Welcome to Amdocs 4th Quarter 2022 Earnings Call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. I would now like to hand the call over to Matt Smith, Head of Investor Relations. Please go ahead.
Thank you, operator. Before we begin, I need to call your attention to our 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, including 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 Participating on the call with me today are Shuky Sheffer, President and Chief Executive Officer of Amdocs Management Limited And Tamar Rapaport Dagim, Chief Financial and Operating Officer. To support today's earnings call, we are providing a presentation, which can be On today's agenda, Shuky will recap our business and financial achievements for the Q4 and full year fiscal 2022 and will update you on the continued progress we have made against our strategic growth framework. Shikoh will finish by commenting on our financial outlook for the full year fiscal 2023, after which Tamar will provide additional details on our Q4 financial performance and forward guidance.
As a reminder, our comments today will refer to certain financial metrics on pro form a 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. And with that, I'll turn it over to Shuky.
Thanks, Matt, and good afternoon to everyone joining us on the call today. Let me begin by saying how extremely proud I am of Amdocs' achievement in fiscal 2022, which in many respects With our industry leading portfolio of technology and services and global reach, We delivered on our objective to sustain accelerated and profitable revenue growth, and we did so while Playing a major role in serving the mission critical needs and strategic requirements of the global communication and media industry, which will result question become more the backbone of society post the global pandemic. Of course, None of this would be possible without the dedication and commitment of our global and diverse base of more than 30,000 talented employees To whom I wish to extend my huge gratitude for making fiscal 2022 an amazing year by providing market leading innovation and exceptional service to our customers. Turning to Slide 7. We wrapped up strong fiscal 2022 financial performance with solid Q4 results that were in line with our guidance despite Persistent foreign currency headwinds and inflationary pressures throughout the quarter.
Recapping the full year highlights. Records revenue of approximately $4,570,000,000 increased 10.3% on a pro form a constant currency basis It was consistent with the high end of our outlook for 6% to 10% growth as provided at the start of the fiscal year. Reflecting heavy sales momentum, we finished fiscal 2022 with record high 12 months backlog of $3,970,000,000 up approximately 8% from a year ago, and we achieved record non GAAP diluted earnings per Share of $5.30 up 12.1 percent on a pro form a basis as we delivered on our targets For accelerated and profitable top line growth. To further add, our earning to cash conversion exceeded 1% in fiscal 2022, resulting in better than expected normalized free cash flow of $665,000,000 of which we return more than 100% to shareholders via share repurchases and dividends. To provide additional color in respect to Amdocs full year financial performance, All 3 of our core operating regions grew revenue on a pro form a constant currency basis in fiscal 2022 as shown on Slide 8.
The broad based growth across geographies demonstrate that our strategy to bring product and services innovation Across 5 gs monetization, cloud, network automation and digital is highly relevant and well aligned with the needs of our customers worldwide. For instance, North America delivered record year driven by 5 gs and cloud transformation projects. In addition to AT and T NT Mobile, revenue growth across the broader North American region as we continue to expand activities with many customers such as Comcast, Charter, DISH, Verizon, Bell Canada and Rogers. Our efforts to further expand in Europe and the rest of the world will also apparent in fiscal 2022. We won important strategic awards With long standing customers like Vodafone, AYN Telekone, Globe, PDT and XL Axiata And new logos like Group, Vodacom and Azarcell, which altogether demonstrate Amdocs' impressive global reach.
Fiscal 2022 was also a year in which we solidified our unrivaled reputation for execution. Driven by our consistent focus on operational excellence, we achieved a record number of project milestone deployments in the Q4 and full year Fiscal 2022, including major go live in Q4 at Verizon, 3UK, Vivo and Exela Xchata to name a few. As to our gross investment, we accelerate R and D in fiscal 2022 to further extend our technological leadership It's recognized by various industry analysts who are being. Moreover, we now have dozens of accounts using the latest versions of our cloud native CS Which I believe is a testament to the rapid cadence and industry leading capabilities of our platform. Additionally, we remain committed to M and A as a lever to accelerate our growth strategy by augmenting our R and D investments.
