Amdocs (DOX) Q1 2022 Earnings Call Transcript

Amdocs (DOX -1.27%)
Q1 2022 Earnings Call
Feb 01, 2022, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Thank you for standing by and welcome to the Amdocs Limited first quarter 2022 earnings conference call. [Operator instructions] After the speakers' presentation, there will be a question-and-answer session. [Operator instructions] 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, sir.

Matthew Smith -- Head of Investor Relations

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

Participating on the call with me today are Shuky Sheffer, president and chief executive officer of Amdocs Management Limited; and Tamar Rapaport-Dagim, 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 as always, a copy of today's prepared remarks will also be posted immediately following the conclusion of this call. On today's agenda, Shuky will provide an update on our recent strategic progress and business performance, and Tamar will review our financial results and outlook for fiscal year 2022.

With that, I'll turn it over to Shuky.

Shuky Sheffer -- President and Chief Executive Officer

Thanks, Matt, and good afternoon to everyone joining us on the call today. I will start today's call by recapping our business and financial achievements for the first quarter of fiscal '22. Second, I will update you on the main pillars of our strategic growth framework and the 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 and 2024, which we are providing today.

Tamar will then provide additional details on our first quarter financial performance and guidance. As a reminder, our comments today will refer to certain financial metrics on the pro forma basis, where applicable, to provide you with a sense of the underlying business trends, excluding the financial impact of OpenMarket, which we divested on December 31, 2020. So, let's get going. Turning to Slide 7, I'm proud to report a great start for fiscal year 2022.

At 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, 5G monetization, journey to the cloud, and network automation. 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 as AT&T, T-Mobile, Vodafone, Globe Telecom, and others. Additionally, we penetrated several new logos that support our ongoing growth and regional expansion, including PPF Group in Europe and Vodacom in Africa. Our customer investment in the industry megatrends like 5G and cloud are gathering pace and translating to strong demand for our products and services.

The relevancy of our offering to the market results from our past and ongoing commitment to R&D investment, which further extends our technological leadership and brings cutting-edge innovation to our customers. To add a further point, I believe our capacity to win new business is a function of our unrivaled reputation for product delivery as demonstrated yet by another record quarter for the number of deployment milestones achieved for our customers in Q1. M&A is another important tool we use strategically to accelerate our capabilities in key growth areas. Focusing on our cloud strategy, I am delighted to announce our acquisition of DevOpsGroup, a boutique UK-based cloud company specializing in engineering, consultancy, and training services for enterprises implementing cloud and DevOps.

DevOpsGroup geographically complements the high-end expertise we acquired with last year's acquisition of Sourced Group and further strengthens our professional services organization to support all aspects of our customer cloud journey, including consulting, cloud-native software, migration of Amdocs and non-Amdocs application, ongoing development, and cloud operations. Overall, I am proud of our progress in Q1, which we achieved while striving to improve the lives of people in our community. Slide 8 highlights just some of many initiatives. Demonstrating our commitment to green environment, we recently completed a cloud migration project to support improved air quality in London by expanding the city's ultra-low emissions zone.

Amdocs Mexico was recognized by NGO Human Rights Campaign as one of Mexico's best places to work for LGBTQ+ for 2021. And our deep commitment to diversity was recognized by the Peruvian government for promoting an inclusive society in which people with disabilities achieve full development. Amdocs Israel also won the Diversity in the Business prestigious award for work to promote employability of the Arab minority in the tech industry. As a 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 third consecutive year, placing us among the Top 15 companies in our industry based on long-term economic, environmental, and social criteria.

I believe such recognition is a testament to Amdocs' identity and reflects the value held by our 20,000 -- 29,000 employees worldwide. I would like to take this opportunity to extend a warm welcome to all of -- 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. Our great start of fiscal year is reflected in our Q1 financial performance. The key highlights of which are on Slide 10.

We delivered record revenue $1.1 billion, up 10.6% on a pro forma constant currency basis, and led by our best-ever quarter in North America, where we continue to see high activity levels across our top customers. Strong sales momentum was reflected in record -- in our record 12 months backlog of $3.8 billion, which was up $140 million sequentially and 9.7% 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 range. Now, let me update you on the recent progress we've made against our strategic imperative, as presented on Slide 11.

