Prepared remarks
Good day and thank you for standing by. Welcome to the Amdocs Third Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please be advised, today's call is being recorded. I would like to hand the conference over to your speaker today, Matthew Smith. Please go ahead. Thank you, Kevin. Before we begin, I need to call your attention to our disclaimer statement on slide 2 of the presentation. 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 6K.
Participating on the call with me today are Shuky Sheffer, President and Chief Executive Officer of Amdocs Management Ltd.; and Tamar Rapaport Dagim, Chief Financial and Chief 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 third quarter fiscal 2024, and will update you on the continued progress we've made executing against our strategic growth framework, including generative AI and our continued sales momentum in cloud. Shuky will finish by discussing our financial outlook for the full fiscal 2024, after which Tamar will provide additional details on our third quarter financial performance, our forward guidance, and our continued commitment to ESG. And with that, I'll turn it over to Shuky.
Thanks, Matt, and good afternoon to everyone joining us on the call today. I'm pleased to report solid results for our third fiscal quarter and would like to thank our employees globally for their commitment to helping our customers provide seamless connectivity and amazing user experience to billions of end users each day. The key financial highlights of the quarter can be found on slide 7. Q2 revenue was a record $1.25 billion, up nearly 2% from a year ago in constant currency, and in line with the midpoint of our guidance after adjusting for unfavorable foreign currency movements. Notably, non-GAAP operating margin was 18.6%, the highest in many years, rising by 80 basis points year over year and 20 basis points sequentially as we continue to benefit from our ongoing margin expansion initiatives. Non-GAAP earnings per share was $1.62, consistent with the higher end of our expectation, and we ended Q3 with a record-setting 12-month backlog of $4.25 billion, up approximately 3% from a year ago.
Demonstrating our confidence in Amdocs’ unique business model and the future success of the company, we also increased our pace of buyback activity in Q3, repurchasing approximately $169 million of Amdocs’ shares. Turning to Q3 operational highlights on slide 8. Demand for Amdocs’ cloud solution remained especially strong, highlighted by the significant five-year cloud deal we recently announced with AT&T and newly signed partnership agreements to support the long-term cloud migration journeys at TELUS in Canada and VodafoneZiggo in the Netherlands. Customer demand was also healthy across our broader strategic domain of digital modernization, 5G and fiber monetization, and network automation, as reflected by significant new deal awards at AT&T and Charter in the U.S., A1 Telekom in Austria, and PLDT and Globe in the Philippines. As to generative AI, I am happy to announce an important award with a leading global operator, which has chosen to integrate Amdocs’ GenAI telco-specific amAIz platform in its business operation.
From an operational perspective, we delivered consistent execution and a substantial number of deployments, including major project milestone achievements with customers such as AT&T and U.S. Cellular, Vodafone Italy, Vodafone Germany, and SES, a European Satellite Communication Provider, PLDT in the Philippines, and Optus in Australia. Among the highlights, we successfully transitioned CLARO Brazil's on-premise infrastructure to Oracle Cloud Infrastructure, OCI, for about 48 million subscribers. Demonstrating Amdocs’ capability to efficiently manage the type of large-scale customer projects that underpin our high market win rate and reputation as a dependable partner. Q3 was also a record quarter in managed services, reflecting the ongoing ramp-up of mission-critical support activities and new logos and longstanding customers, such as Rogers, where we newly expanded a multi-year engagement that is creating a pull-through of our latest cloud-native offerings, like Enterprise Catalog and Charging.
Now, moving to slide 9, let me add some color around the growth strategy, which, to remind you, is designed to provide the market-leading innovation and technology our customers need to accelerate the journey to the cloud, digitally transform the customer experience and consumer in B2B, monetize the future market potential of 5G standalone networks, fixed wireless access and fiber, deliver a dynamic connectivity experience by streaming and automating complex network ecosystems, and simplify and accelerate the adoption of generative AI. Starting with cloud on slide 10, market interest and sales momentum for Amdocs’ cloud solution remain strong, with a growing list of service providers choosing us as a primary technology partner to support their cloud migrations in core and surrounding systems alike. For many service providers, cloud migration is a complex, multi-year journey that is still in the early phases.
