Amdocs Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
February 4, 2025

Key Takeaways

  • Q1 performance: Revenue of $1.11 billion beat the midpoint of guidance, non-GAAP EPS of $1.66 exceeded expectations, and twelve-month backlog grew to $4.14 billion sequentially, signaling solid demand.
  • Margin expansion: Non-GAAP operating margin rose to 21.2%, up 310 bps year-over-year and 250 bps sequentially, driven by the phase-out of low-margin business and efficiency initiatives.
  • Cloud momentum: The company is on track for another year of double-digit cloud growth, fueled by new multi-year deals with Vodafone ZIGO in the Netherlands and City Montenegro (Deutsche Telekom subsidiary).
  • GenAI strategy: Amdocs acquired Profinet to bolster data science and intelligence capabilities, executed over 10 generative AI POCs, and opened a GenAI experience center with NVIDIA and Microsoft.
  • Reiterated guidance: Fiscal 2025 revenue growth of 1%–4.5% on a pro forma constant-currency basis and non-GAAP EPS growth of 6.5%–10.5% support a fifth consecutive year of double-digit expected total shareholder return.
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Earnings Conference Call
Amdocs Q1 2025
00:00 / 00:00

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Operator

Thank you for standing by. Welcome to the First Quarter twenty twenty five Amdocs Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. As a reminder, today's program is being recorded.

Operator

And now I'd like to introduce your host for today's program, Matt Smith, Head of Investor Relations. Please go ahead, sir.

Matthew Smith
Matthew Smith
Secretary & Head of Investor Relations at Amdocs

Thank you, Jonathan. 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 Amdocs' 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 six K. Participating on the call with me today are Shuky Shetha, President and Chief Executive Officer of Amdocs Management Limited and Tamar Rapoport Digim, Chief Financial and Operating Officer.

Matthew Smith
Matthew Smith
Secretary & Head of Investor Relations at Amdocs

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 hosted immediately following the conclusion of this call. On today's agenda, Shuky will recap our business and financial achievements for the first quarter and full fiscal year 2025, and I will update you on the continued progress we've made executing against our strategic growth framework, including GenAI and our continued sales momentum in cloud. Shuky will finish by discussing our financial outlook for the full year fiscal twenty twenty five, after which Tamar will provide additional details on our first quarter financial performance and our forward guidance. And as we've communicated previously, Shuky and Tamar will also compare certain financial metrics on a pro form a basis, which adjusts prior fiscal year twenty twenty four revenue by approximately $600,000,000 to reflect the phase out of certain low margin non core business activities, which was substantially already seized in the first quarter of fiscal twenty twenty five. And with that, I'll turn it over to Shuky.

Shuky Sheffer
Shuky Sheffer
President and CEO at Amdocs

Thanks, Matt, and everyone on joining us on the call today. Thanks to the commitment and education of Amdocs employees around the world, fiscal twenty twenty five got off to a solid start as we continue to deliver the cloud digital Gen AI based solution that service provider needs to grow revenue, improve efficiency and drive immersive next generation customer experiences in the argentic area for millions of consumer and business enterprises every day. Reviewing the financial highlights on Slide six. First quarter revenue was $1,110,000,000 slightly above the midpoint of guidance, adjusting for negative foreign currency movements, which are more than we anticipated. Portability jumped by three ten basis points year over year and two fifty basis points sequentially, reflecting the phase out of certain non core low margin business activities now ongoing initiatives to derive efficiency gains.

Shuky Sheffer
Shuky Sheffer
President and CEO at Amdocs

Non GAAP earnings per share was $1.66 exceeding the midpoint of guidance and we closed Q1 with a healthy twelve months backlog of $4,140,000,000 an acceleration of roughly $80,000,000 sequentially and an increase of approximately 2.7% from a year ago on a pro form a basis. Our twelve months backlog position reflects among others several key wins this quarter as highlighted on Slide seven. In North America, we expanded our activities with AT and T in data and intelligence and increased support for AT and T Cricket. We are also leading the billing system consolidation at Bell Canada and recently began collaborating with DreamWorks Automation. On the international front, we saw continued sales momentum in cloud.

