Q1 2022 Amdocs Ltd Earnings Call

February 1, 2022

[music].

Speaker 1: Thank you for standing by and welcome to the MDOT's limited first quarter 2022 earnings conference call. After this time, all participants are in listening only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 on your telephone. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program. Matthew Smith, head of investor relations. Please go ahead there.

Thank you for standing by and welcome to the Amdocs Limited first quarter 2022 earnings Conference 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 to ask a question. During this session you will need to press star one on your telephone as a reminder, today's program is being recorded and now I would.

To introduce your host for today's program Matthew Smith head of Investor Relations. Please go ahead Sir.

Speaker 2: Thank you, John . Before we begin, I need to call your attention to our disclaimer statement on slide two of the presentation. It notes that some of our comments today may be forward looking statements and our subject to risks and uncertainties as described in Amdox's SEC filings and that we will discuss certain financial information that is not prepared in accordance with GAP. For more information regarding our use of non- GAAP financial measures, including direct conciliations of these measures, we refer you to today's earnings release, which will also be finished with the SEC on Form 6K.

Thank you John before we begin I need to call your attention to our disclaimer statement on slide two of the presentation and note that some of our comments today may be forward looking statements and are subject to risks and uncertainties. As described in Amdocs is 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.

All of you to today's earnings release, which will also be furnished with the SEC on form 6K.

Speaker 2: Participating on the call with me today are Shuki Sheffa, President and Chief Executive Officer of Amdok's Management Limited and tomorrow Rappaport Gagin, Joint Chief Financial and Operating Officer.

Participating on the call with me today are <unk>, President and Chief Executive Officer of Amdocs Management Limited and Tomorrow Rappaport, the game joint Chief financial and operating officer.

Speaker 2: In the system with last quarter to support today's earnings call, we are providing a presentation which can be found on the Investor Relations section of our website and also as always a copy of today's prepared remarks will also be posted immediately following the conclusion of this call. On today's agenda, Shuki will provide an update on our recent strategic progress and business performance and tomorrow we'll review our financial results and our local fiscal year 2022 and with that I'll turn it over to Shuki.

System with last quarter 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 <unk> will provide an update on our recent strategic progress and business performance and Tomorrow will review our financial results.

Results and outlook for fiscal year, 2022, and with that I'll turn it over to shoot.

Speaker 3: Thanks Math and good afternoon to everyone joining us on the call today.

Thanks, Matt and good afternoon to everyone joining us on the call today.

Speaker 3: August 12th they call by recapping our business and financial achievements for the first quarter of fiscal 2020.

We will start today's call by recapping, our business and financial achievements for the first quarter fiscal 2000 tool set.

Speaker 3: Second, I will add to you on the main pillars of our strategic growth framework and continued progress we've made in the past quarter. I will wrap up by discussing our financial outlook, including our expectation for continuous revenue growth in fiscal year 2023 in 2024, which we are providing today. Tama will then provide additional details on our first quarter financial performance and guidance.

Second I will update you on the main pillars of our strategic growth framework and continued progress we've made in the past quarter.

I will wrap up by discussing our financial outlook, including our expectation for continuous revenue growth in fiscal year 2023 in 2019 for which we are providing today.

<unk> will then provide additional details on our first quarter financial performance and guidance.

Speaker 3: As a reminder, our comments today will refer to certain financial metrics on a performance basis that are applicable to provide you with a sense of the underlying business trends, including the financial impact of open market, which we divested on December 31, 2020.

As a reminder, our comments today will refer to certain financial metrics on a pro forma basis, where applicable to provide you with a sense of the underlying business trends, excluding the financial impact of open market, which we divested on December 31st 2020.

So let's get going.

Speaker 3: Turning to slide 7. I'm proud to report a great start to fiscal year 2012.

Turning to slide seven I am proud to report a great start to fiscal year 2022.

Speaker 3: At our analyst and investor business at the Class November , we outlined our strategy to deliver accelerators revenue growth by bringing market-leading innovation designed to meet industry needs for digital modernization, 5G monetization, journey to the cloud and network automation.

Our analyst and Investor business update last November we outlined our strategy to deliver accelerated revenue growth by bringing market, leading innovation designed to meet industry needs for digital modernization <unk> monetization journey to the cloud and network automation.

Speaker 3: Better than our first quarter performance, I believe our strategies continuously gaining traction in the month.

Our first quarter performance I believe our strategy is continuously gaining traction in the market.

Speaker 3: Evidence by another quarter of a strong film momentum echoes long-standing global customers such as AT&T, Pimoba, Waterfront, Glob Telecomi NADERS, additionally, we penetrate several new logos that support our ongoing growth and digital expansion, including PPS Group in Europe and WaterCommina.

Evidenced by another quarter of strong sales momentum of course long standing global customers, such AT&T T mobile Vodafone Globe Telecom and others. Additionally, we penetrated several new logos that support our ongoing growth in the digital expansion, including PBF group in Europe and Vodacom in Africa.

Speaker 3: Our customer investment industry mega-trains like 5G and Cloud are gathering pace and translating to strong demand for a product and service.

Our customer investment in the industry Megatrends like <unk> cloud is gathering pace and translating to strong demand for our products and services. The relevancy of our offering to the market result from our past and ongoing commitment to R&D investment, which further extends our technological leadership.

Speaker 3: The relevancy of our offering to the market results from our past and ongoing commitment to R&D investment, which Federal extends our technological leadership and breaks cutting aid innovation to our customers.

In brakes cutting edge innovation to our customers.

Speaker 3: To add a further point, I believe our capacity to win new business in is a function of our unrivaled reputation for project delivery, as demonstrated yet by another record quarter for the number of deployment miles on the chief for our customers in Q1.

To add a further point I believe our capacity to win new business and is a function of our unrivaled reputation for project delivery is.

Demonstrate its yet by another record quarter for the number of deployment milestone achieved for our customers in Q1.

Speaker 3: MNA is another important tool we use strategically to accelerate our capabilities in key growth areas.

M&A is another important tool, we use strategically to accelerate our capabilities in key growth areas, focusing our cloud strategy I am delighted to announce our acquisition of <unk>, a boutique UK based cloud company specializing in engineering consultancy and training services for Enterprises, Inc.

Speaker 3: Focusing our cloud strategy, I'm delighted to announce our position of DevobSkuk, a boutique UK-based cloud company, specializing in engineering, consultancy and training services for heteropiasis, implementing cloud and DevobSkuk.

Limiting cloud enables Davis group geographically complements the high end expertise, we acquired with last year's acquisition of <unk> group and further strengths our professional services organization to support all aspects of our customer cloud journey, including consulting cloud native software integration of <unk>.

Speaker 3: DevOps Group geographically complements the high-end expertise required with last-year acquisition of Source Group and further strength our professional services organization to support all aspects of our customer cloud journey, including consulting, cloud-native software, migration of MDocs and non-MDocs applications, ongoing development, and cloud operations.

Noninterest application ongoing development and cloud operation.

Speaker 3: Overall, I am proud of our Ferguson Q1, which we achieved while striving to improve the lives of people in our communities.

Overall, I am proud of our progress in Q1, which we achieved while striving to improve the lives of people in our communities.

Speaker 3: Slidehead High Letters, just some of many issues.

Slide eight highlights just some of many initiatives demonstrating our commitment to green environment. We recently completed the cloud migration project to support improved air quality in London by expanding the <unk> ultra low emission zone and.

Speaker 3: Demonstrating our commitment to green environment, we recently completed the Cloud Migration Project to support the quality of the run-down by expanding the city's ultra-low emissions.

Speaker 3: Endox Mexico was recognized by NGO Human Rights Campaign as one of Mexico's best places to work for LGBTQ plus for 2021. In our deep commitment to diversity was recognized by the Peruvian government for promoting an inclusive society which people with disabilities achieve full development.

Ox metric Mexico was recognized by NGO Human rights campaign is one of Mexico's best places to work for LGBTQ plus for 2021, and our deep commitment to diversity was recognized by the Peruvian government for promoting an inclusive society, which people with disabilities.

<unk> achieved full development.

Speaker 3: Underfizio and I also warn that diversity in the business prestige world for a work to promote employability of the Arab community minority in the tech industry.

Amdocs seasonally it also won the diversity in the business prestigious awards for work to promote employee ability over the Arab minority in the tech industry.

Speaker 3: Is the Markoval commitment to sustainability and corporate responsibility? Amdox was recently honored to be included in the prestigious S&P Dow Jones Sustainability Index for North America for the self-consecretity.

Is the bulk of our commitment to sustainability and corporate responsibility Amdocs was recently honored to be included in the prestigious S&P Dow Jones sustainability index for North America for the seventh consecutive year.

Speaker 3: placing us and mass the top 15 companies in our industry based on long-term economic, environmental and social critique.

Placing us among the top 15 companies in our industry based on long term economic environmental and social criteria.

Speaker 3: I believe such recognition is a testament to Amdocs' identity and reflects the value held by our 29,000 employees worldwide. I would like to take this opportunity to extend a warm welcome to all those who have recently joined the Amdocs family, and my sincere thanks to all our people for their dedication, resilience and commitment to ensuring a great start to our fiscal year.

