20-F 1 d180832d20f.htm 20-F 20-F
P3YP3YfalseThrough 2040 for $245,843 tax credit, net capital and operating loss carryforwardsThrough 2041 for $170,430 tax credit, net capital and operating loss carryforwardsFY0001062579MONet of tax benefit (expense) of $3,369, $(2,371) and $(2,458) for the fiscal years ended September 30, 2021, 2020 and 2019, respectively. Net of immaterial amount of tax benefit for the fiscal years ended September 30, 2021, 2020 and 2019. Net of tax (expense) benefit of $(1,461), $(11) and $1,080 for the fiscal years ended September 30, 2021, 2020 and 2019, respectively. In fiscal years 2021, 2020 and 2019, all of the Company’s net income is attributable to Amdocs Limited as the net income attributable to the Non-controlling interests is negligible. As of September 30, 2021, 2020 and 2019, accumulated other comprehensive income (loss) is comprised of unrealized gain on derivatives, net of tax, of $13,773, $18,836 and $3,945, unrealized loss on short-term interest-bearing investments, net of tax, of $(1,274), $(2) and $0 and unrealized loss on defined benefit plan, net of tax, of $(3,161), $(7,172) and $(6,492). The Cumulative effect adjustments as of October 1, 2018 include an increase of $14,294 to retained earnings due to the impact of adoptions of ASU No. 2014-09 (ASC 606) and decrease of $3,860 to retained earnings due to adoption of ASU No. 2016-16. The amounts under “Interest” include payments of interest to financial institution, tax authorities and other. The amounts under “Purchase of property and equipment, net”, include proceeds from sale of property and equipment of $328, $194, and $151 for the year ended September 30, 2021, 2020 and 2019, respectively, and proceeds of $9,676 relating to refund of betterment levy for the year ended September 30, 2019 ($4,776 of which was a refund to the noncontrolling interest).Mainly relates to the acquisition of Openet. In allocating the total purchase price for Openet, based on estimated fair values, the Company recorded $110,347 of goodwill, $40,409 of customer relationships to be amortized over approximately eight years, $53,614 of core technology to be amortized over five years and $2,594 of trademark to be amortized over two years. Mainly relates to the acquisition of Sourced. In allocating the total preliminary purchase price for Sourced, based on estimated fair values, the Company recorded $80,055 of goodwill, $18,211 of customer relationships to be amortized over approximately seven years and $3,056 of core technology to be amortized over three years.Risk-free interest rate is based upon U.S. Treasury yield curve appropriate for the term of the Company’s employee stock options.Expected life of stock options is based upon historical experience.Expected volatility is based on blended volatility.Expected dividend yield is based on the Company’s history and future expectation of dividend payouts.Starting April 1, 2020, following the merger of two significant customers, their respective revenue was consolidated.Relates to the divestiture of OpenMarket completed on December 31, 2020, please see also Note 3. 0001062579 2020-10-01 2021-09-30 0001062579 2021-09-30 0001062579 2020-09-30 0001062579 2019-10-01 2020-09-30 0001062579 2018-10-01 2019-09-30 0001062579 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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM
20-F
 
 
(Mark One)
 
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2021
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
    
    
    
to
    
    
    
.
OR
 
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report                
Commission file number:
1-14840
 
 
AMDOCS LIMITED
(Exact name of Registrant as specified in its charter)
 
 
Island of Guernsey
(Jurisdiction of incorporation or organization)
Hirzel House, Smith Street,
St. Peter Port, Guernsey, GY1 2NG
Amdocs, Inc.
1390 Timberlake Manor Parkway, Chesterfield, Missouri 63017
(Address of principal executive offices)
Matthew E. Smith
Amdocs, Inc.
1390 Timberlake Manor Parkway, Chesterfield, Missouri 63017
Telephone:
314-212-8328
Email: dox_info@amdocs.com
(Name, Telephone,
E-mail
and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
 
Title of each class
 
Trading Symbol
 
Name of each exchange on which registered
Ordinary Shares, par value £0.01
 
DOX
 
Nasdaq Global Select Market
Securities registered or to be registered pursuant to Section 12(g) of the Act:
[None]
 
 
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
[None]
 
 
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
 
Title of Class
 
Number of Shares Outstanding (1)
Ordinary Shares, par value £0.01
 
124,866,230
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☒    No  ☐
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes  ☐    No  ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T
(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a
non-accelerated
filer. See definition of “accelerated filer and large accelerated filer” in Rule
12b-2
of the Exchange Act. (Check one):
Large Accelerated Filer  ☒                 Accelerated Filer  
☐                Non-accelerated
Filer   ☐                 Emerging growth company   
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.    ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.    
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
 
U.S. GAAP  ☒   
International Financial Reporting Standards as issued
by the International Accounting Standards Board  ☐
   Other  ☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).    Yes  ☐    No  
 
(1)
Net of 157,078,647 shares held in treasury. Does not include 4,208,743 ordinary shares reserved for issuance upon exercise of stock options and vesting of restricted stock units granted under our stock option plan or by companies we have acquired.
 
 
 

TABLE OF CONTENTS
 
 
 
 
  
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Unless the context otherwise requires, all references in this Annual Report on Form
20-F
to “Amdocs,” “we,” “our,” “us” and the “Company” refer to Amdocs Limited and its consolidated subsidiaries and their respective predecessors, and references to our software products refer to current and subsequent versions. Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP, and are expressed in U.S. dollars. References to “dollars” or “$” are to U.S. dollars. Our fiscal year ends on September 30 of each calendar year. References to any specific fiscal year refer to the year ended September 30 of the calendar year specified. For example, we refer to the fiscal year ending September 30, 2021 as “fiscal 2021.”
We own, have rights to or use trademarks or trade names in conjunction with the sale of our products and services, including Amdocs
, CES
and The New World of Customer Experience
, among others.
 
i

Forward-Looking Statements
This Annual Report on Form
20-F
contains forward-looking statements (within the meaning of the U.S. federal securities laws) that involve substantial risks and uncertainties. You can identify these forward-looking statements by words such as “expect,” “anticipate,” “believe,” “seek,” “estimate,” “project,” “forecast,” “continue,” “potential,” “should,” “would,” “could,” “intend” and “may,” and other words that convey uncertainty of future events or outcome. Statements that we make in this Annual Report that are not statements of historical fact also may be forward-looking statements. Forward-looking statements are not guarantees of future performance, and involve risks, uncertainties and assumptions that may cause our actual results to differ materially from the expectations that we describe in our forward-looking statements. There may be events in the future that we are not accurately able to predict, or over which we have no control. You should not place undue reliance on forward-looking statements. Although we may elect to update forward-looking statements in the future, we disclaim any obligation to do so, even if our assumptions and projections change, except where applicable law may otherwise require us to do so. Readers should not rely on those forward-looking statements as representing our views as of any date subsequent to the date of the filing of this Annual Report on Form
20-F.
Important factors that may affect these projections or expectations include, but are not limited to: changes in the overall economy; the duration and severity of the
COVID-19
(coronavirus) pandemic, and its impact on the global economy; changes in competition in markets in which we operate; changes in the demand for our products and services; the loss of a significant customer; consolidation within the industries in which our customers operate; our ability to derive revenues in the future from our current research and development efforts; changes in the telecommunications regulatory environment; changes in technology that impact both the markets we serve and the types of products and services we offer; financial difficulties of our customers; losses of key personnel; difficulties in completing or integrating acquisitions; litigation and regulatory proceedings; and acts of war or terrorism. For a discussion of these and other important factors, please read the information set forth below under the caption “Risk Factors.”
 
ii

PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
Risk Factors
Risks Related to the
COVID-19
Pandemic
The global outbreak of the
COVID-19
pandemic may continue to negatively impact the global economy in a significant manner for an extended period of time, and also could materially adversely affect our business and operating results.
An outbreak of a novel strain of the coronavirus,
COVID-19,
was recognized as a pandemic by the World Health Organization on March 11, 2020. This
COVID-19
outbreak has severely restricted the level of economic activity around the world. In response to this outbreak, the governments of many countries, states, cities and other geographic regions have taken preventative or protective actions, such as imposing restrictions on travel and business operations and advising or requiring individuals to limit or forego their time outside of their homes. In addition, temporary closures of businesses have been ordered and numerous other businesses have temporarily closed voluntarily.
Starting in the second quarter of 2020, we reduced workforce density at our offices by requiring employees to work from home and also limited business travel. Leveraging our cloud-based technology, we used remote-connectivity and collaboration tools and technology to continue servicing our customers, allowing operations to be largely uninterrupted. Towards the end of fiscal year 2020, with the rollout of the
COVID-19
vaccines, we began bringing employees back to the office on a
region-by-region
basis where appropriate given local conditions. Since then, resurgence of infection rates has resulted in us again switching to a remote working environment and hybrid work models in offices that had reopened. We will continue to consider all local governments’ guidelines in reopening our offices, with the health and safety of our employees, customers and partners being our top priority.
Given the uncertainty regarding the spread and severity of
COVID-19
and the adverse effects on the global economy, the related financial impact on our business cannot be accurately predicted at this time, but the pandemic and actions taken in response to the pandemic could materially adversely impact our business, results of operations and financial results. For example, negative economic conditions may cause customers generally to reduce their spending, delay or cancel projects, choose to focus on
in-house development
efforts or seek to lower their costs by renegotiating or terminating existing agreements. We continue to monitor the rapidly evolving situation and guidance from the authorities and local public health officials and as a result may take additional actions.
Risks Related to Our Business and Industry
We are exposed to general global economic and market conditions, particularly those impacting the communications industry.
We provide software and services primarily to service providers in the communications industry, and our business is therefore highly dependent upon conditions in that industry. Developments in the communications industry, such as the impact of global economic conditions, industry consolidation, emergence of new
 
1

competitors, commoditization of voice, video and data services and changes in the regulatory environment, at times have had, and could continue to have, a material adverse effect on our existing or potential customers. These conditions have reduced, and may continue to reduce, the growth rates that the communications industry had previously experienced and caused the market value, financial results and prospects and capital spending levels of many communications companies to decline or degrade. Industry consolidation involving our customers, which has been significant in recent years, may place us at risk of losing business to the incumbent provider to one of the parties to the consolidation or to new competitors. During previous economic downturns, the communications industry experienced significant financial pressures that caused many in the industry to cut expenses and limit investment in capital intensive projects and, in some cases, led to restructurings and bankruptcies. Continuing uncertainty as to the pace of economic recovery following such economic downturns may have adverse consequences for our customers and our business.
Downturns in the business climate for communications companies have in the past resulted in slower customer buying decisions and price pressures that adversely affected our ability to generate revenue. Adverse market conditions may have a negative impact on our business by decreasing our new customer engagements and the size of initial spending commitments under those engagements, as well as decreasing the level of demand and expenditures by existing customers. In addition, a slowdown in buying decisions may extend our sales cycle period and may limit our ability to forecast our flow of new contracts. If such adverse business conditions arise in the future, our business may be harmed.
If we fail to adapt to changing market conditions and cannot compete successfully with existing or new competitors, our business could be harmed.
We may be unable to compete successfully with existing or new competitors, particularly as we expand into new market segments. Our failure to adapt to changing market conditions, new market segments such as 5G and the cloud, and to compete successfully with established or new competitors could have a material adverse effect on our results of operations and financial condition. We face intense competition for the software products and services that we sell, including competition for managed services we provide to customers under long-term service agreements. These managed services include management of data center operations and IT infrastructure, application management and ongoing support, systems modernization and consolidation and management of
end-to-end
business processes for billing and customer care operations.
The market for communications information systems is highly competitive and fragmented, and we expect competition to continue to increase. We compete with independent software and service providers and with the
in-house
IT and network departments of communications companies. Our main competitors include firms that provide IT services (including consulting, systems integration and managed services), software vendors that sell products for particular aspects of a total information system, software vendors that specialize in systems for particular communications services (such as internet, wireline and wireless services, cable, satellite and service bureaus) and network equipment providers that offer software systems in combination with the sale of network equipment. We also compete with companies that provide digital commerce software and solutions. We believe that our ability to compete with other vendors as well as with
in-house
IT and network departments of communications companies, depends on a number of factors, including:
 
   
the development by others of software products and services that are competitive with our products and services;
 
   
the price at which others offer competitive software and services;
 
   
the ability of competitors to deliver projects at a level of quality that rivals our own;
 
   
the responsiveness of our competitors to customer needs; and
 
   
the ability of our competitors to hire, retain and motivate key personnel.
A number of our competitors have long operating histories, large customer bases, substantial financial, technical, sales, marketing and other resources, and strong name recognition. Current and potential competitors
 
2

have established, and may establish in the future, cooperative relationships among themselves or with third parties to increase their abilities to address the needs of our existing or prospective customers. In addition, our competitors have acquired, and may continue to acquire in the future, companies that may enhance their market offerings, or may themselves be acquired by larger companies with more resources and ability to leverage existing business relationships. Accordingly, new competitors or alliances among competitors may emerge and rapidly acquire significant market share. As a result, our competitors may be able to adapt more quickly than us to new or emerging technologies and changes in customer requirements, and may be able to devote greater resources to the promotion and sale of their products. Additionally, our competitors are increasingly able to offer services related to their software, platform and other solutions that require integration with their other existing services. These more integrated services may represent more attractive alternatives to clients than some of our software products and services. We cannot assure you that we will be able to compete successfully with existing or new competitors. If we fail to adapt to changing market conditions and to compete successfully with established or new competitors, our results of operations and financial condition may be adversely affected.
If we do not continually enhance our products and service offerings, introduce new products and features and adopt and monetize new technologies and methodologies in the marketplace, we may have difficulty retaining existing customers and attracting new customers.
We believe that our future success will depend, to a significant extent, upon our ability to enhance our existing products and services, to introduce new products, services and features to meet the requirements of our customers, and to adopt to and leverage new technologies and methodologies such as 5G, cloud, microservices-based architecture, DevOps, automation, and artificial intelligence, in a rapidly developing and evolving market. We devote significant resources to refining and expanding our base software modules and to developing our products, services and development methodologies and tools. In some instances, we rely on cooperative relationships with third parties to assist us in delivering certain products and services to our customers. Our present or future products, services and technology may not satisfy the evolving needs of the communications industry or of other industries that we serve. If we are unable to anticipate or respond adequately to such needs, due to resource, technological or other constraints, our business and results of operations could be harmed.
Our future success will depend on our ability to develop and maintain long-term relationships with our customers and to meet their expectations in providing products and performing services.
We believe that our future success will depend to a significant extent on our ability to develop and maintain long-term relationships with successful network operators and service providers with the financial and other resources required to invest in significant ongoing development of our products and services. If we are unable to develop new customer relationships, our business will be harmed. In addition, our business and results of operations depend in part on our ability to provide high-quality services to customers that have already implemented our products. If we are unable to meet customers’ expectations in providing products or performing services, our business and results of operations could be harmed.
If our security measures for our software, hardware, services or cloud offerings are compromised and as a result, our data, our customers’ data or our IT systems are accessed improperly, made unavailable, or improperly modified, our products and services may be perceived as vulnerable and it may materially affect our business and result in potential legal liability.
Our products and services, including our cloud offerings, store, retrieve, and manage our customers’ information and data, as well as our own data. We have a reputation for secure and reliable product offerings and related services and we have invested a great deal of time and resources in protecting the integrity and security of our products, services and the internal and external data that we manage. Despite our efforts to implement security measures, we cannot guarantee that our systems are fully protected from vulnerabilities related to
IT-related
viruses, worms and other malicious software programs, attacks,
break-ins
and similar disruptions from unauthorized tampering by computer hackers and others. Cybersecurity threats are constantly expanding and
 
3

evolving, thereby increasing the difficulty of detecting and defending against them. For example, we might not discover a security breach or a loss of information for a significant amount of time after the breach, and might not be able to anticipate attacks or implement sufficient mitigating measures. Such cybersecurity incidents could include, but are not limited to, an attempt to gain unauthorized access to digital systems for purposes of misappropriating assets or sensitive information, corrupting data, or causing operational disruption. “Phishing” and other types of attempts to obtain unauthorized information or access are often sophisticated and difficult to detect or defeat. In addition, security measures in our products and services may be penetrated or bypassed by computer hackers and others who may gain unauthorized access to our or our customers’ or partners’ software, hardware, cloud offerings, networks, data or systems. These actors may use a wide variety of methods, which may include developing and deploying malicious software to attack our products and services and gain access to our networks and datacenters, using social engineering techniques or acting in a coordinated manner to launch distributed denial of service or other coordinated attacks. This is also true for third party data, products or services incorporated into our own. Data may also be accessed or modified improperly as a result of customer, partner or employee error or malfeasance and third parties may attempt to fraudulently induce customers, partners, employees or suppliers into disclosing sensitive information such as user names, passwords or other information in order to gain access to our data or IT systems or our customers’ or partners’ data or IT systems. Our exposure to cyber security and data privacy breach incidents may increase due to a large number of employees working remotely. Any of the foregoing occurrences could create system disruptions and cause shutdowns or denials of service or compromise data, including personal or confidential information, of us, our partners or our customers.
If a cyberattack or other security incident (for example phishing, advanced persistent threats, or social engineering) were to result in unauthorized access to, or deletion of, and/or modification and/or exfiltration of our customers’ data, other external data or our own data or our IT systems or if the services we provide to our customers were disrupted, customers could lose confidence in the security and reliability of our products and services, including our cloud offerings, and perceive them not to be secure. This in turn could lead to fewer customers using our products and services and result in reduced revenue and earnings. The costs we would incur to address and fix these security incidents would increase our expenses. These risks will increase as we continue to grow our cloud solutions and network offerings and store and process increasingly large amounts of data, including personal information and our customers’ confidential information and data and other external data, and host or manage parts of our customers’ businesses in cloud-based IT environments. In addition, we have acquired certain companies, products, services and technologies over the years and have partnered with other companies for certain of our other offerings. While we make significant efforts to address any IT security issues with respect to our acquired companies and partners, we may still inherit such risks when we integrate these companies, products, services and technologies or work with our partners.
Any of the events described above could cause our customers to make claims against us for damages allegedly resulting from a security breach or service disruption, which could adversely affect our business, results of operation and financial condition.
We are subject to laws, directives, and regulations relating to the collection, use, retention, disclosure, security and transfer of personal data. These laws, directives, and regulations, and their interpretation and enforcement continue to evolve rapidly and may be inconsistent from jurisdiction to jurisdiction; we will need to extend time and resources to ensure compliance with these evolving regulations, and failure to understand and comply with these regulations can have an impact on our results of operations and financial condition. For example, the General Data Protection Regulation (GDPR) went into effect in the European Union (EU) on May 25, 2018. The GDPR regulates the processing of personal data originated in the EU and its transfer out of the EU and applies globally to all of our activities conducted from an establishment in the EU, to related products and services that we offer to EU customers and to
non-EU
customers which offer services in the EU. The GDPR also affects our role as product developers, as we are required to adopt “privacy by design” principles in order to address our customers’ need to apply privacy adequate solutions when handling their subscribers’ data. Complying with the GDPR and similar emerging and changing privacy and data protection requirements may
 
4

cause us to incur substantial costs or require us to change our business practices. Additionally, new local privacy laws have been enacted recently as part of an overall trend, including in Brazil. In the United States, there have been proposals for federal privacy legislation and state-level privacy laws have also recently been enacted, including the California Consumer Privacy Act. Noncompliance with our legal obligations relating to privacy and data protection could result in penalties, fines, legal proceedings by governmental entities or others, loss of reputation, legal claims by individuals and customers and significant legal and financial exposure and could affect our ability to retain and attract customers. In addition, Guernsey has introduced legislation similar in form to the GDPR, the Data Protection (Bailiwick of Guernsey) Law, 2017 (as amended), which will apply globally in a similar fashion as the GDPR to our activities conducted from and within Guernsey.
We rely on third-party vendor relationships to deliver our business which exposes us to supply disruptions, cost increases, and cyberattacks.
We are reliant on third-party vendors in the provision of
our services, including our expanding cloud services. Failure by any of our third-party vendors could interrupt our operations and the delivery of our solutions, and/or significantly increase costs as we transition to a new vendor. Similarly, if any of these third-party vendors would decide to significantly increase costs, it could have an adverse financial impact on our business, as it may require us to shift to a competing solution or redesign our solutions which might take considerable time, effort and money. Further, if a third party were to experience a material breach of its information technology systems which results in the unauthorized access, theft, use, destruction, or unauthorized disclosures of customers’ or employees’ data or confidential information of the Company stored in such systems, including through cyberattacks or other external or internal methods, it could result in a material loss of revenues from the potential adverse impact on our reputation, our ability to retain or attract new customers, potential disruption or loss of services from the vendor and disruption to our business. Such a breach could also result in contractual claims, and could lead to our being named as a party in consumer litigation brought by or on behalf of impacted individuals. For more information on risks related to cybersecurity and data privacy, please see “Risk Factors —
If our security measures for our software, hardware, services or cloud offerings are compromised and as a result, our data, our customers’ data or our IT systems are accessed improperly, made unavailable, or improperly modified, our products and services may be perceived as vulnerable and it may materially affect our business and result in potential legal liability.”
In addition, IT hardware suppliers face shortages that are otherwise caused or exacerbated by the
COVID-19
pandemic and/or global technology changes. As such, we may need to incur higher expenses when purchasing certain IT hardware and could face shortages of equipment and components that we and our employees rely upon in the conduct of our business and our operations and sales could be adversely impacted by such supply interruptions. Although we have not experienced material adverse impacts to date, additional or prolonged supplier shortages that have occurred or were exacerbated because of
COVID-19
and/or global technology changes could adversely impact our operations and the solutions that we offer.
We may not receive significant revenues from our current research and development efforts for several years, if at all.
Developing software and digital products is expensive and the investment in the development of these products often involves a long return on investment cycle. An important element of our corporate strategy is to continue to make significant investments in research and development and related products and service opportunities both through internal investments and the acquisition of intellectual property including from companies that we have acquired. Accelerated products and service introductions and short software and hardware life cycles require high levels of expenditures for research and development that could adversely affect our operating results if not offset by revenue increases. We believe that we must continue to dedicate a significant amount of resources to our research and development efforts to maintain our competitive position. However, we cannot guarantee that we will receive significant revenues from these investments for several years, if at all.
 
5

Our business is dependent on a limited number of significant customers, and the loss of any one of our significant customers, or a significant decrease in business from any such customer, could harm our results of operations.
Our business is dependent on a limited number of significant customers, of which AT&T has historically been our largest. AT&T accounted for 25% and 26% of our revenue in fiscal years 2021 and 2020, respectively. In fiscal years 2021 and 2020, our next largest customer,
T-Mobile
US, accounted for 19% and 12% of our revenue, respectively.
2
We cannot assure you that our revenues from AT&T or any of our significant customers will remain the same or grow in future years. Aggregate revenue derived from the multiple business arrangements we have with the ten largest of our significant customers accounted for approximately 69% of our revenue in fiscal year 2021 and 65% in fiscal year 2020. The loss of any significant customer, including as a result of industry consolidation involving our customers, a significant decrease in business from any such customer or a reduction in customer revenue due to adverse changes in the terms of our contractual arrangements, market conditions, customer circumstances (such as financial condition and market position) or other factors could harm our results of operations and financial condition. Revenue from individual customers may fluctuate from time to time based on the commencement, scope and completion of projects or other engagements, the timing and magnitude of which may be affected by market or other conditions.
Although we have received a substantial portion of our revenue from recurring business with established customers, many of our major customers do not have any obligation to purchase additional products or services from us and generally have already acquired fully paid licenses for their installed systems. Therefore, our customers may not continue to purchase new systems, system enhancements or services in amounts similar to previous years or may delay implementation or significantly reduce the scope of committed projects, each of which could reduce our revenue and profits.
We seek to acquire companies or technologies, enter into new strategic partnerships and alliances and cannot assure you that these activities will enhance our products and services or strengthen our competitive position, and they may adversely affect our results of operations.
It is a part of our business strategy to pursue acquisitions and other initiatives, including new strategic partnerships and alliances, in order to offer new products or services or otherwise enhance our market position or strategic strengths. Consistent with this strategy, in recent years we have completed numerous acquisitions and partnerships and we are actively evaluating potential new opportunities, some of which could be significant, stand alone or in the aggregate. In the future, we intend to continue expanding our portfolio of products, services and technologies that we believe will advance our business strategy through acquisitions and strategic partnerships. However, we may not be able to identify suitable future candidates, consummate them on favorable terms or complete otherwise favorable acquisitions or partnerships because of antitrust, regulatory or other concerns. For instance, some countries, including the United States and countries in Europe and the Asia-Pacific region, are considering or have adopted restrictions on transactions involving foreign investments, whether in response to the
COVID-19
pandemic or otherwise. In addition, the ongoing
COVID-19
pandemic and the related potential for a prolonged downturn in the economy may impact our ability to grow acquired entities, which could result in reduction of their valuations. We cannot assure you that the acquisitions we have completed, strategic partnerships or alliances that we established, or any future acquisitions, partnerships or alliances that we may make, will enhance our products and services or strengthen our competitive position. Due to the multiple risks and difficulties associated with such activities, there can be no assurance that we will be successful in achieving our expected strategic, operating, and financial goals for any such acquisition partnerships or alliances.
We may not be successful in the integration of our acquisitions.
We cannot assure you that we have identified, or will be able to identify, all material adverse issues related to the integration of our acquisitions, such as significant defects in the internal control policies of companies that
 
(2)
 
Starting April 1, 2020,
 
T-Mobile
 
US includes Sprint, which was also previously in our ten largest customers, upon the completion of the merger between Sprint and
 
T-Mobile
 
US.
 
