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spk03: Good day and thank you for standing by. Welcome to the AMDOT's third quarter 2024 earnings call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised today's call is being recorded. I would like to hand the comments over to your speaker today, Matthew Smith, please go ahead.
spk04: Thank you, Kevin. And before we begin, I need to call your attention to our disclaimer statement on slide two of the presentation. It notes that some of our comments today may be forward-looking statements and are subject to risks and uncertainties, including as described in AMDOT'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 AMDOT's Management Limited, and Tamar Rappaport DeGim, Chief Financial and Chief 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 third quarter fiscal 2024, and we'll update you on the continued progress we've made executing against our strategic growth framework, including generative AI and our continued sales, momentum and cloud. Shuki will finish by discussing our financial outlook for the full year fiscal 2024, after which Tamar will provide additional details on our third quarter financial performance, our forward guidance and our continued commitment to ESG. And with that, I'll turn it over to Shuki.
spk02: Thanks, Matt, and good afternoon to everyone joining us on the call today. I'm pleased to report solid results for our third fiscal quarter, and would like to thank our employees globally for their commitment to helping our customer provide seamless connectivity and amazing user experience to billions of end users each day. The key financial highlights of the quarter can be found on slide seven. Q2 revenue was a record 1.25 billion, up nearly 2% from a year ago in content currency, and in line with the midpoint of our guidance after adjusting for unfavorable foreign currency movements. Notably, non-gap operating margin was .6% was the highest in many years, rising by 80 basis points year over year and 20 basis points sequentially, as we continue to benefit from our ongoing margin expansion initiatives. Non-gap earning per share was $1.62 consistent with the higher end of our expectation. And we ended Q3 with a record setting 12 months backlog of $4.25 billion, up approximately 3% from a year ago. Demonstrating our confidence in Amdoc's unique business model and the future success of the company, we also increased our pace of buyback activity in Q3, repurchasing approximately $169 million of Amdoc shares. Turning to Q3 operational highlights on slide eight, demand for Amdoc's cloud solution remained especially strong, highlighted by the significant five-year cloud deal we recently announced with AT&T, and newly signed partnership agreements to support the long-term cloud migration journeys at Telus in Canada and Vodafone Z-Go in the Netherlands. Customer demand was also healthy across our broader strategic domain of digital modernization, 5G and fiber monetization, and network automation, as reflected by significant new deal awards at AT&T and charter in the US, A1 Telecom in Austria, and PLDT in Globe in the Philippines. As to generative AI, I'm happy to announce an important award with a leading global operator, which has chosen to integrate Amdoc's GenAI telcospecific and maze platform in its business operation. From an operational perspective, we deliver consistent execution and a substantial number of deployments, including major project milestone achievements with customers such as AT&T and US Cellular, Vodafone Italy, Vodafone Germany, and SCS and European Satellite Communication Provider, PLDT in the Philippines, and Optus in Australia. Among the highlights, we successfully transitioned Claro Brazil's on-premise infrastructure to Oracle Cloud Infrastructure, or CI, for about 48 million subscribers, demonstrating Amdoc's capability to efficiently manage the type of large-scale customer projects that underpin our high market win rate and the reputation as a dependable partner. Q3 was also a record quarter-remainer services, reflecting the ongoing ramp up mission-critical support activities and new logos and long-standing customer, such as Rogers, where we newly expanded a multi-year engagement is creating a full-throw of our latest cloud-native offering like enterprise catalog and charging. Now, moving to slide nine, let me add some color around the growth strategy, which to remind you is designed to provide the market-leading innovation and technology our customers need to accelerate the journey to the cloud, dilute its own form, the customer experience and consumer in B2B, monetize the future market potential of 5B standalone networks, fixed wireless access, and fiber, deliver dynamic connectivity experience by streaming and automation complex network ecosystems and simplify and accelerate the adoption of generative AI. Starting with cloud on slide 10, market interest and sales momentum for Amdoc's cloud solution remains strong. With a growing list of service providers choosing us as a primary technology partner to support the cloud migration in core and surround the systems alike. For many service providers, cloud migration