Nov 5, 2013
Executives
Elizabeth W. Grausam - Vice President of Corporate Strategy and Investor Relations Eli Gelman - Director, Chief Executive Officer of Amdocs Management Limited and President of Amdocs Management Limited Tamar Rapaport-Dagim - Chief Financial Officer of Amdocs Management Limited and Senior Vice President of Amdocs Management Limited
Analysts
Paul B. Thomas - Goldman Sachs Group Inc., Research Division Ashwin Shirvaikar - Citigroup Inc, Research Division Mark Sue - RBC Capital Markets, LLC, Research Division Matthew Van Vliet - Stifel, Nicolaus & Co., Inc., Research Division David Kaplan - Barclays Capital, Research Division Tal Liani - BofA Merrill Lynch, Research Division
Operator
Good day, everyone, and welcome to this Amdocs Fourth Quarter 2013 Earnings Release Conference Call. Today's call is being recorded and webcast.
At this time, I would like to turn the call over to Liz Grausam. Please go ahead.
Elizabeth W. Grausam
Thank you, Mike. 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 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 operation 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 a 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, 2012, filed on December 11, 2012, our Form 6-K furnished for the first quarter of fiscal '13 on February 12, 2013, our Form 6-K furnished for the second quarter of fiscal 2013 on May 16, 2013, and our Form 6-K furnished for the third quarter of fiscal 2013 on August 12, 2013. 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 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 to Eli.
Eli Gelman
Thank you, Liz, and good afternoon to everyone joining us on the call today. I am pleased to report that we concluded fiscal 2013 with a solid fourth quarter results.
We delivered full-year non-GAAP earnings per share growth of roughly 8%, which was the high end of our guidance issued at the start of the year. Overall, we believe that this was a year of continued progress for Amdocs.
We strengthened our competitive position in the market by winning strategically important deals with new and existing customers. Moreover, we demonstrated the quality and efficiency of our execution by successfully delivering on a number of major transformation deals around the globe.
In North America, we closed out a good year. AT&T was particularly strong in fiscal 2013, growing revenue in the double digits.
But we also benefited from the broader pickup in activity level as we help our customers respond to the rapidly changing competitive dynamics in the North American market. In the emerging markets, the progression of highly complex transformation projects drove double-digit growth for the year with strong finish at the fourth quarter.
We further solidified our strategic position in fiscal 2013 by expanding our reach within new and existing customers in Latin America and Southeast Asia. In Europe fiscal 2013, revenues declined as a result of tough operating environment and the anticipated ramp-down of some transformation projects.
However, sequential performance was relatively stable throughout the year. Overall, we exited fiscal 2013 with record quarterly and annual revenues, stable profitability and earnings per share growth, which was consistent with the high end of our expectations.
Turning to fiscal year 2014. We expect to deliver total revenue growth of 4% to 8%, which includes an organic growth outlook of roughly 2% to 5% plus the anticipated benefits of recently announced acquisitions.
Core business conditions are different among the geographies. Let me elaborate.
In North America, after strong growth year in 2013, we expect revenue growth will moderate in 2014. This outlook reflects normal variations in account activity.
As a reminder though, we are still subject to lingering uncertainty, resulting from recent acquisitions and consolidation in the North American market. As you know, several of our large North American customers are still in the process of closing acquisitions or post-managing integration planning.
As such, timing and scope of new activities within these accounts remains somewhat difficult to predict in the context of the fiscal year. I can assure you, though, that we are working diligently to serve these customers and to prove the value where we can bring to them in executing their cost measure and business strategies.
In the emerging markets, current projects activity, along with healthy pipeline of new opportunities, drive our outlook for continued double-digit growth in fiscal 2013 and '14. In Europe, recent awards with large operators support the projected stability in our outlook.
Nevertheless, difficult macroeconomics and regulatory conditions continue to leave us cautious. On top of solid expected performance in the core business in fiscal year 2014, we are also executing against new strategic growth initiatives.
In particular, we have announced 2 recent acquisitions that accelerate our activities in the area of network optimization. In the fourth quarter, we concluded -- we closed the acquisition of Actix.
And today, we have signed an agreement to acquire Celcite Management Solutions for $129 million. Combined, we expect Actix and Celcite to contribute between 2% to 3% of our full year revenue outlook in fiscal 2014 and drive modest earning accretions.
