Thank you for standing by, and welcome to Amdocs Fourth Quarter Fiscal '23 Conference Call. [Operator Instructions] As a reminder, today's call is being recorded. I would now like to turn the conference to your host, Mr. Matt Smith, Head of Investor Relations. Please go ahead.

Thank you, operator. Before we begin, I need to call your attention to our disclaimer statement on Slide 2 of the presentation. It notes that some of the 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 6-K. Participating on the call with me today are Shuky Sheffer, President and Chief Executive Officer of Amdocs Management Limited; and Tamar Rapaport-Dagim, Chief Financial and Operating Officer. 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 posted immediately following the conclusion of this call. On today's agenda, Shuky will recap our business and financial achievements for the full year fiscal 2023, and we'll update you on the continued progress we've made executing against our strategic growth framework including exciting development in cloud and generative AI. Shuky will finish by commenting on our financial outlook for the full fiscal year '24 after which Tamar will provide additional details on our fourth quarter financial performance, our forward guidance and our continued commitment to ESG. And with that, I'll turn it over to Shuky. Go ahead.

Thanks, Matt, and good afternoon to everyone joining us on the call today. To begin, I want to sincerely thank our talented and diverse group of global employees for a successful 2023 in which we continued to bring value to our customers while developing the innovative technology that forms the backbone of today’s seamless, digital world. More so, I’d like to express my deep gratitude to our employees in Israel, which in the days following the horrific attack of October 7 have shown tremendous resilience, dedication, and commitment to Amdocs and each other. My heart felt sympathies go to all those who have lost loved ones, or who are directly suffering because of these terrible events. As a global company, with support and development centers around the world, I am proud of the way the Amdocs family has come together to support each other in recent weeks, and we will continue to give absolute priority to the safety and wellbeing of our people, doing everything necessary to ensure they have the support they need to navigate this difficult time. With that said, I am pleased to report solid fourth quarter results consistent with our guidance, wrapping up another strong year of healthy, profitable revenue growth and robust free cash flow generation in fiscal 2023. Summarizing the fiscal year highlights on Slide 7. Record revenue of approximately $4.89 billion grew 7.7% in constant currency as we supported our customers' multi-year journey to the cloud, digital modernization, network automation, and the deployment and monetization of 5G and fiber networks. We are also excited to report that revenue from cloud activities grew at a double-digit rate and exceeded 20% of Amdocs' total revenue for the first time in fiscal 2023. Closing 12-month backlog was a record $4.15 billion, up approximately 5% from a…

Thank you, Shuky, and hello, everyone. Thank you for joining us. I'm pleased with our solid financial results for the fourth fiscal quarter, the highlights of which you can see on Slide 18. Record Q4 revenue of approximately $1.243 billion was up 6.3% year-over-year in constant currency. On a reported basis, revenue increased 6.5% and was above the midpoint of guidance, including an immaterial impact from foreign currency movements compared to our guidance assumptions. Revenue from the acquisition of ProCom Consulting in late August, was immaterial this quarter. On a geographical basis, North America delivered a record quarter. Europe delivered strong growth of nearly 20% from a year ago but declined sequentially because of normal fluctuations in project activity. Rest of world grew on a sequential and year-over-year basis to post its best quarter in more than 4 years, primarily due to improved activity in Southeast Asia. Moving down the income statement, our non-GAAP operating margin of 17.8% was up 20 basis points from a year ago and unchanged as compared with the prior quarter. On the bottom-line, non-GAAP diluted EPS of $1.42 was slightly above the midpoint of guidance and included a non-GAAP effective tax rate of 21.8% which, as anticipated, was above our annual target range. Note that non-GAAP diluted EPS excludes restructuring charges of $46 million incurred in the quarter. Diluted GAAP EPS was $0.86 for the fourth fiscal quarter, which was above the guidance range of $0.67 to $0.81, primarily due to lower-than-anticipated restructuring charges. Summarizing fiscal 2023 on Slide 19, revenue grew 7.7% in constant currency, in line with our most recent guidance but slightly below the original 8% midpoint we anticipated at the start of the fiscal year. As a new point of disclosure, revenue from cloud activities grew at a double-digit rate and…

Thank you, Tamar. As you can probably tell from our remarks today, we are pleased with our solid financial and operational performance in fiscal 2023 and we are looking forward to delivering a fourth consecutive year of double-digit non-GAAP earnings per share growth in fiscal 2024. With that, we are happy to take your questions. Operator?

