Good day, ladies and gentlemen, and welcome to the Q3 2018 Amdocs Earnings Conference Call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will host a question-and-answer session and our instructions will be given at that time. [Operator Instructions] As a reminder, this conference call is being recorded for replay purposes. It is now my pleasure to hand the conference over to Mr. Matt Smith, Head of Investor Relations. Sir, you may begin.

Thank you, Brian. Before we begin, I'd 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 effect 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 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, 2017, filed on December 11, 2017, and our Form 6-K furnished for the first quarter of fiscal 2018 on February 12, 2018 and the second quarter on May 25, 2018. 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 Eli Gelman, President and Chief Executive Officer of Amdocs Management Limited; and Tamar Rapaport-Dagim, Chief Financial Officer. With that, I'll turn it over to Eli.

Thank you, Matt, and good afternoon to anyone joining us on the call today. We are pleased with our solid third quarter performance which was notable on several fronts. Revenue exceeded the $1 billion mark the first time and was in line with the midpoint of our guidance adjusting to currency. We maintained a high win rate across our various business lines and operating regions and we made positive progress integrating our recent acquisitions of Vubiquity and UXP Systems within the broader Amdocs. This quarter, I’m also pleased to report some exciting developments with respect to our strategic initiatives in network function virtualization and media and entertainment. I will provide an update on this important growth engines later in the call. But first, let me offer some color in regarding to our regional businesses activities in quarter three. Beginning with North America. Revenue grew on a sequential basis. As we supported the digital modernization and integrate carrier strategies of a broad based of wireless and pay-TV customers. Regarding the business environment in North America, service providers continue to face fierce competition, resulting from the convergence of wireless and pay-TV offerings with content ownership and direct-to-consumer business models. As a result of this rapidly changing market dynamics, we see many opportunities to support the strategic requirements of our customers in North America, which we believe will translate to positive long-term growth trajectory in the region. That said, we remind you over the many moving products that’s affecting our North American outlook and we expect sequential trends to fluctuate in the foreseeable future further before growth resumes in a steadier way. As a reminder, industry consolidation activity continues to present an additional source of uncertainty in our outlook, including T-Mobile planned merger with Sprint or others which may be contemplated in the…

Thank you, Eli. Third fiscal quarter revenue of $1 billion was at the midpoint of our guidance range on a constant currency basis after adjusting for a $9 million negative impact from foreign currency movements relative to guidance. Our third quarter guidance range have included a minimum sequential impact from foreign currency fluctuations. Our third fiscal quarter non-GAAP operating margin was 17.3%, unchanged from a year-ago and in line with the high-end of our long-term target range of 16.5% to 17.5%. Below the operating line, non-GAAP net interest and other expense were $3.2 million in Q3, primarily reflecting foreign exchange movements. For forward-looking purposes, we continue to expect non-GAAP net interest and other expense in the range of a few million dollars quarterly due to foreign currency fluctuations. Diluted non-GAAP EPS was $1.03 in Q3 in line with the midpoint of our guidance range of $1 to $1.06. As we anticipated, our non-GAAP effective tax rate of 13.4% in Q3 was near the low end of our expected annual range of 13% to 17%. Diluted GAAP EPS was $0.64 for the third fiscal quarter below our guidance range of $0.71 to $0.81 due to nonrecurring restructuring charges primarily associated with recently completed acquisition and internal business realignment actions in North America net of tax effect. Free cash flow was $1.8 million in Q3. This was comprised of cash flow from operations of approximately $164 million, less $36 million in net capital expenditures and other. Capital expenditure relating to the multiyear development of our new campus in Israel was immaterial this quarter. DSO of 89 days was flat quarter-over-quarter. We remind you that this item may fluctuate from quarter-to-quarter. Total unbilled receivables decreased by $4 million as compared to second fiscal quarter of 2018. Our total deferred revenue both short and…

Thank you, ma'am. [Operator Instructions] And our first question will come from the line of Tom Roderick with Stifel. Your line is now open.

Yes. Hi. Matt [indiscernible] on for Tom. Thanks for taking my question and congrats Eli on the pending retirement. That’s great news. I’m sure for you all, though, it brings some positive and a little bit of other news story, but congrats on that certainly. Looking at the business in some of the business and some of the commentary you made around North America, could you maybe dig in a little bit on what you're seeing now at AT&T that a lot of the overhang from the Time Warner deals, seemingly should be behind us and maybe what your discussions with AT&T have been around maybe where the projects and some of the things are working on in the next couple of years are headed?

