Amdocs : BofA Securities 2025 Global Technology Conference Transcript

Published: 2025-06-05 11:36:06 ET DOX

Published on 06/05/2025 at 11:36

REFINITIV STREETEVENTS

EDITED TRANSCRIPT

DOX.OQ - Amdocs Ltd at Bank of America Global Technology

Conference

EVENT DATE/TIME: JUNE 04, 2025 / 8:20PM GMT

OVERVIEW:

Company Summary

(audio in progress) If I say 30 years, I probably -- I don't exaggerate. And I always -- because I also speak Hebrew, I always get the people that think that I know something special, so I'm going to tell you, I don't know anything more than what they say publicly, but I know the company really well. That's what I told you before.

So I'm going to basically use this session to discuss the growth drivers and discuss what drives -- what causes revenue growth to accelerate, decelerate, and kind of long-term potential and things. So because we're a small group, if you have any questions, in the middle, just raise your hand, we have a mic, we can make it interactive.

‌So Tamar, thank you, and what I wanted to ask is if you can -- the main discussion I always have with investors is they ask me, what are the drivers for growth for the next three years? Kind of big picture kind of trends. And I want to understand, where are you positioning your company for growth? What are the areas? What are the target markets? If you can give us even a little bit of history, so we know how you get from where you are today or where you started a few years back.

Sure, we'll do that. But before that, I have to share that because you said, I know you. It's his birthday. (laughter)

I want to say something about it. Today, two other great people were born. One is called Angelina Jolie, and one is called Bar Refaeli. It's a model. And that's why there is not enough beauty in the world. I was last in line, so at least I was there for the brain. (laughter)

Nice group. All right, so let's talk about Amdocs. Great to be here. We are providing software and services to help telecommunication service providers around the world to provide services to you, to businesses. We're running it in 90 countries. We've been doing it for several decades. And over the years, we've expanded our addressable market by adding more and more offerings.

The company is coming with a very unique business model, i.e. this combination where we provide both the best software stack as well as take the full capability to deploy that software successfully in our customers' environment. And beyond that, we also offer our customers that we can run it for them based on a model where we can run under a multi-year engagement we call Managed Services. There are systems for them, including enhancements, including committing to certain KPIs, et cetera.

And looking on the company growth over the recent years, we've focused on a couple of significant growth investment domains for our customers. And before we go into the details of what these are, we'll say that we are running a company that is generating revenue of roughly, let's say, $4.5 billion expected this year in an addressable services market of -- services and software market of $60 billion, six zero. So we feel we have a very large room to grow by taking more wallet share, even in domains that we're activating. Roughly speaking, about half of that global spend that is relevant for us is still done by the in-house organizations, the in-house IT organizations of our customers. And we are there to provide them value both as they modernize and they're looking to enhance revenue, as well as reduce their cost footprint and improve their operational excellence.

Major growth drivers we've identified in the last several years, and of course, it's something that is evolving. First, the shift to the cloud. Our industry, the telecom industry is moving a lot of their software and workloads from their own data centers to the cloud. This is not an easy undertaking. We're talking about mission-critical applications, very large-scale complex environments.

And we are coming to our customers both with the advisory around the what's the right journey for that specific customer to take when they're moving to the cloud, the software stack that will actually run in a cloud native environment with all the great features and functions, the ability to help them migrate to the cloud, all the way after the new system is up and running, run it in Managed Services on the new cloud environment.

Cloud activities already comprise 25% of our revenue in the last fiscal year '24, growing double digits very nicely, and we expect to continue and grow double digits this year. A lot of the new transformations, the setup of new systems around the world are driven, among other reasons, by primarily with the shift to the cloud.

We also realized that we want to help our customers move to the cloud not only with our own application, but also helping them migrate from legacy applications that they have to the cloud. We are, for example, helping AT&T, as we speak, move hundreds of applications from mainstream to cloud. And this is based again on a technology driven approach. We've acquired the company that is delivering this through a very sophisticated tools.