Amdocs’ cloud strategy is therefore designed to help service providers simplify and accelerate their journey to the cloud by offering an end-to-end suite of unique products and services delivered under a fully accountable cloud operational model. The journey typically begins with Amdocs’ cloud consulting and planning expertise, in addition to which we also support product deployment, including Amdocs’ latest CES suite or cloud-enabled classic version, the migration of Amdocs’ and non-Amdocs’ applications, including mainframe, cloud-managed services or CloudOps, and the benefits of our intimate partnership with Azure, AWS, and Google Cloud. Furthermore, we consistently enhance our cloud services portfolio with a combination of organic investment and strategic M&A to provide additional beachhead from which to accelerate the industry's journey to the cloud. A prime example is the last November acquisition of Astadia, which contributed highly sophisticated mainframe to cloud migration capabilities that are now supporting the previously announced expansion of our cloud activities in this new domain at AT&T. Among other recently signed deals, TELUS in Canada signed a multi-year managed services agreement with Amdocs to migrate its monetization operation to the cloud.
And VodafoneZiggo in the Netherlands chose Amdocs to modernize and migrate its monetization engines to the public cloud, including both Amdocs and non-Amdocs applications. Moving to digital modernization on slide 11. AT&T has chosen ConnectX, a cloud-native SaaS platform powered by AWS, enabling it to quickly launch new digital brands and services for different customer segments. Reflecting healthy market demand, this win adds to a growing list of ConnectX customers, which include Winity in Brazil and Melon in South Africa. Globe in the Philippines has chosen Amdocs to deploy its AI and data platform for the information data hub. The platform hosted on Google Cloud will enable Globe to access real-time business data from various sources and systems and use it to enhance customer experience, optimize operations, and launch personalized services. In Australia, our B2B Amdocs Configure Price Quotes CPQ platform deployed together with Amdocs Catalog to support its enterprise business, will simplify and accelerate the sales journey for Optus agents in Australia, empowering them to offer innovative business solutions to enterprise, SMB, and wholesale customers faster than ever.
Turning to 5G and fiber monetization on slide 12. A1 Telekom Austria recently selected Amdocs for a multi-year project to consolidate, upgrade, and modernize its billing, charging, and catalog solution, enabling fast time-to-market for new revenue growth, operational efficiencies, and improved customer experience. This key project will also support the launch of new services and products across all customer segments, including 5G, IoT, and other advanced services. Amdocs' next generation monetization offerings are also proving relevant to telcos and newly emerging fiber operators that are investing to accelerate the rollout of fiber networks in the U.S. and internationally. Our capabilities include a full range of BSS and OSS offerings to support all aspects of the fiber customer journey, including fiber service creation, ordering and activation, billing and customer support, as well as the planning and automation of the fiber network rollout itself.
Moving to slide 13, I am delighted to name PLDT in the Philippines as the Southeast Asian service provider that recently selected Amdocs' end-to-end service orchestration solution, our key offering that was strengthened by our acquisition of TEOCO’s service assurance business last year. As an important component of PLDT's OSS and cloud modernization program, Amdocs will deliver unified network inventory, service and network orchestration, and business process automation capabilities operating on the public cloud. Notably, the agreement also includes the customer service solution for case management, which is a component of the Amdocs customer engagement platform we built in partnership with Microsoft. Rounding out my strategic review, I would like to brief you on some exciting advancements in generative AI, as illustrated on slide 14. As you are aware, generative AI has been a top priority for Amdocs.
