Welcome to Amdocs' fourth quarter 2006 earnings release conference call. Today's call is being recorded and webcast. At this time I would like to turn the conference over to Tom O'Brien. Mr. O'Brien, please go ahead. Tom O’Brien: Thank you. I'm Tom O'Brien, Vice President of Investor Relations for Amdocs. Before we begin I would like to point out that during this call we will discuss certain financial information that is not prepared in accordance with GAAP. The Company's management uses this financial information in its internal analysis in order to exclude the effect of acquisitions and other significant items that may have a disproportionate effect in a particular period. Accordingly, management believes isolating the effects of such events enables management and investors to consistently analyze the critical components and results of operations of the Company's business, and to have a meaningful comparison to prior periods. For more information regarding our use of non-GAAP financial measures, including reconciliations of these measures, we refer you to today's earnings release, which will also be furnished to the SEC on Form 6-K. Also, this call includes information that constitutes forward-looking statements. Although we believe the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that our expectations will be obtained or that any deviations will not be material. Such statements involve risks and uncertainties that may cause future results to differ from those anticipated. These risks include, but are not limited to, the effects of general economic conditions, and such other risks as discussed in our earnings release today, and at greater length in the company's filings with the Securities and Exchange Commission, including our annual report on Form 20-F, filed on December 28, 2005, and on our Form 6-K, furnished on August 15, 2006. Amdocs…

Thank you, Dov. Our fourth-quarter revenue was $665 million, representing growth of 16%. Q4 revenue includes a contribution of approximately $8 million from Cramer, which closed on August 14. Our non-GAAP EPS, which excludes acquisition-related costs and equity-based compensation expense, net of related tax effects, was up 28% to $0.50 per diluted share. Non-GAAP EPS was positively impacted by good results in our business and a favorable tax rate, offset by some dilution related to Cramer. GAAP EPS was $0.35 per diluted share. I will spend a minute now on a few P&L items. Please note that I am referring to the results excluding acquisition-related items and equity compensation expense. Also, in Q4 we had the full quarter of Qpass results and Cramer for about six weeks. Operating margins were 18.3% this quarter, up 40 basis points from last quarter. The main drivers of the increase were higher gross margins, offset in part by higher R&D and SG&A expenses. Gross margin was positively impacted by higher license revenue and by improved gross margin on services. R&D and SG&A expenses include additional costs from Qpass and Cramer. Next quarter will be the first full quarter with both Qpass and Cramer expenses, so we expect operating margins to decrease slightly in Q1. The dilution from the Qpass and Cramer acquisitions is weighted towards the first half of fiscal 2007, so this pressure on profitability will decrease as the year progresses. License revenue was up significantly this quarter, as we benefited from subsequent license fees paid by existing customers, as well as license revenue from Qpass. License revenue in Q1 should be similar to this quarter. Other income decreased this quarter, as expected, since we are carrying a lower cash balance after the Qpass and Cramer acquisitions. We used $353 million in net…

(Operator Instructions) Your first question comes from Liz Grausam - Goldman Sachs. Liz Grausam - Goldman Sachs: Hi guys. Just wanted to dig in a little bit more on your gross margin, in particular in the services area. You seemed to have a nice sequential uptick. Could you help us understand what in your services portfolio is driving it? Is it maturation in some of your managed services contracts?

The pickup in the gross margin of the services is the result of many items, including efficiencies that we see in our delivery as a result of the alignment process that we have gone through this year, and as a result of the extension of our activity in the development center in India; that's also contributed to that increase in quality and I would say stronger performance in all aspects of our business. Liz Grausam - Goldman Sachs: Would you expect, Ron, for that margin to hold up going forward despite being a little bit lower in the operating margin from some of the other OpEx items?

Overall, we expect positive trends in the margins on the core business; however, in the next quarter we're going to see the full impact of Qpass and Cramer on our margins, so there is some impact there. We're going to see some relief of this impact over time. Liz Grausam - Goldman Sachs: Great. Then the stock-based compensation is actually a little bit higher than we had expected this quarter and going forward. It looked like you increased it a bit from where you were sitting last quarter on the 2007 guidance. Could you help us understand what's going on there? Is this related to the acquisitions?