So everything we do in Amdocs is about helping our customers. When we talk about the services that we provide, they're already embedded around our products, but also driven by technology. And this is another example for that.

Another growth pillar is the ability of our customers to go and digitize and automate the business processes they have for the business segment. We've been talking as the industry about digital transformation for many, many years, and we've been -- Amdocs historically, been very focused on helping our customers go through the digital transformation for the consumer segment.

Another vector we've been seeing in the recent years that many of them identify the business segment as a growth area, one that has been run more based on manual business processes, semi-automated business processes. And we are helping customers around the world address that challenge by automating and providing our software stack, addressing the opportunities that they have to grow their business segments. And I'm talking about customers like Comcast in the US, Hutchison in Europe, PLDT in Philippines, and there are many other examples out there.

Another vector we've been seeing is the networks have become more and more virtualized, more and more software-defined. We are not a network equipment provider. We are the software that runs on top of that that enables our customers to better manage the inventory of the network, and it's a hybrid network that includes both physical as well as virtual elements to optimize how you actually service a new opportunity, meaning let's say a customer comes in, they want a new service, you need to understand how to activate certain elements in the network and how to fulfill that service. Then you need to ensure the quality of service. All of that is run by software that we can provide our customers and that -- some might call it the NextGen OSS or service orchestration and fulfillment, all different names out there. But eventually, it's all about running for software a better use plan -- planning and usage of the network.

The last thing I would say is that everything that has to do with monetization. Amdocs historically, for those who knew us in the early days in the 90s, started with billing, the monetization of the services to customers. And since then, we've expanded significantly with many business support systems that go much beyond billing. But eventually, everything the customers that we have invest in, whether it's 5G networks, fiber rollout, they want to monetize. We help them actually with the monetization.

And of course, it's evolving over time. So today, monetization may be for launching over-the-top services as part of this bundled service they're providing. Monetization can be by providing new services that are taking a -- some partnership ecosystem, let's say a gaming company that they want to offer to the younger customers. It can be anything, really, and the sophistication of what we provide is that when they invest billions and billions of dollars into enabling new networks, new ways of connectivity, new ways of monetization, we are there actually to provide them this kind of flexibility.

Now overarching all of that, generative AI. Of course, like any other tech company out there, we are seeing an amazing opportunity taking generative AI, embedding it in our software products, also helping our customers in providing a much better capability from the data structure. We understand the data structure very well, a lot of this data is coming out of our software applications, and we can help our customers with tools and services to prepare for the Gen AI era.

And we're also proposing to our customers a very unique platform that we call amAIz that could help them actually launch to market different use cases. Again, some of these use cases are about generating more revenue, some of these use case is about how to reduce cost, but eventually, the power of the relationship we built with industry leaders such as Nvidia, et cetera is to come with amAIz as a platform and help our customers generate fast launch of use case and make money out of that.

So that's been very sure, and the company has been targeting, for the full year 2025, a year-over-year growth rate of roughly 3%, but if you look through the year, we are showing acceleration. So we started the year on a slower pace, accelerate, and we have a leading indicator we call 12-month backlog that we publish every quarter. And our 12-month backlog as of March 31 already showed 3.5%, so you can understand that we are on a path to such an acceleration. Very excited about all these opportunities and of course, we push forward to make sure that we translate a very solid pipeline to continue and fuel that growth.

Historically, there was some correlation between CapEx and your growth. Going forward, do you think that there is going to be much correlation between CapEx and growth? And the reason why I'm asking is because CapEx is not expected to grow on the carrier side, on service providers side. How can you grow within an environment where spending overall, the overall pie is not growing?

Yeah, so that correlation you mentioned that was maybe right in the past, the distant year is no longer the case. Actually, 75% of our revenue is generated from recurring revenue because over the years, we've added a lot of engagement of what we call the Managed Services in which we actually run the system for our customers. So out of three quarters of our revenue being recurring, already, we reported, for example, in our second fiscal quarter that ended in March, that 66% of total revenue of the company is Managed Services engagement, so we definitely see that as the more recurring aspect, the more consistent long-term engagement, those are typically multi-year agreements that run between five to seven years. So that's the piece that looks very differently on what kind of budget from our customers this is being paid for. This is operating expenses for our customers.