6

we have acquired. In addition, our acquisitions could lead to difficulties in integrating acquired personnel and operations and in retaining and motivating key personnel from these businesses. In some instances, we may need to depend on the seller of an acquired business to provide us with certain transition services in order to meet the needs of our customers. Any failure to recognize significant defects in the internal control policies of acquired companies or properly integrate and retain personnel, and any interruptions of transition services, may require a significant amount of time and resources to address. Acquisitions may disrupt our ongoing operations, expose us to potential identified or unknown security vulnerabilities, divert management from
day-to-day
responsibilities, increase our expenses and harm our results of operations or financial condition.
The skilled and highly qualified workforce that we need to develop, implement and modify our solutions may be difficult to hire, train and retain, and we have and could continue to face increased costs to attract and retain our skilled workforce.
Our business operations depend in large part on our ability to attract, train, motivate and retain highly skilled information technology professionals, software programmers and communications engineers on a worldwide basis, particularly as we expand into new market segments such as 5G and the cloud. In addition, our competitive success will depend on our ability to attract and retain other outstanding, highly qualified employees, consultants and other professionals. Because our software products are highly complex and are generally used by our customers to perform critical business functions, we depend heavily on skilled technology professionals. Skilled technology professionals are often in high demand and short supply. If we are unable to hire or retain qualified technology professionals to develop, implement and modify our solutions, we may be unable to meet the needs of our customers. In addition, serving several new customers or implementing several new large-scale projects in a short period of time may require us to attract and train additional IT professionals at a rapid rate.
We may face difficulties identifying and hiring qualified personnel and in particular, we may face difficulties in our ability to attract and retain employees with technical and project management skills, including those from developing countries. Although we are heavily investing in training our new employees, we may not be able to train them rapidly enough to meet the increasing demands on our business, particularly in light of high attrition rates in some regions where we have operations. Additionally, there is increasing competition for talent in the technology sector that is driven by the accelerated push toward digital initiatives and such increasing competition is currently expected to grow. Thus, our inability to hire, train and retain the appropriate personnel could further increase our costs of retaining a skilled workforce and make it difficult for us to manage our operations, meet our commitments and compete for new customer contracts. In particular, wage costs in lower-cost markets where we have historically added personnel, such as India, are increasing and we may need to continue increasing the levels of our employee compensation more rapidly than in the past to remain competitive.
As a result of our entry into new domains, we now compete for high-quality employees in those domains’ limited and competitive talent market. In addition, cost containment measures effected in recent years, such as the relocation of projects to lower-costs countries, may lead to greater employee attrition and further increase the cost of retaining our most skilled employees. The transition of projects to new locations may also lead to business disruptions due to differing levels of employee knowledge and organizational and leadership skills. Although we have never experienced an organized labor dispute, strike or work stoppage, any such occurrence, including in connection with unionization efforts, could disrupt our business and operations and harm our financial condition.
In addition, a national union and a group of our employees had attempted in the past to secure the approval of the minimum number of employees needed for union certification with respect to our employees in Israel. While these efforts have not resulted in either group being recognized as a representative union, we cannot be certain there will be no such efforts in the future. In the event an organization is recognized as a representative union for our employees in Israel, we would be required to enter into negotiations to implement a collective bargaining agreement. We are unable to predict whether, and to what extent, efforts to unionize our employees in Israel or elsewhere would have an adverse effect on our business, operations or financial condition. Our continued growth and success will also depend upon the continued active participation of a relatively small group
 
7

of senior management personnel, and requires us to hire, retain and develop our leadership bench. If we are unable to attract and retain talented, highly qualified senior management and other key executives, as well as provide for the succession of senior management, our growth and results of operations may be adversely impacted.
Our quarterly operating results may fluctuate, and a decline in revenue in any quarter could result in lower profitability for that quarter and fluctuations in the market price of our ordinary shares.
At times, we have experienced fluctuations in our quarterly operating results and anticipate that such movements may continue to occur. Fluctuations may result from many factors, including:
 
   
the size, timing and pace of progress of significant customer projects license and service fees, and sales of partners software and hardware;
 
   
delays in or cancellations of significant projects and activities by customers;
 
   
changes in operating expenses;
 
   
increased competition;
 
   
changes in our strategy;
 
   
personnel changes;
 
   
foreign currency exchange rate fluctuations;
 
   
penetration of new markets, regions, customers and domains; and
 
   
general economic and political conditions, including the continuous effect of the
COVID-19
pandemic.
Generally, our revenue relating to software licenses that require significant customization, modification, implementation and integration is satisfied over time as work progresses. Given our reliance on a limited number of significant customers, our quarterly results may be significantly affected by the size and timing of customer projects and our progress in completing such projects.
We believe that the placement of customer orders may be concentrated in specific quarterly periods due to the time requirements and budgetary constraints of our customers. Although we recognize a significant portion of our revenue as projects are performed, progress may vary significantly from project to project, and we believe that variations in quarterly revenue are sometimes attributable to the timing of initial order placements. Due to the relatively fixed nature of certain of our costs, a decline of revenue in any quarter could result in lower profitability for that quarter. In addition, fluctuations in our quarterly operating results could cause significant fluctuations in the market price of our ordinary shares.
Our revenue, earnings and profitability are affected by the length of our sales cycle, and a longer sales cycle could adversely affect our results of operations and financial condition.
Our business is directly affected by the length of our sales cycle. Information systems for communications companies are relatively complex and their purchase generally involves a significant commitment of capital, with attendant delays frequently associated with large capital expenditures and procurement procedures within an organization. The purchase of these types of products and services typically also requires coordination and agreement across many departments within a potential customer’s organization. Delays associated with such timing factors could have a material adverse effect on our results of operations and financial condition. In periods of economic slowdown in the communications industry, our typical sales cycle lengthens, which means that the average time between our initial contact with a prospective customer and the signing of a sales contract increases. The lengthening of our sales cycle could reduce growth in our revenue. In addition, the lengthening of our sales cycle contributes to increased selling expenses, thereby reducing our profitability.
 
8

We may be required to increase or decrease the scope of our operations in response to changes in the demand for our products and services, and if we fail to successfully plan and manage changes in the size of our operations, our business will suffer.
In the past, we have both grown and contracted our operations, in some cases rapidly, in order to profitably offer our products and services in a continuously changing market. If we are unable to manage these changes and plan and manage any future changes in the size and scope of our operations, our business will suffer.
Restructurings and cost reduction measures that we have implemented, from time to time, have reduced the size of our operations and workforce. Reductions in personnel can result in significant severance, administrative and legal expenses and may also adversely affect or delay various sales, marketing and product development programs and activities. These cost reduction measures have included, and may in the future include, employee separation costs and consolidating and/or relocating certain of our operations to different geographic locations.
Acquisitions, organic growth and absorption of significant numbers of customers’ employees in connection with managed services projects have, from time to time, increased our headcount. During periods of expansion, we may need to serve several new customers or implement several new large-scale projects in short periods of time. This may require us to attract and train additional IT professionals at a rapid rate, as well as quickly expand our facilities, which we may have difficulties doing successfully.
Volatility and turmoil in the world’s capital markets may adversely affect our investment portfolio and other financial assets.
Our cash, cash equivalents and short-term interest-bearing investments totaled $966 million, as of September 30, 2021. Our short-term investments consist primarily of bank deposits, money market funds, corporate bonds and U.S. government treasuries securities. Although we believe that we generally adhere to conservative investment guidelines, adverse market conditions have resulted in immaterial impairments of the carrying value of certain of our investment assets in recent fiscal years, and future adverse market conditions may lead to additional impairments. Realized or unrealized losses in our investments or in our other financial assets may adversely affect our financial condition, including by reducing the capital available for our business and requiring us to seek additional capital, which may not be available on favorable terms.
Declines in the financial condition of banks or other global financial institutions may adversely affect our normal financial operations.
We may be exposed to the credit risk of customers that have been adversely affected by adverse business conditions.
We typically sell our software and related services as part of long-term projects and arrangements. During the life of a project or arrangement, a customer’s budgeting constraints or other financial difficulties can impact the scope of such project or arrangement as well as the customer’s requirements and ability to make payments or comply with other obligations with respect to such project or arrangement. In addition, adverse general business conditions may degrade the creditworthiness of our customers over time, and we can be adversely affected by bankruptcies or other business failures.
Our international presence exposes us to risks associated with varied and changing political, cultural, legal and economic conditions worldwide.
We are affected by risks associated with conducting business internationally. We maintain development facilities in Brazil, Canada, Cyprus, India, Ireland, Israel, Mexico, the Philippines, the United Kingdom and the United States, and have operations in North America, Europe, Israel, Latin America, Africa and the Asia-Pacific region. Although a substantial majority of our revenue is derived from customers in North America, we obtain significant revenue from customers in Europe, the Asia-Pacific region and Latin America. Our strategy is to continue to broaden our North American and European customer bases and to continue to expand into
 
9

international markets, including emerging markets, such as those in Latin America, Russia and other members of the Commonwealth of Independent States, India and Southeast Asia. Conducting business internationally exposes us to certain risks inherent in doing business in numerous markets, including:
 
   
lack of acceptance of
non-localized
products or services and other related services;
 
   
difficulties in complying with varied legal and regulatory requirements across jurisdictions, including those applicable to employees and the terms of employment;
 
   
difficulties in staffing and managing foreign operations;
 
   
longer payment cycles;
 
   
difficulties in collecting accounts receivable, converting local currencies or withholding taxes;
 
   
capital restrictions that limit the repatriation of earnings;
 
   
trade barriers;
 
   
challenges in complying with complex foreign and U.S. laws and regulations, including communication, trade sanctions, export controls, and privacy regulations;
 
   
political instability and threats of terrorism;
 
   
currency exchange rate fluctuations;
 
   
hyper inflation;
 
   
foreign ownership restrictions;
 
   
regulations on the transfer of funds to and from foreign countries;
 
   
the lack of well-established or reliable legal systems in some countries; and
 
   
variations in effective income tax rates and tax policies among countries where we conduct business.
One or more of these factors could have a material adverse effect on our operations, which could harm our results of operations and financial condition.
In addition, the ability of foreign nationals to work in the United States, Europe and other regions in which we have customers depends on their and our ability to obtain the necessary visas and work permits for our personnel who need to travel internationally. If we are unable to obtain such visas or work permits, or if their issuance is delayed or if their length is shortened, this may impact our ability to provide services to our customers in a timely and cost-effective manner. Immigration and work permit laws and regulations in the countries in which we have customers are subject to legislative and administrative changes as well as changes in the application of standards and enforcement.
As we continue to develop our business internationally, including in emerging markets, we face increasing challenges that could adversely impact our results of operations, reputation and business.
As we continue our efforts to expand our business internationally, including in emerging markets such as those in Latin America, Africa, Russia and other members of the Commonwealth of Independent States, India and Southeast Asia, we face a number of challenges. These challenges include those related to more volatile economic conditions, competition from companies that are already present in the market, the need to identify correctly and leverage appropriate opportunities for sales and marketing, poor protection of intellectual property, inadequate protection against crime (including counterfeiting, corruption and fraud), lack of due process, inadvertent breaches of local laws or regulations and difficulties in recruiting sufficient personnel with appropriate skills and experience. In addition, local business practices in jurisdictions in which we operate, and particularly in emerging markets, may be inconsistent with international regulatory requirements, such as anti-corruption and anti-bribery laws and regulations (including the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act) to which we are subject. It is possible that some of our employees, subcontractors, agents or partners may violate such legal and regulatory
 
10

requirements, which may expose us to criminal or civil enforcement actions, including penalties and suspension or disqualification from U.S. federal procurement contracting. If we fail to comply with such legal and regulatory requirements, our business and reputation may be harmed.
Our international operations expose us to risks associated with fluctuations in foreign currency exchange rates that could adversely affect our business.
Although we have operations throughout the world, approximately 70% to 80% of our revenue and approximately 50% to 60% of our operating costs are denominated in, or linked to, the U.S. dollar. Accordingly, we consider the U.S. dollar to be our functional currency. As we conduct business internationally, fluctuations in exchange rates between the dollar and the currencies not denominated in, or linked to, the U.S. dollar in which revenues are earned or costs are incurred may have a material adverse effect on our results of operations and financial condition. From time to time, we may experience increases in the costs of our operations outside the United States, as expressed in dollars, as well as decreases in revenue not denominated in, or linked to, the U.S. dollar, each of which could have a material adverse effect on our results of operations and financial condition.
As a result of the
COVID-19
pandemic, foreign exchange rates fluctuation may continue to present challenges in future periods should significant increases in volatility in foreign exchange markets occur. Due to volatility in foreign exchange rates during the height of the financial crisis in fiscal 2008, for example, we recognized higher than usual foreign exchange losses under interest and other expense, net, mainly due to the significant revaluation of assets and liabilities denominated in other currencies attributable to the rapid and significant foreign exchange rate changes associated with the global economic turbulence. Although our foreign exchange losses have been less significant since then as a result of enhanced hedging strategies, we believe that foreign exchange rates may continue to present challenges in future periods should significant increases in volatility in foreign exchange markets occur.
Our policy is to hedge significant net exposures in the major foreign currencies in which we operate, and we generally hedge our net currency exposure with respect to expected revenue and operating costs and certain balance sheet items. We do not hedge all of our currency exposure, including for currencies for which the cost of hedging is prohibitively expensive. We cannot assure you that we will be able to effectively limit all of our exposure to currency exchange rate fluctuations.
The imposition of exchange or price controls, devaluation policies, restrictions on withdrawal of foreign exchange, other restrictions on the conversion of foreign currencies or foreign government initiatives to manage local economic conditions, including changes to or cessation of any such initiatives, could also have a material adverse effect on our business, results of operations and financial condition.
Political and economic conditions in the Middle East and other countries may adversely affect our business.
Of the development centers we maintain worldwide, two of our largest development centers are located in Israel and India. In Israel, the centers are located in several different sites, and up to 20% of our workforce is located in Israel. As a result, we are directly influenced by the political, economic and military conditions affecting Israel and its neighboring regions. Any major hostilities involving Israel could have a material adverse effect on our business. We maintain contingency plans to provide ongoing services to our customers in the event that escalated political or military conditions disrupt our normal operations. These plans include the transfer of some development operations within Israel to several of our other sites both within and outside of Israel. Implementation of these plans could disrupt our operations and cause us to incur significant additional expenditures, which could adversely affect our business and results of operations.
Conflicts in North Africa and the Middle East, including in Egypt and Syria, which border Israel, have resulted in continued political uncertainty and violence in the region. Relations between Israel and Iran continue to be seriously strained, especially with regard to Iran’s nuclear program. In addition, efforts to improve Israel’s
 
11

relationship with the Palestinian Authority have failed to result in a permanent solution, and there have been numerous periods of hostility in recent years. Further deterioration of relations with the Palestinian Authority or other countries in the Middle East might require increased military reserve service by some of our workforce, which may have a material adverse effect on our business.
In recent years, we have expanded our operations internationally, particularly in India, Southeast Asia and Latin America. Conducting business in these and other countries involves unique challenges, including political instability, threats of terrorism, the transparency, consistency and effectiveness of business regulation, business corruption, the protection of intellectual property, and the availability of sufficient qualified local personnel. Any of these or other challenges associated with operating in these countries may adversely affect our business or operations. Terrorist activity in India and Pakistan has contributed to tensions between those countries and our operations in India may be adversely affected by future political and other events in the region, including the
COVID-19
pandemic and government responses thereto.
If we are unable to protect our proprietary technology from misappropriation or enforce our intellectual property rights, our business may be harmed.
Any misappropriation of our technology or the development of competitive technology could seriously harm our business. Our software and software systems are largely comprised of software and systems we have developed or acquired and that we regard as proprietary. We rely upon a combination of trademarks, patents, contractual rights, trade secret law, copyrights,
non-disclosure
agreements and other methods to protect our proprietary rights. We enter into
non-disclosure
and confidentiality agreements with our customers, workforce and marketing representatives and with certain contractors with access to sensitive information, and we also limit our customer access to the source codes of our software and our software systems. We have undertaken, and will continue to undertake, appropriate actions to protect our technology. The ability to develop and use our software and software systems requires knowledge and professional experience that we believe is unique to us and would be very difficult for others to independently obtain. However, our competitors may independently develop technologies that are substantially equivalent or superior to ours.
Intellectual property laws are complex and subject to change and existing trade secret, copyright, trademark and patent laws offer only limited protection. For example, there is uncertainty concerning the scope of patent and other intellectual property protection, including for software and business methods. Even where we obtain intellectual property protection, the steps we have taken to protect our proprietary rights may be inadequate. If so, we might not be able to prevent others from using what we regard as our technology to compete with us. In addition, the laws of some foreign countries do not protect our proprietary technology or allow enforcement of confidentiality covenants to the same extent as the laws of the United States.
If we have to resort to legal proceedings to enforce our intellectual property rights, the proceedings could be burdensome, protracted and expensive and could involve a high degree of risk, including the risk of counterclaims that allege that we infringe, misappropriate or otherwise violate the intellectual property of another party, regardless of whether we are successful in such proceedings.
Claims by others that we infringe their proprietary technology and trade secrets could harm our business and subject us to potentially burdensome litigation.
Our software and software systems are the results of long and complex development processes, and although our technology is not significantly dependent on patents or licenses from third parties, certain aspects of our products make use of software components that we license from third parties, including our employees and contractors. As a developer of complex software systems, third parties may claim that portions of our systems violate their intellectual property rights.
Software developers, including us, have been and are becoming increasingly subject to infringement claims as the number of products and competitors providing software and services to the communications industry
 
12

increases and overlaps occur. In addition, patent infringement claims are increasingly being asserted by patent holding companies, which do not use the technology subject to their patents, and whose sole business is to enforce patents against companies, such as us, for monetary gain. Any claim of infringement by a third party could cause us to incur substantial costs defending against the claim and could distract our management from our business. Furthermore, a party making such a claim, if successful, could secure a judgment that requires us to pay substantial damages. A judgment could also include an injunction or other court order that could prevent us from selling our products or offering our services, or prevent a customer from continuing to use our products. We also support service providers and media companies with respect to digital content services, which could subject us to claims related to such services. Our digital content services and offerings may also subject us to possible claims of infringement of the ownership rights to media content, for example, as well as to direct legal claims from retail consumers arising from the delivery of such services.
If anyone asserts a claim against us or one of our indemnitees relating to proprietary technology or information, we might seek to license their intellectual property. We might not, however, be able to obtain a license on commercially reasonable terms or on any terms. In addition, any efforts to develop
non-infringing
technology could be unsuccessful. Our failure to obtain the necessary licenses or other rights or to develop
non-infringing
technology could prevent us from selling our products and could therefore seriously harm our business.
Product defects, software errors, or service failures could adversely affect our business.
Design defects or software errors may cause delays in product introductions and project implementations and damage customer satisfaction, and may have a material adverse effect on our business, results of operations and financial condition. Our software products are highly complex and may, from time to time, contain design defects or software errors that may be difficult to detect and correct.
Because our products are generally used by our customers to perform critical business functions, design defects, software errors, misuse of our products, incorrect data from external sources, failures to comply with our service obligations or other potential problems within or outside of our control may arise during implementation or from the use of our products and services, and may result in financial or other damages to our customers, for which we may be held responsible. Although we have license and service agreements with our customers that contain provisions designed to limit our exposure to potential claims and liabilities arising from customer problems, these provisions may not effectively protect us against such claims in all cases and in all jurisdictions. In addition, as a result of business and other considerations, we may undertake to compensate our customers for damages caused to them arising from the use of our products and services, even if our liability is limited by a license or other agreement. Claims and liabilities arising from customer problems could also damage our reputation, adversely affecting our business, results of operations and financial condition and the ability to obtain “Errors and Omissions” insurance.
Our use of “open source” software could adversely affect our ability to sell our services and subject us to possible litigation.
We use open source software in providing our solutions, and we may use additional open source software in the future. Such open source software is generally licensed by its authors or other third parties under open source licenses. Under such licenses, if we engage in certain defined manners of use, we may be subject to certain conditions, including requirements that we offer our solutions that incorporate the open source software for no cost; that we make available source code for modifications or derivative works we create based upon, incorporating or using the open source software; and/or that we license such modifications or derivative works under the terms of the particular open source license. In addition, if a third-party software provider has incorporated open source software into software that we license from such provider in a manner that triggers one or more of the above requirements, we could be required to disclose any of our source code that incorporates or is a modification of such licensed software. If an author or other third party that distributes such open source software were to allege that we had not complied with the conditions of one or more of these licenses, we could be required to incur significant legal
 
13

expenses defending such allegations and could be subject to significant damages, enjoined from the sale of our solutions that contained the open source software, and required to comply with the foregoing conditions, which could disrupt the distribution and sale of some of our solutions. In addition, generally open source software licenses do not contain any warranties and may not have available support from the authors or third parties from whom we license it. If such open source software contains prior defects, security vulnerabilities or infringes any third party right or we are unable to obtain or provide necessary support, we could be exposed to legal claims and significant legal expenses without the ability to seek contribution from the authors or third parties from whom we license open source software. If open source software that we utilize is no longer maintained, developed or enhanced by the relevant authors or third parties, our ability to develop new solutions, enhance our existing solutions or otherwise meet customer requirements for innovation, quality and price may be impaired.
System disruptions and failures may result in customer dissatisfaction, customer loss or both, which could materially and adversely affect our reputation and business.
Our systems are an integral part of our customers’ business operations. The continued and uninterrupted performance of these systems for our customers is critical to our success. Customers may become dissatisfied by any system failure that interrupts our ability to provide services to them.
Our ability to serve our customers depends on our ability to protect our systems and infrastructure against damage from fire, power loss, water damage, telecommunications and technology failure, cyberattacks, earthquake, severe weather conditions, terrorist attacks, vandalism and other similar unexpected adverse events. We also depend on various cloud providers and
co-location
data center providers which provide us environments, tools and applications on which we provide our products. Although we maintain insurance that we believe is appropriate for our business and industry, such coverage may not be sufficient to compensate for any significant losses that may occur as a result of any of these events. In addition, we have experienced systems outages and service interruptions in the past, none of which has had a material adverse effect on us. However, a prolonged system-wide outage or frequent outages for our infrastructure or our cloud providers’ infrastructure could cause harm to our customers and to our reputation and reduce the attractiveness of our services significantly, which could result in decreased demand for our products and services and could cause our customers to make claims against us for damages allegedly resulting from an outage or interruption. Any damage or failure that interrupts or delays our operations could result in material harm to our business and expose us to material liabilities.
Changes in the tax legislation policies and regulations imposed by the jurisdictions in which we operate, the termination or reduction of certain government programs and tax benefits, or challenges by tax authorities of our tax positions could adversely affect our overall effective tax rate.
There can be no assurance that our effective tax rate of 15.5% for the year ended September 30, 2021 will not change over time as a result of changes in corporate income tax rates or other changes in the tax laws of Guernsey, the jurisdiction in which our holding company is organized, or of the various countries in which we operate. Any changes in tax laws could have an adverse impact on our financial results.
For example, there is growing pressure in many jurisdictions and from multinational organizations such as the Organization for Economic Cooperation and Development (OECD) and the EU to amend existing international taxation rules in order to align the tax regimes with current global business practices. Specifically, in October 2015, the OECD published its final package of measures for reform of the international tax rules as a product of its Base Erosion and Profit Shifting (BEPS) initiative, which was endorsed by the G20 finance ministers. Many of the initiatives in the BEPS package required and resulted in specific amendments to the domestic tax legislation of various jurisdictions and to existing tax treaties. We continuously monitor these developments. Although many of the BEPS measures have already been implemented or are currently being implemented globally (including, in certain cases, through adoption of the OECD’s “multilateral convention” to effect changes to tax treaties which entered into force on July 1, 2018 and through the European Union’s “Anti Tax Avoidance” Directives), it is still difficult in some cases to assess to what extent these changes would impact
 
14

our tax liabilities in the jurisdictions in which we conduct our business or to what extent they may impact the way in which we conduct our business or our effective tax rate due to the unpredictability and interdependency of these potential changes. In January 2019 the OECD announced further work in continuation of the BEPS project, focusing on two “pillars.” On October 8, 2021, 136 countries approved a statement known as the OECD BEPS Inclusive Framework, which builds upon the OECD’s continuation of the BEPS project. The first pillar is focused on the allocation of taxing rights between countries for
in-scope
multinational enterprises that sell goods and services into countries with little or no local physical presence. The second pillar is focused on developing a global minimum tax rate of at least 15 percent applicable to
in-scope
multinational enterprises. Guernsey is one of the 136 jurisdictions which has agreed in principle to enforce the global minimum tax rate. Given these developments, it is generally expected that tax authorities in various jurisdictions in which we operate might increase their audit activity and might seek to challenge some of the tax positions we have adopted. It is difficult to assess if and to what extent such challenges, if raised, might impact our effective tax rate. In addition, following the screening by the EU Code of Conduct Group on Business Taxation (“COCG”) of third-country jurisdictions to assess their compliance for tax purposes, Guernsey was found to be a
co-operative
jurisdiction. However, the COCG has requested that Guernsey, along with a number of other jurisdictions, take further steps to ensure that its tax system does not facilitate offshore structures which attract profits without real economic activity. Legislation introducing economic substance requirements for companies in the Crown Dependencies was approved by the respective parliaments in December 2018 and amended and updated with effect from June 30, 2021. The legislation applied initially to all companies resident for tax purposes in the Crown Dependencies and was effective for accounting periods commencing on or after January 1, 2019. The most recent amendments extended the legislation to include partnerships but did not make material changes to the substance requirements applicable to Guernsey tax resident companies. The regulations require companies and partnerships to demonstrate that they have sufficient substance in Guernsey via a series of requirements, or tests. Amdocs is monitoring the developments closely to ensure that the Company is compliant with the various requirements.
Further, there are proposals in the United States to introduce further amendments to the federal tax regime applicable to corporations. As of the date of filing, it remains unclear what legislation, if any, would be enacted. If the draft legislation currently being discussed is enacted, it
could create the potential for added volatility in our provision for income taxes and might have an adverse impact on our future income tax provision and tax rate.
Risks Related to Our Indebtedness
There are risks associated with our outstanding and future indebtedness.
As of September 30, 2021, we had an aggregate of $650 million of outstanding indebtedness and we may incur additional indebtedness in the future. Our ability to pay interest and repay the principal for our indebtedness is dependent upon our ability to manage our business operations, generate sufficient cash flows to service such debt and the other factors discussed in this section. There can be no assurance that we will be able to manage any of these risks successfully.
We may also need to refinance a portion of our outstanding debt as it matures. There is a risk that we may not be able to refinance existing debt or that the terms of any refinancing may not be as favorable as the terms of our existing debt. Furthermore, if prevailing interest rates or other factors at the time of refinancing result in higher interest rates upon refinancing, then the interest expense relating to that refinanced indebtedness would increase.
In addition, changes by any rating agency to our outlook or credit rating could negatively affect the value of both our debt and equity securities and increase the interest amounts we pay on certain outstanding or future debt. These risks could adversely affect our financial condition and results of operations.
 