Let me take a moment to elaborate on the rationale for this back-to-back acquisition. First, we strongly believe that our traditional product-led service business model will also be successful in the network optimization space.
In our view, Actix and Celcite offer the most attractive spread of products and services capabilities available in the market, along with highly complementary geographic reach. By combining these acquisitions as a single unit in back-to-back deals, we believe we are in the best, best path to capture the network optimization opportunity.
Second, ready network optimization is a major concern to wireless carriers worldwide. With these acquisitions, we are tapping into new markets with significant growth potential.
We expect to bring value by combining a superior product and services offering with an agnostic approach to the underlying network equipment. Third, we are now better positioned to participate in the long-term growth potential of self-optimizing networks, or SON, which we believe represent the next generation of network optimization software.
Finally, Amdocs is uniquely positioned to introduce the most comprehensive customer experience portfolio that can capture the quality of service on the network as a critical touch point in the overall customer's experience. Overall, Actix and Celcite demonstrate that we're allocating capital against our strategic objectives by buying companies with strong, incumbent positions in new growth end markets.
Looking forward, we still see healthy pipeline for acquisition opportunities. Furthermore, we believe M&A will remain an important component of executing our strategy and strategic agenda, but only when we find the right targets.
These deals are also a good segue for me to talk about our broader capital allocation framework beyond M&A. First, we continue to believe in the value of dividend as the demonstration of our confidence in the future success of Amdocs, and as a dependable income stream for further enhance our total return to shareholders.
As such, we recommended, and our board subsequently approved, a 19% increase in our quarterly cash dividend to about $0.155. This represents an annual rate of $0.62 per share and equates to about a yield of 1.6% based on today's closing share price.
This dividend increase will be subject to shareholders' approval and will be payable in April 2014. I will also note that future changes in the dividend will be subject to periodic review and will be more likely to be tied to the underlying growth rate of our business.
Second, as I noted several times in the past quarters, I want to emphasize that we do not intend to accumulate cash on the balance sheet over the long term. In recognition of the better-than-expected proceeds from stock option exercise in fiscal 2013, and as well as a strong year of free cash flow production, our buyback activity picked up sequentially in the fourth quarter.
Given what we know today, we expect to continue repurchasing stock above the levels suggested in our 50-50 framework, at least into the early 2014. With that, I will turn the call over to Tamar.
Tamar Rapaport-Dagim
Thank you, Eli. Fourth fiscal quarter revenue of $845 million was within our guidance range of $830 million to $860 million.
Foreign currency fluctuations were negligible relative to the third fiscal quarter of 2013. Additionally, there was an immaterial impact from the acquisition of Actix, which closed on September 19.
Our fourth fiscal quarter non-GAAP operating margin was 16.7%, a decline of 10 basis points compared to the third fiscal quarter of 2013 and within our target range of 16% to 17%. Below the operating line, net interest and other expense was $1.5 million in Q4.
For forward-looking purposes, we continue to expect the net expense in the range of $2 million quarterly due to foreign currency fluctuations. Non-GAAP EPS was $0.63 in Q4 compared to our guidance range of $0.60 to $0.66.
As anticipated, the higher-than-usual effective tax rate negatively impacted non-GAAP EPS in Q4 by approximately $0.10, and was primarily due to changes in tax logs and rates in several jurisdictions. Free cash flow was strong at $205 million in Q4.
This was comprised of cash flow from operations of approximately $232 million, less than -- less $27 million in net capital expenditures and other. DSO of 73 days increased by 1 day quarter-over-quarter and was mostly due to consolidation of Actix.
Total unbilled receivables were down by $14 million as compared to the third fiscal quarter of 2013. Our total deferred revenue, both short and long-term, increased by $16 million sequentially in Q4.
Our cash balance at the end of the fourth fiscal quarter was approximately $1.3 billion. Though net of short-term debt, it was $1.1 billion.
And you were down $200 million on our credit facility in Q4 for short-term funding purposes. And the balance has since been fully repaid.
