Letter to Shareholders
Fiscal 2020: A year of resilient growth
- Record annual revenue of $4.2 billion, highlighting strength of business model
- Ability to operate at a high level during COVID-19 underscores our value to customers
- Amdocs takes the industry to the cloud, in partnership with AWS, Microsoft Azure and Google Cloud
- Industry-leading transformation projects around the world, new modernization program at AT&T
- Acquisition of Openet brings market-leading 5G charging solution to Amdocs
Dear Fellow Shareholders,
Fiscal 2020 was a year like no other for Amdocs due to the impact of the COVID-19 pandemic. Nevertheless, we ended the year with year-on-year growth, as we helped our customers accelerate their migration to the cloud, increase the digital modernization of their systems and provide their end users with next-generation communication and media experiences. Despite the pandemic, we continued to develop and introduce new solutions to the market, and remotely deliver successfully major project milestones for customers across the globe. Our ability to operate the mission-critical systems of our customers without interruption during COVID-19 is a testament to Amdocs' rigor in delivering under the most challenging circumstances, as well as proof of the real-time value our managed services model brings our customers.
We are also proud of the fact we increased our support for the community during these challenging times, living up to our company purpose of enriching lives and progressing society. We donated medical equipment and life-saving machines, computers for remote learning and food for the needy. We established a call center to assist senior citizens and others in enjoying the benefits of a better-connected world, operated by Amdocs volunteers utilizing their creativity and technology skills.
In other community initiatives, we deepened the connection between our efforts to increase diversity and inclusion inside Amdocs to providing external future employability programs for the communities in which we work. Among others, these included a corporate readiness program for underprivileged women engineering students in India, a bootcamp for finance professionals from the Arab community in Israel and entrepreneurship training for people with disabilities.
Our performance around environmental and social policies, including operational eco-efficiencies, corporate social responsibility and employment practices, was recognized again by our being selected as an index component of the Dow Jones Sustainability Index (DJSI) North America.
In terms of our business, key financial highlights for fiscal 2020 include:
- Total revenue of $4.2 billion
- GAAP operating margin of 14.3%
- GAAP diluted earnings per share growth of 6.9%
- Non-GAAP operating margin of 17.2%
- Non-GAAP diluted earnings per share growth of 3.0%
- Record 12-month backlog of $3.62 billion, an increase of 3.7% from a year ago
Reflecting the strength and resiliency of our technology and product-led services model, our full-year revenue and non-GAAP diluted earnings per share grew 2.0% and 3.0% respectively in fiscal 2020. Our strong execution translated to better than expected normalized free cash flow of $527 million for the year, all of which was returned to shareholders through our quarterly dividend and share repurchase program. Reflecting our confidence in the future success of Amdocs, our Board has also approved the eighth consecutive annual increase in our quarterly cash dividend, subject to shareholder approval.
Taking the industry to the cloud
Service providers worldwide are embarking on transformational journeys centered on the cloud in order to deal with today's fast-paced changes in both technology and consumer expectations, which demands an agile environment. The cloud will enable service providers to drive new services, revenue opportunities and customer experiences, and we are working with our customers to provide each one with a tailored path to the cloud, regardless of their initial starting point.
This business imperative has been further heightened by COVID-19 as service providers accelerated their plans to migrate their on-premise data centers to the cloud, closed retail stores and doubled down on digital commerce, and quickly moved their customer care representatives and other back-office staff to work securely from home. As the crisis began, we were quick to bring to market remote solutions to support our customers' business continuity, addressing their immediate pain points.
Before the pandemic's outbreak, utilizing the most advanced technologies available today, combined with Amdocs' own intellectual property and research and development capabilities, we launched a fully open and modular, cloud-native, microservices-based version of our market-leading customer experience suite. In parallel, we also introduced a complete set of services and system integration (SI) capabilities to help our customers fast-track their legacy systems to the cloud, drive agile development for continual integration and deployment of their customer experience systems, and upgrade their operations.
Recognizing our success in transforming our own internal working culture to accelerate service providers' move to the cloud, leading industry association TM Forum this year selected Amdocs as the winner of its prestigious Excellence Award in the Human Factor category.
Over the course of the year, we signed strategic partnerships with Amazon Web Services and Google Cloud, which follow on from the expansion last year of our global strategic agreement with Microsoft Azure. We secured a pivotal win at a top-tier North American customer to deploy our cloud-native CatalogONE solution on the AWS Cloud, while in Southeast Asia we deployed our entire customer experience suite on the AWS Cloud in a DevOps delivery model.
