Letter to Shareholders

Dear Fellow Shareholders,

Communications and media service providers are entering the first stage of a multi-year transition as they transform digitally to improve the customer experience. They are also moving to a virtualized, service-driven network environment in order to accelerate service agility and, in the case of many market leaders, continuing their journey to become “full-service” providers. Such full-service providers seek to furnish their customers with a rich portfolio of offerings including core communications; media, advertising and entertainment; enterprise enablement; internet of things (IoT) and digital lifestyle services.

We believe that Amdocs is well positioned in all these spheres to enable this industry transition. Our unique and global perspective, gained through working with the world’s leading operators, enables us to help our customers seize the opportunities of this ever-changing landscape.

Fiscal 2017 was a successful year for Amdocs in which we maintained our high win rate, having invested in what we believe are the right strategic engines to support the needs of the world’s largest global carriers as well as innovative operators in smaller markets. Furthermore, we delivered on our long-held reputation for execution, progressing a record number of significant transformation projects toward production. With an eye to the future, we continued to invest in innovation, partnered with cutting-edge companies and became early adopters of new tools and technologies such as DevOps and microservices (decomposing an application into different smaller services to make it easier to develop and test) to maintain our strong market position and extend our product leadership. And we achieved all this while maintaining our profitability at the high end of our forecast.

The trend towards full-service providers

WE WON A SIGNIFICANT NUMBER OF PAY TV PROJECTS

North American market accelerates its modernization moves

The North American market is leading important aspects of the industry’s transition, particularly around increased interactions between Pay TV companies and communications service providers such as AT&T as each looks to expand their portfolio in order to become a full-service provider. Having anticipated this trend, we believe we will benefit from this transformation. We invested in an extensive digital solution for customer care and full multi-play services to address this expansion and have the R&D and delivery scale to support operators’ future requirements.

Indeed many leading North American mobile operators and Pay TV providers, such as Comcast, are now using our digital technology solutions to drive their business and modernize their systems. Over the past 12 months we have won a significant number of projects as Pay TV providers invest to improve their customer experience through digitization. These include a pivotal business support systems (BSS) transformation project at Altice USA and our partnership with Charter, where we are helping Charter provide a uniform and enhanced customer experience for all their subscribers following the company’s acquisition of Time Warner Cable and Bright House Networks. We were also selected by DISH Network Corporation for a strategic project in which we will help them better support their business customers. The enterprise business-to-business (B2B) customer market is a growing one, and we have accelerated our investments here in order to help service providers capture this opportunity.

New customers in Europe, Rest of World

The consolidation of mobile and Pay TV operators into full-service providers is not unique to North America. Vodafone Netherlands, for example, has entered into a cable joint venture with Ziggo, a subsidiary of Liberty Global, in which they are using our technologies to drive their digital vision. While focusing on project execution at some of the region’s largest service providers, we also expanded our momentum at the Vodafone Group, with Vodafone Italy, a new customer, selecting Amdocs for its BSS transformation across its multiple service lines. Additionally, in a further testament to our support for carriers rolling out digital lifestyle services as part of their expanded offering, Orange Spain selected our smart home security solution, which is based on our partnership with the Tyco securities unit of Johnson Controls. We are providing technology solutions to help our customers achieve their business goals and are also instrumental in helping them meet their everyday needs. In fiscal 2017 we signed several multi-year services extension agreements in Europe, including at BT, the United Kingdom’s largest full-service provider, and at Rostelecom, Russia’s national communications service provider.

In South-East Asia, we continued to solidify and strengthen our position in the region. We saw the progression of several major digital modernization projects, including KT Corporation, South Korea’s largest full-service provider, moving to Amdocs for a real-time monetization system to capture the opportunities of the digital economy. The enterprise sector, which requires automated and sophisticated order fulfillment solutions, is also a growth engine for this region, and we signed a deal with Telstra in Australia to transform their order orchestration and fulfillment, while Singapore’s NetLink Trust selected Amdocs to accelerate its fiber connectivity rollout and simplify the ordering experience for its broadband service provider customers.