I believe such recognition is a testament to amdocs identity and reflects the value held by our 22000 9000 employees worldwide I would like to take this opportunity to extend a warm welcome to all of those all of those we've recently joined Amdocs family and my sincere.

Thanks to all our people for their dedication resilience and commitment to ensuring a great start to our fiscal year.

Speaker 3: Our great start to fiscal year is reflected in our Q1 financial performance. The key highlight of each...

Our great start to fiscal year is reflected in our Q1 financial performance. The key highlights of which are on slide 10.

Speaker 3: We delivered record revenue of $1.1 billion, up 10.6% on a performance-constant-currency basis, and led by our best-ever quarter in North America, where we continue to see high activities levels across our top customers.

We delivered record revenue of $1 $1 billion up 10, 6% on a pro forma constant currency basis, and led by our best ever quarter in North America, We will continue to see high activity level of course, our top customers.

Speaker 3: Strong sales momentum was reflected in our record 12-month backlog of $3.8 billion, which was up $140 million sequentially and 9.7% from a year ago.

Sales momentum was reflected in the record in our record 12 months backlog of $3 8 billion.

Which was up $140 million sequentially and nine 7% from a year ago.

Speaker 3: On the bottom line, we deliver a non-gap earning per share of $1.20, which was the higher end of our Q1 guidance rate.

The bottom line, we delivered a non-GAAP earnings per share of $1 20, <unk>, which was the higher end of our Q1 guidance range.

Speaker 3: Now, let me update you on the recent progress we've made against our strategic imperative as presented on slide 11.

Now let me update you on the recent progress we've made against our strategic imperative is presented on slide 11.

Speaker 3: To remind you, our goal strategy is intentional and focused.

So we remind you our growth strategy is intentional and focused.

Speaker 3: as industry leaders around the world look to the right growth in modernized 5G, the rely on our market leading innovation to deliver and power the experiences to their consumers and enterprise customers. Our key innovation enables and includes end-to-end cloud platform and services that ensure operational agility, scalability and ultimately clouded scale.

As industry leaders around the world look to derive gross and modernized <unk> they rely on our market, leading innovation to deliver unparalleled experiences to their consumers and enterprise customers.

Innovation Enablers include end to end cloud platform and services that ensure operational agility scalability and ultimately cloud at scale.

Speaker 3: monetization of new 5G services like ultra low latency connectivity, emerse mental time and connected industries.

More monetization of new <unk> services like ultra low latency connectivity immersive entertainment and connected industries, creating.

Speaker 3: creating seamless digital experiences by transforming IT operations and reinventing user interactions and delivering dynamic connected experience with real-time automated networks.

Creating seamless digital experiences by transforming <unk> operations in Greenville, reinventing user interactions and delivering dynamic connected experience with real time automated niches.

Speaker 3: Beginning with cloud, I am proud to announce two key awards this fall.

Beginning with cloud I am proud to announce two key awards this quarter.

Speaker 3: First, we were selected by T-Mobile's partner to shift non-AMDOPS application to the public cloud, thereby expanding our activities in the support of T-Mobile's multi-year cloud journey. Additionally, we were excited to report a multi-year deal with T-Mobile to deploy and operate DataONE, our data intelligence platform.

First we also record by T. Mobile's partner, two shifts not amdocs application to the public cloud, thereby expanding our activities in supporting in the support of T Mobile's multiyear cloud young.

Additionally, we are excited to report a multiyear deal with T mobile to deploy and operate data one our data intelligence platform.

Speaker 3: Second, we are going to announce that PPS group awarded us a digital cloud minisonsumation of its next gen business support system across all line of business.

Second we are pleased to announce that PPS awarded us a digital cloud minutes transformation of its next gen business support system.

All lines of businesses under which Amdocs will provide its wide set of cloud native products to be operating on the public cloud is a part of a long term multi country agreement.

Speaker 3: under which Anders will provide its wide set of cloud-native products to be operated on the public cloud as a part of a long-term multi-country agreement.

Speaker 3: This is a world-demonstrate and dogs ability to expand internationally by penetrating new logos and we look forward to supporting PPF's 18-minute subscribers across Bulgaria, Hungary, Serbia and other.

This will demonstrate <unk> ability to expand internationally by penetrating new logos and we look forward to supporting PPS 18 million subscribers of course, Bulgaria, Hungary, Sylvia and others.

Speaker 3: In 5G monetization, Androx OpenNet 5G charging and policy solution was chosen by Vodacom, a new logo in Africa, which we are supporting to enable the quicker launch of new product services and tariffs for its operation in Tanzania, Mozambique and the Democratic Republic of Congo.

In fact, <unk> monetization and also open at 50 charging and policy solution was chosen by political and new logo in Africa, which we are supporting to enable the quicker launch of new products services and salaries for its operation in Tanzania, Mozambique in the Mcarthur Republic of Congo.

Speaker 3: In Malta, we extend our agreement with Malita Ltd. to provide charging solutions that will expand its range of IoT and 5G offerings for consumer and business customers.

In Malta, we extended our agreement with them a little limited to provide charging solution that will expand its range of Iot and <unk> offering for consumer business for consumer and business customers. Additionally, we announced cooperation with Samsung Electronics America to deliver end to end <unk>, So <unk> <unk> and <unk>.

Speaker 3: Additionally, we announced cooperation with Samsung Electronics America to deliver end-to-end 4G and 5G private network solutions to help U.S. enterprises across key industries to unlock next-generation use cases and to help close the digital divide in hard-to-reach locations.

Private network solution to help U S enterprises of course key to suites to unlock next generation use cases and to help close the digital divide in how to reach locations.

Speaker 3: Turning to digital modernization, we are happy to announce two new North American logos in Q1, including Summit broadband, a flow-in-the-based service provider which is selected end-offs for a multi-year deal to uplift their BSS and OSS ecosystem and Consumer cellular, a post-part mobile virtual network operator from Portland, Oregon, with selected end-docs is in solution

Turning to digital modernization, we are happy to announce two new North American logos in Q1, including semi broadband a Florida based service provider, which has selected amdocs for a multiyear deal to at least the BSS and Oss ecosystem and consumer cellular postpaid mobile deal to our network.

Right So from Portland, Oregon, we selected Amdocs ECM solution.

Speaker 3: Additionally, Vodafone Turkey selected Amdox for a 3-year deal to provide end-to-end quality engineering services that will quickly develop, test, and bring to market new products and services for the benefit of its customers.

Additionally, Vodafone Turkey selected Amdocs for a three year deal to provide end to end quality engineering services that we quickly develop test and bring to market new products and services for the benefit of its customers.

Speaker 3: Moving to network automation, I am excited to share the two T1 North American customers, including Lumen, a recently selected to model night and upgrade on our cloud native forests.

Moving to network automation I am excited to share the two tier one north American customer, including lumen recently selected to modernize and upgrade on a cloud native next generation fiber network services orchestration platform <unk>.

Speaker 3: Additionally, we today announced that we will deal with Globe Telecom in the Philippines to provide radio access network optimization services to accelerate the expansion of its 4G and 5G networks and the time-to-market launching of new services.

Additionally, we today announced the deal with Globe Telecom in the Philippines to provide radio access network optimization services to accelerate the expansion of its five <unk> networks and the time to market launching new services.

Speaker 3: Finally, let me quickly highlight it M.Dox Media, which continues to explain our Friday News on Riggs.

Finally, let me greatly highest at Amdocs media, which continues to expand outside of North America.

Speaker 3: In Indonesia, we extended a multi-year agreement with Excel Axiata. We selected our SaaS-based M-Docs Market One platform to offer its customers seamless access to international, local, and regional content services.

In Indonesia, we extended our multiyear agreement with Axa XL, a chapter we selected our SaaS based amdocs market one platform to offer its customers seamless access to international local and regional content services.

Speaker 3: Additionally, Amdok recently worked with Astro, a leading Southeast Asian media and entertainment company to successfully launch new content and broadband bundles, including Netflix, to provide customer with premium, affordable entertainment in the streaming world.

Additionally, Amdocs recently walk with Astral, a leading southeast Asia Media and Entertainment company to successfully launch new content and broadband bundles, including Netflix to provide customer with premium affordable entertainment.

The streaming world.

Speaker 3: Now turning to slide 12 and now financial out.

Now turning to slide 12, and our financial outlook.

Speaker 3: Let me begin by addressing the revenue growth projections we are providing today for the three fiscal years 2022 through 2023.

Let me begin by addressing the revenue growth projections, we are providing today for the three fiscal years 2022 through 2024.

Speaker 3: At class quarter we guided to fiscal year 2022 revenue growth in the range of 6% to 10% on a performer constant currency basis. And we are now projecting annual revenue growth in the range of percent constant currency in 2020 and 2024.

Last quarter, we guided to fiscal year 2022 revenue growth in the range of 6% to 10% on a pro forma constant currency basis, and we are now projecting annual revenue growth in the range of 6% to 10% constant currency in 2023 and 2024.

Speaker 3: Our conviction in this outlook founded on our technology leadership and the strengths of Endox Unique Business Model, from which we derive highly recurring revenue stream, strong business visibility, and doable multi-year engagement supporting our customers vision critical operations.

Our conviction in this outlook founded on our technology leadership and the strength of Amdocs unique business model from which we derive highly recurring revenue stream strong business visibility and durable multiyear engagements supporting our customers' mission critical operations.