During fiscal 2022, we accelerated the post merger integration of DevOps Group to strengthen our cloud consulting expertise and we acquired Rome Digital to expand our digital experience capability. We also initiated a move to add service assurance to our network automation portfolio With the planned acquisition of Mycom OSI, which subject to certain regulatory approval, we expect to close before the end of fiscal Q1. Turning to Slide 9. Let me also say a quick word about Amdocs' approach to corporate social responsibility, which is tightly interwoven with Amdocs' business strategy. Since Amdocs is crucial to empowering our increasingly connected world, I believe we have an obligation to provide sustainable products that help our customer to advance the interest of the environment, while also taking responsibility to enable digital inclusion whenever we can.
A great example Is our work with Vinity Telecom, which is rolling out 4 gs and 5 gs network across remote communities in Brazil, Bringing connectivity to more than 600 small municipalities and public school to help close the gap in a digital divide. Now let me update you on our framework for strategic growth, the key pillars of which shown on Slide 10. As a reminder, our growth strategy is clear and simple, enabling our customers to derive growth, improve cost efficiency and providing amazing experiences To consumer and enterprises by bringing market unique innovation in respect to end to end cloud platform and services, Creating seamless digital experiences by transformation by transforming IT operations, monetizing new 5 gs services and delivering dynamic connected experiences with real time automated networks. During Q4, we made additional progress executing against From all premises to the cloud. This 5 year agreement will enable AT and T Mexico to quickly adopt the latest 5 gs innovation, Facilitated new business models and allow unmatched flexibility and capacity by ensuring the right IT service infrastructure to support its network evolution and growing business needs.
Additionally, and prior to say that Amdocs is working with Rogers Canada to move existing analog services and application to Rogers Private Cloud. Moving next to digital transformation, We've expanded our work with T Mobile as they implemented Amdocs AI and data platform on the cloud to unlock business insight for an improved customer experience. We signed a multiyearstrategic managed services agreement with Telefonica Espone America to deploy new BSS and cloud native OSS modules on the public cloud for Telefonica's entities in Argentina, Chile and Peru, enabling cost reduction, faster time to market for new services, advanced digital capabilities and improved Customer experience. I'm also happy to announce of our first digital transformation engagement with Azarcel And as a Bijan based operator, Amdocs will modernize Azul said BSS and OSS infrastructure With the cloud native platform to improve time to market for new product and services while increasing efficiency by digitizing and streamlining processes. Moving to 5 gs monetization.
At Verizon, we recently went into production with Amdocs Catalog 1, our cloud native platform designed to rapidly create Early in Q4, we also launched our next generation Amdocs charging, which combines the industry leading charging and BSS capabilities of both Amdocs and Oppenet to support rapid time to market End the monetization of innovative new services across 10 and on 5 gs Networks and beyond. Leading service providers, including 2 Tier 1 operators in North America, are already using Andox charging, and we are busy working with many others as they explore the ways to make a return on their 5 gs investments. To learn more about the significant market potential For future 5 gs use cases, we invite you to join us for a webinar on December 12, where we will share global perspectives An insight highlighting 5 gs's growing contribution to innovation services, the potential economic impact across industries, as well as real world example illustrating Amdocs' critical role in bringing 5 gs to life. Switching to network automation, we are continuing to broaden and strengthen our relationship with SCS, a leading operator of multi orbit satellite To deliver enhanced form of connectivity, Amdocs recently signed an important new managed services agreement with SCS, under which we'll provide anomaly detection, monitoring, diagnostics and remediation across SCS new satellite communication system.
Amdocs also seeing increased customer demand for private enterprise networks as society becomes more reliant on ubiquitous connectivity. As an example, Ambras is now working with EAS, a new Brazilian communication services provider, to build a private network Finally, I would like to quickly acknowledge Endox Media, where we are proud to say that Juice, Which is the part of Ubiquiti, earn a Netflix preferred fulfillment partner on the early world for the American region, this is your 3rd NPFP of the year win the most of any quarter since this program launch. Additionally, Vubiquity was recently selected by Cellcom in Israel to ensure a personalized digital content experience For Cellcom's 51 TV viewers under a newly extended agreement. Now moving to our fiscal year 2023 outlook, As presenting on Slide 11. As you expected, we are closely monitoring the global macroeconomic environment, which has become even more complex since we spoke last quarter.