Our 12-month backlog, which includes anticipated revenue related to contracts, estimated revenue for Managed Services contracts, letters of intent, maintenance and estimated ongoing support activities was $2.87 billion at the end of the fourth fiscal quarter, up $40 million sequentially. Approximately half of the sequential increase in backlog was due to consolidation of Actix.
During the fourth fiscal quarter, we repurchased $97 million of our ordinary shares under our current $500 million authorization plan. We had $336 million remaining under this authorization as of September 30.
Now turning to our outlook. We expect revenue to be within a range of $845 million to $875 million for the first fiscal quarter of 2014.
Our guidance incorporates a full quarter of revenue contribution from Actix, but no contribution from Celcite, as the deal is expected to close quite late in the first fiscal quarter or early in the second fiscal quarter. We anticipate minimal sequential impact from foreign currency fluctuations as compared to Q4.
For our full fiscal year, we expect total revenue growth to be within the range of roughly 4% to 8% on a constant currency basis and reported basis. This outlook incorporates the consolidation of Actix and Celcite, which in aggregate, we expect to contribute approximately 2 to 3 percentage points of the growth outlook.
Also within this outlook, and consistent with our prior expectations, we anticipate revenue from our Directory business in fiscal 2014 to decrease in the double-digit percentage range, placing about a 1% drag on the total company results. We anticipate our non-GAAP operating margin for fiscal 2014 to continue to be within our long-term target range of 16% to 17%.
We also expect our non-GAAP effective tax rate to be in the range of 13% to 16% for fiscal 2014. We expect the first fiscal quarter non-GAAP EPS to be in the range of $0.72 to $0.78, which reflects a non-GAAP effective tax rate of 13% to 15%.
Our first fiscal quarter non-GAAP EPS guidance also incorporates an expected average diluted share count of roughly 162 million shares and the likelihood of a negative impact from foreign exchange fluctuations in net interest and other expense. We excluded the impact of incremental future share buyback activity during the first fiscal quarter, as the level of activity will depend on market conditions.
For the full fiscal year, we expect to deliver 6% to 9% non-GAAP EPS growth, which includes modest equation from the combination of Actix and Celcite. Our full year EPS outlook does factor in expected repurchase activity over the year.
As Eli mentioned, due to the recent accumulation of cash from the proceeds of employee stock option exercises and strong free cash flow performance in fiscal 2013, we expect that our buyback activity may be greater than that suggested in our 50-50 free cash flow allocation framework. Finally, the total return we deliver to shareholders will be enhanced beyond the earnings growth outlook by our dividend program, which is the new quarterly dividend rate as approved by shareholders, would yield about 1.6% on the current share price.
Therefore, in fiscal 2014, we expect our non-GAAP EPS growth plus our dividend yield to add up to the high single to low double digits, which we believe should support an attractive total return to shareholders. With that, we can turn it back to the operator to begin our question-and-answer session.
Operator
[Operator Instructions] We'll go first to Paul Thomas with Goldman Sachs.
Paul B. Thomas - Goldman Sachs Group Inc., Research Division
You've talked about moderation in North American growth next year. Is that across the customer base or is that more specific to your large North American customers?
Or there might be some more M&A impact?
Eli Gelman
Paul, some of them will continue growing. Some of them will slow down.
It's the summation of all of them together. I don't really think that specifically in AT&T, the double digit is a sustainable growth rate even for AT&T.
But it's not only one customer. It's the summation and the fluctuation between the different businesses, both on the wireless, wire line, cable MSOs in North America, including Canada, of course.
That's kind of the color I can give you on that.
Paul B. Thomas - Goldman Sachs Group Inc., Research Division
Okay. Looking at the margins and the guidance, if the acquisitions are accretive in adding 2 to 3 percentage points of revenue growth, how come EPS guidance isn't a little bit higher, more like 9% to 12% growth?
Are there other investments planned during the year or -- what are the moving parts there?
Tamar Rapaport-Dagim
So first of all, we said it's modestly accretive. And we are also factoring the fact that we are using the same margin range of 16% to 17%.
So we are looking, on the one hand, on the business continuing to develop organically, as well as from the M&A contribution. However, we don't want the market to expect that immediately.
As we go through this acquisition, our focus is going to be around margin expansion. We are entering into a new space.
It's definitely a strategic move for us. And we want to focus on making the right move entering that and continuing to expand, of course, on the basis of Actix and Celcite, the customer base and activities we are going to have in this domain.