We have progressed our generative AI strategy by leveraging our amAIz platform to deliver generative AI super agents that directly address our customers' most pressing business imperatives and forging strong collaboration with industry leaders such as NVIDIA, Microsoft, and AWS. I am therefore happy to share today's news that a leading global operator has joined our amAIz platform to create new revenue opportunities, drive efficiencies, and reshape customer experience. This important award, in partnership with NVIDIA, demonstrates our commitment to innovation and highlights Amdocs' unique role as one of the leading technology enablers in the telecommunications industry with the power to help service providers fully harness the potential of data and GenAI to deliver real-world value and savings. For instance, Amdocs is at the heart of helping our customers accelerate GenAI-driven technology disruption in their call center operations and re-imagine the care experience, as we showed in a recent production trial with a North American service provider that resulted in a remarkable 60% plus decrease in average call handling times for billing inquiries, achieving 90% successful case resolution with almost 100% accuracy.
We continue to progress our active engagement, running many pilots globally, including with our large flagship customers, to enable important GenAI use cases and smart agent capabilities of the future. Now, moving to slide 15. I would like to comment on our current market and operating position before discussing our fourth quarter outlook. First, we continue to operate in a challenging industry demand environment, the conditions of which are yet to improve. Nonetheless, we continue to see a healthy pipeline of opportunities across our strategic areas of focus, and we are positioned to maintain a high market win rate by leveraging our pedigree for innovation and technology, market-leading portfolio, best-in-class execution, and highly talented people. I'm especially pleased with our cloud-related activities, which last year exceeded 20% of total revenue and which is on track for double-digit growth in fiscal 2024.
Our GenAI strategy is gaining momentum as we begin to make the shift from production pilots to commercial customer rewards, and our commitment to operational excellence and ongoing efficiency initiatives is also bearing fruit. This positions us to achieve our targets for accelerated profitability gains in fiscal 2024. Wrapping everything together on slide 16. We are on track to achieve the midpoint of our guidance for constant currency revenue growth in fiscal 2024. Additionally, we are reiterating the midpoint of our guidance for non-GAAP diluted earnings per share growth of roughly 9% in fiscal 2024, which is within the tightened range of 8.5% to 9.5%. Coupled with our dividend yield of more than 2%, we are positioned to deliver double-digit expected total shareholder returns for the fourth year in a row. With that, let me turn the call over to Tamar for remarks.
Thank you, Shuky, and hello, everyone. Thank you for joining us. I'm pleased with our solid financial results for the third fiscal quarter as detailed on slide 18. With record Q3 revenue of approximately $1.25 billion, up 1.8% year-over-year in constant currency. On a reported basis, revenue increased 1.1% from a year ago and was consistent with the midpoint of guidance, adjusting for a negative impact from foreign currency movements of approximately $5 million compared to our guidance assumptions. From a geographical perspective, North America declined slightly as compared to a year ago, but grew on a sequential basis. Europe was weaker, mainly reflecting timing differences between a natural roll-off of completed projects and a gradual ramp-up of new deal awards. The rest of the world delivered another record quarter with revenue growth of nearly 13% from a year ago. Shifting down the income statement, our non-GAAP operating margins were 18.6% for the third quarter, the highest in many years.
Non-GAAP operating margin improved by 80 basis points from a year ago and 20 basis points sequentially, reflecting our continuous drive to improve operational excellence through disciplined resource management, automation, sophisticated tools, and leveraging AI, including generative AI, to push for more cost savings and higher efficiencies across the board. Interest and other expenses amounted to roughly $7 million in the third quarter and reflected adverse foreign currency movements in the quarter. On the bottom line, non-GAAP diluted EPS of $1.62 was at the higher end of guidance and included a non-GAAP effective tax rate of 16.7%, which was consistent with the higher end of our annual target range of 13% to 17%. Diluted GAAP EPS was $1.21 for the third fiscal quarter. This includes a restructuring charge of approximately $15 million, or $0.11 per share, without which diluted GAAP EPS would have been at the high end of the guidance range of $1.24 to $1.32.