While Amdocs and our global customer are not immune To macroeconomic cycles, we are confident in our unique and relatively resilient business model, which result in a highly recurring revenue stream And strong visibility from the mission critical system we support and the multiyear engagement. We're already working with our customer to optimize their plans to address the complex macroeconomic situation, helping them to improve customer experience, Accelerate cost reduction and increase efficiency by bringing our highly relevant capabilities in digital cloud and automation. We continue to see rich pipeline of opportunity, which I believe reflects Amdocs' position as a key technology enabler Situated at the heart of the 5 gs monetization and cloud related investments, strategies that we believe our customer will continue to execute in the next several years. Tying everything together on Slide 12. We expect to deliver full year revenue growth of between 6 10% on a constant currency basis in fiscal 2023, consistent with the long term guidance range we provided previously.
Our visibility is supported by record 12 months backlog entering the fiscal year. We expect all 3 of our core operating regions to grow on a constant currency basis in fiscal 2023, With Europe and rest of the world enjoying a stronger year compared with fiscal 2022 as recent project awards continue to ramp up. On the bottom line, we expect non GAAP diluted earnings per share growth of roughly 8% 12% in fiscal 2023. The outlook assumes an increased level of profitability As compared with the 2022 fiscal year, mainly resulting from ongoing efforts to improve operational excellence So automation and other sophisticated tools, which are now yield benefits. Additionally, we expect cost saving enabled By our move to the new campus in Israel, we expect earnings to cash conversion to remain at around 100% in fiscal 2023, supporting another year of strong free cash flow generation, the majority of which we plan to return to shareholders.
To summarize, we expect to deliver double digit expected total shareholder returns for the 3rd straight year Fiscal 2023, assuming our non GAAP diluted earnings per share gross guidance plus our dividend yield of about 2%. With that, let me turn the call over to Tamar for her remarks.
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 form a basis, which exclude the financial impact of open market, which we divested on December 31, 2020. Turning to our financial highlights on Slide 14, I'm happy to report solid 4th quarter financial results rounding out a remarkable full year fiscal 2022. Record Q4 revenue of approximately $1,170,000,000 was up 9.5% year over year in constant currency.
On a reported basis, revenue increased 7.3% and was slightly above the midpoint of guidance despite unfavorable foreign currency movements of roughly $9,000,000 compared to our guidance assumptions. Moving down the income statement. Our non GAAP operating margin was 17.6% in Q4, consistent with the prior quarter and up ten basis points from a year ago. During Q4, we continued to balance accelerated R and D investments in a competitive labor environment with our initiatives to improve operational excellence and efficiency through ongoing implementation of automation and other sophisticated tools. Additionally, I would like to remind you that our foreign currency hedging program is designed to protect our profitability and free cash flow generation rather than revenue, and we are once again pleased that this strategy has proven mostly effective through the volatile currency markets of Q4.
On the bottom line, non GAAP diluted EPS of $1.29 was at the midpoint of our guidance range and included non GAAP effective tax rate of 20.6%, which as expected was above the high end of our annual non GAAP effective tax rate guidance of 13% to 17%. For the full fiscal year, our non GAAP effective tax rate of 15.7% was within our annual guidance range. Diluted GAAP EPS was $1.05 for the 4th fiscal quarter, which was at the higher end of the guidance range of 0.98 currency basis, slightly above the high end of the 6% to 10% guidance range we provided at the start of the year. As Shuky mentioned, all three of our core operating regions grew on a pro form a constant currency basis for the full year. Our growth in North America was very strong, both at our top two customers as well as the rest of the region.
In Europe, Revenue declined as reported, but realistically, the region grew on a pro form a constant currency basis as new project activities ramped up Through the fiscal second half. Additionally, rest of the world grew in both Southeast Asia and Latin America in fiscal 2022. To provide some further data points highlighting the results of our global diversification initiatives, 6 Of our top 10 customers were located outside North America in 2022, despite strong growth in North America. 3 of these 6 customers were new logos added in the last decade. Additionally, the number of countries in which we generate annual revenue More than $40,000,000 has almost doubled over the 10 years, which is a result of our international, intentional geographic expansion.
