Amdocs(DOX) - 2023 Q4 - Annual Report

Q3 FY2023 Earnings Release Overview This section overviews Amdocs' Q3 FY2023 earnings, highlighting record revenue, backlog, improved profitability, and strategic developments Q3 FY2023 Performance Highlights Amdocs achieved record $1.24 billion revenue and $4.14 billion 12-month backlog, demonstrating improved profitability and strategic progress with amAIz AI and a new $1.1 billion share repurchase program Q3 FY2023 Key Financial Metrics | Metric | Value | YoY Growth | Note | | :--- | :--- | :--- | :--- | | Revenue | $1.24 Billion | 6.5% | Record quarterly revenue | | 12-Month Backlog | $4.14 Billion | ~5% | Record backlog | | GAAP Diluted EPS | $1.32 | - | Above guidance of $1.16-$1.26 | | Non-GAAP Diluted EPS | $1.57 | - | Above guidance of $1.45-$1.51 | | GAAP Operating Margin | 14.8% | +20 bps | - | | Non-GAAP Operating Margin | 17.8% | +20 bps | - | - Record revenue was driven by strong performance in North America ($831 million, up 5.4%) and Europe ($187 million, up 28.2%), with managed services hitting a record of $720 million, constituting about 58% of total revenue[2] - The company launched Amdocs amAIz, an enterprise-grade Generative AI framework for communications service providers[2][4] - A new share repurchase program of $1.1 billion was authorized, adding to the existing authorization[2][10] Management Commentary Management highlighted strong execution in digital modernization, 5G, cloud, and network automation, noting record performance and new cloud deals, but acknowledged economic uncertainty impacting full-year revenue growth - CEO Shuky Sheffer emphasized the company's strategy focused on core growth pillars: digital modernization, 5G monetization, cloud, and network automation, highlighted by new cloud deals with two North American Tier 1 operators[4] - CFO & COO Tamar Rapaport-Dagim pointed to superb execution, with a high number of project milestones achieved, such as the migration of over 80 million prepaid subscribers for XL Axiata in Indonesia[5] - Profitability improvement was attributed to a focus on cost leadership, including the implementation of automation and other sophisticated tools[5] - Despite a large opportunity pipeline, management acknowledged that economic uncertainty is causing customers to prioritize and carefully evaluate investments, slightly impacting the full-year outlook[7] Financial Performance This section details Amdocs' Q3 FY2023 financial results, including revenue, net income, EPS, backlog, and cash flow Revenue Amdocs reported Q3 FY2023 revenue of $1,236 million, exceeding guidance midpoint with 6.5% reported growth and 6.9% constant currency growth YoY Q3 FY2023 Revenue Performance | Metric | Actual | Guidance | | :--- | :--- | :--- | | Revenue | $1,236 million | $1,215 - $1,255 million | | Revenue Growth (as reported) | 6.5% | - | | Revenue Growth (constant currency) | 6.9% | - | - Revenue for Q3 FY2023 included a positive impact from foreign currency movements of approximately $5 million compared to guidance assumptions[8] Net Income and Earnings Per Share GAAP diluted EPS rose to $1.32 and Non-GAAP diluted EPS to $1.57 in Q3, both exceeding guidance due to a lower effective tax rate Q3 Net Income and EPS (GAAP vs. Non-GAAP) | Metric | Q3 2023 | Q3 2022 | | :--- | :--- | :--- | | GAAP Measures | | | | Net Income | $160.1M | $128.5M | | Diluted EPS | $1.32 | $1.04 | | Non-GAAP Measures | | | | Non-GAAP Net Income | $189.6M | $156.5M | | Non-GAAP Diluted EPS | $1.57 | $1.27 | - Non-GAAP net income excludes items such as amortization of purchased intangible assets, acquisition-related costs, and equity-based compensation expenses[9] Backlog and Cash Flow Amdocs achieved a record $4.14 billion twelve-month backlog, up 5% YoY, indicating strong future revenue, alongside $144 million in free cash flow - Twelve-month backlog reached a record $4.14 billion at the end of Q3 FY2023, an increase of approximately 5% compared to the same period last year[11] - Generated free cash flow of $144 million in Q3, comprised of $173 million in cash flow from operations less $29 million in net capital expenditures[6] Capital Allocation This section details Amdocs' capital allocation strategies, including shareholder returns via dividends and share repurchases, and M&A activities Shareholder Returns and M&A Amdocs approved a $0.435 per share quarterly dividend and a new $1.1 billion share repurchase plan, while completing the acquisition of TEOCO's service assurance business - The Board approved a quarterly cash dividend of $0.435 per share, payable