Amdocs Ltd at Citi Global TMT Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Ryan Potter - Citi - Analyst : Good morning. I guess for those in the audience on the webcast that might be new to Amdocs, can you provide a shorter overview of who Amdocs is, who you compete with, and what are your competitive advantages in the market?

Question: Ryan Potter - Citi - Analyst : Got it. It's a good overview. I guess just shifting gears, moving to demand a little bit, it's been a tough enterprise spending environment for the past year and a half and two years now, and you've seen your growth rate as market growth rate has decelerated a little bit in recent quarters. But your backlog has been consistently 2% to 3% growth, you can call it. So I guess how would you characterize demand environment now versus, call it, 12 months ago and maybe you could also find some color in how it's evolved throughout maybe calendar '24?

Question: Ryan Potter - Citi - Analyst : Got it. That makes sense. And with the majority of your clients being telco clients, is there anything unique to that vertical that we have to think through in terms of demand? Like, how would lower interest rates affect those clients if we start seeing lower interest rates? And in general, I guess, what would it take for the demand environment to open up more for decision-making cycles to condense and stuff like that?

Question: Ryan Potter - Citi - Analyst : Got it. Got it. Can you comment on, I guess, regional demand color, like America versus Europe? Is there any differences? And from a geopolitical standpoint, I mean, you have the war in Israel. Is that impacting client demand at all, but also geopolitical broadly? I mean, we have election cycles in the US and other countries, too. Is that impacting demand?

Question: Ryan Potter - Citi - Analyst : On the last earnings call, you mentioned growth is likely to remain around these levels maybe in the near term. I mean, I'm sure it's uncertain in terms of how many cores might be at those levels. But backlog growth being around 2% or 3%, is that kind of a good baseline to think through? Like maybe low single digits, what you guys could achieve in the near term, given the, I guess, visibility it gives going forward?

Question: Ryan Potter - Citi - Analyst : I guess just sticking on top line, before this enterprise spending slowed down, you guys had a medium-term growth outlook of, call it, 6%, 10%. Some of it was kind of pent-up demand, pandemic. And maybe it was just the right time in terms of, like, cloud investments, 5G, all that stuff. Could you eventually get back to those levels? Or was that more opportunistic? And probably once we get to a normalized kind of spending environment, maybe it's mid-single digits or lower end. I don't want to put words in your mouth, but --

Question: Ryan Potter - Citi - Analyst : Got it. And you've touched on a lot of these already, but you called out kind of five strategic growth drivers between cloud, digital, 5G, network automation, and AI, GenAI, right? Any color you can give in terms of sizing of exposures you have to those and which of them are in the fastest? I know cloud, you've been calling out growing double digits. I assume maybe that's like the largest growth lever to total company growth. But so that element, and then in general, we think of telco clients, maybe what inning do you believe they're in, want to talk baseball terms, or can pick your sport?

Question: Ryan Potter - Citi - Analyst : Got it. I guess [SIGGYI] cloud and Astadia probably helps with the journey to hybrid cloud with the mainframe, like you were saying. And a big part of the AT&T deal as well, too. But what has been client feedback outside of AT&T to Astadia? Is there an opportunity to take those capabilities to other clients? And then I guess on AT&T, you've also talked about that not the full run rate is in the 12-month backlog of a new deal. So any call you can give on how that might ramp over time.

Question: Ryan Potter - Citi - Analyst : I guess shifting to AI, you've touched on AI multiple times throughout the conversation, but just an overview of some of your AI capabilities and GenAI capabilities, and I guess maybe some examples where you've deployed it at clients, some of the benefits they've seen, and has any of that moved from more experimentation-type phase yet to more production stages?

Question: Ryan Potter - Citi - Analyst : Got it. And does the use of Gen AI change the, maybe commercial models you have with clients at all in terms of pricing models or anything like that to move to maybe more outcome-based contracts or anything like that? Or is that something that's always on the distance, potential possibility, but --

Question: Ryan Potter - Citi - Analyst : And how are you thinking about deploying AI and Gen AI internally to get some efficiencies, boost productivity? Also, there's new skillsets you have to look for. I know you announced over-structuring recently. Is AI having an impact on why you're doing the over-structuring?

Question: Ryan Potter - Citi - Analyst : Okay, got it, got it. And then just shifting towards capital allocation, the kind of last element of getting towards the bottom line or total shareholder return. When you think of M&A versus share purchases, like how do you balance the two of them? I mean, you've been opportunistic with the study recently in similar acquisitions, but also in terms of share purchases, if maybe a year of lower growth margin expansion is X basis points, would you use share purchases as a lever, flux up and down to ensure you get kind of total shareholder return?

Question: Ryan Potter - Citi - Analyst : Got it. So if I look at 24, Europe's slower growth, margin expansion was higher. If we see another period of slower growth, do you think you have enough levers on the margin expansion and shareholder return to continue that double digit total?

Question: Ryan Potter - Citi - Analyst : That's great. We're in the last minute. So any final thoughts you want to share with investors, things to look forward with Amdocs going forward?

Question: Ryan Potter - Citi - Analyst : All right, great. Thanks again, Tamar. Thanks for your conversation. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 04, 2024 / 11:30AM, DOX.OQ - Amdocs Ltd at Citi Global TMT Conference