On the bottom line, we achieved double digit non GAAP diluted earnings per share growth of 12.1% on a pro form a basis in fiscal year 2022, driven by strong top line performance, a slightly better non GAAP operating margin and the benefit of our share repurchase activity. Moving to Slide 16, 12 months backlog was a record high at 3,000,000,000.97, up 7.6% from a year ago, our strong sales momentum continued in the 4th quarter. On a sequential basis, 12 months backlog was up $20,000,000 as compared to the Q3. Our 12 months backlog has traditionally served as a good leading indicator of our business, Having consistently averaged around 80% of forward looking 12 months revenue over the years. Turning to Slide 17, I'm delighted to report a strong 4th quarter and our best ever year in managed services.
4th quarter managed services revenue of $715,000,000 was up 12.1% from a year ago and accounted for about 61 During Q4, we continued to expand our list of managed services customers with new multiyear deals, including those with Telefonica, Hispano America and SCS, which Shuky referenced earlier. Additionally, Charter and Amdocs have signed an expansion to our managed services agreement, providing ongoing support for Charter's growth of Spectrum Mobile. These deals add to an already impressive year for managed services renewals, including with customers such as Bell Canada, PLDT, Cricket Wireless and BT in line with our track record of nearly 100% renewal rate. Additionally, it is worth noting that we have virtually doubled our number of managed services accounts over the last 10 years. To remind you, our managed services engagements underpin the resiliency of our business with recurring revenue streams, high renewal rates and expanded activities, which may sometimes include auto transformation projects with existing customers.
Now turning to the balance sheet and cash flow highlights on Slide 18. DSO of 74 days declined by 8 days sequentially in Q4, reflecting healthy customer collections in the period. Additionally, the net difference of deferred revenue and unbilled receivables declined by $7,000,000 year over year. We generated normalized free cash flow of $176,000,000 in Q4 6 On a reported basis, full year free cash flow was $530,000,000 including CapEx of $116,000,000 in relation to our new campus in Israel. I'm very excited to report that as we speak, our employees in Israel are starting the process of moving Into the new premises.
Since the Israel campus is now substantially complete, we plan to stop disclosing Moving forward, normalized free cash flow starting from next quarter, and only free cash flow will be provided moving forward. Overall, we ended the year with strong balance sheet and a healthy cash balance of approximately $800,000,000 including aggregate borrowings Roughly $650,000,000 Moreover, we have ample liquidity to support our ongoing business needs while Retaining the capacity to fund strategic growth. This includes the acquisition of Micomavisai, which subject to certain regulatory approvals We expect to close before the end of Q1 for approximately $188,000,000 cash. Turning to capital allocation on Slide 19. We repurchased $108,000,000 of our shares in the 4th quarter and paid cash dividends of $48,000,000 Overall, we returned a total of $694,000,000 to shareholders Through share repurchases and dividends in fiscal 2022, equating to roughly 104% of normalized free cash flow.
Looking ahead to fiscal 2023, we expect free cash flow of approximately $700,000,000 which represents a healthy free cash flow yield of about 7% relative to Amdocs' current market capitalization. Our outlook assumes a conversion rate of approximately 100% relative to non GAAP net income. Regarding our capital allocations in fiscal year 2023, we expect to return the majority of our free cash flow to shareholders. This includes dividends for which we are pleased to announce the proposed increase of 10% in our quarterly cash payment to a new rate of $0.435 per share, subject to shareholder approval at the Annual Meeting in January. Overall, I believe fiscal 2022 was a remarkable year for Amdocs, which included record high revenue, slightly better profitability, Strong free cash flow generation and double digit growth in non GAAP diluted earnings per share.
Now turning to our outlook on Slide 20. As Shuky indicated earlier, we are closely monitoring the prevailing level of macroeconomic business and operational uncertainty, which remains elevated in the current business environment. Thus, the Q1 and full year fiscal 2023 financial guidance Reflects what we consider to be the most likely outcomes based on the information we have today, but we cannot predict all possible scenarios. With that said, we are positioned to deliver revenue growth in line with the midpoint of our long term guidance range of 6% to 10% year over year on constant currency basis in fiscal 2023. Visibility to this outlook is supported by a record 12 month backlog and the strong pipeline we see.
