Dear Fellow Shareholders,
Fiscal 2023 was another record year for Amdocs in terms of annual revenue as our customers continued their journey of digital modernization, accelerated cloud activities, network automation, serving the business-to-business (B2B) sector, and the increased deployment and monetization of 5G and fiber networks. While Amdocs and our global communications service provider customers are not immune to economic cycles, Amdocs plays a central role in these vital modernization journeys, and we believe we are ideally placed to further expand our future scope of activity in these multi-year investments in strategic imperatives.
Our software and services are mission-critical in empowering service providers to deliver an amazing experience to their end users, be they individual consumers or enterprise customers. We want to call out our talented and diverse group of employees across the world and thank them for their professionalism and dedication in ensuring the smooth-running of our customers’ IT operations and the continued development of the innovative technology that forms the backbone of today’s seamless, digital world.
FY2023 key financial highlights
(compared to FY2022)
- Record revenue of $4.89 billion
- GAAP operating margin of 13.4%
- GAAP diluted EPS of $4.49, up 1.1%
- Non-GAAP2 operating margin of 17.8%, up 20 basis points while continuing to increase R&D investment
- Non-GAAP2 diluted earnings per share of $5.91, up 11.5%
- Record 12-month backlog of $4.15 billion, up 4.5%
Fiscal 2023 was a strong year of healthy, profitable revenue growth and robust free cash flow generation. Full year revenue grew 6.8% as reported and 7.7% on a constant currency1 basis and included strong double-digit growth from cloud activities which exceeded 20% of Amdocs’ total revenue for the first time this year. GAAP diluted EPS grew 1.1% and Non-GAAP2 diluted EPS grew 11.5%, reflecting topline growth and consistent margin expansion led by our continual efforts to improve operational excellence, including through automation and other sophisticated tools. Focused execution was another hallmark of fiscal 2023, once again supporting earnings-to-cash conversion of nearly 100%, and strong free cash flow3 of $698 million of which we returned nearly the same amount to shareholders through our quarterly dividend and share repurchase program. We are also pleased to report that our Board of Directors has approved the eleventh consecutive annual increase in our quarterly cash dividend, subject to shareholder approval.
Fiscal 2023 also saw year-over-year growth in most of the geographical regions in which we operate. North America and Europe had record years, delivering robust growth as we progressed modernization projects on behalf of many of the world’s largest service providers. Revenue in the rest of world declined slightly in fiscal 2023 but we exited the year with Q4 a record quarter for this region in the past four years.
Developing the industry's leading generative AI framework and building new partnerships
During fiscal 2023, we announced the launch of Amdocs amAIz, a cutting-edge, enterprise-grade generative AI (GenAI) framework, which creates a foundation for global service providers to benefit from the immense potential of the GenAI era. Importantly, this framework addresses the telecom industry-specific challenges of security, data privacy, scalability, and the complexity of data governance. Its telco-specific taxonomy empowers service providers to deploy GenAI use cases across the entire ecosystem, improving their business agility and enabling them to re-invent the way in which they engage with customers, as well as accelerate cost reduction and drive operational efficiencies.
The Amdocs amAIz framework follows the expansion of our strategic partnership with Microsoft earlier in fiscal 2023, marked by the launch of a new AI-powered Customer Engagement Platform which leverages Microsoft and Amdocs capabilities to create what we believe is a market-leading offering. We have also announced a partnership with NVIDIA to optimize large language models (LLMs) to speed adoption of GenAI applications and services across the telecommunications and media industries.
We have begun to embed GenAI use cases into our products and services, including in our latest CES23 suite, which also provides service providers with enhanced B2B capabilities, specifically developed to help them meet the increasingly complex demands of their enterprise customers. Our ability to continuously deliver our products from our R&D shop to customers at a very fast pace enables service providers not only to move fast, but also see faster returns on their investments, an important factor in today’s economic environment.
