Conference Transcript - DOX 2026-09-09

John Zadder, Analyst — City TMT Specialist

Good afternoon. Thank you all for coming. Am I too loud? I'm John Zadder, City TMT Specialist. I'm very excited to be hosting Shimmy Hotig from MDocs, who will walk us through kind of the basics of the story. We have some questions prepared. We'll take questions from the audience if there is any. But mostly I wanted to start with this. And it's funny, I've known the company on and off over the years. It's been a little while, but I thought maybe we'd start with just an overview. Remind people who maybe aren't familiar with Amdocs, where is this story? What is the company doing? How are you participating?

Shimie Hortig, CEO

Okay, excellent. So, good afternoon. Amdocs, for those of you that are not familiar with the company, is a market leader in mission critical systems in the telecommunication industry. We are supporting more than 400 customers globally, working and supporting customers in more than 90 different countries in which we run and operate their business. Our platform sits at the heart of the telecommunication. Every day, we are running digital experiences for more than 3 billion customers globally. globally, and basically our customers are relying on MDocs to support and run their business, help them launch offerings and new products, manage customers, and generate revenue. We have a very unique business model, outcome-based business model, that is based on one hand innovation and technology. But on the other hand, we take full accountability and responsibility for everything that we do for our customers. We bring the software, we deploy the software, we migrate customers, and then we run and operate the systems in long-term managed services. This type of business model is very unique and calls for a very deep and long-standing partnership with customers, which we have for many, many years. good visibility long term contract very high rate of contract renewals and now with the Gen AI we see Amdocs as the primary partner of our customers to help them accelerate the adoption of AI and for that they will realize the value that this era can bring to them reduce complexity accelerate the time that it takes them to launch new products and new offerings reimagine all the workflows end to end which is a key important parameter for our customers and last but not least of course reduce significantly the cost structure I can say one thing I sat down the hall I saw Verizon this morning they talked about AI really impacting the business two ways.

John Zadder, Analyst — City TMT Specialist

One is in customer retention, customer interaction, but also internally taking costs out. So maybe let's talk about agentic AI. You're excited about this opportunity. You talked about how you can help customers. Can we drill down a little bit on how exactly your systems are doing this? What are you bringing to the table?

Shimie Hortig, CEO

So the main offering of Amdocs for this era is what we call AOS. The Amdocs, the agentic operating system, In our view, our customers have right now an amazing opportunity to fundamentally change the way Verizon's and other customers are operating today. You know, we are running and supporting our customers with ecosystems of systems that will build over the years, evolution of systems that will build layer on layer on layer, and eventually you end up with a spaghetti of systems that are running today, the entire ecosystem of any telecommunication today all over the world. And again, it's a natural evolution of an industry. But now, there is an opportunity to replace all of it. All of it with a platform that in our vision should be fully autonomous, fully agentic, business to machine, that will change fundamentally the way customers are operating today. And this is the vision that we are bringing today to our customers under the umbrella of AOS, the agentic operating system.

John Zadder, Analyst — City TMT Specialist

And can we talk, because it sounds amazing, just is this a new system? Is this taking the existing system and migrating? Like how actually take a carrier in Latin America? How are they, what do they have to do to integrate AOS?

Shimie Hortig, CEO

So AOS, think about it as a technological framework. is a set of products, tools, services, migration tools, the entire portfolio that is needed in order to help a customer to embark on any journey. Because we know that today, customers are starting from different starting points. They have different ecosystems that they're operating today. And once they subscribe on the vision that we just described, on the future fully automated, fully authentic operating system for the telco, there's still going to be a journey. How to take them from here to this future? Some customers have more appetite to go faster. Some customers will want to transform the entire systems and they can use our latest and greatest platform that can replace all of it. Some of them will try to do it in steps. So our job, and this has been M-Doc's job for years in this industry, is to help them to define the right roadmap and the right path and the right journey to take it from where they are today to this future agentic journey in the pace and the time and the risk level that they're willing to take during this journey. Now, when I said MDOX has been doing it for years, think about other major technological shifts that happen in the industry. Think about everyone going digital. So MDOX was there to help our customers several years ago. It was the big wave of going all digital. So MDOX was there to help them realize and become all digital. Think about the cloud, moving to the cloud. So everyone was working on-prem, and then the new technology emerged, and everyone wanted to start to move to the cloud. This was our job to help our customers to move from on-prem to the cloud. And now we have even a bigger opportunity because the technology, the promise is huge, to bring this new technology and help them to become fully authentic, fully autonomous, and to change the way they operate.