[Operator Instructions] Our first question comes from the line of Ashwin Shirvaikar of Citigroup.

I guess the first question I have is with regards to the double-digit EPS growth, plus the dividend, of course, on top of that. And the flexibility that you seem to have with regards to scaling up margin improvement to make up for the lower rev growth. How much visibility do you have into that scaling up of margin improvement in terms of each of the factors that you have named?

Ashwin, good to hear you. We have a very good visibility. As a reminder, we are talking for at least for the last 3 years about all the automation improvements we are doing in best-in-class processes and many, many sophisticated tools that we are implementing across the organization, both on operations and development life cycle. Additionally, if you remember, we announced already in Q3 that we are doing a cost cut process in Amdocs that we actually almost completed in Q4. I think another layer that we're increasingly seeing impacting our profitability is all the innovation that we see in the efficiency from Generative AI. So you need to assume that the majority of the cost cutting, not all but the majority was taken place already in Q4, so we wanted to bring it in a position that we -- in 2024, we have realized the whole benefit of this activity. So I would say -- I would argue to be a very good visibility.

Understood. And then I want to get a little deeper into sort of the revenue growth range 1% to 5%. How much of that is a, I guess, inorganic contribution. And with regards to the revenue headwind of the 3% that's kind of attributable to reduced customer investment in legacy sort of system enhancements. Could you give an example of the kind of work that, that might entail? And I know you mentioned cloud, but it would seem to me that in a time like this, the whole range of what you have should be beneficial with regards to selling to clients, I mean network automation and some of the other factors also. So could you maybe…?

Let me start with the second question because I forgot the first one. So the -- in most of our customers, we're talking about our big customers, and this is like T-Mobile, AT&T, Vodafone and many others across the world, we are in the last -- where we started a very significant modernization programs. We need to understand that the customer was spending both in building the new platforms, this is the new -- most all of them are cloud platforms with all the new capabilities of the Amdocs new platform, including some Generative AI capabilities, while do we continue to run from them in managed services and both at the same time, we are doing development on the legacy platform that we are running for them. By the way, this is -- most of them, this is the systems that are the core system today because the monetization program are not -- are just starting and we are in the process of building the new platforms. So at the same time, we spend money to the both on the legacy platform enhancements and building the next generation plant, which is the future of the operational apartments. Now what we shared with you already last quarter, given the headwinds that everyone is experiencing because of the macro environment and some of the headwinds in that the industry is facing, they have done privatization, so they want to double down on the monetization platform while reducing the spend on the legacy platform. So I hope this is a bit clarify what we meant.

With respect to the first question about the inorganic contribution at the midpoint, it's roughly half coming from those recent acquisitions we talked about. So we feel that looking in terms of the overall picture, on the one hand, we are very excited about our growth pillars. We talked about the cloud continuing to grow double digit. On the other hand, we do see some macro impact on this discretionary spending to enhancing legacy systems. But I think the important point is that our customers are modernizing and building the next-generation stack with us. So that's really important factor as we're looking into the future. And we are continuing to see very good win rates with new customers joining us.

Our next question comes from the line of Tal Liani of Bank of America.