is a complex, multi-year journey that is still in the early phases. Amdoc's cloud strategy is thereof designed to help service providers simplify and accelerate their journey to the cloud by offering an -to-end suite of unique products and services delivered under a fully accountable cloud operational model. The journey typically begins with Amdoc's cloud consulting and planning expertise, in addition to which we also support product deployment, including Amdoc's latest CS suite or cloud enabled classic version, the migration of Amdoc's and non-Amdoc's application, including mainframe, cloud-managed services or cloud ops, and the benefits of our intimate partnership with Azure, AWS, and Google Cloud. Furthermore, we consistently enhance our cloud services portfolio with a combination of organic investment and strategic M&A to provide additional bench, beachhead from which to accelerate the industry journey to the cloud. A prime example is the last November acquisition of Astadia, which contributed high sophisticated mainframe to cloud migration capabilities that are now supporting the previously announced expansion of our cloud activities in this new domain at AT&T. Among other recently signed deals, Telus in Canada signed a multi-year managed services agreement with Amdocs to migrate its monetization operation to the cloud. And what of on Zigo in Netherlands, choose Amdocs to modernize and migrate its monetization engines to the public cloud, including both Amdocs and non-Amdocs application. Moving to digital modernization on slide 11. AT&T has chosen ConnectX, cloud native SaaS platform powered by AWS, enabling it to quickly launch new digital brands and services for different customer segments. Reflecting healthy market demand, this win adds to a growing list of ConnectX customers, which include Winity in Brazil and Melon in South Africa. Globe in the Philippines has chosen Amdocs to deploy its AI and data platform for the information data hub. The platform hosted on Google cloud will enable Globe to access real-time business data from various sources and system and use it to enhance customer experience, optimize operation and large personalized services. In Australia, our B2B Amdocs configure price quote CPQ platform deployed together with Amdoc catalog to support its enterprise business, while simplify and accelerate the sales journey for Optus agents in Australia, empowering them to offer an innovative business solution to enterprise SMB and wholesale customer faster than ever. Turning to 5G and fiber monetization on slide 12. N1 Telecom Austria recently selected Amdocs for a multi-year project to consolidate, upgrade and modernize its billing, charging and catalog solution, enabling fast and time to market, new revenue growth, operational efficiencies and improve customer experience. This key project will also support the launch of new services and product across all customer segments, including 5G IoT and other advanced services. Amdocs net generation monetization offering are also proving relevant to telcos and newly emerging fiber operators that are investing to accelerate the rollout of fiber networks in the US and internationally. Our capabilities include a full range of BSS and OSS offering to support all aspects of the fiber customer journey, including fiber service creation, ordering and activation, billing and customer support, as well as the planning automation of the fiber network rollout itself. Moving to slide 13, I'm delighted to name PLDT in the Philippines as the Southeast Asian service provider that recently selected Amdocs end to end service orchestration solution, our key offering that was thanks by our acquisition of Tiocos Service Assurance business last year. As an important component of PLDT's and OSS and cloud monetization program, Amdocs will deliver unified network inventory, service and network orchestration and business process automation capabilities operating on the public cloud. Notably, the agreement also includes the customer service solution for case management, which is a component of the Amdocs customer engagement platform we build in partnership with Microsoft. Rounding out my strategic review, I would like to brief you on some exciting advancement in generative AI as illustrated on slide 14. As you are aware, generative AI has been a top priority for Amdocs. We have progressed our generative AI strategy by leveraging our Amaze platform to deliver generative AI super agents that directly address our customer most pressing business imperative and forging strong collaboration with industry leaders such as Nvidia, Microsoft and AWS. I'm therefore happy to share today's news that the leading global operator is showing our Amaze platform to create new revenue opportunities, drive efficiencies and reshape customer experience. This important award in partnership with Nvidia demonstrates our commitment to innovation and highlights Amdocs unique role as one of the leading technology enablers in the telecommunication industry with the power to help service provider fully harness the potential of data and gen.ai to deliver real world value and savings. For instance, Amdocs is