Shuky Sheffer
Shuky Sheffer
President and CEO at Amdocs

Adding to the five year modernization and BSS migration deal we announced with Vodafone Italy last quarter, we recently secured a new cloud ops agreement with Vodafone ZIGO in Netherlands and a modernization and cloud migration award at Citi Montenegro, a Deutsche Telekom subsidiary. From the standpoint of execution, we are supporting a large number of customer projects, including some of the largest transformation globally. Demosanding our best in class deployment capabilities, we continue progressing major transformation of customer like AT and T, T Mobile, Bell, Rogers, Comcast, PTT Telefonica Chile during Q1 and supported successful platform launches for M1 in Singapore and Optus in Australia. I'm also proud of our managed service operation, which deliver flawless mission critical support for customer over the peak retail volume periods of Black Friday and the holiday season. To remind you, managed services support a high level of business visibility for MDox, reflecting the combination of multi year customer engagements, recurring revenue streams and renewal rates of close to 100% over time.

Shuky Sheffer
Shuky Sheffer
President and CEO at Amdocs

Along these lines, we have recently extended our managed service agreements with Comcast Xfinity Mobile, Comcast Business and Claro Chile, as Tamar will reference in her remarks. Moving to Slide eight, let me provide some recent example regarding our multi pillar growth strategy, which is designed to provide our customer with the market leading innovation and technology they need to accelerate the journey to the cloud. Easily transform the customer experience for consumer and B2B, monetize the future market potential of next generation networks and deliver dynamic connected experiences by streamlining automation complex network systems and to simplify and accelerate the adoption of generative AI. Beginning on Slide nine, cloud continues to drive strong sales momentum as the market increasingly recognize Amdocs' unique ability to support complex multi year cloud journeys. For instance, Eduardo Von ZIGO in The Netherlands, we are providing cloud operations services and FinOps as an extension to the demobilization of the cloud migration project we announced last year.

Shuky Sheffer
Shuky Sheffer
President and CEO at Amdocs

Amdocs has also been selected by City Montenegro, a Deutsche Telekom subsidiary to upgrade and migrate to the cloud in its existing Amdocs charging, ordering and CRM system. We believe cloud will remain important growth engine for Amdocs in the foreseeable future as the most service providers are yet to fully adopt the cloud and many more are still in the evaluation stage of the journey. Overall, we are on track to deliver double digit growth in cloud again this year, supported by our marketing 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 of many recent awards. In Canada, Amdocs is working closely with Public Mobile, one of TELUS mobility brands to enhance the digital experience of their self-service application.

Shuky Sheffer
Shuky Sheffer
President and CEO at Amdocs

Optus, one of Australia's largest communication providers has enhanced its enterprise customer experiences by offering a more agile and responsive way to engage and support customer through the deployment of Amdocs Customer Experience Suite. AT and T Mexico extended its agreement with Amdocs for the MarketOne platform, expanding capabilities to include a new marketplace that will accelerate OTT resale, demonstrating continued trust in Amdocs' ability to derive modernization and monetization. I'm also pleased to announce that DreamWorks Animation is collaborating with Amdocs on an advanced platform that will streamline production workflows, ease complexities, efficiency manage hundreds of thousands of digital assets, enabling DreamWorks Animation to better meet the demand of its production pipeline. Additionally, we remain delighted by the rapid adoption of ConnectX, our cloud based telco in a box solution powered by AWS. To enable digital experiences in its mvne and mvno services, ConnectX was recently chosen by Systegra, a Nigerian service provider.

Shuky Sheffer
Shuky Sheffer
President and CEO at Amdocs

This deal adds to ConnectX existing customers such as AT and T and Ries Wireless in The U. S, Winity in Brazil and Melon Digital in South Africa. Turning to monetization of Slide 11, Ammos is delivering cutting edge technology to help service provider monetize next generation network investment, including wireless charging stand alone, fixed wireless access and fiber. In Canada, I'm pleased to report that Andros is collaborating with Bell to unify their billing system into a single cohesive platform. We also extend our collaboration with ODDO, one of Netherlands largest telecom providers.