Speaker 3: Second, we are encouraged to see a large funnel of market opportunity in front of us, the size of which is continuously expanding.

Second we are encouraged to see large funnel of market opportunity in front of us the size of which is continuously expanding.

Speaker 3: This dynamic is consistent with our view that global operators are still in the early innings of a multi-year investment cycle, driven by megatrends such as 5G and the cloud.

This dynamic is consistent with our view that global operators are still in the early innings of a multi year investment cycle, driven by Mega trends such as <unk> in the cloud.

Speaker 3: Third, our strong sense momentum in recent quarter supports confidence that Amdox is well positioned with the right strategy to monetize the market opportunity leveraging our innovative cutting edge technology, which continues to support the future growth made for our customers and constantly extend our competitive lead in the market.

Our strong sales momentum in recent quarters support confidence that Amdocs is well positioned with the right strategy to monetize the market opportunity leveraging our innovative cutting edge technology, which continue to support the future roadmap of our customers and constantly extend our competitive lead.

In the market.

Speaker 3: Our execution track record, which is the best in the industry, and our highly skilled and talented employee base, which is focused on delivering value to our customers worldwide.

Alex <unk> track record, which is the best in the industry and our highly skilled and talented employee base, which is focused on delivering value to our customers worldwide.

Speaker 3: At the final point, our 3 year revenue growth projection does not depend on a material level of M&A activities.

As a final point on.

Revenue growth projection does not depend on a material level of M&A activity.

Speaker 3: To summarize our long-term view, we firmly believe that Androx has entered a new era of accelerated growth as reflected in the three-year outlook we have provided today.

To summarize our long term view, we firmly believe that Amdocs is handle a new era of accelerated growth is reflected into the three year outlook. We have provided today.

Speaker 3: Turning attention to the current fiscal year 2022, we believe revenue growth is tracking at the higher end of our 6% to 10% guidance range on a performer-constant currency basis, given our encouraging start to the year. On the bottom line, we are also on track to achieve performer-diluted non-gap earning per share growth at the higher end of our expected range in fiscal year 2022 outlook.

Turning attention to the current fiscal year 2022, we believe revenue growth is tracking at the higher end of our 6% to 10% guidance range on a pro forma constant currency basis, given our oncology startled deal to deal.

On the bottom line. We are also on track to achieve pro forma diluted non-GAAP , earning per share growth at the higher end of our expected range in fiscal year 2022 outlook.

Speaker 3: Putting us in a strong position to deliver double digit expected total shows returns for the second year running Including our Liberty team with that. Let me turn the call over to Tamar for RRM

Putting us in a strong position to deliver double digit expected total shareholder returns for the second year running including <unk> with that let me turn the call over to Tamara for her remarks. Thank.

Speaker 3: Thank you, Shuki, and hello, everyone. Thank you for joining us.

Thank you <unk> and Hello, everyone. Thank you for joining us.

Speaker 4: As a reminder, my comments today will refell to certain financial metrics on the performance basis, which exclude the financial impact of open markets, which will be requested on the Subst copies.

As a reminder, my comments today will refer to certain financial metrics on a pro forma basis, which exclude the financial impact of open market wood.

On December 31 2020.

Speaker 4: Turning to slide 14, I would like to echo Shukri's comment that we are off to a great start to the fiscal year and we are very proud of our Q1 financial performance.

Turning to slide 15, I would like to Echo <unk> comment that we are off to a great start to the fiscal year and we're very proud of our Q1 financial performance.

Speaker 4: Record Q1 revenue of $1.1 billion was up 10.6% year-over-year on a per-forma, constant-currency basis, driven by a best-ever quarter in North America with a great momentum in our top customers.

Record Q1 revenue of $1 1 billion was up 10, 6% year over year on a pro forma constant currency basis, driven by our best ever quarter in North America with a great momentum in our top customer.

Speaker 4: Revenue was above the midpoint of guidance, despite an unfavorable impact on foreign currency fluctuations of $2 million relative to guidance, which mainly impacted the European region.

Revenue was above the midpoint of guidance, despite an unfavorable impact from foreign currency fluctuations of $2 million relative to guidance.

Which mainly impacted our European region.

Speaker 4: Moving down the income statement, a Q1 NANGAP operating margin of 17.5% was in line with the midpoint of our long-term target training.

Moving down the income statement, our Q1 non-GAAP operating margin was 17, 5% was in line with the midpoint of our long term target range.

Speaker 4: Compared to the year ago, on an Angaku operating margin improved by 20 basis points, as accelerated R&D investments were more than offset by a focus on operational excellence and the invested tier of open funds.

Compared with a year ago on a non-GAAP operating margin improved by 20 basis points.

As accelerated R&D investments were more than offset by a focus on operational excellence and the divestiture of open market.

Speaker 4: On the bottom line, diluted NANGA PPS of $1.20 was at the high end of our guidance.

On the bottom line diluted non-GAAP EPS of $1 20 was at the higher end of our guidance range.

Speaker 4: Zilluted Nangabi PS includes the Nangabi Effective Tax Rate of 19.9% which hasn't dissipated was above the height of our annual target range of 13-17.

Diluted non-GAAP EPS include the non-GAAP effective tax rate of 19, 9%, which as anticipated was above the high end of our annual target range of 13% to 17%.

Speaker 4: Diluted GAAP EPS was $1.07 for the first fiscal quarter, above the guidance range of $0.91 to $0.99, primarily due to a net gain of $0.06 per share from contingent performance-based consideration in the final amount of $10 million received in relation to last year's divestiture of open market.

Diluted GAAP EPS was $1 seven for the first fiscal quarter above the guidance range of 91% to 99%.

Primarily due to a net gain of <unk> <unk> per share from contingent performance based consideration in the final amount of $10 million received in relation to last year's divestiture of open market.

Speaker 4: Moving to slide 15, strong first quarter sales momentum translated to record high 12-month backlog of $3.83 billion, which was up 9.7% from a year ago. On a sequential basis, 12-month backlog was particularly strong, rising by $140 million as compared to September 30.

Moving to slide 15, strong first quarter sales momentum translated into record high 12 months backlog of $3 $83 billion, which was up nine 7% from a year ago on.

On a sequential basis 12 months backlog was particularly strong rising by $140 million as compared to September 30.

Speaker 4: 12-month battle continues to support an expectation for growth on a constant currency basis across each of our three core operating regions in fiscal year 2022.

12 months backlog continues to support an expectation for growth on a constant currency basis across each of our three core operating region in <unk>.

Fiscal year 2022.

Speaker 4: As a reminder, 12-months backlog has traditionally served as a good leading indicator of our business having consistently averaged around 80% of our forward-looking 12-months revenue over the years.

As a reminder, 12 months backlog has traditionally served as a good leading indicator of our business, having consistently averaged around 80% of our forward looking 12 months revenue over the years.

Q1 was also a record quarter for revenue from managed services engagement, which grew roughly 6% from a year ago equating to roughly 60% of our total revenue.

Speaker 4: A multi-year managed services engagement to underpin the resiliency of our business with recurring revenue streams, high renewal rates, and expanded activities with existing customers.

Our multi.

A multiyear managed services engagement to underpin the resiliency of our business with recurring revenue stream high renewal rates and expanded activities with existing customers.

Speaker 4: Among the customer highlights is quarter, busy group renew this relationship with Amnox for application development and maintenance of non-alcoholic BSS systems in relation to BTS EEDRA.

And one of the customer highlights this quarter busy group renewed its relationship with Amdocs for application development and maintenance of non Amdocs BSS systems in relation to Bt's E. Tran.

Speaker 4: Turn to the Balance Sheet in Cash Flow, as you can see in Slide 16.

Turning to the balance sheet and cash flow as you can see on slide 16.

Speaker 4: He has solved 79 days, equipped by one day year over year and six days, the Quential Inquiry 1. For a male that is selecting higher invoicing levels, triggered by a record number of milestone deliveries achieved in the quarter.

DSO of 79 days decreased by one day year over year and six days sequentially in Q1.

Reflecting higher invoicing levels triggered by a record number of milestone deliveries achieved in the quarter.

Speaker 4: We also saw a healthy increase in the fair revenue Q1.

We also saw a healthy increase in deferred revenue in Q1.

Speaker 4: All together we generated normal electric cashflow of $186 million in the first-case full quarter.

Altogether, we generated normalized free cash flow of $186 million in the first fiscal quarter.

Speaker 4: Overall, we ended the quarter with a strong cash balance of approximately $869 million, including aggregated borrowing of up to $650 million.

Overall, we ended the quarter with a strong cash balance of approximately $869 million, including aggregated borrowing of approximately $650 million.

Our balance sheet is strong and with ample liquidity, we expect to be in a good position to continue to support our ongoing business needs, while retaining the capacity to find the future strategic growth investments as and when the right opportunities arise.

Additionally, we remain committed to maintaining our investment grade credit rating.

Turning to capital allocation on slide 17.

As you can see in the first chart, we accelerated our buyback program and repurchased $171 million of our shares in the first quarter, which we believe demonstrates our confidence in the future success of Amdocs.

We returned $216 million to shareholders in Q1, including $45 million in cash dividend payments.