in the heart of helping our customer to accelerate gen.ai driven technology disruption in their call center operation and to reimagine the care experience as we showed in a recent production trial with a North American service provider that resulted in a remarkable 60 plus percent decrease in average call handling times for bill inquiry achieving 90% successful case resolution and almost 100% accuracy. We continue to progress our active engagement running many pilots globally including with our large flagship customers to enable important gen.ai use cases and smart agent capabilities of the future. Now, moving to slide 15, I would like to comment on our current market and operating position before discussing our fourth quarter outlook. First, we continue to operate in a challenging industry demand environment the condition of which are yet to improve. Nonetheless, we continue to see healthy pipeline of opportunities across our strategic areas of focus and we are positioned to maintain a high market win rate by leveraging our pedigree for innovation and technology market-leading portfolio, best in class execution and highly talented people. I'm especially pleased with our cloud related activities which last year exceeded 20% of total revenue and which is on track for a double digit growth in fiscal 2024. Our gen.ai strategy is gaining momentum as we begin to make the shift from production pilots to commercial customer awards and our commitment to operational excellence and ongoing efficiency initiative is also bearing fruit. Position us to achieve our targets for accelerated profitability gains in fiscal 2024. Wrapping everything together on slide 16, we are on track to achieve the midpoint of our guidance for constant currency revenue growth in fiscal 2024. Additionally, we are reiterating the midpoint of our guidance for non-gap diluted earnings per share growth of roughly 9% in fiscal 2024. Which is in within the tightened range of .5% to 9.5%. Coupled with our dividend yield of more than 2%, we are positioned to deliver double digit expected total sharehold return for the fourth year in a row. With that, let me turn the call over to Tamar for remarks.
spk01: Thank you Shuki and hello everyone. Thank you for joining us. I'm pleased with our solid financial results for the third fiscal quarter as detailed on slide 18. We'd record Q3 revenue of approximately $1.25 billion up .8% year over year in constant currency. On a reported basis, revenue increased .1% from a year ago and was consistent with the midpoint of guidance, adjusting for a negative impact from foreign currency movements of approximately $5 million compared to our guidance assumptions. From a geographical perspective, North America declined slightly as compared with a year ago but grew on a sequential basis. Europe was weaker mainly reflecting timing differences between a natural roll off of completed projects and a gradual ramp up of new deal awards. Rest of the world delivered another record quarter with revenue growth of nearly 13% from a year ago. Shifting down the income statement on non-gap operating margins was .6% for the third quarter, the highest in many years. Non-gap operating margin improved by 80 basis points from a year ago and 20 basis points sequentially, reflecting our continuous drive to improve operational excellence through disciplined resource management, automation, sophisticated tools and leveraging AI, including generative AI to push for more cost savings and higher efficiencies across the board. Interest in other expenses amounted to roughly $7 million in the third quarter and reflected adverse foreign currency movements in the quarter. On the bottom line, non-gap diluted EPS of $1.62 was the higher end of guidance and included a non-gap effective tax rate of 16.7%, which was consistent with a higher end of our annual target range of 13 to 17%. Diluted gap EPS was $1.21 for the third fiscal quarter. This includes a restructuring charge of approximately $15 million or 11 cents per share, without which diluted gap EPS would have been at the high end of the guidance range of 124 to 132. We'll provide more context around the restructuring charge when I discuss our financial outlook later. Moving to slide 19, 12 months backlog was the record for $4.25 billion, up approximately 2.7 from a year ago and 20 million sequentially. Our 12 months backlog reflects a positive mix of projects, awards, managed services, renewals, and expansions with existing customers and new logos and has traditionally served as a new leading indicator of our business. As an additional point, note that 12 months backlog includes less than a full year impacts from the significant new deal we recently signed with AT&T, reflecting the phased ramp up of activities expected under the current plan of execution. Turning to slide 20, managed services revenue was a record $741 million in Q3, up nearly 3% from a year ago, and equivalent to roughly 59% of total revenue. Managed services revenue was mainly driven by ongoing ramp of mission critical support activities with new logos and long-standing customers, such as the extended multi-year engagement we announced