John Zadder, Analyst — City TMT Specialist

Can you talk about, because you signed a large deal with Liberty Latin America. Can you talk about, let's go even back to the beginning, like how did that conversation start, what was the deal, and how does that roll out?

Shimie Hortig, CEO

Yeah, so going back to this topic of journey, each one of our customers has a different appetite, and therefore we're going to tailor a different journey for each one of them. Liberty Latin America, it's a case of good customers, that decided that they want to see all the benefits and enjoy all the benefits that GNI can bring them, got very excited from our agentic operating systems, from AOS, from the technology, from what it could bring, and also decided that the best way to achieve it is by basically outsourcing and giving Amlogs the keys to transform their entire organization. So they handed over to us their entire IT and asked us to take the responsibility on implementing AOS and generating the same value that we are committed to do and they want you to get and achieve it quickly, improve time to market, accelerate the digital transformation, and generate a lot of savings from their business. So the journey that we tailored together with Liberty Latin America is one that they basically rely on us completely to be the one that will transform them. And for that, we got into a 10-year agreement which will allow us to complete it. We took the entire space So we'll be committed to these outcomes. So in this journey, the customer, Liberty Latam, is relying on us to deliver the value. Now, other customers will probably define a different path and a partnership or a different approach. Or we'll take the same path that Liberty Latam took. But I think, and our goal right now, is that over the next few years, all our customers, we have 400 customers all over the world, all the 400 customers will embark on a journey, partner with us, each one of them, again, in a different path to get them to this realization of the value that this technology can bring.

John Zadder, Analyst — City TMT Specialist

Okay, so this could be a model for how things are done, but maybe that could also be a one-off. And I guess as you're more successful with them, it brings a testimonial to take to other customers, look, this is how we're doing. Okay, can we talk a little bit about what are the risks and I guess the opportunities for Amdoc specifically as customers start to do this? because there's things that are going to take costs out, so there's part of the business you could lose, but there are other things you can get. How does it wash out?

Shimie Hortig, CEO

Yeah, I think the formula, and this is exactly what we did with Liberty Latin America and with other customers that we're in discussions right now, is to look for the win-win commercial model that will work for both companies. In order to achieve that, you need to look at the entire BSS OSS domain and everyone realized today that the real benefit in implementing agentic solutions is if you look at the processes end to end now in each of our customers on the BSS and OSS this spaghetti of systems part of it is Amdox we are part of these ecosystems usually our portion is give or take a third of the entire footprint of our customers so what we're trying to do is the following we're telling our customers let's partner let's look at the holistic the entire domain and try to you know revolutionize and change completely and transform completely the entire domain you will get all the savings and you will get again to your point they're trying to reduce cost let's look at ways to reduce the total TCO on the other hand MDocs will play a bigger role and help you doing that so our business can grow they can get the TCO reduction that they're looking for, and there's a win-win that we can achieve. This is exactly the formula that worked very well with Liberty Latin America, and it's exactly the type of discussions that we are doing right now. So there is definitely a win-win here in which each of the parties is getting exactly what they are looking for in terms of cost savings.

John Zadder, Analyst — City TMT Specialist

So there's an opportunity to take a bigger pie than what you have to. It just reminds me years ago, I remember there was an ultrasound company who decided to start offering services where they were going to service all the ultra, you know, including their competitors, and they ultimately were able to take market share. It's a similar dynamic. Before I go on, next question I was going to ask you about your partnerships with the Hyperscales. Can we just talk about the competition? Because clearly you're way ahead. You wouldn't sign a big deal with Liberty if you didn't have something leading it. So what is the, because historically the competition has been very in-house or piecemeal, but now you add AI. So how do you see the competitive landscape evolving?

