Amdocs (NASDAQ: DOX) reported Q4 EPS of $1.23, $0.05 better than the analyst estimate of $1.18. Revenue for the quarter came in at $1.05 billion versus the consensus estimate of $1.03 billion.

Fourth Quarter Fiscal 2020 Highlights

• Closed the previously announced acquisition of Openet on August 11, 2020
• Today signed an agreement for the divestiture of OpenMarket, an Amdocs subsidiary, for approximately $300 million cash with Infobip, a company in which One Equity Partners is the primary institutional investor
• Revenue of $1,053 million. After adjusting for a positive impact from foreign currency movements of approximately $7 million compared to our guidance assumptions, and revenue from Openet, which was not included in the fourth quarter guidance range, revenue was slightly above the midpoint of the $1,015-$1,055 million guidance range
• Record managed services revenue of $611 million, up 4.8% as compared to last year’s fourth fiscal quarter and equivalent to approximately 58% of total revenue
• GAAP diluted EPS of $1.01, above the midpoint $0.95-$1.03 guidance range
• Non-GAAP diluted EPS of $1.23, above the $1.16-$1.22 guidance range
• GAAP operating income of $147 million; GAAP operating margin of 14.0%
• Non-GAAP operating income of $181 million; non-GAAP operating margin of 17.2%
• Quarterly free cash flow of $145 million, comprised of cash flow from operations of $205 million, less $60 million in net capital expenditures and other; normalized free cash flow of $161 million (1)
• Record twelve-month backlog of $3.62 billion, up $140 million sequentially and up 3.7% as compared to last year’s fourth fiscal quarter
• The board of directors approved a quarterly cash dividend of $0.3275 per share to be paid on January 22, 2021
• The board of directors also approved a 10% increase in the Company’s quarterly cash dividend payment from $0.3275 per share to $0.36 per share, anticipated to be first paid in April 2021, subject to shareholder approval at the January 2021 annual meeting

“I am pleased to report a return to sequential revenue growth in our fourth fiscal quarter, primarily driven by healthy activity levels in North America and the ramp-up of new customer engagements in Europe, where we had our best-ever performance. At the operating level, we accelerated our R&D investments while maintaining consistent project execution and stable profitability. Amid the ongoing global pandemic, our sales momentum also accelerated, as reflected in our record 12-month backlog which grew $140 million sequentially and 3.7% year-over-year,” said Shuky Sheffer, president and chief executive officer of Amdocs Management Limited.

Sheffer continued, “Over the last few months, we have taken several steps to accelerate our growth strategy around 5G and the cloud. The post-merger integration of Openet is proceeding well and we are happy to report a new award at AT&T, which has selected Openet’s 5G solution to quickly launch and monetize exciting new 5G services on the cloud. Additionally, we have signed a new multi-year strategic agreement with AWS as part of which we will bring our cloud-native BSS offerings and wide range of services to jointly address the rapidly growing cloud market in the coming years. As part of another move to focus on our strategy, we have also signed an agreement for the divestiture of OpenMarket for approximately $300 million cash with Infobip, a company in which One Equity Partners is the primary institutional investor. With this transaction, Amdocs is divesting a non-strategic asset in the mobile messaging domain and remaining laser-focused on our core strategic growth initiatives.”

Sheffer concluded, “Turning to our fiscal 2021 outlook, I am happy to report an expected acceleration in growth, with revenue projected to increase at more than twice the rate of last year in constant currency. This outlook is based on the visibility of our record 12-month backlog, the full-year consolidation of Openet and the ramp-up of customer activities across strategic growth areas, including 5G and the cloud.”

GUIDANCE:

Amdocs sees Q1 2021 EPS of $1.09-$1.15, versus the consensus of $1.14. Amdocs sees Q1 2021 revenue of $1.055-1.095 billion, versus the consensus of $1.06 billion.

Twelve-month Backlog
Twelve-month backlog, which includes anticipated revenue related to contracts, estimated revenue from managed services contracts, letters of intent, maintenance and estimated on-going support activities, was $3.62 billion at the end of the fourth quarter of fiscal 2020, up $140 million from the end of the prior quarter and up 3.7% as compared to last year’s fourth fiscal quarter.

First Quarter Fiscal 2021 Outlook

• Revenue of approximately $1,055-$1,095 million, assuming approximately $2 million sequential negative impact from foreign currency fluctuations as compared to the fourth quarter of fiscal 2020 and a full quarter revenue contribution from the acquisition of Openet
• GAAP diluted EPS of approximately $0.85-$0.93
• Non-GAAP diluted EPS of approximately $1.09-$1.15, excluding amortization of purchased intangible assets and other acquisition-related costs, changes in certain acquisitions related liabilities measured at fair value, and approximately $0.08-$0.10 per share of equity-based compensation expense, net of related tax effects

Full Year Fiscal 2021 Outlook

• Revenue growth of 4.0%-8.0% year-over-year as reported
• Revenue growth of 3.5%-7.5% year-over-year on a constant currency basis
• Full year fiscal 2021 revenue guidance incorporates roughly 1.5% of growth from the acquisition of Openet, and an expected positive impact from foreign currency fluctuations of about 0.5% year-over-year
• GAAP diluted earnings per share growth of roughly 1.5%-8.5% year-over-year
• Non-GAAP diluted earnings per share growth of roughly 5.0%-9.0% year-over-year, excluding amortization of purchased intangible assets and other acquisition-related costs, changes in certain acquisitions related liabilities measured at fair value, and approximately $0.32-$0.40 per share of equity-based compensation expense, net of related tax effects. The impact of the acquisition of Openet on Amdocs’ non-GAAP diluted earnings per share is expected to be neutral in fiscal year 2021, and accretive thereafter
• Free cash flow of approximately $470 million, comprised of cash flow from operations, less net capital expenditures and other
• Normalized free cash flow of approximately $620 million; normalized free cash flow excludes capital expenditure of up to $150 million related to the new campus development in Israel, and other items
• Divestiture of OpenMarket is expected to close within the next few months, at which time the full fiscal year 2021 outlook will be updated, as the current 2021 outlook includes anticipated full year results from OpenMarket

Our first fiscal quarter 2021 and full year fiscal 2021 outlook takes into consideration the Company’s current expectations regarding macro and industry specific risks and various uncertainties and certain assumptions that we will discuss on our earnings conference call. However, we note that market dynamics continue to shift rapidly and we cannot predict all possible outcomes, including those resulting from the COVID-19 pandemic, which has created, and continues to create, a significant amount of uncertainty, and from T-Mobile’s completed merger with Sprint, or from other current and potential customer consolidation activity.

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