Paul B. Thomas - Goldman Sachs Group Inc., Research Division
Okay. Then last, so looking at the dividend increase, it's about $100 million for the dividend for next year.
So I guess looking in the 50-50 frameworks, are you looking for $500 million in free cash flow for '14?
Tamar Rapaport-Dagim
We're not guiding specifically to a free cash flow number because it may fluctuate. But if you recall, we talked in the Analyst Day about the fact that $400 million a year is the minimum.
We're tracking this year with $560 million. So I don't think your $500 million is kind of out of the ballpark.
I just don't want to be at a position where we're guiding to a number.
Operator
And we'll go next to Ashwin Shirvaikar.
Ashwin Shirvaikar - Citigroup Inc, Research Division
I guess my first question was with regards to just the network optimization market that you're beginning to focus on here in a bigger way. Is this more of a software-led market?
Who tends to be the buyer and the client? Is it the same person that might buy BSS/OSS?
And then why now? I mean, are you just pointing to maybe increased competition from telecom equipment-type players?
Or is this a response to, I don't know, AT&T Domain 2.0? Any thoughts?
Eli Gelman
Well, let me try to give you some color, Ashwin. First of all, the buying center in a regular carrier would not be the IT or the finance group, which we usually work with.
It will be the CTO, the IN guys. So this is another fringe benefit that we have stepping into these new buying centers.
Secondly, this is a purely offensive move for us. We are going after new markets.
And when you look around, this is one of the most important aspect of key areas around the world. They have to go down both on their cost structure using the infrastructure, the frequencies, the equipment better, as well as providing a better customer experience.
And when you combine both ends, we think that we can contribute significantly to their -- to meet their needs. It might be a defensive mode as well if some of the normal competitors of us that's coming from the network equipment provider space will try to get into our market.
But we're doing okay on the regular business as is. It's just for us.
It's a new business stepping into a new buying center, providing our typical product and services move. We could not find it in one company so we had to do 2 acquisitions to complete the whole cycle.
And again, it's going after the network equipment optimization and it's frequencies and infrastructure optimization, as well as providing better customer service to the end user. At the end of the day, the network is probably the number one touch point that nobody is actually dealing with.
So we believe that we can make a change here and into this new value to the market. So far, we have been getting a very strong validation from many customers around the world around this move.
So we are optimistic that we are doing the right thing.
Ashwin Shirvaikar - Citigroup Inc, Research Division
Okay. And with regards to the 2% to 5% revenue growth estimate, the organic revenue growth estimate, I guess it's fair to say it's been in consensus expectations for some time that Amdocs should be -- or actually has the right to be the leading beneficiary of a plant M&A in North America here that's going on.
So to what extent have you included that in your estimates? I know you said timing and scope is difficult to predict, but is it there at all or will it result in upside if it comes?
Is it 5% instead of 2%? Just to kind of explain that, please.
Eli Gelman
Well, Ashwin, we can always look at the positive aspect. We did not conclude in this guidance every -- any major move, positive or negative, that can come out of a strong acquisition.
Let me just -- I mentioned last quarter, but we worked diligently with Sprint for many years. But now they have a new owner, SoftBank.
They come with their own philosophy of life. And one extreme could be that they will say, okay, we want to take it in-house and we will know how to operate it better.
And we have our own software. We think it will be a big mistake, but just as an extreme case.
The other way is such as saying, guys, you know what? Why won't you take more of it and enjoy -- and help us to compete in this dynamics.
North America became a very competitive market in the last couple of quarters. So it can go both ways.
We are estimating here more or less normal fluctuations in the business. The same goes about T-Mobile, the same goes about the AT&T and Leap or Cricket.
So we are making some normal assumptions here. By that, I think we are doing something on average.
But any one of them can go to positive or negative. It depends on your assessment, who are going to enjoy consolidations and M&A in the North American market.
Operator
And we'll go next to Mark Sue with RBC Capital Markets.
Mark Sue - RBC Capital Markets, LLC, Research Division
Maybe just on when do you know that the uncertainty related to kind of the direction that some of North American carriers might take -- might be behind us? Will that be another 3 months, 6 months or possibly even longer?