Regarding our capital allocation in fiscal year 2022, we remain on track to generate normalized free cash flow of approximately $650 million the.

City of which we expect to return to shareholders.

Additionally, we remind you that free cash flow in the second fiscal quarter is typically lower due to the timing of annual bonus payments.

As another point, our normalized free cash flow conversion rate of roughly 100% of non-GAAP net income, which is consistent with our long term average.

Normalized free cash flow also excludes anticipated capex of about $131 million in relation to the development of our new Israel Campbell.

Which remains on track for completion and move in by this summer.

Now turning to our outlook on slide 18.

The prevailing level of macroeconomic business and operational certainty surrounding the magnitude and duration of the COVID-19 pandemic, including its novel strength remains elevated.

Second quarter and full year fiscal 2022 revenue guidance reflects what we consider to be the most likely outcome based on the information we have today.

Cannot predict all possible scenarios.

With that said, we believe full year fiscal 2022 revenue growth is tracking at the higher end of our guidance range of 6% to 10% on a pro forma constant currency basis.

And I would look at skilled revenue growth across all three of our key geographical regions and includes an immaterial contribution from the small bolt on acquisition of Dev Ops group.

Our annual outlook includes second fiscal quarter revenue within a range of 1 billion 110 to one.

Billion in 150, the midpoint of which equates to a healthy growth of roughly seven 7% from a year ago.

On a reported basis, we expect full year revenue growth in the range of three 4% to seven 4% year over year.

As compared with three 7% to seven seven previously.

We anticipate an unfavorable foreign currency impact of approximately 60 basis points year over year.

Compared to the unfavorable impact of 30 basis points previously.

Moving down the income statement, we anticipate quarterly non-GAAP operating margins to track roughly in line with the midpoint of our annual target range of 17, two to 17, 8%.

This outlook continues to assume an accelerated pace of R&D investment to support our customers in line with our strategy balanced with our constant focus on achieving operational excellence.

Below the operating line, we anticipate that foreign currency fluctuations will continue to impact on non-GAAP net interest and other expense line in the range of a few million dollars on a quarterly basis.

We expect that our non-GAAP effective tax rate in the second fiscal quarter will be above the high end of our annual target range of 13% to 17% for.

For the full year fiscal 2022, we expect our non-GAAP effective tax rate to be within the annual target range.

Bringing everything together, we believe non-GAAP diluted earnings per share growth is tracking at the higher end of our guidance range of 8% to 12% on a pro forma basis for the full fiscal 2022.

Likewise, we believe non-GAAP diluted earnings per share growth is also tracking at the higher end of our guidance range of six 3% to 10, 3% year over year on a reported basis.

Overall, we are firmly on track to deliver double digit total shareholder return for the second fiscal year running in 2022, assuming the higher end of our pro forma non-GAAP , earning per share growth guidance, plus our dividend yield.

With that back to you shortly.

Thanks Tamara.

As you can probably tell from our remarks today, we are excited by the great start to the year, our focus of growth strategic focus areas and the healthy accelerated growth outlook. We've provided for the next two years with that we're happy to take your questions operator.

Certainly ladies and gentlemen.

Quick question at this time. Please press Star then one on your Touchtone telephone. If your question has been answered and you'd like to remove yourself from the queue. Please press the pound key.

First question comes from the line of Palestinian from Bank of America. Your question. Please.

Hi, guys I almost didn't recognize my own name.

Okay.

I have an easy question for you because you're a quarter is kind of straightforward, but if I take a step back in.

In the last three four quarters your growth is accelerating repeatedly and now you are even providing.

More visibility to the next to the following two years.

My question is simple.

Analyze your numbers in the last few quarters, including this last quarter.

We'll provide the guidance can you take us through the basics, meaning what drives your growth.

Kind of projects.

Once more to understand the bigger picture, what's happening in the market that eventually drives our growth acceleration.

Hi, Kyle I will start and Tom can add.

I think first there is a greater alignment.

Between our product and services to the market needs.

So many years in the company, but this is one of the I would say the best April .

Positioning of Amdocs.

All the Mega trends that we have.

Well, there we predicted them into vessels a lot to make sure that we're ready and we've talked about these mega trends like <unk> journey to the cloud.

Network automation Digitization journey.

We are very ready to do same mega trend. So I think this is one.

The top reason.

Secondly is that we see a lot of success globally. So it is not.

Just in North America.

In Europe , we saw.

See it vary.

A good momentum sales momentum across all regions and as important as I mentioned, we see a lot of funnel ahead of us. So it's not that you know that we want some deal that actually and we see that the funnel of opportunities is increasing.

And from quarter to quarter, so by the way as reflected by the by our backlog. So if you took everything together tying it altogether. We believe we have a very strong momentum we have the right product right services I think that the.

Our technology leadership.

<unk>.

Comparing the competition is the highest ever.

We are very encouraged with our position and as you say, it's working with Tom I'll do one side, maybe just to add some.

Second dimension of looking at it.

Look on our position in the market as you know we have very strong customer base. So one thing that is extremely important is that.

Chosen again by key customers.

To build the future on Amdocs, so talking about names such as AT&T and T mobile and Vodafone they're building the.

Next generation stack to support the business in the heart of the strategy on Amazon on top of that we are.

<unk>.

Expanding our footprint within very strong names in the market that are relatively new customer for us.

Very strong in the in the market such as charters, such as Verizon and other lean and then add to that penetration into many new logos globally, such as the examples with gave on the call PPA, if we talked about.

Additional affiliates within the Vodafone Group for example, in Turkey, we talked not Vodacom in Africa.

And from quarter to quarter, you see more and more examples of these new logos that are supporting the growth as well. So it's a combination of expanding in existing customers entering new large potential logos that can be very meaningful for our future and many many other logos internationally.

Great.

Two quick.

Quick questions also.

Your customers, sometimes they deploy your pure software company your customers, though depend on equipment to launch some services that they do suffer from supply constraints that we also cover the equipment vendors who are.

Not growing as much as much as the orders growing just because they can supply so.

The Big question here is whether your business has impacted in any way by supply constraints that we're seeing across the hardware market.

And EPS.

And the answer is no first of all we are working in the cloud.

We are not using you know directly connected to any harder.

It used to be.

And I would I.

I will tell you that so far we did not encounter any headwinds related to the supply chains.

Got it last.

Last question Tomorrow.

As reported <unk> grew one 7% and constant currency grew over 6%. It's a big gap can you take us through what's happening there can you take us also through the <unk>.

Just the revenue, but also the expense match with currencies.

I'm not looking for the outlook, because it's impossible to predict I'm, just looking to understand what happened.

Yes.

The difference is the fact that Q1 'twenty one still included a full quarter of open markets. The company with invested on December 31.

So that's the main difference between the reported which is the largest local format.

Currency had some impact but it was more like less than 10, probably less than a percent.

So the vast majority if you remember we talked about open market being roughly $300 million a year so to make it easy on you would probably like quarter would be $80 million.

So.

That's the main reason and Thats why we keep giving the pro forma number which shows actually the real business growth of the company.

And then on the currency and we continue to track all our exposure focusing mainly on protecting the bottom line.

<unk> always had this philosophy on our hedging program.

So we are continuing to track on each currency in each activity.

<unk> exposure positions and trying to first of all create operational decisions that are building the natural hedge where possible.

Ive always use the example of Brazil as a country.

We have business in Brazil, and the part of the decision of how much of the execution for our Brazilian customers is done locally in Brazil has to do with these kinds of exposures that is what I call. The natural hedge and then on top of that wherever we have a remaining residual exposure.

Building derivatives, where I would say affordable to boost those so most of the currencies.

We are applying listen derivatives.

On the hedging.

Thank you and ladies and gentlemen linked to ask you to limit yourself to one question and one follow up you may get back in the queue. As time allows our next question comes from the line of Tim Horan from Oppenheimer. Your question. Please.

Hi, Good evening this is actually Edward Yang on behalf of Tim.

Congratulations.

Quarter, Schulke and tomorrow.

Thank you.

My first question, obviously, youre speaking very positively about the outlook.

But just focusing on the backlog.

The backlog the 12 month backlog was up close to 10%.

But in the prior two quarters it was up a little bit more than that 10 510, 8% is there anything to read into that or is that just normal.

Fluctuations quarter to quarter on the backlog.

Normal fluctuations I don't think you should read into that.

The accuracy of the decimal points.

But the most important thing for US is that we've seen very strong visibility by awards that are happening.

As you've seen the scale that we have not seen in the past. So that's definitely driving a lot of the confidence that we have.

And on top of that is the pipeline.

It is large and getting stronger.

Just additional point.

I believe that it's really important that this is not a one trick pony kind of thing we've talked about the megatrends in the industry the investment trends and also the fact that these across the different regions.

So it's a healthy situation, where we are seeing this momentum all over the place.

Understood and for my follow up.

My follow up question would be on <unk> use cases.

We're hearing a lot of telco customers talk very aggressively about fixed wireless deployments and part of that is trying to monetize the <unk> investment.

Can you about growing subs, 50% per year, obviously off of a very small base.

But is that an area, where you participate and.

Related to that just on additional <unk> use cases tomorrow I think I heard you had a conference talk about your market one platform that sounded like a different type of business then with Amdocs is.