So, Tom, obviously, I cannot give you a very detailed exposure to the dialogue we have constantly with AT&T at the highest level. I would give you a few data points. One is, first of all, it's not completely over, because the government decided to challenge AT&T. We actually don't believe personally the company we don't believe that they will be able to do that, but it does represent little bit of slowdown in there in the execution plan if you expected AT&T media to rocket like a spring being released. It takes a little bit longer time. And to remind you, we don't have media numbers from AT&T specifically, other than the business that we had originally with Vubiquity baked into the numbers. We believe this by itself will be over the next couple of years a growth engine, timing of which we really cannot predict or share right now with you. On other areas, which are indirectly affected, AT&T is a very big company and they see the growth engines, including Cricket, including Mexico. They have a lot of business in the enterprise, which is new area for us. If we will be able to get in there. And I think they’re also revisiting their strategy regarding mobility due to recent years of losing some market share. So altogether, we’re seeing in AT&T activities in many, many, many domains obviously from the network, NFV, 5G, first network and all that, all the way to Mexico and to other areas including enterprise in between. But other than that I really -- it's really hard for me to give you more tangible data without compromising AT&T information or without guiding really for specific customer which we -- which is something that we cannot do it. It would not be useful for you and not have been useful for us.

All right. Great. Thanks. And then a lot of good wins we saw some from press releases after the close today. Nothing specific on ONAP, but could you give us a little bit of an update in terms of how that's progressing? Are we moving towards being sort of a standardization across some of the larger carriers across the world or is it still a little bit in flux and you’re still pressing forward with the opportunities that you have now? Thanks.

So, Tom, basically if you read between the lines of the prepared remarks, we do see overall more opportunities and more initial phases. Unfortunately, all of them start very small. But fortunately, we have more and more major carriers, especially the early adopters because the people that make the decision now that see Amdocs as a major contribution to their journey into NFV. So I think that there is no question about NFV. I think we have a better share than anyone has in cooperation with this companies. And we see uptick in the number of activities we have. The big news of today is Comcast. Comcast is something we started a year-ago and one of the small whatever couple of million dollars project and that's became the backbone of SD-WAN. SD-WAN is basically the most popular enterprise service and enterprise is the growth engine of Comcast and many others. So to be the heart of the NFV domain for SD-WAN is a big deal regardless to also not only the numbers and the size of the project is the position. I believe once we will finish this project, it includes orchestration and activation and active inventory of this component, this is a base for additional services. So we are very bullish about it and you can hear it and our voice and likely we also got this time, which is quite rare, also the permission of Comcast to mention their name specifically. So we’re thankful for that. So this is a big news of the quarter, but the Telstra deal of the OSS next-generation is also NFV related. They’re ONAP follower and few other proof-of-concept box that we are doing all around Europe and all-around the world are also good indication that we are on the right track. As I said more than once, now we see more cases but as I say more than once. The one thing it's really hard for us to predict and it's not like we really want to hold it back from you, is the pace of the additional projects. But every time we have this data points that I just shared with you, it makes us a little bit more optimistic about NFV and the investments that we have made in these domain. So it is a very exciting thing for us.

Great. Thank you and congrats Shuky, Tamar on the added role and Eli on the retirement. Thank you.

Thank you, Tom. Thank you.

Thank you. And our next question will come from the line of Jackson Ader with JPMorgan. Your line is now open.

Great. Thank you. Good evening, guys. Thanks for taking my question.

Hi.

Eli, the Vubiquity managed services contract with Verizon. Can you help us how we should be thinking about maybe a Vubiquity managed services contract versus the legacy Amdocs managed services contract? How they're structured, how they're priced? Maybe term, that sort of thing.

Yes. Its slightly different, although there are some components that repeat itself. The idea is that instead of charging Verizon for every transaction on the -- what is called SVOD and TVOD which is the transactional video on-demand or subscription video on-demand, we kind of strike a deal with them that up to certain level, it all will included in a like in a retailer, okay? Like in a fixed-price, so to speak. So it is related to volume eventually, but we basically give them the whole service, packaging it in a certain commercial agreement and to certain period of time. This specifically line is actually including all the video on-demand and the pay-per-view of Verizon Fios, quite significant contract and it's a multiyear. I can't remember this how long we signed it for this time.