We continue to play a key role in our customers’ modernization journeys, expanding our role in T-Mobile USA’s digital transformation, where the Amdocs Commerce & Care Suite, together with our monetization suite, will power insightful and transparent experiences across all channels for T-Mobile USA consumer and B2B subscribers. Three UK meanwhile selected Amdocs to migrate to a modern cloud-based data architecture to provide customers with timely recommendations, based on data-driven decision-making, and we have deepened our relationships at other longstanding major customers such as AT&T, Comcast, DISH, Vodafone, and Globe Telecom in the Philippines as they continue their digital transformations. In Dubai, we worked with etisalat by e& to revolutionize their in-store retail experience with one of the world’s first AI-enabled telco autonomous stores, providing a personalized next-generation shopping experience.
Over the past fiscal year, we have seen good momentum in our cloud business, which we believe reflects the combination of our unique industry expertise and our strategic cloud partnerships with the leading cloud providers: Amazon Web Services, Microsoft Azure, Google Cloud Platform and Oracle Cloud Infrastructure. We help to remove complexity for operators by delivering end-to-end, fully accountable cloud migration paths, which begin with strategic planning and stretch to cloud-native product deployment and cloud managed services. At Bell Canada, we are expanding our multi-year business relationship to migrate Bell’s core applications, including billing, from their on-premise data center to the public cloud and have begun similar projects at TELUS in Canada, Claro Brazil, Vodafone Ireland and at PLDT in the Philippines and its wireless subsidiary Smart. We also have also entered into a multi-year agreement with AT&T Mexico to provide ongoing operations and support services for their cloud transformation, which will enable this operator to deliver an elevated level of service, enhancing the overall customer experience.
Selected customer digital transformation, cloud and modernization projects
- T-Mobile USA
- Bell Canada
- Claro Brazil
- Three UK
- Globe Telecom
- Melon Digital
Generative AI partners
Driving 5G monetization and network automation
Amdocs provides service providers with the next-generation solutions they will need to monetize and unlock the future market potential of true 5G standalone networks as they roll out over the next few years. One of the most powerful use cases to emerge from 5G so far is 5G fixed wireless access, and during fiscal 2023 Amdocs played an important part in the launch of Internet Air, AT&T’s fixed wireless access offering which runs on the new cloud-native digital platform we are delivering there under our large-scale BSSe technology modernization and simplification program. Furthermore, our Amdocs Home Operating System was selected by T-Mobile USA to simplify its internet and device management, as well as automate customer support for its 5G home internet customers, providing a new level of care, smart insights, security and control over the growing number of connected home devices and services.
In North America, our network services helped DISH expand their 5G services on the public cloud, culminating in the successful rollout of DISH’s comprehensive 5G network that now reaches over 70% of the US population, while at Verizon we went live with Amdocs Catalog, our cloud-native platform designed to rapidly create and launch new 5G service offerings, and Verizon’s 5G orchestration platform, enabling service and network automation.
Additionally at Verizon, we expanded our engagement in operational engineering in fiscal 2023 to include continued platform support in network function onboarding and improved automation, while Telefonica Germany selected our cloud-native Amdocs Network Optimization Suite, enabling this operator to maximize network performance and accessibility and to benefit from greater flexibility, scalability and automation.
We also delivered a 5G-ready, next-generation charging solution at a major European operator, while service providers around the world, such as Magyar Telekom in Hungary, Melita in Malta, M1 in Singapore and Italy’s WindTre, selected our software and services to modernize their monetization platforms to maximize the revenue opportunities from innovative 5G and IoT-based services for both consumer and business customers.
With their end users expecting amazing experiences, service providers need the ability to assure the quality of their service. Following our acquisition of TEOCO’s service assurance arm in the second quarter of fiscal 2023, Amdocs now offers service providers a unique end-to-end service orchestration offering, helping them predict, detect and resolve service and network quality issues quickly and efficiently.
Selected 5G monetization & network automation projects
- T-Mobile USA
- KT Corporation
- Magyar Telekom
Landmark year for managed services
Our managed services engagements underpin the resiliency of our business with recurring revenue streams, near 100% renewal rates and expanded activities under multi-year engagements. They also often include modernization projects, which deepen our relationship with the customer even further. At Globe in the Philippines, we extended our partnership to reimagine their IT operations, enabled by digital transformation and cloud adoption for better business alignment under a multi-year managed services arrangement. In Africa, we extended our longstanding collaboration with a leading regional service provider, signing a multi-year modernization and managed services extension agreement, which includes implementing Amdocs’ cloud-native charging solution to enable this operator to monetize 5G and data products efficiently. And our managed services are not restricted solely to Amdocs applications: in fiscal 2023 we expanded our relationship with 3UK to migrate and operate non-Amdocs applications on the cloud.
