annual report 2012 WWW.AMDOCS.COM 2012 ANNUAL REPORT | 1 FISCAL 2012 WAS A SUCCESSFUL YEAR FOR AMDOCS growth ENGINES THE COMPANY PERFORMED WELL ACROSS SEVERAL KEY GROWTH ENGINES, INCLUDING EMERGING MARKETS AND MANAGED SERVICES WWW.AMDOCS.COM shareholder RETURNS We drove double-digit growth in earnings per share in fiscal 2012 2012 ANNUAL REPORT | 3 DEAR FELLOW SHAREHOLDERS, Overall, we believe fiscal 2012 the wake of the breakup of the was a successful year for Amdocs, proposed merger of AT&T and especially in establishing and T-Mobile USA. We believe we extending key strategic relationships successfully managed through with the world’s most influential this unexpected headwind and service providers and in winning a continued to drive strong new series of important transformational sales, delivered ongoing operational deals around the globe. The and execution improvements, and company performed well across executed on our share repurchase several key growth engines, programs. All of these factors including the emerging markets contributed to healthy double-digit and managed services. Additionally, earnings per share growth in fiscal we strengthened our product and 2012. In addition, the Board of service delivery organizations Directors authorized the company’s over the course of the year, first quarterly cash dividend enhancing our ability to deliver program which commenced in the many concurrent transformation first quarter of fiscal 2013, in order projects globally. to further enhance returns to our shareholders. Nevertheless, the year also posed its challenges. In particular, North American growth was difficult in ELI GELMAN ROBERT A. MINICUCCI President and CEO, Chairman of the Board, Amdocs Management Limited Amdocs Limited Director, Amdocs Limited WWW.AMDOCS.COM GROWTH ENGINES FIRED: EMERGING MARKETS AND MANAGED SERVICES We continued to drive our began a major BSS transformation contract expansions and geographic expansion into the project at Globe Telecom in the extensions with key customers, emerging markets, producing 37% Philippines under a seven-year including Comcast and, more year-over-year revenue growth in managed services agreement. recently in early fiscal 2013, Sprint. these exciting regions. Highlights In Europe, we won the 2012 Best included our announcements of Beyond the emerging markets, Telephony Outsourcing Award two major managed services deals. we continued to see strong global in a submission with Vodafone First, our agreement with TIM Brasil interest in managed services, Netherlands, and also signed a new marked not only our first managed providing further evidence of the managed services agreement with services deal in Latin America, but strength of our unique business a large wireless operator. In these also our first managed services model, which combines industry- times of economic uncertainty, the contract spanning both business leading software, professional importance of long-term managed support systems (BSS) and services and end-to-end managed services agreements, and the operational support systems (OSS). services operations. In North predictable revenue streams they On the other side of the world we America, we signed important bring, cannot be overestimated. AMDOCS DELIVERS ON NEW PRODUCTS AND OPERATIONAL IMPROVEMENTS A highlight of the past fiscal year first Data Experience Solution. This our vision and ability to execute was the launch of our latest portfolio brings together our industry-leading have been recognized externally, stack, CES 8.1, which has shown policy control and Turbo Charging with Amdocs being positioned strong adoption and deployment technologies, pre-integrated as a in Gartner’s Leaders Quadrant rates at customers around the single solution. We also improved for both Integrated Revenue and globe. Further demonstrating our the quality and efficiency of our Customer Management (IRCM) commitment to innovation and delivery and managed services and Operational Support Systems distancing us from the competition, organizations throughout the year, (OSS), and cited as BSS Vendor within months of our acquisition helping us deliver on our project of the Year in Asia Pacific by of Bridgewater Systems, we also commitments while simultaneously Frost & Sullivan. successfully launched the industry’s improving profitability. Indeed, 2012 ANNUAL REPORT | 5 new PRODUCTS A highlight of the past fiscal year was the launch of our latest portfolio stack, CES 8.1 WWW.AMDOCS.COM cash DIVIDEND The Board of Directors approved our first quarterly cash dividend program 2012 ANNUAL REPORT | 7 THE NORTH AMERICAN MARKET: CHALLENGING IN 2012, BUT STRATEGIC ACTIVITY POISED TO RESUME North America proved to be our announcements, the commitment to most challenging region in fiscal next-generation network build-outs 2012 as our largest customer – AT&T and services offerings, the launch of – decided at the beginning of the early data monetization packages, year to abandon plans to