Shimie Hortig, CEO

So in terms of competition, our approach, and this is what we're discussing with our customers, we believe that in order to achieve the ultimate goals and what AI can really bring you, you need to look for a major transformation of the entire domain. competition is coming to our customers saying oh just a second there's no need to do that leave all this spaghetti of systems whatever you have right now as is and just put a layer on top of it and this is a valid alternative approach again we don't believe that this is going to bring our customers the value that they need yes it's going to add some value you put some agents on top of the legacy system but still you're going to be constrained by the underlining systems and you will never be able to enjoy a real, fully autonomous, fully agentic ecosystem that will transform significantly the way you operate. But a valid alternative option that definitely for short-term accomplishment and some small gains here and there, you can look at this option of putting some layer on top of it. So this is one type of competition that we are facing these days. The other competition is internal IT, which was always a competitor of Amvox because some of the things they are doing internally, some of the things we are doing. So this opportunity right now to leverage AI is giving more appetite for the internal IT, maybe to do things by themselves. But I think when it comes to mission-critical systems, you know, the heart of their operations, it's probably going to be the last area that they will try to do internally. They will probably try to maybe look at other applications that are more on the fringe and less critical for running their business. But in terms of competition, I think these are the two alternatives that we see today.

John Zadder, Analyst — City TMT Specialist

It's funny. I remember talking to a CIO executive earlier this year, and he said a year and a half ago when AI first really became apparent, he thought, oh, I can just get rid of all my systems, like Workday or whoever. Like, I can just do all this on my own. He goes, a year later, my thinking evolved to, why am I replacing these? Maybe I can work with them and maybe I use the internal to build functionality on top of it. Can we talk about your partnerships with NVIDIA, with the hyperscalers? What do they bring to the party? And I guess related to that, do you need partnerships with the frontier models also as you bring AI in, or is that something you have internally?

Shimie Hortig, CEO

So we have good partnership with all the hyperscalers. It started mainly on the journey to the cloud. This was the beginning of this partnership. We will try to move applications to AWS and to Azure and we've been going on in this journey and continue to go on this journey these days. Today, we're shifting and moving more to partnering around large language models and partnering with them. They are providing us a variety of options. Again, everyone is trying right now to optimize the cost and to make sure that you're using some open source and some more expensive frontier models and so on and so forth. So this is also some kind of the support that you get today from all the hyperscales, including NVIDIA. So we are evolving right now in our partnership with them to the Argentic era.

John Zadder, Analyst — City TMT Specialist

So closing out this AOS discussion, it just seems to me like there's an opportunity for Amdocs, to move beyond your core, within your core business, to take more share in that sense. Absolutely.

Shimie Hortig, CEO

If you think about what is the ultimate goal for us, what will be an ultimate achievement of our strategy, is in the moment that we have all our 400 customers all over the world, all of them embarking on a journey to move from where they are right now to this future agentic. We know it's a different journey, but all of them will be in a journey. This will accelerate significantly the adoption and the transformation of our customers all right now the other growth factor is to go into new verticals and new opportunities so maybe can we talk a little bit about where do you see an opportunity to go beyond sort of the traditional telecom yeah so the thinking behind this growth engine is that we have done some amazing things in the telecom industry for many years we know how to work with a lot of customers we know how how to deal with mission critical systems. And these are skills that we have been proven and we believe that can be relevant for additional industry. We are not talking about industries, we're talking about one industry. We believe in the verticals. We're not gonna go horizontal, this is not Amdocs. We are looking for one more vertical that we can add on top of our telecommunication which will continue to be a top focus for the company. We're talking about high-regulated industries with complexity, things that are similar to what we did in telecommunication. And we think that the time is now. It's now because of Gen AI. Gen AI is opening an opportunity right now for customers to think their journeys. We're investing a lot with AOS in the telecommunication domain, and we can definitely leverage this investment and bring it to additional industry. and the same ideas that we are bringing to telco will be definitely relevant for additional industry. So our plan is to get started. The sooner we can get it ready and organized and we have the right penetration point and we know how to get started, we're going to do it soon. But we look at it as a mid-term, long-term additional growth engine for the company, more customers, more time that we did not have before in telecommunication. That's why it's a major growth pillar for us for the next five years.

