Letter to Shareholders
Record year of accelerated and profitable growth
- Highest-ever annual revenue of $4.58 billion
- 10.3% revenue growth on a pro forma1 constant currency2 basis
- Industry-leading portfolio of innovative products and services
- Strategic focus on industry megatrends of digitalization, 5G monetization, network automation and cloud
- Resilient business model driving continued growth
Dear Fellow Shareholders,
Fiscal 2022 was a record year for Amdocs, based on our success in addressing our customers' highly strategic initiatives around digital modernization, the deployment and monetization of 5G and fiber networks, network automation and their transition to the cloud. Our innovative offerings and the strategic role we play in operating our customers' mission-critical systems empower service providers to deliver amazing experiences, ensuring a seamless digital world.
At the outset of this letter, we would like to call out our global and diverse base of incredibly talented employees and thank them for their devotion. Their commitment to enabling our customers to unlock their innovative potential for the benefit of their end users is fundamental to Amdocs' success.
In terms of our business, key financial highlights for fiscal 2022 include:
- Record revenue of $4.58 billion
- GAAP operating margin of 14.5%
- Adjusted GAAP diluted earnings per share growth of 13.3%, excluding from prior year the gain from the sale of OpenMarket, which was divested on December 31, 2020
- GAAP diluted EPS was down 16.5%3 as reported
- Non-GAAP4 operating margin of 17.6%, up 10 basis points as compared to last year while accelerating R&D investment
- Non-GAAP4 diluted earnings per share growth of up 12.1% on a pro forma1 basis and 10.2% as reported
- Record 12-month backlog of $3.97 billion, up 7.6% as compared to last year's fourth fiscal quarter
Reflecting the demand for our industry-leading portfolio of technology and services as well as our global reach, in fiscal 2022 Amdocs' full-year revenue and non-GAAP4 diluted earnings per share grew 10.3% on a pro forma1 basis in constant currency2 and 12.1% on a pro forma1 basis respectively. Our strong execution translated to healthy earnings-to-cash conversion, which exceeded 100%, and better than expected normalized free cash flow of $665 million3 for the year. Furthermore, we returned slightly more than this amount to shareholders through our quarterly dividend and share repurchase program. Given our confidence in the company's future success, our Board has approved the tenth consecutive annual increase in our quarterly cash dividend, subject to shareholder approval.
Fiscal 2022 also saw year-over-year growth in all the geographical regions in which we operate. North America was very strong, both at our top two customers as well as in the rest of the region. In Europe, revenue grew on a pro forma1 constant currency2 basis as new project activities ramped up throughout the year and we also grew in both Southeast Asia and Latin America.
Reinventing the customer experience around the globe
Our industry-leading product and services cloud portfolio empowers service providers to deliver amazing customer experiences, while reducing costs and improving efficiency. Our CES22 suite includes the latest technologies for service providers to accelerate new growth opportunities, diversify their business, monetize innovative and advanced services for both consumers and enterprise, and introduce new business models adapted to the partner-powered economy.
Our accelerated pace of R&D investment5 underscores our commitment to continuously bring cutting-edge technology and world-class products and platforms to market for the benefit of our customers. This is recognized by major customers like AT&T and T-Mobile US, where we continue to support core elements of their modernization journeys, implementing our next-generation products and cloud services.
These customers, and many others where we are expanding our footprint such as Vodafone Germany, are building their next-generation technology stack on Amdocs software to support their business. New customers, such as PPF Telecom Group, also selected Amdocs in fiscal 2022 to provide next-generation digital experiences for their customers in Bulgaria, Hungary and Serbia.
Whenever a customer selects Amdocs for a modernization project, we make them cloud ready. The cloud offers service providers the flexibility to scale their ecosystem, innovate via open-source platforms, and rapidly deploy solutions to market. Following the successful fiscal 2021 acquisition of Sourced Group to bolster our cloud transformation consulting capabilities, in fiscal 2022 we acquired DevOpsGroup, a boutique UK-based cloud company specializing in engineering, consultancy and training services for enterprises implementing cloud and DevOps.
With these acquisitions complementing our portfolio of cloud-native products and services, as well as strategic partnerships with Microsoft Azure, AWS and Google Cloud Platform, we believe we are well placed to enable our customers to begin or, in more advanced cases, continue their cloud migration journeys.
Our cloud-based, software-as-a-service MarketONE platform meanwhile, is enabling delivery of personalized flexible and seamless access to a vast catalog of premium on-demand content for consumers at service providers across the globe, including Virgin Media O2 in the United Kingdom, AT&T Mexico and XL Axiata in Indonesia.
Selected customer digital transformation, cloud and modernization projects
Unlocking the potential of 5G and shaping the network of the future
To realize 5G's competitive advantage and deliver innovative services to customers and partners, service providers need flexible engines with agile, cloud-native capabilities that intelligently manage and monetize their network.
Our solutions provide an end-to-end, automated approach to service lifecycle management, data analytics, network exposure and monetization – transforming a service provider's network into an agile, revenue-generating platform at the heart of the 5G ecosystem. During fiscal 2022, we completed an exciting proof of concept with A1 Telekom Austria Group, where we showcased the ability of 5G standalone networks to unlock the metaverse and other next-generation Web 3.0 experiences with on-demand connectivity for consumers and enterprises.