merge and rising investment in prepaid with T-Mobile USA amidst regulatory and no contract service offerings. scrutiny. While this had an immediate We believe these announcements impact on AT&T’s spending plans for suggest good long-term opportunity the year, and therefore on Amdocs, for Amdocs, but we remain cautious we believe the effects were, in fact, on how quickly this activity resumes. broader reaching and temporarily In particular, we believe business stalled strategic movement in the U.S. combinations may raise near-term wireless market. Recently, we have uncertainty as merging companies begun to witness more strategically often focus initially on merger- oriented activity in the U.S. market related activities rather than on with several proposed merger transformation projects. FINANCIAL STRENGTH AND SHAREHOLDER RETURNS We continue to focus on the total our recent share repurchase return we are delivering to our programs. In addition, our Board shareholders, through a combination of Directors approved our first of revenue growth, stable profitability quarterly cash dividend program and the return of capital through which commenced in October share repurchases and dividends. 2012. The Board also increased In fiscal 2012, even in light of our share repurchase authorization unexpected headwinds from our by an additional $500 million in largest customer, we were able to November 2012. We believe these drive healthy earnings per share actions demonstrate our ongoing growth. As of September 30, 2012, commitment to increasing total we had repurchased roughly 25% shareholder returns and our belief of our total shares outstanding since in the future of Amdocs. April 2010 when we commenced WWW.AMDOCS.COM EMBRACE CHALLENGE, EXPERIENCE SUCCESS We started fiscal 2012 by marking our we delivered, and the improvements 30th anniversary, a landmark event we made on how we deliver great value which provided us with the opportunity to our customers. With uncertainty both to look back at our successful lingering in the global economic history, and also to look ahead. We forecast and planned service provider used the occasion to unveil a new consolidations in the North American brand promise: “embrace challenge, market still very much at the initial experience success.” We believe stages, we remain cautiously optimistic this brand positioning captures our in our outlook for the year ahead. Given unique ability to help our customers the strength of our product portfolio, succeed while overcoming the most our IT services, professionalism and complex IT challenges. It is this core our growing global managed services value, supported by our innovation and operations, we are confident that operational excellence that enables us to Amdocs will continue to maintain deliver value to our shareholders as well. our heritage as the market-leading provider to the world’s top We believe that we ended fiscal 2012 communications operators. in a stronger position than we started, thanks to the new deals we signed Thank you for your continued support, over the course of year, the projects confidence and commitment. Sincerely, ELI GELMAN ROBERT A. MINICUCCI President and CEO, Chairman of the Board, Amdocs Management Limited Amdocs Limited Director, Amdocs Limited 2012 ANNUAL REPORT | 9 brand PROMISE Our brand promise: “embrace challenge, experience success” captures our unique ability to help our customers succeed while overcoming the most complex IT challenges WWW.AMDOCS.COM financial HIGHLIGHTS (ALL DATA IN $ MILLIONS, EXCEPT PER SHARE DATA) 2012 2011 2010 TOTAL REVENUE 3,247 3,178 2,984 OPERATING INCOME (1) 442 404 410 OPERATING INCOME FROM TOTAL REVENUE 13.6% 12.7% 13.7% NET INCOME (1)(2) 391 347 344 FREE CASH FLOW (3) 391 425 598 DILUTED EARNINGS PER SHARE (1)(2) 2.31 1.86 1.69 CASH BALANCES NET OF SHORT TERM DEBT (4) 918 923 1,233 REVENUE OPERATING INCOME(1) NET INCOME(1)(2) ($ MILLIONS) ($ MILLIONS) ($ MILLIONS) 3,500 500 20.0% 400 391 3,000 3,247 350 3,178 400 15.0% 2,984 300 344 347 2,500 13.7% 12.7% 13.6% 250 2,000 300 10.0% 200 1,500 410 404 442 150 200 5.0% 1,000 100 500 100 0.0% 50 2010 2011 2012 2010 2011 2012 2010 2011 2012 OPERATING INCOME AS A PERCENTAGE OF REVENUE CASH BALANCES NET (3) (1)(2) FREE CASH FLOW DILUTED EPS OF SHORT-TERM DEBT(4) ($ MILLIONS) ($ MILLIONS) 700 2.5 1,400 600 2.31 1,200 598 2.0 1,233 500 1.86 1,000 1.5 1.69 923 918 400 425 800 391 300 600 1.0 200 400 0.5 100 200 2010 2011 2012 2010 2011 2012 2010 2011 2012 SELECTED QUARTERLY DATA QUARTERLY REVENUE ($ MILLIONS) 900 800 822 801 812 807 809 809 775 789 700 600 Q1 / 11 Q2 / 11 Q3 / 11 Q4 / 11 Q1 / 12 Q2 / 12 Q3 / 12 Q4 / 12 (1) INCLUDES AMORTIZATION OF PURCHASED INTANGIBLE ASSETS AND OTHER AND EQUITY-BASED COMPENSATION EXPENSE. (2) INCLUDES ALL RELATED TAX EFFECTS, GAIN FROM SALE OF INVESTMENT (IN 2012) AND LOSS FROM DIVESTITURE OF A SUBSIDIARY (IN 2010). (3) FREE CASH FLOW IS NOT DEFINED UNDER UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (U.S.