These new deals, alongside others at DISH, Vodafone Romania, VodafoneZiggo, and other customers, ensured that fiscal 2023 was a record year for managed services in terms of revenue. Our managed services agreements comprised around 58% of our total revenue for the financial year. As these deals are long term, they provide, along with our 12-month backlog, strong visibility into our business going forward.
Selected customer managed services engagements and deployments
- Three UK
- Vodafone Romania
ESG: an integral part of our business strategy
We are proud of the role we play to make the connected world a reality, enriching billions of lives and progressing society. We do so through offering our customers valuable, reliable, and sustainable products; driving people-centricity, with social impact as our compass, and ensuring our operations are held to the highest ethical standards and are conducted with care for the environment. This year, we set ourselves a long-term climate change goal of becoming carbon neutral in our business operations (scopes 1 and 2) by 2040.
Our achievements have also been recognized by independent organizations. We have been included in the Dow Jones Sustainability Index (North America) for five consecutive years, as well as listed in the Bloomberg Gender Equality Index, and have received increasingly higher ratings in CDP and EcoVadis.
As we seek to make a positive impact on the world, our Tech for Good platform leverages Amdocs’ spirit and skills to champion digital inclusion, shaping a future where our communities are equipped for sustainable employment and people are not left behind. We are also very focused on our own people, placing flexibility at the forefront of our workplace, harnessing diversity, equity and inclusion, promoting employee wellbeing, enhancing career growth through upskilling and internal mobility and, crucially, sharing a sense of purpose.
The global nature and strength of our employee base has been highlighted following the October 7 terrorist attack against Israel. With the vast majority of our employees located outside of Israel, and with support and development centers around the world, we have been able to serve our customers seamlessly, providing 24/7 service and support to all our customers and business operations worldwide, while tending to the needs of our employees and their families in Israel whose safety, security and wellbeing is our primary concern.
Ensuring long-term growth and continued operating margin expansion
As a key technology enabler and trusted partner to the communications industry, we continue to see a high level of customer engagement and large pipeline of opportunity, which we believe Amdocs is well positioned to monetize. Amdocs sits at the heart of a multi-year, technology-driven investment cycle, centered around the major long-term trends of 5G, network automation, digital modernization, the cloud, artificial intelligence and opportunities such as the enterprise segment.
Nevertheless, current economic uncertainty and industry pressure is beginning to weigh on the decisions of some customers, who are now prioritizing multi-year strategic modernization programs while reducing discretionary spending, including investments to enhance legacy systems.
To ensure our long-term growth, combined with continued, improvement of our operating margins, we are placing an even greater emphasis on operational excellence, driven by efficiency gains resulting from our growing adoption of automation, sophisticated tools and the more recent potential of GenAI-related capabilities, while maintaining investment in our strategic growth areas.
These drivers, coupled with our relatively resilient business model with recurring revenue streams resulting from our support of mission-critical systems under long-term engagements, lead us to expect revenue growth of 1-5% in fiscal 2024, coupled with accelerated operating margin improvement and continued double-digit growth in the cloud. Moreover, we expect to deliver double-digit GAAP diluted earnings per share growth and 8-12% Non-GAAP2 diluted earnings per share growth.
We would like to thank our outgoing chairman, Rob Minicucci, for his great contribution to the company during his 12-year tenure as chairman of the board and want to conclude this letter by thanking our shareholders, customers, partners and employees for your trust and confidence in us as Amdocs continues to help those who shape the future to make it amazing for billions of people around the world.
President and Chief Executive Officer
Chairman of the board
1 Revenue on a constant currency basis assumes exchange rates in the current period were unchanged from the prior period.
2 For further details of reconciliation of selected financial metrics from GAAP to Non-GAAP, please refer to the tables on pages 12-13.
3 Free cash flow is calculated as cash flow from operating activity less net capital expenditures and other.