We also collaborated with Samsung to deliver end-to-end 4G and 5G private network solutions to US enterprises to help businesses across industries leverage next-generation communications applications and services, and were selected by Dish and Amazon Web Services (AWS) to support the rollout of Dish's 5G, open, virtualized and fully interoperable mobile and cloud network.
Monetization of new 5G services like ultra-low latency connectivity, immersive entertainment and connected industries is key to our customers' growth strategy over the coming years. At Mobile World Congress 2022, we unveiled our flexible monetization offering, designed to match end users' unique needs in the 5G era. This solution enables service providers to evolve their billing with a next-generation, flexible, customizable offering, future-proofed for the endless possibilities of 5G experiences. Several tier-1 North American service providers have already integrated this solution, improving their existing customer experiences and preparing their business for the future.
Elsewhere around the world, Vodacom, a new customer in Africa, chose our 5G charging and policy solution to enable the quicker launch of new products, services and tariffs for its operations in Tanzania, Mozambique and the Democratic Republic of Congo. America Movil has also selected Amdocs to deliver our policy and charging products in several countries in Latin America, while Globe Telecom in the Philippines is deploying our radio access network optimization services to accelerate the expansion of its 4G and 5G networks, and we are providing inventory next-generation OSS capabilities for Vodafone entities in Albania, Czech Republic, Germany and Romania.
Selected 5G monetization & network automation projects
- America Movil
Record managed services and consistent operating execution
Our multi-year managed services engagements underpin the resilience of our business, with recurring revenue streams, high renewal rates and expanded activities with existing customers. For instance, over the course of fiscal 2022 we extended our managed services relationship in terms of both scope and tenure with AT&T Cricket Wireless, BT Group, Bell Canada and PLDT in the Philippines among others.
In a record year for managed services in terms of revenue, our managed services agreements comprised around 61% of our total revenue for the financial year, which is also a record. Given the long-term nature of these deals, along with our largest-ever 12-month backlog, this provides a good leading indicator of our business.
Alongside the success of our managed services, consistent operating execution has been a hallmark of fiscal 2022. We successfully deployed a record number of project milestones on behalf of our customers, and our unrivalled reputation for project delivery is a crucial factor behind our ability to win new business. At Three UK, for example, we completed a major digital transformation program for its enterprise customer segment, where we moved from scoping, to building the cloud infrastructure, and go live in just 15 months.
Selected customer managed services engagements and deployments
- Three UK
- AT&T Cricket Wireless
- Bell Canada
- BT Group
Making a difference in our digital society
Driving our increasingly connected digital society forward comes with deep responsibility. As we partner with our customers to create a better-connected world, we also seek to make a difference. We strive to use our resources to provide sustainable product offerings, such as our eSIM solution that helps our customers eliminate the need for plastic SIM cards, and we focus on enabling digital inclusion not just across our offerings, but also in the communities in which we work.
We are proud of the success of our environmental, social and governance (ESG) performance achievements: for the fourth consecutive year, Amdocs was included among the leaders in the prestigious S&P Dow Jones Sustainability Index (DJSI) North America and we have a gold rating standard from EcoVadis, a leading provider of business sustainability ratings.
We also commit to enriching the lives of our employees and seek to provide the best people-centric work environment. We believe flexibility is key, providing employees with unlimited vacation and choice as to how and when they work. In our commitment to diversity, we aim to increase women's representation, particularly for technology and managerial roles, and we also promote initiatives to increase the representation of people with disabilities and from different ethnicities.
Following the outbreak of the Russia-Ukraine war, we took steps to ensure the wellbeing of our employees and contractors in the region and to support employees who wanted to leave with their families. Additionally, we actively provided humanitarian aid in Ukraine and neighboring countries. Among our many initiatives, Amdocs joined a donation campaign to provide essential services via UNICEF to vulnerable children and affected families, and we offered financial support to Amdocs employees hosting refugee families.
Well-positioned for growth
While Amdocs and our customers are not immune to macroeconomic cycles, we believe that Amdocs is well-positioned with the right strategy, unique business model, innovative technology and highly talented employees to capture the market opportunity.
The combination of different aspects of our business – unique business model of product and services, projects around our customers' mission-critical systems, the fact that a very high portion of our revenue is recurring in nature, and more importantly, customer investments with Amdocs in their strategic initiatives around 5G, digital, move to the cloud and network automation – presents a sustainable investment thesis for our investors.
We expect to grow in all key operating regions, deliver revenue growth of 6-10% in fiscal 2023, on a constant currency2 basis, and improved profitability. Moreover, we expect to deliver a double-digit expected total shareholder return6 for the third year running in fiscal 2023.
As we continue in our mission to empower our customers to shape the future to make it amazing for their end users, we want to thank you, our shareholders, alongside our customers and employees, for the trust and confidence you have placed in us.
President and chief executive officer
Robert A. Minicucci
Chairman of the board
1 Pro forma growth rate excludes the financial impact of OpenMarket (which was divested on December 31, 2020) from fiscal year 2021 and comparable fiscal year
2 Revenue on a constant currency basis assumes exchange rates in the current period were unchanged from the prior period
3 Primarily due to a gain from previously announced divesture of OpenMarket in the prior fiscal year.
4 For further details of reconciliation of selected financial metrics from GAAP to Non-GAAP, please refer to the tables on pages 11-12
5 In both absolute terms and as a percentage of revenue.
6 Assuming our non-GAAP diluted earnings per share growth guidance, plus our dividend yield of about 2%.