Ladies and gentlemen, thank you for standing by, and welcome to the Amdocs Q3 2020 Earnings Conference Call. [Operator Instructions] I would now like to hand the conference to your speaker today, Matt Smith, Head of Investor Relations. Please go ahead, sir.

Thank you very much, operator. Before we begin, I would like to point out that during this call, we will discuss certain financial information that is not prepared in accordance with GAAP. The company's management uses this financial information in its internal analysis in order to exclude the effects of acquisitions and other significant items that may have a disproportionate effect in a particular period. Accordingly, management believes that isolating the effects of such events enables management and investors to consistently analyze the critical components and results of operations of the company's business and to have a meaningful comparison to prior periods. 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 6-K. Also, this call includes information that constitutes forward-looking statements. Although we believe the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that our expectations will be obtained or that any deviations will not be material. Such statements involve risks and uncertainties that may cause future results to differ from those anticipated. These risks include, but are not limited to, the effects of general economic conditions, the duration and severity of the COVID-19 pandemic and its impact on the global economy, and such other risks as discussed in our earnings release today and at greater length in the company's filings with the Securities and Exchange Commission, including in our annual report on Form 20-F for the fiscal year ended September 30, 2019, filed on December 16, 2019, and our Form 6-K furnished for the first quarter of fiscal 2020 on February 18, 2020, and for the second fiscal quarter of fiscal 2020 on May 18, 2020. Amdocs may elect to update these forward-looking statements at some point in the future, however, the company specifically disclaims any obligation to do so. Participating on the call with me today are: Shuky Sheffer, President and Chief Executive Officer of Amdocs Management Limited; and Tamar Rapaport-Dagim, Joint Chief Financial and Operating Officer. And with that, I'll turn it over to Shuky.

Thank you, Matt, and good afternoon to everyone joining us today to our third fiscal quarter results. This was our first full quarter operating under the global condition of the COVID-19 pandemic, consider which I'm proud of the company's performance. Revenue exceeded the midpoint of guidance and grew 1% year-over-year in constant currency. We delivered a significant number of live deployments, demonstrating incredible operating execution using remote deployment tools and methodologies. And we maintained stable profitability and robust free cash flow generation, the latter which was driven by healthy cash collection across our customer base. Q3 was also notable for another record quarter in Managed Services, where revenue grew 4.6% year-over-year. This performance reflects the ramp-up of activities with new logos, a long-standing customer where we continue to expand our scope of work under a multiyear agreement with highly recurring revenue streams. Our ability to seamlessly operate the mission-critical system of our customer without interruption during the COVID-19 pandemic further underscore the value Amdocs consistently brings to our Managed Services model. I'm pleased to say that we ended Q3 with a sequential and year-over-year increase in our 12 months backlog. Over after a slow start into the quarter, the pace of the deal signing accelerated as Q3 progressed, which we see an early but encouraging sign of business stabilization, following the disruption of March and April. Moreover, we see attractive and increasing pipeline of opportunity as our customer focus on the critical investments needed to strive the post-COVID-19 environment, including digital modernization in consumer and enterprise B2B, 5G deployment and monetization, system migration to the cloud and launching media and entertainment offering. Amdocs is a best-in-class cloud-native engine to support such investment today, and we remain committed to investing in R&D and M&A to make sure we bring the innovation…

Thank you, Shuky. Third fiscal quarter revenue of $1.03 billion exceeded the midpoint of our expectations of $990 million to $1.04 billion. Also after adjusting for positive impact from foreign currency of approximately $5 million compared to our guidance assumptions. On a reported basis, revenue performance included a negative impact from foreign currency fluctuations of approximately $3 million relative to the second fiscal quarter of 2020. On a year-over-year basis, our third quarter revenue grew by 1% in constant currency. Our third fiscal quarter non-GAAP operating margin was 17.1%, above the midpoint of our long-term target range of 16.5% to 17.5% and consistent with our guidance that we will protect profitability despite the COVID-19 related challenges. Below the operating line, non-GAAP net interest and other expense was $2.4 million in Q3, the mix of which includes higher interest expense related to our recent short-term borrowings and senior bond issue, offset by favorable foreign currency fluctuations. For forward-looking purposes, we continue to expect that foreign currency fluctuations will continue to impact our non-GAAP net interest and other expense lines in the range of a few million dollars on a quarterly basis. Diluted non-GAAP EPS was $1.07 in Q3, above the midpoint of our guidance range of $1 to $1.08. As anticipated, our non-GAAP effective tax rate of 17.3% in third fiscal quarter was roughly in line with the high end of our annual target range of 13% to 17%. If you look at GAAP EPS, it was $0.90 for the third fiscal quarter, above the midpoint of our guidance range of $0.81 to $0.91.Free cash flow was $146 million in Q3. This was comprised of cash flow from operations of approximately $187 million, less $41 million in net capital expenditures and other. Normalized free cash flow was $169 million in the…

Thank you. [Operator Instructions] Our first question comes from Shaul Eyal with Oppenheimer. Your line is now open.

Thank you. Good afternoon, Matt. Congrats on the quarter, execution and the improved outlook. Two quick questions on mind. Shuky, we keep hearing we keep seeing that the new COVID-19 environment is exactly accelerating digital transformation journeys. When you talk to customers, what are they telling you about their spending priorities as it relates to this ongoing shift to the cloud, even within that shift, what could be prioritized first versus some other products or services?