Shuky Sheffer
Shuky Sheffer
President and CEO at Amdocs

Under this long term agreement, Andos will transform this customer charging system into fully converged and cloud based charging solution, enabling Odido to rapidly introduce new and innovative services to their end users. These awards add to our existing leads of modernization projects, including our previously announced five year deal to transform the mobile and fixed line of B2C billing system of Altice Sefaro, one of France's leading telecom provider. Moving to network automation on Slide 12. Andres is supporting the design and build out of fiber networks investment in The U. S.

Shuky Sheffer
Shuky Sheffer
President and CEO at Amdocs

And globally with our next generation fiber offering. This includes ProCom Consulting and other expertise we have acquired to grow our capabilities and strengthen relationship with existing and emerging fiber customers alike. Last quarter, we said a leading provider of fiber optic Internet services in The U. S. Has chosen Amdocs to further example of our growing recognition in the market, Bright Speed, U.

Shuky Sheffer
Shuky Sheffer
President and CEO at Amdocs

S. Based fiber broadband telecom provider has selected Amdocs resource manager to operate its network inventory, improving their processes. As an additional highlight, Amdocs has successfully completed the lab certification of Sapphire Rapids for vRAN, enabling Verizon to increase capacity and reduce compute power consumption during rollouts. Turning to Slide 13. Andof's laser focus on helping service provider to unlock the transformative potential of generative AI.

Shuky Sheffer
Shuky Sheffer
President and CEO at Amdocs

To start, Amdocs recently introduced additional co pilot capabilities for B2B, customer care and commerce in our latest CES quarterly releases. We've also unveiled enhanced generative AI capabilities in the MACE platform featuring GenAI agents to support next level customer engagement and AgenTi capabilities across sales and sales domain. To further extend our position as a leader in data AI and generative AI, we recently completed acquisition of Profinet, a data science engineering and intelligence company based in Czech Republic. This acquisition is an important building block in our offering, but practically our data and gen AI services capabilities helping us to address the rapidly growing demand for data, AI and gen AI services in telecom and beyond. As to our sales progress, in Etisalat in The UAE is a flagship customer of our Amaze platform and we continue to work with them to expand their use cases and deploy them to better support the customer, including in billing care, knowledge management and more.

Shuky Sheffer
Shuky Sheffer
President and CEO at Amdocs

Similarly, AT and T, we are supporting as a long standing partner to create improved experiences for the customer is leveraging our generative AI capabilities to improve customer care. Amdocs has historically provided data and AI services to many of our customers, including T Mobile and Globe Telecom in The Philippines. The adoption of generative AI has created a new wave of demand for data related services, spending data readiness to bespoke Gen AI use cases development to proof of concept. This quarter we successfully executed more than 10 generative AI POCs as global provider, thereby adding our expanding pipeline of deal opportunities. Finally, we have launched our generative AI experience center in Dallas together with NVIDIA and Microsoft to showcase and reimagine what's possible for our customer.

Shuky Sheffer
Shuky Sheffer
President and CEO at Amdocs

This facility will allow us to host and our global customer and showcase the leading capabilities that can transform the businesses. Turning to Slide 14, let me say a few words about the operating environment, which has remained challenging and mostly unchanged over the last several quarters. To begin, we remain extremely confident in our relatively resilient business model, including managed services, which support highly recurring revenue streams and strong level of business visibility under multi year customer engagements. Additionally, we believe we retain an ample room to improve our long term revenue growth within our large addressable market of nearly $60,000,000,000 in size. I am also excited by the rich and encouraging deal pipeline in front of us.