To remind you, our growth strategy is intentional and focused. As industry leaders around the world look to drive growth and modernize 5G, they rely on our market-leading innovation to deliver unparalleled experiences to their consumers and enterprise customers. Our key innovation enablers include end-to-end cloud platform and services that ensure operational agility, scalability, and ultimately, cloud at scale; monetization of new 5G services like ultra-low latency connectivity, immersive entertainment, and connected industries; creating seamless digital experiences by transforming IT operations and reinventing user interactions; and delivering dynamic, connected experience with real-time automated networks. Beginning with cloud, I am proud to announce two key awards this quarter.

First, we were selected by T-Mobile's partner to shift non-Amdocs application to the public cloud, thereby expanding our activities in support -- 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 DataONE, our data intelligence platform. Second, we are thrilled to announce that PPF Group awarded us a digital, cloud-managed transformation of its next-gen business support system across all lines of businesses, under which Amdocs will provide its wide set of cloud-native products to be operated on the public cloud as a part of a long-term multicountry agreement. This award demonstrates Amdocs' ability to expand internationally by penetrating new logos, and we look forward to supporting PPF's 18 million subscribers across Bulgaria, Hungary, Serbia, and others.

In 5G monetization, Amdocs' Openet 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 products, services, and tariffs for its operation in Tanzania, Mozambique, and the Democratic Republic of Congo. In Malta, we extended our agreement with Melita Limited to provide charging solutions that will expand its range of IoT and 5G offering for consumer and business customers. Additionally, we announced a collaboration with Samsung Electronics America to deliver end-to-end 5G -- sorry, 4G and 5G 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 hard-to-reach locations.

Turning to digital modernization, we are happy to announce two new North American logos in Q1, including Summit Broadband, a Florida-based service provider which has selected Amdocs for a multiyear deal to uplift their BSS and OSS ecosystem; and Consumer Cellular, a postpaid mobile virtual network operator from Portland, Oregon which selected Amdocs eSIM solution. Additionally, Vodafone Turkey selected Amdocs for a three-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. Moving to network automation, I am excited to share that two Tier 1 North American customers, including Lumen, have recently selected to modernize and upgrade on our cloud-native, next-generation 5G network and services orchestration platform. Additionally, we today announced a three-year 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 its new services.

Finally, let me quickly highlight Amdocs Media, which continues to expand outside North America. In Indonesia, we extended a multiyear agreement with XM -- XL Axiata, which selected SaaS-based Amdocs MarketONE platform to offer its customers seamless access to international, local, and regional content services. Additionally, Amdocs recently worked with Astro, a leading Southeast Asia media and entertainment company, to successfully launch new content and broadband bundles, including Netflix, to provide customers with premium, affordable entertainment in a streaming world. 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. 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. Our conviction in this outlook is founded on our technology leadership and the strength of Amdocs' unique business model from which we derive highly recurring revenue streams, strong business visibility, and durable multiyear engagements supporting our customers' mission-critical operation. Second, we are encouraged to see a 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 multiyear investment cycle, driven by megatrends such as 5G and the cloud. Third, our strong sales momentum in recent quarters supports 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 road map of our customers and constantly extend our competitive lead in the market; 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. As a final point, our three-year 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 has entered a new era of accelerated growth as reflected in the three-year outlook we have provided today.

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 encouraging start of the year -- to the year. On the bottom line, we are also on track to achieve pro forma diluted non-GAAP earnings-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 our dividend yield. With that, let me turn the call over to Tamar for her remarks.

Tamar Rapaport-Dagim -- Joint Chief Financial and Operating Officer

Thank you, Shuky, 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 excludes the financial impact of OpenMarket, which we divested on December 31, 2020. Turning to Slide 14, I would like to echo Shuky's 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 our top 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 of 17.5% was in line with the midpoint of our long-term target range. Compared with a year ago, our 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 OpenMarket.

On the bottom line, diluted non-GAAP EPS of $1.20 was on the higher end of our guidance range. Diluted non-GAAP EPS includes a 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 $1.07 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 OpenMarket. Moving to Slide 15, strong first quarter sales momentum translated to record-high 12 months backlog of $3.83 billion, which was up 9.7% from a year ago.

On a sequential basis, 12 months backlog was particularly strong, rising by $140 million compared to September 30. Twelve months backlog continues to support an expectation for growth on a constant currency basis across each of our three core operating regions 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.

