Letter to Shareholders

Dear Fellow Shareholders,

Fiscal 2015 was a good year for Amdocs, with continued progress across the company. We maintained our strong customer win rate, securing significant transformational projects across the globe, further enhanced our market-leading solutions with new releases of the Amdocs CES portfolio as well as several other key offerings, and acquired a substantial majority of the business support systems (BSS) assets of long-time competitor Comverse, thereby enlarging our customer base.

The year was not without its challenges, particularly in terms of the effects of volatile foreign currency fluctuations and the persistent uncertainty resulting from U.S. customer consolidation activity which impacted activity at some of our largest customers. Nevertheless, we exited fiscal 2015 with diluted non-GAAP earnings per share growth that was consistent with the high end of our expectations at the beginning of the year.

Solid performance in North America, Europe

The increased consolidation activity among wireless and Pay TV providers in North America, combined with delays in regulatory reviews, has created uncertainty in the communications market over the past 12 months. At the same time, we have continued to support our major customers in their ongoing operations and increase our activities with them. We extended our current managed services and related professional services relationship with Bell Canada through 2022, signed a new five-year agreement at U.S. Cellular to manage the operations of a range of its business and operational support systems (BSS/OSS), and assumed responsibility for Rogers’ BSS systems, across all lines of business, under a three-year agreement. Looking ahead over the longer term, we believe our expertise in post-merger integration planning and execution positions us to benefit from the trend of service provider consolidation. We also believe that intensified competition in the North American market will present us with additional opportunities to partner with our key customers as they execute their competitive initiatives.

In Europe, performance was negatively affected by foreign currency movements in addition to macroeconomic challenges and regulatory pressures which persist in the region. Nevertheless, over the past year, we have strengthened long-term relationships with some of Europe’s largest service providers extending and expanding managed services agreements at Mtel, Bulgaria’s largest mobile service provider and one of the largest affiliates in the Telekom Austria Group, and at EE, the UK’s largest mobile operator. In addition, Vodafone UK selected Amdocs for a four-year managed BSS/OSS transformation project in support of its enterprise business, while in Russia we successfully deployed a customer management solution at VimpelCom’s Beeline brand.

Record growth in Rest of World

Our long-term strategy to penetrate new customers and geographies resulted in a record year for revenue outside of our established markets of North America and Europe, primarily due to our progress in implementing complex modernization projects in both Latin America and Asia-Pacific. We also announced this year major BSS transformation projects at either end of the globe: at Singtel for its key markets of Singapore and Australia, while Telefónica selected Amdocs for its quad-play transformation at Vivo in Brazil. We also won new customers in other markets, including Kcell, Kazakhstan’s largest mobile operator, KT Corporation in South Korea and Indonesian direct-to-home Pay TV provider, Transvision.

Successful acquisition of Comverse BSS assets provides new opportunities

Over our more than 30-year history, we have used M&A as a tool for expansion into new areas, and to bring new technologies into the company. With our acquisition of a substantial majority of Comverse’s BSS assets, we have expanded and diversified our global customer base, particularly in Asia-Pacific, Latin America and Europe, where Comverse had a wide BSS customer footprint. Importantly, a majority of the Comverse customer base that we have acquired represents new relationships for Amdocs and, therefore, new opportunities to support many former Comverse BSS customers with a much broader range of offerings and services.

Expanding into new buying centers

Our strategy to expand into new buying centers of existing customers is also progressing as we extend our value proposition into the network. At the beginning of the year we launched our Network Cloud Service Orchestrator, which enables service providers to define and activate complex services containing virtual network functions (VNFs) in a matter of days instead of months, while our radio access network (RAN) optimization and Self-Optimizing Networks solutions help operators such as Vodafone Hutchison Australia improve their network coverage and customer experience across their networks. Meanwhile, our entry into the mobile financial services domain has already seen success with our solution being selected by the State Bank of India (SBI) to offer mobile financial services to India’s unbanked and under-banked population, using the mobile network of Bharat Sanchar Nigam Limited (BSNL).

We have also continued to strengthen our big data analytics offering, providing new communications-specific applications that allow operators to aggregate data from multiple marketing, network and customer care sources, and generate business and customer insights with actionable recommendations. Our data management services have been selected by Telefónica for an operational data store solution at its operations in Argentina, Chile and Peru.

In addition, our continued new releases of the Amdocs CES 9 portfolio have introduced new solutions for online commerce and interactive bills, as well as cross-portfolio enhancements to improve system performance. As a result, service providers embarking on their digital transformation journey are better able to proactively address the demands of what we’re terming The New World of Customer Experience™, and inspire customers with exciting services, create intelligent interactions and deliver a dynamic quality of experience, all the while accelerating the creation of business value.

Allocation of free cash flow to enhance shareholder returns

Free cash flow generation of $658 million in fiscal 2015 represented a new company record for the second successive year and comfortably supported our $268 million acquisition of a substantial majority of Comverse’s BSS assets. Demonstrating our commitment to further enhance the total return we provide to our shareholders, we proactively returned about $0.6 billion, or 84% of our free cash flow, by way of our share repurchase program and our quarterly dividend program. Our Board has also approved a nearly 15% increase in our quarterly cash dividend rate to 19.5 cents per share, commencing in April 2016, subject to shareholder approval. This marks the third consecutive year in which we have increased the dividend, and demonstrates our confidence in the future success of Amdocs.

Looking forward with confidence

Over the past fiscal year we have grown both organically and through acquisition, and our strategy for future growth is built on solid foundations, supported by our ability to execute the industry’s most complex projects and managed services. As we move forward, we believe the strength of our company and business model will enable Amdocs to offer even better value and benefits to our customers and shareholders. Thank you for your continuing support, confidence and commitment.

Eli Gelman
President and CEO,
Amdocs Management Limited
Director, Amdocs Limited
Robert A. Minicucci
Chairman of the Board,
Amdocs Limited