Yes, exactly. Basically, when we acquired Qpass and Cramer, we had to roll over some of the equity measures that they have, stock options and so on, and some were in the money. So we needed to carry these costs from last year. So that basically accounts for this pickup.

Your next question comes from Tal Liani - Merrill Lynch. Tal Liani - Merrill Lynch: Thank you. I had one question for the next quarter, and it's actually a more general question. Next quarter some of your customers said that a few of their initiatives are being deployed, so for you, they hit the revenue recognition test, which is Sprint Nextel starting the migration of the customers, and you have AT&T starting to deploy more nationwide their Lightspeed project. What happens from revenue and expense recognition when you have such situations? You invested in a certain project throughout the year, and then it hits on recognition tests. So, what happens from that point onward? Thanks.

Thank you. The AT&T side, our activities categorize similar to most of our activity where we recognize revenue based on the percentage of completion, and we are not necessarily impacted by one or the other milestone. Obviously we are pleased with the progress of AT&T on this front, so over time it's better for us. As for in Sprint, a conversion of subscribers is contributing to the base fees that we are getting from Sprint. So we are really happy with that as well. Tal Liani - Merrill Lynch: So when it comes to such projects, you probably assimilated some expense and you probably capitalized some expenses. And then once you start the migration, the question I have is Sprint is going to migrate the subscribers and it's going to ramp throughout the year. It's not going to be at a constant rate every quarter. It starts low and it sort of ramps throughout the following four quarters. What happens to expenses? Do they match this kind of ramp, or expenses are high first and should we expect margins to increase as your migration project continues? Should we incorporate this constant addition every quarter?

Margins should increase as the migration process accelerates. However, we cannot refer at this point to the pace of migration or give any specific reference to the next quarter versus any other quarter. Dov Baharav: Let me add here that you mentioned two major success of the success of the company. One is the successful delivery, the initial delivery to Sprint, and the second is our success with Lightspeed. We are extremely pleased with our success and the smooth delivery, and the fact that we enable our customers to actually implement our software and actually the full plans that they have in order to build their revenue and increase the opportunity for them to be more successful and competitive in the market. The more they grow, and the more they implement new services and IP-based services, and moving to IPTV on one end, and content to the other, and the more they get better from us, it will open new opportunities for additional revenue for Amdocs.

Your next question comes from Ashwin Shirvaikar - Citigroup. Ashwin Shirvaikar - Citigroup: Nice quarter. Congratulations. Clearly, a lot of global telcos around the world continue to buy into the Amdocs vision of integrated billing and customer care. But with demand so strong, and continuing to be strong, do you worry about the supply side of the equation? What's the thought process to ensure that you have the right infrastructure in place at the right place, right time and right price? Could you go through that metric a little bit? Eli Gelman: Ashwin, are you talking mainly about our ability to meet the demand, right? Ashwin Shirvaikar - Citigroup: Right. Meet demand on a global basis. Eli Gelman: Thanks for the question. I think that one of the things that we've done in preparation for this demand is the alignment process, where we are using and utilizing our people better. We explained this process about four quarters ago. But basically we're talking about expertise by application, versus expertise by customer set. So that's one area that we definitely see some better results of better utilization, if I may call it this way, of our work force. On top of it, we accelerated dramatically our work force, our capable work force in India in some other development centers, where access to additional people is available in a high rate. On top of all that, you need to remember that some of the growth that we have is actually managed services, where we take upon ourselves responsibility with people that are being transferred to the company. So we feel very comfortable with the growth rate that we have right now and our ability to support the demand. As a matter of fact, we are geared even to higher growth. Ashwin Shirvaikar - Citigroup: A separate question. Between the investments in working capital and CapEx, is it reasonable for fiscal '07 to expect free cash flow growth sort of in line with the earnings growth?

All in all, we expect free cash flow to grow and to correlate to non-GAAP earnings growth. Obviously there might be some changes in working capital CapEx versus depreciation that we cannot specify at this point.

Your next question comes from Sterling Auty - JP Morgan. Sterling Auty - JP Morgan: Can we look at the margins this way? How much of the margin improvement might be coming from leverage on some of the large managed service deals versus the contribution now that you'd moved more stuff offshore versus other items?