15

Risks Related to Ownership of Our Ordinary Shares
The market price of our ordinary shares has and may continue to fluctuate widely.
The market price of our ordinary shares has from time to time fluctuated widely and may continue to do so. Many factors could cause the market price of our ordinary shares to rise and fall, including:
 
   
market conditions in the industry and the economy as a whole, including the continuous effect of the
COVID-19
pandemic;
 
   
variations in our quarterly operating results;
 
   
changes in our backlog levels;
 
   
announcements of technological innovations by us or our competitors;
 
   
announcements by any of our key customers;
 
   
introductions of new products and services or new pricing policies by us or our competitors;
 
   
trends in the communications, media or software industries, including industry consolidation;
 
   
acquisitions or strategic alliances by us or others in our industry;
 
   
changes in estimates of our performance or recommendations by financial analysts, institutions and other market professionals;
 
   
changes in our shareholder base; and
 
   
political developments in the Middle East or other areas of the world.
In addition, the stock market frequently experiences significant price and volume fluctuations. In the past, market fluctuations have, from time to time, particularly affected the market prices of the securities of many high technology companies. These broad market fluctuations could adversely affect the market price of our ordinary shares.
It may be difficult for our shareholders to enforce any judgment obtained in the United States against us or our affiliates.
We are incorporated under the laws of the Island of Guernsey and a majority of our directors and executive officers are not citizens or residents of the United States. A significant portion of our assets and the assets of those persons are located outside the United States. As a result, it may not be possible for investors to effect service of process upon us within the United States or upon such persons outside their jurisdiction of residence. Also, we have been advised that there is doubt as to the enforceability in Guernsey of judgments of the United States courts of civil liabilities predicated solely upon the laws of the United States, including the federal securities laws.
ITEM 4. INFORMATION ON THE COMPANY
History, Development and Organizational Structure of Amdocs
Amdocs Limited was organized as a company with limited liability under the laws of the Island of Guernsey in 1988. Since 1995, Amdocs Limited has been a holding company for the various subsidiaries that conduct our business on a worldwide basis. Our global business is providing software and services solutions to leading communications and media companies in North America, Europe and the rest of the world. Our registered office is Hirzel House, Smith Street, St. Peter Port, Guernsey, GY1 2NG, and the telephone number at that location is
+44-1481-728444.
The executive offices of our principal subsidiary in the United States are located at 1390 Timberlake Manor Parkway, Chesterfield, Missouri 63017, and the telephone number at that location is
+1-314-212-7000.
 
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Our subsidiaries are organized under and subject to the laws of several countries. Our principal operating subsidiaries are in Canada, Cyprus, India, Ireland, Israel, Switzerland, the United Kingdom and the United States. Please see Exhibit 8 to this Annual Report on Form
20-F
for a listing of our significant subsidiaries.
As part of our strategy, we have pursued and may continue to pursue acquisitions, partnerships and other initiatives in order to offer new products or services or otherwise enhance our market position or strategic strengths. In recent years, we have completed numerous acquisitions, which, among other things, have expanded our business into digital commerce solutions and other digital offerings, 5G charging and policy, network and cloud technologies, software design and development and the media and entertainment domain. In February 2018, we acquired Vubiquity, a leading provider of premium digital content services and technology solutions, in order to further expand our capabilities in the world of media and entertainment which is increasingly converging with our traditional domain of communications. Also in February 2018, we acquired UXP Systems, a leader in user lifecycle management, to enhance our capabilities around digital identity, user entitlements, personalization, and privacy, including consent management. In August 2019, we acquired TTS Wireless, a provider of mobile network engineering services, specializing in network optimization and planning, to further expand our 5G capabilities and help operators accelerate and simplify deployment of 5G networks with comprehensive network rollout solutions. In August 2020, we acquired Openet, a provider of 5G charging, policy and cloud technologies, to extend our portfolio with open and network-centric technologies to help service providers differentiate in the 5G era. In December 2020, we completed the divestiture of OpenMarket, an Amdocs subsidiary, for approximately $300 million in cash, as part of our strategy to divest a
non-strategic
asset in the mobile messaging domain and remain focused on our core strategic growth initiatives. During fiscal year 2021, we acquired three technology companies. The largest of the three, acquired in March 2021, is Sourced Group (“Sourced”), a leading global technology consultancy specializing in large-scale cloud transformations, to accelerate our strategy of taking the communications and media industry to the cloud and complement our portfolio of cloud-native products and services and further expand and diversify our customer base. As the result of our organic growth and acquisitions, our workforce has increased over the last three years from an approximate average workforce of 24,516 in fiscal 2019 to 27,176 in fiscal 2021. In the past, our workforce has fluctuated with changes in business conditions.
Our principal capital expenditures for fiscal 2021, 2020 and 2019 have been for computer equipment in our operating facilities and development centers, for which we spent approximately $89 million, $126 million and $110 million, respectively, and for the development of our new campus in Israel, for which we spent approximately $101 million, $63 million and $7 million (which is net of proceed of $9.7 million relating to refund of betterment levy), respectively.
Business Overview
Amdocs is a leading provider of software and services for more than 350 communications, Pay TV, entertainment and media industry and other service providers in developed countries and emerging markets. Our customers include some of the largest telecommunications companies in the world (including America Movil, AT&T, Bell Canada, Singtel, Telefonica, Telstra,
T-Mobile,
Verizon and Vodafone), as well as cable and satellite providers (including Altice USA, Charter, Comcast, DISH, J:COM, Rogers Communications and Sky), small to midsized communications businesses and mobile virtual network enablers/mobile virtual network operators and directory publishers and providers of media and other services, such as financial services. Amdocs also holds relationships with hundreds of content owners and distributors around the globe, including MGM and WarnerMedia.
Our software and services, which we develop, implement and manage, are designed to meet the business imperatives of our customers. Our offerings are based on a product and services mix, using technologies and methodologies such as cloud and cloud native, microservices, DevSecOps,
low-/no-code,
edge computing, open source, bimodal operations, Site Reliability Engineering (SRE) and increasing amounts of automation through standard information technology (IT) tools, open APIs and machine learning and artificial intelligence (AI). As a
 
17

result, our offerings enable service providers to efficiently and cost-effectively engage their customers, introduce new products and services, automate service and network operations, monetize connectivity and content, support new business models and generally enhance their understanding of their customers. Our technology,
design-led
thinking approach and expertise help service providers accelerate their journey to the cloud, enhance their entertainment offerings, deploy and manage existing and next-generation networks, and serve their customers across all channels. In order to fulfill our responsibilities to our customers, we sometimes engage third-party vendors and system integrators providing complementary products and services, including hardware and software.
We are able to offer customers superior products and services on a worldwide basis, in large part because of our highly qualified and trained technical, engineering, sales, marketing, consulting, and management personnel. We combine deep industry knowledge and experience, advanced methodologies, industry best practices and
pre-configured
tools to help deliver consistent results and minimize our customers’ risks. We invest significantly in the ongoing training of our personnel in key areas such as industry knowledge, software technologies and management capabilities. Based in significant part on the skills and knowledge of our workforce, we believe that we have developed a reputation for reliably delivering quality solutions.
We believe the demand for our solutions is driven by our clients’ continued migration to the cloud, deployment of 5G networks and transformation into digital service providers to provide wireless access services, content and applications (apps) on any device through digital and
non-digital
channels. It is also driven by the trend towards integrated service offerings which we believe is leading to increased merger and acquisition activity among our customers who then require systems consolidation, which we provide, to ensure a consistent customer experience at all touchpoints. Our solutions enable service providers to help their consumer and enterprise (B2B) customers navigate the increasing number of devices, services, partner services and plans available in today’s digital world and the need of service providers to cope with the rapidly growing demand for content and data that these devices and services create, as well as to compete with
over-the-top
(OTT)-focused players. Regardless of whether service providers are bringing their first offerings to market, scaling for growth, consolidating systems or transforming the way they do business, we believe that they seek to differentiate themselves by delivering a customer experience that is simple, personal, contextual and valuable at every point of engagement and across all channels.
We invest time and resources to identify and address cybersecurity risks, including risks that our customers face with regard to our systems, products or services. We have established policies and procedures, based on industry best practices, to protect the integrity and security of our products and services. We work with our customers and use overlapping controls to defend against cybersecurity attacks and threats on networks,
end-user
devices, servers, applications, data and our cloud solutions. In light of
COVID-19
and the transition across the globe to working from home, we enabled secure solutions for collaboration and remote connectivity. In addition, we utilize a combination of educational tools to foster a culture of security awareness and responsibility among our workforce.
In addition to the business value we provide to our customers, we also aim to create value for society and make our increasingly connected world more empowering by unlocking our customers’ innovative potential and empowering them to transform their boldest ideas into reality, and make customer experiences which are truly amazing. We were selected for the 2021 S&P Dow Jones Sustainability Index (DJSI) North America, with DJSI recognizing Amdocs as a sustainability leader in our industry. We also received a gold rating standard from EcoVadis for environmental, social, and ethical performance. We are committed to diversity, believing a gender diverse, multi-cultural and multi-generational workforce provides strength and a competitive advantage. We seek to create a welcoming work environment for all employees, regardless of age, disability, ethnicity, gender, religion or sexual orientation. Inside the company we run internal programs to increase representation and empower female employees. We have placed particular effort in recruiting more women for core technology and customer-facing roles, and 40% of our software testing engineers are women. To help the communities in which we live and work during the
COVID-19
pandemic, we donated medical equipment and life-saving machines, computers for remote learning, internet access for schools and food for the needy. Furthermore, we established a
 
18

call center operated by Amdocs volunteers to assist senior citizens and others make video calls to stay in touch with their families. We also place high value on protecting the environment and minimizing any negative environmental impacts of our operations and seek to create sustainable products and services and have been rated as a leading company by the Carbon Disclosure Project for both GHG emissions management and supplier-chain engagement for sustainability. As we take the industry to the cloud, we help service providers shift away from costly, space and energy-consuming hardware components, by delivering software-driven capabilities.
Our business is conducted on a global basis. We maintain development and support facilities worldwide, including Brazil, Canada, Cyprus, India, Ireland, Israel, Mexico, the Philippines, the United Kingdom and the United States and have operations in North America, Europe, Israel, Latin America, Africa and the Asia-Pacific region.
Industry Background
We believe service providers will maintain a strong focus on growing new revenue streams, cost reduction and driving more efficient operations, and that the trends of ongoing digital transformation with focus on customer experience, migration to the cloud, next-generation networks, and consolidation within the industry will continue. Service providers are increasingly focusing on their core capabilities, investing in 5G and fiber rollouts, to meet the demand for increased bandwidth, faster pace of innovation for new digital services, as well as to improve their business and operational agility and optimize and monetize their investments in such services. At the same time, many service providers are partnering with leading suppliers to offer their customers a rich portfolio of offerings including media; entertainment; enterprise enablement; Internet of Things (IoT); and digital lifestyle services, all of which is driving growth in the demand for multi-modal customer engagement capabilities and data.
OTT-focused
players and device manufacturers continue to penetrate the communications market and are also competing for customer attention in the entertainment market, while traditional content creators are increasingly streaming their content
direct-to-consumer
(D2C). Additionally, social networks such as Facebook and Twitter, alongside
OTT-focused
players such as Snapchat and WhatsApp, have become widely accepted alternatives to traditional voice communications and are also providing video streaming services. To meet the challenges from new competitors, service providers are developing cooperative partnerships with
OTT-focused
players to improve the customer experience as well as vertically integrating with content creators. Pay TV providers are moving toward more OTT and
on-demand
video services in their need to respond to customers’
on-demand
experience expectations. As the
business-to-consumer
(B2C) domain is crowded with disruptors and heightened competition from OTT players, service providers are also looking to strengthen their standing with enterprise customers, explore new opportunities in the wholesale market and provide IoT services to new vertical market segments, such as the home, health and automotive industries.
To capture new revenue streams, service providers are expanding within existing and
non-traditional
business models and deploying new network technologies such as 5G. We believe 5G will enable service providers to grow their enterprise revenues through the introduction of new business models such as B2B2x, the roll out of private enterprise networks (PEN) and by exposing
network-as-a-service
(NaaS) functionality. As a result, we expect service providers will continue to place an emphasis on modernization and transformation projects for their networks and operational and business systems as they seek to introduce these new offerings, migrate to the cloud and offer innovative new services for both enterprise customers and individual consumers and monetize these new capabilities.
We believe these factors create significant opportunities for vendors of information technology software products and providers of managed services and
end-to-end
systems integration, such as Amdocs.
 
19

Business Strategy
Our goal is to provide software and services solutions and support to communications and media companies of all sizes as they strive to deliver digital engagements, accelerate their migration to the cloud and remain competitive. We seek to accomplish our goal by pursuing the strategies described below.
 
   
Focus on the Communications and Media Industry
. We focus our resources and efforts primarily on providing customer experience solutions to service providers in the communications and media industry. We consider our longstanding and continuing focus on this industry a competitive advantage. This strategy has enabled us to develop the specialized industry
know-how
and capability necessary to deliver the technologically advanced, large-scale, specifications-intensive solutions required by the leading wireless, wireline, broadband, cable and satellite companies as well as provide targeted point solutions for service providers of all sizes. These strengths have enabled us to diversify our customer base and expand our offering domains and may continue to provide us with opportunities to expand within other vertical segment markets.
 
   
Target Industry Leaders
. We intend to continue to direct our marketing efforts primarily toward communications and media industry leaders and contenders. By targeting such leading service providers, which require the most sophisticated and relevant solutions, we believe that we are better able to remain at the forefront of developments in the industry. We believe that the development of this customer base has helped position us as a market leader.
 
   
Continued Expansion into New Geographies and Emerging Markets.
We seek to grow our customer base by expanding into new markets inside the regions we currently serve and serving the needs of service providers operating in emerging markets. While we have a strong presence overall in developed markets such as Europe, there are countries in which we believe we can further expand our presence. In fiscal 2021, for example, we succeeded in growing our activities in the Italian market and also expanded in Russia. In emerging markets, prepaid subscriber growth remains high and average revenue per user remains relatively low in comparison to more developed markets. In order to increase subscriber revenue, service providers are focusing on customer experience and on increasing capacity, particularly for data and content offerings, as key competitive differentiators. Our existing and prospective customers in these markets vary dramatically, with some service providers serving subscriber bases already numbering in the hundreds of millions and others introducing communications services to communities for the first time. We believe this shift in focus to customer experience and on increasing bandwidth and providing content helps to create the wide spectrum of emerging market service providers that require offerings ranging from relatively
low-cost
systems with
pre-packaged
services that can be implemented rapidly, to more robust services, to complete customer experience solutions.
 
   
Provide Customers with an Open, Dynamic and Cloud-Native Portfolio to Meet Key Industry Trends
. With our offerings, we seek to accelerate our customers’ journey to the cloud and help them differentiate in the 5G era so they can deliver an
always-on
customer experience that is intuitive, simple, personal and valuable at every point of service. We provide solutions across digital business systems and legacy business and operational support systems (BSS/OSS) and network domains and multiple lines of business, including wireline, wireless, broadband, cable, satellite services, IoT and digital services. The business integration of our systems, supporting commerce, monetization and network automation, is achieved through a central, cloud-native catalog, built on an open,
API-first
and microservices-based approach to enable third-party integration. We believe that our ability to provide a broad, open, dynamic, modular,
AI-embedded
and cloud-native portfolio, with certified
end-to-end
business processes deployed using best practice DevOps, helps position us as a strategic partner for our customers as they seek to migrate to the cloud and continue to transform into digital service providers. This provides us with multiple avenues for strengthening and expanding our ongoing customer relationships. Our strategic collaborations with Amazon Web Services, Microsoft Azure and Google
 
20

 
Cloud will further enable service providers to offer new and differentiated cloud services to drive growth, customer loyalty and
value-add
with fast and agile interactions, and a wide ecosystem of
third-party
partners.
 
   
Expand Our Managed Services Capabilities
. We seek to assume responsibility for the operation, development and management of our customers’ Amdocs systems, as well as systems developed by
in-house
IT departments or by other vendors. Our mandate can extend across the service provider’s entire IT and network environment and encompass key business process operational needs, organizational readiness preparation and employee upskilling. Many of these projects involve what we call managed transformations: a multi-year project in which we modernize legacy systems while operating them, and then continue to provide managed services once the transformation is complete. Our customers receive predictable service levels based on agreed-upon key performance indicators, access to global repository of automation processes, as well as improved efficiencies and long-term savings over the
day-to-day
costs of operating and maintaining these systems. Managed transformations also provide an improved
end-user
experience, so service providers can focus on their own internal strengths and strategy to grow their business, leaving system concerns to us. We are continuing to expand our cloud operations, covering the full cloud management lifecycle, including cloud cost optimization (FinOps), multi-cloud management, and cloud security. Managed services also benefit us, as they can be a source of predictable revenue and long-term relationships.
 
   
Develop and Maintain Long-Term Customer Relationships
. We seek to develop and maintain
long-term,
mutually beneficial relationships with our customers, and have organized our internal operations to better anticipate and respond to our customers’ needs. We believe these relationships can lead to additional product and services sales, including products and services from recent acquisitions which have expanded our offering, as well as ongoing, long-term support, system enhancement, modernization and maintenance and managed services agreements. We believe that such relationships are facilitated in many cases by the mission-critical, strategic nature of Amdocs systems and by the added value we provide through our specialized skills and knowledge. We believe that the longevity of our customer relationships, and the recurring revenue that such relationships provide, produce a competitive advantage for us.
The Amdocs Offerings
Our understanding of our customers’ business needs provides the framework for our portfolio of
capability-based
products and services. Our offerings are designed to meet the challenges facing our customers as they roll out 5G networks, migrate to the cloud and transform into digital service providers within the framework of a hybrid IT environment, which requires them to rapidly introduce new cloud-native applications while still operating legacy systems. They enable modular expansion as a service provider evolves, ensuring
low-cost
and reduced-risk implementations, while their microservices-based architecture enables the rapid deployment of complex applications as suites of independently deployable services that can be frequently upgraded via DevOps. With our portfolio’s open and modular structure, organized by capability such as monetization, commerce and care, consulting, delivery, operations and others, and matched to industry standards, our customers have the flexibility to choose business offerings that address their specific needs and improve their time to market and value. In the third quarter of fiscal 2021, we released Amdocs CES21, a 5G and cloud-native, microservices-based version of our market-leading customer experience suite.
The CES21 suite enables service providers to build, deliver and monetize advanced services, leveraging their investments in technologies such as 5G standalone network, multi-access edge computing (MEC), software-defined networks (SDN), artificial intelligence (AI) and machine learning (ML), and the cloud. This suite includes new developments such as a
low-/no-code
experience technology platform for our care and commerce solutions. This technology is a visual software development approach that requires little to no coding skill on the part of the user, allowing the rapid development of applications with minimal dependency on IT and code developers. The suite also includes embedded carrier-grade
AI/ML-based
use cases for optimized customer
 
21

experience,
zero-touch
operations and hybrid network management. It aligns with the TM Forum’s open API framework, offering a continuous integration/continuous delivery (CI/CD) environment built using Amdocs’ cloud-agnostic Microservices Platform to ensure agility and IT velocity.
Other suites inside CES21 include our Commerce and Care suite for order capture and handling and customer engagement; the Monetization suite for charging, billing, policy and revenue management among other functions, and our Intelligent Networking suite with a set of modular, flexible and open service lifecycle management capabilities designed for network automation journeys such as OSS modernization,
digital-to-network
automation,
end-to-end
service and network orchestration, 5G slice & edge automation, or
Network-as-a-Service.
Our product catalog uniquely serves all our suites and products across the commerce, monetization and network domains. We have furthermore launched solutions for the
5G-specific
needs of service providers as they begin to introduce, deliver and monetize new 5G services, encompassing charging and policy functions from Openet and managed by a centralized catalog.
We also offer Amdocs MarketONE, a cloud-native, SaaS, scalable business ecosystem designed to enable a frictionless OTT and digital consumer services experience and monetization and Amdocs Digital Brands Suite, a fully
pre-integrated
digital business suite, designed for digital telecom brands and small-scale service providers covering care, commerce, ordering and monetization needs.
Overall, our technology capabilities include individual products for commerce and care, catalog management, monetization, subscription management, IoT, AI, service and network automation and network development and optimization. The Amdocs eSIM Cloud enables service providers to launch IoT solutions and monetize experiences on devices from Apple, Samsung, Microsoft, Google and other device manufacturers, while our advanced cybersecurity service helps protect and manage enterprises. Our
AI-powered,
cloud-native, home operating system enables service providers to expand the home broadband experience, offering end users automated care, smart insights, security and control over the growing number of connected home devices. Our data intelligence solutions and applications span every aspect of the service provider’s business, with detailed use cases embedded within our products and best practices to help service providers become truly data-driven organizations. We also provide media offerings for media publishers, TV networks, video streaming providers, and service providers.
Our broad portfolio of services capabilities ranges from consulting to delivery, quality engineering (testing), operations, systems integration, mobile network services, experience design and content services, and the extent of services provided varies from customer to customer. Our services engagements can range in size and scope and include advising customers on business and technical strategy, designing and implementing particular business solutions, managing specific business operations processes, adopting DevOps, migrating applications to the cloud and orchestrating large-scale transformation projects. We also provide
end-to-end
application development and maintenance, from ideation to deployment, managing all steps of the development lifecycle, supporting
bi-modal
development methodologies, as well as ongoing maintenance.
In addition, we are generally retained by the customer to provide ongoing services, such as maintenance, enhancement design and development and operational support, or to act as a lead systems integrator for post-production activities that may include interfaces with third-party and legacy systems. We also provide network development and optimization services, supporting the industry’s move to 5G. For a substantial number of our customers, the implementation and integration of an initial system has been followed by the sale of additional systems and modules. We aim to establish long-term maintenance and support contracts with our customers. These contracts generally involve an expansion in the scope of support delivered and provide us with recurring revenue.
Using AI and predictive analytics, as well as robotic process automation and machine learning, our managed services are designed to enable service providers’ IT departments to keep pace with the speed of business requirements as they journey towards
zero-touch
operations, provide faster time to market for new services as well as the cost-effective management of existing offerings. Our telco and media-specific adoption of SRE
 
22

methodology helps provide more agile and reliable operations and also includes dedicated tools that automate tasks that would traditionally require various software development skills. Our Amdocs Cloud Management Platform contains a set of advanced tools and integrations to external tools to support and enable our services across many aspects of the IT lifecycle in service provider environments, including solution development, quality engineering, cloud migration and operations, FinOps, automation and AI engines, self-service channels, governance and more. Managed services provide multi-year, flexible and tailored managed services across all verticals, managing IT, business processes and applications services, including application development and maintenance, operations, IT and infrastructure hosting, cloud operations and
in-house
developed practices, and legacy modernization.
Our quality engineering services are designed to help modernize our customers’ approach to testing. They combine upskilling our customers’ organization, employing our
AI-driven
test automation platform specifically designed for the communications industry, and integrating a DevOps approach to ensure faster time to market combined with higher product quality. We support the complete quality engineering spectrum of services, from project-based engagements to fully outsourced testing centers of excellence.
Our professional services are designed to assist customers in the selection, implementation, operation, management, modernization and maintenance of their IT, network and content systems. As a lead systems integrator, we assume
end-to-end
responsibility to monitor, manage and deploy the overall development and integration activities of Amdocs and third-party vendors throughout the transformation lifecycle and
business-as-usual
state. We also offer integration design and implementation services to help bridge between modern digital channels and a customer’s existing legacy
back-end
and third-party systems. Our unique integration platform as a service solution is built specifically for the challenges of the communications and media industry, enabling modernization with minimal impact on the systems of record and other legacy systems.
Our business and
top-level
technology strategy consulting services cover both Amdocs and
non-Amdocs
systems. Our consultants understand the service provider’s environment and bring with them the experience we accumulated when modernizing our own Amdocs product lines and
re-skilling
our people to master hybrids of the legacy and the new. Using expertise from recent acquisitions, we also provide experts in specific niches, such as user experience (UX) experts from projekt202, digital software engineering and cloud development experts from Kenzan and cloud platform and cloud transformation experts from Sourced Group.
Our content services are designed to enable service providers to build rich, premium content offerings for their customers, accessing large libraries of premium licensed content, securely processed and distributed across any channel, device type or geography. Through content aggregation, localization and compliance management, metadata creation, encoding, distribution, asset management and delivery, our services help service providers and premium content owners monetize content through a variety of commercial models.
Technology
Our portfolio architecture enables our applications to work in multiple customer environments ranging from on premise to public cloud.
To help service providers respond more quickly to changes in their markets, we embrace an open and integrated approach to our technology built on the following key principles:
 
   
Design Led
. Adopting
design-led
principles and methodologies across software applications to ensure improved and optimized customer experiences.
 
   
API-First
. Leveraging domain-driven design to expose APIs across key applications and ensure consumption and interaction between applications is easily enabled. It exposes the Amdocs portfolio application programming interfaces to external systems, allowing our applications to integrate with each other and with third-party applications.
 
23

   
Cloud Flexibility
. Architected to run in public and
on-premise
cloud environments, and across a variety of providers based on customer needs.
 
   
Microservices
. Developing highly granular, lightweight distributed software architecture, shipped and delivered using containers and orchestrated using Kubernetes, the industry-leading cluster management for containers.
 
   
Scalability
. Designed to take full advantage of the capabilities of the underlying platform, allowing progressive system expansion, proportional with increases in business volumes. Using the same software, our applications can support operations for small and very large service providers.
 
   
Reliability.
System and component architecture supports high availability and redundancy to allow connected and uninterrupted operations at full network utilization and device load.
 