And then if we look at the big areas of growth and opportunity in emerging markets, maybe you could just give us a sense qualitatively the pipeline activity inclination for a lot of these service providers to increase their service velocity and to rely on partners such as Amdocs, that will be helpful.
Eli Gelman
So basically, you're talking about 2 very different questions. Regarding the first one, the uncertainty, we have our own guesses.
But your guess is as good as ours. You are following up on that.
I believe that we're seeing in the fiscal year FY '14, maybe even the first half of it, but it's not demonstrative. That could be a quarter, 2 quarters, it depends.
And it's not necessarily going to be binary like someone to declare to the world that they're going to do A-B-C. It's a moving process.
We are very close to all of these customers. And we're working with them, as I mentioned in the script, diligently to prove our value to them.
But since it's unknown, it's unknown. But I don't think it's a matter of weeks, but it's not a matter of many quarters.
But that's more or less our guess I guess right now because most of them already announced it and working on it, but not necessarily concluded all the aspects of the merger. The second question about the emerging markets, the color I can give you there mainly has to do with the dynamics of the emerging markets on both ends of the world, the Southeast Asia and Latin America.
On both ends, what you see is a shift from land grabbing simple prepaid environment to more and more convergent prepaid and postpaid. You're talking about introduction of smartphones.
And you're talking about potential of customers. So customer experience basically.
This is the #1 tool. The second -- the third component is multiply.
You see, customers are going from single play to double, triple, quadruple play. All of the 3 major dynamics should work for Amdocs because we wrote the book on convergent prepaid, postpaid and data on customer experience and on multiply.
If you add to that some potential M&A in the emerging markets, which is not out of the equation, that again should work for us. So we feel quite comfortable that once we establish in the last couple of years our strong position, both in Latin America and Southeast Asia, that we will be able to continue the momentum in the double-digit growth, as we mentioned in the script, but it is bent on some fundamental things.
Now in terms of the bids and what we are chasing, you will exceed, Mark, but I'm not sure that I can really give you the list of names to start with just because we don't want to wake up the rest of the gangs. But we think that we're in a good position in many of the projects there.
And it's a matter of execution now. So we need them then to go delivering it.
Mark Sue - RBC Capital Markets, LLC, Research Division
Understood, that's helpful. So that's in Asia and Latin America that the carriers want to be more outward-facing than inward-facing so that it's kind of moving in your direction a little bit faster than we saw with the prior rate of adoption.
Eli Gelman
Exactly.
Mark Sue - RBC Capital Markets, LLC, Research Division
Okay, that's helpful. And then maybe just separately on just Managed Services.
I think it was down sequentially a little bit for 2 quarters in a row. Maybe some dynamics there, that will be helpful.
Eli Gelman
I wouldn't read too much into it. It's fluctuation of -- in all the business that's in a normal way.
As a matter of fact, what it really means that percentage-wise, we are getting more projects. Now why we're excited about more projects because more projects basically means real muscles.
We're bending real muscles for the company. Usually, Amdocs model is that once we have a project, we put it in production successfully.
Then the customer is happy. They will give us more business.
And we are building on top of it more and more businesses. And as we're expanding our offering, we have more to sell to the same customer.
Now we have also a network optimization that we didn't have only 1 quarter ago. So the fact that we have projects versus Managed Services usually is an exciting component.
Obviously, it's more volatile, so we have to go to some period of less stability, if you will. We hope and intend to turn some of the projects into Managed Services in the future, as we have done in the past.
So I would not read too much into the fluctuation there on Managed Services. Part of it is Clearwire.
Part of it is just change of business. Some of it is directory.
I don't think you need to go -- to be too excited about it. I'm actually more excited about the fact that we have a large portion of new projects coming our way.
And behind us, we have a lot of, really, well execution of major projects around the world. So the combination of projects that we just delivered with 8.1, with version 9 now, and with the fact that we have new projects to the new wins, is kind of an important component.
Operator
And we'll go next to Tom Roderick with Stifel.
Matthew Van Vliet - Stifel, Nicolaus & Co., Inc., Research Division
Yes. Matt Van Vliet on for Tom.
I wanted to follow up on the question regarding Asia. And just seeing -- what kind of trends you're seeing there?