Our revenue growth for fiscal 2023 includes a contribution of about 60 basis points from Michael Morrissey. Given our expectation that subject to certain regulatory approvals, this deal will close before the end of Q1. This is similar to the inorganic growth contribution that was assumed in the guidance initially for fiscal 2022. Additionally, we expect to deliver revenue growth across all 3 operating regions of North America, Europe and Rest of the World on a constant currency basis for the full year fiscal 2023. Our annual outlook includes 1st fiscal quarter revenue within the range of $1,155,000,000 to 1,195,000,000 On a reported basis, we expect full year revenue growth in the range of 48% year over year, which anticipates an unfavorable foreign currency impact of approximately 2% year over year.
Moving down the income statement, we anticipate quarterly non GAAP operating margins around the midpoint of a new and improved annual target range of 17.5% to 18.1%, reflecting the benefits of our ongoing initiatives to improve operational excellence, automation, other sophisticated tools and disciplined resource management as well as expected cost saving resulting The cost of hedging will continue to impact our non GAAP net interest and other expense line in the range of a few $1,000,000 on a quarterly basis. We expect that our non GAAP effective tax rate will remain within an unchanged annual target range of 13% to 17% for the full fiscal year 2023. Specifically, our non GAAP effective tax is expected to be above that high end of the annual range in the 1st fiscal quarter. Bringing everything together, we expect non GAAP diluted earnings per share growth in the range of 8% to 12% for the full fiscal year of 2023. Overall, we expect to deliver double digit total shareholders' return for the 3rd year running in fiscal 2023, including our outlook for non GAAP earnings per share growth, Plus our dividend yield of about 2% based on the newly proposed quarterly cash payment to be approved by shareholders at January's Annual Meeting.
With that, back to you, Shuky.
Thanks, Tamar. As you can probably tell from our remarks today, I am very proud of our achievements for the Q4 and the full year of fiscal 2022. And I believe we are in a strong shape to deliver another year of profitable growth in 2023. With that, we are happy to take your questions. Operator?
Our first question comes from the line of Tal Lani of Bank of America. Please go
ahead.
First question comes from Tal Lani of Bank of America. Please go ahead. Our next question comes from Ashwin Shirvaikar of Citi. Please go ahead.
Thank you. Hey, congratulations on the good quarter.
Yes,
my
first question is related to the Comments on macro, which is front and center for investors as well. Are you Seeing perhaps a change in the nature of projects, maybe more cost savings, like more cloud or more managed services instead of more growth oriented New product type projects and could you sort of let us know in your base of revenues, does that lean More towards cost savings or growth?
I think, Ashwin, if you think about what we are bringing to the market in terms of the investment Domains we are supporting, many of them are relevant also in a more challenging macro environment. If you think about the journey to the cloud, for example, in terms of offering the service provider, the agility of providing quick services, matching In an easier way, the peaks of capacity that is required around the peak seasons like holiday seasons and A more agile cost structure. Those are things that are very applicable also in a more challenging macro environment. Same goes for how do you provide Quicker time from marketing ideas to customer experience. So many of those things that we're looking at Are very relevant also in more challenging times.
Now one of the big changes we've done irrespective of the macro situation, we've done this decision a couple of years back, is to find for more sophisticated technology, a faster time to market of our products to the production of the customer environment That from their point of view is creating faster value. Now one may say in this kind of environment, What kind of features and functions will they want relative to maybe prior times? But that's the beauty of the thing that we can actually respond Very quickly, we're bringing these ideas to production given today's environment. If I'm comparing it to years back, Well, it took us a year or 2 to develop a product version. So we are very close to our customers monitoring what are their needs.
You touched on managed services. I think this is absolutely one of the vehicles that we can bring to our customers in terms of reducing their cost structure. We are seeing managed services growing as you've seen already 12% in Q4, continuing to enjoy very high renewal rate Plus new engagements and new logos of branded services. So that continues to be a vector we push forward. But if you ask me, are you seeing a big Change as of now of the behavior of customers?
Not yet. I hope never. But we have not noticed anything like that. So we are continuing to look very carefully, of course, and we are very close to what's happening out there. The big impact is Frankly, the immediate impact we are seeing is inflation and currency volatility.
Understood. No, got that. And then on the campus, first of all, congratulations on completing it, it's a long process. I wanted to Understand there should be ongoing benefits, things like rent expense goes down, maybe Because employees are together, it helps in terms of bringing out product faster, things like that. Could you kind of go through What some of the original benefits were that you expected and are those kinds of things incorporated in your outlook?