I'm not sure we are at liberty to say, but several years.

Okay, but several years right there.

Yes, okay. Got you.

So from this perspective similar, but it has some different components. And again, it's something that is I would not say customary, but it's something that Vubiquity did before, and we will may evolve this model later on with slightly different components, but we are very happy with this deal. It's a very important deal for us.

Sure. Okay. And then a quick follow-up. I think, Eli, you mentioned in your prepared remarks that Europe is expected to outgrow the broader corporate average. And I just want to clarify, is that after foreign exchange headwinds, or is that on a constant currency basis?

Yes, yes, both reported basis as well as obviously they’re for constant currency as well.

Okay, cool. Thank you, Tamar.

Thank you, Jackson.

Thank you. [Operator Instructions] And our next question will come from the line of Ashwin Shirvaikar with Citi. Your line is now open.

Thank you. Let me also start with congratulations, Shuky and Tamar for your added responsibilities in the case of Shuky obviously new responsibilities.

Thank you.

Eli, it's bittersweet. I'm very happy for you, but also will miss you. Every time we've spoken, I’ve learned a lot. So thank you for that. Wish you the best. I wanted to start by asking about there were some comments with regards to North America restructuring. And then there is some specific mention of T-Mobile and Sprint. So I wanted to kind of parse that a little bit more to see if you're making a general statement with regards to a deal or is there some financial information that we should be -- we should know with regards to either that transaction or any details on the restructuring?

So, Ashwin, there is no direct relation whatsoever between our expectations of how we can support T-Mobile and Sprint and between the restructure. And the restructuring is more related to some alignments we have done around recent acquisitions as well as the fact that we see the full dynamics of demand in terms of skill set, location, et cetera, within the business that we are seeing. For example, we are very excited to see the Comcast NFV deal. Obviously, that requires us to shift resources and build up capabilities around Philly [ph]. So this kind of changes of requirements also alignment internally and this is exactly what is [indiscernible].

Got it. And then the relationship with AWS that you are setting up, it's -- I mean, I just want to get into some details with regards to as you perhaps involve services like AWS more, how does that change the economics of your contract?

Overall it doesn't. It's just a component. We're not talking about this early on the specific project in the Philippines. In general, we are …

No -- yes.

… really aligning our product sets to be cloud agnostic, but primarily we are testing it and we are offering a lot of it. It's a default on AWS. We’ve also strong relation with Microsoft Azure and others. So we see -- in regular deals, we see the cloud management system as a component, we price it as part of the overall deal and it's just an engine, instead of using our own data center or the customer data center or the resourcing [indiscernible]. We will use the cloud management system from Amazon or from some other component. So the overall feature does not change. Specifically on project like this, when we team up with AWS, it's actually basically transforming certain components of Globe in this case on to the cloud. Some of it -- our applications, some of it adjacent application. So in this case we just price it based on the capacity that we are consuming from the cloud. The beauty of it is that we show on one end to the services like [indiscernible] our capability to do that and it's something that everybody and its [indiscernible] more or less need. And on that end, the fact that we had a very [indiscernible] started by the way on the engineering side and went over to the commercial side. It means that they will call us [technical difficulty] and they have sales people all over the place and we hope that we will have other customers that will actually require the same type of capabilities. So that's kind of the story about AWS, and it's very exciting relationship. We developed a lot of rapport based on our requirement from the cloud. We are high-end software, so simple to carry Amdocs application in the cloud. We started there and we’ve all the relationships out there into the type of the deals that we’ve now with Globe.

Got it. Thank you, guys.

Thank you, Ashwin.

Thanks.

Thank you. And I'm showing no further questions in queue at this time. So now it is my pleasure to hand the conference back over to Mr. Matthew Smith, Head of Investor Relations for some closing comments or remarks.

Thank you very much for joining the 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 give us a call on the Investor Relations line. Have a great evening. Thanks.

Ladies and gentlemen, thank you for your participation on today's conference. This does conclude our program. You may all disconnect. Everybody have a wonderful day.