Shuky Sheffer
Shuky Sheffer
President and CEO at Amdocs

This pipeline includes several large and mature businesses opportunities, which we are working hard to accelerate and convert to formal awards by leveraging our pedigree of innovation, telco specific Gen AI solution, consistent track record execution, mission critical operational expertise and an unrivaled ability to support our customer growth, efficiency and industry consolidation strategies as a started IT partner. Wrapping everything together on Slide 15, we are reiterating the mid profile fiscal twenty twenty five revenue growth guidance of between 1% to 4.5 on a pro form a constant currency basis, which include another year of double digit growth in the cloud. We are also on track to deliver double digit expected total shareholder return for the fifth year running in fiscal twenty twenty five. Assuming the midpoint of our non GAAP diluted earnings per share outlook of between 6.5% to 10.5% plus our dividend yield. With that, let me turn the call to Tamar for her remarks.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

Thank you, Shuky, and hello everyone. Thank you for joining us. Before I begin in today's comments, I will compare certain financial metrics on pro form a basis, which adjust prior fiscal year twenty twenty four revenue by approximately $600,000,000 to reflect the phase out of certain low margin non core business activities, which were substantially already seized in the first quarter of fiscal twenty twenty five. To further assist your modeling, the regional mix of this revenue was similar to the overall company and it contributed roughly $150,000,000 per quarter. Now echoing Shukhi's sentiments, I'm pleased with our solid financial results for the first fiscal quarter as detailed on Slide 17.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

Q1 revenue of approximately $1,110,000,000 was up 1.7% year over year in pro form a constant currency and was slightly higher than the midpoint of our guidance after adjusting for negative foreign currency movements of approximately 6,000,000 compared to our guidance assumptions. Reflecting the phase out of certain business activities, reported revenue declined by 10.9% from a year ago. Revenue from recently completed acquisitions including PROFINET was immaterial this quarter as PROFINET closed at the December. On a regional basis, North America and rest of the world delivered year over year growth in a pro form a constant currency basis. Europe was weaker, mainly reflecting timing differences between natural roll off of completed projects and the gradual ramp up of new deal awards.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

So we expect Europe to go back to growth next quarter. Shifting down the income statement, we are proud to report a significant jump in profitability this quarter. Non GAAP operating margin of 21.2% was up three ten basis points year over year and two fifty basis points sequentially, primarily reflecting the end of low margin business activities and the ongoing benefit of our operating improvement initiatives. Interest and other expenses amounted to roughly $400,000 in the first quarter, reflecting a gain on the sale of an equity investment, mainly offset by adverse foreign currency movements. 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.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

On the bottom line, non GAAP diluted EPS of $1.66 was $0.02 above the midpoint of guidance. It included a non GAAP effective tax rate of 19.6%, which as we expected was this quarter above our annual target range of $15 to $17. Diluted GAAP EPS was $1.33 for the first fiscal quarter above our guidance range of 1.2 to $1.29 Turning to Slide 18, revenue from Managed Services was $729,000,000 in the first fiscal quarter, up 0.9% from a year ago. 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. During Q1, we continued to sign new managed services agreements, including the multi year cloud ops deal with Vodafone ZIGO in The Netherlands, which Shuky referenced earlier, while also maintaining our historical renewal rate of close to 100% with existing managed services customers.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

As an example, Amdocs renewed the development in managed services engagement across Comcast Xfinity Mobile and Comcast Business. We also recently extended our managed services engagement with Claro in Chile. Turning to balance sheet and cash flow highlights on Slide 19, DSO of eighty one days increased by six days year over year and seven days sequentially, reflecting normal fluctuations in business activity. The sequential increase in unbilled receivables net of deferred revenue was $33,000,000 in Q1, aggregating both 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.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

This quarter's increase is primarily attributable to ramp up and execution of our Mainframe to Cloud deal in AT and T, which we announced last May. Reflecting strong execution, free cash flow before restructuring payments was $101,000,000 in Q1. Including the restructuring payments of $23,000,000 reported free cash flow was $78,000,000 Overall, we ended Q1 with a healthy cash balance of approximately $349,000,000 in aggregate borrowings of roughly $650,000,000 providing ample liquidity to support our ongoing business needs while retaining the capacity to fund our future strategic growth. Turning to capital allocation on Slide 20. We repurchased $144,000,000 of our shares in the first quarter and paid cash dividends of $54,000,000 Overall, we returned a total of $198,000,000 to shareholders through share repurchases and dividends in Q1.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