I'm not sure that we can specify because it's intermingled. Some of what we are doing offshore is serving all areas of the business. For instance, in the delivery organization, this is one organization that serves all the business units of the Company, so I cannot differentiate, bifurcate that. Dov Baharav: But in general, one of the reasons why we are successful, and we are aimed to be successfully in the future, is to be able to reduce the total cost of ownership to our customers. We do it by having by far more effective and efficient suite of products, as Eli mentioned, by having a centralized delivery organization that is getting more and more professional and effective. Also by having substantial development centers in local countries like India and China. So, we are able to provide to our customer attractive pricing on one end, and protect and increase our margins. So we expect increasing the margin moving forward on the managed services contracts. Sterling Auty - JP Morgan: Last question would be you mentioned Sprint Nextel. Can you give us some idea of how much of the organic backlog increase came from Sprint Nextel? Eli Gelman: Sterling, maybe it's a good opportunity to shed some light on this project. Basically we signed a contract to the full extent. We delivered the initial releases on time. We started conversion. So we have some CDMA customers already running on our system. So it's the first time that CDMA and iDEN customers are sharing the same infrastructure. And basically we see maybe three or four components of the revenue in our stream. One that will keep on growing, which is related to the customer that we are processing. Although we have to remember that the marginal additions are, obviously, in a lower sliding scale rate. Then we have the setup, one-time services that some of them will go away as we progress into the ongoing stage. Then we have ongoing services, the new services. On top of all that, obviously, we have some new components of software and services that are in the pipeline, but they are not in the backlog at all, because they are future business for us. Based on other customers and our experience in other places in the world, when companies of this size are going through such a major transformation, that they did, we expect to have more and more business from Sprint altogether. So in terms of the backlog, you need to assume that on one hand, the revenue from the backlog from converted customers will grow. But some of it in '07 will be offset to a certain extent by completion of specific set-up projects. Altogether we expect the revenue from Sprint to keep on growing over the next few years.

In reference to the quarter, actually in this quarter and the previous quarters we saw some contribution to the backlog from the Sprint side. I cannot specify exactly how much of it, but it's significant.

Your next question comes from Thomas Ernst - Deutsche Bank. Thomas Ernst - Deutsche Bank : Congratulations on the quarter. A quick question on the announcement you made a few days ago, the DIRECTV extension. Should we be expecting an increase in backlog thanks to this contract? As a follow-up question to that, is it a fair assumption to believe that this contract will involve the new version of Amdocs Enabler for DIRECTV? Thank you.

First of all, the extension by itself of DIRECTV is contributing to the long-term backlog of the company. On top of the 12-month backlog that we measure. On top of that. There is some increase in scope, extension of our activity with DIRECTV that will contribute to the backlog as we move along in the next several quarters. Eli Gelman: In regard to the second part and to what extent the activity is going to use Amdocs 7, we cannot reveal too many details, but I would say that they are going to gradually migrate to Amdocs 7. Amdocs 7 is all about improvement in the broadband and cable and DBS abilities of our system. So with Amdocs 7, we actually have full convergence of critical play on one platform, that we can support wireline and wireless and Internet and broadband and video. Slowly but surely, we'll see DIRECTV moving in this direction. The rest of the data should be released by DIRECTV.

Your next question comes from Daniel Meron - RBC Capital Markets. Daniel Meron - RBC Capital Markets: Thank you. Congrats on the good quarter and outlook. Ron, maybe you can provide us with some sense on the organic growth that you saw apples-to-apples in 2006? And also, where do you expect organic growth in 2007 as well?

In '06 organic growth was around 10%. Specifically this quarter it was about 3.5%; you can make the math yourself. Going forward in '07, some of the activities are intermingled. But we still expect to be in the low double-digit growth rate organically. As you know, when we discuss '07 for us cable and the satellite, China, broadband are already part of the organic growth. Daniel Meron - RBC Capital Markets: Great, thanks. Just a follow-up on the Amdocs 7 launch. Is this still on plan early 2007? Where do you see the interest coming from? Is it mainly from pay TV operators, existing cable DBS guys, or elsewhere as well? Eli Gelman: Thank you, Daniel. Regarding Amdocs 7, the billing part of Amdocs 7 is actually available now. The other components will be available at the beginning of the year, actually right up to the first of the year. In terms of the revenue, we expect basically a combination of existing customers upgrading to Amdocs 7 and we have a few of those already committed to this direction. We expect new customers to sign up on Amdocs 7, which we have in the pipeline right now. On top of all that, we expect broadband companies to start realizing the benefits of Amdocs 7, including companies in North America and outside of North America.