   
Modularity
. Applications can be installed on an individual standalone basis, interfacing with the customer’s existing systems, or as part of an integrated Amdocs system environment. We believe this modularity provides our customers with a highly flexible solution that is able to incrementally expand with the customer’s growing needs and capabilities.
 
   
Continuous Updates
. Ongoing delivery of software functionality enables customers to adopt the latest features and functions as they are made available, accelerating time to market and business agility.
 
   
Virtualization
. Business agility improves with virtualization as it allows introduction of new services rapidly. Moreover, virtualization reduces cost by improving resource utilization, and by automating processes.
 
   
Hybrid-Cloud
. Supporting application architecture that spans physical, virtual and cloud-based infrastructures. The deployment, security and operation of these diverse permutations must be orchestrated in order to deliver seamless experiences.
 
   
Open-Source Software
. Enabling rapid time to market and lower-cost functionality introduction, our software leverages open-source components to encourage standardization and improved quality where possible. We are a founding partner of the 5G Open Innovation Lab, a global ecosystem for developers, enterprises, wireless carriers and technology leaders to fuel the development and monetization of new
5G-powered
technology use cases and markets. We are also a contributor to the
O-RAN
Alliance – whose mission is to reshape the RAN industry towards more intelligent, open, virtualized and fully interoperable mobile networks – and to the development of The Linux Foundation’s ONAP, an advanced open source solution for the telecommunications industry. Furthermore, Amdocs plays an integral part in Telecom Infra Project (TIP) initiatives, focused on bringing viable open, standards-based market solutions to service providers for a variety of environments, from urban to rural, and creating a better-connected society.
 
   
Service-Oriented Architecture.
SOA enables improved flow of information, rapid function development, easier scaling and simplified introduction of new services.
 
   
Embedded
Automation
.
End-to-end
automation capabilities spanning multiple domains and extending across users, business and operating systems and networks, to optimize the efficient utilization of resources while enabling adaptive, real-time responsiveness to specific business and customer requirements in a timely and cost-efficient manner.
 
   
Low-/No
code.
A visual software development approach that requires little to no coding skill on the part of the user, allowing the rapid development of applications with minimal dependency on IT and code developers.
 
   
Artificial Intelligence/Machine Learning
. Delivering automation and providing service providers with more intelligence about their customers and the performance of their infrastructures, optimizing the customer experience and enabling
zero-touch
operations.
 
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Sales and Marketing
Our sales and marketing activities are primarily directed at major communications and media companies.
As a result of the strategic importance of our solutions to the operations of service providers, a number of constituencies within a customer’s organization are typically involved in purchasing decisions, including senior management, information systems personnel and user groups, such as the finance, customer service and marketing departments.
Our sales activities are supported by marketing efforts and increasing cooperation with strategic partners. We interact with other third parties in our sales activities, including independent sales agents, information systems consultants engaged by customers and system integrators that provide complementary products and services. We also have value-added reseller agreements with leading hardware and software vendors. Our sales and marketing activities also support projects with our partner ecosystem of over 100 partner companies in domains such as digital and consumer experience, media and entertainment, IoT, data intelligence, security and privacy, cloud and open source. Partner companies include Amazon Web Services, Microsoft, Intel, Google, Redhat, Dell EMC and VMware, Hewlett Packard Enterprise and IBM, as well as
start-up
companies.
Customers
Our target market is comprised of service providers in the communications and media industry that require customer experience solutions with advanced functionality and technology. The companies in our target segment are typically market leaders. By working with such companies, we help ensure that we remain at the forefront of developments in the industry and that our product offerings continue to address the market’s most sophisticated needs. Additionally, with projekt202 and Sourced Group, we deliver experience-driven and cloud transformations for customers in other industry verticals. We have a global orientation and customers in over 85 countries.
Our customers include service providers, such as:
 
A1 Bulgaria   Comcast
A1 Telekom Austria Group   Deutsche Telekom
Airtel   Dish Network
Airtel Africa   EE
Altice France   Elisa
Altice USA   EPIX
América Móvil   Eros Now
Astro   FarEasTone
AT&T   Fastweb
AT&T Mexico   Foxtel
Bell Canada   Globe Telecom
Bharat Sanchar Nigam Limited   J:COM
Botswana Telecommunications Corporation   KCOM
BT   KT
Cable & Wireless   LG Uplus
Capita Business Services   Liberty Global
Cellcom   Kyivstar
Charter Communications   Lumen
Claro Brasil   M1
Claro Chile   Magyar Telekom
Claro Dominican Republic   Maxis
Claro Puerto Rico   MGM
 
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MTS   Three UK
Optus   TIM
Orange Belgium   TIM Brasil
Orange Liberia  
T-Mobile
US
Orange Spain   True Corporation
Partner Communications   Turner
PLDT   UPC Broadband
Proximus   US Cellular
Rogers  
UTS
Rostelecom  
Verizon
Safaricom  
VEON
SES  
ViacomCBS
Sensis  
Vimeo
Singtel  
Virgin Media
Sky Italia  
Vodacom
Sky UK  
Vodafone Germany
StartHub  
Vodafone Hungary
Sunrise  
Vodafone Idea
Telefónica Argentina (Movistar)  
Vodafone Ireland
Telefónica Brasil (Vivo)  
Vodafone Italy
Telefónica Chile (Movistar)  
Vodafone Qatar
Telefónica Peru (Movistar)  
Vodafone Romania
Telenet  
Vodafone Spain
Telia Norway  
Vodafone Turkey
Telia Sweden  
Vodafone UK
Telkom SA  
VodafoneZiggo
Telkomsel  
Warner Bros
Telstra  
Wind Tre
TELUS Communications  
XL Axiata
Three Ireland    
The following is a summary of revenue by geographic area. Revenue is attributed to geographic region based on the location of the customer:
 
    
2021
   
2020
   
2019
 
North America
     65.1     65.3     63.2
Europe
     14.5     14.7     14.7
Rest of the World
     20.4     20.0     22.1
Competition
The market for customer experience solutions in the communications and media industry continues to become more competitive. Amdocs’ competitive landscape is comprised of internal IT departments of our customers, as well as independent competitors or new entrants that may compete broadly with us or in limited segments of our market, and can be generally categorized as follows:
 
   
providers of BSS/OSS and customer relationship management (CRM)/digital systems, including CSG International, Netcracker (a NEC subsidiary), Optiva, Oracle, Pegasystems, Salesforce and SAP;
 
   
system integrators and providers of IT services, such as Accenture, Cognizant, DXC Technology, IBM Global Services, Infosys, Tata Consultancy Services, Tech Mahindra and Wipro (some of whom we also cooperate with in certain opportunities and projects);
 
26

   
network equipment providers such as Ciena, Ericsson, Huawei, Nokia Networks, and NEC and its subsidiary Netcracker (some of whom we also cooperate with in certain opportunities and projects and some of whom also have BSS/OSS offerings); and
 
   
niche domain players, often
start-up
companies, which compete against particular parts of our portfolio, such as Matrixx in charging; Hansen (Sigma) in catalog; Aria, Stripe, Zuora in subscription billing; Forgerock and Okta in identity management; Deluxe Entertainment and iNDEMAND in Media.
We expect the competition in our industry to increase from many of such companies.
We believe that we are able to differentiate ourselves from these competitors by, among other things:
 
   
applying our over
35-year
heritage to the development and delivery of products and professional services that enable our customers to overcome their challenges and achieve service differentiation by migrating to the cloud, providing a personalized and intelligent customer experience, shaping the quality of network experience and simplifying the complexity of the operating environment;
 
   
continuing to design and develop solutions targeted specifically to the communications and media industry;
 
   
innovating and enabling our customers to adopt new business models that will improve their ability to drive new revenues, and compete and win in a changing market;
 
   
providing high-availability, high-quality, reliable, scalable, integrated and modular applications, leveraging cloud technology, artificial intelligence and new software development and deployment options;
 
   
providing flexible and tailored IT and business process outsourcing solutions and delivery models; and
 
   
offering customers
end-to-end
accountability from a single vendor.
Employees
We invest significant resources in the training, retention and motivation of high-quality personnel. Training programs cover areas such as technology, applications, development methodology, project methodology, programming standards, industry background, business, management development and leadership. Our management development efforts are reinforced by an organizational structure that provides opportunities for talented managers to gain experience in general management roles. We also invest considerable resources in personnel motivation, including providing various incentive plans for sales staff and high-quality employees. Our future success depends in large part upon our continuing ability to attract and retain highly qualified managerial, technical, sales and marketing personnel and outstanding leaders. Moreover, we are committed to diversity and inclusion, believing a gender diverse, multi-cultural workforce spread across the globe provides strength and a competitive business advantage.
See “Directors, Senior Management and Employees — Workforce Personnel” for further details regarding our employees and our relationships with them.
Property, Plants and Equipment
Facilities
We lease land and buildings for our executive offices, sales, marketing, administrative, development and support centers. We lease an aggregate of approximately 3.2 million square feet worldwide, including significant
 
27

leases in the United States, Israel, Canada, Cyprus, India, Philippines, United Kingdom and Mexico. The following table summarizes information with respect to the principal facilities leased by us and our subsidiaries as of September 30, 2021:
 
Location
  
Area
(Sq. Feet)
 
Americas
     752,449  
EMEA
     1,241,840  
APAC
     1,223,045  
    
 
 
 
Total
     3,217,334  
    
 
 
 
Our leases expire on various dates through 2035. In December 2017, the Company entered into agreements with Union Investments and Development Limited (“Union”) to partner through a legal entity that would be equally owned by the Company and Union for the purpose of acquiring land that the Company intends to use as the site for a new campus in Ra’anana, Israel, which we believe will provide an advanced, optimal working environment that can meet the needs of Amdocs Israel and its employees, and support the Company’s future growth. The design for the new campus is in accordance with LEED
requirements and includes advanced energy and water saving systems. We expect to complete and start occupying our campus during the later part of fiscal year 2022.
Equipment
We develop our solutions over a system of Linux and Windows servers owned or leased by us, as well as over cloud providers. We use a variety of software products in our development centers, including products by Microsoft, CouchBase, Syncsort, Red Hat, CA, IBM, Hewlett-Packard or others. Our data storage is based mainly on equipment from EMC, InfiniDat, IBM and Hewlett-Packard.
ITEM 4A. UNRESOLVED STAFF COMMENTS
Not applicable.
 
ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Overview of Business and Trend Information
Amdocs is a leading provider of software and services for communications and media industry service providers in both developed countries and emerging markets. We believe the demand for our solutions is driven by our clients continued migration to the cloud, deployment of 5G networks and transformation into digital service providers to provide wireless access services, content and applications (apps) on any device through digital and
non-digital
channels. Regardless of whether service providers are bringing their first offerings to market, scaling for growth, consolidating systems or transforming the way they do business, we believe that service providers seek to differentiate their offerings by delivering a customer experience that is simple, personal, contextual and valuable at every point of engagement and across all channels.
We believe service providers will maintain a strong focus on growing new revenue streams, cost reduction and driving more efficient operations, and that the trends of ongoing digital transformation with focus on customer experience, migration to the cloud, next-generation networks, and consolidation within the industry will continue. Service providers are increasingly focusing on their core capabilities, investing in 5G and fiber rollouts, to meet the demand for increased bandwidth, faster pace of innovation for new digital services, as well as to improve their business and operational agility and optimize and monetize their investments in such services. At the same time, many service providers are partnering with leading suppliers to offer their customers a rich
 
28

portfolio of offerings including media; entertainment; enterprise enablement; Internet of Things (IoT); and digital lifestyle services, all of which is driving growth in the demand for multi-modal customer engagement capabilities and data.
We develop, implement and manage software and services designed to meet our customers’ business needs. Our technology,
design-led
thinking approach and expertise help service providers to migrate to the cloud, manage and monetize their next-generation networks, further transform into digital service providers, enhance their entertainment offerings, and serve their customers across all channels. With our portfolio’s open and modular structure, organized by capability and matched to industry standards, our customers have the flexibility to choose business offerings that address their specific needs and improve their time to market and value.
In part, we have sought, through acquisitions, to expand our service offerings and customer base and to enhance our ability to provide managed services to our customers. In recent years, we have completed numerous acquisitions (including our fiscal 2018 acquisitions of projekt202, UXP Systems and Vubiquity, our fiscal 2019 acquisition of TTS Wireless, our fiscal 2020 acquisition of Openet and our fiscal 2021 acquisition of Sourced Group), which, among other things, we believe will enable us to expand our digital offerings, 5G network and cloud-native capabilities and technological expertise. As part of our strategy, we may continue to pursue acquisitions and other initiatives in order to offer new products or services, enter into new vertical markets or otherwise enhance our market position or strategic strengths. In December 2020, we completed the divestiture of OpenMarket, an Amdocs subsidiary, as part of our strategy to divest a
non-strategic
asset in the mobile messaging domain and remain focused on our core strategic growth initiatives.
The Amdocs Offerings
Our portfolio consists of software and services that address service providers’ business and operational needs. Our offerings, grouped by technology capabilities such as commerce and care, catalog management, monetization, subscription management, IoT, AI, service and network automation and network deployment and optimization, are designed to meet the challenges facing our customers as they roll out 5G networks, migrate to the cloud and transform into digital service providers within the framework of a hybrid IT environment, which requires them to rapidly introduce new cloud-native applications while still operating legacy systems. They are designed to enable modular expansion as a service provider evolves, and their microservices-based architecture enables the rapid deployment of complex applications as suites of independently deployable services that can be frequently upgraded via DevOps.
Our comprehensive line of services is designed to address every stage of a service provider’s lifecycle. They include consulting, delivery, quality engineering (testing), operations, systems integration, mobile network services, experience design and content services. Our managed services provide multi-year, flexible and tailored business processes and applications services, including application development, modernization and maintenance, IT and infrastructure services, testing and professional services that are designed to assist customers in the selection, implementation, operation, management and maintenance of their IT systems.
We conduct our business globally, and as a result we are subject to the effects of global economic conditions and, in particular, market conditions in the communications and media industry. In fiscal year 2021, customers in North America accounted for 65.1% of our revenue, while customers in Europe and the rest of the world accounted for 14.5% and 20.4%, respectively. We maintain development facilities in Brazil, Canada, Cyprus, India, Ireland, Israel, Mexico, the Philippines, the United Kingdom and the United States. Historically, AT&T has been our largest customer, accounting for 25% and 26% of our revenue in fiscal years 2021 and 2020, respectively. In fiscal years 2021 and 2020, our next largest customer,
T-Mobile
US, accounted for 19% and 12% of our revenue, respectively
3
. Aggregate revenue derived from the multiple business arrangements we have with
 
(3)
 
Starting April 1, 2020,
T-Mobile
US includes Sprint, which was also previously in our ten largest customers, upon the completion of the merger between Sprint and
T-Mobile
US.
 
29

our ten largest customers accounted for approximately 69% and 65% of our revenue in fiscal 2021 and fiscal 2020. We believe that demand for our solutions is primarily driven by the following key factors:
 
   
Transformation within the communications and media industry, including:
 
   
continued transformation of service providers to digital service providers;
 
   
service provider migration to the cloud;
 
   
increasing use of communications and content services;
 
   
widespread access to content, information and applications;
 
   
continued growth in Latin America and Southeast Asia;
 
   
expansion into new lines of business;
 
   
consolidation among service providers in established markets, often including companies with multinational operations;
 
   
increased competition, including from
non-traditional
players;
 
   
continued bundling and blending of communications and entertainment; and
 
   
continued commoditization and pricing pressure.
 
   
Technology advances, such as:
 
   
wide-scale foundational technology changes including the leveraging of open-source, cloud-enabled and cloud-native operating infrastructure, microservices-based architecture,
API-based
ecosystems, and aggressive digital modernization transformations;
 
   
evolving service provider business models and opportunities like OTT partnerships, content development and offerings, enterprise and small or
medium-sized
business modernization, and innovative consumer bundling solutions;
 
   
network evolution in order to support growing technology needs associated with Internet of Things (IoT), autonomous vehicles and augmented and virtual reality;
 
   
new communications technologies such as 5G wireless technology, eSIM,
Wi-Fi
6, and Narrowband IoT
(NB-IOT),
and;
 
   
artificial intelligence, including machine learning (ML) and natural language processing (NLP) edge computing, network and service automation, and blockchain.
 
   
Customer focus, such as:
 
   
the need for service providers to personalize the customer’s experience and provide contextual and personalized engagements at all points in their omni-channel customer journey;
 
   
increasing customer expectations for new, innovative services and applications that are personally relevant and that can be accessed anytime, anywhere and from any device;
 
   
the ever-increasing expectations for service and support, including omni-monetization and proactive multi-modal customer care and commerce; and
 
   
continuous proliferation of
on-demand
experiences, including
low-latency,
high quality of service connectivity and seamless digital interactions.
 
   
The need for operational efficiency, including:
 
   
the shift from
in-house
management to vendor solutions;
 
   
business needs of service providers to reduce costs and lower total cost of ownership of software systems while retaining high-value customers in a highly competitive environment;
 
30

   
automating, introducing artificial intelligence, and integrating business processes that span service providers’ business systems and network solutions;
 
   
implementing and integrating new next-generation networks (and retiring legacy networks) to deploy new technologies; and
 
   
transforming fragmented legacy OSS to introduce new, orchestrated and automated services in a timely and cost-effective manner.
Revenue from managed services arrangements is a significant part of our business generating substantial, long-term recurring revenue streams and cash flow. Revenue from managed services arrangements accounted for approximately $2.55 billion and $2.4 billion of revenue in fiscal 2021 and 2020, respectively. In managed services contracts revenue from the operation of a customer’s system is recognized as services are performed based on time elapsed, output produced or volume of data processed. In the initial period of our managed services projects, we often invest in modernization and consolidation of the customer’s systems. Managed services engagements can be less profitable in their early stages; however, margins tend to improve over time, and this improvement is seen more rapidly in the initial period of an engagement, as we derive benefit from the operational efficiencies and from changes in the geographical mix of our resources.
Research and Development, Patents and Licenses
Our research and development activities involve the development of new software architecture, modules and product offerings in response to an identified market demand. We also expend additional amounts on applied research and software development activities to keep abreast of new technologies in the communications and media markets and to provide new and enhanced functionality to our existing product offerings. We leverage leading-edge development technologies and associated technologies, for example, DevOps, Continuous Integration/Continuous Development (CI/CD) and Agile, to ensure we are able to develop and deliver our solutions efficiently and cost-effectively.
Substantially all of our research and development expenditures are directed at our solutions. In recent years, we have also invested our research and development efforts in network control, optimization and orchestration and network functions virtualization technologies; applications to enable service providers to deploy and monetize technologies such as fiber, LTE, 5G, small cells and
Wi-Fi;
big data analytics and intelligence capabilities leveraging natural language processing and artificial intelligence toward consumer and business satisfaction, marketing effectiveness and network operations and experience; increased focus for the business segment, digital, commerce and entertainment domains, platforms for processing, distributing and monetizing content globally and on foundational technologies including microservices and cloud infrastructure readiness. We believe that our research and development efforts are a key element of our strategy and are essential to our success. However, an increase or a decrease in our total revenue would not necessarily result in a proportional increase or decrease in the levels of our research and development expenditures, which could affect our operating margin.
Our products are largely comprised of software and systems that we have developed or acquired and that we regard as proprietary. In recent years, we have invested in adopting open source components in an effort to reduce total cost of ownership for our customers, but our software and software systems remain the results of long, robust and intensive development processes. Although our technology is not significantly dependent on patents or licenses from third parties, certain aspects of our products continue to make use of software components licensed from third parties. As a developer of complex software systems, third parties may claim that portions of our systems infringe their intellectual property rights. The ability to develop and use our software and software systems requires knowledge and professional experience that we believe would be very difficult for others to independently obtain. However, our competitors may independently develop technologies that are substantially equivalent or superior to ours. We have taken, and intend to continue to take, several measures to
 
31

establish and protect our proprietary rights in our products and technologies from third-party infringement. We rely upon a combination of trademarks, patents, contractual rights, trade secret law, copyrights and
non-disclosure
agreements. We enter into
non-disclosure
and confidentiality agreements with our customers, employees and marketing representatives and with certain contractors with access to sensitive information; and we also limit customer access to the source code of our software and software systems.
Operating Results
The following table sets forth for the fiscal years ended September 30, 2021, 2020 and 2019, certain items in our consolidated statements of income reflected as a percentage of revenue (figures may not sum because of rounding):
 
    
Year Ended September 30,
 
    
  2021  
   
  2020  
   
  2019  
 
Revenue
     100     100     100
Operating expenses:
      
Cost of revenue
     65.5       66.1       64.9  
Research and development
     7.3       6.8       6.7  
Selling, general and administrative
     11.4       11.0       12.1  
Amortization of purchased intangible assets and other
     1.8       1.9       2.4  
  
 
 
   
 
 
   
 
 
 
     86.0       85.7       86.1  
  
 
 
   
 
 
   
 
 
 
Operating income
     14.0       14.3       13.9  
Interest and other expense, net
     (0.3     (0.3     (0.0
Gain from sale of a business
     5.3       —         —    
  
 
 
   
 
 
   
 
 
 
Income before income taxes
     19.0       14.0       13.9  
Income taxes
     2.9       2.1       2.2  
  
 
 
   
 
 
   
 
 
 
Net income
     16.1     11.9     11.7
  
 
 
   
 
 
   
 
 
 
Fiscal Years Ended September 30, 2021 and 2020
The following is a tabular presentation of our results of operations for the fiscal year ended September 30, 2021, compared to the fiscal year ended September 30, 2020. Following the table is a discussion and analysis of our business and results of operations for these fiscal years.
 
    
Year Ended September 30,
    
Increase (Decrease)
 
    
2021
    
2020
    
Amount
    
%
 
    
(In thousands)
 
Revenue
   $ 4,288,640      $ 4,169,039      $ 119,601        2.9
Operating expenses:
           
Cost of revenue
     2,810,967        2,755,563        55,404        2.0  
Research and development
     312,941        282,042        30,899        11.0  
Selling, general and administrative
     487,255        458,539        28,716        6.3  
Amortization of purchased intangible assets and other
     78,784        78,137        647        0.8  
  
 
 
    
 
 
    
 
 
    
     3,689,947        3,574,281        115,666        3.2  
  
 
 
    
 
 
    
 
 
    
Operating income
     598,693        594,758        3,935        0.7  
Interest and other expense, net
     (10,797      (11,436      639        (5.6
Gain from sale of a business
     226,410        —          226,410        100.0  
  
 
 
    
 
 
    
 
 
    
Income before income taxes
     814,306        583,322        230,984        39.6  
Income taxes
     125,932        85,482        40,450        47.3  
  
 
 
    
 
 
    
 
 
    
Net income
   $ 688,374      $ 497,840      $ 190,534        38.3
  
 
 
    
 
 
    
 
 
    
 
32

Revenue
.
Revenue increased by $119.6 million, or 2.9%, to $4,288.6 million in fiscal year 2021, from $4,169.0 million in fiscal year 2020. The increase in revenue was attributable mainly to managed services arrangements, including managed transformation activities. Revenue for fiscal year 2021 increased by 2.9% compared to fiscal year ended September 30, 2020, including approximately 1.1% positive foreign exchange fluctuations impact and was positively affected by activities related to recently completed acquisitions and negatively affected by a decrease in revenue as a result of the divestiture of OpenMarket completed on December 31, 2020.
In fiscal year 2021, revenue from customers in North America, Europe and the rest of the world accounted for 65.1%, 14.5% and 20.4%, respectively, of total revenue, compared to 65.3%, 14.7% and 20.0%, respectively, in fiscal year 2020. Revenue from customers in North America increased in fiscal year 2021, while total revenue increased at a slightly higher rate, which resulted in a decrease in revenue from customers in North America as a percentage of total revenue. The increase in revenue from customers in North America in absolute amount was primarily attributable to higher revenue from managed services arrangements from key customers in North America and to a lesser extent to activities related to recently completed acquisitions, which was partially offset by the divestiture of OpenMarket completed on December 31, 2020.
Revenue from customers in Europe increased in fiscal year 2021 while total revenue increased at a slightly higher rate, which resulted in a decrease in revenue from customers in Europe as a percentage of total revenue and was positively affected by foreign exchange fluctuations impact. The increase in revenue from customers in Europe was primarily attributable to higher revenue from development and modernization activities while we expand our presence in this region, and partially offset by the divestiture of OpenMarket completed on December 31, 2020.
Revenue from customers in the rest of the world in Asia-Pacific increased in fiscal year 2021. The increase was attributable to wide number of customers and activities within this region and was partially offset by the activities in other regions within the rest of the world.
Cost of Revenue
.
Cost of revenue consists primarily of costs associated with providing services to customers, including compensation expense and costs of third-party products, as well as fee and royalty payments to software suppliers. Cost of revenue increased by $55.4 million, or 2.0%, to $2,811.0 million in fiscal year 2021, from $2,755.6 million in fiscal year 2020. The cost of revenue as a percentage of revenue decreased to 65.5% in fiscal year 2021 from 66.1% in fiscal year 2020. This decrease in cost of revenue as a percentage of revenue was attributable to operational excellence initiatives through automation and new methodologies, as well as the divestiture of OpenMarket completed on December 31, 2020, as OpenMarket’s cost of revenue as a percentage of revenue was higher than the Company average. This decrease was partially offset by the impact of changes of certain acquisition-related liabilities measured at fair value recognized in fiscal year 2021.
Research and Development
.
Research and development expense is primarily comprised of compensation expense. Research and development expense increased by $30.9 million, or 11.0%, to $312.9 million in fiscal year 2021, from $282.0 million in fiscal year 2020. Research and development expense increased as a percentage of revenue from 6.8% in fiscal year 2020, to 7.3% in fiscal year 2021, as we accelerated our investment in our cloud offerings, 5G and network related innovation and further developing our digital offerings. Our research and development efforts are a key element of our strategy and are essential to our success, and we intend to maintain our commitment to research and development. However, increase or a decrease in our revenue would not necessarily result in a proportional increase or decrease in the levels of our research and development expenditures, which could affect our operating margin. Please see “Research and Development, Patents and Licenses.”
Selling, General and Administrative
.
Selling, general and administrative expense, which is primarily comprised of compensation expense, increased by $28.7 million, or 6.3%, to $487.3 million in fiscal year 2021, from $458.5 million in fiscal year 2020. The increase was primarily attributable to recent completed acquisitions
 
33

and was also attributable to sales and marketing efforts, which were partially offset by lower travel costs as a result of the
COVID-19
restrictions. Selling, general and administrative expense may fluctuate from time to time, depending upon such factors as changes in our workforce and sales efforts and the results of any operational efficiency programs that we may undertake.
Amortization of Purchased Intangible Assets and Other
.
Amortization of purchased intangible assets and other slightly increased by $0.6 million, or 0.8%, to $78.8 million in fiscal year 2021, from $78.1 million in fiscal year 2020. The slight increase in amortization of purchased intangible assets and other was primarily attributable to an increase in amortization of intangible assets due to recently completed acquisitions, and partially offset by the completion of amortization of previously purchased intangible assets.
Operating Income
.
Operating income increased by $3.9 million, or 0.7%, to $598.7 million in fiscal year 2021, from $594.8 million in fiscal year 2020. Operating income decreased as a percentage of revenue, from 14.3% in fiscal year 2020 to 14.0% in fiscal year 2021. The decrease in operating income as a percentage of revenue was attributable primarily to the increase in research and development expense, increase inselling, general and administrative expense and changes in certain acquisition-related liabilities measured at fair value, partially offset by operational excellence initiatives and by the divestiture of OpenMarket completed on December 31, 2020, in fiscal year 2021. The impact of foreign exchange fluctuations on our operating income in fiscal year 2021 relative to fiscal year 2020, was immaterial.
Interest and Other Expense, Net
.
Interest and other expense, net, decreased from a net expense of $11.4 million in fiscal year 2020 to a net expense of $10.8 million in fiscal year 2021. The decrease in interest and other expense, net, was primarily attributable to changes of minority equity investments measured at fair value in fiscal 2021 compared to fiscal year 2020 and foreign exchange impacts, and partially offset by expenses related to financing activities.
Gain from sale of a business.
Gain from sale of a business, for fiscal year 2021, was $226.4 million, while there was no such gain in fiscal year 2020. Please see Note 3 to our consolidated financial statements.
Income Taxes
.
Income taxes for fiscal year 2021 were $125.9 million on
pre-tax
income of $814.3 million, resulting in an effective tax rate of 15.5%, compared to 14.7% in fiscal year 2020. Absent the gain from sale of a business, the effective tax rate for fiscal year 2021, would have been 14.7%. Our effective tax rate may fluctuate between periods as a result of discrete items that may affect a particular period. Please see Note 10 to our consolidated financial statements.
Net Income
.
Net income increased by $190.5 million, or 38.3%, to $688.4 million in fiscal year 2021, from $497.8 million in fiscal year 2020. The increase in net income was primarily attributable to the gain from sale of a business, net of tax.
Diluted Earnings Per Share
.
Diluted earnings per share increased by $1.61, or 43.4%, to $5.32 in fiscal year 2021, from $3.71 in fiscal year 2020. The increase in diluted earnings per share was primarily attributable to the gain from sale of a business, net of tax, which increased the diluted earnings per share for fiscal year 2021 by $1.44, and, to a lesser extent to the decrease in the diluted weighted average number of shares outstanding which resulted from share repurchases. Please see also Note 20 to our consolidated financial statements.
 