Looking ahead, we are reiterating a free cash flow target of between $710,000,000 to $730,000,000 in fiscal twenty twenty five, which is before payments under our current restructuring program. Our annual free cash flow outlook equates to 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% relative to Amdocs' current market capitalization. Additionally, we remind you that free cash flow in the second fiscal quarter is typically lower due to the timing of annual bonus payments. Regarding our capital allocations in fiscal year twenty twenty five, we expect to return the majority of our free cash flow to shareholders. Moving to Slide '21, '12 months backlog was $4,140,000,000 at the end of Q1, an acceleration of $80,000,000 sequentially and up $2,700,000 from a year ago on a pro form a basis.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

To provide you with additional data point given the significant foreign currency movements impacting this quarter, twelve months backlog was up 3.5% from a year ago on a pro form a constant currency basis, supporting our expectation for an acceleration in quarterly year over year revenue growth on pro form a constant currency basis from Q2. Following the phase out of certain business activities, we expect twelve months backlog to represent roughly 90% of forward looking revenue, further underscoring the importance of this metric as a leading indicator of our business. Now turning to our revenue outlook on Slide 22, we are continuing to closely monitor the prevailing level of macroeconomic, geopolitical business and operational uncertainty, which remains elevated in the current business environment. Thus, the second quarter and full fiscal year 2025 financial guidance reflects what we consider to be the most likely outcome based on the information we have today, but we cannot predict all possible scenarios. Beginning with the top line, we are reiterating our guidance for revenue growth of of between 14.5% on a pro form a constant currency basis for the full fiscal year 2025, including another year of double digit growth in cloud.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

As a reminder, our annual guidance already assumed revenue contribution from inorganic deal activity this year, some of which we already completed in Q1. As of the second fiscal quarter, we expect revenue of between $1,105,000,000 to $1,145,000,000 the midpoint of which equates to a healthy acceleration of roughly $15,000,000 sequentially. This is despite an assumed negative sequential impact of roughly $3,000,000 from foreign currency fluctuations as compared with the rates prevailing at the end of our first fiscal quarter twenty twenty five on December 31. 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 twenty twenty five, the midpoint of which equates to a substantial increase of roughly 300 basis points as compared with the prior fiscal year. The midpoint of our full year margin outlook assumes roughly two thirty basis points of improvement from phase out of business activities and another 60 to 70 basis points resulting from our continued focus on operational excellence, automation and the gradual implementation of generative AI.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

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. We expect our non GAAP effective tax rate for fiscal twenty twenty five 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. Bringing everything together on Slide 24, we are positioned to deliver non GAAP diluted earnings per share growth of 6.5% to 10.5% in fiscal twenty twenty five, the midpoint of which supports a fifth consecutive year of double digit expected total shareholders return when including a dividend yield of more than 2%. Before turning it back to Shuke, I'm proud to announce that Amdocs has been included in the 2024 S and P Dow Jones Sustainability Index North America for the sixth year in a row. With over 3,500 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.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

We are proud to stand among the best in class in our industry. And on behalf of Shuky and myself, we'd like to thank our dedicated employees for the way they support our customers and our communities each day. With that, back to you Shuky.

Shuky Sheffer
Shuky Sheffer
President and CEO at Amdocs

Thanks, Tamal. With our fiscal twenty twenty five off to a solid start, we are reiterating our full year revenue guidance based on our healthy twelve months backlog position and the rich and encouraging pipeline of opportunities ahead of us. We are also on track to deliver for ongoing margin improvement and robust earning to cash conversion, federal supporting our commitment to deliver another year of double digit expected total shareholder return. With that, we are happy to take your questions.

Operator

Certainly. And our first question for today comes from the line of George Notter from Jefferies. Your question please.

George Notter
Managing Director, Equity Research at Jefferies & Company Inc

Hi, guys. Thank you very much. I wanted to ask, Shuki, you were talking about, I think at different points in your monologue, the pipeline of projects that are significant that are out there. Is there something changing in the marketplace that's driving that pipeline? And can you talk about the genre of customers or types of projects that you're seeing? Any more details on that would be great. Thanks.