Associated with usually and I was just wondering if you could.

Talk a little bit more about that and whether carriers are open to plugging into your platform versus traditionally higher R&D to build something in house for them. Thank you.

Hi, So I'll try to answer further.

The first question so fixed wireless.

There is a lot of potential towards mainly in rural areas.

Since it's a mainly consumable type of.

Activity and as you know as we speak we are building bowls At&t's end.

And T mobile is another.

All consumer base will definitely we are involved.

I think the industry is still yet to be seen towards degree.

This will catch up but definitely that.

We are involved in many in many fixed wireless initiatives and our system supported.

Any shared before.

Regarding market one youre right. This is a different platform. This is a software as a service platform. The idea in markets. One is that many of our customers like to.

To offer their customers.

Many OTT some of them for content some of them for we know Microsoft application and many others.

So the idea of market one is rather than every one of our customers will start to integrate specifically and the bespoke way to Netflix too.

To shopify too.

And many many other content Peacock HBO Max will pay a bill to do it in one one integration we have a platform today that actually integrated for many many OTT and the customer needs to do one integration point to Amdocs.

On the SaaS basis, and immediately give long.

Many many partners or OTT or the integrated tomorrow, So our platform it's accelerated.

At the time to market.

Very very I think efficient and we have a lot of traction to this offering by the way across the world not just in North America.

Very popular platform getting lot of traction.

Completely software as a service basis.

Thank you.

Thanks.

Our next question comes from the line of Tom Roderick from Stifel. Your question. Please.

Hi, It's Max I was not a ton for Tom <unk>.

Thinking about the geographic breakdown on the business Europe has had a little bit of a decline in the last two quarters, how much of that is related to divestiture of open market and how should we see that.

Kind of trending going forward.

So comparing year over year.

Some influence on the open market about a quarter of the open market business was in Europe .

I think the more kind of fundamental and interesting thing in Europe is the fact that we have naturally ramped down some large scale transformations and recent awards are starting to ramp up now in terms of revenues, we expect a much stronger second half in 2022 for Europe , and hence the conviction of the.

Full year growth year over year also in Europe .

Reflected already in deals that we have in our pockets may now and definitely looking on the pipeline, we're encouraged to see those more opportunities coming in.

In addition slides.

Impact sequentially and also year over year is coming from the currencies a lot of the currency movements. We are talking about is.

<unk> European business.

Got it thanks, and then just kind of focusing on the <unk>.

Long term outlook, you gave I know that that excludes.

Excluding foreign currency and it also excludes any M&A activity, but it is the company positioned to achieve that right now or are there some things that need to happen. In addition to the pipeline and the current sales team are there any incremental investments to capture that.

Look the plan of record that we have the supporting these numbers, obviously, we need to execute.

I don't want you to think it's in our pocket, but.

It's not building on anything special that we don't have a clear line of sight to including the product offering the execution.

Mark has to do with.

The backlog the pipeline regular business.

Awesome. Thanks, Congrats on a good quarter and good start to the year. Thank.

Thank you. Thank you.

Thank you as a reminder, if you have a question at this time. Please press Star then one our next question comes from the line of Jackson Ader from Jpmorgan. Your question. Please.

Great. Thanks, Paul.

First one on.

On AT&T, so revenue from AT&T jumped up a bunch in in 2020, a fiscal 'twenty and then kind of flattish last year.

Just curious.

Whether there was anything in particular.

That caused that to slow down there.

Our Jackson, so AT&T talking about Q1, and we saw a very significant ramp up in the second half of the year.

And I can tell you that for the growth that we see America.

In 2022 and generally the company.

AT&T represents a significant part of this growth and we see very very healthy growth in AT&T in 2022.

To add some color on AT&T as you'll recall, we are running a large scale transformation building next gen stack for AT&T in the heart of the strategy consumer mobility will talked about expansion of business, helping them migrate to the cloud many of the applications beyond just our own technology and products.

We mentioned last quarter, the fact that we actually extended.

The managed services engagement through 2026.

Any angle we are looking at it beyond just obviously the very large importance of the numbers themselves.

The relationship is expanding and very healthy here and the bottom line, we see AT&T grow supporting significantly the growth of the company.

Yes, Okay. So just just like a mismatch in timing exit run rate I guess sort of like exit velocity of that AT&T business better than the full year growth, yes, yes, not so much okay cool.

Alright, and then the <unk>.

Follow up.

You guys have.

Bunch of employees all over the place just curious what the expectation for any impact of wage inflation might be either in the U S or abroad, and how thats being kind of factored into your margin outlook here tomorrow.

So naturally we have factored the our expectation into the margin outlook and as you've seen we've managed to extend even margin year over year given the decent.

Now into the numbers so yes, the hot wage increases around the world.

But working globally, including in many emerging countries wage increases is not a new phenomena.

War for talent is definitely there, but we have a global flexibility model that enables us to attract talent and apply decisions, where we want to hire we have a very sophisticated onboarding.

Platform and processes to make sure that we have.

Not only getting into the company effectively new employees, but we scaling many existing employees into the new technologies.

And as discussed in the Investor update day last quarter, we have a lot of benefits coming from the unique business model in providing not only the international career mobility opportunity, but also casino opportunities within the company to move around between different.

Maine, which is very attractive for career development people. So yes wages are part of the overall package.

First on development opportunities and obviously the people centric mindset, we have is extremely important as well in attracting and retaining the talent.

Great Alright, thank you.

Thank you thanks Jackson.

Thank you. Our next question comes from the line of Charles <unk> from Baird. Your question. Please.

Hey, Thanks for taking the question and congrats on the strong quarter.

I was hoping you could talk a little bit about Verizon and how that account has progressed over the past few quarters and also.

Is that something that's contemplated in the three year revenue guidance and if so sort of how much growth are you kind of contemplating from horizons specifically.

So for the second question definitely the opportunities and Verizon are backed into our opportunities for the next two to three.

The answer is yes regarding Verizon than we are.

Are progressing very nicely in the in the programs that we started with them.

And they are starting to deploy our catalog and other services on the creation of the network domain and many other services. So we see very good traction.

I think that the.

Verizon is starting to experience the quality of Amdocs products and services.

And at the same time, we are developing a lot of opportunities.

Ahead of us.

And we compete on the opportunities we have.

Hope to win them, but.

Overall, a very nice progress in Verizon.

Great and then I was hoping to ask one more as well just on the operating margins maybe medium term.

Do you think it's possible that you might be sort of above the range of $17 3 million to $17 seven that you've been calling out is that something that you're trying to do or do you think that range is sort of just the optimal level for for the business.

Based on what we see now we see that manages the applicable one but obviously, it's something that we will continue and focused on it also depends on very specific decisions, we're making around the level of investments in R&D.

And the opportunity to expand into many new countries and new logos.

So it's a balancing act all the time between the fact that we are expanding margin from our performing engines in the more mature engines of the company and how much we want to invest and we need that level of flexibility within that margin.

Range that we guided for.

So I believe that what we see is the momentum now in the market. The fact that we are seeing expansion in the total serviceable addressable market that is very meaningful.

Sure you mentioned the investment.

Pieces that we have there on the Mega trend in the industry. All of these are great opportunities.

Positioned very well to take the controlling the yields of that Apple.

Community and very focused on doing so.

Great if I could just squeeze one more follow up so.

The degree that more of your revenue growth over the next three years is expected to maybe come from new business opportunities and new customers is that somewhat of a headwind actually its operating margin.

I don't think so we are already experiencing great momentum with new names new countries. New logos. Then as you can see we are managing to balance all of that with the.

A lot of activities that we're doing in building new tools automation methodologies et cetera that are more than offsetting for them.

Great Alright, thanks, very much and congrats again thanks.

Thank you.

This does conclude the question and answer session of today's program I'd like to hand, the program back to Matthew Smith head of Investor Relations for any further remarks.

Yes, thanks, very much for joining the call and for your interesting Amdocs. We look forward to hearing from you in the coming days and if you do have any additional questions. Please contact us here in the Investor Relations group and with that have a great evening. Thank you. Thank you.

Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.

Okay.

[music].

Thank you for standing by and welcome to the Amdocs Limited first quarter 2022 earnings Conference 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 to ask a question. During the session you will need to press star one on your telephone as a reminder, today's program is being recorded and now I would like to.

Introduce your host for today's program Matthew Smith head of Investor Relations. Please go ahead Sir.

Thank you John before we begin I need to call your attention to our disclaimer statement on slide two of the presentation and note that some of our comments today may be forward looking statements and are subject to risks and uncertainties as described in Amdocs as SEC filings and that we will discuss certain financial information that is not prepared in accordance with GAAP for more information regarding our use.

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.

Okay.

Participating on the call with me today are shaky Sheffer, President and Chief Executive Officer of Amdocs Management Limited and Tomorrow, Rappaport again joint Chief financial and operating officer.

Consistent with last quarter to support today's earnings call. We are providing a presentation, which can be found on the investor Relations section of our website and also otherwise a copy of today's prepared remarks will also be posted immediately following the conclusion of this call on today's agenda, Shane will provide an update on our recent strategic progress and business performance and Tomorrow will review our financials.

Results and outlook for fiscal year, 2022, and with that I'll turn it over to <unk>.