34

Fiscal Years Ended September 30, 2020 and 2019
The following is a tabular presentation of our results of operations for the fiscal year ended September 30, 2020, compared to the fiscal year ended September 30, 2019. Following the table is a discussion and analysis of our business and results of operations for these fiscal years.
 
    
Year Ended September 30,
    
Increase (Decrease)
 
    
2020
    
2019
    
Amount
   
%
 
    
(In thousands)
 
Revenue
   $ 4,169,039      $ 4,086,669      $ 82,370       2.0
Operating expenses:
          
Cost of revenue
     2,755,563        2,653,172        102,391       3.9  
Research and development
     282,042        273,936        8,106       3.0  
Selling, general and administrative
     458,539        492,457        (33,918     (6.9
Amortization of purchased intangible assets and other
     78,137        97,358        (19,221     (19.7
  
 
 
    
 
 
    
 
 
   
     3,574,281        3,516,923        57,358       1.6  
  
 
 
    
 
 
    
 
 
   
Operating income
     594,758        569,746        25,012       4.4  
Interest and other expense, net
     11,436        1,859        9,577       515.2  
  
 
 
    
 
 
    
 
 
   
Income before income taxes
     583,322        567,887        15,435       2.7  
Income taxes
     85,482        88,441        (2,959     (3.3
  
 
 
    
 
 
    
 
 
   
Net income
   $ 497,840      $ 479,446      $ 18,394       3.8
  
 
 
    
 
 
    
 
 
   
Revenue
.
Revenue increased by $82.4 million, or 2.0%, to $4,169.0 million in fiscal year 2020, from $4,086.7 million in fiscal year 2019. The increase in revenue was attributable mainly to managed services arrangements, including managed transformation activities. Revenue for the year ended September 30, 2020 increased by 2.4% compared to fiscal year ended September 30, 2019, excluding approximately 0.4% negative foreign exchange fluctuations impact, and was also positively affected by activities related to acquisitions completed in fiscal year 2019 and to a lesser extent, acquisitions completed in fiscal year 2020.
In fiscal year 2020, revenue from customers in North America, Europe and the rest of the world accounted for 65.3%, 14.7% and 20.0%, respectively, of total revenue, compared to 63.2%, 14.7% and 22.1%, respectively, in fiscal year 2019. The increase in revenue in fiscal year 2020 in North America was primarily attributable to higher revenue from managed services activities. Having said that, we note that in addition to the global uncertainties, including those resulting from the
COVID-19
pandemic, the recently completed
T-Mobile
and Sprint merger remains a source of uncertainty in the North America region.
Revenue from customers in Europe increased in fiscal year 2020, despite negative foreign exchange fluctuations, primarily as a result of higher revenue from development and modernization activities while we expand our presence in this region.
Revenue from customers in the rest of the world decreased in fiscal year 2020, which is attributable to an increase in revenue from customers in Asia-Pacific, as a result of our expansion and progress of managed transformation activities, which was more than offset by lower revenue from other regions within the rest of the world region, as well as negative foreign exchange fluctuations impact.
Cost of Revenue
.
Cost of revenue consists primarily of costs associated with providing services to customers, including compensation expense and costs of third-party products, as well as fee and royalty payments to software suppliers. Cost of revenue increased by $102.4 million, or 3.9%, to $2,755.6 million in fiscal year 2020, from $2,653.2 million in fiscal year 2019. As a percentage of revenue, cost of revenue increased to 66.1% in fiscal year 2020 from 64.9% in fiscal year 2019, mainly due to investments required to support
ramp-up
of new deals.
 
35

Research and Development
.
Research and development expense is primarily comprised of compensation expense. Research and development expense increased by $8.1 million, or 3.0%, to $282.0 million in fiscal year 2020, from $273.9 million in fiscal year 2019. Research and development expense increased as a percentage of revenue from 6.7% in fiscal year 2019, to 6.8% in fiscal year 2020. We continue to invest in our cloud offering, 5G and network related innovation and developing our digital offerings as well as our media offerings. Our research and development efforts are a key element of our strategy and are essential to our success, and we intend to maintain our commitment to research and development. An increase or a decrease in our revenue would not necessarily result in a proportional increase or decrease in the levels of our research and development expenditures, which could affect our operating margin. Please see “Research and Development, Patents and Licenses.”
Selling, General and Administrative
.
Selling, general and administrative expense, which is primarily comprised of compensation expense, decreased by $33.9 million, or 6.9%, to $458.5 million in fiscal year 2020, from $492.5 million in fiscal year 2019. The decrease was mainly due to lower travel and selling and marketing costs in fiscal year 2020 compared to fiscal year 2019 as a result of the
COVID-19
restrictions and was also attributable to decrease in the account receivable allowances. Selling, general and administrative expense may fluctuate from time to time, depending upon such factors as changes in our workforce and sales efforts and the results of any operational efficiency programs that we may undertake.
Amortization of Purchased Intangible Assets and Other
.
Amortization of purchased intangible assets and other decreased by $19.2 million, or 19.7%, to $78.1 million in fiscal year 2020, from $97.4 million in fiscal year 2019. The decrease in amortization of purchased intangible assets and other was primarily attributable to a completion of amortization of previously purchased intangible assets, partially offset by an increase in amortization of intangible assets due to acquisitions completed in fiscal years 2020 and 2019.
Operating Income
.
Operating income increased by $25.0 million, or 4.4%, to $594.8 million in fiscal year 2020, from $569.7 million in fiscal year 2019. Operating income increased as a percentage of revenue, from 13.9% in fiscal year 2019 to 14.3% in fiscal year 2020. The increase in operating income was attributable primarily to the increase in revenue and the decrease in selling, general and administrative and amortization of purchased intangible assets and other, partially offset by the increase in cost of service in fiscal year 2020. Positive foreign exchange impacts on our operating expenses were partially offset by the negative foreign exchange impacts on our revenue, resulting in a positive impact on our operating income.
Interest and Other Expense, Net
.
Interest and other expense, net, changed from a net expenses of $1.9 million in fiscal year 2019 to a net expenses of $11.4 million in fiscal year 2020. The increase in interest and other expense, net, was primarily attributable to an increase in interest expenses related to financing activities and to the changes of minority equity investments recorded in fiscal year 2019 compared to fiscal year 2020, partially offset by foreign exchange impacts.
Income Taxes
.
Income taxes for fiscal year 2020 were $85.5 million on
pre-tax
income of $583.3 million, resulting in an effective tax rate of 14.7%, compared to 15.6% in fiscal year 2019. Our effective tax rate may fluctuate between periods as a result of discrete items that may affect a particular period. Please see Note 10 to our consolidated financial statements.
Net Income
.
Net income increased by $18.4 million, or 3.8%, to $497.8 million in fiscal year 2020, from $479.4 million in fiscal year 2019. The increase in net income was primarily attributable to the increase in operating income partially offset by an increase in interest and other expenses, net.
Diluted Earnings Per Share
.
Diluted earnings per share increased by $0.24, or 6.9%, to $3.71 in fiscal year 2020, from $3.47 in fiscal year 2019. The increase in diluted earnings per share was primarily attributable to the increase in net income as well as to the decrease in the diluted weighted average number of shares outstanding which resulted from share repurchases. Please see also Note 20 to our consolidated financial statements.
 
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Liquidity and Capital Resources
Cash, Cash Equivalents and Short-Term Interest-Bearing Investments.
Cash, cash equivalents and short-term interest-bearing investments, totaled $965.6 million as of September 30, 2021, compared to $983.9 million as of September 30, 2020. The decrease was mainly attributable to $680.0 million used to repurchase of our ordinary shares, $210.4 million for capital expenditures, net, $177.5 million of cash dividend payment, $142.7 million of payments for business and intangible assets acquisitions and $100.0 million payments under financing arrangement, partially offset by $925.8 million in positive cash flow from operations, reflecting healthy cash collections and the cash benefit of a multi-year strategic partnership agreement with
T-Mobile,
$289.0 million cash received from sale of a business and $89.1 million of proceeds from stock option exercises. Net cash provided by operating activities amounted to $925.8 million and $658.1 in fiscal years 2021 and 2020, respectively.
Our free cash flow for fiscal year 2021, was $715.4 million, and is calculated as net cash provided by operating activities of $925.8 million for the period less $210.4 million for capital expenditures, net (which included capital expenditures of $100.7 million as part of our investment in our new campus in Israel).
Free cash flow is a
non-GAAP
financial measure and is not prepared in accordance with, and is not an alternative for, generally accepted accounting principles and may be different from
non-GAAP
financial measures with similar names used by other companies.
Non-GAAP
measures such as free cash flow should only be reviewed in conjunction with the corresponding GAAP measures. We believe that free cash flow, when used in conjunction with the corresponding GAAP measure provides useful information to investors and management relating to the amount of cash generated by the Company’s business operations.
We believe that our current cash balances, cash generated from operations, our current lines of credit, loans, Senior Notes and our ability to access capital markets will provide sufficient resources to meet our operational needs, fund the construction of the new campus in Israel, loan and debt repayment needs, fund share repurchases and the payment of cash dividends for at least the next fiscal year.
We have short-term interest-bearing investments comprised of marketable securities and bank deposits. We classify all of our marketable securities as
available-for-sale
securities. Such marketable securities consist primarily of money market funds, corporate bonds and U.S. government treasuries, which are stated at market value. We believe we have conservative investment policy guidelines. Our interest-bearing investments are stated at fair value with the unrealized gains or losses reported as a separate component of accumulated other comprehensive income (loss), net of tax, unless a security is impaired due to a credit loss, in which case the loss is recorded in the consolidated statements of income. Our interest-bearing investments are priced by pricing vendors and are classified as Level 1 or Level 2 investments, since these vendors either provide a quoted market price in an active market or use other observable inputs to price these securities. During fiscal years 2021 and 2020 we did not recognize credit losses. Please see Notes 5 and 6 to our consolidated financial statements.
Revolving Credit Facility, Loans, Senior Notes, Letters of Credit, Guarantees and Contractual Obligations.
In December 2011, we entered into the unsecured $500.0 million Revolving Credit Facility. In December 2014, December 2017 and March 2021, the Revolving Credit Facility was amended and restated to, among other things, extend the maturity date of the facility to December 2019, December 2022 and March 2026, respectively. As of September 30, 2021, we were in compliance with the financial covenants and had no outstanding borrowings under the Revolving Credit Facility.
In June 2020, we issued an aggregate principal amount of $650.0 million in Senior Notes that will mature in June 2030 and bear interest at a fixed rate of 2.538 percent per annum (the “Senior Notes”). The interest is payable semi-annually in June and December of each year, commencing in December 2020. We incurred issuance costs of $6.1 million in relation to the Senior Notes, which are being amortized to interest expenses over the term of the Senior Notes using the effective interest rate. The Senior Notes are our senior unsecured
 
37

obligations and rank equally in right of payment with all of our existing and future senior indebtedness, including any indebtedness we may incur from time to time under the Revolving Credit Facility. As of September 30, 2021, the noncurrent outstanding principal portion was $650.0 million. Please see Note 12 to our consolidated financial statements.
As of September 30, 2021, we had additional uncommitted lines of credit available for general corporate and other specific purposes and had outstanding letters of credit and bank guarantees from various banks totaling $78.1 million. These were supported by a combination of the uncommitted lines of credit that we maintain with various banks.
Acquisitions and Divestiture of Subsidiaries.
During fiscal year 2021, we acquired three immaterial technology companies, for an aggregate net consideration of $101.9 million in cash, and additional contingent consideration subject to the achievement of certain performance metrics. Among them the largest of the three is Sourced, a leading global technology consultancy specializing in large-scale cloud transformations for sophisticated,
high-end
enterprise customers in different industries such as communications, financial services and others. On December 31, 2020, we completed the divestiture of OpenMarket for approximately $300.0 million in cash. Please see Note 3 to our consolidated financial statements.
During fiscal year 2020, we acquired three companies and other intangible assets for an aggregate net consideration of approximately $280.8 million, among them the largest of the three is Openet, which offers cloud-native capabilities, network pedigree, and deep 5G charging, policy and data management expertise and whose solutions complement the Amdocs portfolio.
Capital Expenditures.
Generally, 80% to 90% of our capital expenditures (excluding the investment in our new campus in Israel) consist of purchases of computer equipment, and the remainder is attributable mainly to leasehold improvements. Our capital expenditures were approximately $210.4 million in fiscal year 2021, net (which included capital expenditures of $100.7 million as part of our investment in our new campus in Israel). Our fiscal year 2021 capital expenditures were mainly attributable to investments in our operating facilities and our development centers around the world. Regarding our expected investment in our new campus in Israel. Please see Note 2 to our consolidated financial statements.
Share Repurchases.
From time to time, our Board of Directors can adopt share repurchase plans authorizing the repurchase of our outstanding ordinary shares. On November 12, 2019, our Board of Directors adopted a share repurchase plan for the repurchase of up to $800.0 million of our outstanding ordinary shares with no expiration date. The November 2019 plan permitted us to purchase our ordinary shares in the open market or through privately negotiated transactions at times and prices that we consider appropriate. On May 12, 2021, our Board of Directors adopted another share repurchase plan authorizing the repurchase of up to an additional $1.0 billion of our outstanding ordinary shares with no expiration date. The May 2021 plan has no expiration date and permits us to purchase our ordinary shares in the open market or through privately negotiated transactions at times and prices that we consider appropriate. In September 2021, we completed the repurchase of the remaining authorized amount of ordinary shares under the November 2019 plan and initiated repurchases of our outstanding ordinary shares pursuant to the May 2021 plan. In fiscal year 2021, we repurchased approximately 9.0 million ordinary shares at an average price of $75.24 per share (excluding broker and transaction fees). As of September 30, 2021, we had remaining authority to repurchase up to $998.5 million of our outstanding ordinary shares under the May 2021 plan.
 
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Cash Dividends.
Our Board of Directors declared the following dividends during fiscal years 2021, 2020 and 2019:
 
Declaration Date
  
Dividends Per
Ordinary Share
    
Record Date
  
Total Amount
(In millions)
    

Payment Date
 
August 4, 2021
   $ 0.36      September 30, 2021    $ 45.0      October 29, 2021
May 12, 2021
   $ 0.36      June 30, 2021    $ 45.6      July 23, 2021
February 2, 2021
   $ 0.36      March 31, 2021    $ 46.0      April 23, 2021
November 10, 2020
   $ 0.3275      December 31, 2020    $ 42.9      January 22, 2021
 
August 5, 2020
   $ 0.3275      September 30, 2020    $ 43.1      October 23, 2020
May 7, 2020
   $ 0.3275      June 30, 2020    $ 43.6      July 24, 2020
February 4, 2020
   $ 0.3275      March 31, 2020    $ 43.7      April 24, 2020
November 12, 2019
   $ 0.285      December 31, 2019    $ 38.4      January 24, 2020
 
August 7, 2019
   $ 0.285      September 30, 2019    $ 38.4      October 25, 2019
May 14, 2019
   $ 0.285      June 28, 2019    $ 38.7      July 19, 2019
February 5, 2019
   $ 0.285      March 29, 2019    $ 39.1      April 19, 2019
November 8, 2018
   $ 0.250      December 31, 2018    $ 34.8      January 18, 2019
 
On November 2, 2021, our Board of Directors approved a quarterly dividend payment of $0.36 per share and set December 31, 2021 as the record date for determining the shareholders entitled to receive the dividend, which is payable on January 28, 2022. On November 2, 2021 our Board of Directors also approved, subject to shareholder approval at the January 2022 annual general meeting of shareholders, an increase in the quarterly cash dividend to $0.395 per share, anticipated to be paid in April 2022.
Our Board of Directors considers on a quarterly basis whether to declare and pay, if any, a dividend in accordance with the terms of the dividend program, subject to applicable Guernsey law and based on several factors including our financial performance, outlook and liquidity. Guernsey law requires that our Board of Directors consider a dividend’s effects on our solvency before it may be declared or paid. While the Board of Directors will have the authority to reduce the quarterly dividend or discontinue the dividend program should it determine that doing so is in the best interests of our shareholders or is necessary pursuant to Guernsey law, any increase to the per share amount or frequency of the dividend would require shareholder approval.
Contractual Obligations
The following table summarizes our contractual obligations as of September 30, 2021, and the effect such obligations are expected to have on our liquidity and cash flows in future periods (in millions):
 
    
Payments Due by Period
 
Contractual Obligations
  
Total
    
Less Than
1 Year
    
1-3

Years
    
4-5

Years
    
More Than
5 Years
 
Long-term debt and accrued interests
   $ 654.8      $ 4.8        —          —        $  650.0  
Pension funding
     11.5        1.2        3.5        2.3        4.5  
Purchase obligations
     126.5        66.4        60.1        —          —    
Non-cancelable
operating leases
     282.6        66.8        78.7        51.0        86.1  
Construction of the new campus (see below)
     131.0        131.0        —          —          —    
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $  1,206.4      $  270.2      $ 142.3      $  53.3      $ 740.6  
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
As discussed in Note 2 to our consolidated financial statements, we purchased specific land to use as the future site of the new campus in Ra’anana, Israel and we are obligated to construct the campus. The total net investment we expect to make in connection with the construction of the new campus is estimated to be up to $350 million over a period of five years, starting with fiscal year 2018, out of which approximately $96 million
 
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was incurred in fiscal years 2018 by both us and our partner Union at equal portions (i.e. our net investment was approximately $48 million), $7 million was incurred by us in fiscal year 2019, $63 million was incurred by us in fiscal year 2020 and $101 million was incurred by us in fiscal year 2021. Please see Note 2 to our consolidated financial statements.
The total amount of unrecognized tax benefits for uncertain tax positions was $195.2 million as of September 30, 2021. Payment of these obligations would result from settlements with taxing authorities. Due to the difficulty in determining the timing of resolution of audits, these obligations are not included in the above table.
Deferred Tax Asset Valuation Allowance
As of September 30, 2021, we had deferred tax assets of $65.6 million, which were offset by valuation allowances due to the uncertainty of realizing any tax benefit for such credits and losses. These deferred tax assets derived primarily from tax credits, net capital and operating loss carryforwards related to some of our subsidiaries, please see Note 10.
Critical Accounting Policies
Our discussion and analysis of our consolidated financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of these financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosure of contingent liabilities. On a regular basis, we evaluate and may revise our estimates. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent. Actual results could differ materially from the estimates under different assumptions or conditions.
We believe that the estimates, assumptions and judgments involved in the accounting policies described in Note 2 “Summary of Significant Accounting Policies” and below have the greatest potential impact on our financial statements, so we consider these to be our critical accounting policies. These policies require that we make estimates in the preparation of our financial statements as of a given date. Our critical accounting policies are as follows:
 
   
Revenue recognition and contract accounting
 
   
Tax accounting
 
   
Business combinations
 
   
Goodwill, intangible assets and long-lived assets-impairment assessment
 
   
Derivative and hedge accounting
 
   
Accounts receivable reserves
We discuss these policies further below, as well as the estimates and judgments involved. We also have other key accounting policies. We believe that, compared to the critical accounting policies listed above, the other policies either do not generally require us to make estimates and judgments that are as difficult or as subjective, or it is less likely that they would have a material impact on our reported consolidated results of operations for a given period.
 
40

Revenue Recognition and Contract Accounting
We follow very specific and detailed guidelines, which are discussed in Note 2 to our consolidated financial statements , in measuring revenue; however, certain judgments affect the application of our revenue recognition policy:
 
   
We evaluate contracts entered into at or near the same time with the same customer (or related parties of the customer) and determine if the contracts should be combined in accordance with the guidance for revenue recognition.
 
   
A significant portion of our revenue is recognized over the course of implementation and integration projects, usually based on a percentage that incurred labor effort to date bears to total projected labor effort. The recognition of revenue over time requires the exercise of judgment on a quarterly basis, such as with respect to estimates of
progress-to-completion,
contract revenue, loss contracts and contract costs. Progress in completing such projects may significantly affect our annual and quarterly operating results.
 
   
Our revenue recognition policy takes into consideration the creditworthiness and past transaction history of each customer in determining the probability of collection. This determination requires the exercise of judgment, which affects our revenue recognition. If we determine that a fee is not collectible, we exclude the relevant fee from transaction price.
 
   
Many of our agreements include multiple performance obligations. We allocate the transaction price for each contract to each performance obligation identified in the contract based on the relative standalone selling price (SSP). We determine SSP for the purposes of allocating the transaction price to each performance obligation by considering several external and internal factors including, but not limited to, transactions where the specific performance obligation sold separately, historical actual pricing practices and geographies in which we offer our services in accordance with ASC 606. The determination of SSP requires the exercise of judgement.
 
