Amdocs (DOX) Q3 2024 earnings summary

Executive summary

• Achieved record Q3 revenue of $1.25 billion, up 1.1% year-over-year as reported and 1.8% in constant currency, in line with guidance midpoint after currency adjustments.

• Non-GAAP operating margin reached 18.6%, the highest in many years, up 80 bps year-over-year and 20 bps sequentially, reflecting operational excellence and benefits from automation and AI initiatives.

• Non-GAAP EPS was $1.62, at the high end of guidance; GAAP EPS was $1.21, including a $15 million ($0.11 per share) restructuring charge.

• 12-month backlog hit a record $4.25 billion, up 2.7% year-over-year and $20 million sequentially, supporting strong business model visibility.

• Strong demand and sales momentum for cloud, digital modernization, and AI-driven solutions, with major multi-year deals signed with AT&T, TELUS, Vodafone Ziggo, and Charter.

Financial highlights

• Q3 revenue: $1.25 billion (+1.1% YoY, +1.8% constant currency); North America up 0.7% QoQ, down 0.3% YoY; Europe down ~6% YoY; Rest of World up 13% YoY.

• Non-GAAP operating income: $232 million (18.6% margin); GAAP operating income: $176 million (14.1% margin).

• Non-GAAP net income: $187.8 million; GAAP net income: $140 million.

• Free cash flow: $175 million; cash balance: $502 million; borrowings: $650 million; liquidity of $1.0 billion including credit facility.

• Managed services revenue: $741 million, 59% of total, with high renewal rates and new multi-year deals.

Outlook and guidance

• Fiscal 2024 constant currency revenue growth outlook midpoint reiterated at 2.7%, range tightened to 2.3%-3.1%; as reported, 1.9%-2.7% YoY, reflecting ~40bps FX headwind.

• Full-year non-GAAP EPS growth outlook midpoint reiterated at 9%, range tightened to 8.5%-9.5%; GAAP EPS growth forecasted at 7.4%-9.2%.

• Q4 revenue expected between $1.24 billion-$1.28 billion; non-GAAP EPS: $1.67-$1.73; GAAP EPS: $1.34-$1.42.

• Free cash flow target for fiscal 2024: ~$700 million before restructuring payments, with >90% cash conversion and ~7% FCF yield.

• Double-digit total shareholder return expected for the fourth consecutive year.