Thanks, Matt and good afternoon to everyone joining us on the call today.

I'll start today's call by recapping, our business and financial achievements for the first quarter fiscal 'twenty two.

Second I will update you on the main pillars of our strategic growth framework and continued progress we've made in the past quarter.

I'll wrap up by discussing our financial outlook, including our expectation for continuous revenue growth in fiscal year 2023 in 2020 for which we are providing today tomorrow will then provide additional details on our first quarter financial performance and guidance as a reminder, our comments today will refer to <unk>.

Certain financial metrics on a pro forma basis, where applicable to provide you with a sense of the underlying business trends, excluding the financial impact of open market, which we divested on December 31st 2020.

So let's get going.

Going to slide seven I am proud to report a great start to fiscal year 2022.

Based on our first quarter performance I believe our strategy is continuously gaining traction in the market.

Evidenced by another quarter of strong sales momentum across long standing global customers, such AT&T T mobile Vodafone Globe Telecom and others. Additionally, we penetrated several new logos that support our ongoing growth in the digital expansion, including PBF group in Europe and Vodacom in Africa.

Our customer reinvestment in the industry Megatrends like <unk> and cloud are gathering pace and translating to strong demand for our products and services. The relevancy of our offering to the market result from our past and ongoing commitment to R&D investment, which further extends our technological leadership.

And brakes cutting edge innovation to our customers.

So I had a further point I believe our capacity to win new business and is a function of our unrivaled reputation for project delivery.

Demonstrate its yet by another record quarter for the number of deployment milestone achieved for our customers in Q1.

M&A is another important tool, we use strategically to accelerate our capabilities in key growth areas, focusing our cloud strategy I am delighted to announce our acquisition of <unk>, a boutique UK based cloud company specializing in the engineering consultancy and training services for Enterprises, Inc.

Lamenting cloud enables Davis group geographically complements the high end expertise, we acquired with last year's acquisition of <unk> group and further strengths our professional services organization to support all aspects of our customer cloud journey, including consulting cloud native software regression of Amp.

Non MTS application ongoing development and cloud operation.

Overall, I am proud of our progress in Q1, which we achieved while striving to improve the lives of people in our communities.

And ox metric Mexico was recognized by NGO Human rights campaign is one of Mexico's best places to work for LGBTQ plus for 2021.

Our deep commitment to diversity was recognized by the Peruvian government for promoting an inclusive society, which people with disabilities achieved full development amdocs seasonal and also all the diversity in the business prestigious awards for work to promote employee ability over the Arab minority in the.

<unk> discipline.

Is the mark of our commitment to sustainability and corporate responsibility Amdocs was recently honored to be included in the prestigious S&P Dow Jones sustainability index for North America for the sales consecutive year.

Placing us among the top 15 companies in our industry based on long term economic and environmental and social criteria.

I believe such recognition is a testament to amdocs identity and reflects the value held by our 20 <unk>.

<unk> 9000 employees worldwide I would like to take this opportunity to extend a warm welcome to all of those all of those we've recently joined Amdocs family and my sincere. Thanks to all our people for their dedication resilience and commitment to ensuring a great start to our fiscal year.

Our great start to fiscal year is reflected in our Q1 financial performance. The key highlights of which are on slide 10.

Sales momentum was reflected in the record in our record 12 months backlog of $3 8 billion.

Which was up $140 million sequentially and nine 7% from a year ago.

On the bottom line, we delivered a non-GAAP earnings per share of $1, 20%, which was the higher end of our Q1 guidance rates.

Now let me update you on the recent progress we've made against our strategic imperative is presented on slide 11.

To remind you our growth strategy is intentional and focused.

Innovation Enablers include end to end cloud platform and services that ensure operational agility scalability and ultimately cloud at scale.

More monetization of new <unk> services like ultra low latency connectivity immersive entertainment and connected industries, creating.

Creating seamless digital experiences by transforming <unk> operations, and lean reinventing user interactions and delivering dynamic connected experience with real time automated network.

Beginning with cloud I am proud to announce two key awards this quarter.

First we also exited by T mobile's partner to shift non amdocs applications to the public cloud, thereby expanding our activities in supporting in the support of T Mobile's multiyear cloud journey.

Additionally, we are excited to report a multiyear deal with T mobile to deploy and operate data one our data intelligence platform.

We are pleased to announce that PPA awarded us a digital cloud minutes automation of its next Gen business support system across all line of businesses under which Amdocs will provide its wide set of cloud native products to be operating on the public cloud as a part of a long term multi country agreement.

This will demonstrate <unk> ability to expand internationally by penetrating new logos and we look forward to supporting PPS 18 million subscribers of course, Bulgaria, Hungary, Serbia and others.

In fact, <unk> monetization and also open at 50 charging and policy solution was chosen by vertical a new logo in Africa, which we are supporting to enable the quicker launch of new products services and salaries for its operation in Tanzania, Mozambique, and the Macarthur Republic of Congo.

In Mazda, we extended our agreement with them a little limited to provide charging solution that will expand its range of Iot and <unk> offering for consumer business for consumer and business customers. Additionally, we announced cooperation with Samsung Electronics America to deliver end to end five G. So reform <unk>.

Private network solution to help U S enterprises across key industries to unlock next generation use cases and to help close the digital divide in how to reach locations.

Turning to digital modernization, we are happy to announce two new North American logos in Q1, including selling broadband a Florida based service provider, which has selected amdocs for a multiyear deal to at least the BSS and Oss ecosystem and consumer cellular postpaid mobile deal to our network.

Rachel from Portland, Oregon, We selected Amdocs ECM solution.

Moving to network automation I am excited to share the two tier one north American customer, including lumen recently selected to modernize and upgrade on a cloud native next generation <unk> network services orchestration platform <unk>.

Additionally, we today announced the deal with Globe Telecom in the Philippines to provide radio access network optimization services to accelerate the expansion of its style <unk> networks and the time to market launching new services.

Finally, let me greatly highest at Amdocs media, which continues to expand outside North America.

In Indonesia, we're extending our multiyear agreement with Axa XL a chapter we selected our SaaS based amdocs market one platform to offer its customers seamless access to international local and regional content services.

Now turning to slide 12, and our financial outlook.

Let me begin by addressing the revenue growth projections, we are providing today for the three fiscal years 2022 through 2024.

Our conviction in this outlook founded on our technology leadership and the strength of Amdocs unique business model from which we derive highly recurring revenue stream strong business visibility in durable multiyear engagements supporting our customers' mission critical operations.

Second we are encouraged to see large funnel of market opportunity in front of us the size of which is continuously expanding.

This dynamic is consistent with our view that global operators are still in the early innings of a multi year investment cycle, driven by Mega trends such as <unk> in the cloud.

Our strong sales momentum in recent quarter support confidence that Amdocs is well positioned with the right strategy to monetize the market opportunity leveraging our innovative cutting edge technology, which continue to support the future roadmap of our customers and constantly extend our competitive lead.

In the market.

Or is it <unk> track record, which is the best in the industry and our highly skilled and talented employee base, which is focused on delivering value to our customers worldwide.

As a final point on <unk> revenue growth projection does not depend on a material level of M&A activity.

To summarize our long term view, we firmly believe that Amdocs is handle a new era of accelerated growth is reflected into the three year outlook, we provided today.

On the bottom line. We are also on track to achieve pro forma diluted non-GAAP , earning per share growth at the higher end of our expected range in fiscal year 2022 outlook.

Putting us in a strong position to deliver double digit expected total shareholder returns for the second year running including I'll leave it to deal with that let me turn the call over to Tamara for her remarks. Thank.

Thank you <unk> and Hello, everyone. Thank you for joining us.

As a reminder, my comments today will refer to certain financial metrics on a pro forma basis, which exclude the financial impact of open market, which was adjusted on December 31 2020.

Turning to slide 15, I would like to Echo <unk> comment that we are off to a great start to the fiscal year and we're very proud of our Q1 financial performance.

Record Q1 revenue of $1 1 billion was up 10, 6% year over year on a pro forma constant currency basis, driven by our best ever quarter in North America with a great momentum in auto customers.

Revenue was above the midpoint of guidance, despite an unfavorable impact from foreign currency fluctuations of $2 million relative to guidance.

Which mainly impacted our European region.

Moving down the income statement, our Q1 non-GAAP operating margin was 17, 5% was in line with the midpoint of our long term target range.

Third with a year ago on a non-GAAP operating margin improved by 20 basis points.

As accelerated R&D investments were more than offset by a focus on operational excellence and the divestiture of open market.

On the bottom line diluted non-GAAP EPS of $1 20 was at the higher end of our guidance range.

Diluted non-GAAP EPS includes the non-GAAP effective tax rate of 19, 9%, which as anticipated was above the high end of our annual target range of 13% to 17%.

Diluted GAAP EPS was $1 seven for the first fiscal quarter above the guidance range of 91 to 99.

Primarily due to a net gain of <unk> <unk> per share from contingent performance based consideration in the final amount of $10 million, we see in relation to last year's divestiture of open market.

Moving to slide 15, strong first quarter sales momentum translated into record high 12 months backlog of $3 $83 billion, which was up nine 7% from a year ago on.

On a sequential basis 12 months backlog was particularly strong rising by $140 million as compared to September 30.