Your next question comes from Kerry Rice - Wedbush Morgan. Kerry Rice - Wedbush Morgan: Let me think. You talked about the increase in expenses in the first half of '07 should see a peak and then start to tail off. Can you talk a little bit about what your strategy is for managing that cost structure?

I'd say it's very simple. We are integrating Qpass and Cramer. And as we mentioned in the past, at the beginning we are being dilutive. Our strategy is to provide growth on the top line, and basically leveraging on the cost structure without having to reduce the costs necessarily. So the growth on the top line with a good control on the expense side will provide us the margin expansion. Kerry Rice - Wedbush Morgan: But no additional offshoring, you think, based upon the new additions of Cramer and Qpass?

Not directly related to that. Dov Baharav: I would say that when you think about Cramer and Qpass, all these acquisitions are all about growth. We bought two companies augmenting additional capabilities to Amdocs, getting into the content area, getting into the OSS area, where by coupling the Amdocs presence in the market, the relationship with the customers, and the new capabilities that we acquired with Cramer and Qpass, we are able to accelerate the growth of this company, and as Ron said, to control the expenses. So, as we have done in the past, with DSP and Longshine and other acquisitions, we feel quite good about our ability to generate growing margins. Eli Gelman: Maybe one more point about these acquisitions. Both Qpass and Cramer are not only strategic, but they are by far the best in class. We paid maybe the full price, but definitely we got the premium assets in the market. They are second to none. So, any other assets out there we believe that we will be able to compete well with.

Your next question comes from Marianne Wolk - Susquehanna. Marianne Wolk - Susquehanna: I had one follow-up and then one new question. First of all, Ron, when I tried to calculate organic growth for this quarter, I came close to 12.5% excluding Qpass and Cramer. Can you just verify that? Secondly, since you have been so active in the OSS area, I was wondering what else you think you need? What's missing in your portfolio right now that we might expect to see you acquire in fiscal '07 or fiscal '08 from a big picture standpoint? Thanks.

I don't know regarding the 12%. When I said 10% organic growth I referred to the full '06 number. I don't have off-the-cuff the numbers for the fourth quarter. Eli Gelman: In terms of getting into new subjects and something that might be of an interest for us, I would say there are three components. One is technology. We are constantly looking for areas where we can save R&D money by acquiring technology, and even within our account strategy. So that's one area. The other one is maybe something that will help us to penetrate into new areas, geographies, areas like this. The third one is services, mainly around maybe special SI activity or best practices that can enhance our capability on the services. As you know that we have grown our consulting services as well as implementation services dramatically in the last two years, but we can accelerate that further. Of course we did not complete our abilities in content in new areas.

We ran some quick calculations and it was about 11% for the quarter, the organic growth.

Your next question comes from Tom Roderick - Thomas Weisel Partners. Tom Roderick - Thomas Weisel Partners: Eli, I wanted to follow-up on a comment you made on the question of Sprint earlier. I think you said that marginal additions that are added to the system will be added on a sliding scale rate. I was hoping you could clarify what that means. Does that mean that as new Sprint subs are added on to the platform that you have built, that those subs will be added at a lower rate per month or per year, however you bill, than the existing subscribers on the network? Eli Gelman: Tom, thanks for the question. By and large, you would expect any large company to enjoy the economy of scale. We have done it for years and years and years. Part of the idea is that the more they grow, the marginal subscribers are being added to the system on a relatively lower rate. It does not mean that there is an erosion to the current volumes or something of this nature. But the larger the company is, they will enjoy some marginal rate. Now for us, of course, it is also much easier to add these subscribers, because it's a marginal cost as well. In many cases it's the same data center, the same CPU, the same operators, the same billing operations people, in many cases the same programmers that are writing the code. So it allows us to, in a way, share the high efficiency that we have in high volumes with the largest customers that we have, and it makes a win-win situation. Tom Roderick - Thomas Weisel Partners: Thank you. Ron, can you clarify one comment you made? Did you say that the Sprint contribution to backlog over the last few quarters has been significant? Was that your word?