with Rogers last quarter, that included an expansion into new domains like data and testing services and more. Managed services growth is also supported by our customers' migration to the cloud, as proven by our recently signed agreements with Telas in Canada and Vodafone, Zygo in Netherlands, and our previously announced five-year cloud deal at AT&T, which expanded our activities in the new domain while extending our existing consumer domain engagements through 2029. As a further highlight, I am pleased to announce a multi-year extension and expansion of our hosting and managed services agreement with Charter, under which Amdocs will continue to provide Spectrum Mobile with hosting and operational support for its mobile billing systems, along with its enhanced services to support the rapid growth of Spectrum's mobile and cable business, enabling innovative offerings for their customers. Now, turning to the balance sheets and cash flow highlights on slide 21. DSO of 74 days decreased by five days year over year, and by two days sequentially in Q3. The sequential change in unbilled receivables net of deferred revenue was $40 million in Q3, aggregating the short-term and long-term balances. 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. We generated free cash flow of $175 million in Q3, comprised of cash flow operations of approximately 191 million, less 16 million in net capital expenditures, adjusting for restructuring payments of approximately $18 million, reported free cash that would have been 193 million in the third quarter. Overall, we ended Q3 with a strong balance sheet, including a healthy cash balance of approximately $502 million, and aggregate borrowing of roughly 650 million. We have ample liquidity to support our ongoing business needs while returning the capacity to fund our future strategic growth. Turning to capital allocation on slide 22, we increased the pace of buyback activity to roughly $169 million in Q3, reflecting our confidence in Androx Unique Business Model and the future success of the company. Additionally, we paid cash dividends of $56 million in the quarter. Overall, for the year to date, we have already returned a total of $601 million to shareholders for share repurchases and dividends, putting us on track to return more than 100% of free cash flow before restructuring payments to shareholders in fiscal 2024. For the full year of fiscal 2024, we're reiterating our free cash flow target of approximately $700 million before restructuring payments, equating to more than 90% of expected non-GAAP net income this year, and a healthy free cash flow yield of roughly 7% relative to Androx current market capitalization. Now, turning to our revenue outlook on slide 23, we are continuing to closely monitor the prevailing level of microeconomic, geopolitical, business, and operational certainty, which remains elevated in the current business environment. That's the fourth quarter and full year fiscal 2024 financial guidance reflects what we consider to be the most likely outcomes based on the information we have today, but we cannot predict all possible scenarios. On a constant currency basis, we are reiterating the .7% meet point of our fiscal 2024 revenue growth outlook, which we have tightened to a range of .3% to .1% year over year, as compared to .7% to .7% previously. Our annual outlook includes fourth fiscal quarter revenue within a range of $1.24 billion to $1.28 billion, which assumes an immaterial sequential impacts on foreign currency fluctuations as compared to Q3. On a reported basis, we now expect full year revenue growth in the range of .9% to .7% year over year, as compared with .6% to .6% previously. This outlook assumes an unfavorable impact from foreign currency fluctuations of approximately 40 basis points year over year, as compared to 10 basis points previously. Moving down the income statement on slide 24, the gradual sequential improvement in our profitability over the last three quarters puts us on track to deliver non-GAAP operating margins around the meet point of our annual target range of .1% to .7% in fiscal 2024. As I discussed last quarter, we remain committed to improving the company's long-term cost structure and productivity by leveraging our unique business model, focus on operational excellence, and implementing technology to achieve our goal of sustained profitable growth. We generate presenting a new wave of innovation and technology capabilities. We are proactively evaluating the portfolio of products and services and business lines in relation to our strategic investment priorities for fiscal 2025, rebalancing a workforce and site strategy to meet our future needs, and optimizing resources such as technology infrastructure and workspace. Along these lines, we took additional actions under our latest restructuring plan during Q3, which resulted in the previously mentioned charge of 15 million that was mainly comprised of employee severance and benefits arrangements. Looking out over the next several quarters, we expect to incur additional charges as we carry out our current restructuring plan in respect to which we will provide further updates