Two questions. First, so cloud is at least 20% and growing at least 10%, so that means it contributes 2% to the growth. So if I take your guidance for next year and I remove the cloud, it's between minus 1% to plus 3%, that's the growth for next year, so give us the historical perspective in times of slowdown, what happened to spending? Or what happens to Amdocs when customers reduce spending? How long down cycles kind of lasted? And just in general, what did companies do and what they didn't do during slowdowns? Another kind of follow-up question on the same topic is, do you think that this one is different given that the strength was so strong? I mean the cycle was so strong in the last two years, does it mean that maybe the slowdown is going to linger a little bit more than historical? I'm just asking it because we see it in other areas. So that's my first question. My second question is quick, it's easy, it's about hedging. Can you tell us, given that there is a war in Israel, sometimes the currency kind of fluctuates? What's your hedging strategy for how long do you do it? And what's typically the policy around it?

Let me try to start with the first quick question and then Tamar will take the second one. I not necessarily agree to your mathematics. We grew over 7% last year. You need to think that the cloud will start the growth engine in double digit, we cannot disclose. There's another also in 2023. So going to next year, when we talk about the impact of the 3%, and this is another phenomenon that I want to explain. The phenomena is that when most of the legacy enhancement projects are part of the --was like a -- I want to say like a normal business as usual. I mean, we have large system that we are adding on time, we have teams in place. We are doing the projects and the revenue was pretty much secured. When we have a headwind of 3% in this domain, you need to assume that to cut the spending happen very fast. So when customers decide because of the pressure to prioritize modernization over latency, the cutting spending is almost instant. On the other hand, all the new programs that there are many of them, new wins that we won in actually last quarter in the -- only in fiscal '23, it takes time to ramp these projects up, I'm giving one example. We announced Three UK. It's a very significant managed services that we've signed last quarter. We are going, but not go back to start to recognize full revenue only towards Q3 next year. We won many transformation programs last year. We need to put the teams in place, will lead to other paths to go through the phases. So sometimes it can take us a quarter or two from the time that we win a project until we start to ramp…

And Shuky, on modernization program -- if you don't mind -- before the hedging, just a follow-up on what Shuky. If the modernization program starts, then the customer continues at the scheduled pace, what's the risk that they say -- you need to migrate customers to modern systems, et cetera. What's the risk that this part slows down or that it's more challenging for customers to slow down modernization programs?

We did not see any slowdown in modernization because remember, when talking about monetization, this is moving -- the value for our customers is moving to the cloud much more edge in environment. As we mentioned already, all the new implementation of use cases on Generative AI capabilities are targeted to new platform and not to the legacy platform. So if you want to grade in these capabilities to be able to successfully compete in the market with a very strong platform on the cloud, a very fast time to market and many, many other things, you need to modernize. We do not see any slowdown in modernization. If any, some customers show acceleration.

Just added on that, drawing from past down scenarios, whether it is the financial crisis or even in the midst of the COVID, we did not see any modernization project slowdown. So just to back up what we are seeing right now is not surprising. And in terms of the...

If you get my point as I just mentioned is that when you sometimes employ legacy revenue, sometimes it takes some time to catch up.

I fully understand it. Now I understand it. Absolutely.

Regarding the currency and then our hedging, in general, we are looking forward for hedging on an ongoing basis. So we are not waiting for a certain market opportunity as we want to protect the bottom line, which means practically in the near term, when we look, for example, on Q1 2024 or even on fiscal '24 as a whole, we are already coming into the year with pretty high coverage of our hedging. Yes, taking advantage of weakness of currency, as we've seen now in the Israeli shekel means we can improve the effective rate of our hedging for the latter part of '24 and mainly for 2025, which, of course, we are doing as we speak.

[Operator Instructions] I'm showing no further questions at this time. I'd like to turn the call back over to Matt Smith for any closing remarks.

Thank you, operator, and thanks, everyone, for joining the call this evening. We do look forward to hearing from you very soon. And as always, if you have any additional questions, just reach out to us here in the IR Group. With that, have a great evening.

Thank you. Ladies and gentlemen, this does conclude today's conference. Thank you all for participating. You may now disconnect. Have a great day.