We'll provide more context around the restructuring charge when I discuss our financial outlook later. Moving to slide 19, the 12-month backlog was a record $4.25 billion, up approximately $2.7 billion from a year ago, and $20 million sequentially. Our 12 months of backlog reflects a positive mix of projects, awards, managed services, renewals, and expansions with existing customers and new logos and has traditionally served as a leading indicator of our business. Notably, the 12-month backlog includes less than a full year impact from the significant new deal we recently signed with AT&T, reflecting the phased ramp-up of activities expected under the current plan of execution. Turning to slide 20, managed services revenue was a record $741 million in Q3, up nearly 3% from a year ago, and equivalent to roughly 59% of total revenue. Managed services revenue was mainly driven by ongoing ramp of mission-critical support activities with new logos and long-standing customers, such as the extended multi-year engagement we announced with Rogers last quarter that included an expansion into new domains like data and testing services and more.
Managed services growth is also supported by our customers' migration to the cloud, as proven by our recently signed agreements with TELUS in Canada and VodafoneZiggo in the Netherlands and our previously announced five-year cloud deal with AT&T, which expanded our activities in a new domain while extending our existing consumer domain engagements through 2029. As a further highlight, I am pleased to announce a multi-year extension and expansion of our hosting and managed services agreement with Charter, under which Amdocs will continue to provide Spectrum Mobile with hosting and operational support for its mobile billing systems along with its enhanced services to support the rapid growth of Spectrum's mobile and cable business, enabling innovative offerings for their customers. Now, turning to the balance sheet and cash flow highlights on slide 21. DSO of 74 days decreased by five days year over year and by two days sequentially in Q3.
The sequential change in unbilled receivables, net of deferred revenue, was $40 million in Q3. Aggregating the 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. We generated free cash flow of $175 million in Q3, comprised of cash flow from operations of approximately $191 million, less $16 million in net capital expenditures. Adjusting for restructuring payments of approximately $18 million reported free cash that would have been $193 million in the third quarter. Overall, we ended Q3 with a strong balance sheet, including a healthy cash balance of approximately $502 million and aggregate borrowing of roughly $650 million. We have ample liquidity to support our ongoing business needs while returning the capacity to fund our future strategic growth.
Turning to capital allocation, on slide 22, we increased the pace of buyback activity to roughly $169 million in Q3, reflecting our confidence in Amdocs' unique business model and the future success of the company. Additionally, we paid cash dividends of $56 million in the quarter. Overall, for the year to date, we have already returned a total of $601 million to shareholders through share repurchases and dividends, putting us on track to return more than 100% of free cash flow before restructuring payments to shareholders in fiscal 2024. For the full year of fiscal 2024, we are reiterating our free cash flow target of approximately $700 million before restructuring payments, equating to more than 90% of expected non-GAAP net income this year, and a healthy free cash flow yield of roughly 7% relative to Amdocs' current market capitalization. Now, turning to our revenue outlook on slide 23, 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 fourth quarter and full year fiscal 2024 financial guidance reflects what we consider to be the most likely outcomes based on the information we have today, but we cannot predict all possible scenarios. On a constant currency basis, we are reiterating the 2.7% midpoint of our fiscal 2024 revenue growth outlook, which we have tightened to a range of 2.3% to 3.1% year-over-year as compared to 1.7% to 3.7% previously. Our annual outlook includes fourth fiscal quarter revenue within a range of $1.24 billion to $1.28 billion, which assumes an immaterial sequential impact on foreign currency fluctuations as compared to Q3. On a reported basis, we now expect full year revenue growth in the range of 1.9% to 2.7% year-over-year as compared with 1.6% to 3.6% previously. This outlook assumes an unfavorable impact from foreign currency fluctuations of approximately 40 basis points year-over-year as compared to 10 basis points previously.