12 months backlog continues to support an expectation for growth on a constant currency basis across each of our three core operating region in fiscal year 2022.

As a reminder, 12 months backlog has traditionally served as a good leading indicator of our business, having consistently averaged around 80% of our forward looking 12 months revenue over the years.

Q1 was also a record quarter for revenue from managed services engagements, which grew roughly 6% from a year ago equating to roughly 60% of our total revenue.

Our multi.

Multiyear managed services engagements to underpin the resiliency of our business with recurring revenue stream high renewal rates and expanded activities with existing customers.

And one of the customer highlights this quarter busy group renewed its relationship with Amdocs for application development and maintenance of 900 BSS systems in relation to Bt's E. Tran.

Turning to the balance sheet and cash flow as you can see on slide 16.

DSO of 79 days decreased by one day year over year and six days sequentially in Q1 <unk>.

Primarily reflecting higher invoicing level triggered by a record number of milestone deliveries achieved in the quarter.

We also saw a healthy increase in deferred revenue in Q1.

Altogether, we generated normalized free cash flow of $186 million in the first fiscal quarter.

Overall, we ended the quarter with a strong cash balance of approximately $869 million, including aggregated borrowing of approximately $650 million.

Additionally, we remain committed to maintaining our investment grade credit rating.

Turning to capital allocation on slide 17.

You can see in the first chart, we accelerated our buyback program and repurchased $171 million of our shares in the first quarter, which we believe demonstrates our confidence in the future success of Amdocs.

We returned $216 million to shareholders in Q1, including $45 million in cash dividend payments.

Regarding our capital allocation in fiscal year 2022, we remain on track to generate normalized free cash flow of approximately $650 million.

The majority of which we expect to return to shareholders.

Additionally, we remind you that free cash flow in the second fiscal quarter is typically lower due to the timing of annual bonus payments.

As another point, our normalized free cash flow assumes the conversion rate of roughly 100% of non-GAAP net income, which is consistent with our long term average.

Normalized free cash flow also excludes anticipated capex of about $171 million in relation to the development of our new Israel Campbell.

Which remains on track for completion and move in by this summer.

Now turning to our outlook on slide 18.

The prevailing level of macroeconomic business and operational certainty surrounding the magnitude and duration of the COVID-19 pandemic, including its novel strength remains elevated.

The second quarter and full year fiscal 2022 revenue guidance reflects what we consider to be the most likely outcome based on the information we have today.

We cannot predict all possible scenarios.

With that said, we believe full year fiscal 2022 revenue growth is tracking at the higher end of our guidance range of 6% to 10% on a pro forma constant currency basis.

Our outlook assumes revenue growth across all three of our key geographical regions and includes an immaterial contribution from the small bolt on acquisition of Dev Ops group.

Our annual outlook include second fiscal quarter revenue within a range of 1 billion $110 billion to $1 billion and 150 <unk>.

<unk>, which equates to a healthy growth of roughly seven 7% from a year ago.

On a reported basis, we expect full year revenue growth in the range of three 4% to seven 4% year over year.

As compared with three 7% to seven seven previously.

We anticipate an unfavorable foreign currency impact of approximately 60 basis points year over year.

Compared to the unfavorable impact of 30 basis points previously.

Moving down the income statement, we anticipate quarterly non-GAAP operating margins to track roughly in line with the midpoint of our annual target range of 17, two to 17, 8%.

This outlook continues to assume an accelerated pace of R&D investment to support our customers in line with our strategy balanced with our constant focus on achieving operational excellence.

Below the operating line, we anticipate foreign currency fluctuations will continue to impact on non-GAAP net interest and other expense line in the range of a few million dollars on a quarterly basis.

We expect that our non-GAAP effective tax rate in the second fiscal quarter will be above the high end of our annual target range of 13% to 17% for.

For the full year fiscal 2022, we expect our non-GAAP effective tax rate to be within the annual target range.

Bringing everything together, we believe non-GAAP diluted earnings per share growth is tracking at the higher end of our guidance range of 8% to 12% on a pro forma basis for the full fiscal 2022.

Likewise, we believe non-GAAP diluted earnings per share growth is also tracking at the higher end of our guidance range of six 3% to 10, 3% year over year on a reported basis.

Overall, we are firmly on track to deliver double digit total shareholder return for the second fiscal year run rate in 2022, assuming the higher end of our pro forma non-GAAP , earning per share growth guidance, plus our dividend yield.

With that back to you shortly.

Thanks Tamara.

As you can probably tell from our remarks today, we are excited by the great start to the year, our <unk> or growth strategic focus areas and the healthy accelerated growth outlook. We've provided for the next two years with that we're happy to take your questions operator.

Certainly ladies and gentlemen.

A question at this time. Please press Star then one on your Touchtone telephone. If your question has been answered and you'd like to remove yourself from the queue. Please press the pound key.

First question comes from the line of Palestinian from Bank of America. Your question. Please.

Hi, guys I almost didn't recognize my own name.

I have an easy question for you because you're a quarter is kind of straightforward.

But if I take a step back in.

In the last three four quarters your growth is accelerating repeatedly and now you are even providing.

More visibility to the next to the following two years.

My question is simple when you analyze your numbers in the last few quarters, including this last quarter.

And when you provided guidance can you take us through the basics, meaning what drives your growth.

What kind of projects.

Are happening in the market, where you are in terms of high level positioning in the market kind of type types of opportunities I'm not talking about specific customers. Because you gave a lot of examples I want more to understand the bigger picture what's happening in the market that eventually drives our growth acceleration.

Hi, Kyle I will start and Tom can add.

I think first.

There is a greater alignment.

Between our product and services to the market needs the sink.

There are many years in the company, but this is one of the I would say the best April .

Positioning of Amdocs that all the mega trends that.

Well, there we predicted them into vessels a lot to make sure that we're ready and we've talked about these mega trends like <unk> and journey to the cloud and network automation.

<unk> in general I think we are very ready to do same mega trend. So do you think this is one.

The top reason the second is that we see a lot of success globally. So it's not you know.

Just in North America.

In Europe .

We see a very.

A good momentum sales momentum across all regions and as important as I mentioned, we see a lot of funnel ahead of us. So it's not that you know that we.

We want some deal that treats actually and we see that the funnel of opportunities is increasing.

From quarter to quarter, so by the way as reflected by the by our backlog. So if you took everything together tying it altogether. We believe we have a very strong momentum we have the right product right services I think that the.

Our technology leadership of our products.

Comparing the competition is the highest ever.

So we are very encouraged with our position and as you say, it's working with Tom I'll do one side, let me just to add a different dimension of looking at it.

We look on our position in the market as you know we have very strong customer base. So one thing that is extremely important is that we have.

Chosen again by key customers.

To build the future on Amdocs, so talking about names such as AT&T and T mobile and Vodafone They're building the next generation stack to support the business in the heart of this strategy on Amazon.

Part of that.

Yeah.

Expanding our footprint within very strong names in the market that are relatively new customers for us, but very strong in the in the market such as charters, such as Verizon and other lean and then add to that penetration into many new logos globally such as the examples we gave on the call TPS, we talked about.

<unk>.

Additional affiliates within the Vodafone Group for example, in Turkey, We talked about Vodacom in Africa and from quarter to quarter, you see more and more examples of these new logos.

<unk> is supporting the growth as well so it's a combination of expanding in existing customers entering new large potential logos that can be very meaningful for our future and many many other logos internationally.

Great I have two.

Two.

Quick questions also.

Sure.

The Big question here is whether your business has impacted in any way by supply constraints that we're seeing across the hardware market.

And EPS.

And the answer is no first of all we are working in the cloud.

We are not using you know directly connected to any how the hardware processes used to be.

And I would I will tell you that so far we did not encounter any headwinds related to the supply change.

Got it.

Last question Tomorrow.

As reported <unk> grew one 7% and constant currency grew over 6%. It's a big gap can you take us through what's happening there can you take US also through not just the revenue, but also the expense match with currencies.

I'm not looking for the outlook, because it's impossible to predict I'm, just looking to understand what happened.

Yes.

The difference is the fact that Q1 'twenty one still included a full quarter of open markets. The company with investors on December 31.

So that's the main difference between the reported the last quarter Oklahoma.

Currency had some impact but it was more like I don't know less than 10, probably less than a percent.

So the vast majority if you remember we talked about open market being roughly $300 million a year so to make it easy on you'd probably like a quarter would be $80 million.

So.

That's the main reason and Thats why we keep giving the pro forma number which shows actually the real business growth of the company.

And then on the currency and we continue to track all our exposure focusing mainly on protecting the bottom line.

We've always had this philosophy on our hedging program.

So we are continuing to track on each currency in each activity.

Different exposure positions and trying to first of all create operational decisions that are building the natural edge where possible.

Ive always use. The example of Brazil is a country, where we are.

Business in Brazil, and the part of the decision on how much of the execution for our Brazilian customers is done locally in Brazil has to do with these kinds of exposure Thats, what I call. The natural hedge and then on top of that whatever we have a remaining residual exposure. We are building derivatives, where I would say affordable to do so.

Most of the currencies, we will apply and listen derivatives.

On the hedging.

Okay.