as we move along. Bringing everything together on slide 25, we are reiterating the 9% meet point of our fiscal 2024 non-GAAP diluted earning per share growth outlook, which we have tightened to a range of .5% to .5% year over year as compared with our previous outlook of 7% to 11%. This full year guidance assumes a non-GAAP effective tax rate within our unchanged annual target range of 13 to 17% for the full year fiscal 2024. Although we know that the rate is expected to be towards the higher end of this range in Q4. Overall, we are on track to deliver expected double digit total shareholders return for the fourth year running in fiscal 2024, assuming the sum of our non-GAAP diluted earning per share growth outlook plus our dividend yield of approximately 2%. Before handing it back to Shukie, I'm pleased to highlight that today we published Amdocs ESG NCSR report for 2023-24. Among the many achievements listed in this year's report, I'm especially proud of our significant environmental efforts, which have resulted in a 55% reduction in Amdocs scope one and scope two CO2 emissions since fiscal 2019, far exceeding our science based target commitments. Additionally, Amdocs global consumption of renewable energy approached 59% in 2023, way up from just over 19% in 2021. Our progress was recently recognized by Time Magazine, which named Amdocs as one of the world's most sustainable companies in 2024, ranking us as one of only 500 inclusions out of more than 5,000 large companies initially assessed. For additional information regarding Amdocs recent ESG NCSR initiatives and achievements, including our commitments to diversity, equity and digital inclusion, please refer to our report, which is now available for download on our website. With that, back to you Shukie.
spk02: Thank you Tamar. As I said earlier, I'm pleased with our solid third quarter results. And while we continue to operate in a challenging demand environment, we remain well positioned to monetize a healthy pipeline of opportunities across cloud, generative AI and our other strategic domains by leveraging our market learning portfolio, best in class execution and highly talented people. With that, we are happy to take your questions.
spk03: Thank you ladies and gentlemen. If you have a question or a comment at this time, please press star one one on your telephone. If your question has been answered, you should move yourself from the queue, please press star one one again. We'll pause for a moment while we compile our Q&A roster. Our first question comes from Timothy Herring with Oppenheimer, your line is open.
spk05: Oh thanks guys, I wanted to focus on AI, the contract win and I think that was separate from maybe the trial that you did with the contact center. I guess on the contact center, can you just talk about how large the trial was, how expensive it was and those sounded like some pretty amazing results. Have you been able to replicate them in other places or do you think you can roll it out relatively quickly and any more color you can give around the AI contract one would be great, thanks.
spk02: So regarding this award, which is a very significant global operators that have many opcos, the initial deal actually consisted of us implementing our infrastructure, it's called the Amdox Amaze platform and then setting up the first use case to one of these. This is the initial deal with the prospect to continue enhancing to more and more what we call super agents or use cases in this specific opco and then to other opcos. As we mentioned, we are doing it with the partnership is Nvidia and regarding the operator in North America, this is a good example how we using our technology actually we're able to build what we call super agents, especially for the care center that increases the productivity of the call center agent by 10s of percent, extremely accurate. By the way, we are doing similar, similar I would say proof of concept like this with other large operators in the world. The call center operation is a highly mission critical so our customers want to make sure that this is working consistently in this type of accurate and become like another mission critical system as part of a call center. We assume that they will start to implement these tools across the call centers. This is going to completely disrupt the call center operation because it means that you can take relatively young or relatively new CSR that's working in the call center and immediately bring into capabilities and experience someone is working three, four years in the call center. So we believe our customer will use it not just obviously to take the cost saving, but it's also going to increase the quality of the call center, call time, customer satisfaction, and we believe that this technology is going to disrupt all the call center of all our customers.
spk05: And are you doing that in partnership with Microsoft still or any other partners there?
spk02: We have many partners in this domain. I think this specific one we are doing it with Nvidia, but at the same time we are running several proof of concept with Microsoft and others. So we are very diverse from this perspective.