Shuky Sheffer
Shuky Sheffer
President and CEO at Amdocs

I'm not sure that we can declare now that there is a change in the market, but the reality is that the pipeline is very rich, mature deals and this is across all geographies and the different growth engine domain of Amdocs. And I think that we are now putting a lot of effort to close this deal, translate it to deals 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 all the areas we are operating.

George Notter
Managing Director, Equity Research at Jefferies & Company Inc

If I go back to the fall, I think, when 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 there's been a change in the environment. I guess I'm just pushing back here. I'm wondering what's changed that's driving that improvement or is that something that indeed is not the case? Like what can you tell us there? Thanks.

Shuky Sheffer
Shuky Sheffer
President and CEO at Amdocs

I think I can answer this question better in next quarter, but definitely the pipeline is very encouraging.

George Notter
Managing Director, Equity Research at Jefferies & Company Inc

Okay, super. Thank you.

Operator

Thank you. And our next question comes from the line of Tim Horan from Oppenheimer. Your question please.

Timothy Horan
Managing Director at Oppenheimer & Co. Inc.

Just back on the pipeline question. Are you seeing an improvement in spending on some of the legacy projects that had kind of slowed down a lot last year or is it more on the cloud side where that's kind of accelerating? Yes.

Shuky Sheffer
Shuky Sheffer
President and CEO at Amdocs

No, it's more on the new stuff. It's cloud, OSS projects, BSS transformation, digital modernization. So it's not on the legacy, it's much more on the new stuff.

Timothy Horan
Managing Director at Oppenheimer & Co. Inc.

And do you think the legacy might kick back in at some point or everyone is pretty committed to the new stuff?

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

Just to remind you that when we said legacy at the time, we talked about the level of enhancements of existing systems in the same customers that are investing in transformation and building the next gen with us. So we are not counting on the fact that they will start accelerating investments 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, bringing all the great offering we have and the innovation we are investing into our Mandir Mandir and bringing that to the table when we have the dialogue with customers. This is where the focus is and this is where we want to see the conversion of this pipeline to additional deals.

Shuky Sheffer
Shuky Sheffer
President and CEO at Amdocs

But to your question, the pipeline is by far for all the new stuff.

Timothy Horan
Managing Director at Oppenheimer & Co. Inc.

And you mentioned, I think 10 proof of concept projects for AI. Can you give a little maybe more update, I guess, what do you personally think AI can do for the carriers? Can it materially lower their expenses over time, improve quality and maybe drive some new revenues and what's it kind of take to implement it?

Shuky Sheffer
Shuky Sheffer
President and CEO at Amdocs

So what we see right now is acceleration more in the foundation, meaning as we discussed this before and shared with you, in order to make the best use of generative technology, You need to make sure that you have the right data in place. So we see more activities in this domain in our large customer preparing all the data for all the generative use cases. In generative use cases, I mean, we see different it's related to care, to commerce, upsell. So we are trying I said we are trialing with our customers and we hope we'll see a more closure of new deals in the next quarters.

Timothy Horan
Managing Director at Oppenheimer & Co. Inc.

Thank you.

Operator

Thank you. And our next question comes from the line of Taglioni from Bank of America. Your question please.

Analyst

Hi.

Shuky Sheffer
Shuky Sheffer
President and CEO at Amdocs

Hi, Tal.

Analyst

I have my question is about general growth and it's more specifics about breaking down the growth. When I look at your numbers and I try to take kind of a bird's eye view, 1.7% growth on a like to like is good, but it's just not that there's kind of the momentum we would like to see. And the question is, first of all, if I break it down and I try to understand, okay, cloud contributed and what happened with service providers, what happened to big customers versus smaller customers, Can you break down this 1.7% to better understand what are the components of it so that we can link it to the future? And the future, the question about the future is, what could change such that your growth could be on a sustainable basis at the higher level? And what are the things that you're working on today that could change the growth trajectory because 2% is kind of the low average, it's not even the midpoint average of the company in company.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