Thank you and ladies and gentlemen would like to ask you to limit yourself to one question and one follow up you may get back in the queue. As time allows our next question comes from the line of Tim Horan from Oppenheimer. Your question. Please.

Hi, Good evening this is actually Edward Yang on behalf of Tim.

Congratulations Gregg.

Quarter, Schulke and tomorrow. Thank you.

My first question, obviously, youre speaking very positively about the outlook.

Just focusing on the backlog.

The backlog the 12 month backlog was up close to 10%.

But in the prior two quarters it was up a little bit more than that 10 510, 8% is there anything to read into that or is that just normal.

Fluctuations quarter to quarter on the backlog.

Its normal fluctuations I don't think you should read into that.

The accuracy of the decimal points.

But the most important thing for US is that we've seen very strong visibility by awards that are happening.

As you've seen the scale that we have not seen in the past. So that's definitely driving a lot of the confidence that we have.

And on top of that it's the pipeline.

That is large and getting stronger.

And just additional point I believe that it's really important that this is not a one trick pony kind of thing we talked about the mega trends in the industry. The investment trends and also the fact that these across the different regions.

So it's a healthy situation, where we are seeing this momentum all over the place.

Understood and for my follow up.

My follow up question would be on <unk> use cases.

We're hearing a lot of telco customers talk very aggressively about fixed wireless deployments and part of that is trying to monetize the <unk> investment we're talking about growing subs, 50% per year, obviously off of a very small base.

But is that an area, where you participate and.

Related to that just on additional <unk> use cases tomorrow I think I heard you had a conference talk about your market one platform that sounded like.

Current type of business then with Amdocs is.

Associated with usually and I was just wondering if you could.

Talk a little bit more about that and whether carriers are open to plugging into your platform versus traditionally hiring you to build something in house for them. Thank you.

Hi, So I'll try to answer further.

The first question so fixed wireless.

There is a lot of potential to aid mainly in rural areas.

Since it's a mainly a consumer type of.

Activity and as you know as we speak we are building balls At&t's end.

And T mobile is another.

All consumer base will definitely we are involved.

I think the industry is still yet to be seen towards degree.

This will catch up but definitely that.

We are involved in many in many fixed wireless initiatives and in our system support it.

We shared before.

Regarding market one you're right. This is a different platform. This is a software as a service platform. The idea in market. One is that many of our customers like to.

All filled their customers.

Many ott's some of them for content some of them for we know Microsoft's application and many others.

So the idea of market one is larger than every one of our customer will start to integrate specifically and the bespoke way to Netflix too.

To shopify too.

Many many other content Peacock HBO Max will pay a bill to do it in one to one integration we have a platform today. They are actually integrated for many many OTT and the customer needs to do want integration point to Amdocs.

On the SaaS basis, and immediately give long.

Many many partners or OTT is already integrated to our to our platform it's accelerated.

Time to market is very very I think efficient and we have a lot of traction to this offering by the way across the world not just in North America and <unk>.

Very popular platform getting lot of traction.

Completely and software as a service basis.

Thank you.

Thanks.

Thank you. Our next question comes from the line of Tom Roderick from Stifel. Your question. Please.

Hi, It's Max I was not a ton for Tom just thinking about the geographic breakdown on the business.

Europe has had a little bit of a decline in the last two quarters, how much of that is related to the divestiture of open market and how should we see that.

<unk> kind of trending going forward.

So comparing year over year.

Some influence on the open market about a quarter of the open market business was in Europe .

But I think the more kind of fundamental and interesting thing in Europe is the fact that we have naturally ramped down some large scale transformations and recent awards are starting to ramp up now in terms of revenues, we expect a much stronger second half in 2022 for Europe , and hence the conviction of.

Full year growth year over year also in Europe .

As reflected already in deals that we have in our pockets may now and definitely looking on the pipeline, we're encouraged to see those more opportunities coming in.

In addition slides.

The impact sequentially and also year over year is coming from the currency is a lot of the currency movements. We are talking about is impacting our European business.

Got it thanks, and then just kind of focusing on the long term outlook. You gave I know that that excludes foreign currency and it also excludes any M&A activity, but it is the company is positioned to achieve that right now or are there some things that need to happen. In addition to the pipeline.

And like the current sales team are there any incremental investments to capture that.

Look the plan of record that we have supporting these numbers, obviously, we need to execute.

Just wanted to think it's in our pocket, but.

It's not too building on anything special that we don't have a clear line of sight to including the product offering the execution.

<unk> has to do with the.

The backlog the pipeline regular business.

Awesome. Thanks, Congrats on a good quarter and good start there.

Thank you. Thank you.

Thank you Andrew.

If you have a question at this time. Please press <unk> one our next question comes from the line of Jackson Ader from Jpmorgan. Your question. Please.

Great. Thanks, Paul.

The first one on <unk>.

AT&T revenue from AT&T jumped up a bunch in in 2020 fiscal 'twenty and then kind of flattish last year just curious.

Whether there was anything in particular.

That caused that slowdown there.

Our Jackson, so AT&T talking about the one we saw a very significant ramp up in the second half of the year.

And I can tell you that for the growth that we see some erica.

In 2022 and generally the company.

AT&T represents a significant part of this growth and we see very very healthy growth in AT&T in 2022.

Let me to add some color on AT&T as you'll recall, we are running a large scale transformation building next gen stats for AT&T in the heart of the strategy consumer mobility, we talked about expansion of business, helping them migrate to the cloud many of the applications beyond just our own technology and products.

We mentioned last quarter, the fact that we actually extended.

The managed services engagement through 2026, though.

Any angle we are looking at it beyond just obviously the very large importance of the numbers themselves.

The relationship is expanding and very healthy and the bottom line, we see AT&T grow supporting significantly and the growth of the company.

Yeah. Okay. So just just like a mismatch in timing exit run rate I guess sort of like exit velocity of that AT&T business better than the full year growth, yes, yes, not so much okay cool.

Alright, and then the follow up.

Okay.

You guys have.

A bunch of employees all over the place just curious what the expectation for any impact of wage inflation might be either in the U S or abroad, and how thats being kind of factored into your margin outlook here tomorrow.

So naturally we have factored the our expectation into the margin outlook and as you've seen we've managed to extend even margin year over year given the difference in <unk>.

Into the numbers.

Yes, the hot wage increases around the world, but working globally, including in many emerging countries wage increases is not a new phenomena.

War for talent is definitely there, but we have a global flexibility model that enables us to attract talent and apply decisions, where we want to hire we have a very sophisticated onboarding.

<unk> and processes to make sure that we are.

Not only getting into the company effectively new employees, but we scaling many existing employees into the new technologies.

And as discussed in the Investor update day last quarter, we have a lot of benefit coming from the unique business model in providing not only the international career mobility opportunity, but also casino opportunities within the company to move around between different domain, which is very attractive for career.

People. So yes wages are part of the overall package that touch on development career opportunities and obviously the people centric mindset. We have is extremely important as well in attracting and retaining the talent.

Great Alright, thank you.

Thank you thanks Jackson.

Thank you. Our next question comes from the line of Charles <unk> from Baird. Your question. Please.

Hey, Thanks for taking the question and congrats on the strong quarter.

I was hoping you could talk a little bit about Verizon and how that account has progressed over the past few quarters and also.

That's something that's contemplated in the three year revenue guidance and if so sort of.

How much growth are you kind of contemplating from Verizon specifically.

So for the second question definitely the opportunities and Verizon are backed into our opportunities for the next.

The answer is yes regarding to Verizon we are progressing very nicely in the in the programs that we started with them.

And they are starting to deploy our catalog and other services on the creation of the network domain and many other services. So we see very good traction and I think that the.

Verizon is starting to experience the quality of Amdocs products and services.

At the same time, we are developing a lot of opportunities.

Ahead of us.

And we compete on the opportunities and we hope to win them, but.

Overall, a very nice progress in Verizon.

Great and then I was hoping to ask one more as well just on the operating margins maybe medium term.

Do you think it's possible that you might be sort of above the range of the $17 3 million to $17 seven that you've been calling out is that something that you're trying to do or do you think that range is sort of just the optimal level for for the business.

First of all what we see now we see that manages the applicable one but obviously, it's something that we will continue on and focused on it also depends on very specific decisions, we're making around the level of investments in R&D.

And the opportunity to expand into many new countries and new logos.

Range that we guided for.

So I believe that what we see is the momentum now in the market. The fact that we are seeing expansion in the total serviceable addressable market that is very meaningful.

Sure you mentioned the investment.

Thesis that we have around the mega trend in names into all of these are great opportunities.

Physicians very well to take the controlling the yields of that Apple.

Community and very focused on doing so.

Great if I could just squeeze one more follow up so.

I don't think so we are already experiencing great momentum.

New countries New logos, then as you can see we are managing to balance all of that with.

A lot of activities that we're doing in building new tools automation methodologies et cetera that are more than offsetting from that.

Okay, alright, thanks, very much and congrats again thanks.

Thank you.

This does conclude the question and answer session of today's program I'd like to hand, the program back to Matthew Smith head of Investor Relations for any further remarks.

Yes, thanks, very much for joining the call 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 contact us here in the Investor Relations group and with that have a great evening. Thank you. Thank you.

Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.

Q1 2022 Amdocs Ltd Earnings Call

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