Moving down the income statement on slide 24. The gradual sequential improvement in our profitability over the last three quarters puts us on track to deliver non-GAAP operating margins around the midpoint of our annual target range of 18.1% to 18.7% in fiscal 2024. As I discussed last quarter, we remain committed to improving the company's long-term cost structure and productivity by leveraging our unique business model focused on operational excellence and implementing technology to achieve our goal of sustained profitable growth. With GenAI presenting a new wave of innovation and technology capabilities, we are proactively evaluating the portfolio of products, services, and business lines in relation to our strategic investment priorities for fiscal 2025, rebalancing our workforce and site strategy to meet our future needs, and optimizing resources such as technology, infrastructure, and workspace.
Along these lines, we took additional actions under our latest restructuring plan during Q3, which resulted in the previously mentioned charge of $15 million that was mainly comprised of employee severance and benefits arrangements. Looking out over the next several quarters, we expect to incur additional charges as we carry out our current restructuring plan, in respect of which we will provide further updates as we move along. Bringing everything together on slide 25, we are reiterating the 9% midpoint of our fiscal 2024 non-GAAP diluted earnings per share growth outlook, which we have tightened to a range of 8.5% to 9.5% year-over-year as compared with our previous outlook of 7% to 11%. This full-year guidance assumes a non-GAAP effective tax rate within our unchanged annual target range of 13% to 17% for the full-year fiscal 2024. Although we note that the rate is expected to be towards the higher end of this range in Q4.
Overall, we are on track to deliver expected double-digit total shareholders' return for the fourth year running in fiscal 2024, assuming the sum of our non-GAAP diluted earnings per share growth outlook plus our dividend yield of approximately 2%. Before handing it back to Shuky, I'm pleased to highlight that today we published Amdocs’ ESG and CSR report for 2023-24. Among the many achievements listed in this year's report, I'm especially proud of our significant environmental efforts, which have resulted in a 55% reduction in Amdocs’ Scope 1 and Scope 2 CO2 emissions since fiscal 2019, far exceeding our science-based target commitments. Additionally, Amdocs’ global consumption of renewable energy approached 59% in 2023, way up from just over 19% in 2021. Our progress was recently recognized by Time Magazine, which named Amdocs as one of the world's most sustainable companies in 2024, ranking us as one of only 500 inclusions out of more than 5,000 large companies initially assessed.
For additional information regarding Amdocs’ recent ESG and CSR initiatives and achievements, including our commitments to diversity, equity, and digital inclusion, please refer to our report, which is now available for download on our website. With that, back to you, Shuky.
Thank you, Tamar. As I said earlier, I am pleased with our solid third quarter results. And while we continue to operate in a challenging demand environment, we remain well-positioned to monetize a healthy pipeline of opportunities across cloud, generative AI, and our other strategic domains by leveraging our market-leading portfolio, best-in-class execution, and highly talented people. With that, we are happy to take your questions.
Questions and answers
Thank you. Our first question comes from Timothy Horan with Oppenheimer. Your line is open.
Thanks, guys. I wanted to focus on AI, the contract win, and I think that was separate from maybe the trial that you did with the contact center. I guess on the contact center, can you just talk about how large the trial was, how extensive it was, and those sounded like some pretty amazing results. Have you been able to replicate them in other places, or do you think you can roll it out relatively quickly? Any more color you can give around the AI contract win would be great. Thanks.
Regarding this award, this is a very significant global operator that has many operational companies. The initial deal consisted of us implementing an infrastructure called the Amdocs amAIz platform, and then setting up the first use case for one of these operational companies. This is the initial deal with the prospect to continue enhancing to more and more what we call super agents or use cases in this specific operational company and then to other operational companies. As we mentioned, we are doing this in partnership with NVIDIA. Regarding the operator in North America, this is a good example of how we, using our technology, were able to build what we call super agents, especially for the care center that increases the productivity of call center agents by tens of percent, extremely accurately. We are doing similar proof of concept pilots like this with other large operators around the world.