Yes, definitely. We're very happy to see that coming to life. And as you've indicated, this was Long term and a very important investment in terms of the talent that we are seeking to have as well as Productivity. Now to remind you, when we talked about investing in the new campus and we believe that this is going to be economically beneficial, We took into our business case only direct savings, meaning tangible reduction in expenses of rent, etcetera. At the same time, I absolutely agree with you.
There are also indirect positive influences in terms of productivity, team engagement and things like that. So I'm Talking right now in terms of the direct benefit, that's already factored into the operating margin improvement we are guiding for 2023. The full year impact of that will happen in 2024, but already to a large extent, we are enjoying that in 2023. And the indirect influence is something that is harder to measure in an accurate way, but definitely something we're looking forward to seeing and feeling As we move into the new campus, and I can tell you the employees are highly excited about the move.
Thank you. Our next question comes from Edward Yang
Thank you. First question for me would just be around your fiscal 2023 outlook. I was a little surprised you kept the Fairly wide constant currency growth range 6% to 10% for fiscal year 2023. I know it's in line with your long term outlook And you gave the same range last year for fiscal year 2022, but the low end 6% would be a fairly draconian slowdown from the growth Scenarios do you see where potentially the low end could play out in that range?
So when we look into how we are guiding for the year in terms of the range, it's not different than what was done a year ago and also 2 years ago, Just to give you some context, and the reason for the range is that eventually when we're thinking about our visibility, it's pretty good. As we talked about having the 12 months backlog, covering roughly 80% of our business and having a solid pipeline ahead of us. But at the Same time, we're enjoying a peak level of transformation project activity, which by itself is Just thinking about what does it entail, it's not just about having the signed agreements, it's about having the plan of execution aligned with the customer with different milestones. So we need to be considering that as part of the moving parts. And hopefully, we have given the midpoint, the most likely scenario based on the plan of records we have Right now with our customers, but we need to take into consideration some changes that may come along to the upside as well as the downside.
And in addition to that, it's about the demand environment because while going with 80% visibility into the year, we still have 20% to make up for new signings. And just looking on what's on the pipeline and the conversion rate that we're expecting, we're trying to give the possible scenarios within that range. I would say the bottom line is, yes, there is a range, but we are guiding to something we believe is the midpoint to be the most likely scenario.
Fair enough. And my second question would just be on your backlog. And The backlog slowed somewhat. Was that driven by currency or any change? It doesn't seem like there were any changes in
Tamar can give you the details, but we don't guide the backlog in constant But definitely, there was a currency impact on the backlog this quarter. Tamar, you want to take it for me?
I think what you see, if we're looking on the 12 The year ahead, the next 12 months of revenue recognition, we're talking about the 2% headwind coming from currency year over year. So definitely, part of that is reflected also in the backlog that we have. I would say, in general, We don't see slowdown in terms of the momentum. Some quarters in terms of specific signings can be different than others, so I wouldn't sign too much into it. But I think we're encouraged to see more deals coming in.
We gave a lot of examples today in the prepared remarks. And to me, and I hope the message got across, the fact that we are continuing to sign deals with existing customers, but at the same time adding new logos And intentionally diversifying our customer base and entering more new countries is extremely important. We obviously love our existing customers. We want to have relationships that last For decades and sell to them more of the next generation and great technology we're bringing to the table, but we want to expand the number of customers and the number Countries in which we operate and the momentum on that is extremely important and continue to be something we expect to see in 2023.
And just to add, we see a growth in all three regions and the pipeline
is great.
Our next question comes from the line of Tal Lani of Bank of America. Please go ahead.
Hear me
now? Yes. Finally, we can hear you, sir. It brought
me bad memories from my ex wife. I used to tell her I'm talking, but you're not hearing me.
Everything is recorded, Todd. Yes. Okay.
I want to go back to the guidance for next quarter in the year. So The guidance for next quarter in revenues is about $15,000,000 below consensus. And for the year, it's about $80,000,000 So that means it's Not just Q1, it's below the consensus for the next few quarters. And I want to understand, I'm going to have 2 sets of questions. 1 is on revenues and the other one is on margins.