And how much of the macro commentary that we're seeing around the market and just kind of the headwinds there do you think is impacting your business? And kind of how is that impacting?
Eli Gelman
You are talking about Asia, right?
Matthew Van Vliet - Stifel, Nicolaus & Co., Inc., Research Division
Yes.
Eli Gelman
So look, most of the headwind that I know if we're was talking about and when you look at the overall macroeconomics come out of a slowdown in China, some changes in India and such, first of all, these are not our primary markets in Asia. Our primary markets in Asia is Malaysia, Indonesia, Philippines, Singapore and others, also India, but not really a large business.
That's A. B, most of the macroeconomics and the trends that you see there are traditional.
In India, for example, in telecom, the government is really pushing for higher competition and are issuing more licenses. And so we actually believe that there will be more opportunities in India for us in the future.
So altogether, we believe that Asia represents a strong potential for us also in FY '14 and FY '15. And the same goes with Latin America.
So we are not that worried about some of the bigger picture that you see out of Asia.
Matthew Van Vliet - Stifel, Nicolaus & Co., Inc., Research Division
And then just a quick follow-up on that. Given that the region is driven so much by the economies in China and in India as being kind of tertiary to your core markets, is there any concern or are you starting to see anything with the markets you mentioned that they might be slowing just as a cautionary move, as the larger economies in the area tend to -- are looking to put the brakes on?
Eli Gelman
We couldn't see any trends of net. You need to remember that we have 0 business in China and limited business in India.
It's such that for us, India represents growth for the future. So the ripple effect over the other markets, we haven't seen it.
More than that, in many cases, the macroeconomics are not a direct influence on Amdocs. We are not that vulnerable to the number of devices or the number of phones that they are selling.
For us, penetrating into a new territory or into a new customer is more important than overall microeconomics. Now if the situation will be really bad, they may not decide not to transform.
But we didn't see evidence to that on the contrary. Actually, we are bidding right now on some readily major transformation deals in Asia.
So, so far, we cannot say anything that can support the concern that you're raising in theory.
Operator
[Operator Instructions] We'll go next to David Kaplan with Barclays.
David Kaplan - Barclays Capital, Research Division
I have a couple of questions, but I'm going to start with one that's kind of out in left field a little bit. Can you guys talk a little bit to us about what's going on in the cable market opportunities?
We all know your bagger strength in telcos. Your strength in Europe is also very clear.
U.S., we can get that in a second. But what kind of opportunities are you seeing in cable, specifically?
So that's, I guess, the first question.
Eli Gelman
So this is -- first of all, David, this is not left field, this is center. Part of our business, I would divide it into 2, first of all starting with the rest of the world.
We see progress in the rest of the world. I call it video with your permission.
This is cable TV, IPTV and satellite. So we see all kinds of new initiatives around the world from prepaid to cable and satellite all the way to combining it in a very interesting way, multi-play video and wireless and wireline and others.
So we see it in Brazil. We see it in Southeast Asia, we see it in other places.
And also in Europe, and you see Vodafone buying Kabel Deutschland, which is a major move in Germany. These all represent interesting opportunities in the rest of the world.
In North America specifically, we believe that it will be a slow transformation. We have seen it.
We have said it actually several times, but we believe it will happen, and it's happening but in a very slow pace. In other words, people will upgrade from components of the software.
They will -- maybe we'll see some consolidation of the market, which is not out of the question anymore. And we also anticipate maybe some stronger competition within North America between the telcos and the MSOs.
If you would notice -- if you would follow the rumors and you see what Verizon is trying to do, what AT&T is trying to do, they're not necessarily sitting still in this business. So on one hand, we do not see major transformations.
I wish I could have -- break any news there. But on the other hand, we don't see the MSOs sitting on their hands anymore.
And they start doing all kinds of things. And we hope to take a part of it as well.
So we see more activity right now in the rest of the world, cable, satellite, video in general. North American market is still kind of talking[ph] for position, I would say, but I would not exclude the option that within the next year or maybe in a half, we'll start seeing some bigger moves.
David Kaplan - Barclays Capital, Research Division
Okay. And if we can now move onto the acquisition a little bit.
And I think this question was kind of asked already. One of the things,you might want to think about the market you guys are in, and it's a very -- or it seems at least to be a very consolidated market.
