Overall, we believe fiscal 2012 was a successful year for Amdocs, especially in establishing and extending key strategic relationships with the world’s most influential service providers and in winning a series of important transformational deals around the globe. The company performed well across several key growth engines, including the emerging markets and managed services. Additionally, we strengthened our product and service delivery organizations over the course of the year, enhancing our ability to deliver many concurrent transformation projects globally.
Nevertheless, the year also posed its challenges. In particular, North American growth was difficult in the wake of the breakup of the proposed merger of AT&T and T-Mobile USA. We believe we successfully managed through this unexpected headwind and continued to drive strong new sales, delivered ongoing operational and execution improvements, and executed on our share repurchase programs. All of these factors contributed to healthy double-digit earnings per share growth in fiscal 2012. In addition, the Board of Directors authorized the company’s first quarterly cash dividend program which commenced in the first quarter of fiscal 2013, in order to further enhance returns to our shareholders.
GROWTH ENGINES FIRED: EMERGING MARKETS AND MANAGED SERVICES
We continued to drive our geographic expansion into the emerging markets, producing 37% year-over-year revenue growth in these exciting regions. Highlights included our announcements of two major managed services deals. First, our agreement with TIM Brasil marked not only our first managed services deal in Latin America, but also our first managed services contract spanning both business support systems (BSS) and operational support systems (OSS). On the other side of the world we began a major BSS transformation project at Globe Telecom in the Philippines under a seven-year managed services agreement.
Beyond the emerging markets, we continued to see strong global interest in managed services, providing further evidence of the strength of our unique business model, which combines industry-leading software, professional services and end-to-end managed services operations. In North America, we signed important contract expansions and extensions with key customers, including Comcast and, more recently in early fiscal 2013, Sprint. In Europe, we won the 2012 Best Telephony Outsourcing Award in a submission with Vodafone Netherlands, and also signed a new managed services agreement with a large wireless operator. In these times of economic uncertainty, the importance of long-term managed services agreements, and the predictable revenue streams they bring, cannot be overestimated.
AMDOCS DELIVERS ON NEW PRODUCTS AND OPERATIONAL IMPROVEMENTS
A highlight of the past fiscal year was the launch of our latest portfolio stack, CES 8.1, which has shown strong adoption and deployment rates at customers around the globe. Further demonstrating our commitment to innovation and distancing us from the competition, within months of our acquisition of Bridgewater Systems, we also successfully launched the industry’s first Data Experience Solution. This brings together our industry-leading policy control and Turbo Charging technologies, pre-integrated as a single solution. We also improved the quality and efficiency of our delivery and managed services organizations throughout the year, helping us deliver on our project commitments while simultaneously improving profitability. Indeed, our vision and ability to execute have been recognized externally, with Amdocs being positioned in Gartner’s Leaders Quadrant for both Integrated Revenue and Customer Management (IRCM) and Operational Support Systems (OSS), and cited as BSS Vendor of the Year in Asia Pacific by Frost & Sullivan.
THE NORTH AMERICAN MARKET: CHALLENGING IN 2012, BUT STRATEGIC ACTIVITY POISED TO RESUME
North America proved to be our most challenging region in fiscal 2012 as our largest customer – AT&T – decided at the beginning of the year to abandon plans to merge with T-Mobile USA amidst regulatory scrutiny. While this had an immediate impact on AT&T’s spending plans for the year, and therefore on Amdocs, we believe the effects were, in fact, broader reaching and temporarily stalled strategic movement in the U.S. wireless market. Recently, we have begun to witness more strategically oriented activity in the U.S. market with several proposed merger announcements, the commitment to next-generation network build-outs and services offerings, the launch of early data monetization packages, and rising investment in prepaid and no contract service offerings. We believe these announcements suggest good long-term opportunity for Amdocs, but we remain cautious on how quickly this activity resumes. In particular, we believe business combinations may raise near-term uncertainty as merging companies often focus initially on merger-related activities rather than on transformation projects.
FINANCIAL STRENGTH AND SHAREHOLDER RETURNS
We continue to focus on the total return we are delivering to our shareholders, through a combination of revenue growth, stable profitability and the return of capital through share repurchases and dividends. In fiscal 2012, even in light of unexpected headwinds from our largest customer, we were able to drive healthy earnings per share growth. As of September 30, 2012, we had repurchased roughly 25% of our total shares outstanding since April 2010 when we commenced our recent share repurchase programs. In addition, our Board of Directors approved our first quarterly cash dividend program which commenced in October 2012. The Board also increased our share repurchase authorization by an additional $500 million in November 2012. We believe these actions demonstrate our ongoing commitment to increasing total shareholder returns and our belief in the future of Amdocs.
EMBRACE CHALLENGE, EXPERIENCE SUCCESS
We started fiscal 2012 by marking our 30th anniversary, a landmark event which provided us with the opportunity both to look back at our successful history, and also to look ahead. We used the occasion to unveil a new brand promise: “embrace challenge, experience success.” We believe this brand positioning captures our unique ability to help our customers succeed while overcoming the most complex IT challenges. It is this core value, supported by our innovation and operational excellence that enables us to deliver value to our shareholders as well.
We believe that we ended fiscal 2012 in a stronger position than we started, thanks to the new deals we signed over the course of year, the projects we delivered, and the improvements we made on how we deliver great value to our customers. With uncertainty lingering in the global economic forecast and planned service provider consolidations in the North American market still very much at the initial stages, we remain cautiously optimistic in our outlook for the year ahead. Given the strength of our product portfolio, our IT services, professionalism and our growing global managed services operations, we are confident that Amdocs will continue to maintain our heritage as the market-leading provider to the world’s top communications operators.
Thank you for your continued support, confidence and commitment.