So that is a great point. And if you think about Q1 specifically, the growth on pro form a constant currency was 9.7%, but we are already indicating through different leading indicators. For example, the twelve months backlog and this is why it was important for us to give the color on the real growth of the twelve months backlog being 3.5% because this is indeed leading to the fact we can start seeing acceleration of the growth. And if you look at the midpoint that we are guiding for Q2 with $15,000,000 sequentially up, but if I'm adding back the currency, in fact, it's more like $20,000,000 up or close to $20,000,000 up. So you can definitely see the beginning of an acceleration of that growth to three point something percent.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

You're right that overall midpoint for the year is 2.7%. But if you look on the trend during the year, how we are seeing it, we are seeing starting to see the pickup. And this pickup and acceleration in the growth that we should see through the quarter is coming from these new things, the ramp up of new deals that we won as well as expectation more in the second half of the year, of course, to continue and close more deals. So with 90% visibility that the backlog 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 and recognizing revenue and some of that will come from additional conversion from the strong pipeline into new deals and executing on them. Cloud continues to perform very nicely.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

We feel very good about the ability to continue with double digit growth on cloud. So that momentum is there. And as we said before, we believe that we will start seeing some pickup from all those great POCs and great, I would say, early deals with customers. Also starting to see some Gen AI activities. I don't think that's going to be a huge number in 2025, but definitely we start contributing to revenue growth as well.

Analyst

Great. Thanks, Tamar. The second question I have is about just to understand your large customer exposure. So you spoke about implementation of a deal that you wanted AT and T. Can you as much as you can provide numbers kind of or trends within your 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 and that represent I don't remember the current number, it used to be about 60% of revenues.

Analyst

What are the trends within that group, the group of giant service providers?

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

First of all, we definitely see across our large customers different buying centers. I just want to remind that it's not one monolithic contract that drives the business. We are active, for example, in AT and T across multiple activities, modernizing their next generation consumer stack, building new capabilities around cricket, doing stuff in AT and T Mexico. So the list goes on. So it's more diversified than just a name.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

Of course, eventually AT and T is a big name, but for us it means many activities with different decision makers, different buying centers there. I want to add that beyond our two customers with whom we are building significant new transformations and seeing the activity. We are continuing to push forward on moving into new geographies, new names. We mentioned last quarter, for example, significant win with NTT in Japan. That's a new country in which we are building our business.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

It's a very big market, but for us, it's a new market. So we're continuing to look beyond 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 relationship with other significant big names, for example, Charter that we continue to see the momentum with. 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.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

Bell Canada is a meaningful customer and we are very proud to be the ones that are consolidating for them the different platforms. So definitely the list goes beyond just the two largest names that we continue to work very nicely with 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 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 Amdocs, of not only providing new innovation and deploying it, but then supporting them in ongoing IT operations and cloud ops, which is another good example how we expanded in Vodafone, Netherlands, for example, 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 are thinking about expanding our existing customer base as well as moving forward with more new logos such as entity in Japan.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

But 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.

Operator

Thank you. Thank you. And our next question comes from the line of Sloane Rosenberg from Stifel. Your question please.

Shlomo Rosenbaum
Managing Director at Stifel Institutional

Hi, thank you very much. Shuki, I just want to ask you again about the growth in the backlog and it seems great that we have kind of a leading indicator that something is stepping up. But it's a backlog where we're kind of stripping out some of the exited business, I believe. And is there anything unusual that we should think about this backlog 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?

Shlomo Rosenbaum
Managing Director at Stifel Institutional

And then just the step up in backlog, were there some particular types of contracts that drove the growth sequentially, moving it up $80,000,000 or just is there any more color you can give into the growth in this backlog?

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

Thanks, Simon, for the question. I'll try to give some additional color there. We don't have typically seasonality on a regular basis in the backlog. Specifically this quarter, the $80,000,000 sequentially, first of all, it's comparing apples to apples. So both of this is on a pro form a basis after phase out activity.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

So it's comparing to apples to apples in terms of the sets of numbers. When we look on the composition of the increasing backlog, it's a combination of several new deals of the fact that we are enjoying now in the twelve months backlog a full year already of dimension to cloud deal of AT and T that we are ramping up on execution and before that it was just lower than the full twelve months. And the fact that we have some contribution to backlog coming from PROFINET, the recent acquisition. And so I would say taking all of that into consideration, I'm very happy with the composition that we see there. And also broad based in terms of the geographies, the contributed to the backlog, which is always great to have.

