Investigation of Amdocs Limited
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Amdocs Limited (DOX) Misstated its Financials
Amdocs conducted its 2021 Annual General Meeting (“AGM”) on January 29, 2021, wherein all ten directors were elected to the Board, the quarterly dividend rate increase was approved, Amdocs’ Consolidated Financial Statements for FY2020 was approved, and Ernst & Young was approved as the Company’s independent registered public accounting firm for FY2021. The Notice of the 2021 AGM incorporated the Company’s annual report on Form 20-F for the period ended September 30, 2020 (FY20 20-F), and directed shareholders to consult it for additional information. The FY20 20-F claimed Amdocs’ U.S. business had been increasing, that its cash flow and lines of credit would “provide sufficient resources to meet our operational needs,” and stated that it had zero debt outstanding as of September 30, 2019.
On February 2, 2021, Amdocs issued a press release announcing its first quarter FY2021 financial results for the interim period ended December 31, 2020. The Company’s President and CEO touted Amdocs’ “best ever performance in North America” and increased profitability. The release affirmed previously provided financial guidance, stating, “We remain on-track with our guidance to deliver accelerated growth in fiscal 2020 … we continue to expect a stronger second half as we execute on our strategy…” A conference call with investors and the Company’s SEC filings on February 16, confirmed these statements.
Despite these positive affirmations, Amdocs had failed to inform investors that it had been losing customers and its U.S. business had been declining, that it had borrowed undisclosed sums to meet its capital needs, concealed the restrictions on the cash it held, and that it had been overstating its profits by up to 50%. The truth was revealed on March 30, 2021, when Jehoshaphat Research issued a report “reveal[ing] the results of a months-long investigation into what [that firm] believe[s] is a massive financial deception taking place at Amdocs.” On this news, Amdocs stock fell more than 10%, closing at $70.15 on March 31, 2021.