   
For transactions which involve third-party hardware, software and services, the determination of revenue recognition based on the gross amount or on a net basis requires the exercise of judgment in considering whether we control the third-party hardware, software or services prior to fulfilling the performance obligation.
Tax Accounting
As part of the process of preparing our consolidated financial statements, we are required to estimate our income tax expense in each of the jurisdictions in which we operate. In the ordinary course of a global business, there are many transactions and calculations where the ultimate tax outcome is uncertain. Some of these uncertainties arise as a consequence of revenue sharing and reimbursement arrangements among related entities, the process of identifying items of revenue and expenses that qualify for preferential tax treatment and segregation of foreign and domestic income and expense to avoid double taxation. We also assess temporary differences resulting from differing treatment of items, such as deferred revenue, for tax and accounting differences. These differences result in deferred tax assets and liabilities, which are included within our consolidated balance sheet.
We apply an estimated annual effective tax rate to our quarterly operating results to determine the interim provision for income tax expense. A change in judgment that impacts the measurement of a tax position taken in a prior year is recognized as a discrete item in the interim period in which the change occurs. In the event there is a significant unusual or infrequent item recognized in our quarterly operating results, the tax attributable to that item is recorded in the interim period in which it occurs
A valuation allowance is provided for the respective part of the deferred tax assets for which it is more likely than not that, we will not be able to realize its benefit. In assessing the realizability of deferred tax assets,
 
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we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized and adjust the valuation allowances accordingly. Factors considered in making this determination include the period of expiration of the tax asset, planned use of the tax asset, tax planning strategies and historical and projected taxable income as well as tax liabilities for the tax jurisdiction in which the tax asset is located. Valuation allowances will be subject to change in each future reporting period as a result of changes in one or more of these factors.
Although we believe that our estimates are reasonable in estimating our tax outcome and in assessing the need for the valuation allowance, there is no assurance that the final tax outcome and the valuation allowance will not be different than those that are reflected in our historical income tax provisions and accruals. Such differences could have a material effect on our income tax provision, net income and cash balances in the period in which such determination is made.
Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes. Although we believe our reserves are reasonable, no assurance can be given that the final tax outcome of these matters will not be different from that which is reflected in our historical income tax provisions and accruals. We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit, or changes in tax law. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made. The provision for income taxes includes the effect of reserve provisions and changes to reserves that are considered appropriate.
We have filed or are in the process of filing tax returns that are subject to audit by the respective tax authorities. Although the ultimate outcome is unknown, we believe that any adjustments that may result from tax return audits are not likely to have a material, adverse effect on our consolidated results of operations, financial condition or cash flows.
Business Combinations
Accounting for business combinations requires us to make significant estimates and assumptions, especially at the acquisition date with respect to tangible and intangible assets acquired and liabilities. In accordance with business combinations accounting, assets acquired and liabilities assumed, as well as any contingent consideration that may be part of the acquisition agreement, are recorded at their respective fair values at the date of acquisition. Such fair value valuations require management to make significant estimates and assumptions, especially with respect to intangible assets, as a result, we obtain the assistance of independent valuation firms. We complete these assessments as soon as practical after the closing dates. Any excess of the purchase price over the estimated fair values of the identifiable net assets acquired is recorded as goodwill.
For acquisitions that include contingent consideration, the fair value is estimated on the acquisition date as the present value of the expected contingent payments, determined using weighted probabilities of possible payments. We remeasure the fair value of the contingent consideration at each reporting period until the contingency is resolved. Except for measurement period adjustments, the changes in fair value are recognized in the consolidated statements of income. We consider several factors when determining that contingent consideration liabilities are part of the purchase price, such as the following: the valuation of the acquisitions is not supported solely by the initial consideration paid, and the contingent consideration payments are not affected by employment termination.
Although we believe the assumptions and estimates of fair value we have made in the past have been reasonable and appropriate, they are based in part on historical experience and information obtained from the management of the acquired companies and are inherently uncertain and subject to refinement. Critical estimates in valuing certain assets acquired and liabilities assumed include but are not limited to: future expected cash flows from license and service sales, maintenance, customer contracts and acquired developed technologies,
 
42

expected costs to develop the
in-process
research and development into commercially viable products and estimated cash flows from the projects when completed and the acquired company’s brand awareness and discount rate. Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill, if the changes are related to conditions that existed at the time of the acquisition. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments, based on events that occurred subsequent to the acquisition date, are recorded in our consolidated statements of income.
We estimate the fair values of our services, hardware, software license and maintenance obligations assumed. The estimated fair values of these performance obligations are determined utilizing a cost
build-up
approach. The cost
build-up
approach determines fair value by estimating the costs related to fulfilling the obligations plus a normal profit margin.
As discussed above under “Tax Accounting”, we may establish a valuation allowance for certain deferred tax assets and estimate the value of uncertain tax positions of a newly acquired entity. This process requires significant judgment and analysis.
Goodwill, Intangible Assets and Long-Lived Assets — Impairment Assessment
Goodwill is subject to periodic impairment tests, which are performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Please see Note 3 to our consolidated financial statements. We perform an annual goodwill impairment test during the fourth quarter of each fiscal year, or more frequently if impairment indicators are present. We operate in one operating segment, and this segment comprises our only reporting unit. In calculating the fair value of the reporting unit, we used our market capitalization and a discounted cash flow methodology. There was no impairment of goodwill in fiscal years 2021, 2020 or 2019.
We test long-lived assets, including definite life intangible assets, for impairment in the event an indication of impairment exists. Impairment indicators include any significant changes in the manner of our use of the assets or the strategy of our overall business, significant negative industry or economic trends and significant decline in our share price for a sustained period. If the sum of undiscounted future cash flows resulting from the use of the cash generating unit and its eventual disposition is less than the carrying amount of such assets, an impairment would be recognized, and the assets would be written down to their estimated fair values, based on expected future discounted cash flows. There was no impairment of long-lived assets in fiscal years 2021, 2020 or 2019.
Derivative and Hedge Accounting
During fiscal years 2021, 2020 and 2019, approximately 70% to 80% of our revenue and 50% to 60% of our operating expenses were denominated in U.S. dollars or linked to the U.S. dollar. We enter into foreign exchange forward contracts and options to hedge a significant portion of our foreign currency net exposure resulting from revenue and expense in major foreign currencies in which we operate, in order to reduce the impact of foreign currency on our results. We also enter into foreign exchange forward contracts and options to reduce the impact of foreign currency on balance sheet items. We estimate the fair value of such derivative contracts by reference to forward and spot rates quoted in active markets.
Establishing and accounting for foreign exchange contracts involve judgments, such as determining the fair value of the contracts, determining the nature of the exposure, assessing its amount and timing, and evaluating the effectiveness of the hedging arrangement.
 
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Although we believe that our estimates are accurate and meet the requirement of hedge accounting, if actual results differ from these estimates, such difference could cause fluctuation of our recorded revenue and expenses.
Accounts Receivable Reserves
The allowance for doubtful accounts is for estimated losses resulting from accounts receivable and unbilled receivables for which their collection is not reasonably assured. We evaluate accounts receivable to determine if they ultimately will be collected. Significant judgments and estimates are involved in performing this evaluation, which we base on factors that may affect a customer’s ability to pay, such as past experience, credit quality of the customer, age of the receivable balance and current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect its ability to collect from customers. If the fee is not collectible at the time the transaction is consummated, we exclude the relevant fee from the transaction price. The allowance for doubtful accounts, net of credit losses is for expected credit losses resulting from accounts receivable and unbilled receivables for which their collection is not reasonably probable. If we estimate that our customers’ ability and intent to make payments have been impaired, additional allowances may be required.
Within the context of these critical accounting policies, we are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported.
Recent Accounting Standards
Please see Note 2 to our consolidated financial statements.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
Directors and Senior Management
We rely on the executive officers of our principal operating subsidiaries to manage our business. In addition, Amdocs Management Limited, our management subsidiary, performs certain executive coordination functions for all of our operating subsidiaries. As of November 30, 2021, our directors and officers were as follows:
 
Name
 
Age
   
Position
Robert A. Minicucci(1)(2)(3)     69     Chairman of the Board
Adrian Gardner(1)     59     Director and Chairman of the Audit Committee
James S. Kahan(3)     74     Director
Richard T.C. LeFave(1)(2)(3)     69     Director
Giora Yaron(4)     73     Director and Chairman of the Technology and Innovation Committee
Rafael de la Vega(2)     70     Director and Chairman of the Management Resources and Compensation Committee
Eli Gelman(3)(4)     63     Director and Chairman of the Nominating and Corporate Governance Committee
John A. MacDonald(2)(4)     68     Director
Yvette Kanouff(4)     56     Director
Sarah Ruth Davis(1)     54     Director
Shuky Sheffer     61     Director, President and Chief Executive Officer
Tamar Rapaport-Dagim     50     Chief Financial Officer and Chief Operating Officer
Rajat Raheja     51     Division President, Amdocs Development Centre India LLP
Matthew Smith     49     Secretary; Head of Investor Relations
 
(1)
Member of the Audit Committee
(2)
Member of the Management Resources and Compensation Committee
(3)
Member of the Nominating and Corporate Governance Committee
(4)
Member of the Technology and Innovation Committee
 
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Robert A. Minicucci has been Chairman of the Board of Directors of Amdocs since 2011 and a director since 1997. Mr. Minicucci joined Welsh, Carson, Anderson & Stowe, or WCAS, in 1993. Mr. Minicucci has served as a managing member of the general partners of certain funds affiliated with WCAS and has focused on the information and business services industry. Until 2003, investment partnerships affiliated with WCAS had been among our largest shareholders. From 1992 to 1993, Mr. Minicucci served as Senior Vice President and Chief Financial Officer of First Data Corporation, a provider of information processing and related services for credit card and other payment transactions. From 1991 to 1992, he served as Senior Vice President and Treasurer of the American Express Company. He served for 12 years with Lehman Brothers (and its predecessors) until his resignation as a Managing Director in 1991. Mr. Minicucci was a director of one other publicly-held company, Alliance Data Systems, Inc. until June 2020. He is also a director of several private companies. Mr. Minicucci’s career in information technology investing, including as a director of more than 20 different public and private companies, and his experience as chief financial officer to a public company and treasurer of another public company, have provided him with strong business acumen and strategic and financial expertise.
Adrian Gardner has been a director of Amdocs since 1998 and is Chairman of the Audit Committee. Mr. Gardner serves as Chief Operating Officer of Stonehage Fleming Family & Partners Limited, an international Multi-Family Office business, since October 2019. Mr. Gardner has served as a member of the Audit & Risk Committee of Worcester College, Oxford University since May 2017. From 2016 to 2019, Mr. Gardner served as Chief Financial Officer of Ipes Holdings Limited, a provider of outsourced services to private equity firms. From 2014 to September 2016, Mr. Gardner served as Chief Financial Officer of International Personal Finance plc, an international home credit business. Mr. Gardner was Chief Financial Officer and a director of RSM Tenon Group PLC, a London-based accounting and advisory firm from 2011 until the acquisition in 2013 of its operating subsidiaries by Baker Tilly UK Holdings Limited, since renamed RSM UK Limited. Mr. Gardner was Chief Financial Officer of PA Consulting Group, a London-based business consulting firm from 2007 to 2011. Mr. Gardner was Chief Financial Officer and a director of ProStrakan Group plc, a pharmaceuticals company based in the United Kingdom and listed on the London Stock Exchange, from 2002 until 2007. Prior to joining ProStrakan, he was a Managing Director of Lazard LLC, based in London, where he worked with technology and telecommunications-related companies. Prior to joining Lazard in 1989, Mr. Gardner qualified as a chartered accountant with Price Waterhouse (now PricewaterhouseCoopers). Mr. Gardner’s extensive experience as an accountant, technology investment banker and chief financial officer enables him to make valuable contributions to our strategic and financial affairs.
James S. Kahan has been a director of Amdocs since 1998 and previously served as Chairman of the Nominating and Corporate Governance Committee from January 2018 and until November 2021. From 1983 until his retirement in 2007, he worked at SBC Communications Inc., which is now AT&T, and served as a Senior Executive Vice President from 1992 until 2007. AT&T is our most significant customer. Prior to joining AT&T, Mr. Kahan held various positions at several telecommunications companies, including Western Electric, Bell Laboratories, South Central Bell and AT&T Corp. Mr. Kahan also serves on the Board of Directors of Live Nation Entertainment, Inc., a publicly-traded live music and ticketing entity, as well as one private company. Mr. Kahan’s long service at SBC Communications Inc. and AT&T, as well as his management and financial experience at several public and private companies, have provided him with extensive knowledge of the telecommunications industry, particularly with respect to corporate development, mergers and acquisitions and business integration.
Richard T.C. LeFave has been a director of Amdocs since 2011. Since 2008, Mr. LeFave has been a Principal at D&L Partners, LLC, an information technology consulting firm. Mr. LeFave served as Chief Information Officer for Nextel Communications, a telecommunications company, from 1999 until its merger with Sprint Corporation in 2005, after which he served as Chief Information Officer for Sprint Nextel Corporation until 2008. From 1995 to 1999, Mr. LeFave served as Chief Information Officer for Southern New England Telephone Company, a provider of communications products and services. Mr. LeFave has held the CISO position and duties for a U.S.-based manufacturing firm and attended Harvard Business School (“HBS”) courses in Board Compensation and Audit Committee strategies and recently completed his HBS Corporate
 
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Director Certificate. We believe Mr. LeFave’s qualifications to sit on our board include his extensive experience and leadership in the information technology and telecommunications industry.
Giora Yaron has been a director of Amdocs since 2009 and is Chairman of the Technology and Innovation Committee. Dr. Yaron
co-founded
Itamar Medical Ltd., a publicly-traded medical technology company, and has been its
co-chairman
since 1997 and since 2015, served as its chairman. Dr. Yaron provides consulting services to Itamar Medical and to various other technology companies. He
co-founded
P-cube,
Pentacom, Qumranet, Exanet and Comsys, privately-held companies sold to multinational corporations. In 2009, Dr. Yaron also
co-founded
Qwilt, Inc., a privately-held video technology company and serves as one of its directors. Dr. Yaron served as a director of Hyperwise Security, a company focused on providing a comprehensive APT protection, which was sold to Checkpoint in early 2015, served as Chairman of the Board at Excelero (ExpressIO) until 2019, a company focused on providing ultra-fast block storage solution and Equalum focused on streaming in real-time changes from a variety of data bases to a unified platform for real-time Big Data Analytics. Dr. Yaron is an active investor in various companies including, Salto, Afforata, Vulcan Security, Aqua Security, CyberPion, ArgonSec and Illumex. Dr. Yaron has served as the chairman of The Executive Council of Tel Aviv University an institution of higher education between 2010-2019 and a director of Ramot, which is the Tel Aviv University’s technology transfer company until 2015. Dr. Yaron has served on the advisory board of Rafael Advanced Defense Systems, Ltd., a developer of high-tech defense systems, since 2008, and on the advisory board of the Israeli Ministry of Defense since 2011. Dr. Yaron served from 1996 to 2006 as a member of the Board of Directors of Mercury Interactive, a publicly-traded IT optimization software company acquired by Hewlett-Packard, including as chairman from 2004 to 2006. We believe that Dr. Yaron’s qualifications to sit on our Board of Directors include his experience as an entrepreneur and the various leadership positions he has held on the boards of directors of software and technology companies.
Rafael de la Vega has been a director of Amdocs since January 2018 and is Chairman of the Management Resources and Compensation Committee. Since 2017, he has served as the Chairman and Founder of the De La Vega Group, a consultancy and advisory services firm. From February 2016 to December 2016, Mr. de la Vega served as the Vice Chairman of AT&T Inc. and CEO of Business Solutions & International. From 2014 to 2016 Mr. de la Vega served as President and CEO of AT&T Mobile and Business Solutions and from 2007 to 2014 he served as the President and CEO of AT&T Mobility. Mr. de la Vega also held various positions at several telecommunications companies, including Cingular Wireless and Bell South Latin America. During his time at Cingular Wireless, he was responsible for the integration of AT&T Wireless and Cingular Wireless. He also serves on the boards of American Express Company and New York Life Insurance Company. He served on the Executive Committee of the Boy Scouts of America until May 2018 and served as Chairman of the 2017 Boy Scouts Jamboree. He is the former Chairman of Junior Achievement Worldwide and continues to serve on its board of directors. In June of 2018, Mr. de la Vega joined as the Vice Chairman of the Board of Directors of Ubicquia LLC. In September of 2018 he joined the Board of Advisors of RapidSOS. Mr. de la Vega also recently joined Forté Ventures as a Limited Partner. We believe Mr. de la Vega’s qualifications to sit on our Board of Directors includes his extensive experience and leadership in the telecommunications industry.
Eli Gelman has been a director of Amdocs since 2002 and is the Chairman of the Nominating and Corporate Governance Committee since November 2021. Since January 2019, Mr. Gelman has served as the chairman of the Executive Council of Tel Aviv University. Mr. Gelman served as our President and Chief Executive Officer from 2010 to September 30, 2018. From 2010 until 2013, Mr. Gelman served as a director of Retalix, a global software company, and during 2010, he also served as its Chairman. From 2008 to 2010, Mr. Gelman devoted his time to charitable matters focused on youth education. He served as Executive Vice President of Amdocs Management Limited from 2002 until 2008 and as our Chief Operating Officer from 2006 until 2008. Prior to 2002, he was a Senior Vice President, where he headed our U.S. sales and marketing operations and helped spearhead our entry into the customer care and billing systems market. Before that, Mr. Gelman was an account manager for our major European and North American installations, and has led several major software development projects. Before joining Amdocs, Mr. Gelman was involved in the development of real-time software systems for communications networks and software projects for NASA. Mr. Gelman’s qualifications to serve on our Board of Directors include
 
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his more than two decades of service to Amdocs and its customers, including as our Chief Operating Officer and President and Chief Executive Officer. With more than 30 years of experience in the software industry, he possesses a vast institutional knowledge and strategic understanding of our organization and industry.
John A. MacDonald has been a director of Amdocs since 2019. Mr. MacDonald is an experienced senior executive who has worked at some of Canada’s largest technology organizations and serves as a board member of BookJane Inc. From 2012 to 2021, Mr. MacDonald served as a board member of Rogers Communications Inc. From 2003 to 2008, Mr. MacDonald served as the President, Enterprise Division of MTS Allstream. Before that, between 2002 to 2003, Mr. MacDonald was a President and Chief Operating Officer AT&T Canada. AT&T Canada was
re-branded
Allstream in 2003 and was subsequently acquired by MTS the following year. In 1994 Mr. MacDonald joined Bell Canada as its Chief Technology Officer and retired from Bell Canada in 1999 as its President and Chief Operating Officer. From 1977 to 1994 Mr. MacDonald worked at NBTel, where he became Chief Executive Officer in 1994. We believe Mr. MacDonald’s qualifications to sit on our Board of Directors includes his extensive experience and leadership in the telecommunications industry.
Yvette Kanouff has been a director of Amdocs since 2020. Since August 2018, Ms. Kanouff has served as a director of Sprinklr CXM, which became a public company in June 2021. Since August 2019, Ms. Kanouff has served as a director of Science Applications International Corporation (SAIC). Since February 2021, Ms. Kanouff has served as a director of Entegris ENTG. Ms. Kanouff is currently a partner and chief technology officer at Silicon Valley-based venture capital and private equity firm JC2 Ventures where Ms. Kanouff is responsible for technology strategy and engineering relationships within JC2 Ventures investment companies, partners, and customers. Prior to that, Ms. Kanouff served as a senior vice president and general manager for Cisco’s Service Provider Business where she was responsible for more than $7 billion in direct revenue and more than 6,000 employees globally. Previously, Ms. Kanouff held leadership positions for numerous companies, including Cablevision, SeaChange International, and Time Warner. Ms. Kanouff holds a bachelor’s degree and a master’s degree in mathematics from the University of Central Florida. Ms. Kanouff is also a director and executive advisor of several private technology companies.
Sarah Ruth Davis has been a director of Amdocs since 2021. From 2007 to May 2021 Ms. Davis served in various executive roles at Loblaw Companies Limited, Canada’s largest retailer and the nation’s food and pharmacy leader. From 2017 until May 2021, Ms. Davis served as the president of Loblaw Companies Limited. From 2014 until 2017, Ms. Davis served as the chief administrative officer of Loblaw. Before being appointed as the chief administrative officer, Ms. Davis served as Loblaw’s chief financial officer from 2010 until 2014. Prior to her appointment as chief financial officer, Ms. Davis served as the financial controller between 2007 to 2010. From 2005 until 2007 she was the controller and vice president of finance of Rogers Communications, Inc. Between 1996 to 2005 Ms. Davis served in various finance and accounting roles with Bell Canada, including chief financial officer of Bell Nexxia and the vice president of complex bids at BCE Emergis Inc., a Bell
spin-off
that owned an array of media and
e-commerce
companies. Since 2014 Ms. Davis also serves on the board of directors of AGF Management Limited, an investment manager traded on the Toronto Stock Exchange. Between 2010 until 2021 Ms. Davis served on the board of directors of President’s Choice Bank. From 2017 until 2021, Ms. Davis served as the chairman of T&T Supermarket Inc. In August 2021, Ms. Davis joined the boards of directors of Victoria’s Secret & Co., a company traded on the New York Stock Exchange, and Pet Valu Holdings Ltd., a pet supply company traded on the Toronto Stock Exchange. Ms. Davis was named one of Canada’s Most Powerful Women: Top 100 in 2011 by the Women’s Executive Network and was the executive sponsor of the Women@Loblaw network. Ms. Davis holds a Bachelor of Commerce, honors degree from Queen’s University and is a chartered accountant and Fellow of the CPA.
Shuky Sheffer is a director and has been our President and Chief Executive Officer since October 1, 2018. Mr. Sheffer previously served as Senior Vice President and President of the Global Business Group from October 2013 to September 30, 2018. Mr. Sheffer served as Chief Executive Officer of Retalix Ltd., a global software company, from 2009 until its acquisition by NCR Corporation in 2013. Following the acquisition, he served as a General Manager of Retalix through September 2013. From 1986 to 2009, Mr. Sheffer served at various managerial positions at Amdocs, most recently as President of the Emerging Markets Divisions.
 
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Tamar Rapaport-Dagim has been our Chief Financial Officer since 2007, and our Chief Operating Officer since October 1, 2018. Ms. Rapaport-Dagim served as our Vice President of Finance from 2004 until 2007. Prior to joining Amdocs, from 2000 to 2004, Ms. Rapaport-Dagim was the Chief Financial Officer of Emblaze, a provider of multimedia solutions over wireless and IP networks. She has also served as controller of Teledata Networks (formerly a subsidiary of ADC Telecommunications) and has held various finance management positions in public accounting.
Rajat Raheja has been our Division President for India operations since February 2016. Mr. Raheja has close to 23 years of experience and most recently served as Director, Global Services at Deloitte Consulting. Prior to joining Amdocs, Mr. Raheja held leadership positions in Deloitte Consulting, Arthur Andersen, PricewaterhouseCoopers and Tata Telecom.
Matthew Smith has been Secretary of Amdocs Limited since January 2015. Mr. Smith joined Amdocs in October 2012 as Director of Investor Relations and has been Head of Investor Relations since January 2014. Prior to joining Amdocs, from April 2006 to August 2012, Mr. Smith was a research director at A.I. Capital Management, a hedge fund, where he covered many sectors, including the technology
sub-sectors
of IT hardware, semiconductors, software and IT services. From April 2001 to April 2006, Mr. Smith was an equity analyst at CIBC World Markets (now Oppenheimer Co.).
Compensation
During fiscal 2021, each of our directors who was not our employee, or
Non-Employee
Directors, received compensation for their services as directors in the form of cash and restricted shares. Each
Non-Employee
Director received an annual cash payment of $80,000. Each member of our Audit Committee who is a
Non-Employee
Director and who is not the chairman of such committee received an annual cash payment of $30,000. Each member of our Management Resources and Compensation Committee who is a
Non-Employee
Director and who is not a committee chairman received an annual cash payment of $20,000. Each member of our Nominating and Corporate Governance and Technology and Innovation Committees who is a
Non-Employee
Director and who is not a committee chairman received an annual cash payment of $15,000. The Chairman of our Audit Committee received an annual cash payment of $42,500 and the Chairman of our Management Resources and Compensation Committee received an annual cash payment of $32,500. The Chairmen of our Nominating and Corporate Governance and Technology and Innovation Committees each received an annual cash payment of $27,500. Each
Non-Employee
Director received an annual grant of restricted shares at a total value of $255,000. The Chairman of the Board of Directors received an additional annual amount equal to $200,000 awarded in the form of restricted shares. The restricted share awards to our
Non-Employee
Directors vest quarterly. The price per share for the purpose of determining the value of the grants to our
Non-Employee
Directors was the Nasdaq closing price of our shares on the last trading day preceding the grant date. We also reimburse all of our
Non-Employee
Directors for their reasonable travel expenses incurred in connection with attending Board or committee meetings. Cash compensation paid to our
Non-Employee
Directors is prorated for partial-year service.
A total of 14 persons who served either as directors or officers of Amdocs during all or part of fiscal 2021 received remuneration from Amdocs. The aggregate remuneration paid or accrued by us to such persons in fiscal 2021 was approximately $5.3 million, compared to $5.3 million and $5.4 million in fiscal 2020 and fiscal 2019, respectively, which includes amounts set aside or accrued to provide cash bonuses, pension, retirement or similar benefits, but does not include amounts expended by us for automobiles made available to such persons, expenses (including business travel, professional and business association dues) or other fringe benefits. During fiscal 2021, we granted to such persons an aggregate of 222,690 restricted shares typically subject to three- to four-year vesting and, often times, achievement of certain performance thresholds, and in the case of our directors, subject to quarterly vesting. All restricted share awards were granted pursuant to our 1998 Stock Option and Incentive Plan, as amended. See discussion below — “Share Ownership — Employee Stock Option and Incentive Plan.”
 
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Board Practices
Eleven directors currently serve on our Board of Directors, ten of whom were elected at our annual meeting of shareholders on January 29, 2020, and one director, Ms. Sarah Ruth Davis, was elected by the Board of Directors on August 2, 2021. All directors hold office until the next annual meeting of our shareholders, which generally is in January or February of each calendar year, or until their respective successors are duly elected and qualified or their positions are earlier vacated by resignation or otherwise. In August 2017, the Board of Directors established a mandatory retirement age of 73 for directors. No person of or over the age of 73 years shall be nominated or elected to start a new term as director, unless the Chairman of the Board of Directors recommends to the Board of Directors, and the Board of Directors determines, to waive the retirement age for a specific director in exceptional circumstances. Once the waiver is granted, it must be renewed annually for it to stay in effect. In August 2021, Mr. James Kahan and Mr. Giora Yaron were each granted a
one-year
waiver to continue as director past the age of 73 years until the annual general meeting in 2023 in light of the circumstances presented to the Board of Directors, including their exceptional industry experience and value to the Board, as well as the current global business and market environment. Other than the employment agreement between us and our President and Chief Executive Officer, which provides for immediate cash severance upon termination of employment, there are currently no service contracts in effect between us and any of our directors providing for immediate cash severance upon termination of their employment.
Board Committees
Our Board of Directors maintains four committees as set forth below. Members of each committee are appointed by the Board of Directors.
The Audit Committee reviews, acts on and reports to the Board of Directors with respect to various auditing and accounting matters, including the selection of our independent registered public accounting firm, the scope of the annual audits, fees to be paid to, and the performance of, such public accounting firm, and assists with the Board of Directors’ oversight of our accounting practices, financial statement integrity and compliance with legal and regulatory requirements, including establishing and maintaining adequate internal control over financial reporting, risk assessment and risk management. The current members of our Audit Committee are Mr. Gardner (Chair), Mr. LeFave, Mr. Minicucci and Ms. Davis, all of whom are independent directors, as defined by the rules of Nasdaq, and pursuant to the categorical director independence standards adopted by our Board of Directors. The Board of Directors has determined that Mr. Gardner is an “audit committee financial expert” as defined by rules promulgated by the SEC, and that each member of the Audit Committee is financially literate as required by the rules of Nasdaq. In particular, we believe that the professional experiences of Mr. Gardner, Mr. LeFave, Mr. Minicucci and Ms. Davis provide important insights into their work on the Audit Committee. For example, we believe Mr. Gardner’s extensive experience as an accountant, technology investment banker and chief financial officer enables him to make valuable contributions to the Committee. In addition, we believe that Mr. LeFave’s experience as a seasoned Fortune 500 CIO and CISO for over five years provides a foundation of cyber awareness to the Audit Committee and also believe that Mr. LeFave’s post-graduate training at HBS in Audit Committee, Board compensation best practices and recently completed HBS Corporate Director Certificate provide valuable contributions to the Committee. Similarly, we believe that Mr. Minicucci’s experience as chief financial officer to a public company and treasurer of another public company have provided him with strong business acumen and strategic and financial expertise that benefits the Committee. We also believe Ms. Davis’s extensive executive experience with Loblaw and her myriad roles in finance and accounting, along with her experience as a director of other public companies, position her to make valuable contributions to the Committee. The Audit Committee written charter is available on our website at
www.amdocs.com.
The Nominating and Corporate Governance Committee identifies individuals qualified to become members of our Board of Directors, recommends to the Board of Directors the persons to be nominated for election as directors at the annual general meeting of shareholders, develops and makes recommendations to the Board of Directors regarding our corporate governance principles and oversees the evaluations of our Board of Directors.
 