The call center operation is highly mission-critical, so our customers want to ensure that this is working consistently and becomes part of a critical system as part of a call center. We assume that they will begin to implement these tools across the call centers. This is going to completely disrupt the call center operation because it means that you can take a relatively young or a relatively new customer service representative working in a call center and immediately equip them with capabilities and experience like someone who has been working for three or four years in the call center. We believe our customers will use it not just to achieve cost savings, but also to improve the quality of the call center, increase customer satisfaction, and we believe this technology will disrupt all the call centers of our customers.
Are you doing that in partnership with Microsoft still or any other partners there?
We have many partners in this domain. I think this specific one we are doing with NVIDIA, but at the same time, we are running several proof of concept pilots with Microsoft and others, so we are very diverse from this perspective.
Our next question comes from George Notter with Jeffries. Your line is open.
Hi there. Thanks a lot, guys. I guess I wanted to ask about just the overall spending environment. If I go back the last few quarters, there's been a running narrative of customers focusing on transformation projects versus traditional projects. I think you guys talked about different M&A deals slowing decision-making down, leading to longer closure times. Can you just talk about the bigger picture here, what you're seeing, and is there an opportunity to maybe see the business reaccelerate if those conditions get better? Thanks.
What we're seeing is that, on the one hand, customers are looking for ways to transform. Some of them, as we said in the past, decide to take the bigger approach of removing legacy systems and implementing new solutions. Some of our large North American and European customers are going down this route. Many more customers are actually looking for a gradual modernization path, which is something we cater to very well given the modular nature of our portfolio, allowing them different ways to modernize and take the journey to the cloud, whether they want to put a new stack in place or whether they want to take existing applications and make them cloud-enabled. We can assist them with migration to the cloud and many other activities around that. Having said that, we do see more scrutiny in decision-making and a tougher environment in terms of the pace at which those decisions are made. Our win rate continues to be very high, and the relevance of our offerings remains strong.
In terms of consolidations, I would say that overall, consolidation in the industry is a good thing for us. We've historically benefited from these situations, as typically when carriers in the market consolidate, they're looking to provide a different value proposition to their customers. We provide the systems they need, but in the short term, sometimes when there is a situation—let's take, for example, if you sell a lot, which is a customer of ours in North America, as they wait for the regulatory approval of the acquisition by T-Mobile, naturally they will not invest a lot of money into long-term investments. We do see this kind of phenomenon from time to time, but I would say generally speaking, historically, we typically enjoy consolidation in the industry, even though sometimes in the short term, it may create some delays in some investments.
Got it. Any insights into maybe when some of these effects might come off? Is it just a question of the business environment? Is it a question of elections? The M&A part, I guess, certainly.
I think it's about the business environment as a whole. I'm not just talking about the U.S., but globally. We've been seeing this scrutiny that I've mentioned, this phenomenon. I think it's about the overall business demand and how we should see that unfolding as we move along.
Thank you.
Thanks, George.
Our next question comes from Tal Liani with Bank of America. Your line is open.
Hi, guys. I'm in a public space. I'm whispering.
Hi, Tal. We can hear you well.
Good. You and the entire bus here hearing me. I have two questions. Number one is the $20 million increase in backlog, is it related to the AT&T contract that you spoke about last quarter? The second question is much more philosophical. If I look at the last 40 quarters or 10 years or 8 years or 7 years, the needs of carriers never changed. The story changes, but the need to do what you're providing never changes. It's always a high priority. However, when I look at the quarters, there were many more quarters where you grew 2% a year versus quarters that you grew 6% or 8% a year. When I look at your growth rate over the last few quarters, four quarters ago you were at 6.5% growth year-over-year, and now you're guiding to 1.4% growth, which is more in line with the averages or what we've seen in the last 10 years. The question I have is, and again it's philosophical, but I want to understand what drives it? Can the environment support growth of 6% to 10%, as you said three years ago? Can the projects and what the carriers are doing support growth that is higher than 2% to 3%? If that's the case, then what drives the growth to accelerate over the next few years? Thanks.