So you are right. This is true that our customers are reducing the discretionary spending, but, I think, which it relates to the cloud journey and to digital transformation, which are really needed for the post-COVID-19 environment. This is where I think that they are not stopping. And actually, in some cases, they are accelerating. And I think everyone understand in the post-COVID-19 that retail stores are going to be closed, people are using much more digital capabilities, mobile application, website, etc. This is one. So digital trading or commerce become pretty much the standard. And the other thing is, obviously, that the migration to the cloud, getting rid of on-premise data center. This is something that started before the COVID-19 and actually accelerated by the COVID-19. So we do see a good trend and good opportunities in this domain.

And I have a follow-up for Tamar. As the work from anywhere or work-from-home phenomenon continues to accelerate, are you having any second thoughts, any fresh thoughts about the campus being built in Israel? And maybe some of your other global branches, how to approach it longer term?

So when we look in our kind of philosophy around working from home versus working from the office, we believe that working together at the office creates very important environment of collaboration and innovation that is necessary in the tech world. Yes, flexibility is important. And to remind you, ahead of COVID-19, we were actually encouraging our employees on a global basis to work one day a week from home because we thought that flexibility matters. But as a matter of principle, we do hope to see a world where we can go back to more of a hybrid model. And we've taken that into consideration in planning our workspace globally as well as in the new campus buildup in Israel to create that kind of flexibility and take that into considerations in the planning.

Thank you for that. Congrats thank you.

Our next question comes from Jackson Ader with JPMorgan. Your line is now open.

Thanks for Taking my questions. First one is on Openet. I think if we just look at tomorrow, you mentioned the expected contribution for maybe fiscal 2021 is pretty much in line with what you guys said was the annual revenue for Openet for the last couple of years when you announced the acquisition. So just curious, what should we be expecting in terms of growth, either acceleration? What are the levers of growth? And with 5G deployments picking up, why wouldn't Openet maybe see a growth acceleration?

So when we look on the financial model that Openet had as a stand-alone company, it was a very difficult software product company, where the majority of revenue is coming from license, maintenance support and to some extent, later on with some professional services. We believe that in conjunction with the Amdocs portfolio of products, we can obviously take it to be something more robust and bigger over time. But the type of sales cycles that we see ourselves and same goes for Openet, such us usually take a bit more time. And then once you close the deal, it takes some time to ramp up the deal and recognize the revenue. So taking that into consideration and the fact that obviously, together, we want to accelerate the buildup of the pipeline and see that acceleration coming later on in the form of closing deals with Openet under the wings of Amdocs, we think that should accelerate, of course, over time.

Okay. Great. That makes sense. And then a quick follow-up, actually just sticking with Openet. In terms of maybe total opportunity just within the Amdocs customer base, which should be you mentioned that the third point, I think, for the strategic rationale was that you can now sell Openet to the global customer base of Amdocs. So how much overlap do you have in current customers now? And what do you think for the kind of total opportunity?

We have some overlap, but we have also a lot of customers that we have and they don't probably have much more customer that we have and they don't and makes a bit of the opposite. I think that the 5G charging of Openet, which is completely cloud-native and recognized probably the best in the market, adding to our obviously, our commerce, billing, real-time billing portfolio. I think this is a unique combination in the market. As everyone is moving to 5G, this cloud-native 5G charging is pretty much relevant to every service provider, obviously, to all the Apple's customer. So I think it's a great opportunity for us to come with holistic cloud-native solution that address all the 5G needs of our customers.

Okay, thank you.

Thank you. [Operator Instructions] Our next question comes from Will Power with Baird. Your line is now open.

Hey guys, this is Charlie Erlikh on for Will. I was hoping to stay with Openet and ask a question specifically on 5G. I'm wondering now with Openet in the portfolio, how would you compare your product portfolio as it relates to 5G compared to some of the other competitors that are also offering similar products? And then related to that, how would you characterize just the 5G opportunity in general in terms of the possibility to accelerate the top line and potentially the timing around that? Thanks.

Obviously, I'm biased, but definitely, I believe that our portfolio in this domain is second to none. The I mean the all the monetization platform and our D1 and CatalogONE platform that, obviously, we believe this is the best in the market. Our real-time billing that we have and now we added the charging for 5G. I think it completes the solution end-to-end. And actually, we are going to integrate the Openet solution to our suite in a way that the same catalog of CatalogONE, which we, for example, we announced last quarter that another big North American service provider chose. By using the same catalog, we can have an end-to-end suite that support 5G. Now to your point, all our customers are moving to 5G. If I need to rank the world, probably North America is number one, Europe is second and APAC in third from adoption of 5G, all of them are looking to build capabilities for monetization and charging for 5G. And I think we have the right portfolio to address all these needs.

Great, thank you very much.

Thank you.

I'm not showing any further questions at this time. I would now like to turn the call back over to Matt Smith for closing remarks.

Thank you very much for joining our call today and for your interest in Amdocs. We look forward to hearing from you in the coming days. And if you do have any additional questions, please call the Investor Relations group. Have a great evening. Thanks.

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.