John Zadder, Analyst — City TMT Specialist

But it's still being developed, what you want to go after, and then at some point you'll relay it out to people.

Shimie Hortig, CEO

The beginning, we start with some acquisition. We need to get in with some M&A. We need some footprint. We need to get in. We need some knowledge. We need some customers. We need technology. So the idea is to get in with an acquisition. But the main play is the telco play, whatever we have there. So we're not looking for a big acquisition or major penetration to this industry. We don't need it. We need enough and the rest we're gonna bring from what we have.

John Zadder, Analyst — City TMT Specialist

Some domain expertise and then you can build on that. Makes a lot of sense. Okay, now, since you've become CEO, you've emphasized transforming Amdocs. AI first, you've gone through this strategic assessment, four pillars of growth.

Shimie Hortig, CEO

Can you just maybe talk about what drove you there? the main focus is the growth of the strategy, the four pillars of the growth of the strategy, pillar one, AOS for telecommunication, pillar two that you mentioned expanding to an additional vertical, pillar three is new growth horizons that we believe that we have opportunity to emerge right now with new offerings for the industry but in order to support the growth strategy, those three pillars it requires an internal transformation of the company We have to lead by example. We want Amdocs internally to be customer zero of everything that we are offering right now to our customers. So if we are selling AOS right now to our customers, the same principles and the same concept we want to apply internally in the company. Accelerating agentic SDLC processes, changing the operations to become agentic operations. Changing the way of working, changing the structure of the teams. So everything that we believe that will make M-Docs as a genetic first organization and to lead by example.

John Zadder, Analyst — City TMT Specialist

How's it going?

Shimie Hortig, CEO

It's a major change. It's a major transformation. We've been in this journey for a while. We are definitely accelerating. In the last five, six months, we are definitely accelerating. We are scaling it, rolling it all over the company. we spend a lot of time trying to learn and probably made some mistakes and we knew how to fix it so now we're ready to go at scale and do it across the entire company but it's a transformation when was the last time that agents and humans were working together in the same team and it's new to all of us I saw the matrix that was about the closest we got exactly so we're getting very close to that but it's a transformation many companies are going through this transformation right now but it's probably key and fundamental to support

John Zadder, Analyst — City TMT Specialist

the growth strategy we had our CIO on stage yesterday and he was talking about this same thing and he said one of the things that's really helped is they've created these sort of thought leaders people that kind of champions that work and work with the employees and then give feedback to IT so that it becomes I see it as an employee. It works when you have people that are like, look, let me help you. How do I do it? So it's a great – when it gets done, it's going to be a beautiful thing. Okay, let's talk about growth outlook. So historically, Amdocs has grown sort of low single-digit growth. What's the potential for that to accelerate? What time frame? How much of the four pillars kind of get you there?

Shimie Hortig, CEO

We need to, in order to accelerate the growth, we need few things to happen. On the first pillar, we think that we have an amazing opportunity with AOS to accelerate the growth. The main consideration, how quick it's going to happen depends a lot on how quickly our customers will move, adapt, and embark on these journeys. We talked about other transformation that Ambrox did in the past. For example, the digital transformation that we did for our customers or the cloud transformation that we did. So digital went much faster. Customer adapted it much quicker, and we were running very quickly, and many of our customers were transforming and becoming all digital. So we saw an accelerated growth in those years for 6%, 8% a year because it was moving very quickly in the industry. The cloud went slower. Even though it was a very good, compelling event, it went slower. So we saw growth, but not at the same pace. Now the question is how quickly the industry, our customers, will adapt AI and will embark on these journeys. We want to believe that it's going to be similar to the digital transformation because it's been driven by the business. It's not a back office infrastructure change. It's more of a business-driven transformation. So we want to believe that it's going to happen faster. I think there's a lot of pressure right now from board, from CEOs, to the entire organization in our customer base to move faster to look for things that are more fundamental meaningful that will have them transform the companies the company so I think this will hopefully go go faster but you know time will tell and we'll see how quickly the industry will move in this in this direction the new vertical we need to get started is a huge potential to grow but we are starting small and it's going to take time we believe that this is a growth engine for the mid and long term, and the new horizons. We just need to pick two or three good examples that can accelerate quickly. And we're working on that right now. So all in all, I think that each one of the growth pillars has a great potential. We just want to accelerate, as right now there's a sense of urgency to get started in all of them and to make the right investment and to push forward because we wanna build the company for the next five years and beyond. So overall, we're quite optimistic on the strategy that we put in place.