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The current members of the Nominating and Corporate Governance Committee are Messrs. Gelman (Chair), Kahan, Minicucci and LeFave, all of whom are independent directors, as required by the Nasdaq listing standards, and pursuant to the categorical director independence standards adopted by our Board of Directors. The Nominating and Corporate Governance Committee written charter is available on our website at www.amdocs.com. The Nominating and Corporate Governance Committee has approved corporate governance guidelines that are also available on our website at
www.amdocs.com
.
The Management Resources and Compensation Committee discharges the responsibilities of our Board of Directors relating to the compensation of the Chief Executive Officer of Amdocs Management Limited, makes recommendations to our Board of Directors with respect to the compensation of our other executive officers and oversees management succession planning for the executive officers of the Company. The current members of our Management Resources and Compensation Committee are Messrs. De la Vega (Chair), LeFave, Minicucci and MacDonald, all of whom are independent directors, as defined by the rules of Nasdaq, and pursuant to the categorical director independence standards adopted by our Board of Directors. The Management Resources and Compensation Committee written charter is available on our website at
www.amdocs.com.
The Technology and Innovation Committee was established to assist the Board of Directors in reviewing our technological development, opportunities and innovation, in connection with the current and future business and markets. The current members of our Technology and Innovation Committee are Dr. Yaron (Chair) and Mr. Gelman, Ms. Kanouff and Mr. MacDonald.
Our
non-employee
directors receive no compensation from us, except in connection with their membership on the Board of Directors and its committees as described above regarding
Non-Employee
Directors under “— Compensation.”
Workforce Personnel
The following table presents the approximate average number of our workforce for each of the fiscal years indicated, by function and by geographical location (in each of which we operate at multiple sites):
 
    
Fiscal Year,
 
    
2021
    
2020
    
2019
 
Software and Information Technology, Sales and Marketing
        
Americas
     5,465        5,522        5,409  
EMEA
     6,087        5,957        6,063  
APAC
     14,083        12,815        11,472  
  
 
 
    
 
 
    
 
 
 
     25,635        24,294        22,944  
Management and Administration
     1,541        1,581        1,572  
  
 
 
    
 
 
    
 
 
 
Total Workforce
     27,176        25,875        24,516  
  
 
 
    
 
 
    
 
 
 
As a company with global operations, we are required to comply with various labor and immigration laws throughout the world. Our employees in certain countries of Europe, and to a limited extent in Canada and Brazil, are protected by mandatory collective bargaining agreements. To date, compliance with such laws has not been a material burden for us. As the number of our employees increases over time in specific countries, our compliance with such regulations could become more burdensome.
Our principal operating subsidiaries are not party to any collective bargaining agreements. However, our Israeli subsidiaries are subject to certain provisions of general extension orders issued by the Israeli Ministry of Labor and Welfare which derive from various labor related statutes. The most significant of these provisions provide for mandatory pension benefits and wage adjustments in relation to increases in the consumer price index, or CPI. The amount and frequency of these adjustments are modified from time to time.
 
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A small number of our employees in Canada and Bulgaria, our employees in Brazil and our employees in Chile have union representation. We also have an affiliation with a
non-active
union in Mexico. We have a works council body in the Netherlands and Germany which represents the employees and with which we work closely to ensure compliance with the applicable local law. We also have an employee representative body in France, Hungary and Finland.
In recent years, Israeli labor unions have increased their efforts to organize workers at companies with significant operations in Israel, including several companies in the technology sector. In addition, a national union and a group of our employees had attempted to secure the approval of the minimum number of employees needed for union certification with respect to our employees in Israel. While these efforts have not resulted in either group being recognized as a representative union, we cannot be certain there will be no such efforts in the future. In the event an organization is recognized as a representative union for our employees in Israel, we would be required to enter into negotiations to implement a collective bargaining agreement. See “Risk Factors —
The skilled and highly qualified workforce that we need to develop, implement and modify our solutions may be difficult to hire, train and retain, and we could face increased costs to attract and retain our skilled workforce
.”
We consider our relationship with our employees to be good and have never experienced an organized labor dispute, strike or work stoppage.
Share Ownership
Security Ownership of Directors and Senior Management and Certain Key Employees
As of November 30, 2021, the aggregate number of our ordinary shares beneficially owned by our directors and executive officers was 2,334,541 shares. As of November 30, 2021, none of our directors or members of senior management beneficially owned 1% or more of our outstanding ordinary shares.
Beneficial ownership by a person, as of a particular date, assumes the exercise of all options and warrants held by such person that are currently exercisable or are exercisable within 60 days of such date.
Stock Option and Incentive Plan
Our Board of Directors adopted, and our shareholders approved, our 1998 Stock Option and Incentive Plan, as amended, which we refer to as the Equity Incentive Plan, pursuant to which up to 70,550,000 of our ordinary shares may be issued.
The Equity Incentive Plan provides for the grant of restricted shares, stock options and other stock-based awards to our directors, officers, employees and consultants. The purpose of the Equity Incentive Plan is to enable us to attract and retain qualified personnel and to motivate such persons by providing them with an equity participation in Amdocs. As of September 30, 2021, of the 70,550,000 ordinary shares available for issuance under the Equity Incentive Plan, 60,352,038 ordinary shares had been issued as a result of option exercises and restricted share issuances. As of September 30, 2021, 5,989,219 ordinary shares remained available for future grants, subject to a sublimit applicable to the award of restricted shares or awards denominated in stock units. As of November 30, 2021, there were outstanding options to purchase an aggregate of 3,913,057 ordinary shares at exercise prices ranging from $29.44 to $72.19 per share and 300,567 shares are subject to outstanding restricted stock units.
The Equity Incentive Plan is administered by a committee of our Board of Directors, which determines the terms of awards for directors, employees and consultants as well as the manner in which awards may be made subject to the terms of the Equity Incentive Plan. The Board of Directors may amend or terminate the Equity Incentive Plan, provided that shareholder approval is required to increase the number of ordinary shares available
 
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under the Equity Incentive Plan, to materially increase the benefits accruing to participants, to change the class of employees eligible for participation, to decrease the basis upon which the minimum exercise price of options is determined or to extend the period in which awards may be granted or to grant an option that is exercisable for more than ten years. Ordinary shares subject to restricted stock awards are subject to certain restrictions on sale, transfer or hypothecation. Under its terms, no awards may be granted pursuant to the Equity Incentive Plan after January 28, 2025.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
Major Shareholders
The following table sets forth specified information with respect to the beneficial ownership of the ordinary shares as of November 30, 2021 of (i) any person known by us to be the beneficial owner of more than 5% of our ordinary shares, and (ii) all of our directors and executives officers as a group. Beneficial ownership is determined in accordance with the rules of the SEC and, unless otherwise indicated, includes voting and investment power with respect to all ordinary shares, subject to community property laws, where applicable. The number of ordinary shares used in calculating the percentage beneficial ownership included in the table below is based on 124,621,808 ordinary shares outstanding as of November 30, 2021, net of shares held in treasury. Information concerning shareholders other than our directors and officers is based on periodic public filings made by such shareholders and may not necessarily be accurate as of November 30, 2021. None of our major shareholders have voting rights that are different from those of any other shareholder.
 
Name
  
Shares
Beneficially
Owned
    
Percentage
Ownership
 
FMR LLC(1)
     15,857,488        12.7
Janus Henderson Group plc(2)
     6,802,093        5.5
All directors and officers as a group (14 persons)(3)
     2,334,541        1.9
 
(1)
Based on a Schedule 13G/A filed by FMR LLC, or FMR, with the SEC on February 8, 2021, as of December 31, 2020, FMR had sole power to vote or direct the vote over 1,430,864 shares and sole power to dispose or direct the disposition of 15,857,488 shares. Abigail P. Johnson is a Director, the Chairman of FMR and the Chief Executive Officer of FMR. Members of the Johnson family, including Abigail P. Johnson, directly or through trusts, own approximately 49% of the voting power of FMR. The address of FMR is 245 Summer Street, Boston, Massachusetts 02210.
(2)
Based on a Schedule 13G/A filed by Janus Henderson Group plc, or Janus Henderson, with the SEC on February 11, 2021, as of December 31, 2020, Janus had an indirect 97% ownership stake in Intech Investment Management LLC (“Intech”) and a 100% ownership stake in Janus Capital Management LLC (“Janus Capital”), Perkins Investment Management LLC (“Perkins”), Henderson Global Investors Limited (“HGIL”) and Janus Henderson Investors Australia Institutional Funds Management Limited (“JHIAIFML”) (each an “Asset Manager” and collectively the “Asset Managers”). Due to the above ownership structure, holdings for the Asset Managers are aggregated for purposes of this filing. Each Asset Manager is an investment adviser registered or authorized in its relevant jurisdiction and each furnishing investment advice to various fund, individual and/or institutional clients (collectively referred to herein as “Managed Portfolios”). As a result of its role as investment adviser or
sub-adviser
to the Managed Portfolios, Janus Capital may be deemed to be the beneficial owner of 6,788,486 shares or 5.2% of the shares outstanding of Amdocs Common Stock held by such Managed Portfolios. However, Janus Capital does not have the right to receive any dividends from, or the proceeds from the sale of, the securities held in the Managed Portfolios and disclaims any ownership associated with such rights. As a result of its role as investment adviser or
sub-adviser
to the Managed Portfolios, HGIL may be deemed to be the beneficial owner of 12,446 shares or 0.0% of the shares outstanding of Amdocs Common Stock held by such Managed Portfolios. However, HGIL does not have the right to receive any dividends from, or the proceeds from the
  sale of, the securities held in the Managed Portfolios and disclaims any ownership associated with such
 
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  rights. As a result of its role as investment adviser or
sub-adviser
to the Managed Portfolios, Intech may be deemed to be the beneficial owner of 1,161 shares or 0.0% of the shares outstanding of Amdocs Common Stock held by such Managed Portfolios. However, Intech does not have the right to receive any dividends from, or the proceeds from the sale of, the securities held in the Managed Portfolios and disclaims any ownership associated with such rights. The address of Janus Henderson is 201 Bishopsgate EC2M 3AE, United Kingdom.
(3)
Includes options held by such directors and executive officers that are exercisable within 60 days after November 30, 2021. As of such date, none of our directors or executive officers beneficially owned 1% or more of our outstanding ordinary shares.
As of September 30, 2021, our ordinary shares were held by 1,630 record holders. Based on a review of the information provided to us by our transfer agent, 759 record holders, including Cede & Co., the nominee of The Depository Trust Company, holding approximately 99% of our outstanding ordinary shares held of record, were residents of the United States.
Related Party Transactions
On January 31, 2020, Mr. Julian Brodsky retired from our Board of Directors. On February 1, 2020, we entered into an agreement with Mr. Brodsky pursuant to which Mr. Brodsky served as “director emeritus” and provided us certain advisory services, for which we paid Mr. Brodsky for such services a total payment equal to $255,000 in equity and $80,000 in cash during the term of the agreement in fiscal years 2020 and 2021. The agreement with Mr. Brodsky expired on January 31, 2021.
ITEM 8. FINANCIAL INFORMATION
Financial Statements
Please see “Financial Statements” for our audited Consolidated Financial Statements and Financial Statement Schedule filed as part of this Annual Report.
Legal Proceedings
We are involved in various legal claims and proceedings arising in the normal course of our business. We accrue for a loss contingency when we determine that it is probable, after consultation with counsel, that a liability has been incurred and the amount of such loss can be reasonably estimated. At this time, we believe that the results of any such contingencies, either individually or in the aggregate, will not have a material adverse effect on our financial position, results of operations or cash flows.
In April 2021, two separate lawsuits alleging violations of the federal securities laws and pursuing remedies under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule
10b-5
promulgated thereunder, were filed against us and certain of our current and former officers (
Glover v. Amdocs Ltd., et. al,
4:21-cv-00418,
E.D. Mo. and Marn v. Amdocs Ltd. et. al,
2:21-cv-03078-CAS-PVC,
C.D. Ca.
). In June 2021, the two federal securities lawsuits against us were voluntarily dismissed without prejudice as to all defendants and no other litigation with respect to the allegations in those actions is pending.
Certain of our subsidiaries are currently in a dispute with a state-owned telecom enterprise in Ecuador, which appears to have political aspects. Our counterparty has claimed monetary damages. The dispute is over contracts, under which we were providing certain services, which have been terminated by the counterparty in connection with such dispute and which are under scrutiny by certain local governmental authorities. We believe we have solid arguments and are vigorously defending our rights. To date, however, the Ecuadorian Courts have responded to such defense efforts, including motions alleging constitutional defects, in an inconsistent manner. While we have achieved some successes, the majority of the procedures are still ongoing. We are unable to reasonably estimate the ultimate outcome of the above dispute.
 
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Dividend Policy
Please refer to “Liquidity and Capital Resources — Cash Dividends” for a discussion of our dividend policy.
ITEM 9. THE OFFER AND LISTING
On December 19, 2013, we voluntarily withdrew our ordinary shares from the New York Stock Exchange and transferred our listing to the Nasdaq Global Select Market (“Nasdaq”) and commenced trading on Nasdaq on December 20, 2013. Our ordinary shares were quoted on the New York Stock Exchange (“NYSE”) from 1998 to 2013 under the symbol “DOX” and are now quoted on Nasdaq under the same symbol.
ITEM 10. ADDITIONAL INFORMATION
Memorandum and Articles of Incorporation
Amdocs Limited is registered as a company with limited liability pursuant to the laws of the Island of Guernsey with company number 19528 and whose registered office situated at Hirzel House, Smith Street, St Peter Port, Guernsey, GY1 2NG. The telephone number at that location is
+44-1481-728444.
Our Memorandum of Incorporation, or the Memorandum, provides that the objects and powers of Amdocs Limited are not restricted and our Articles of Incorporation, or the Articles, provide that our business is to engage in any lawful act or activity for which companies may be organized under the Companies (Guernsey) Law, 2008, as amended, or the Companies Law.
The Articles grant the Board of Directors all the powers necessary for managing, directing and supervising the management of the business and affairs of Amdocs Limited.
Article 70(1) of the Articles provides that a director may vote in respect of any contract or arrangement in which such director has an interest notwithstanding such director’s interest and an interested director will not be liable to us for any profit realized through any such contract or arrangement by reason of such director holding the office of director. Article 71(1) of the Articles provides that the directors shall be paid out of the funds of Amdocs Limited by way of fees such sums as the Board shall reasonably determine. Article 73 of the Articles provides that directors may exercise all the powers of Amdocs Limited to borrow money, and to mortgage or charge its undertaking, property and uncalled capital or any part thereof, and to issue securities whether outright or as security for any debt, liability or obligation of Amdocs Limited for any third party. Such borrowing powers can only be altered through an amendment to the Articles by special resolution. Our Memorandum and Articles do not impose a requirement on the directors to own shares of Amdocs Limited in order to serve as directors; however, the Board of Directors has adopted guidelines for minimum share ownership by the directors.
The Board of Directors is authorized to issue a maximum of (i) 25,000,000 preferred shares and (ii) 700,000,000 ordinary shares, consisting of voting and
non-voting
ordinary shares without further shareholder approval. As of September 30, 2021, 124,866,230 ordinary shares were outstanding (net of treasury shares) and no
non-voting
ordinary shares or preferred shares were outstanding. The rights, preferences and restrictions attaching to each class of the shares are set out in the Memorandum and Articles and are as follows:
Preferred Shares
 
   
Issue
— The preferred shares may be issued from time to time in one or more series of any number of shares up to the amount authorized.
 
   
Authorization to Issue Preferred Shares
— Authority is vested in the directors from time to time to authorize the issue of one or more series of preferred shares and to provide for the designations, powers, preferences and relative participating, optional or other special rights and qualifications, limitations or restrictions thereon.
 
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Relative Rights
— All shares of any one series of preferred shares must be identical with each other in all respects, except that shares of any one series issued at different times may differ as to the dates from which dividends shall accrue.
 
   
Liquidation
— In the event of any liquidation, dissolution or
winding-up
of Amdocs Limited, the holders of preferred shares are entitled to a preference with respect to payment over the holders of any shares ranking junior to the preferred in liquidation at the rate fixed in any resolution or resolutions adopted by the directors in such case plus an amount equal to all dividends accumulated to the date of final distribution to such holders. Except as provided in the resolution or resolutions providing for the issue of any series of preferred shares, the holders of preferred shares are entitled to no further payment. If upon any liquidation our assets are insufficient to pay in full the amount stated above, then such assets shall be distributed among the holders of preferred shares ratably in accordance with the respective amount such holder would have received if all amounts had been paid in full.
 
   
Voting Rights
— Except as otherwise provided for by the directors upon the issue of any new series of preferred shares, the holders of preferred shares have no right or power to vote on any question or in any proceeding or to be represented at, or to receive notice of, any meeting of shareholders.
Ordinary Shares and
Non-Voting
Ordinary Shares
Except as otherwise provided by the Memorandum and Articles, the ordinary shares and
non-voting
ordinary shares are identical and entitle holders thereof to the same rights and privileges.
 
   
Dividends
— When and as dividends are declared on our shares, the holders of voting ordinary shares and
non-voting
shares are entitled to share equally, share for share, in such dividends except that if dividends are declared that are payable in voting ordinary shares or
non-voting
ordinary shares, dividends must be declared that are payable at the same rate in both classes of shares.
 
   
Conversion of
Non-Voting
Ordinary Shares into Voting Ordinary Shares
— Upon the transfer of
non-voting
ordinary shares from the original holder thereof to any third party not affiliated with such original holder,
non-voting
ordinary shares are redesignated in our books as voting ordinary shares and automatically convert into the same number of voting ordinary shares.
 
   
Liquidation
— Upon any liquidation, dissolution or
winding-up,
any assets remaining after creditors and the holders of any preferred shares have been paid in full shall be distributed to the holders of voting ordinary shares and
non-voting
ordinary shares equally share for share.
 
   
Voting Rights
— The holders of voting ordinary shares are entitled to vote on all matters to be voted on by the shareholders, and the holders of
non-voting
ordinary shares are not entitled to any voting rights.
 
   
Preferences
— The voting ordinary shares and
non-voting
ordinary shares are subject to all the powers, rights, privileges, preferences and priorities of the preferred shares as are set out in the Articles.
As regards both preferred shares and voting and
non-voting
ordinary shares, we have the power to purchase any of our own shares, whether or not they are redeemable and may make a payment out of capital for such purchase. If we repurchase shares off market, the repurchase must be approved by special resolution of our shareholders. If we are making a market acquisition of our own shares, the acquisition must be approved by an ordinary resolution of our shareholders. In practice, we expect that we would continue to effect any future repurchases of our ordinary shares through our subsidiaries.
The Articles now provide that our directors, officers and other agents will be indemnified by us from and against all liabilities to Amdocs Limited or third parties (including our shareholders) sustained in connection with their performance of their duties, except to the extent prohibited by the Companies Law. Under the Companies Law, Amdocs Limited may not indemnify a director for certain excluded liabilities, which are:
 
   
fines imposed in criminal proceedings;
 
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regulatory fines;
 
   
expenses incurred in defending criminal proceedings resulting in a conviction;
 
   
expenses incurred in defending civil proceedings brought by Amdocs Limited or an affiliated company in which judgment is rendered against the director; and
 
   
expenses incurred in unsuccessfully seeking judicial relief from claims of a breach of duty.
In addition to the excluded liabilities listed above, directors may also not be indemnified by us for liabilities to us or any of our subsidiaries arising out of negligence, default, breach of duty or breach of trust of a director in relation to us or any of our subsidiaries. The Companies Law authorizes Guernsey companies to purchase insurance against such liabilities to companies or to third parties for the benefit of directors. We currently maintain such insurance. Judicial relief is available for an officer charged with a neglect of duty if the court determines that such person acted honestly and reasonably, having regard to all the circumstances of the case.
There are no provisions in the Memorandum or Articles that provide for a classified board of directors or for cumulative voting for directors.
If the share capital is divided into different classes of shares, Article 11 of the Articles provides that the rights attached to any class of shares (unless otherwise provided by the terms of issue) may be varied with the consent in writing of the holders of three-fourths of the issued shares of that class or with the sanction of a special resolution of the holders of the shares of that class.
A special resolution is defined by the Companies Law as being a resolution passed by a majority of shareholders representing not less than 75% of the total voting rights of the shareholders present in person or by proxy.
Rather than attend general or special meetings of our shareholders, shareholders may confer voting authority by proxy to be represented at such meetings. Generally speaking, proxies will not be counted as voting in respect of any matter as to which abstention is indicated, but abstentions will be counted as ordinary shares that are present for purposes of determining whether a quorum is present at a general or special meeting. Nominees who are members of NYSE and who, as brokers, hold ordinary shares in “street name” for customers have, by NYSE rules, the authority to vote on certain items in the absence of instructions from their customers, the beneficial owners of the ordinary shares. If such nominees or brokers indicate that they do not have authority to vote shares as to a particular matter, we will not count those votes in favor of such matter; however, such “broker
non-votes”
will be counted as ordinary shares that are present for purposes of determining whether a quorum is present.
Provisions in respect of the holding of general meetings and extraordinary general meetings are set out at
Articles 22-41
of the Articles. The Articles provide that an annual general meeting must be held once in every calendar year (provided that not more than 15 months have elapsed since the last such meeting) at such time and place as the directors appoint. The shareholders of the Company may waive the requirement to hold an annual general meeting in accordance with the Companies Law. The directors may, whenever they deem fit, convene an extraordinary general meeting. General meetings may be convened by any shareholders holding more than 10% in the aggregate of Amdocs Limited’s share capital. Shareholders may participate in general meetings by video link, telephone conference call or other electronic or telephonic means of communication.
A minimum of ten days’ written notice is required in connection with an annual general meeting and a minimum of 14 days’ written notice is required for an extraordinary general meeting, although a general meeting may be called by shorter notice if all shareholders entitled to attend and vote agree. The notice shall specify the place, the day and the hour of the meeting, and in the case of any special business, the general nature of that business and details of any special resolutions, waiver resolutions or unanimous resolutions being proposed at the meeting. The notice must be sent to every shareholder and every director and may be published on a website.
 
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At general meetings, the Chairman of the Board may choose whether a resolution put to a vote shall be decided by a show of hands or by a poll. However, a poll may be demanded by not less than five shareholders having the right to vote on the resolution or by shareholders representing not less than 10% of the total voting rights of all shareholders having the right to vote on the resolution.
A shareholder is entitled to appoint another person as his proxy to exercise all or any of his rights to attend and to speak and vote at a meeting of Amdocs Limited.
Amdocs Limited may pass resolutions by way of written resolution.
There are no limitations on the rights to own securities, including the rights of
non-resident
or foreign shareholders to hold or exercise voting rights on the securities.
There are no provisions in the Memorandum or Articles that would have the effect of delaying, deferring or preventing a change in control of Amdocs Limited or that would operate only with respect to a merger, acquisition or corporate restructuring involving us (or any of our subsidiaries).
There are no provisions in the Memorandum or Articles governing the ownership threshold above which our shareholder ownership must be disclosed. U.S. federal law, however, requires that all directors, executive officers and holders of 10% or more of the stock of a company that has a class of stock registered under the Securities Exchange Act of 1934, as amended (other than a foreign private issuer, such as Amdocs Limited), disclose such ownership. In addition, holders of more than 5% of a registered equity security of a company (including a foreign private issuer) must disclose such ownership.
The directors may reduce our share capital or any other capital subject to us satisfying the solvency requirements set out in the Companies Law.
Material Contracts
In March 2021, we entered into a Third Amended and Restated Credit Agreement among us, certain of our subsidiaries, the lenders from time to time party thereto and JPMorgan Chase Bank, N.A., as administrative agent, providing for an unsecured $500 million five-year revolving credit facility with a syndicate of banks (the “Amended and Restated Credit Agreement”). The facility is available for general corporate purposes, including acquisitions and repurchases of our ordinary shares that we may consider from time to time, and has a maturity date in March 2026. The Amended and Restated Credit Agreement replaces our Credit Agreement, dated as of December 11, 2017, by and among us, certain of our subsidiaries, JPMorgan Chase Bank, N.A., as administrative agent, J.P. Morgan Europe Limited, as London agent, and JPMorgan Chase Bank, N.A., Toronto branch, as Canadian agent. A copy of the Amended and Restated Credit Agreement is included as Exhibit 4.c to this Annual Report.
In November 2021, we entered into the First Amendment to the Amended and Restated Credit Agreement, in which we adopted technical changes to facilitate moving from a LIBOR-based lending standard to a SONIA-based lending standard, as needed. A copy of the First Amendment to the Amended and Restated Credit Agreement is included as Exhibit 4.c.1 to this Annual Report.
In October 2021, we entered into a Restated and Amended Master Services and Software License Agreement with AT&T Services, Inc., as amended, which amends and restates the Master Services Agreement, as amended, that we entered into with AT&T Services, Inc. in February 2017. The agreement provides that Amdocs will provide software and services to AT&T as specified therein and remains in effect until October 15, 2022. A copy of the Restated and Amended Master Services and Software License Agreement is included as Exhibit 4.a to this Annual Report.
 