What are the up-and-coming disruptive technology that Amdocs sees out there? I'm guessing that the acquisitions that you made in the last 2 months.
Talk to that a little bit. And then, also, what's in your technology pipeline when you think in terms of where the market's going that's going to keep Amdocs at its competitive advantage over its peers?
Eli Gelman
So David, obviously, we have a lot of activities within our core to keep us ahead of the competition. We like this position to be ahead of the competition.
And we keep on investing in the core to expand this leadership. Let me just give you an idea.
We came up with what we call a multichannel, and omnichannel customer management set of publications. That is to say that it does really matter if you address.
You're actually coming into the back end systems from the call centers, CSRs, from the stores, from dealers, from kiosks or from your own device is self-service, you would actually have a very coherent and a very similar experience as a consumer or as small and medium businesses and so on. So this omnichannel is a big thing.
And that's part of it adding on to the leading position that we have with the CES 8.1 and CES 9. And then we have additional applications that we are coming to the market with, which has to do with machine-to-machine and connected homes and security and other things, but that's all within the core and we can talk about it.
And most likely in the next Analyst Day, sometime in the following few quarters, we'll probably elaborate on some of these initiatives, which are always limited on the call. Adjacent to that, and specifically around network, we believe that network software will never get close to the hardware, okay?
So network software, we believe, represents a very big opportunity for Amdocs. There are a very few companies in our scale that can actually get into this space, very few companies that are trusted by both IP and IN in the carrier's environment and in the Amazon environment, and that can deliver high-scale carrier grade network software.
We are doing it today with OSS. We are doing it today with prepaid.
We are doing it today with several places. But Bridgewater acquisition obviously is in the heart of it.
But we believe that network optimization is an area that for the next foreseeable future, 5 years, 10 years, would be very important to the carriers, the world's carriers. We are talking about networks that are hybrid in nature, talk about 3G and 4G.
And now we're talking about small cells and other technologies. They need to manage all of this hybrid network in a very complex environment.
On top of it, we are talking about several providers, could be the Erickson and Huawei and Alcatel-Lucent and NSN and what have you. So we come with a proposition that we can optimize entire networks over several dimensions, including different network equipment providers, different technologies and automated way -- products and services, they're quite a compelling proposition.
So this is like just to give you an idea of an area that we were not involved in up until recently. We saw it as a great opportunity.
And the underlying dynamics, I would say, is that network moves to software. That's it.
As hardware became commodity in the IT space, we believe the same thing would happen in the next 5 years or whatever in the network space. And as such, when you look around, we could be a player.
Not only that, we have been encouraged by some of our key customers to move faster in this space. And then that's -- and between our strategy and the encouragement that we get from the market, we think that we're doing the right things.
And in this case, accelerating and hit the ground running with 2 acquisitions came better than building it internally. Now some other thing we are not telling you right now is what is cooking in our R&D.
But we'll wait until we are ready and tell you how we augment with some new products in this field as well.
David Kaplan - Barclays Capital, Research Division
Okay. Maybe just a little quick one, I mean a housekeeping, this one actually be for Tamar.
These 2 acquisitions, you guys talked about them being accretive to the top line. Is there any impact on seasonality?
Or is this more leaning towards licenses or services, one or the other, that's going to have an impact in our models?
Tamar Rapaport-Dagim
Actix is more of a software product maintenance and professional services. So that's more of the product side in our product-led service model that we are trying to build here in the served network.
Actually, Celcite is more service-oriented. The combination of both is presenting a combination that is more balanced.
And therefore, adding on the fact that there could be regular fluctuations in this kind of businesses, I don't expect any major seasonality.
Operator
[Operator Instructions] We'll go next to Tal Liani with Bank of America.
Tal Liani - BofA Merrill Lynch, Research Division
Most of my questions were asked. I have one more.
When it comes to your guidance, you're guiding for the balance, if I take the midrange, organic growth was about 3.5%. And in the last year, you grew kind of about the same, but North America was up nicely and rest of the world was down.
So 7% it is plus-minus versus minus 6%. So the question is what kind of dynamics are you expecting in 2014 that takes you together between North America versus the rest of the world takes you together to plus 3.5% in the midpoint?