At the same time, when we look on new transformation projects, the rest of the 25% of revenue, this is typically more of a CapEx spend. Now we are a small part of the overall CapEx spend of our customers, but typically, the majority of which is going for the network equipment guys, et cetera.

But, okay, so we don't have direct correlation. Having said that, of course, from our point of view, we need to see that our customers are investing in the domains that we are focusing on, and this is something that is obviously getting traction for, first of all, the POs that we are seeing signed, but also a lot of the dialogues we're having with our customers to make sure that our prediction and our strategy is aligned with theirs in terms of how they're thinking about the future, such is the example I gave of the focus on the business segment and the fact that we have the right tools and software to provide them around that and other things.

So short answer, no direct relation to CapEx. Of course, when we look at our serviceable addressable market and the definition of what we see as the growth domains, those growth strategic pillars, they're very much focused to see where they're going to invest their money.

I want to look at growth maybe from a different angle. You disclose kind of customer concentration every year in your report, and you have about five, six customers that are more than half of revenues, and the other part of the world is the other half or 40%. Can you discuss about growth in that kind of two buckets, meaning what are -- outside of the very large customers that you have, what are the trends in the other parts of the market? What kind of customers you have? What kind of opportunities do you have? Is there a difference between the projects here and the projects there?

So it's a great point. First of all, for anyone who knows telecommunication, it's a pretty concentrated industry. Eventually, if you look on the customers that make the end market revenue, it's probably less than 100 that make over 80, so pretty classical Pareto kind of thing.

Having said that, from our point of view, there are a couple of important things. First of all, the customers we serve, we need to do a great job and continue to bring them value so our renewal rate keeps close to 100% like it has been in the past.

Second, we continue to invest in innovation that we'll bring also to new customers, of course. And over the years, we've expanded significantly, both into new buying centers within existing customers. For example, I mentioned network automation. Historically, the company was more in BSS, which is an IT spend. When I'm talking about network automation, it's more of the CTO tower. It's more of the -- a different buying center that is making this decision.

And then of course, new logos. We've expanded to new logos both in our largest market, which is North America. So for example, in the last several years, we've expanded significantly our relationship with Charter. We've penetrated Verizon. It was not a customer. Last quarter, we announced a new logo, a smaller name, Consumer Cellular, 4 million subs as an MVNO.

And having the focus to continue and expand in North America, we also expanded internationally in a very meaningful way. So just to give you a couple of data points, if you look on our top 10 customers, a decade ago, we had two names that were international. The other 8 were North American. If you look at it today, 6 out of 10 are international names, not because we lost any North American customer. On the contrary, we expanded our business with them. First of all, the threshold of being a top 10 just went up. And I'm glad to say that we developed strong, recurring relationship with groups like Hutchison Group, Telefonica, PLDT in Philippines. So those are meaningful groups or carriers out there in the world that we are seeing now as top customers.

And we continue to see how we continue and expand to new countries. By way of example, Japan. Recently, a recent success story for us. We've been trying to penetrate Japan for a while. Now we have NTT. We have a new modernization project in JCOM, a cable operator in Japan. With Paramount, a media company in Japan. So we're continuing to see opportunity to go into new countries and expand more and more beyond just North America that has been more of a traditional market for us.

Is there a different growth profile between North America and other parts?

I wouldn't say it's a different growth profile as much as where the base of business is relative to us. Yes, so we are going to North America even though it's such a long-term market for us, and we're doing it with existing customers as well as some new, as I mentioned.

But if I'm looking from a geographical point of view, first of all, Europe, great success in the recent years for us. We're coming with a very unique business model, as I said before, providing both the software and services. Historically, the European customers were more inclined to buy separately

Disclaimer

Amdocs Ltd. published this content on June 05, 2025, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on June 05, 2025 at 15:35 UTC.