John Zadder, Analyst — City TMT Specialist

I remember talking to an AI expert two years ago, and we talked about the difference between cloud and AI. And one of the things that they stuck in my mind, which I never got, they said, because I remember the cloud transition, they said, in the cloud transition, part of the challenge was the incumbents were fighting it. Remember who the incumbents were 25 years ago? They're like, don't go to the cloud. It's not safe. And so they slowed the process down. They go, look who is driving the AI today. It's the incumbents. I mean, the biggest players in cloud are the biggest players in AI. So that has a potential to accelerate. So that hopefully provides more of a tailwind, less of a – I can't imagine a board today who's not thinking AI or what are we going to do. So let's talk about margins because one of the things about AI is it has not only the potential to drive revenue, it also has potential to take cost out. So how does Amdocs think about the margin benefits of AI internally, but also with customers? Do you share it? Do you keep it? How do you price for it?

Shimie Hortig, CEO

So the internal transformation that I meant, the fourth pillar of the internal transformation, should drive a company that has less people, more technology. Therefore, even though technology cost is going to go up, we think that the net-net over time should generate better margins for the company. On the same time, we want to share it with our customers. And this is going back to this, you know, we have a bigger piece of the pie, and we're going to share, and we're going to give them a TCO reduction. Some of it is going to be our reduction. Some of it is going to be the entire domain reduction. So we're going to share it, of course, with our customers, because we are all together in this goal to try to reduce the total TCO for our customers. So overall, a great potential for us to become more profitable, and also for our customers to reduce costs significantly. I think there was a win-win for both of us here.

John Zadder, Analyst — City TMT Specialist

So last question. I'm going to actually put the two together, and that is how do you think about capital allocation and how do you think about M&A especially? And again, it didn't sound like you were thinking about a huge M&A, but just how do you think about returning cash versus making investments and how do you balance sort of the near-term shareholder demands versus this longer-term, bigger opportunity?

Shimie Hortig, CEO

I would say that we put right now a strategy that we strongly believe can drive the company for the long term. It's a strong growth engine that can develop and grow the company for many years to come. And we are quite determined to make the right investment in order to make it work. So if we need to think about short-term considerations versus long-term, this management team is thinking right now about long-term. and we believe that we are building the right growth engines that will make Amdocs a great company also for the next five and ten years. So if we need an M&A right now in order to support expansion to another industry, we definitely want to go and do it. If we need to invest right now and do some growth on the new horizons and the new vertical, if we need to make sure that our AOS is the leading platform and there's no one better than us that can help our customers, we're going to make this investment. We are quite determined to make sure that we are supporting the strategy in the right way. Some of it is organic, some of it is of course through M&A, but the main goal right now is to make sure that behind the strategies we're very confident that this is the right strategy we are supporting the right capital to make it happen.

John Zadder, Analyst — City TMT Specialist

I appreciate it. Well, Shimi, thank you for your time. And there's a lot to follow. I mean, Again, AI has created this, like, unsettled but also much larger opportunity. You're going after bigger opportunities, and so I think you have an excellent strategy just as far as the way you're thinking about layering in the growth. So wish you much success. Thank you all for coming. Thank you for your time. Thanks for attending our conference. Thank you very much. All right. I'll give you back.