A multiyear managed services engagements underpin the resiliency of our business with recurring revenue streams, high renewal rates, and expanded activities with existing customers. Among the customer highlights this quarter, BT Group renewed its relationship with Amdocs for application development and maintenance of non-Amdocs BSS systems in relation to BT's EE brand. Turning to the balance sheet and cash flow, as you can see on Slide 16. DSOs of 79 days increased by one day year over year and six days sequentially in Q1, primarily reflecting higher invoicing levels 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 a 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 roughly 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 fund our 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 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 an added 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 $131 million in relation to the development of our new Israel campus, 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 uncertainty surrounding the magnitude and duration of the COVID-19 pandemic, including its novel strains, 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, but 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 DevOpsGroup. Our annual outlook includes second fiscal quarter revenue within a range of $1.11 billion to $1.15 billion, the midpoint of which equates to healthy growth of roughly 7.7% from a year ago. On a reported basis, we expect full year revenue growth in the range of 3.4% to 7.4% year over year, as compared with 3.7% to 7.7% previously, which anticipates an unfavorable foreign currency impact of approximately 60 basis points year over year, compared with an 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 17.2% 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 our non-GAAP net interest and other expense line in the range of a few million dollars on a quarterly basis. We expected our non-GAAP effective tax rate in the second fiscal quarter would be above the high end of our annual target range of 13% to 17%. 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 6.3% to 10.3% year over year on a reported basis. Overall, we are firmly on track to deliver double-digit total shareholders return for the second fiscal year running in 2022, assuming the higher end of our pro forma non-GAAP earnings-per-share growth guidance, plus our dividend yield. With that, back to you, Shuky. 

Shuky Sheffer -- President and Chief Executive Officer

Thanks, Tamar. As you can probably tell from our remarks today, we are excited by the great start to the year, our progress across strategic focus areas, and the healthy accelerated growth outlook we provided for the next two years. With that, we're happy to take your questions. Operator.

Questions & Answers:

Operator

[Operator instructions] Our first question comes from the line of Tal Liani from Bank of America. Your question, please.

Tal Liani -- Bank of America Merrill Lynch -- Analyst

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

Tamar Rapaport-Dagim -- Joint Chief Financial and Operating Officer

Hi, Tal.

Shuky Sheffer -- President and Chief Executive Officer

Hi, Tal.

Tal Liani -- Bank of America Merrill Lynch -- Analyst

I have an easy question for you because your quarter is kind of straightforward. But if I take a step back in the last three or four quarters, your growth is accelerating repeatedly. And now, you're even providing more visibility to the next -- to the following two years. And my question is simple.

What -- when you analyze your numbers in the last few quarters, including this last quarter, and when you provide the guidance, can you take us through the basics? Meaning, what drives your growth? What kind of projects that are happening in the market? Where you are in terms of high-level positioning in the market, kind of 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 your growth acceleration?

Shuky Sheffer -- President and Chief Executive Officer

Hi, Tal. I will start and Tamar can add. I think, first, there is a great alignment between our product and services to the market needs. I think, you know, that many years in the company, but this is one of the, I would say, the best-ever positioning of Amdocs that all the megatrends that, you know, we -- that was there, we predicted them, invested a lot to make sure that we are ready.

And we talked about these megatrends like 5G and journey to the cloud, and network automation, the [Inaudible] general. I think we are very ready to these megatrends. So, I think this is a one -- top reason. The second is that we see a lot of success globally.

So, it's not, you know, just in North America or 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, we won some deal and that's it.

Actually -- and we see that the funnel of opportunities is increasing from quarter to quarter. So, the -- and as -- by the way, it's reflected by our backlog. So, if you took everything together, tying it all together, we believe we have a very strong momentum. We have the right product, right services.

I think that our technology leadership of our products comparing the competition is the highest ever. And so, we are very encouraged with our position. And as you see, it's working well. Tamar, do you want to add?

Tamar Rapaport-Dagim -- Joint Chief Financial and Operating Officer

Maybe just to add some different dimension of looking at it. As we look on our position in the market, as you know, we have a very strong customer base. So, one thing that is extremely important is that we are chosen again by key customers to build a future on Amdocs. So, talking about names such as AT&T, and T-Mobile, and Vodafone.