spk03: Congratulations, thank you. Thank you. One moment for our next question. Our next question comes from George Nader with Jeffries. Your line is open.
spk06: Hi there, thanks a lot guys. I guess I wanted to ask about just the overall spending environment. If I go back the last few quarters, there's been a running narrative, you know, customers focusing on transformation projects versus traditional projects. I think you guys talked about different M&A deals kind of slowing decision making down, slower to close type situations. Can you just talk about the bigger picture here, what you're seeing and is there an opportunity to maybe see the business reaccelerate if those conditions get better? Thanks.
spk01: So what we're seeing is on the one hand, customers looking for ways to transform and some of them, as we said in the past, decide to take kind of the bigger approach of taking out legacy and putting in new. You know, some of our large North American and European customers, for example, are going with this and many more customers are actually looking for the gradual modernization path, which is something we cater to very well, given the fact our portfolio is modular, given the fact we are allowing them different ways to modernize and take the journey to the cloud, whether they want to put the new stack in place or whether they want to take the classic existing applications and make them cloud enabled, we can have them with the migration to the cloud and many other activities around that. Having said that, we do see more scrutiny in decision making. We do see a tougher environment in terms of the pace in which those decisions are being taken. Our win rate continues to be very high. The relevancy of our offering remains very strong. And in terms of the consolidations, overall I would say consolidation in the industry is a good thing for us. We've been historically benefiting from these situations as typically when carriers in the market consolidate, they're looking to provide a different value proposition to their customers. We are coming with a very strong experience in supporting them in doing that. We provide the systems that they need, but in the short term, sometimes when there is a situation, let's take the example of you sell a lot, which is a customer of ours in North America. They are waiting for the regulator to approve the acquisition by T-Mobile. Naturally, they will not put a lot of money into long-term investment. So we do see this kind of phenomena from time to time, but I would say generally speaking, looking back on a merger activities between T-Mobile and Spree, merger activities that are happening. One of the big transformations we are running right now is Vodafone Germany, for example, that has been acquiring different assets along the years and we're helping them to build one stack to support the online of business. So if I need to generalize, we are typically enjoying consolidation in the industry, even though sometimes in the short term, it may create some delays in some investments.
spk06: Got it. And then any insights into maybe when some of these effects might come off? Is it just a question of sort of the business environment? Is it a question of, I don't know, elections? I mean, the M&A part, I guess, certainly, but.
spk01: I think it's about the business environment as a whole. I'm not talking just about the US, I'm talking globally. We've been seeing this scrutiny that I've mentioned, this phenomenon. So I think it's about the business environment as a whole in terms of the pace and the pickup of investments that we are looking for. So again, there could be some specifics of, some examples of a carrier in a specific situation, but I think it's more about the business demand overall and how we should see that unfolding as we move along. Thank you. Thank you, George.
spk03: Again, ladies and gentlemen, if you have a question or a comment at this time, please press star one, one on your telephone. Our next question comes from Tal Leoni with Bank of America, your line is open.
spk08: Hi guys, I'm in a public space on whispering.
spk01: Hi, Todd, we can hear you well.
spk08: Good, good. You and the entire bus here hearing me. I have two questions. Number one is the 20 million increase in backlog. Is it related to the AT&T contract that you spoke about last quarter? And the second question is much more philosophical. So if I look at the last 40 quarters or 10 years or eight years or seven years, the needs of carriers never changed. The story changes, but the need to do what you're providing never changed. It's always high in the priority. But when I look at the quarters, there were many more quarters where you grew 2% a year versus quarters that you grew 6% or 8% a year. And when I look at your growth rate over the last few quarters, four quarters ago you were at .5% growth year over year, and now you're guiding to .4% growth, which is more in line with kind of the averages or more in line with what we've seen the last 10 years. So the question I have is, and again, it's philosophical, but I wanna understand what drives it. Can the environment support growth of 6% to 10%, as you said three years ago? Can the projects and what the carriers are doing, can it support growth that is higher than 2% to 3%? And if that's the case, then what drives the growth to accelerate over the next few years?