Shuky Sheffer
Shuky Sheffer
President and CEO at Amdocs

And the EUR 80,000,000 does not roughly we have some headwinds.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

EUR 80,000,000 is after headwinds from currencies. That's why we are saying the constant currency pro form a number is 3.5% rather than the 2.7% that is unfortunately absorbing that currency impact. So if you want to compare to the 2.7% midpoint of growth on revenue, 3.5% obviously being higher is a sign of acceleration.

Shlomo Rosenbaum
Managing Director at Stifel Institutional

Okay. And just on the acquisition, the PROFINET acquisition, as we're looking at the organic growth in the business, if you factor in both the currency and the PROFINET, would the midpoint of the revenue guidance be going down if you did not have that acquisition? And how much is that acquisition adding to the backlog, so we can kind of look at things a little bit on an apples to apples basis?

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

So as we've said in the beginning of the year, we factored already into the initial guidance for the Aerosam acquisition and this is part of kind of fulfilling on that promise. So I just want to emphasize, it's not incremental to what we thought in the beginning of the year. It's actually now putting a name to the plan. And in terms of the contribution to the backlog, it was part of the contribution. I don't think it's such a big part of it.

Tamar Rapaport-Dagim
Tamar Rapaport-Dagim
Chief Financial & Chief Operating Officer at Amdocs

I would say probably less than half is coming from the impact of M and A and the rest is organic.

Shlomo Rosenbaum
Managing Director at Stifel Institutional

Okay. And then if I can squeeze in one more. Just on the AI side, there's a lot of POCs and what do you think is the gating factor to kind of landing a big deal? Is it the readiness on the client side? Is it getting more comfortable with what's offered?

Shlomo Rosenbaum
Managing Director at Stifel Institutional

Is it proving out enough return on investment given the risk in terms of changing their way that they operate? Can you just talk a little bit about that?

Shuky Sheffer
Shuky Sheffer
President and CEO at Amdocs

It depends. I mean, first of all, as I said, we see some acceleration in the data domain. By the way, this was the rationale also of the acquisition of Parfinet because preparing the data in a way that can support generally our use cases, this is a lot of work. So here we see a lot of progress. We mentioned that we do a lot of it in AT and T and other large customers. And the adoption,

Shuky Sheffer
Shuky Sheffer
President and CEO at Amdocs

I mean, some of it, there was a lot of activities in the call center, sometimes call center unionized. So it's not that simple to I think it's starting to get the maturity level that you can put a tool like this and know that it work 100% accurate because you start to when you put it in the hands of customer care representative, you know, to make sure that it's effective, it works very precise. So and it becomes so we start to feel some maturity and we believe we will see some acceleration in signing deals. The deals that we already signed, we see that they are expanding. For example, we mentioned Etisalat, we started this couple of use cases, it become a much more broader deal than that.

Shuky Sheffer
Shuky Sheffer
President and CEO at Amdocs

So we see there whenever we are landing a deal, it's working well and we see some acceleration.

Shlomo Rosenbaum
Managing Director at Stifel Institutional

Okay. Thank you.

Operator

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.

Matthew Smith
Matthew Smith
Secretary & Head of Investor Relations at Amdocs

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.

Operator

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Executives
    • Matthew Smith
      Matthew Smith
      Secretary & Head of Investor Relations
    • Shuky Sheffer
      Shuky Sheffer
      President and CEO
    • Tamar Rapaport-Dagim
      Tamar Rapaport-Dagim
      Chief Financial & Chief Operating Officer
Analysts
    • George Notter
      Managing Director, Equity Research at Jefferies & Company Inc
    • Timothy Horan
      Managing Director at Oppenheimer & Co. Inc.
    • Analyst
    • Shlomo Rosenbaum
      Managing Director at Stifel Institutional
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