Considering the fact that you are in a public space, it's a relatively long question. Let me try with the second one. I think that the difference, if you compare us previously to now, is that we have maybe one or two growth engines, and today we have five. Not all of them are working at the same pace. For example, we repeatedly highlight the journey to the cloud engine that is more than 20% of our revenue and growing double digits. When we expand to others, the total addressable market we operate today is much higher compared to what we had maybe 10 years ago. What we are saying is that in a normal demand environment, which is not the situation right now, we believe we can return to single-digit growth. In the current demand environment, there is some industry pressure, macroeconomic pressures, interest rates, and other customers are cutting CapEx because of this and are focusing on free cash flow and other issues that the industry is experiencing, which may be contributing to the current pressures. It will be difficult for us to achieve the higher growth rates, likely more in the range that you mentioned historically, but we believe with some support from the macro environment and other main conditions, we can get back to what you call mid-single digit growth like 5% in this area. Regarding the backlog, maybe Tamar can elaborate.
Naturally, we always have fluctuations during the quarter in the backlog as we recognize revenue and sign many new deals. So it's definitely part of it. The interesting point to make here is that we are talking about a 12-month backlog. The reason I made the comment that the current 12-month backlog does not reflect the full year of this deal is that as planned and as expected, we do not take effective control of that operation of that IT environment immediately; it takes time. We need to learn the environment, transition, and set up certain capacities. So we do not yet have a full 12-month impact of that deal reflected in the number we're reporting as of June 30. Everything, I can assure you, is going well according to plan. We will definitely see the full run rate of that in the middle of probably calendar 2025.
Back to your first question, in a normal demand environment, I think we can get close back to the mid-single-digit growth rate right now—given the industry and everyone is under pressure. I think it will be tougher, and you would expect more of the historical level of revenue growth.
Great. Thank you.
One moment for our next question. Our next question comes from William Power with Baird. Your line is open.
Great. Thanks. It's Yanni Samoilis on for Will. Thanks for taking the question. Just to follow up on some of the comments you were making a second ago about the spending environment in the market generally. When we're thinking about what growth might look like in fiscal 2025, at this point it sounds like we should be expecting similar growth as fiscal 2024 or are there any near-term drivers, I guess, other than an improved spending environment that would lead you to expect some re-acceleration? Any guideposts or directional color would be great.
We're not guiding yet for 2025, but we were trying to give some more color about how we see the environment. Typically, our 12-month backlog is a good leading indicator. Don't take it literally as I'm telling you now; if the 12-month backlog grew 2.7%, that's the growth next year. I think what you're seeing is hovering around these levels right now, and we need more change in the demand environment to see an acceleration. That's the message we're trying to convey.
Thanks, that's helpful. Should we expect continued accelerated buybacks, or do you expect M&A to become a more significant use of cash next year? Any outlook on that front?
First of all, I would say that generally speaking, we believe we have the capacity and we are always trying to do both. I don't think it's one versus the other. At the same time, M&A is something we're always looking at. There's always a pipeline that we're actively evaluating, but it's harder to predict the pace and the specific deals that will mature to closing. We've been very consistent with our buyback; you've seen us out there always, and also believing in ourselves, of course, and in the story of Amdocs. We definitely think that cash allocation back to shareholders through buyback is an important vehicle. At the same time, we are looking for M&A and we will probably do more M&A in our strategic domain. I think the simple answer is both, and I don't think that one should be at the expense of the other necessarily.
Makes sense. Thank you very much.
Thanks.
I'm not showing any further questions at this time. I'd like to turn the call back over to Matt for any closing remarks. Thanks, Kevin, and thanks everyone for joining today. If you do have any additional questions, please reach out to us here in the IR group and we look forward to speaking with you soon. Have a great night. Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.