Are you assuming that North America reverts to what we see in this quarter and kind of grows for the year? Or are you assuming that there is going to be kind of [indiscernible] in North America, but rest of the world is going to pick up and grow?
Tamar Rapaport-Dagim
We are expecting North America to grow. Actually, the point of the message is that they're going to moderate because we didn't think that the type of growth we've seen in fiscal '13 is sustainable.
But North America continues to be an area where we believe we can drive growth in fiscal '13. In particular, we've seen year-over-year decline in Europe.
And actually sequentially, we have been stable in Europe for some quarters now. So we expect that we can continue in these kinds of stable mode at least in Europe.
Yes, there could be fluctuations from quarter-to-quarter. So I'm talking about in terms of the vector overall and emerging markets.
We are continuing to see very healthy momentum in terms of activity in emerging markets, as Eli mentioned before, both in APAC and in CALA. We are seeing this kind of opportunity to continue and drive double-digit growth.
So that will be a factor of energy to the top line of our fiscal '14 as well. So in July, I would say it's more of probably a healthy blend of the growth from different regions that we're seeing in fiscal '14.
And yes, they could be around this midpoint or they could be obviously different fluctuations from region to region.
Tal Liani - BofA Merrill Lynch, Research Division
Got it. And Tamar, when you entered 2013, you had -- AT&T was weak before, but the project kind of started.
And how would -- and then you had also very big projects you won before that in emerging markets. So that it looks like the visibility into 2013 was kind of relatively solid, if I look kind of throughout the world.
Is it -- is the visibility going into 2014 worse than what you had before? Is it worse than normal?
Or is it similar to what you had? And the only reason I'm asking is because there were some very big projects that ended before kind of -- or ended recently.
And it looks like maybe there is less visibility there versus there are some things you already digested in emerging markets and maybe you have better visibility there. So I'm just trying to understand the visibility into projects going into the next year.
Tamar Rapaport-Dagim
You're actually seeing normal visibility, I would say. Yes, some projects ended, but some are picking up and running at their peak level as we speak.
And as always, we also want to win new projects going into the year. So we're not resting just on the existing backlog.
But I would say more of the same in terms of visibility.
Operator
It looks like we do have a follow-up from Ashwin Shirvaikar.
Ashwin Shirvaikar - Citigroup Inc, Research Division
I had a -- it may sound like a hard question. But with all the recent news around privacy and data and spying and all that kind of stuff on -- does that affect you directly or indirectly because you deal with networks and you deal with a lot of these telecom customers and so on, so forth?
So have you seen any impact around that? Conversely, maybe it provides you with an opportunity for a new product.
I don't know, just asking.
Eli Gelman
It's actually a good question, Ashwin. The bottom line, first of all, is that we don't see any change or any pick of concerns.
We've been in this security and intellectual property and privacy protection for many years. We're actually running a lot of stress tests against what we are doing for our customers.
If that will become a topic that become a concern around the world for telecom, yes, it might even represent eventually an opportunity for us. But right now, we don't see it as an opportunity or a major threat.
And we cannot say that we see any trend in the concerns. At the end of the day, and don't forget, we don't work for the U.S.
government. So people do not suspect us to have any specific doings, any of that.
And it's not something new at all for the business that we are running. And it's mainly around privacy more than anything else, if you will think about it this way.
Now don't forget that in most cases, still most of the projects, we do not run the operation. And even when we do, we usually do not own or copy the customer information, which is the most delicate one.
Even when we do operation remotely, we develop a software that allows us to access the data, the customer data remotely without moving it to our operation. So we have a lot of layers of protection in today's environment.
And so far, well, we didn't see a pick in this topic. But it could be that it will come.
Operator
Thank you. And that is all the time that we have today for questions.
At this time, I would like to hand the program back over to Liz Grausam for closing remarks.
Elizabeth W. Grausam
Thank you all very much for joining our call this evening. And we do appreciate your continued interest at Amdocs.
We look forward to hearing from you in the coming days. And if you have any questions, please do call the Investor Relations group.
Have a great evening, and I'll turn it back to the operator to conclude the call.
Operator
And thank you for joining us, everyone, today. We do appreciate your participation.
This does conclude today's program. You may disconnect at any time.