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In the past two years, we have not entered into any material contracts other than contracts entered into in the ordinary course of our business.
Taxation
Taxation of the Company
The following is a summary of certain material tax considerations relating to Amdocs and our subsidiaries. To the extent that the discussion is based on tax legislation that has not been subject to judicial or administrative interpretation, there can be no assurance that the views expressed in the discussion will be accepted by the tax authorities in question. The discussion is not intended, and should not be construed, as legal or professional tax advice and is not exhaustive of all possible tax considerations.
General
Our effective tax rate was 15.5% for fiscal 2021, compared to 14.7% for fiscal 2020 and 15.6% for fiscal 2019.
Our effective tax rate may fluctuate between periods as a result of discrete items that may affect a particular period and there can be no assurance that our effective tax rate will not change over time as a result of a change in corporate income tax rates or other changes in the tax laws of Guernsey, the jurisdiction in which our holding company is organized, or of the various countries in which we operate, including the potential impact, which we are continuously assessing, of the tax reform in the United States. Moreover, our effective tax rate in future years may be adversely affected in the event that a tax authority challenges the manner in which items of income and expense are allocated among us and our subsidiaries. In addition, we and certain of our subsidiaries benefit from certain special tax benefits. The loss of any such tax benefits could have an adverse effect on our effective tax rate.
Certain Guernsey Tax Considerations
Tax legislation in Guernsey subjects us to the standard rate of corporate income tax for a Guernsey resident company of zero percent.
Certain Indian Tax Considerations
Through subsidiaries, we operate development centers and a business processing operations center in India. In 2021, the corporate tax rate applicable in India on trading activities was 34.94% for development center and reduced corporate tax at 27.82% for business processing operations having gross turnover up to a prescribed threshold. Our main subsidiary in India operates under specific favorable tax entitlements that are based upon
pre-approved
information technology-related services activity. As a result, these activities are entitled to considerable corporate income tax exemptions on eligible profits from export of services derived from such
pre-approved
information technology activity, provided our subsidiary continues to meet the conditions required for such tax benefits.
During the years 2016–2017, our main subsidiary in India changed its corporate legal structure from a private limited company (PLC) to a limited liability partnership (LLP) through conversion by process of law effective February 28, 2017. Thereafter, all rights and liabilities of the PLC under agreements are vested in the LLP by operation of law.
As of April 1, 2011, the Minimum Alternative Tax, or MAT, became applicable to all of our PLC Indian operations. The MAT is levied on book profits at the effective rate of 17.48% and can be carried forward for 15 years to be credited against corporate income taxes. As for the LLP, as a result of the conversion certain
 
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accumulated tax credits are not available to be set off against future income of the LLP; however, for LLP the Alternative Minimum Tax, or AMT, provisions are applicable such that LLPs are subject to AMT at a rate of 21.55% on adjusted total income (Income as computed under the normal provisions, increased by prescribed adjustments) if tax on income under normal provisions is lower than the AMT, and can be carried forward for 15 years.
Our main Indian subsidiary is subject to a separate tax entitlement under which its operating units are exempt from tax on the respective tax incentive-eligible activity for the first five years of operations and it enjoys a 50% reduction on its corporate income tax for such activity for the following five years. Further, an additional 50% deduction is available for another five years, if 50% of the profits of the unit are credited to a specific reserve provided that such reserve is utilized for the purpose of investments in plant & machinery within three years from the end of the year in which reserve is created. If such reserve is not utilized for the purpose specified in the Indian Tax Laws, the same will be deemed as income in the year immediately following the period of three years in which the reserve is made.
Further, in 2018 a new operation was commenced in another subsidiary in India with effect from May 1, 2018. The activity conducted by this entity is generally entitled to a 100% reduction on its corporate income tax for the first five years of operation and a 50% reduction for the following five years. MAT is levied on book profits at an effective rate of 16.69% and can be carried forward for 15 years to be credited against corporate income taxes.
Certain Israeli Tax Considerations
Our primary Israeli subsidiary, Amdocs (Israel) Limited, operates one of our largest development centers. Discussed below are certain Israeli tax considerations relating to this subsidiary.
General Corporate Taxation in Israel.
The general corporate tax rate on taxable income is 23%. However, the effective tax rate applicable to the taxable income of an Israeli company that is eligible for tax benefits by virtue of the Law for the Encouragement of Capital Investments may be considerably lower.
Law for the Encouragement of Capital Investments, 1959.
Certain production and development facilities of our primary Israeli subsidiary have been granted “Approved Enterprise” status pursuant to the Law for the Encouragement of Capital Investments, 1959, or the Investment Law, which provides certain tax and financial benefits to investment programs that have been granted such status.
In general, investment programs of our primary Israeli subsidiary that have obtained instruments of approval for an Approved Enterprise issued by the Israeli Investment Center prior to the change in legislation in 2005 continue to be subject to the old provisions of the Investment Law as described below. In addition, our primary Israeli subsidiary made several expansions to its Approved Enterprise under the terms of the Investment Law of 2005.
More recently, our primary Israeli subsidiary has availed of tax benefits under the “Preferred Technological Enterprise” regime, which has become available as a result of a further amendment to the Law for the Encouragement of Capital Investments which was enacted in 2017. Further details can be found below.
Tax Benefits
Our primary Israeli subsidiary has elected the alternative benefits route with respect to its existing Approved Enterprise and its expansions, pursuant to which it enjoys, in relation to its Approved Enterprise operations, certain tax holidays, based on the location of activities within Israel, for a period of two to ten years and, in the case of a two year tax holiday, reduced tax rates for an additional period of up to eight years (and, in certain cases, up to 13 years). In case it pays a dividend, at any time, out of exempt income generated during the tax
 
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holiday period in respect of its Approved Enterprise, it will be subject to corporate tax at the otherwise applicable rate of 10% of the income from which such dividend has been paid. This tax is in addition to the withholding tax on dividends as described below. The tax benefits, available with respect to an Approved Enterprise only to taxable income attributable to that specific enterprise, are provided according to an allocation formula set forth in the Investment Law or in the relevant approval, and are contingent upon the fulfillment of the conditions stipulated by the Investment Law, the regulations issued thereunder and the instruments of approval for the specific investments in the Approved Enterprises. In the event our primary Israeli subsidiary fails to comply with these conditions, the tax and other benefits could be rescinded, in whole or in part, and the subsidiary might be required to refund the amount of the rescinded benefits, with the addition of CPI linkage differences and interest. We believe that the Approved Enterprise of our primary Israeli subsidiary substantially complies with all such conditions currently, but there can be no assurance that it will continue to do so.
Dividends.
Dividends paid out of income derived by an Approved Enterprise are subject to withholding tax at a reduced rate (15%, compared with the general rate of 30%). If a dividend is paid by our primary Israeli subsidiary, such dividend may be distributed out of income from both Approved Enterprises and
non-Approved
Enterprises. As such, we expect the weighted average withholding tax rate applicable to such dividend to be approximately 20%. This withholding tax shall be levied in addition to the corporate tax to which our primary Israeli subsidiary shall be subject in the event it pays a dividend out of earnings generated during the tax holiday period related to its Approved Enterprise status.
The 2017 amendment (“Preferred Technological Enterprises”)
Amendment 73 to the Investment Law, which came into effect January 1, 2017, was followed by regulations promulgated on May 28, 2017, which incorporated the “Nexus Principles,” based on OECD guidelines published as part of the Base Erosion and Profit Shifting (BEPS) project, into Israeli law. The OECD has since then confirmed that the regime adopted by Israel is “not harmful.”
The new incentives regime applies to “Preferred Technological Enterprises” that meet certain conditions. A key condition for the application of the benefits pursuant to the Preferred Technological Enterprise regime is the ownership of “Qualifying IP.”
The corporate tax rate applicable to the Preferred Technological Income generated by a Special Preferred Technological Enterprise (companies that qualify as a Preferred Technological Enterprise and which are part of a group with annual consolidated revenue in excess of NIS 10 billion—approximately US $3 billion at current exchange rates) is 6%. The reduced tax rate applies only with respect to the revenue attributable to the portion of intellectual property developed in Israel. The Preferred Technological Income is calculated for each tax year by applying the “Nexus” formula as detailed in Israeli regulations.
The withholding tax on dividends paid to a foreign parent company holding at least 90% of the shares of the distributing company out of earnings that are eligible for the reduced corporate tax rate (in our case, 6%) is 4%. For other dividend distributions out of earnings of a Preferred Technological Enterprise, the withholding tax rate is 20% (or a lower rate under a tax treaty, if applicable). The application of the Preferred Technological Enterprise is not limited to a particular time period.
In 2021, our primary Israeli subsidiary elected for the first time to apply the Preferred Technological Enterprise regime to its activities. Accordingly, our primary Israeli subsidiary will be eligible for the benefits of the Preferred Technological Enterprise regime to the extent of its Preferred Technological Income for the tax (calendar) year 2021 and for any subsequent tax year in which it meets the conditions stipulated in the Encouragement Law. Provided that the consolidated annual turnover of the group continues to be in excess of the NIS 10 billion threshold (as has been the case in recent years), we expect that our primary Israeli subsidiary will qualify as a Special Preferred Technological Enterprise also in calendar tax year 2021 and in future years and, as a result, its Preferred Technological Income will be taxed at a rate of 6% and dividends distributed out of
 
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earnings generated under the Special Preferred Technological Enterprise regime will be subject to withholding tax at a rate of 4%. However, there can be no assurance that this beneficial tax treatment will apply in any future year (for example, as a result of a change in law or if the any of the conditions stipulated in the Encouragement Law are not met in a particular year).
Taxation Of Holders Of Ordinary Shares
Certain Guernsey Tax Considerations
Under the laws of Guernsey as currently in effect, a holder of our ordinary shares who is not a resident of Guernsey (which includes Alderney and Herm for these purposes) and who does not carry on business in Guernsey through a permanent establishment situated there is not subject to Guernsey income tax on dividends paid with respect to the ordinary shares and is not liable for Guernsey income tax on gains realized upon sale or disposition of such ordinary shares. In addition, Guernsey does not impose a withholding tax on dividends paid by us to a holder of our ordinary shares who is not a resident of Guernsey and who does not carry on business in Guernsey through a permanent establishment situated there. Under Guernsey tax legislation, a holder of our ordinary shares who is a Guernsey resident or who carries on business in Guernsey through a permanent establishment may, depending on their circumstances, be subject to Guernsey income tax in connection with dividends paid by us and where such holder is a Guernsey resident individual, such tax may be collected by way of withholding from the dividend. We do not believe this legislation affects the taxation of a holder of ordinary shares who is not a resident of Guernsey and who does not carry on business in Guernsey through a permanent establishment situated there.
There are no capital gains, gift or inheritance taxes levied by Guernsey, and the ordinary shares generally are not subject to any transfer taxes, stamp duties or similar charges on issuance or transfer.
Certain United States Federal Income Tax Considerations
The following discussion describes material U.S. federal income tax consequences to a U.S. holder of the ownership or disposition of our ordinary shares. A U.S. holder is a beneficial owner of our ordinary shares that is:
(i) an individual who is a citizen or resident of the United States;
(ii) a corporation created or organized in, or under the laws of, the United States or of any state thereof;
(iii) an estate, the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or
(iv) a trust, if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons has the authority to control all substantial decisions of the trust.
This summary generally considers only U.S. holders that own ordinary shares as capital assets. This summary does not discuss the U.S. federal income tax consequences to an owner of ordinary shares that is not a U.S. holder.
This discussion is based on current provisions of the Internal Revenue Code of 1986, as amended, or the Code, current and proposed Treasury regulations promulgated thereunder, and administrative and judicial decisions as of the date hereof, all of which are subject to change, possibly on a retroactive basis. This discussion does not address all aspects of U.S. federal income taxation that may be relevant to a U.S. holder of ordinary shares based on such holder’s particular circumstances, U.S. federal income tax consequences to certain U.S. holders that are subject to special treatment (such as broker-dealers, insurance companies,
tax-exempt
organizations, financial institutions, U.S. holders that hold ordinary shares as part of a “straddle,” “hedge” or
 
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“conversion transaction” with other investments, U.S. holders that hold ordinary shares in connection with a trade or business outside the United States, or U.S. holders owning directly, indirectly or by attribution at least 10% of the ordinary shares), or any aspect of state, local or
non-U.S.
tax laws. Additionally, this discussion does not consider the tax treatment of persons who hold ordinary shares through a partnership or other pass-through entity, the possible application of U.S. federal gift or estate taxes or any alternative minimum or Medicare contribution tax consequences.
This summary is for general information only and is not binding on the Internal Revenue Service, or the IRS. There can be no assurance that the IRS will not challenge one or more of the statements made herein. U.S. holders are urged to consult their own tax advisers as to the particular tax consequences to them of owning and disposing of our ordinary shares. Except as described in “—Passive Foreign Investment Company Considerations” below, this discussion assumes that we are not and have not been a passive foreign investment company (a “PFIC”) for any taxable year.
Dividends.
In general, a U.S. holder receiving a distribution with respect to the ordinary shares will be required to include such distribution (including the amount of
non-U.S.
taxes, if any, withheld therefrom) in gross income as a taxable dividend to the extent such distribution is paid from our current or accumulated earnings and profits as determined under U.S. federal income tax principles. Any distributions in excess of such earnings and profits will first be treated, for U.S. federal income tax purposes, as a nontaxable return of capital to the extent of the U.S. holder’s tax basis in the ordinary shares, and then, to the extent in excess of such tax basis, as gain from the sale or exchange of a capital asset. However, since we do not calculate our earnings and profits under U.S. federal income tax principles, it is expected that any distribution will be reported as a dividend. In general, U.S. corporate shareholders will not be entitled to any deduction for distributions received as dividends on the ordinary shares.
Dividend income is taxed as ordinary income. However, a preferential U.S. federal income tax rate applies to “qualified dividend income” received by individuals (as well as certain trusts and estates), provided that certain holding period and other requirements are met. “Qualified dividend income” includes dividends paid on shares of a foreign corporation that are readily tradable on an established securities market in the United States. Since our ordinary shares are listed on the Nasdaq, we believe that dividends paid by us with respect to our ordinary shares should constitute “qualified dividend income” for U.S. federal income tax purposes, provided that the applicable holding period and other applicable requirements are satisfied. U.S. holders should consult their tax advisers regarding the availability of these preferential rates in their particular circumstances.
Dividends paid by us generally will be foreign-source “passive category income” or, in certain cases, “general category income” for U.S. foreign tax credit purposes, which may be relevant in calculating a U.S. holder’s foreign tax credit limitation.
Disposition of Ordinary Shares.
Subject to the PFIC rules described below, upon the sale, exchange or other disposition of our ordinary shares, a U.S. holder generally will recognize capital gain or loss in an amount equal to the difference between the amount realized on the disposition by such U.S. holder and its tax basis in the ordinary shares. Such capital gain or loss will be long-term capital gain or loss if the U.S. holder has held the ordinary shares for more than one year at the time of the disposition. In the case of a U.S. holder that is an individual, trust or estate, long-term capital gains realized upon a disposition of the ordinary shares generally will be subject to a preferential U.S. federal income tax rate. Gains realized by a U.S. holder on a sale, exchange or other disposition of ordinary shares generally will be treated as U.S. source income for U.S. foreign tax credit purposes. The deductibility of capital losses is subject to limitations.
Passive Foreign Investment Company Considerations.
If, for any taxable year, 75% or more of our gross income consists of certain types of passive income, or 50% or more of the average value of our assets including goodwill (generally determined on a quarterly basis) consists of passive assets (generally assets that generate passive income), we will be treated as a PFIC for such year. If we are treated as a PFIC for any taxable year
 
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during which a U.S. holder owns our ordinary shares, the U.S. holder generally will be subject to increased tax liability upon the sale of our ordinary shares or upon the receipt of certain excess distributions, unless such U.S. holder makes an election to mark our ordinary shares to market annually.
We believe that we were not a PFIC for our taxable year ended September 30, 2021. However, because the tests for determining PFIC status for any taxable year are dependent upon a number of factors, some of which are beyond our control, including the value of our assets, which may be determined by reference to the market price of our ordinary shares (which may be volatile), and the amount and type of our gross income, we cannot guarantee that we will not become a PFIC for the current or any future taxable year or that the IRS will agree with our conclusion regarding our current PFIC status.
In addition, if we were a PFIC for any taxable year in which we make a distribution or the preceding taxable year, the preferential rules on “qualified dividend income” described above would not apply. If a U.S. holder owns ordinary shares during any year in which we are a PFIC, the U.S. holder generally must file annual reports to the IRS.
Information Reporting and Backup Withholding.
U.S. holders generally will be subject to information reporting requirements with respect to dividends that are paid within the United States or through U.S.-related financial intermediaries, as well as with respect to gross proceeds from disposition of our ordinary shares, unless the U.S. holder is an “exempt recipient.” U.S. holders may also be subject to backup withholding on such payments, unless the U.S. holder provides a taxpayer identification number and a duly executed IRS Form
W-9
or otherwise establishes an exemption. Backup withholding is not an additional tax and the amount of any backup withholding will be allowed as a credit against a U.S. holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.
Certain U.S. holders who are individuals or certain specified entities are required to report information with respect to their investment in our ordinary shares not held through a custodial account with a U.S. financial institution to the IRS. In general a U.S. holder holding specified “foreign financial assets” (which generally would include (i) our ordinary shares not held through a custodial account with a financial institution, and (ii) a custodial account with a
non-U.S.
financial institution through which our ordinary shares may be held) with an aggregate value exceeding certain threshold amounts should report information about those assets on IRS Form 8938, which must be attached to the U.S. holder’s annual income tax return. Investors who fail to report required information could become subject to substantial penalties.
Documents On Display
We are subject to the reporting requirements of foreign private issuers under the U.S. Securities Exchange Act of 1934. Pursuant to the Exchange Act, we file reports with the SEC, including this Annual Report on
Form 20-F.
We also submit reports to the SEC, including Form
6-K
Reports of Foreign Private Issuers. You may call the SEC at
1-800-SEC-0330
for further information about the Public Reference Room. Such reports are also available to the public on the SEC’s website at
www.sec.gov.
Some of this information may also be found on our website at
www.amdocs.com.
You may request copies of our reports, at no cost, by writing to or telephoning us as follows:
Prior to January 1, 2022:
Amdocs, Inc.
Attention: Matthew E. Smith
1390 Timberlake Manor Parkway
Chesterfield, Missouri 63017
Telephone:
314-212-8328
 
63

On or after January 1, 2022:
Amdocs, Inc.
Attention: Matthew E. Smith
625 Maryville Centre Drive, Suite 200
Saint Louis, Missouri 63141
Telephone:
314-212-7000
 
ITEM 11.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign Currency Risk
We manage our foreign subsidiaries as integral direct components of our operations. The operations of our foreign subsidiaries provide the same type of services with the same type of expenditures throughout the Amdocs group. We have determined that the U.S. dollar is our functional currency. We periodically assess the applicability of the U.S. dollar as our functional currency by reviewing the salient indicators as indicated in the authoritative guidance for foreign currency matters.
During fiscal year 2021, approximately 70% to 80% of our revenue and approximately 50% to 60% of our operating expenses were denominated in U.S. dollars or linked to the U.S. dollar. If more customers seek contracts in currencies other than the U.S. dollar, the percentage of our revenue and operating expenses in the U.S. dollar or linked to the U.S. dollar may decrease over time and our exposure to fluctuations in currency exchange rates could increase.
In managing our foreign exchange risk, we enter into various foreign exchange contracts. We do not hedge all of our exposure in currencies other than the U.S. dollar, but rather our policy is to hedge significant net exposures in the major foreign currencies in which we operate, assuming the costs of executing these contracts are worthwhile. We use such contracts to hedge net exposure to changes in foreign currency exchange rates associated with revenue denominated in a foreign currency, primarily in Canadian dollar and European Euros, and anticipated costs to be incurred in a foreign currency, primarily New Israeli Shekels and Indian Rupees. We also use such contracts to hedge the net impact of the variability in exchange rates on certain balance sheet items such as accounts receivable and employee related accruals denominated primarily in New Israeli Shekels, Indian Rupees, Canadian dollar, Philippine Pesos, Indonesian Rupee, and European Euros, as well as other foreign currency of jurisdictions in which we operate. We seek to minimize the net exposure that the anticipated cash flow from sales of our products and services, cash flow required for our expenses and the net exposure related to our balance sheet items, denominated in a currency other than our functional currency will be affected by changes in exchange rates. Please see Note 7 to our consolidated financial statements.
The table below presents the total volume or notional amounts and fair value of our derivative instruments as of September 30, 2021. Notional values are in U.S. dollars and are translated and calculated based on forward rates as of September 30, 2021, for forward contracts, and based on spot rates as of September 30, 2021 for options.
 
    
Notional Value*
    
Fair Value of
Derivatives
 
Foreign exchange contracts (in millions)
   $ 1,260      $ 11.0  
 
(*)
Gross notional amounts do not quantify risk or represent assets or liabilities of the Company, but are used in the calculation of settlements under the contracts.
Interest Rate Risk
Our interest expense and income are sensitive to changes in interest rates, as all of our cash investments and some of our borrowings, are subject to interest rate changes. Our short-term interest-bearing investments, if applicable, are generally invested in short-term conservative debt instruments, primarily U.S. dollar-denominated, and consist mainly of bank deposits, money market funds, corporate bonds securities and U.S government treasuries.
 
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ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable.
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
Not applicable.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
Not applicable.
ITEM 15. CONTROLS AND PROCEDURES
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. With the participation of the Chief Executive Officer and Chief Financial Officer of Amdocs Management Limited, our management evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2021. The term “disclosure controls and procedures,” as defined in Rules
13a-15(e)
and
15d-15(e)
under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of September 30, 2021, the Chief Executive Officer and the Chief Financial Officer of Amdocs Management Limited concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level. Ernst and Young LLP, the independent registered public accounting firm that audited the financial statements included in this Annual Report on Form
20-F,
has issued an attestation report on our internal control over financial reporting as of September 30, 2021, which is included herein.
No change in our internal control over financial reporting (as defined in Rules
13a-15(f)
and
15d-15(f)
under the Exchange Act) occurred during the fiscal year ended September 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Management’s report on our internal control over financial reporting (as defined in Rules
13a-15(f)
and
15d-15(f)
under the Exchange Act), and the related reports of our independent public accounting firm, are included on pages
F-2
through
F-7
of this Annual Report on Form
20-F,
and are incorporated herein by reference.
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Our Board of Directors has determined that there is at least one audit committee financial expert, Adrian Gardner, serving on our Audit Committee. Our Board of Directors has determined that Mr. Gardner is an independent director.
 
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ITEM 16B. CODE OF ETHICS
Our Board of Directors has adopted a Code of Ethics and Business Conduct that sets forth legal and ethical standards of conduct for our directors and employees, including our principal executive officer, principal financial officer and other executive officers, of our subsidiaries and other business entities controlled by us worldwide.
Our Code of Ethics and Business Conduct is available on our website at
www.amdocs.com
, or you may request a copy of our code of ethics, at no cost, by writing to or telephoning us as follows:
Prior to January 1, 2022:
Amdocs, Inc.
Attention: Matthew E. Smith
1390 Timberlake Manor Parkway
Chesterfield, Missouri 63017
Telephone:
314-212-8328
Or after January 1, 2022 at:
Amdocs, Inc.
Attention: Matthew E. Smith
625 Maryville Centre Drive, Suite 200
Saint Louis, Missouri 63141
Telephone:
314-212-7000
We intend to post on our website within five business days all disclosures that are required by law or Nasdaq rules concerning any amendments to, or waivers from, any provision of the code.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
During each of the last three fiscal years, Ernst & Young LLP has acted as our independent registered public accounting firm.
Audit Fees
Ernst & Young billed us approximately $3.6 million for audit services for fiscal 2021, including fees associated with the annual audit and reviews of our quarterly financial results submitted on Form
6-K,
consultations on various accounting issues and performance of local statutory audits. Ernst & Young billed us approximately $3.6 million for audit services for fiscal 2020.
Audit-Related Fees
Ernst & Young billed us approximately $2.5 million for audit-related services for fiscal 2021. Audit-related services principally include SOC 1 report issuances and due diligence examinations. Ernst & Young billed us approximately $1.4 million for audit-related services for fiscal 2020.
Tax Fees
Ernst & Young billed us approximately $1.3 million for tax advice, including fees associated with tax compliance, tax advice and tax planning services, for fiscal 2021. Ernst & Young billed us approximately $1.5 million for tax advice in fiscal 2020.
All Other Fees
Ernst & Young did not bill us for services other than Audit Fees, Audit-Related Fees and Tax Fees described above for fiscal 2021 or fiscal 2020.
 
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Pre-Approval
Policies for
Non-Audit
Services
The Audit Committee has adopted policies and procedures relating to the approval of all audit and
non-audit
services that are to be performed by our independent registered public accounting firm. These policies generally provide that we will not engage our independent registered public accounting firm to render audit or
non-audit
services unless the service is specifically approved in advance by the Audit Committee or the engagement is entered into pursuant to the
pre-approval
procedure described below.
From time to time, the Audit Committee may
pre-approve
specified types of services that are expected to be provided to us by our independent registered public accounting firm during the next 12 months. Any such
pre-approval
is detailed as to the particular service or type of services to be provided and is also generally subject to a maximum dollar amount. In fiscal 2021, our Audit Committee approved all of the services provided by Ernst & Young.
ITEM 16D. EXEMPTION FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
The following table provides information about purchases by us and our affiliated purchasers during the fiscal year ended September 30, 2021 of equity securities that are registered by us pursuant to Section 12 of the Exchange Act:
Ordinary Shares
 
Period
  
(a)
Total Number of
Shares
Purchased
    
(b)
Average Price
Paid per Share(1)