Selected cloud projects
- Airtel Africa
- Altice USA
- Bell Canada
- Liberty Global
Modernizing, automating and digitizing our customers' business
As we enabled our customers' migration to the cloud, we also helped them speed up their digital transformations, another industry trend accelerated by the global pandemic. During the fiscal year we won significant transformation projects at leading European operators, began a new program to modernize AT&T's consumer mobility domain, and have also seen a significant uptake in the enterprise sector, as service providers look to automate their operations and modernize and consolidate their operational support systems across their entire consumer and enterprise services offerings.
We are also playing a key role enabling the new T-Mobile merger objectives with a wide range of activities, reflecting the deep relationship we have developed with both T-Mobile and Sprint over many years.
These digital engagements are based on the new fully cloud-native version of our market-leading customer experience suite, designed to run on any combination of major public and private clouds and focused on enabling our customers to provide maximum value to their consumer and enterprise customers. In additional validation of our progress in this domain, we were awarded Light Reading's Leading Lights Outstanding Digital Enablement Vendor for 2020.
The importance of content in driving customer loyalty continued to resonate over the year. Our Amdocs Media division maintained its positive momentum, winning deals across all our geographies for solutions ranging from content servicing and distribution to direct-to-consumer services and content aggregation.
Furthermore, in a non-telecommunications project combining the traditional strengths of Amdocs alongside projekt202, the experience-driven design and development company we acquired in 2017, we have been awarded a project with a North American banking group to accelerate its customer experience and digital transformation.
- Selected digital transformation, digital engagement & media projects
- AT&T Mexico
- Partner TV
- Three UK
- T-Mobile US
- Virgin Media
- Vodafone Germany
Future-proofing for 5G and the next-generation network era
As service providers speed up their roll out and deployment of 5G networks, the importance of charging and monetizing the new services 5G enables becomes paramount. To complement our commerce and real-time billing portfolio, over the summer we acquired Openet, the market leader for cloud-native 5G charging and policy. The combination of the Openet solution with Amdocs' portfolio, including our cloud-native catalog, provides our customers with an end-to-end suite to address all their 5G charging and monetization needs. We see a great opportunity to bring Openet's capabilities to our large global customer base of more than 350 service providers so they can succeed in the wave of 5G investments around cloud, edge compute and the Internet of Things, and the new customer experiences that 5G is expected to bring.
In today's hybrid world of legacy and 5G networks, service providers also need a holistic view of their service lifecycle management for network and cloud services. Our new cloud-native service and network automation platform helps service providers reduce costs and improve their agility through network automation and management systems, as well as capture revenue from next-generation connectivity and services. Components of this next-generation OSS technology are already deployed at a number of service providers around the world as they accelerate their network transformation journey.
We also joined T-Mobile, Intel, NASA and others as a founding partner in the 5G Open Innovation Lab, a global ecosystem for developers, enterprises, wireless carriers and technology leaders to fuel the development and monetization of 5G-powered technology use cases and markets. Furthermore, we are gaining important experience through working with customers in the South Korean market, the global leader in commercial 5G launches.
Selected 5G and network projects
- KT Corporation
Record managed services, unrivalled project execution
We continued to see record quarters of managed services growth, reflecting the ramp-up of activities with new customers and the multi-year extension of existing engagements, usually with an expanded scope of work. Overall, revenue from managed services grew 7% in fiscal 2020 and represented nearly 58% of total revenue, the highest proportion in Amdocs' history.
The pandemic also highlighted the resilience and professionalism of our delivery and operational units. By mid-March, almost 100 percent of our 26,000 employees were equipped to work securely from home, remotely delivering project milestones. For example, at Vodafone Idea in India, in one of the largest consolidations of subscribers in the world, we successfully migrated their postpaid customers to Amdocs' digital monetization system while working remotely. Over the course of the year, we maintained our industry-leading reputation for project delivery by utilizing new methodologies, best-in-class practices, and various collaboration and deployment tools to overcome the pandemic's obstacles.
Selected managed services projects
- A1 Bulgaria
- Liberty Latin America
- Three UK
There is no doubt that fiscal 2020 has been a challenging year, but we are confident there is an increasing pipeline of opportunities for fiscal 2021 as our customers focus on the critical cloud, 5G and digital modernization investments needed to thrive in today's environment, which should translate into attractive revenue growth for us.
We would like to end this letter by thanking our customers and shareholders for the trust they have placed in us and to recognize our global base of talented employees for the extraordinary professionalism, dedication and commitment they have shown, and continue to show, during the pandemic.
President and chief executive officer
Robert A. Minicucci
Chairman of the board