You know, they're building the next-generation stack to support their business and the heart of their strategy on Amdocs. And on top of that, we are expanding our footprint within very strong names in the market that are relatively new customer for us, but very strong in the market, such as Charter, such as Verizon, and other names. And then, add to that, penetration into many new logos globally, such as the examples we've given on the call, you know, PPF. We talked about 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 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.

Tal Liani -- Bank of America Merrill Lynch -- Analyst

Great. I have two quick questions also. Your customers, sometimes, they deploy -- you're a pure software company. Your customers, though, depend on equipment to launch some services, and they do suffer from supply constraints.

And we also cover the equipment vendors who are not growing as much as the order is growing just because they can't supply. So, the big question here is whether your business is impacted in any way by supply constraints that we're seeing across the hardware market? And if yes, how --

Shuky Sheffer -- President and Chief Executive Officer

And, Tal, the answer is no. First of all, we are working in the cloud, so we are not using, you know, directly connected to any hardware process like it used to be. And I would tell you that, so far, we did not encounter any headwinds which is related to the supply chain issue.

Tal Liani -- Bank of America Merrill Lynch -- Analyst

Got it. Last question, Tamar, as reported, you grew 1.7%; in constant currency, you grew over 10 -- 10.6. It's a big gap. Can you take us through what's happening there? Can you take us also through the -- not just the revenue, but also the expense match with currencies? And I'm not looking for the outlook because it's impossible to predict.

I'm just looking to understand what happened.

Tamar Rapaport-Dagim -- Joint Chief Financial and Operating Officer

Yeah, the main difference, Tal, is the fact that Q1 '21 still included a full quarter of OpenMarket, the company we divested on December 31st. So, that's the main difference between the reported and the pro forma.

Shuky Sheffer -- President and Chief Executive Officer

And this is the last quarter.

Tamar Rapaport-Dagim -- Joint Chief Financial and Operating Officer

Currency had some impact, but it was more like less than -- probably less than 1%. So, the vast majority -- if you remember, we talked about OpenMarket being roughly $300 million a year. So, to make it easy on you, it would probably like a quarter would be $80 million. So, that's the main reason, and that's why we keep giving the pro forma number.

We chose actually the real business growth of the company.

Tal Liani -- Bank of America Merrill Lynch -- Analyst

Got it.

Tamar Rapaport-Dagim -- Joint Chief Financial and Operating Officer

Then on the currency, 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 and each activity, the different exposure positions, and trying to, first of all, create operational decisions that are building the natural hedge where possible. I've always, you know, used the example of Brazil as a country for -- you know, we have business in Brazil, and part of the decision of how much of the execution for our Brazilian customers is done locally in Brazil has to do with this kind of exposure.

That's what I call the natural hedge. And then on top of that, wherever we have a remaining residual exposure, we are building derivatives where, I would say, affordable to do so. So, most of the currencies, we -- we're applying, also, derivatives for the hedging.

Operator

Thank you. [Operator instructions] Our next question comes from the line of Tim Horan from Oppenheimer. Your question, please.

Edward Yang -- Oppenheimer and Company -- Analyst

Hi, good evening. This is actually Edward Yang on behalf of Tim. Congratulations on a great quarter, Shuky and Tamar.

Shuky Sheffer -- President and Chief Executive Officer

Thank you.

Tamar Rapaport-Dagim -- Joint Chief Financial and Operating Officer

Thank you.

Edward Yang -- Oppenheimer and Company -- Analyst

My first question, obviously, you're 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, 10.5% -- 10.8%. Is there anything to read into that, or is that just normal fluctuations quarter to quarter on the backlog?

Tamar Rapaport-Dagim -- Joint Chief Financial and Operating Officer

It's normal fluctuations. I don't think you should read into that, you know, to 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 for -- you know, as you see in the scale that we've 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 that 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. You know, we talked about the megatrends in the industry, the investment trends, and also the fact that this is across the different regions. So, it's a healthy situation where we are seeing this momentum all over the place.

Edward Yang -- Oppenheimer and Company -- Analyst

Understood. And for my follow-up -- my follow-up question would be on 5G 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 that 5G investment.

They'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 5G use cases, Tamar, I think I heard you at a conference talk about your MarketONE platform. That sounded like a different type of business than what 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.

Shuky Sheffer -- President and Chief Executive Officer

Hi. So, I will try to answer the first question. So, fixed wireless, there is a lot of potential to it, mainly in rural areas. Seems it's mainly a consumer type of activity.