We also secured a major digital transformation project at one of South-East Asia’s leading operators, which is investing heavily to improve its customer experience. This project is a showcase of a former Comverse customer choosing to modernize its systems on Amdocs’ new digital technology stack, providing another proof point to support our fiscal 2015 acquisition of Comverse’s BSS assets.

Through Comverse, we acquired a wide number of customers around the world and saw continued momentum globally, including in Brazil at Agar Telecom and Oi, and in India, where we announced a strategic partnership with Bharti Airtel to create an innovation foundry to bring exciting new services to their customers. We also maintained our momentum with Telefónica in Latin America, where we were selected to deploy a service fulfillment and orchestration solution at Telefónica Argentina, as well as an operational data store to support their enterprise businesses. Our development and operations center in Guadalajara, Mexico, which opened in the previous fiscal year, further increased its support for our numerous projects throughout the region.

Artificial intelligence and the move to virtualized networks

WE HELP OUR CUSTOMERS ACHIEVE THEIR BUSINESS GOALS AND MEET THEIR EVERYDAY NEEDS

Driving innovation at the core of a service provider’s business

One of the major characteristics behind our success is our ability to constantly innovate, focusing on the major innovation needs of our customers as they transform their business and the industry. In particular, we have brought artificial intelligence into our portfolio of products as well as pioneered the transformation of carrier networks to have cloud-ready, service agility.

In the first case, as service providers seek to create intelligent, real-time digital customer interactions, both virtual and human, in their customer’s channel of choice, our modular, open and integrated solutions enable operators to provide digital care and commerce in every channel and a seamless and connected omni-channel experience. With the launch this year of aia, our industry-specific digital intelligence platform, we enable service providers to infuse artificial intelligence into their business systems and processes, and thereby benefit from data-driven and intelligence-fueled decision making and actions. In the Philippines, SMART Communications deployed our contextual digital engagement technology, which is based on last year’s acquisition of Pontis, in order to launch and manage cross-channel, personalized marketing campaigns that leverage analytics to offer customers the most appropriate service at the right time in the right channel.

With regard to the innovation around service providers evolving their legacy networks into more IT, data-centric and virtualized environments, our software and services enable service providers to accelerate the value of network functions virtualization (NFV). Among our NFV initiatives, Amdocs is a platinum sponsor of the Linux Foundation’s Open Network Automation Platform (ONAP), which has become the leading open source initiative for virtualizing service providers’ networks. During the last year, we partnered with several leading service providers to advance their move into the virtualized network space, including AT&T, Bell, Comcast, Orange and others.

Record revenue, continued operating margin improvement

Our fiscal 2017 financial performance was in line with our expectations at the start of the year and included record revenue, continued operating margin improvement, and non-GAAP diluted earnings per share growth of 6.4%. Looking into fiscal 2018, we remain strongly committed to the proactive and disciplined allocation of capital as a mechanism to enhance returns for our shareholders. To support this, our Board has authorized an additional share repurchase plan of $800 million with no expiration date, which we will execute at the company’s discretion going forward. As a further demonstration of our confidence in the future success of Amdocs, we are also pleased to announce a proposed increase in the quarterly cash dividend for the fifth consecutive year, subject to shareholder approval at the annual general meeting in January.

Celebrating 35 years of success

WE CONTINUE TO DELIVER INNOVATION IN PRACTICE AND PROVIDE VALUE TO OUR CUSTOMERS AND SHAREHOLDERS

This past year saw Amdocs celebrate its 35th anniversary, which is no small achievement in our fast-changing industry. As our new brand launched earlier this year highlights, there are some aspects of Amdocs that have never altered over this period: we are dynamic and reliable partners to our customers and, crucially, we are both inventive and experienced. By remaining true to these characteristics, we will continue to deliver innovation in practice and provide value to our customers and shareholders.

Thank you for your support, confidence and commitment.
 
Eli Gelman
President and CEO,
Amdocs Management Limited
Director, Amdocs Limited
 
Robert A. Minicucci
Chairman of the Board,
Amdocs Limited