spk02: Thanks. Considering the fact that you're in a public space, it's a relatively long question. Let me try with the second one. I think that the difference, if you compare us previously, and I think that at the time, I think we have maybe one or two growth engines, and today we have five. Not all of them are working at the same pace. For example, we highlight again and again, the journey to the cloud engine that is more than 20% of our revenue and growing double digits. And obviously when we expand it to others, so the total addressable market that we're operating today is much higher comparing to what we had maybe 10 years ago. But I think that what we are saying is that in the current, in a normal demand environment, which is not the situation right now, we believe we can go back to single digit growth. And in the current demand environment, which we know there is some industry pressure, macroeconomic pressure, interest rates, and other customer are cutting capex because of this and focusing on free cash flow and other things that the industry, by the way, maybe also some others are going through, given the current pressures, it will be difficult for us. It will be more in the range that you mentioned historically, but we believe with some support from the macro and some in the main condition, we can get back to what you call more like close to a middle single digit, like 5% in this area. Regarding the backlog, part of it, maybe Tamar, I
spk01: would say, look, naturally we always, during the quarter eat the backlog by recognizing revenue and signing a new deal. So it's definitely part of it. I think the interesting point to make here is that we're talking about the 12 months backlog. And the reason I made the comment that the current 12 months backlog does not reflect the full year of this deal, because as planned and as expected, we do not take effective control of that operation of that IT environment immediately. It takes time. We need to learn the environment. We need to transition. We need to set up certain capacities. So we do not have full 12 months yet of that deal reflected in the number we're reporting as of June 30, but everything I can assure you is going well, according to plan. And we will definitely see the full run rate of that in the middle of probably calendar 2025.
spk02: And back to your first question I said, normal demand environment, I think we can get close back to the missing digit growth rate. Right now with the industry and everyone is under pressure, I think it will be tougher and you'd expect more the historical level of revenue growth.
spk08: Great, thank you.
spk01: Next up.
spk03: One moment for our next question. Our next question comes from William Power with Bayer, your line is open.
spk07: Great, thanks. It's Giannis and Mollitan for Will. Thanks for taking the question. Just to follow up on some of the comments you were making a second ago about this spending environment and the market generally. So when we're thinking about what growth might look like in fiscal 25, at this point, it sounds like we should be expecting similar growth as fiscal 24 or are there any near term drivers, I guess, other than an improved spending environment that would lead you to expect some re acceleration? Any guideposts or directional color would be great.
spk01: Yeah, we're not guiding yet for 2025, but we were trying to give some more color how we see the environment. So typically for example, our 12 months backlog is a good leading indicator. Don't take it literally as I'm telling you now, okay, if 12 months backlog grew 2.7%, that's the growth next year. But I think what you're seeing us is hovering around these levels right now, and we need more change in the demand environment to see an acceleration. That's the message we're trying to get across.
spk07: Thanks, that's helpful. And then should we expect continued accelerated buybacks or do you expect M&A to become more significant use of cash next year? Any outlook on that problem?
spk01: Yeah, first of all, I would say generally speaking, I believe we have the capacity and we are always trying to do both. I don't think it's one versus the other. At the same time, M&A is something we're always looking at. There's always a pipeline that we are actively evaluating, but it's harder to predict the pace and the specific deals that will mature to closing. So we've been very consistent with our buyback. You've seen us out there always and also believing in ourselves, of course, and in the story of Amdocs, we definitely think that the cash allocation back to shareholders through buyback is definitely an important vehicle. At the same time, we are going to look for M&A and we will probably do more M&A in our strategic domain. So I think the simple answer, both, and I don't think that one should be on account of the other necessarily.
spk07: Makes sense, thank you very much.
spk01: Thanks.
spk03: And I'm not showing any further questions at this time. I'd like to turn the call back over to Matt for any closing remarks.
spk04: Thanks, Kevin, and thanks everyone for joining today. If you do have any additional questions, please reach out to us here in the IR group and we look forward to speaking with you soon. Have a great night.
spk03: Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.
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