So this one is on the revenues. And so the question I have is, What is driving this guidance versus expectations? Is it is there a specific region? Is there any big project that Ending or can you give us more information about the trends that you're guiding just given that it's below consensus?
The answer is pretty simple. It's called foreign currencies. If you think about the $90,000,000 we are Expecting as a headwind going into the year 2023. That spread over the year, we said Specifically, our numbers for Q4 relative to regional guidance Q4 are lower by $9,000,000 If we look ahead, we continue to see this And negative impact. So if you just take the 90 and divide it by 4 to make it simple, you understand that the magnitude is roughly 20 something 1000000 per quarter.
And again, it's not behaving in a linear way, but just to make it simple. Now obviously, this is something that Everybody is talking about, everybody is looking at our hedging program is designed to protect the bottom line, not the top line. We're quite effective in doing so, both in protecting the margins as well as protecting the cash flow, and we'll continue to focus on doing so.
Got it.
Okay. So the next question is on margins. You don't give guidance For the margin, but you give guidance for EPS and EPS is about $0.09 lower than The Street for next quarter.
We actually guided Tal, just to add, we've guided to the fact we believe operating margin It's going to be elevated relative to prior year with the range of 17.5% to 18.1 And we are actually looking on if you compare it to where until 2021, 17.5% was the high end of our range. So you can understand that We are pushing forward on the margin to an improved view. Regarding EPS, I think there are a couple of things at play here. When we are looking on what's happening around the finance line With the currencies, yes, we are heavily trying to hedge, but at the end of the day, it also means there is some cost of hedging that goes into the numbers. And while we are extremely focused on trying to hedge everything possible, it's obviously based also what's effective in terms of cost.
So I'll give you an example. If there is a thinking about Argentina, for example. It doesn't make sense necessarily to go into extensive hedging in Argentina if it's very expensive to do so. So this is one aspect that goes into the numbers. So although operating margin are improving, and by the way, while Continuing to have an elevated level of R and D.
So it's not coming because we cut R and D. It's coming while we are continuing to have stronger R and D investments. And we are continuing to focus on hedging and trying to protect the bottom line. It does have some cost.
Got it. But when I compare your Q1 guidance to the full year, there is about $0.09 difference between your guidance and consensus for next quarter, but there is $0.08 difference for the year. So that means you're expecting that After Q1, you should be fine with EPS versus expectations. So do you agree?
Yes, again, regarding for the year, I want to be I cannot take accountability for consensus. I can explain what we are guiding. We are guiding for an EPS growth rate year over year of 8% to 12%, targeting the midpoint of 10% growth for the year. Specifically in Q1, We said that we expect a higher tax rate, specifically in Q1. For the full year, we take the same position around the range of the tax rate being 13% to 17%.
Specifically in Q1, given the recent volatility in tax rate between the quarters, we think it's going to be higher. And that's why Q1 EPS is lower relative to the full year.
Got it. Great. Last question is about cash conversion rate. Now that the investment is over, can you talk about you improved the cash conversion rate over the last few years. Can you talk about your plan For 2023 beyond, then what are the puts and takes in the calculation?
So the bottom line is we continue to focus on Everything that has to do with converting earnings to cash, and that's why we are confident in the message that we are targeting 100% earnings to cash conversion also in Within that, of course, there are many moving parts. That's obviously with a very strong focus on converting the great business that we have into invoicing and money in the bank collected from customers, which is something we are very focused on. And then, of course, it's managing the outflow of cash in a disciplined manner as we've done always. I make it sound simple. Obviously, It requires a lot of activities around that.
And within the company, there is a very high focus on that as we are continuing To look forward into other aspects. The one thing I want you To take note is that if during the cycle of investing in the campus, we reported 2 metrics, the reported cash flow and normalized cash flow To give full transparency of the investment we're making in the campus, now that it's practically done, We don't need to continue to report normalized cash flow moving forward and there will be one metric of the reported cash flow.
Thank you. At this time, I'd like to turn the call back over to Matt Smith for any closing remarks.
Sir? Yes. Thanks, operator, and thanks, everybody, for joining the call today and for your interest in Amdocs. As always, we do look forward to hearing from you in
This concludes today's conference call. Thank you for participating. You may now disconnect.