [33][34] - Record 12-month backlog of $3.89 billion, up 10% from a year ago, indicating robust sales momentum [15][35] Business Line Data and Key Metrics Changes - Managed services revenue grew 5% year-over-year, accounting for approximately 58% of total revenue, highlighting the resilience of the business model [37] - Significant extensions of managed services agreements with Bell Canada and PLDT, indicating strong customer relationships and ongoing cloud transformation projects [37][38] Market Data and Key Metrics Changes - Strong business activity in North America, particularly with major customers like AT&T and T-Mobile, supporting their strategic investments in 5G and cloud services [9][10] - Continued expansion in Europe, with expectations of acceleration in the second half of the year despite currency impacts [57] Company Strategy and Development Direction - Amdocs is focused on a four-pillar growth strategy encompassing cloud, 5G, digital, and network automation, with significant investments in R&D to enhance product offerings [18][26] - The company aims for annual revenue growth of 6% to 10% on a constant currency basis over the next three fiscal years, indicating a commitment to long-term growth [27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong sales momentum and expanding pipeline of opportunities, with a focus on leveraging innovative technology and execution capabilities [26][28] - The company is tracking at the high end of its revenue growth guidance for fiscal year 2022, with expectations for continued strong performance in the upcoming quarters [45][46] Other Important Information - Amdocs has minimal exposure to Russia and Ukraine, with only about 1% of revenue affected, and has taken steps to comply with sanctions while providing humanitarian aid [16][17] - The company returned over 100% of normalized free cash flow to shareholders in Q2 2022, demonstrating a commitment to shareholder value [43] Q&A Session Summary Question: Future growth rate assumptions based on backlog trends - Management indicated that the strong backlog growth suggests potential for continued growth into fiscal 2023, although specific guidance for 2023 was not provided [54][56] Question: Impact of Bell Canada renewal on revenue or margin - Management clarified that the new agreement with Bell Canada is comprehensive and does not imply any pressure on revenue or margins [55] Question: Clarification on Q4 revenue guidance - Management confirmed that there should not be a sequential decline in Q4 revenue, emphasizing confidence in the outlook provided [60][61] Question: R&D investments focus - Management highlighted that R&D investments are aimed at enhancing products to support new use cases in both consumer and B2B sectors, ensuring readiness for market demands [61]