on October 27, 2023[10] - Repurchased $129 million of ordinary shares during the third fiscal quarter, with a new share repurchase plan authorizing up to $1.1 billion approved, bringing the total remaining authority to $1.26 billion[6][10] - Completed the acquisition of TEOCO's service assurance business on June 30, 2023, for a net consideration of approximately $90 million[6][10] Business Outlook This section outlines Amdocs' financial guidance for Q4 and full-year fiscal 2023, covering revenue and EPS projections Fourth Quarter Fiscal 2023 Outlook Amdocs projects Q4 FY2023 revenue between $1,220 million and $1,260 million, with GAAP diluted EPS of $0.67-$0.81 and Non-GAAP diluted EPS of $1.38-$1.44 Q4 FY2023 Guidance | Metric | Guidance Range | | :--- | :--- | | Revenue | $1,220M - $1,260M | | GAAP Diluted EPS | $0.67 - $0.81 | | Non-GAAP Diluted EPS | $1.38 - $1.44 | Full Year Fiscal 2023 Outlook Amdocs updated full-year FY2023 guidance, projecting constant currency revenue growth of 7.2%-8.0%, Non-GAAP diluted EPS growth of 11.0%-12.0%, and $700 million in free cash flow Full Year FY2023 Guidance Update | Metric (YoY Growth) | Current Guidance | Previous Guidance | | :--- | :--- | :--- | | Revenue Growth (as reported) | 6.3% - 7.1% | 6.0% - 8.0% | | Revenue Growth (constant currency) | 7.2% - 8.0% | 7.0% - 9.0% | | GAAP Diluted EPS Growth | (3.0)% - 0.0% | 3.0% - 10.0% | | Non-GAAP Diluted EPS Growth | 11.0% - 12.0% | 9.0% - 13.0% | - Free cash flow guidance for the full fiscal year remains unchanged at approximately $700 million[13] - The full-year guidance incorporates an expected unfavorable foreign currency impact of approximately 0.9% and an immaterial contribution from the TEOCO acquisition[16] Consolidated Financial Statements This section provides Amdocs' consolidated financial statements, encompassing income statements, balance sheets, cash flow statements, and GAAP to Non-GAAP reconciliations Consolidated Statements of Income For Q3 2023, total revenues were $1,236 million with net income of $160.1 million, while nine-month revenues reached $3,645 million with $440.3 million net income Income Statement Highlights (Three Months Ended June 30) | (In thousands) | 2023 | 2022 | | :--- | :--- | :--- | | Revenue | $1,235,962 | $1,160,290 | | Operating Income | $182,714 | $169,314 | | Net Income | $160,115 | $128,466 | | Diluted EPS | $1.32 | $1.04 | Condensed Consolidated Balance Sheets As of June 30, 2023, Amdocs reported total assets of $6.54 billion, total equity of $3.65 billion, and cash and cash equivalents of $517.7 million Balance Sheet Summary (As of June 30, 2023) | (In thousands) | June 30, 2023 | Sept 30, 2022 | | :--- | :--- | :--- | | Total Current Assets | $2,095,835 | $2,003,147 | | Total Assets | $6,539,342 | $6,390,393 | | Total Current Liabilities | $1,401,346 | $1,252,680 | | Total Equity | $3,652,276 | $3,560,278 | Consolidated Statements of Cash Flows For the nine months ended June 30, 2023, net cash from operations was $550.3 million, with $169.1 million used in investing and $436.9 million in financing activities Cash Flow Summary (Nine Months Ended June 30, 2023) | (In thousands) | 2023 | | :--- | :--- | | Net cash provided by operating activities | $550,259 | | Net cash used in investing activities | ($169,115) | | Net cash used in financing activities | ($436,864) | | Net decrease in cash and cash equivalents | ($55,720) | Reconciliation of GAAP to Non-GAAP Measures Detailed reconciliations show Q3 2023 GAAP operating income of $182.7 million adjusted for items like amortization and equity-based compensation to reach Non-GAAP operating income of $220.2 million Q3 2023 GAAP to Non-GAAP Operating Income Reconciliation | (In thousands) | Amount | | :--- | :--- | | GAAP Operating Income | $182,714 | | Amortization of purchased intangible assets | $13,302 | | Equity based compensation expense | $24,054 | | Other adjustments | $152 | | Non-GAAP Operating Income | $220,222 | Supplementary Information Supplementary data details Q3 2023 revenue by geography, with North America at $830.9 million, managed services at $719.8 million, and a growing $4.14 billion 12-month backlog Q3 2023 Revenue by Geography (In millions) | Region | Q3 2023 Revenue | | :--- | :--- | | North America | $830.9 | | Europe | $187.3 | | Rest of the World | $217.8 | | Total Revenue | $1,236.0 | - Managed Services Revenue for Q3 2023 was $719.8 million, remaining stable compared to the previous quarter[46] - The 12-month backlog has steadily increased from $3,950 million in June 2022 to $4,140 million in June 2023[46]