And as you know, as we speak, we are building both. AT&T and T-Mobile is another all-consumer base, so definitely, we are involved. I think the industry is still yet to be seen to what degree this will catch up, but definitely that we are involved in many fixed wireless initiatives. And our system support it in any shape or form.

Regarding MarketONE, you're right, this is a different platform. This is a software as a service platform. The idea in MarketONE is that many of our customers like, you know, to offer their customers many OTTs, some of them for content, some of them for, you know, Microsoft's application, and many others. So, the idea of MarketONE is rather than every one of our customer will start to integrate specifically in a bespoke way to Netflix, to Shopify, to many, many other content, Peacock, HBO Max, whatever, to do it in one-on-one integration, we have a platform today that actually integrated for many, many OTTs, and the customer needs to do one integration point to Amdocs on a SaaS basis, and immediately, they have a long and many, many partners.

OTTs are already integrated to our platform. It's accelerated the -- definitely, time to market. It's a 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 a very popular platform, getting a lot of traction on a completely software as a service basis.

Edward Yang -- Oppenheimer and Company -- Analyst

Thank you.

Shuky Sheffer -- President and Chief Executive Officer

Thanks.

Operator

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

Max Osnowitz -- Stifel Financial Corp. -- Analyst

Hi, it's Max Osnowitz on for Tom. Just thinking about the geographic breakdown in 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 OpenMarket and how should we see that business kind of trending going forward?

Tamar Rapaport-Dagim -- Joint Chief Financial and Operating Officer

So, comparing year over year, it does have some influence on the OpenMarket. About a quarter of the OpenMarket 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 revenue. So, 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, as reflected already in deals that we have in our pockets now.

And definitely, looking on the pipeline, we're encourage to see those more opportunities coming ahead. In addition, you know, slight impact sequentially and also year over year is coming from the currency. A lot of the currency movements we are talking about is impacting our European business.

Max Osnowitz -- Stifel Financial Corp. -- Analyst

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 real M&A activity. But is the company positioned to achieve that right now, or there are some things that need to happen in addition to the pipeline and like the current sales team? Are there any going to be incremental investments to capture that?

Tamar Rapaport-Dagim -- Joint Chief Financial and Operating Officer

Look, the plan of record that we have is supporting this number. Obviously, we need to execute. So, 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, you know, the product offering, the execution, everything that has to do with the backlog, the pipeline, regular business.

Max Osnowitz -- Stifel Financial Corp. -- Analyst

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

Shuky Sheffer -- President and Chief Executive Officer

Thank you.

Tamar Rapaport-Dagim -- Joint Chief Financial and Operating Officer

Thank you.

Operator

Thank you. [Operator instructions] Our next question comes from the line of Jackson Ader from J.P. Morgan. Your question, please.

Jackson Ader -- J.P. Morgan -- Analyst

Great. Thanks, guys. First one on AT&T. So, revenue from AT&T jumped up a bunch in 2020 -- fiscal '20, and then kind of flattish last year.

Just curious whether there was anything in particular that caused that slowdown there.

Shuky Sheffer -- President and Chief Executive Officer

Hi, Jackson. So, AT&T 2021, 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 in North America in 2022, and generally, in the company, AT&T represents a significant part of this growth, and we see a very, very healthy growth in AT&T in 2022.

Tamar Rapaport-Dagim -- Joint Chief Financial and Operating Officer

Let me add some color on AT&T. As you recall, we are running a large-scale transformation, building next-gen stack 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 for 2026.

So, we -- from any angle, we're looking at it beyond just obviously the very large importance of the numbers themselves. The relationship is expanding and very healthy.

Shuky Sheffer -- President and Chief Executive Officer

Yeah, and the bottom line, we see AT&T growth supporting significantly the growth of the company.

Jackson Ader -- J.P. Morgan -- Analyst

Yeah. OK. So, just like a mismatch of timing, you know, exit run rate, I guess, or like exit velocity of that AT&T business is better than the full year growth if I [Inaudible]

Tamar Rapaport-Dagim -- Joint Chief Financial and Operating Officer

Yes, yes, absolutely.

Shuky Sheffer -- President and Chief Executive Officer

Not match there.

Jackson Ader -- J.P. Morgan -- Analyst

OK, cool. Yup. Yup. Yup.