It is possible, but no. I didn't say specifically what was the percentage out of the total growth of the backlog, but it was not negligible. It was significant.

Your next question comes from Julie Santoriello - Morgan Stanley. Julie Santoriello - Morgan Stanley: Thanks, good afternoon. A question on CapEx. I think it was lower this quarter than, I believe, you were expecting. I think last quarter we talked about CapEx potentially being 40 to 50. Just wondering if there's a specific reason why you've made CapEx less this quarter than expected.

Basically we were spending according to our plans; however, some of the payments to our vendors on the CapEx are going to be due only next quarter. So from a cash flow standpoint, it doesn't flow through the fourth quarter, but rather on the first quarter of '07. Julie Santoriello - Morgan Stanley: Is a large portion of that spending related to building out data centers for the incremental subs from Sprint Nextel?

Yes.

Your next question comes from Julian Abu - Lehman Brothers. Julian Abu - Lehman Brothers: My question is related to Bell Canada. The old contract won't expire until 2010, so why renew it now? Also, are there any changes in scope and terms? Is there a competitive process? Dov Baharav: Julian, the extension of this significant contract with Bell Canada is aimed to enable Bell Canada to have more competitiveness. We had the opportunity to work together with Bell Canada, to design some changes in the ways that we deliver the service to make it more effective, more efficient, so it will help Bell Canada to get better results, to be able to handle all the new services, and to enjoy the overall comprehensive services that we are providing. So by extending it, it enables both sides to plan quarterly the activity and to execute it, and enjoy better results. So the longer time provides predictability, it will provide the stability, provide better revenue stream, and better ability to compete for Bell Canada. Julian Abu - Lehman Brothers: Thanks. That's helpful. Regarding the ten key wins, are there new logos in those ten wins? Dov Baharav: Yes there are. We have not mentioned the names, but there are several.

Your next question comes from Shaul Eyal - CIBC World Markets. Shaul Eyal - CIBC World Markets: Thank you. Ron, backlog for the next quarter. Is it fair to assume that it could continue to grow slightly sequentially?

We don't give guidance for the backlog, as it fluctuates and it depends on timing of signing of orders and contracts and so on. So, I cannot refer to this question. Shaul Eyal - CIBC World Markets: On the operating margin side, still a 20% target for the next, let's say, 18 months or so, 24 months?

I cannot commit to timeframe, but a 20% margin is still a valid target for the Company. In '07 we are investing in the growth of the business by integrating Qpass and Cramer. That takes its toll in the short term, but overall that is going to contribute to the margin capacity of the company. So overall, 20% is definitely feasible. As for timing, I cannot refer to it.

Your next question comes from Mike Latimore - Raymond James. Mike Latimore - Raymond James: On the Bell Canada deal, did that new deal increase or decrease the 12-month backlog?

First of all, it's within backlog. So whatever it is, it's in the backlog for the next 12 months. Mike Latimore - Raymond James: But I guess, does a new contract have a positive or a negative impact relative to the original Bell Canada backlog? Dov Baharav: What I can contribute that overall backlog -- not the 12-month backlog, the particular accounting on it. When you're looking at the overall backlog of the Company it has increased since we had the contract until 2012. The most important thing about this contract is that it's opens, given the fact that we align the plans and the activity of both companies, it opens a lot of opportunities for growth for us, helping Bell Canada moving to new areas in for example it's not only billing, but there are many other areas. As you know, we have acquired in the last few years capability in OSS, in CRM, in mediation and other where we believe that we will find a way, and Bell Canada will find it useful, to have more activity with Amdocs. Eli Gelman: Just to add on to Dov's comment, one of the key things that Bell Canada will get out of the new contract are better SLAs. Now, we can provide the SLAs at the same cost or lower because we became so good at running this type of operation. We assume that we will be able to meet these SLAs. As a result, we'll have an even more satisfied customer. That usually translates, in Amdocs case, to more business.

The original comment regarding the backlog, the backlog of the Company grew this quarter. So, whatever impact, positive or negative, this contract is taken into account the backlog that was reported in Q4.

At this time I would like to turn the conference back to the management for closing remarks. Please go ahead. Tom O’Brien: Thank you very much. On behalf of the management of Amdocs, thank you all for attending our call. This concludes the Q4 conference call. Thank you.