All right. And then the follow-up, you know, you guys have a bunch of employees all over the place. Just curious what the expectations for any impact of wage inflation might be, either in the U.S. or abroad, and how that's being kind of factored into your margin outlook here, Tamar?

Tamar Rapaport-Dagim -- Joint Chief Financial and Operating Officer

So, naturally, we have factored the -- our expectation into the margin outlook. And as you've seen, we've managed to expand EBIT margin year over year given the difference in and out into the numbers. So, yes, there are wage increases around the world, but working globally, including in many emerging countries, you know, wage increases is not a new phenomena. The war for talent is definitely there.

But we have a global flexibility model that enables us, A, 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 are not only getting into the company effectively new employees but reskilling 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 career opportunities within the company to move around between different domains, which is very attractive for career development of people. So, yes, wages are part of the whole package, but there are some development, the career opportunities, and obviously, the people-centric mindset we have is extremely important as well in attracting and retaining the talent.

Jackson Ader -- J.P. Morgan -- Analyst

Great. All right, thank you.

Shuky Sheffer -- President and Chief Executive Officer

Thank you.

Tamar Rapaport-Dagim -- Joint Chief Financial and Operating Officer

Thanks, Jackson.

Operator

Thank you. Our next question comes from the line of Charles Erlikh from Baird. Your question, please.

Charles Erlikh -- Baird -- Analyst

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

Tamar Rapaport-Dagim -- Joint Chief Financial and Operating Officer

Thank you.

Charles Erlikh -- Baird -- Analyst

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

Shuky Sheffer -- President and Chief Executive Officer

So, for the second question, definitely, the opportunities in Verizon are baked into our opportunities for the next three years. The answer is yes. Regarding Verizon, we are progressing very nicely in the programs that we started with them. And they are starting to deploy our catalog and other services [Inaudible] in the network domain and many other services.

So, we see very good traction. And I think that Verizon is starting to experience the quality of Amdocs product and services. At the same time, we -- we're developing a lot of opportunities ahead of us, and we compete on new opportunities, and we hope to win them. But overall, a very nice progress in Verizon.

Charles Erlikh -- Baird -- Analyst

Great. And then I was hoping to ask one more as well. Just on the operating margins, maybe medium term, do you think, you know, it's possible that you might be sort of above the range of the 17.3 to 17.7 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 the business?

Tamar Rapaport-Dagim -- Joint Chief Financial and Operating Officer

Based on what we see now, we see that range is the applicable one. But obviously, it's something that we will continue and focus on. It also depends on very specific decisions we are 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 and the more mature engines of the company and how much we want to reinvest.

And we need that level of flexibility within that margin range that we are guided for. So, I believe that what we see as the momentum now in the market, the fact that we are seeing expansion in the total serviceable addressable market, that is very meaningful. Shuky mentioned the investment thesis that we have been on the megatrends and names. So, all of these are great opportunities.

We're positioned very well to take the controlling wheel of that opportunity and very focused on doing so.

Charles Erlikh -- Baird -- Analyst

Great. If I can just start with one more follow-up? So, to 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 to operating margins?

Tamar Rapaport-Dagim -- Joint Chief Financial and Operating Officer

I don't think so. We are already experiencing great momentum with new names, new countries, new logos. And as you can see, we're managing to balance all of that with a lot of activities that we're doing on building new tools, automation, methodologies, etc. that are more than offsetting for that.

Charles Erlikh -- Baird -- Analyst

Great. All right. Thanks very much, and congrats again.

Tamar Rapaport-Dagim -- Joint Chief Financial and Operating Officer

Thanks.

Shuky Sheffer -- President and Chief Executive Officer

Thank you.

Operator

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.

Matthew Smith -- Head of Investor Relations

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.

Shuky Sheffer -- President and Chief Executive Officer

Thank you.

Operator

[Operator signoff]

Duration: 47 minutes

Call participants:

Matthew Smith -- Head of Investor Relations

Shuky Sheffer -- President and Chief Executive Officer

Tamar Rapaport-Dagim -- Joint Chief Financial and Operating Officer

Tal Liani -- Bank of America Merrill Lynch -- Analyst

Edward Yang -- Oppenheimer and Company -- Analyst

Max Osnowitz -- Stifel Financial Corp. -- Analyst

Jackson Ader -- J.P. Morgan -- Analyst

Charles Erlikh -- Baird -- Analyst

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